Key John: KiwiSaver Bill — In Committee 
Key John: KiwiSaver Bill — In Committee 
[Volume:633;Page:4902] 
JOHN KEY (National—Helensville) 
: 
 That was Lianne Dalziel one of 50 members of the Labour Party who stole $882000 of taxpayers’ money in order to buy an election. It is no wonder she hangs her head in shame and those members were pretty down in the mouth when it came to question time today. She said in her remarks that this is not the same scheme as that in 1974. That was when she was taking a trip down memory lane to the time when she was 15. But what was interesting was that she was quite right. This scheme is not actually the scheme that the Finance and Expenditure Committee looked at for weeks when it heard submissions. Why? Because Michael Cullen and Helen Clark stole $882000 worth of taxpayers’ money. They propped up a member of Parliament who frankly was a disgrace to this House and the  
Sunday 
 television programme rightly highlighted that. 
Two weeks ago after we had heard 71 submissions on the KiwiSaver Bill Michael Cullen and Helen Clark were so desperate to get themselves off the front page of the paper regarding the disgraceful antics of the Labour Party when it stole $882000 that Michael Cullen would have been prepared to listen to anything. That happened to be Gordon Copeland who wandered into his office with some mad idea about mortgage diversion. That is actually why we have seen that change to the bill. Gordon is laughing— 
The CHAIRPERSON (H V Ross Robertson) 
: The member will use the member’s full name. 
JOHN KEY 
: I understand that the honourable member Mr Gordon Copeland supported mortgage diversion. But Michael Cullen did not know anything about it and neither did the officials. 
It is interesting to look at Part 1 of the bill. Clause 3 “Purpose” states: “(1) The purpose of this Act is to encourage a long-term savings habit …”. That is quite interesting actually. That is the purpose of the Act—to encourage long-term savings. Maybe the Minister in the chair the Hon Lianne Dalziel would like to take another call; she looks as though she is in a happy mood this afternoon and will be happy to take a call. She should explain to the people of New Zealand just this: when is a savings scheme not a savings scheme? It is like one of the riddles that my 11-year-old son reads out to me when I am driving the car. When is a savings scheme not a savings scheme? The answer son is when we can put money in and whip it out immediately to pay for a first home. The answer son is when we can have our weekly contribution put in and whipped out to pay for the mortgage. The answer son is when we can actually save zero of our own money—zero. That is a savings scheme under Labour and that apparently will encourage long-term savings. 
Interestingly enough when Michael Cullen was answering the question for oral answer about this—it is in my little box here but I can say this off the top of my head—he had the problem that he was so rushed while talking about Gordon Copeland’s mortgage diversion scheme that he forgot to match his answer up with the question. He was asked one of those really tough patsy questions that no Minister wants to get and that needs preparation from many Treasury and Inland Revenue Department officials so as to be ready with the answer. The question to the Minister was why he would not accept a 2 percent contribution rate for the KiwiSaver scheme. That is a good question—the New Zealand Council of Trade Unions has asked it and various other unions have too. The answer was that it would leave many small accounts that would not be large enough to warrant serviceability—oh and by the way also that it would not do much for an individual’s retirement savings. 
So maybe the Hon Dr Michael Cullen would like to wander along take a call and explain this to me. If we have a 4 percent contribution—2 percent made up from an individual’s own savings and 2 percent from the employer’s contribution—and if we take out 2 percent and put it into a mortgage diversion so it flushes from the savings account through to a cheque account then what is four minus two? The answer is 2 percent. [ 
Interruption 
] Thank you Parekura—Parekura was just working that out. 
The CHAIRPERSON (H V Ross Robertson) 
: Order! That is the second time now. 
JOHN KEY 
: The honourable Minister was working that out for us while he was on his feet. The answer is that we have 2 percent left in the account. Michael Cullen in his answer to the question today said he thought that was a really bad idea so I wonder whether he can tell us why he accepted mortgage diversion. When the officials came to the table and we discussed mortgage diversion in the select committee they said they did not have time to work on it and did not think it would work. They were unanimous on that. Labour members also looked at the idea and said it was not a good one for a savings scheme. 
I have had a good look at some savings schemes. When I went to Singapore in March—it was a wonderfully successful trip; I have written a number of speeches about it—I had a look at the Central Provident Fund model. The Central Provident Fund is quite interesting. It takes 25 percent contributions—I am not talking about 2 percent—and money can be put into three accounts. The first account is a health savings account—Singaporeans save for their health in that manner—the second is an ordinary savings account and the third is a capital account. I asked about the ordinary account and was told that it could be used for mortgage diversion. Singaporeans can take money out of it and pay for their mortgage—they put in 25 percent of their income. I asked what the balance was like in the ordinary accounts which were available for mortgage diversion. Does Mr Hughes know what the answer was? 
Darren Hughes 
: They said: “Oh what?”. 
JOHN KEY 
: They said: “Oh Mr Key it is funny that you should ask us that question.” The answer was zip—zero; nothing there. There was no one home—a bit like the Springboks were on Saturday night. There was no one home and not a single thing—not a dollar—in those accounts. It was a so-called savings account robbed by mortgage diversion. Yet Michael Cullen whose express purpose here is to encourage long-term savings thinks it is a great idea to raid the KiwiSaver account. 
We are in the middle of a great debate about rates in New Zealand at the moment. That was another little issue for the Government to try to work its way through; it has now called for an inquiry into rates. Here is my prediction: the next thing that one will be able to take money out of KiwiSaver for will ultimately be rates. Then it will be to pay the lawnmower man the guy who comes to cut the hedges the gardener the housekeeper the pool boy and anybody else who comes to work anywhere around the house. There will be an army of people—an army of Cossacks will be able to come along. That is the idea of savings under KiwiSaver. 
 The second little point is this. 
Hon Judith Tizard 
: It’s like  
Desperate Housewives 
—the National Party MPs’ version. 
JOHN KEY 
: Sorry what was that? I did not realise the member was back from Auckland. 
Hon Judith Tizard 
: Who has a pool boy? 
JOHN KEY 
: Dozens of people have pool boys I am sure. They have a pool boy. There are dozens of them. 
The CHAIRPERSON (H V Ross Robertson) 
: The member will come back to the debate. 
JOHN KEY 
: The second little point is this. What will happen when people make a contribution—put in 2 percent of their salary—and take it out immediately from KiwiSaver for their diversion and the employer puts in 2 percent and the money lasts in that account for 2 years at which time the employees move down the road to substantially better paid jobs with employers who make no contribution and do not operate a KiwiSaver scheme so the employees say they will just take the increased cash? What will happen to those accounts? They will have 2 percent in them. The employees will take a mortgage holiday or a savings holiday for 5 years and then extend that for another 5 years if they want to. There will be no savings. 
This is the interesting question: if this scheme is going to be so successful why then when I asked the Minister of Revenue some months ago how much the Government collected under the withholding tax paid on employer contributions—specified superannuation contribution withholding tax—did he tell me it raises $550 million for the Government yet with KiwiSaver the impact will be $35 million? Either KiwiSaver will not be terribly successful or it will be fiscally a lot more expensive than Michael Cullen thinks—one of the two answers. I suspect that the right answer will be the first one: the scheme will not be very successful at all. We do not even have to get past page 11 of the bill to realise that. We can go about 30 words into this bill. If we go past the title clause and the commencement clause—and by the way that date has already moved twice since the Government decided to introduce this bill—we get to the purpose clause. The purpose is to encourage long-term savings by allowing people to put their money into an account and in the same afternoon to take it out. If that is Labour’s idea of saving all I can say is that it is no wonder it has had to make some changes to the bill in the last couple of weeks because the scheme was doomed to fail when it first started. It was never going to be successful when it had no inducements at all and now it has even fewer. 
Interestingly enough one of the arguments that has been put up is that KiwiSaver will somehow because of the changes to the specified superannuation contribution withholding tax encourage employers—