Volume 653 Week 7 - Tuesday 24 March 2009 
Volume 653 Week 7 - Tuesday 24 March 2009 
[Volume:653;Page:1961] 
Tuesday 24 March 2009 
Mr Speaker 
 took the Chair at 2 p.m. 
Prayers 
. 
Obituaries 
Mary Dorothy Batchelor QSO 
Mr SPEAKER 
: I regret to inform the House of the death on 12 March 2009 of Mrs Mary Dorothy Batchelor QSO who represented the electorate of Avon from 1972 to 1987. I desire on behalf of this House to express our sense of the loss we have sustained and our sympathy with the relatives of the late former member. I now ask members to stand with me and observe a period of silence as a mark of respect for her memory. 
Honourable members stood as a mark of respect. 
Questions to Ministers 
Government Proposals—Cycleway and Nine-day Working Fortnight 
1. Hon PHIL GOFF (Leader of the Opposition) 
 to the  
Prime Minister 
: Does he stand by all the statements he made on TVNZ’s  
Q+A 
 programme on Sunday 22 March? 
Hon JOHN KEY (Prime Minister) 
: 
 Yes. 
Hon Phil Goff 
: Does he stand by the Government’s promise at the Job Summit that the 9-working-day fortnight would help 100000 people keep their jobs given his statement on Sunday that he did not know how many people had signed up to it but anecdotally one or two companies were taking a look at it? 
Hon JOHN KEY 
: There was no promise at the Job Summit; there was an estimate before the Job Summit. But in broad terms that might be the case. I take it as a sign of success that New Zealand companies are able to keep manufacturing for 5 days a week; Mr Goff takes success as being put out to retirement—something that may well happen to him quickly. 
Hon Phil Goff 
: Was the Prime Minister aware when he went on the programme on Sunday that his other promise to the Job Summit which was to build a cycleway from North Cape to the Bluff to create 4000 jobs at a cost of $50 million was utterly unachievable given the estimate that he will have from environmental engineers that the real cost would be six times that amount and for many fewer jobs? 
Hon JOHN KEY 
: Again they were fairly rough estimates at the time. Just before the Leader of the Opposition gets too excited I have good news for him. He should go out and buy himself a bike because he may well get to see a lot of New Zealand. 
Hon Phil Goff 
: Does the Prime Minister understand why the interviewer on Sunday’s  
Q+A  
programme Guyon Espiner was saying this morning that the Job Summit had failed to deliver and that the reality had not matched up to the rhetoric given that the two key proposals to emerge from the summit are now falling well short of expectations? 
Hon JOHN KEY 
: Let us get a few facts right. Firstly it was Mr Goff who was saying that the Job Summit would be a talkfest and nothing would come out of it. In fact within weeks of the Job Summit a 9-day fortnight was rolled out with the full support of the Council of Trade Unions. It is Mr Goff who does not want to believe that the cycleway will happen. It is Mr Goff who does not want to believe that the 40 other proposals that Cabinet is considering will become an option. Overall it is Mr Goff who was not involved in the Job Summit and who therefore does not really know what is going on. 
Hon Phil Goff 
: How did the Prime Minister calculate the figure of $40 billion which he said on  
Q+A  
was the amount that National was borrowing over the next 3 years to preserve public sector jobs; or did he just make that figure up as well? 
Hon JOHN KEY 
: I can read and that figure came from the December Economic Fiscal Update. Quite frankly this Government is going to borrow somewhere in the order of $40 billion over the next 3 years. The reason we— 
Hon Phil Goff 
: Public sector jobs! 
Hon JOHN KEY 
: —are doing that is we are preserving—that is right—the vast bulk of public sector jobs. We are preserving the entitlements that we campaigned on. There will be no cuts to New Zealand superannuation no cuts to Working for Families and no cuts to the entitlements New Zealanders need. We are borrowing to do that in the short term but we are making sure we get on top of the expenditure so that we can afford initiatives in the future—something that member’s Government never did. 
Hon Phil Goff 
: Is the Prime Minister then telling the House that he is borrowing $40 billion just to preserve public sector jobs—that is what he said on  
Q+A 
—and how does that match up with his claim earlier that he was borrowing to pay for superannuation when in fact everybody knows he is borrowing to pay for the tax cuts? 
Hon JOHN KEY 
: I can assure the member that we are not borrowing $40 billion for tax cuts. What we are doing is borrow $40 billion over the next 3 years over and above— 
Hon Phil Goff 
: You’re not borrowing $40 billion to pay for public sector jobs either and the Prime Minister knows it. 
Hon JOHN KEY 
: The Leader of the Opposition needs to get out the Crown accounts and understand what is happening. Over the next 3 years about $200 billion will be spent by the Government. There is a shortfall of about $40 billion. The reason the Government is borrowing is because at this time that is the appropriate thing to do in order to maintain those entitlements and those services. 
Hon Phil Goff 
: Is the Prime Minister now reneging on his promise not to cut Public Service jobs but to cap them given his comment on Sunday that he did not know how many jobs would be lost but the number would not be as high as 4500? 
Hon JOHN KEY 
: The Minister of State Services will be making an announcement later in the week but the policy is very straightforward. We will be capping the size of the State sector. It grew enormously under the Labour Government which had no control over its expenditure. We will not be cutting 4500 jobs; what we will do is move some jobs from the back office to the front office but by and large the vast bulk of Public Service jobs will stay. 
Recession—Position of New Zealand Economy 
2.  
PESETA SAM LOTU-IIGA (National—Maungakiekie) 
 to the  
Minister of Finance 
: How is the New Zealand economy placed to ride out the current economic downturn? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 The economy starts from a mixed position. It has some long-term strengths including a flexible exchange rate and labour markets a banking sector that has remained healthy and relatively low debt and unemployment levels. However this week’s statistics will show that the balance of payments deficit for 2008 is in the order of 9 percent of GDP one of the worst in the OECD and this week’s GDP statistics will show that output declined in the December quarter to a level of around 2 percent lower than a year earlier—that is the economy will have contracted by about as much as that. The pre-election fiscal update showed ongoing fiscal deficits and the outlook has worsened considerably since then. So New Zealand faces a challenge of chronic twin deficits as a result of 10 years of mismanagement chronic fiscal deficits and balance of payments deficits. 
Peseta Sam Lotu-Iiga 
: What steps has the Government already taken to improve the ability of the economy to ride out the downturn? 
Hon BILL ENGLISH 
: We cannot deal immediately with the chronic twin deficits that we have inherited but we have taken action on a wide front to improve the position. This includes—so far—successfully maintaining the orderly operation of the banking system a range of packages that were focused on assistance to small and medium sized businesses and an early start to infrastructure spending. We have also engaged actively with the unions and business via the Prime Minister’s Job Summit—and more announcements will be following on from that. 
Hon David Cunliffe 
: Can the Minister confirm why if the IMF has expressed concern over New Zealand’s current account deficit he has gutted KiwiSaver—a scheme that makes a critical contribution to reining in the same current account deficit? 
Hon BILL ENGLISH 
: In the first place there is no evidence that KiwiSaver is achieving that or would achieve it. Secondly KiwiSaver has not been gutted. The Government in this fiscal year will commit something around a billion dollars of subsidies to KiwiSaver. We are effectively still subsidising savings when the Government is in considerable debt. 
Hon David Cunliffe 
: Can the Minister confirm that IMF mission chief Ray Brooks stated recently that New Zealand’s macroeconomic policies particularly monetary and fiscal policies have been very sound in recent years and that he also praised the low level of Government debt and the strength of the Government’s accounts and said it was the prudent fiscal management of the previous Government that should be credited for this? 
Hon BILL ENGLISH 
: If he said that I disagree with him. In fact the current Government is working day after day to try to bring under control the loose and reckless decisions on spending made by the previous Government. 
Hon Sir Roger Douglas 
: Will the Minister explain to the House and the public of New Zealand how paying people to do nothing 1 day in 10 will help grow the New Zealand economy? 
Hon BILL ENGLISH 
: The 9-day fortnight is a measure designed to cushion the effects of significant restructuring that may occur as a result of the downturn. It is not intended to be a growth measure. Along with the Restart package which cushions the effects of redundancy for people who lose their jobs it is part of the Government’s programme of protecting people from the sharpest edges of the recession while we take longer-term measures to get us through this recession and grow the economy to replace the jobs that are currently being lost. 
Hon Jim Anderton 
: Can the Minister of Finance tell the House which of the Government’s highest economic priorities he thinks will make the greatest dent in the effects of the global economic crisis on New Zealanders: the bicycle lane; the 9-day fortnight which not one business has signed up to; or privatising the prisons? 
Hon BILL ENGLISH 
: As I pointed out to that member before we went to the shed to get the “jobs machine” when we became the Government and found that even when the economy was growing his “jobs machine” could not create jobs. 
Hon Darren Hughes 
: I raise a point of order Mr Speaker. The Hon Mr Anderton asked the Minister of Finance a pretty straight question. He gave him three options in a question with regard to what would create jobs. Instead he got a political answer from the Minister of Finance that had nothing—[ 
Interruption 
] The point I am trying to make is that it was not a political question. It was not loaded. [ 
Interruption 
] Mr Speaker are you going to let them interject during my point of order? I have had two interjections on my point of order from Government members. 
Mr SPEAKER 
: The member’s point of order should be heard in silence. 
Hon Darren Hughes 
: We are trying to comply with your ruling which is that we should ask questions of the Government that contain facts. Mr Anderton did that. He did not put in a little flick to the Minister but the Minister in response just made an attack on Mr Anderton. That did not help the economy at all. 
Mr SPEAKER 
: I think the member has made his point. I understand the member’s point. I think he heard the impact of the assertion he made that it was not a political question. The member who asked the question realised that it was very much a tongue-in-cheek question and he got a similar kind of answer. I cannot judge the quality of the answer but I would not call the member’s question a straight question. 
Hon David Cunliffe 
: Can the Minister of Finance confirm that if this is the rainy day that we have been saving for then it was the Labour Government that did the saving contrary to his own advice to spend more on tax cuts for the rich and does that explain why his boss is so keen to see him replaced by Mr Steven Joyce in his current role? 
Hon BILL ENGLISH 
: I can confirm that the Prime Minister was very pleased to see Dr Cullen replaced by me. 
Government—Willingness to Listen to Ideas 
3.  
Hon ANNETTE KING (Deputy Leader—Labour) 
 to the  
Minister for Social Development and Employment 
: Does she stand by her comment that National is a Government that is “willing to listen to ideas outside the Beehive and that’s what we’re there to do.”? 
Hon PAULA BENNETT (Minister for Social Development and Employment) 
: 
 Yes. 
Hon Annette King 
: Has the Minister seen the programme arranged for Auckland’s regional employment summit held yesterday; if so does she believe that setting aside a total of 10 minutes for ideas from participants out of a 3-hour talking heads session indicates a Government that is willing to listen? 
Hon PAULA BENNETT 
: Yes. 
Hon Annette King 
: Well so much for the public! If the Government is so keen to hear the views of New Zealanders why did not a single National member of Parliament turn up to the Auckland regional job summit that was held yesterday or did those members not want to be insulted by the once-over-lightly pep talk that told participants to “read a book” and to “think with the mind of a cunning fox.”? 
Hon PAULA BENNETT 
: The feedback I have had from regional job summits has indeed been positive. The summits are giving a snapshot of what is happening regionally. Local businesses and chambers of commerce are stepping up with ideas and doing a very good job of that. The feedback coming back to this Government has been hugely impressive. 
Tim Macindoe 
: What examples can the Minister provide of ideas generated by New Zealanders being put into action by this Government? 
Hon PAULA BENNETT 
: We are certainly a Government that is prepared to listen and to put ideas into action. For example tomorrow we are holding our third meeting with community and voluntary sector groups about working through the Budget process and what happens there. The 9-day fortnight job-support scheme which was actually an idea formed by unions and businesses has already been announced. Officials are working through about 40 ideas and are doing a fine job on that. 
Hon Annette King 
: Does the Minister agree with the Prime Minister’s statement that “improving insulation in New Zealand homes will play an important part for social health and climate change reasons.”; if so why did she label those same ideas when outlined in a Labour Party pamphlet as “petty politicking”? 
Hon PAULA BENNETT 
: I certainly stand by the Prime Minister’s comments. That is why we are already insulating State houses and why this Government has gone into action—and the private sector is next. I think the petty politicking was in a Labour taxpayer-funded brochure that was brought along to a regional job summit. It was blatantly quite frankly—[ 
Interruption 
] Oh sorry—yes there are three nice photos of Mr Goff on the inside of the brochure for taxpayers to have a look at. 
Tim Macindoe 
: What is the Government doing to help people stay in jobs? 
Hon PAULA BENNETT 
: I actually think that the “rainy day” that a member talked about previously was coming long before we came into power. In the last three financial quarters under the Labour Government unemployment was rising. In fact just 9 months ago the Hon Ruth Dyson said that losing 29000 jobs was not “bad news at all”. The Labour Government had all that time to start doing something; this Government is about action. 
Genesis Energy Board—Confidence 
4.  
JEANETTE FITZSIMONS (Co-Leader—Green) 
 to the  
Minister for State Owned Enterprises 
: Does he have confidence in the board of Genesis Energy? 
Hon GERRY BROWNLEE (Leader of the House) 
on behalf of the  
Minister for State Owned Enterprises 
: Yes. 
Jeanette Fitzsimons 
: How can the Minister have confidence in the board of Genesis Energy when it told the Rodney District Council that it had “sufficient gas arrangements” to operate the proposed Rodney power station but told the Electricity Commission that it does not have “access to a sufficient secure forward quantity of gas” for it? 
Hon GERRY BROWNLEE 
: I am advised that the board of Genesis Energy has given the go-ahead for a consent to be sought but has not made any decisions about the building of that plant. 
Jeanette Fitzsimons 
: What advice if any has the Minister received from the chair of the board about the company’s Gasbridge project in New Plymouth to import liquefied natural gas to fuel its power stations which under international contracts would tie the price of electricity to the international price of oil? 
Hon GERRY BROWNLEE 
: I am unable to answer that. I do know that New Zealand is a very prospective country. There are lots of opportunities for new gas finds and this Government is encouraging people to go out and make those finds. 
Jeanette Fitzsimons 
: How can the Minister then have confidence in the board of Genesis Energy when it proposes to build the Rodney gas-fired power plant and the Gasbridge liquefied natural gas (LNG) facility which together will tie power prices for Kiwi households and businesses to the rising international price of oil under the contracts that govern LNG trade? 
Hon GERRY BROWNLEE 
: I am advised that neither of those decisions has been made. 
Jeanette Fitzsimons 
: Has the chair of the board advised the Minister that Genesis Energy so far has spent $74 million of electricity consumers’ dollars just on planning for the power station but that it probably will not be built given its statement to the Electricity Commission that it should not consider the power station as “committed or likely in a real world commercial sense”; and does he think that that is prudent spending? 
Hon GERRY BROWNLEE 
: I am unable to answer that question because I do not know what conversations the Minister has had with the chair of Genesis Energy. But I do know that if it were not for Genesis Energy the lights would have gone out in this country last year. It was Genesis Energy’s e3p gas plant at Huntly that kept the lights on. 
Jeanette Fitzsimons 
: Is the Minister saying that any future waste of electricity consumers’ money by that company is completely OK because it has a power plant that it built previously—underwritten by the Government on its gas contract—and that that entitles the company to do anything? 
Hon GERRY BROWNLEE 
: No. 
Question No. 3 to Minister 
Hon ANNETTE KING (Deputy Leader—Labour) 
: 
 I would like to table the Auckland regional employment summit programme which points out— 
Mr SPEAKER 
: We know what the document is. Leave is sought to table that document. Is there any objection to that course of action? There is no objection. 
Document by leave laid on the Table of the House. 
Question No. 4 to Minister 
JEANETTE FITZSIMONS (Co-Leader—Green) 
: 
 I seek leave to table two documents. The first is a letter from Genesis Energy to the Electricity Commission which is the source of one of those quotes I used. The other is from Genesis Energy to the Rodney District Council and is the source of the other quote. 
Mr SPEAKER 
: Is there any objection to those two letters being tabled? There is no objection. 
Documents by leave laid on the Table of the House. 
State-owned Enterprises—Increased Dividends 
5.  
Hon CLAYTON COSGROVE (Labour—Waimakariri) 
 to the  
Minister for State Owned Enterprises 
: Why is the Government seeking increased dividends from State-owned enterprises in the current economic climate? 
Hon BILL ENGLISH (Minister of Finance) 
 on behalf of the  
Minister for State Owned Enterprises 
: Each State-owned enterprise has a stated dividend policy in its annual statement of corporate intent. The statement of corporate intent that each is operating under was signed off by the previous Labour Government. We are expecting that State-owned enterprises will adhere to that policy. 
Hon Clayton Cosgrove 
: Does the Minister not agree that the primary concern of State-owned enterprises in the current economic climate should be to save jobs rather than to line the Government’s pockets with increased dividends? 
Hon BILL ENGLISH 
: The primary concern of the Government in the current economic climate is that State-owned enterprises pay a great deal more attention to running their businesses. In recent years they have spent more time on managing news coverage of Ministers and complying with the no surprises policy and not enough time on controlling their costs. 
Katrina Shanks 
: Has he seen any reports of Governments being prepared to accept a lower dividend than in previous years? 
Hon BILL ENGLISH 
: The Minister has seen a report from June 2007 that states that the then Labour Prime Minister Helen Clark rejected suggestions that the Government had a responsibility to reduce power prices despite the Government having collected $1 billion in dividends from its State-owned enterprises in 2006. This year the interim dividend is $45 million. 
Hon Clayton Cosgrove 
: Does he not accept that any undue pressure on State-owned enterprises in the current economic climate to return greater dividends to the Government will lead to an increase in lay-offs higher prices for consumers a decrease in services or most likely a combination of all three? 
Hon BILL ENGLISH 
: No. Every Government organisation should be paying attention to the effective delivery of services to the public. We think that State-owned enterprises could focus on that more than they have done because in recent years they have spent too much time paying attention to the Government’s political needs. 
Hon Clayton Cosgrove 
: Does he think that the 90 jobs to be cut at Television New Zealand the 52 jobs already lost at Quotable Value and the expected redundancies at New Zealand Post are acceptable responses from State-owned enterprises to the Government’s demand for better financial performance and how many more jobs is he prepared to see lost in State-owned enterprises in order to meet the Government’s unrealistic goals? 
Hon BILL ENGLISH 
: In each of those organisations the fundamental problem is that their revenue is dropping. It is actually nothing to do with Government demands and a lot to do with the fact that the money coming in each week is less than it was. That means that they have to restructure their organisation. I have to say that many New Zealand businesses and Government and non-governmental organisations are unfortunately experiencing the same phenomenon. 
Student Loans—Repayment Schemes 
6.  
AARON GILMORE (National) 
 to the  
Minister of Education 
: What steps has the Government taken to help individuals pay off their student loans quicker? 
Hon ANNE TOLLEY (Minister of Education) 
: 
 Yesterday the Government announced that its voluntary repayment bonus would come into effect on 1 April this year. Under this policy student loan holders who make voluntary repayments totalling $500 or more across the year will be eligible for a 10 percent bonus. That means that if someone makes voluntary repayments of $1000 across the year the Government will deduct $1100 from his or her loan balance. 
Aaron Gilmore 
: How does the scheme announced yesterday differ from the one announced prior to the election? 
Hon ANNE TOLLEY 
: The scheme announced yesterday is a significantly expanded version of the one announced before the election. First of all voluntary repayments are eligible for the bonus regardless of how long after graduation the payments are made. Secondly student loan holders who reside overseas and are fully compliant with their repayment obligations will also be eligible for the voluntary bonus. Finally the bonus will not require the minimum qualifying payment of $500 to be made in a lump sum; instead it can be made across the course of the year. 
Hon Maryan Street 
: Does the Minister agree that it is likely to be people on higher incomes who are able to make additional student loan repayments and that these are the same people who will benefit most from next week’s tax cuts; if so can she explain why this Government is intent on giving cash to those on higher incomes rather than to those on low to moderate incomes who need it more? 
Hon ANNE TOLLEY 
: This Government has been able to extend this proposal to allow students to make a continuous number of repayments throughout the year rather than one lump sum. I think that goes some way towards addressing the concerns the member has raised. 
Accident Compensation—Solvency 
7.  
Hon DAVID PARKER (Labour) 
 to the  
Minister for ACC 
: Does he stand by his statements that “if ACC was an insurance company it would be insolvent” and that “we need to get costs back under control.”? 
Hon Dr NICK SMITH (Minister for ACC) 
: 
 Yes I do. The dictionary defines insolvency as “liabilities exceeding assets”. The accident compensation scheme has liabilities of $22 billion and assets of $10 billion. The scheme’s costs have more than doubled from $1.5 billion a year in 2000 to $3.2 billion this year. 
Hon David Parker 
: Has the Minister seen reports from Brian Fallow that the Government’s “shrill scaremongering and scapegoating is gratuitous” and from Rod Oram that “there is a huge gap between the rhetoric of John Key and Smith and reality” and will he now concede that his exaggerations around accident compensation were irresponsible? 
Hon Dr NICK SMITH 
: I note that there have been other commentators who have been very critical of the financial state of the accident compensation scheme. I simply say to members opposite that if all is well with the scheme why did the Government need to bail it out for $300 million this financial year? 
Michael Woodhouse 
: What has happened to the solvency of the accident compensation scheme over recent years? 
Hon Dr NICK SMITH 
: The solvency ratios of the accident compensation scheme have been in decline over the last 3 years. The decline pre-dates the financial crisis and has arisen because costs have been rising at three times the rate of inflation—three times the rate of inflation. I also note that the scheme’s liabilities increased rapidly by more than $2 billion in 2004 2005 2006 and 2007 which was well before the financial crisis was anywhere near New Zealand. 
Hon David Parker 
: Has the Minister seen the report by Fran O’Sullivan in the  
New Zealand Herald  
on Saturday where John Key was quoted as having no room for “phone throwers” or “temper tantrums at the top” and has the Prime Minister spoken to the Minister about his performance at the select committee on the Thursday before last? 
Hon Dr NICK SMITH 
: Yes I have seen the piece and I also have to say that I read Bill Ralston’s piece. He stated that it was high time for a Government to start taking into account the levy payers in the scheme and ensuring the scheme is viable long term. 
Michael Woodhouse 
: How does the Minister reconcile the claim made by the Opposition that the corporation does not have financial problems with the fact that the non-earners account alone required a $300 million bail-out this financial year and will need another $900 million over the next 3 years just to keep it afloat? 
Hon Dr NICK SMITH 
: The member makes a good point. The $300 million bail-out exceeds the total of the incoming Government’s spending commitments on Herceptin PlunketLine ReStart the 9-day fortnight voluntary bonding and the student loan discount all combined together. Of course that covers the problems in the non-earners account only not in the other four accounts. We on this side of the House are grumpy because we went to great effort to be fiscally responsible and we were blindsided by a problem in the scheme costing over $300 million for this financial year. 
Hon David Parker 
: Is the Minister still proposing to make cuts to the scope of the scheme’s cover and the privatisation of parts of the scheme when his main justifications have been demolished by the media and does he agree with Fran O’Sullivan that there is a fine line between using the worldwide recession to force radical change and downright chicanery? 
Hon Dr NICK SMITH 
: The facts about the scheme’s finances speak for themselves. The reality is that the organisation had to be bailed out by more than $300 million that huge levy increases will be required if we do not make changes and that this Government is committed to securing the future of the accident compensation scheme by improving its financial management. We will look at reviewing the scheme to ensure it is affordable for ordinary New Zealanders. 
Schools—Building Projects 
8.  
PAUL QUINN (National) 
 to the  
Minister of Education 
: What recent announcements has the Government made to fast track school building projects? 
Hon ANNE TOLLEY (Minister of Education) 
: 
 Last week I met with representatives of the four Upper Hutt schools that the Prime Minister John Key had pledged before the election would receive an additional—that is an extra—$30 million in school property funding and I outlined the share of this funding that each school will receive. The schools will receive an overall package of $44.6 million made up of the $14.6 million already allocated and the additional extra over-and-above $30 million that this Government promised and is now delivering on. The significantly increased package for each school will allow these schools to address 100 percent of their essential infrastructure projects to replace all building projects that are beyond their economic life and to complete 70 percent of their lesser priority projects. 
Paul Quinn 
: Why was this additional funding given to these four schools? 
Hon ANNE TOLLEY 
: The previous Government was content to let three successive education Ministers maintain a funding freeze while they toyed with these schools the Upper Hutt community and a whole cohort of students—in fact for some students for their entire school life—over the idea of having a super-school. The extra funding that this Government has made available allows the schools to modernise and recognises that these schools and the Upper Hutt community were treated disgracefully by the previous Government. 
Hon Chris Carter 
: Is the Minister aware that her officials told members of the Education and Science Committee on 18 February that very little of the extra school property money was new money; if so which schools missed out in order to fast track her so-called stimulus package? 
Hon ANNE TOLLEY 
: I am delighted to tell the member that these four schools have not missed out on anything. In fact they have got an extra $30 million from this Government—extra money that is going to those schools which that member when he was a Minister would not give even an idea that they could get on with these building projects. That member was content to let those students rot in classrooms that were growing mushrooms in the wall. 
Hon Chris Carter 
: I raise a point of order Mr Speaker. The Minister was asked where the money came from. She has not told us that. 
Mr SPEAKER 
: If the member reflects back he may recollect that he asked whether the Minister was “aware”. When he asks whether the Minister is aware of something the answer will not be very precise. 
Hon Chris Carter 
: I raise a point of order Mr Speaker. I point out that the Minister did not tell us whether she was aware either. 
Mr SPEAKER 
: The honourable member is seeking a little too much assistance. Members need to be aware of the fact that when they ask whether a Minister is aware of something the answer will never be very precise. 
Te Ururoa Flavell 
: Tena koe Mr Speaker. Kia ora tatou. Which school building projects is the Minister fast tracking to support the increasing demand for Maori immersion that has resulted from population growth and calls from iwi for kura kaupapa Maori? 
Hon ANNE TOLLEY 
: The Government will continue to make announcements about bringing forward school building projects in the future and I intend to work with my Associate Minister the Hon Dr Sharples to ensure there is provision for parents who wish to send their children to kura. But I am aware that the process has begun in the member’s own electorate to construct a kura kaupapa in Tauranga. 
Hone Harawira 
: Tena koe Mr Speaker. How will the building projects respond to the significant population growth particularly in the Maori population forecast for parts of Auckland including Waitakere and Hingaia in Te Tai Tokerau electorate? 
Hon ANNE TOLLEY 
: I am pleased to tell the member that one of the school building projects that this Government is bringing forward is the building of Hingaia Primary School in his own electorate. The building of this school is being brought forward by 2 years with construction to start early next year. 
Roading and Public Transport Projects—Recent Announcements 
9.  
Hon DARREN HUGHES (Labour) 
 to the  
Minister of Transport 
: How are last week’s transport announcements totally consistent with the statement in the Speech from the Throne that “of particular focus will be the development of new roading and public transport projects.”? 
Hon STEVEN JOYCE (Minister of Transport) 
: 
 I am pleased to report that they are totally consistent because in the course of last week’s announcements we have committed very sizable investments to both. Last week we announced a 31 percent increase in actual funding for public transport services over actual expenditure for the last 3 years in addition to a Government commitment to provide $750 million worth of electric trains in both Wellington and Auckland. This is on top of the half a billion dollars worth of rail-track upgrades that ONTRACK is already committed to and the further $600 million spent by the previous Government on the double tracking of Auckland’s rail. For roading we have increased funding for new State highway construction by almost $1 billion over the next 3 years and $4.1 billion over the 10-year period. 
Hon Darren Hughes 
: Does the Minister believe that there is a mandate to increase taxes by 6c a litre thus forcing all New Zealanders to contribute funding to only part of Auckland’s transport needs—a plan that was well developed by local people—and why was such a move not signalled in recent pre-election documents or in the Speech from the Throne? 
Hon STEVEN JOYCE 
: I can report that 3c of the 6c the member refers to was scheduled by the previous Government which scheduled a 4.5c a litre increase in national taxes over 3 years alongside the 9.5c Auckland regional fuel tax that it scheduled. It just forgot to tell Auckland that that added up to 14c a litre over 3 years. 
Nicky Wagner 
: How does this Government’s approach contrast with previous approaches to transport funding? 
Hon STEVEN JOYCE 
: Unfortunately the previous Labour Government left office having signed off on a Government policy statement that projected a 9 percent reduction in new State highway construction over the next 3 years. This was despite the fact that 70 percent of all freight in New Zealand goes by road and about 84 percent of people go to work by car truck or motorbike. The Labour Government’s slow-down of State highway construction would have occurred at the very time that the economy most needed State highway construction to increase. 
Hon Darren Hughes 
: Why does the Minister of Transport think Kiwis will accept paying an additional 6c a litre to fund his half-baked ideas for Auckland when his own Cabinet papers show that he is cutting spending on the renewal maintenance and operation of State highways by $123 million and is cutting spending on the same issues for local roads by $75 million? How is that fair? 
Hon STEVEN JOYCE 
: The reality is that we are not cutting expenditure on those items. We are increasing expenditure but just not at quite the same rate that Labour was proposing so that we can invest more—in fact $1 billion more—in State highway infrastructure around the country over the next 3 years. 
Keith Locke 
: How many new public transport projects has the Minister announced since he took office or are they all pre-existing projects some of whose public funding is less certain now such as the building of new railway stations in Auckland? 
Hon STEVEN JOYCE 
: We have not announced significant new public transport projects. What we have done is change the funding of Auckland transport projects. We have focused transport expenditure to match the modes of transport available to New Zealanders to get to and from work every day such as car truck motorcycle bus or train. 
Hon Darren Hughes 
: Do the deep cuts to public transport of nearly half a billion dollars over what had been scheduled mean that the prospect of new electric trains working before the Rugby World Cup in 2011 has now disappeared and that Kiwis and tourists will still have to fork out $70 for a taxi ride from the city to the airport? 
Hon STEVEN JOYCE 
: The member has two problems with his numbers. I do not know where he gets the half a billion dollars from and the electric trains were not scheduled to be in place by the 2011 Rugby World Cup in anybody’s imagination except that of the previous member for Otaki. 
State Highway Projects—Expected Increase in Spending 
10.  
HEKIA PARATA (National) 
 to the  
Minister of Transport 
: What is the expected increase in spending on new State highway construction over the next 3 years? 
Hon STEVEN JOYCE (Minister of Transport) 
: 
 The Government will spend almost a billion dollars extra on new State highway construction over the next 3 years. This represents an increase of 45 percent compared with that proposed by the previous Government. This increase will allow us to build safer and less congested roads. We will invest in infrastructure that will boost this country’s productivity help our companies grow and create jobs. 
Simon Bridges 
: What roading projects will the Government focus on? 
Hon STEVEN JOYCE 
: The Government has identified the first seven roads of national significance on which we expect very significant progress to be made over the next 10 years alongside other projects already planned for around the country. These are in or adjacent to our five largest metropolitan centres. They include the Puhoi to Wellsford link the Auckland western ring route completion the Victoria Park bottleneck the Waikato Expressway the Levin to Wellington corridor the Christchurch motorway projects and of course the Tauranga Eastern Motorway corridor which leads into the member’s electorate. 
Amy Adams 
: What commitment has the Government given to roading projects in the Canterbury region? 
Hon STEVEN JOYCE 
: The roads of the Christchurch motorway projects have been named as roads of national significance. This means we expect to make significant progress in development over the next 10 years which will be a heck of a lot more development than was made over the last 10 years. By investing in these corridors we will improve freight efficiency to Port Lyttelton provide an improved western bypass around Christchurch and improve safety on those roads. In addition improved roading corridors will improve public transport performance and encourage more people to commute by bus. 
Hon Darren Hughes 
: Is it correct that no additional funding has been tagged to any of these seven roads of national significance; if so could the Minister assist the House by ranking the Government’s priority list of these so-called significant roads from No. 1 to No. 7? 
Hon STEVEN JOYCE 
: The member may not be aware that the New Zealand Transport Agency is responsible for the particular projects. It is the Government’s job firstly to provide some funding—which the previous Government signally failed to do when it cut funding by 9 percent—so we have increased that by about $4.5 billion over the next 10 years and secondly to signal projects of national significance which we have chosen because they are the most important projects for New Zealand’s economy and productivity. 
David Bennett 
: How will the Government improve transport links through the Waikato? 
Hon STEVEN JOYCE 
: Following on from our election pledge to complete the Waikato Expressway within 10 years we have nominated this road as being one of national significance. This reinforces our commitment to the people of the Waikato that they will not have to wait the decades they would have waited under the previous Government. This section of State Highway 1 is the main southern road access to Auckland and links New Zealand’s golden triangle of population and economic growth—Auckland Waikato and the Bay of Plenty. It is clear that completing the Waikato Expressway will fuel long-term economic growth and boost national productivity. 
Keith Locke 
: I raise a point of order Mr Speaker. Is it possible for the Minister to table the list of new roading projects that he has referred to? 
Mr SPEAKER 
: I just ask the honourable Minister whether he was reading from an official document or material prepared for his answer. 
Hon STEVEN JOYCE 
: It was material prepared for my answer Mr Speaker. I would be happy to table the press release that announces the seven projects if the member would prefer. 
Mr SPEAKER 
: That will not be necessary. The point of order related to the fact that if the Minister was quoting from an official document then leave could be sought to have it tabled but it does not relate to material prepared just for his answer. 
Keith Locke 
: I seek leave to table a list of the new public transport projects—namely a blank sheet of paper. 
Mr SPEAKER 
: I guess I have to ask the House whether there is any objection to a blank sheet of paper being tabled. There is no objection—[ 
Interruption 
] There is dispute as to whether there was objection; I will seek leave again before the document is tabled. Leave is sought to table a blank sheet of paper. Is there any objection? There is no objection. 
Document by leave laid on the Table of the House. 
Drinking-water Standards—Minister’s Statements 
11.  
BRENDON BURNS (Labour—Christchurch Central) 
 to the  
Minister of Local Government 
: Can he explain what he meant in telling the New Zealand Community Boards Conference in Christchurch last Friday that the new drinking-water standards being implemented are “ridiculous“ and under review by the Government? 
Hon RODNEY HIDE (Minister of Local Government) 
: 
 Of course I can. 
Brendon Burns 
: Does the Minister maintain that it is “ridiculous” for rural communities such as Cheviot in the Kaikoura electorate to expect safe drinking-water when Canterbury’s medical officer of health has warned that he will declare a public health emergency if the township’s supply is not urgently improved? 
Hon RODNEY HIDE 
: On taking over the job as Minister of Local Government what I found to be “ridiculous” was that representatives of local government were coming to see me complaining about the tens of millions of dollars of cost being imposed on them by the previous Government. When I went back to Ministry of Health officials they disputed the order of magnitude of those costs. I have undertaken to get a proper assessment of the costs as I think is prudent and they will be put before us by 9 April. I have also written to the Minister of Health and said that in the meantime we should put this on a moratorium. I think that is quite reasonable. It is ridiculous to impose this cost without knowing what it will actually cost. 
Brendon Burns 
: Can the Minister confirm whether the Government will maintain the $136 million in funding being provided over 10 years to assist small communities to achieve safe drinking-water standards? 
Hon RODNEY HIDE 
: One of the problems we have with that is that it is another promise that the previous Government made without setting aside any of the money. The second problem is another one that we have constantly come across: the money that has been promised is woefully inadequate because the costs that local government has cited total $700 million—for example $56 million in Taupo $20 million in Thames-Coromandel and $20 million in Hauraki. What I am saying is that before proceeding we should get an assessment of what this will cost and what will be required. 
Retail Deposit Guarantee Scheme—FAI Finance 
12.  
JOHN BOSCAWEN (ACT) 
 to the  
Minister of Finance 
: Does he believe it was “necessary or expedient in the public interest” to grant a guarantee to FAI Finance Ltd as required by the Public Finance Act; if so why? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 One of the overarching principles of the retail deposit guarantee scheme is that the grant of a Crown guarantee to an entity must be necessary or expedient in the public interest where the public interest is either in the maintenance of public confidence in the financial system or in maintaining the confidence of general public depositors in New Zealand’s financial institutions. The effect of this requirement has been that in the early stages of the guarantee those who are delegated to grant entry have been focused principally on maintaining public confidence in the financial system rather than only on credit risk. 
John Boscawen 
: Does he feel it adds insult to injury for investors who have lost money in the Hanover group of companies to now as taxpayers have to guarantee losses in FAI Finance Ltd which is a member of the same Hanover group? 
Hon BILL ENGLISH 
: I can understand people having concerns about any number of the activities that have gone on in the financial markets but I stress that the point of the guarantee when it was brought into place was to maintain public confidence in the whole system. It has put those who are delegated to provide the guarantee in the situation of having to weigh up general public confidence on the one hand with the particular aspects of any individual applicant for the guarantee. 
Hon Jim Anderton 
: Can the Minister advise the House what it was specifically about FAI Finance and its parent company Hanover Finance that convinced him that a guarantee for that company complied with Treasury policy guidelines for Crown guarantees of “the maintenance of public confidence in New Zealand’s financial system; and . . . maintaining the confidence of general public depositors in New Zealand financial institutions.”? 
Hon BILL ENGLISH 
: Any company that has the guarantee has it because it complied with the requirements. I think Parliament needs to keep in mind that the fundamental intent of the guarantee was to prevent a series of collapses of financial institutions for the reason that depositors felt their money was not safe and that has been a significant factor in determining who the guarantee applies to. 
Urgent Debates 
Transport Funding—Replacement of Regional Fuel Tax with Increased Fuel Excise Duty and Road-user Charges 
Mr SPEAKER 
: I have received a letter from the Hon Darren Hughes seeking to debate under Standing Order 380 the announcement made by the Minister of Transport to replace regional fuel taxes with national increases to fuel excise duty and road-user charges. This is a particular case of recent occurrence and it does involve ministerial responsibility. The announcement concerns a new development of national significance that I consider does require the immediate attention of the House. I call on the Hon Darren Hughes to move that the House take note of an urgent matter of public importance. 
Hon DARREN HUGHES (Labour) 
: 
 I move  
That the House take note of a matter of urgent public importance 
. What a shambolic announcement we heard from the Government last week. Last week we saw the National Government in its full and absolutely transparent form. It was a Government determined to be unfair to everybody—unfair to the people of Auckland who got half a plan and unfair to the people of New Zealand who are dumped with the responsibility of paying 6c a litre to fund half a plan for Auckland. 
It was staggering today in the House to watch the Minister of Transport Mr Joyce who was so proud of the announcement he had made. He wandered into office at the end of last year as a new MP as a man of free enterprise and private enterprise but he decided pretty quickly that the big Government of Wellington knew all the answers. That was the approach he took as he went up to Auckland and upset what had been put together in order to ensure that that fine city could have its transport questions met. 
But he was completely unaware of the three miracles that had occurred in Auckland. No. 1 was that everybody had agreed on something; all the regional councils all the city councils and even the district councils that surround the city of Auckland had agreed on what needed to be done to settle Auckland’s transport issues once and for all. They knew that the previous Labour Government had finally changed transport funding so that a percentage of what they got from the National Land Transport Fund would match the size of their populations. But they also knew that some of those projects could not be achieved in just one funding period and that to put it all together in one big plan would require some extra funding. And that is where the second miracle of this story comes in because Auckland had agreed on how to pay for it. So we had two good things going that all the Ministers of Transport in New Zealand’s history would have been happy to have handed to them on a plate: No. 1 was a regional agreement in our largest city and No. 2 was an agreement on how it should be funded. 
The third miracle was that the councils had then consulted with the people of the Auckland region. And guess what? They agreed to it. I cannot think of another tax where a regional government has gone out to the people of its community and said: “We’d like to levy you this amount of money in addition to what you are paying now.” and people have come back and said: “Yes it makes sense because this is the total package of what we are going to be getting.” 
So Auckland had these three miracles lined up in a row; it was a once-in-a generation chance for any political leader in terms of the transport portfolio to walk into office pick it up and run with it. In fact in fairness to Mr Joyce he could have come into office with all the radio-marketing charms he so helpfully informs his colleagues about when he is telling them off in the lobbies—but that is a story for another day—and he could have said: “The evil terrible left-wing Labour Government put in place this regional fuel tax; we in National are against it. But look so much water has gone under the bridge so much work has been done and you are so close with your rail electrification your Penlink road your ferry wharves and your integrated ticketing—you are so close with all the work you are going to do that we reluctant though we are to agree are going to let it sail through.” Then the Minister could have turned up every 6 months for the next 2 years 7 months 3 weeks and 3 days that he will be a Minister and cut ribbons all over the place to celebrate what had happened while nailing Labour as the Government that had allowed the funding regime in Auckland. But he even gave up that chance and in doing so he has left Auckland with half a plan that does not meet the needs of our biggest city and he has socked it to every provincial and rural area in New Zealand which is now forced to pay 6c a litre extra in order to pay for just half a plan. 
I asked the Minister of Transport during question time where it was in National’s pre-election commitment that we would all be paying 6c a litre extra. His big answer was: “Oh well Labour was going to make you pay 3c a litre extra.” The difference was that we had said that before the election and we had gone out and campaigned on a plan for Auckland we were proud of because it would have made a difference. But all the Minister could say was: “It’s a little bit more than what Labour had planned even though we didn’t front up before the election.” So the low-tax party in its first genuine policy decision has put taxes up—so much for the Minister being a right-winger! We have read all about the way he mixes messages in a certain book of a certain name but the approach he is trying to make here takes the cake. 
Let us go through the plan that Steven Joyce has left the people of Auckland. First of all we know that this Government is not committed to public transport one iota. In fact Steven Joyce and the National Party oppose public transport so much that they cannot even mention the words. Do you know what they call it? They call it “non - State highway classes”. We call them trains buses and ferries but over there on the other side of the House they say “non - State highway classes”. I would have thought it was political correctness gone mad not to refer to trains by their name. Labour stood in favour of trying to make sure there was more public transport for Auckland because every city in the world knows that people can be moved efficiently affordably and with environmental sensitivity only if it has a proper public transport plan in place. In fact there is a fourth layer to that now as we find ourselves in the midst of a global financial crisis which is that countries all around the world are using public transport as an economic measure to try to kick start their economies and get things moving. But National members have come out and said that they are not in favour of that at all. 
National has chosen to electrify the Auckland railway line. The whole country is going to pay for that—mind you the whole country is going to pay for a lot of things. I have watched National backbenchers get up and crow about roads in their area but one day the bills will arrive on the Minister’s table and he will find out that it is not possible to keep on saying to everybody: “I’m going to fund this. Don’t worry; we’ll close off revenue streams left right and centre because I will just make sure everything can happen.” We are going to have electrified railway lines; that is a good thing. And there will be trains on them. Of course there is a tender out at the moment from the Auckland Regional Council for those trains but the Minister has cut up right in the middle of that as a member of the so-called business-friendly party that does not care about all the work that is going on there. 
There is one problem: there is no guarantee of providing stations. I am not sure of the last time that man took a train but the last time I was on a train—last week—I had to go to a station and get on a platform in order to get on the train. He must do that unless of course he is going to run after the train and jump on it at the point it comes in like some sort of superhero. He will be looking for trains into Wellington Station that have “CR” on the front of them as if they were some sort of VIP service with a Crown carriage for National Ministers who are used to things waiting for them. But of course working people cannot do that; they have to get on at a railway station. We know that right across the Auckland region National has put railway lines into jeopardy—right left and centre. My colleague the member for New Lynn the Hon David Caygill—the Hon David Cunliffe I am sorry—[ 
Interruption 
] There are so many fine Davids in this party as there are in another book. But the member for New Lynn has pointed out that in relation to the railway station in his electorate funding for an extraordinary trench already built through it for a new station is now up in the air. What does the Minister of Transport say about that? He says: “Oh well we cannot fund everything and we will get around to that. I’ll send a letter to the New Zealand Transport Agency about it because I don’t make the decisions. By the way if you”—the agency—”are still listening here are seven roads I’d like funded.” So on some things he can tell the transport agency what to do but on other things of course these decisions are well outside his scope. 
There are other railway stations too. I know that Carol Beaumont is worried about the Onehunga railway station in that area and Darien Fenton has raised questions about the Helensville railway station as well. We know that if we are going to move more people there is no point in electrifying a railway line if people cannot get on a train at a station. 
 What other options in terms of rail does this close off? Well thanks to the extraordinary work of the Rt Hon Helen Clark we are going to host the Rugby World Cup in 2011 which is a very good thing indeed. There was a prospect—I admit that it would have taken some work—that we could have achieved the use of electric trains on that railway line by 2011. But the Minister said that because it was only a chance there was no point at all in shooting for it. I remember a time when the National Party was ambitious for New Zealand—oh yes. That was during the election campaign. But the Minister regards that now as a marketing campaign that is over. It went off the air in November. He is on to 2009 now and National is more—what is the phrase—ambiguous for New Zealand rather than ambitious for New Zealand in that respect. The Minister said we are not going even to bother to try to meet that target. That means that Aucklanders who are trying to get around their city or other New Zealanders who are going to watch a game—if of course they can win a raffle and afford a ticket—will not be able to use a public transport system that could move thousands and thousands of people and tourists around our country. 
I thought that the Minister of Tourism might have had a view about that but he would rather people cycled than took trains. Actually that is another interesting aspect of this package. It is an economic miracle for this country to defy the global financial crisis to build a cycleway from Cape Reinga to Bluff. That is a miracle but there is no money for cycleways across Auckland. So if people want to come as tourists to New Zealand they can save our entire economy by cycling around as tourists but if people want to go to work and save a bit of money by going on bikes then that is ridiculous and PC nonsense and Steven Joyce has come along and cut it out of the programme. Going to work or school on a bike is another thing called a “non - State Highway class” and it is one of the things that have gone as well. But it is OK to have a national cycleway for New Zealand although as Mr Goff was able to expose during question time there are more questions than answers with regard to the cycleway. Yet when it comes to working people trying to use alternatives to road there is no such opportunity for them whatsoever. 
What are some of the other parts of the package that the Minister has in effect been able to set out to ruin? One of the local body leaders who has done a lot of work on this is the Mayor of North Shore. He has regarded the Waitemata Harbour as being a possibility for an untapped motorway for New Zealanders trying to get across the harbour in Auckland. Local bodies have gone and put a lot of work into wanting to build new wharves for ferries and into trying to encourage that mode of transport for people. But all that has gone under the plans that Steven Joyce is talking about. Every single proposal there has gone. Ferry development is another proposal that is now at the whim of the New Zealand Transport Agency apparently and there is no funding in sight or planning for where it will come from. So if people are interested only in roading if they think that roading is the only answer to every solution and if they have tunnel vision for just one form of transport in New Zealand then maybe—possibly—they might welcome what the Government announced last week unless they do not want their petrol to go up. 
There are some areas of New Zealand—the Minister is actually correct on this—where people can rely only on roading because there are no public transport facilities. The member for Ikaroa-Rawhiti the Hon Parekura Horomia pointed this out to me in one of our usually enlightening conversations. He said to me that in Tolaga Bay where he is from they already pay $1.84 a litre just to get gas. The Minister an Aucklander pays $1.59 a litre when he wants to put gas into his car so there is already a 25c difference between living in Tolaga Bay or in the regions in New Zealand and living in Auckland. And now the Minister is going to go and put another 6c on top of that so that people in Tolaga Bay will pay 31c more than what Aucklanders pay today. Where is the public transport for Tolaga Bay? Where is the extra roading for Tolaga Bay? 
Hon Parekura Horomia 
: Railway stations. 
Hon DARREN HUGHES 
: Where are the railway stations? Where are the ferry wharves? Where are all the things that the people of Tolaga Bay should be entitled to? Where is that transport going to be? It is nowhere for them. They will pay 31c a litre more than what Aucklanders are paying today and Government members laugh about it. They think it is hilarious because they are not interested in rural or regional New Zealand—not one bit not at all. 
We know one thing though. We know that the Minister is very susceptible to fixing up areas where people go for holidays. If people go for holidays at these places their roading gets fixed up. So the Kopu Bridge project is going to be done because the Minister’s friends go and have holidays there. No one believes that that is due to the advocacy of the member for Coromandel. Nobody believes that Sandra Goudie’s advocacy has got the Kopu Bridge project brought forward—nobody does. We know that the Minister would have had his mates over the summer saying: “I was hanging out in the Jag and tried to get across the Kopu Bridge. You’ve got to do something about that; you’re a Minister now.” and the Minister would have said “Oh yes. I will fix that one straight away.” He has left the Waterview project in Auckland hanging. He has left the Transmission Gully scheme in Wellington hanging. He has left hanging the things that working people want to use all the time but he is bringing forward the Kopu Bridge project. So we know that holiday areas count with the Minister which is why I want to know from him when he speaks next why the people of Hahei have to pay $1.89 for their gas right now and why he will put another 6c on top of that. That is what he is going to do to the people who are living in the Coromandel. Their gas prices are all going up at a time when people are finding it tough. 
The previous Labour Government got crucified by the then National Opposition about fuel costs but those members could not wait to get on to the Treasury benches and hike up taxes for New Zealanders without actually making sure they were delivering a proper plan and that is what is wrong with this announcement. The announcement that was made last week is unfair because it hits people doubly. People living in Auckland will not be getting the joined-up transport that city needs. Nor will they have integrated ticketing. The Minister acts as though the single ticketing that people could use on a ferry train or bus is some sort of miraculous science that requires more work more effort more reviews more inquiry— 
Hon Dr Michael Cullen 
: More bureaucrats. 
Hon DARREN HUGHES 
: —and more bureaucrats as Dr Cullen points out. When visiting any city around the world anyone can see that one of the features of a decent public transport system is integrated ticketing which is why that was so important as part of the plan for Auckland. But that project is going as well. 
But it was not just a public transport plan that got whacked last week; it was also roading. That is why I would like to know what the leader of the ACT Party wants to say about the plan announced last week because he must be very disappointed. With Penny Webster—who is a very fine former member of Parliament from the ACT Party and who is now the Mayor of Rodney—he had negotiated for their peninsula to be included in the package with the Penlink road. The Minister had said they would call that by a new phrase: “a strategically local road”. No one knows what that means—it has no criteria—but somehow the ACT Party was pleased that it was going to be labelled in that way. Yet it was thrown out as part of the package. I know that the ACT Party had voted for that legislation last year because they could see that the plan was comprehensive. I know they do not all have to vote together any more as part of a sort of highly regulated system they have of casting party votes—lots of rules and things like that. They do not have to have five votes all the same. So I want to know from ACT which of its members actually supports what the Government did last week because the Mayor of Rodney does not support what happened. People there know they were treated unfairly. 
So we have this new Minister from Wellington coming in and knowing best and thinking that big Government has all the answers. He waltzed into Auckland last week and upset the apple cart but in doing so he slugged the people of New Zealand who will be ripped off to the extent of 6c a litre and he ripped off the people of Auckland who for once had the chance to get their transport needs sorted out. I think that that is a matter of urgent public importance the Minister ought to explain to the House. 
Hon STEVEN JOYCE (Minister of Transport) 
: 
 The Hon David Hughes formerly of Otaki and now of no fixed abode comes running forward at 100 miles an hour and comes face to face with reality. 
Hon Annette King 
: And he’s got more hair. 
Hon STEVEN JOYCE 
: He does have more hair; he used to have a lot more hair actually. 
Let us look at the problems with the member’s argument. The first problem is that he neglects to mention that the previous Government proposed increases in national taxes of 1.5c a litre per year over the next 3 years. That was conveniently forgotten and not mentioned before the election. All we talked about then was the potential for regional fuel taxes. The previous Government forgot to say: “Oh by the way we’ll still be putting up fuel taxes. Oh did we forget to mention that?”. It realised that a tax of 14c a litre in Auckland would probably not be as well received as 9.5c which is less than 10c. The previous Government’s proposal was 4.5c a litre higher. So the member is criticising the National Government for an increase of 1.5c a litre per year for 2 years. He is criticising a national fuel tax increase of 3c a litre over 2 years. 
That was his first mistake. His second mistake was to try to suggest that somehow that means— 
Hon Dr Michael Cullen 
: I raise a point of order Mr Speaker. The member is a new member. Perhaps Mr Assistant Speaker you could draw his attention to the fact that it is actually permissible to look at members opposite in the House. We have not had any eye contact so far at all. 
The ASSISTANT SPEAKER (Eric Roy) 
: That is not a point of order. 
Hon STEVEN JOYCE 
: Then there is—[ 
Interruption 
] Yes I have a much more interesting view looking down here. The next issue is about what the money from national fuel taxes is to pay for. Mr Hughes—Darrell Hughes—says that it is to pay for Auckland’s railway projects. 
Hon Steve Chadwick 
: Darren Hughes. 
Hon STEVEN JOYCE 
: Sorry David Hughes that is right. 
Hon Darren Hughes 
: I raise a point of order Mr Speaker. I am not a precious person so it did not bother me the first time— 
David Bennett 
: Sit down then. 
Hon Darren Hughes 
: I have a point of order and David Bennett is interjecting so maybe we will deal with that first. 
The ASSISTANT SPEAKER (Eric Roy) 
: Points of order will be heard in silence. We will enforce that and members must acknowledge that. 
Hon Darren Hughes 
: My original point of order was that it would be helpful for orderly and good conduct of debate if the member could get my name correct. I called him Steven Joyce. That is his name. My name is Darren Hughes. I am very proud of David Hughes but that is not my name. 
The ASSISTANT SPEAKER (Eric Roy) 
: I think that is a fair call. 
Hon STEVEN JOYCE 
: So Mr Hughes Darren Hughes—is “Dazza” OK?—“Dazza” Hughes tries to tell us that the Auckland railway projects will be paid for from a national fuel tax which of course is not the case. As we said in the releases of last week those projects are being funded through KiwiRail. We have made a commitment in principle for KiwiRail to own the passenger trains in Auckland and Wellington. Members might ask why that has changed since last year. The reason is that halfway through last year the previous Government made a decision to change track so to speak and to go out and purchase KiwiRail. It does not seem to make any sense to me or to the average layperson that the Crown would fund over a long-term period potentially three rail owners the Auckland Regional Transport Authority KiwiRail and the Greater Wellington Regional Council which are all effectively funded by the taxpayer through petrol taxes or through other means. That makes no sense at all. It leads to increased costs poor administration and lots of extra overheads. It just does not make any sense at all. 
In terms of the remaining projects—the diesel trains railway stations and Penlink—the Auckland Regional Council has committed around $80 million of ratepayers’ money to these projects above the regional fuel tax. We have said to the council and I have said in writing to the council chairman Mr Mike Lee that once that money has been invested the New Zealand Transport Agency will be available in principle as it has advised to assist with any bids for any shortfall funding that is required for projects that are already under way. 
Let us look at the regional fuel taxes again at the rest of the country and at which regional fuel taxes were proposed. A number of regional fuel taxes are about to come on to the drawing board. These fuel taxes are for Waikato Wellington Bay of Plenty Canterbury and Taranaki. The reason they were all coming on board was that the previous Government had reduced its expenditure on State highway infrastructure so that all the local regions had a huge number of projects that they knew had absolutely no chance of proceeding very far. They felt they would have to introduce regional fuel taxes in order to undertake those projects. They were being forced into introducing those regional fuel taxes. 
Of course the previous Government rather than actually fronting up to say that a bit more should be added into the national fund—which incidentally it was going to do anyway—said that the high administration costs and boundary issues of regional fuel taxes were all worth it as long as nothing happened that was the Government’s fault. The smaller national increase in national fuel taxes—which New Zealand as a whole will benefit from contrary to what Mr Hughes said through the National Land Transport Fund—will generate an additional $283 million over the next 3 years. On top of that the Government has put in $258 million in new Crown investment so right there is an additional $541 million in the National Land Transport Fund. We reviewed the allocations that the previous Labour Government had made on various activities in the National Land Transport Fund. We discovered that the previous Government had huge increases planned in some areas of the fund on top of other increases that occurred over previous years and a 9 percent decline in State highway construction. That made absolutely no sense. 
Whether we like it or not—and this is where reality intervenes I say to Mr Hughes—84 percent of New Zealanders travel to and from work each day by car bike motorcycle or truck. That is just the reality. We cannot build a transport system for what we would like. We have to build a transport system for what people use unless we are arrogant enough to believe that we can and should completely change the way people go to and from work. We would have to be as arrogant as that to believe this. Of course that approach tends to be used in respect of Governments that are in their dying days and sometimes those Governments get thrown out. 
 We reviewed those allocations and we were able to put up an additional $400 million - odd for State highway construction. State highways in New Zealand represent 11 percent of our roading system. One might not think that that is very much but over half of the traffic that travels on New Zealand roads travels on our State highway system. The Labour Government was going to reduce the amount invested on that by 9 percent. That is a travesty because those roads are also some of the toughest roads in respect of road safety. Let us look at these roads. Over the last 10 years there have been 21 fatalities on the road from Puhoi to Wellsford 55 fatalities on the road from Ohinewai to Cambridge and over 80 fatalities on the road from Foxton to Paremata on State Highway 1. I am sorry but as a country we need to engineer better roads in those areas. We received a cheap shot from Mr Hughes last week when he suggested that this Government did not care about road safety. Well I care about road safety. I care about the need for a divided highway in parts of the country where there has been large numbers of fatalities. 
We have come up with a direction for the New Zealand Transport Agency whereby it will focus on roads of national significance and there are seven of them. Funnily enough they happen to be around our largest five metropolitan areas in the country. They just happen to be some of the busiest most congested and most bottlenecked roads and they have the worst safety records. We have identified what to focus on and that is the Puhoi to Wellsford road the completion of the Auckland western ring route the Victoria Park bottleneck the Waikato Expressway the Tauranga eastern corridor the Wellington northern corridor and the Christchurch motorway projects. What did the previous Government do to move those roading projects forward? Well it sort of— 
The ASSISTANT SPEAKER (Eric Roy) 
: I am sorry to interrupt the member. There is no point in having debates across the Chamber. Interjections are permitted if they are rare and reasonable but members are getting into dialogues that are excluding the speaker who is on his feet. I call order to the House. 
Hon Darren Hughes 
: He’s just so boring. 
Hon STEVEN JOYCE 
: The truth can sometimes be boring I say to young “Dazza”. The previous Government did not even design the Puhoi to Wellsford section and it had no plans to complete it within 10 years. That Government came up with a plan to spend $3 billion on the Waterview Connection but it had no plan or funding to pay for it whatsoever. However I give that Government half a point for its work on the Victoria Park bottleneck because work was set down to start happening on that in the next year or so. 
The Waikato Expressway was on the absolute never-never. I remember back in the 1990s that that road was set down to be completed by about 2008 but hello two-thirds of it is still not done. In respect of the Tauranga eastern corridor the previous Government told the local region that it would get that road only if it turned up with regional fuel taxes and a toll. The Wellington northern corridor is one of the cruellest of all in terms of road safety. That Government went to the regional councils and said: “You want Transmission Gully? OK well here’s the deal: we’ll give you $400 million.”—which just to be clear is not appropriated—”We’ll have to call that a ‘notional’ $400 million and you have to come up with the other $600 million.” If we do the maths even with a regional fuel tax in Wellington we see that it is well short—hundreds of millions of dollars short. So that was a road that the previous Government promised without actually promising a road. It basically said to the people of the Wellington region that they could not have the road but if they were able to go out and borrow hundreds of millions of dollars then it could be done. 
Then we have the Christchurch motorway projects. Over the last 9 years Christchurch has been getting back roughly half of what its local people have been spending in fuel taxes. That is what has been happening in Christchurch over the last 9 years. Opposition members have the temerity to criticise us for coming up with some plans to invest in roading around the country and they try to say that it is all for Auckland. Well those members should ask the people of Christchurch how much has been invested in their roading over the last 9 years. So there we have it. 
The previous member for Otaki the current list member has tried to tell us today that the removal of the regional fuel taxes means that the rest of the country pays for Auckland’s electrification. He is wrong. He tried to tell us that we are putting up national fuel taxes by 6c. That is also wrong; it is 3c over 2 years on top of what the previous Government said. He tries to tell us that a billion dollars in extra State highway construction over 3 years is not a big deal. He tries to tell us that the $4.4 billion over 10 years is also not a big deal. I say it is a very big deal. It is a very big deal for this country. It will be the largest investment in roading infrastructure that has ever been undertaken in this country. It will help national productivity. It will reduce congestion. It will help our economic growth as we come out of this recession. The biggest problem with Mr Hughes’ criticism of it is that he is upset that his Government did not think of it first. 
JEANETTE FITZSIMONS (Co-Leader—Green) 
: 
 Even the International Energy Agency which has long argued that there will never be any shortage of oil has changed its tune recently and it now says that demand will exceed supply within the next decade. Many very competent analysts think that it already has and that only the world recession and the demand destruction it has caused are disguising that promise. 
New Zealand is an extremely oil-dependent nation—oil-dependent for its trade for its transport and for its production. The high price of oil towards the end of last year contributed to our current account deficit contributed to our high inflation rate as the Finance and Expenditure Committee found in its inquiry and contributed to massive budgetary pressures on households. The price dropped from $2.20 a litre in New Zealand or from US$150 a barrel in August last year only because of a world recession which the oil price had partly contributed to and that then reduced demand to the point where the price dropped. But the price will not stay there if we ever get out of this recession. 
New Zealand is highly car dependent: it has poorly developed public transport it has more kilometres of sealed road per person than pretty well any country in the OECD and it has poor cycle facilities. Transport is the largest source of carbon dioxide emissions in New Zealand and we have the fourth-highest level of climate change emissions per person in the OECD and that is still rising. If ever there was a time to make a case to protect our economy by making our transport system more efficient it is now but we have just seen from this Government in the last week or two the biggest step backwards on transport policy in decades. 
It took Labour much of its 9 years in Government to start to take public transport and alternatives to roading seriously but it eventually did so under pressure from the Greens. For years I have put up with being treated like an imbecile in the House—”But Jeanette buses need roads too.”—as though I was somehow arguing that we should do away with roads altogether. But the Greens and I have always argued for changing the balance of new spending between roads and the alternatives to them to give us the security of some alternative means of transport for both freight and people. Eventually Labour got it and at the end of its 9 years it reached a ratio of spending of only $5 on roads for each $1 on all the alternatives put together—public transport walking cycling and travel demand management etc. Of course that $5:$1 ratio is far too high but the new Government policy statement on land transport funding that this Government has issued raises that to between $7:$1 and $9:$1. That is a recipe for gridlock for a blowout in our oil bill and for rising carbon emissions. 
The projected spending by this Government on public transport infrastructure according to its own figures is set to fall from $144 million a year to $45 million a year. That is decimation; only one-tenth of what is being spent in the current year is proposed to be spent next year. The announcement about removing the regional fuel tax and replacing it with a national fuel tax was framed very cleverly as an argument about who should pay for Auckland’s transport projects. Never mind that ever since 1990 and until the last 3 years Auckland has contributed more petrol tax to the general fund than it has received back in all transport spending so the rest of the country is in Auckland’s debt. However the framing of that announcement as being simply about who should pay disguises the much more important issues of what actually should be built and what should be funded. 
The Government has announced an extra billion dollars for new State motorways. Where will that billion dollars come from? It is actually not all new funding because $420 million of it—nearly half of it—will be coming from other transport projects that are currently funded but that will not be funded in the future. Of that extra billion dollars for new motorways $420 million is coming from public transport from walking and cycling infrastructure from safety programmes and from maintenance. So we are going to have a whole lot more roads but we will be maintaining them in a much worse way. They will be fun to drive on will they not? 
Wednesday last week was Walk2Work Day. Living Streets Aotearoa which runs its programme to encourage people to walk to work ran an event down on the waterfront. It was opened by the Minister of Transport who had the gall to go down there and tell them in his speech what a great idea it was to walk to work. What he did not tell those people was that 2 days earlier he had taken $15 million away from them away from people who walk and cycle to work and given it as a handout to people who drive to work. Well that is a great way of encouraging people to get out of their cars and walk to work is it not? I called it “Hobble to Work Day” because that is how it will be trying to walk to work under this new Government. The Minister’s excuse was: “We needed a better balance in funding.” Well that balance has just been made worse. It is no longer 5:1; it is now between 7:1 and 9:1 according to the Government’s figures. 
The other excuse given was that most people drive to work; therefore we should spend most of the funding on cars. But why do most people drive to work? It is not very hard to work out. For decades we have funded motorways and we have not funded public transport. Most people do not have an option about how to get to work so “Let us continue to fund what they do now because they have no choice.” and they will continue to do it because they have no choice. 
Darren Hughes was worried that the Penlink road to Whangaparaoa will not be built under this project. Under the Official Information Act I recently got the advice of Treasury and the Ministry of Transport to previous Ministers. It showed that much better projects with much better benefit-cost ratios than Penlink could have been done in the Auckland region with the regional petrol tax. Those agencies advocated to Ministers a package of road safety pedestrian and cycle projects spread across the region which more fairly spread the benefits across the whole region and which had a very much higher benefit-cost ratio than Penlink but that information was never drawn to the attention of Cabinet in the Cabinet paper. 
The Minister says that we cannot change people’s behaviour and get them out of their cars. The information he needs from his officials is that at peak hour public transport around the country is full. The trains are full and the buses are full. We cannot get any more people out of their cars at peak hour until we have more trains and more buses unless we are going to mechanically shove people into carriages and slam the doors behind them as they do in Japan. People cannot use transport if it is not there. Aucklanders have demonstrated very very clearly with the rise in petrol prices that they will leave their cars at home if they have an alternative and that they want better public transport. Every survey has shown that they want better public transport; it is up to the Government to make sure they have that opportunity. 
The papers I received last week also show that the electrification of Auckland’s rail system has a benefit-cost ratio of only 1 unless we do the surrounding projects of integrated ticketing real time information for passengers and upgrading of stations so that people do not have to wait in horrible places. Those projects have a benefit-cost ratio of 3:4 but they are being left unfunded to apply to the National Land Transport Fund on the chance of getting funding with a financial assistance rate that means they will still have to pay around half of it in Auckland. 
JOHN BOSCAWEN (ACT) 
: 
 I thought it was very interesting that Jeanette Fitzsimons asked a question. She said if ever there was a time to make our transport system efficient it is surely now. I could not agree with her more. There is no better time than the present to make our transport system efficient. I campaigned for the ACT Party on our 20-point plan. One of the most important parts of that 20-point plan was the need for spending on infrastructure. 
Hon Darren Hughes 
: Putting up taxes? 
JOHN BOSCAWEN 
: Well the taxes on people in Auckland who Jeanette Fitzsimons tells me have been paying more than their share and subsidising the country have just been put down. 
Mr Hughes called for an urgent debate. I listened to what he had to say and I really found it very hard to accept what he contributed. 
 What did he contribute? He said he could not believe that Aucklanders would actually vote for a regional tax. He said the Minister was looking a gift horse in the mouth because Aucklanders had voted for a regional tax. Then when the Minister was speaking Mr Hughes interjected to say the regional tax was Aucklanders’ idea. Well Mr Hughes comes from Otaki so let me explain to him why Aucklanders voted for a regional tax. I know something about this because I am an Aucklander. The reason Aucklanders voted for a regional petrol tax was that the transport system in Auckland is shocking. It is shocking. If we want to have a world-class transport system in Auckland then we have to have a system that does not close down at peak hour or when there is a motor vehicle accident on the southern motorway. 
We have had 9 years of a Labour Government and to Labour’s credit it had started to spend on infrastructure in the last 3 or 4 years. Labour started to do that then but for the first 3 or 4 years of its 9-year term we had very little spending on transport in Auckland. Work has been going on in linking the south-western motorway to Manukau City and the southern motorway and one can see that if one drives down the southern motorway today. But I ask why that was not done 15 years ago. The road that was put through from Onehunga to Auckland Airport was so successful that the length of it is now being doubled. Once again that road could have been built 10 years before it was built. 
Mr Hughes said the whole country will pay for this transport spending—the infrastructure that is going into Auckland Tauranga Wellington and Christchurch. 
Hon Darren Hughes 
: No. 
JOHN BOSCAWEN 
: I tell Mr Hughes that he said the whole country will pay but what he does not realise is that the whole country is already paying. Auckland is the powerhouse of this country. Auckland is the powerhouse that generates employment income and taxes and Auckland is not operating efficiently. Who pays for that inefficiency and its effect on our productivity? The whole country pays. 
One of the fundamental things in ACT’s 20-point plan that we highlighted was the fact that living standards in New Zealand have fallen 20 percent below living standards in Australia. I ask why that is. If one goes to Australia if one flies into Sydney one sees some of the world’s best motorways. One can go right into the city on an express road—straight through. What does one have in Auckland? If one tries to drive from Auckland Airport into the city in the peak-hour traffic it takes an hour. I doubt whether there would be a single member in this House who when he or she goes to Auckland does not base his or her travel plans around the traffic on Auckland’s motorways. That situation is a huge cost. It is a cost not just to Aucklanders but to all New Zealanders. 
Mr Hughes said the National Government will leave Transmission Gully hanging. Well that member’s Government was in power for 9 years so I ask who left Transmission Gully hanging. The article that I read in the  
Dominion Post  
last week told me that National has committed itself to make a decision on Transmission Gully in the next 12 months and if this Government can achieve that in 12 months then that is more than Mr Hughes’ Government achieved in 9 years. Mr Hughes also said that National is leaving the Waterview Connection project hanging. I ask why it would not. 
Jeanette Fitzsimons talked about spending money on cycleways and busways. New Zealand spent $1 billion on buying a railway system that Treasury had virtually written down to zero and what did the previous Labour Government propose? It proposed the building of a 4.5 kilometre tunnel under the electorate of Mt Albert—a 4.5 kilometre tunnel. That tunnel was forecast to cost $2.5 billion but that is not the cost because that tunnel was to be two lanes in one direction and two lanes in the other. It was to be a four-lane tunnel. If it was to be anything like the Auckland Harbour Bridge which was built over the Waitemata Harbour in the 1950s then it would not be 5 years before the tunnel would have to be widened and extended. Mr Joyce said that if we are committed to building that tunnel then it will have to be built with at least three lanes in each direction. That ignores the fact that the motorway from Onehunga which will be linking into it is currently being extended to four lanes in each direction. So the reality is that building a 4.5 kilometre tunnel under Mt Albert would cost all of the taxpayers of this country over $3 billion. 
If we are serious about building infrastructure about making Auckland a world-class city and about making New Zealand a world-class country then we need to complete the transport system in Auckland and if we are to build a tunnel under anything in Auckland then we should build it under the Waitemata Harbour. Right now accidents on the southern motorway can bring the city to a standstill—and if members have not seen that I invite them to come to Auckland and I will show them around—on any afternoon from 3.30 to 6.30 in the evening and from 6 o’clock until 9 o’clock in the morning. People used to leave their homes on the North Shore at 6.30 a.m. to avoid the traffic. The reality is that they now do so at 6 o’clock in the morning if they want to be efficient and productive. As a city and as a country we cannot afford to have an inefficient transport system. 
I would like to see the National Government come to the conclusion that building a 4.5 kilometre tunnel under Mt Albert is folly. It is a waste of taxpayers’ money. We should be building that road and linking it up with the Waterview Connection as quickly as possible and we should then continue that road from Waterview through to Point Chevalier and link it to a tunnel underneath the Waitemata Harbour so that if there is an accident on the southern motorway or at “Spaghetti Junction” there are alternative ways for people to move around the city. 
Mr Hughes talked about having an integrated ticketing system. He said one of the factors that make a world-class city is having an integrated ticketing system. I have also had the privilege of travelling round the world. I have been to lots of cities—New York London. I have been very privileged to travel and yes I too have seen integrated ticketing systems. Mr Hughes said the National Government is not committed to having such a system. Once again I ask the member why when his Government had 9 years in office it did not implement that system. The deputy leader of the Labour Party is sitting over there nodding her head. She knows full well that Labour had the opportunity to put an integrated ticketing system in place. I congratulate Mr Joyce because he said that we should look at where the problem is we should spend the money efficiently and we should spend it where it will have the most benefit. 
I was particularly interested in the admission of Jeanette Fitzsimons when she said that the cost-benefit analysis for electrifying the Auckland railway system would be only $1 for $1. She said essentially that we cannot justify the electrification of the Auckland railway system on a cost-benefit analysis. It is all very well for the Opposition parties to criticise spending on roads—[ 
Interruption 
] I do not mean to imply that Jeanette Fitzsimons is an imbecile as that member suggested but the reality is that buses are a fundamental part of our transport system. Buses work all around the world and there is no reason why they cannot work in Auckland. If we want to have an integrated system we have to have roads that the buses can run on and that is why I say that if we are to build a tunnel anywhere in Auckland we should build it under the Waitamata Harbour. 
Mr Hughes talked about the people of Auckland perhaps feeling ripped off as they finally had the chance to build a world-class transport system. Well I am in no doubt whatsoever that Mr Joyce has his eyes firmly set on building a world-class transport system. The ACT Party will be supporting him in that. We say it is folly to spend $3 billion or more on a tunnel 4.5 kilometres long through the heart of the Mt Albert electorate. Thank you Mr Assistant Speaker. 
Hon TARIANA TURIA (Co-Leader—Maori Party) 
: 
 Kia ora Mr Assistant Speaker. Tena tatou katoa. I was thinking that Sir Dove-Myer Robinson is probably looking down on the House at this time having a little smile to himself given that he was a visionary who could see all these things way back then. There is a Robert Frost poem that I believe summarises this entire debate. 
Two roads diverged in a wood and I— 
I took the one less travelled by  
And that has made all the difference. 
The issue for this House is of course which is the road that will make all the difference. The Minister’s announcement last week to unveil a nearly $1 billion fund to fast track State highway projects will be welcomed by New Zealanders who for years have been waiting for the shabby state of our roads to improve. The new nationally significant roads including the Waikato Expressway the Tauranga eastern corridor and the northern corridor between Wellington and Levin are a signal to New Zealand that progress will be made in reducing congestion improving safety and supporting economic development. The green light ahead for new electric trains for Auckland and new passenger trains for Wellington is also an important signal that steps are being take to protect the economy and to facilitate the more effective passage of freight but there are of course other issues that we must confront. 
The Maori Party supported the Land Transport Management Amendment Bill which introduced a regional fuel tax. We supported it because at least half of the additional tax revenue collected in a region had to be spent on developing public transport initiatives. The National Government is now planning to scrap the regional fuel tax and instead increase the fuel excise tax which applies to the whole country. The tax goes to the Land Transport Fund out of which roading infrastructure and public transport projects are funded. We have many questions around whether rural communities will benefit and whether communities outside the regions identified as significant will also benefit from the additional tax that they are being asked to supply. 
There are good arguments to be made for both the regional and national regimes. The key point to be made however is that it appears that roading developments will be prioritised over public transport developments. The Maori Party’s priority for transport and roading is to further invest in public transport by developing well-integrated public transport networks of buses and trains and walking and cycling tracks that are frequent reliable and inexpensive for users. 
So although we in the Maori Party are pleased that the Government has agreed to fund the electrification of Auckland’s rail network out of the Land Transport Fund there is no commitment to fund the wider integrated public transport services that are needed to make Auckland’s public transport system user-friendly. It is this whole concept of support for public transport that we believe is the road less travelled—but the road that could clearly yield a long-term gain. The Maori Party has always been supportive of the development of public transport options as a key response to the dual challenges of peak oil and climate change. 
With peak oil upon us there is an urgent need to prepare for ongoing significant oil price increases and a future downturn in the availability of oil by providing people with affordable alternatives to private motorcars. There is an urgent need to reduce our dependency on oil. In the medium to long term public transport will benefit lower-income earners by providing affordable transport as petrol costs continue to increase. Of course we do have concerns about the additional costs to consumers. The cost at the petrol pump is going to hurt our constituents and we must consider ways of easing this burden because of the burden this will place on low-income communities many of whom are of Maori and Pacific descent. Now that the whole country will have to pay for Auckland’s trains out of their taxes we have to query whether the rise of 6c a litre can be justified against the immediate impact of improving the roads that so desperately needed attention. 
And finally the question we leave in this debate is exactly how the precarious condition of some of the rural roads for the communities of the Maori electorates will benefit from this new tax increase—the narrow windy gravel roads that stretch across our electorates; the unsealed roads that are a site of danger for so many of our constituents. The question for us is how they will benefit. 
The ASSISTANT SPEAKER (Eric Roy) 
: Labour has informed the Chair that this will be a 10-minute call. 
Hon ANNETTE KING (Deputy Leader—Labour) 
: 
 First I congratulate the Hon Darren Hughes on bringing this issue to the urgent attention of the House today. It is an urgent issue for New Zealanders and it needs to be brought to the attention of the House. Before I address the substantial issue I will respond to some of the speeches we have already heard today. I would particularly like to respond to John Boscawen from the ACT Party who said he was an Aucklander. I believe he came from the Hawke’s Bay to Auckland but he failed to mention anything about the Hawke’s Bay and whether it got anything out of this package. He said that nothing happened in Auckland for 9 years. All I can say to Mr Boscawen is that he must have been driving with his eyes shut because over the last 9 years there have been huge improvements in the roads of Auckland. That was because the previous Labour Government acknowledged that throughout the 1990s Auckland was underfunded by the National Land Transport Fund and we increased the amount that went into Auckland over the last 9 years. Maybe Mr Boscawen does not know but none of the western ring route was started under a National Government—not one road. If members look at Auckland now they will see that most of it is completed with the Waterview Connection the major part that has to be completed. 
I also say to Mr Boscawen that we had already announced a third harbour crossing last year. The work had been undertaken for the third harbour crossing because it will be needed in the future—that happened under a Labour Government. So if we are going to talk about transport let us have the facts on the table. There was no Albany to Puhoi road under a National Government. In fact National refused to do that road. It was done under a Labour Government only on the condition it would be brought forward if people would pay a toll to go on that road which is something National said it believed in but it did not put in place legislation for it to happen. That happened under a Labour Government. 
Mr Boscawen said that Transmission Gully was going ahead only because of the National Government. I hope that when Peter Dunne speaks he tells the full story about what happened in relation to Transmission Gully under a Labour Government. The work that has been done on preparing for that road was ignored for 30 years but when we became the Government we said “Let’s take it seriously.” and $80 million has been committed to the geotechnical work to see whether it is possible. We also have a route for that road if it is going to be done that is cheaper than the original designation. That happened under a Labour Government—Mr Boscawen probably did not know that either. 
Mr Boscawen said that he knows a lot about integrated ticketing. There was no ability to have integrated ticketing until we passed legislation to allow it to happen. I thank the ACT members for supporting our legislation. It was never passed under a National Government but it happened with the help of the Green Party the ACT Party and the Maori Party and it enabled Labour to put in place a regime that allows for much better public transport. 
I also listened very carefully to the Hon Tariana Turia. I thank the Maori Party because it did support a regional fuel tax for New Zealand on the grounds that it would be shared between State highways and public transport. That is why the Maori Party voted for it and that is what we wanted. I believe that Tariana Turia is right to be concerned about what will happen to public transport in New Zealand. Everywhere I go I am told that the new Minister of Transport has one interest alone and that is State highways—State highways at the expense of public transport and at the expense of so much that is happening in transport that had already been announced. 
Paul Quinn 
: Rubbish! Absolute rubbish! 
Hon ANNETTE KING 
: I realise that Paul Quinn has not looked at what has been announced by his Government today. He has not read a single thing because if he had he would know that what the National Government is doing today is at the expense of many other parts of the transport system. Let us have a look at it. Public transport is cut under the new Government policy statement announced by Steven Joyce. Public infrastructure has been cut under the policy announced by Steven Joyce. Walking and cycling facilities will be cut by that Minister. Members should listen to this in relation to the renewal of State highways. Steven Joyce says that it is so important to have State highways—but for goodness’ sake let us not keep them in good condition; for goodness’ sake let us not renew them! He will let them fall apart and he will cut the money going into the renewal of State highways and cut the maintenance for their operation. 
Paul Quinn 
: She’s reading from the “Little Red Book”. 
Hon ANNETTE KING 
: I can tell Mr Quinn that I am reading from his Minister’s list and I can tell him that he has never read it. The ignorance coming from that member’s mouth is huge. 
 Let me tell those members something else. Under the new National Government’s policy maintenance has been cut to local roads. What I know as a former Minister of Transport is that if there was one issue that rural New Zealand and our local provincial mayors were worried about it would be the maintenance of their local roads. They advocated up and down New Zealand for more money for the maintenance of local roads. Funding has been cut by a National Government’s new policy statement—so much for rural New Zealand; so much for provincial New Zealand! 
I have to say that one area that will speak up loudly when it gets to grips with this measure will be Southland. I visited the Southland District Council and it said that what it needs money for is the maintenance of local roads due to the big expansion of dairying in Southland and the use of big trucks on local roads which are being cut out faster than ever before. Southland wanted money put into the maintenance of local roads. It is has been cut in the Government’s policy statement announced by Mr Joyce. 
Here is something that I think is an absolute crying shame. Labour set about to put in place a sea freight strategy for New Zealand so that we could actually move some freight around New Zealand domestically by sea. Our domestic sea freight with local ships had almost died out in this country from the 1990s onwards but we set about rebuilding domestic sea freight delivery in this country along with roads along with the trucks on the roads and along with rail and the sea. Let us take the example of Japan. It moves much more of its freight by sea—bulk amounts of freight can be moved by sea. So we said: “Let’s rebuild our domestic sea freight strategy in New Zealand.” and we set about to do that. Labour worked with the Shipping Federation worked with the unions worked with the ship owners and worked with the port companies and we put in place a strategy to bring back sea freight delivery in New Zealand. 
I tell members to have a look at the Government policy statement. It has removed the money and $1 million—one miserable million—is available for domestic sea freight in New Zealand. I have already received the emails from the Shipping Federation. We will receive many more when it gets wind of this. All the work that was done that was planned and that was consulted on has been wiped out. This money has gone to State highways to satisfy the Government’s electoral needs. It has nothing to do with the needs of New Zealand. 
Then the Government decided to cut $50 million out of road policing. What is road policing about? It is not about tickets as Mr Quinn would have one believe; it is about keeping the roads safe for New Zealanders. Over 400 people are killed on New Zealand roads every year. More children die on our roads than from any other cause of death in New Zealand. So what does this Government do? It cuts $50 million out of road safety in New Zealand to put it into the highways that it believes will bring it votes. Shame on the National Government! It is all about trying to look like it is doing something so it announces a list of seven highways of significance in New Zealand. What else has National done? Absolutely nothing! There is no money no timetable—just a list of seven priorities. I have to tell this House that that same list has been announced at least three times this year alone. As Guyon Espiner said three times this year alone National has announced a list. [ 
Interruption 
] Have I finished? No I am enjoying myself and no one else needs to take a call! 
JOHN BOSCAWEN (ACT) 
: 
 I raise a point of order Mr Speaker. Annette King talked about getting facts right and I think that is very important— 
The ASSISTANT SPEAKER (Eric Roy) 
: What is the point of order? 
JOHN BOSCAWEN 
: Annette King said I was from Hawke’s Bay. I would like to correct that impression. 
The ASSISTANT SPEAKER (Eric Roy) 
: That is not a point of order. Please sit. The next speech is scheduled to be 5 minutes long with a bell at 4 minutes. 
Hon PETER DUNNE (Leader—United Future) 
: 
 I have been campaigning for Transmission Gully here in Wellington since the early 1990s. For much of that time it has been a lonely campaign. I have to say that since 2006 considerable progress has been made. The previous speaker Annette King referred to that and I acknowledge that. 
The situation that we were in prior to the announcement last week was simply this. The geotechnical work had been completed a clear route had been designated savings had been identified in the original proposal and a certain amount of funding had been allocated. However there was as the Minister of Transport said a $600 million gap to be bridged. The argument being had within this region in Wellington was how that funding was to be made up—a regional fuel tax tolls a local authority contribution or whatever. The five local authorities—or is it six; they seem to grow like Topsy—could not agree amongst themselves. This project was in danger of foundering because of a lack of financial certainty. 
I think that the announcement last week resolved that problem because what the Government said in effect was that these seven roads of national importance would be funded nationally. Therefore the argument about how we in Wellington will bridge the $600 million gap has been resolved. Given what has already happened in terms of the design work the geotechnical work and the various projects that have been completed over the last 2 or 3 years there is now nothing to stop this road proceeding as a matter of urgency. 
 The commitments that are needed now are political. We have all the local authorities in the region bar one—the Wellington City Council—onside and it is time for the Wellington City Council to come onside. Its concern all along has been about funding but the Minister’s announcement last week effectively resolves that. So I look forward to the Mayor of Wellington getting off her high horse coming in behind this region along with all the other local authorities and supporting Transmission Gully. 
I welcome the intervention of Mr Finney from the Chamber of Commerce as reported in today’s  
Dominion Post 
. It was a wise and prudent article. I deplore the fact that the  
Dominion Post 
 which seems to feel that it has to toe the Wellington City Council line and cannot be an independent newspaper continues to give press to the deluded little group up on the Kapiti Coast the Coastal Highway Group. That group is promoting a dream that is utterly unattainable and this morning’s column demonstrates that quite clearly. 
So here we are in a situation where a necessary infrastructural project has had a huge amount of work done in terms of its design costing and a number of the consents that are required. The financial obstacle that has held it up thus far has effectively been removed by a Government acknowledgment that the Crown will stand the cost of these roads. The only decision we now need to make is about timing and getting on with the job. If last week’s announcements mean that there is more certainty in State highway funding and that the campaign I have waged since the early 1990s is now coming to an end and Transmission Gully is coming to its beginning—and its conclusion eventually—then I for one say that is good news and something we should be celebrating. As we are having an urgent debate in the House this afternoon we should be chivvying the Minister along to make sure he gets on with the job and sees this road built. 
PHIL TWYFORD (Labour) 
: 
 This is a sad day for public transport and a sad day for Auckland. The transport package announced by the Minister—and I mention the Minister’s name out of interest because I would have thought that with a snap debate about transport the Minister would be in the House but never mind— 
The ASSISTANT SPEAKER (Eric Roy) 
: The member must be aware that he cannot mention the absence of someone from the Chamber. 
PHIL TWYFORD 
: I apologise Mr Assistant Speaker. For two reasons the transport package announced by Steven Joyce is bad: it is bad for public transport in Auckland and it is bad for governance in Auckland. It took a long time and a lot of patience and effort by central government local government and regional government to piece together a transport strategy for Auckland that was actually beginning to deliver at last on the aspirations Aucklanders have for a decent public transport system. The Auckland Regional Council had a plan. It had certainty it had a budget it had projects in place and it was funded and organised. It took literally years to put this plan together yet it has been swept away with the stroke of a pen. Now the Auckland Regional Council transport plan for Auckland is in complete disarray. 
Let us talk about what exactly is in jeopardy. There is a $152 million hole in the Auckland transport strategy. Let us talk about what is in there—Penlink for starters. A huge question mark is hanging over Penlink at the moment. A huge question mark is hanging over ferry terminals on the North Shore. Do members know what? A whole lot of railway station upgrades are at risk. The member for New Lynn will know that there is a hole in the ground in New Lynn at the moment. There has been a huge investment by regional government in the New Lynn development—$300 million has been developed and a $160 million railway trench is being dug through New Lynn—yet it may be left as a gaping hole because there is simply no money left to pay for it. I ask the Government what it will say to the people of west Auckland and the people of New Lynn about that project. Did members see in the  
New Zealand Herald 
 the hole in the ground at the Newmarket Railway Station with Auckland Regional Council chairman Mike Lee standing in front of it? I ask the Government what it will do about that. 
I have a question for the member for Maungakiekie: what will he tell his constituents about the Onehunga line? My colleague Carol Beaumont has asked the member for Maungakiekie this very question: what will the Government do about the Onehunga line? It is a vital piece of infrastructure that the people of Onehunga need. What is the answer? We need some answers from this Government. For the Manukau spur the plans are there and the money was there—the funding was committed. That is another piece of infrastructure. The Government has basically given a one-fingered salute to the people of New Lynn the people of Manukau the people of Onehunga the people of the North Shore and the people of Helensville. 
What did the Minister of Transport Steven Joyce say when he was asked about funding for these projects? He said that the Auckland Regional Council will have to look at its resources. Well I have an answer for the Minister today: there are no resources. The Auckland Regional Council has calculated that to fill this hole in the transport budget would mean a 15 percent rate rise for the people of Auckland. There are no other resources. Funding from Auckland Regional Holdings is down because of the performance of international investments. There is nowhere else for this money to come from. 
When the Minister of Transport spoke earlier this afternoon he talked about the fact that 84 percent of New Zealanders travel by car and said it was arrogant to build a public transport system in Auckland because the reality is that at the moment people all travel by car. Well do members know what? To build a public transport system one needs vision and leadership and they are sorely lacking in this Government. 
NATHAN GUY (National—Otaki) 
: 
 We learnt today in the House that there have been 80 road fatalities from Foxton through to Paremata over the last 10 years. We need to do better than that. The Government has shown some leadership in announcing seven roads of national significance. One of those roads is from Wellington to Levin. 
Hon David Cunliffe 
: I raise a point of order Mr Speaker. I seek your advice. A well-known Standing Order says that we are not allowed to use a certain word starting with “h”. The Government has just removed funding for road safety through this package yet a member is now campaigning on the very thing that the Government has just cut. How can members deal with that when they cannot use the “h” word? 
The ASSISTANT SPEAKER (Eric Roy) 
: Well they need to find some other way of doing it. 
NATHAN GUY 
: What a hopeless point of order—trifling with the House like that! That member should be ashamed of himself. This is a serious issue. That is why this Government is showing some decent leadership. 
I was horrified to see the former Minister of Transport the Hon Annette King stand up and say this National Government is not doing enough on roads when in her reign as transport Minister she did nothing to reform the Resource Management Act. When Transit the Government’s road-builder came along to the select committee it said openly that it takes as long to get a consent to build 1 kilometre of highway as it does to actually build it: on average over 3 years. That is why this Government is getting started on reforming the Resource Management Act—so that we can get these roading projects started. That is why we have announced seven major roading network corridors—and I am delighted that one goes up through my electorate where we have had some terrible fatalities—and why we are going to get on and improve the roading network. 
We have heard from members on the other side of the House today about how terrible it is to remove the regional fuel tax—what I call the “jerry tax”. The reason I say that is that it would be very easy for people to move outside their region with their jerrycans on the back of their trailers move into an area where there is no regional fuel tax and fill them up. The announcement that we have made of a level playing field across the whole of the country—3c across the board—will be fairer and less complicated than a regional tax. 
Hon Darren Hughes 
: 6c. 
NATHAN GUY 
: The former member for Otaki should know—he has actually buried the figures—that 1.5c was already signalled under the Labour regime so we have actually announced 3c under this regime. 
We also need to be aware that 84 percent of the people are travelling on the highway whether in a bus a car or a truck. Yes we are supportive of public transport. We have some great initiatives rolling through the Otaki electorate. Over $100 million of public transport projects are already under way; that has already started and I think it is fantastic. It will give people a more reliable service into Wellington. There will be double tracking and electrification—which I have been supporting right through—through to Waikanae. That will take the congestion away from the Paraparaumu railway station and allow for greater frequency of services—as frequent as 15 minutes ultimately—for residents from Waikanae who want to get through to Wellington. 
So this is a great announcement. It has actually been very very well received in my electorate. We are showing some leadership. I was interested to hear from Peter Dunne before who signalled that we now have some decent leadership so we can actually park the old funding debates of the past and move forward. I am looking forward to the New Zealand Transport Agency making some announcements of the significant projects that we can get under way sooner that had been proposed. The reason we will get them under way sooner is that we are going to reform the Resource Management Act and that is why these corridors of national significance are a priority. 
The other important thing to realise is that half the people across New Zealand travel on our State highway network. 
Hon Darren Hughes 
: You’ve said that! 
NATHAN GUY 
: No I did not say that. I said it just now which the member would know if he had been listening. You see that is the problem: the member did not listen and that is why the constituents of Otaki kicked him out of that seat. 
This initiative will give some certainty to funding: $1 billion over the next 3 years; $4.4 billion over the next 10 years. It is a fantastic initiative and I thank the former member for Otaki for bringing it before the House today so that we could clarify some of the smoke and mirrors stuff that he has been out there bandying around the country. There has been strong leadership from this side of the House. We are getting on and addressing the big issues lifting productivity through building more roads getting people into work and carrying on with our jobs and growth programme. This is a fantastic initiative. 
DAVID BENNETT (National—Hamilton East) 
: 
 Following on from that great speech from the member for Otaki Nathan Guy who has delivered for the people in his electorate I say we need to look at some of the arguments that have been going on about this issue. The Labour Party has been saying the rest of the country will pay for Auckland’s roads. If Labour members had gone to the select committee they would have found out that the rest of the country made submissions against the regional petrol taxes. The rest of the country put in submission after submission against the regional petrol taxes. 
Moana Mackey 
: That’s not true. 
DAVID BENNETT 
: The member should check the records; that is what happened. The reason that happened is that the previous Labour Government in its approach of knowing best told the regions how they had to split the regional petrol tax. The regions had to split the tax so that 5c went into public transport and 5c into roading. 
Paul Quinn 
: They did not want that. 
DAVID BENNETT 
: The reason the regions did not want that is that they saw no need for 5c to go to public transport in some regions. There was no need for that. 
The regions wanted to use that money for what they were talking about. If people were talking about Southland and its roading network they would not have been talking about having a train go from one part of Southland to the other; they would have wanted the money to be used on their local roads. The regions wanted to have that discretion. The rest of the country made submissions against the regional fuel taxes because the regions wanted to have discretion to decide how to spend the money. It is a bit rich for Labour members to come into this House now and say the rest of the country wanted that proposal. Members should go back and consider what was actually said by those in the regions. The regions did not want that proposal. 
The Waikato Expressway in the Waikato region is an example of that. That is a road that the Labour Government would not have funded and would not have built. We did not hear the Labour members say that in all their commentary today. They have not mentioned that road because they know they had no chance of delivering it; they had no plan and no funding for it. The National Government has made a commitment to build that road and we will build it—this is the first step in building it. That road is the biggest payback my region has received from central government for many many years. It has taken 9 years to get rid of the previous Government so that we can deliver for the people of the Waikato. We will deliver and we have delivered. 
The second part of Labour’s argument is that the Government is increasing the nationwide petrol tax. Labour was going to do that anyway; it was going to charge another 4.5c anyway. So it is rich for Labour members to come into this House and say the national petrol tax cannot be increased when they were going to increase it. It was their plan to increase the national taxes on top of the regional taxes so Labour members cannot come into this House and say they are not aware of that. In fact during Labour’s term in office it substantially increased the national petrol taxes. Labour increased those taxes time and time again so it cannot come in here and cry foul now when that is what it did for 9 years. 
The transport issues in Auckland have been raised by Labour members. Members have to look at that issue in the sense that if someone was in business would that person own a railway network—KiwiRail—and then pay for two other organisations to run rail networks within the same network that the person owned? A person would not do that; it does not make any business sense for somebody to do that. I think Minister Joyce needs to be complimented on his business sense for putting all the rail network together so that we can have the best possible public transport system and freight system in New Zealand. That will bring efficiencies to the system. It will mean that we can provide new initiatives in public and passenger transport through the rail network because it has been put together in a more efficient basket rather than being spread out and having different organisations funded to run the same thing. What the Minister has done makes good commercial sense and we applaud him for making that decision. 
The last thing I will talk about is what the Greens say about roading. They say that roading is not good. When one looks at what will happen in 10 years’ time one sees that the cleanest greenest form of transport will be electric cars on roads. It will not be dirty trains; it will be clean green transport on roads through the use of electric cars. The National Government is setting up New Zealand to have a clean green economy for the future. 
The debate having concluded the motion lapsed. 
Taxation (Business Tax Measures) Bill 
In Committee 
Part 1 Business tax measures 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I wish to commend the Taxation (Business Tax Measures) Bill to the Committee and to reiterate the statement that Labour members made in the first and second readings that we will be supporting the bill’s passage through the House. The bill comes to the Committee stage following a thorough and I think very helpful and bipartisan select committee process. The common ground that is reflected in the commentary on the bill is that many—indeed most—of the provisions of the bill that are taxpayer-friendly have been in process for some time and date back to the previous Government. The commentary sets out that they include matters in “the Taxation (International Taxation Life Insurance and Remedial Matters) Bill; use-of-money interest rates; uplift thresholds; and instalment regimes.” We appreciate Government members acknowledging that point in the commentary. 
There are a number of areas where we do not believe that the bill goes far enough. The bill incorporates measures that were under development or announced by the previous Government from around the middle of 2008. As we all know the world economy has gone into serious decline since then. What was an aggregate world growth forecast of about 1.5 percent of real GDP growth has now turned into the first negative growth since World War II. Indeed as recently as today we have seen predictions that world exports will fall by as much as 7 percent in the year to date. That is an unprecedented drop-off—the most alarming example of which is in Japan where I understand that export volumes and value are down to the tune of around 45 percent and in Taiwan the figure is nearly 50 percent. This is truly a crisis of a global magnitude. 
Against that background therefore many New Zealand businesses including small and medium sized enterprises will be suffering. Businesses that were and are in the exporting game will find it considerably more difficult to make sales and they will find it considerably more difficult therefore to meet their cash flow predictions. It is incumbent upon this House working in a bipartisan way to see whether more can be done to assist small business through measures such as these. 
The Opposition will be recommending certain matters for the further consideration of the Government pertaining to the policy review processes which as the commentary sets out are already in train. We had considered tabling certain amendments to the bill in the Committee stage today but we have decided not to do that in favour of a more bipartisan approach of working with the Government on matters that the Government can bring forward. At the end of the day this is not about who claims credit; this is about getting the job done for small and medium sized enterprises. 
Certain matters stand out as indicated in the select committee’s report. Use-of-money interest deductibility is a matter of crucial interest to business. It must be said that this has not been resolved for some time and we are gratified across the Committee that this has been noted for further work and we support that being on the work programme. Secondly use-of-money interest rates are still too high. The previous Government had indicated that it would drop use-of-money interest preceding the previous election and this bill takes into account only the measures that had been contemplated some 6 months ago. During that time the Reserve Bank has dropped the official cash rate by around 5 percent and those reductions are not incorporated in action contemplated by the Government at this time. 
It is important that at least some catch-up is made. Several options are available. One would be to have a reciprocal use-of-money interest rate that reflected the deposit interest rate—currently around 4.23 percent. There is some reasonable argument about whether that would provide the ideal incentives for prompt payment. Another and lesser suggestion that we commend to the Government would be to use the Reserve Bank’s 90-day bill rate as a mechanism for securing interest rate reductions. That could be done from the date of passage of this bill and we are already moving in that direction. That would be a current rate somewhere above 8 percent and less than the 9.7 percent currently proposed by the Government. We commend that suggestion for the consideration of Government and the officials. 
Submitters to the select committee raised the issue of the tax deductibility of patent costs and across the committee we had considerable sympathy with those submitters. As a committee we would see merit in moving to align the New Zealand regime which is currently a 20-year amortisation period for patent rights. It is clearly out of step with the OECD average which is probably below 10 years and certainly out of step with our drive to introduce more high technology into the New Zealand economy for which even 10 years is clearly too long and therefore puts an unfair tax burden on companies engaged in those kinds of activities. Those are the kinds of further measures that we see as needing to be considered. Furthermore we suggest that the Governments give further consideration to omitting the 105 percent uplift basis as provided in new section RZ3(3)(a) inserted by clause 20 and replacing it with a straight 100 percent which means that no penalty would be imposed on estimates calculations for preceding years. 
This bill good as it is and perhaps insufficient as it is in its current form subject to the ongoing work that we have drawn attention to begs a far bigger and more important question: where is the Government’s plan that is proportionate to the magnitude of the crisis facing New Zealand business? Surely it cannot be the 9-day fortnight for which a total of $20 million of Government subsidy has been earmarked? Surely it cannot be the Cape Reinga to Bluff cycle track which even since the Job Summit has somehow melted into something of a lesser cycle network? Surely it cannot be simply the fact that the Prime Minister is phoning the Council of Trade Unions more regularly? Surely it cannot be the fact that we have speeches coming out about philanthropy? 
No I do not believe that is the strategy the Government has in mind other than in the public relations sense of the word. As a number of commentators—most recently John Armstrong in this weekend’s  
New Zealand Herald— 
have pointed out the real agenda is becoming clearer. This Government in the last few weeks has increasingly demonstrated itself as a wolf in sheep’s clothing. The trumped-up—it must be said—overhaul of the Accident Compensation Corporation public service spending cuts the privatisation of prisons the unsympathetic treatment of Television New Zealand the Draconian review of the Overseas Investment Act which is not known internationally as one of the most hard line of investment protection measures the stop on contributions to the Cullen superannuation fund and the hard line on the financial performance of State-owned enterprises are just some of the measures. It seems that every day one reads in the newspaper or hears in the media about something else that although not being presented by the Prime Minister as front and centre while he is doing the happy clappy stuff is none the less hard line and part of the gathering right-wing momentum of this Government. Most recently it was back to the old Holidays Act with the supposition that by giving workers “the choice” to put their holidays up for sale somehow that will not become an obligation. 
To sum up this bill is good as far as it goes. It represents a thorough and bipartisan select committee process. It does not go far enough because it was designed 1 year ago before the recession deepened. The Opposition is willing to work in a bipartisan way with the Government to bring further relief to small and medium enterprise. But having said that let us be under no illusions that this represents the real agenda of this Government that by the day is becoming darker and harder edged. 
CRAIG FOSS (National—Tukituki) 
: 
 I acknowledge the tenets of the previous speaker and the bipartisan nature with which the Taxation (Business Tax Measures) Bill has been progressing through the House and the Finance and Expenditure Committee so far and hopefully as it progresses through the Committee stage and the third reading in the not too distant future. As chair of the Finance and Expenditure Committee I would like to acknowledge and thank the previous—and current—Minister of Revenue for getting the bill to this stage other parties for the cross-party support around Parliament in this House and at the select committee and the officials who have worked very very hard to put the bill into this form at very short notice when it became apparent that it was very urgent that it be put into place. Of course my fellow members and colleagues on the select committee need to be acknowledged because to get this bill to this point a lot of cooperation and goodwill has been shown by all parties to enable the processes to be moved through quickly. All parties recognised the urgency of the bill; I would like that to go on record. Thank you very much Mr Chair. 
As I noted—and the previous speaker talked about this a wee bit—it is urgent that this bill is passed as soon as possible. It is not under urgency but it is urgent that it goes through the House as soon as possible. It has been reported back generally without any substantive amendments or changes and I acknowledge again the previous speaker who said that his party had ideas thoughts and policy that it may wish to progress. As a committee we discussed that and I am sure there will be further discussion around that. Again as that member noted the commentary on the bill also addresses issues around the use-of-money interest spread the tax deductibility of patent costs and so on. But there was one point that I need to check my records on. Although New Zealand has a 20-year amortised write-off period I think other options are available in New Zealand to write something off over the life of whatever a product or invention might be—but I stand to be corrected on that one. 
This bill is actually quite short. Its origins are in the Taxation (International Taxation Life Insurance and Remedial Matters) Bill which is still before the select committee. As the commentary notes many of the measures have been taken from that bill and brought forward or enhanced in some way. There are some new measures in this particular bill but again I acknowledge its origins in previous work policy and discussion papers. I think it was in a small-business discussion paper in 2007 that a lot of these points started to be at least talked about. 
The focus in this bill—and this is why for example the patent measures are not here—is on cash flow. It is about assisting businesses through the troubled times in front of us right now. Since this bill was introduced and since the parent bill of this one was introduced the global economy has deteriorated markedly—and again the previous speaker alluded to some of the facts and figures on that. The bill is urgent. 
We had six submitters on the bill all in favour of it but they raised interesting points most of which will be pursued further. I would like to acknowledge the Institute of Chartered Accountants of New Zealand not only for the very progressive and positive way it submitted on the bill but also for the good policy work it does in general around all things regarding tax in New Zealand. The New Zealand Retailers Association submitted particularly on the compliance issue and how those measures would improve life for many of its members not necessarily just in respect of cash but also in respect of compliance—for example with regard to GST and PAYE thresholds. The New Zealand Manufacturers and Exporters Association was actually the group that raised the issue around patents and deductibility and encouraged the committee to do further work on it. I appreciate that and acknowledge the association for that. 
The New Zealand Chambers of Commerce and Industry made as was to be expected a very robust submission. Although it was generally very much in favour of the bill the organisation suggested areas where things could be bigger wider or higher—where thresholds could be made more tax friendly and so on. Of course in these challenging budgetary times we have to balance all of that against the fiscal cost. The aim is admirable but we have to try to balance the budget or at least not let our debt blow out too much as we get through this current trough. I also acknowledge the New Zealand Council of Social Services. It was recommended and suggested as a submitter and its submission was very useful for members of the committee. The council made a big effort. I will be brief but I want to go on record as thanking the council. Its submission was very very beneficial to our committee. 
 The bill is in two parts. The guts if you like—excuse my French—are all in Part 1; Part 2 is about remedial matters and some other issues. All of the issues—the use of money and the provisional tax uplift changes—are in Part 1. As we go through the clauses members will note that all the major points are in Part 1 from clause 3 to clause 27. Virtually all of those provisions are changes to the Income Tax Act such as changing thresholds changing application dates and some minor wording changes to facilitate the main parts of the bill which I am sure other members will speak on. 
I will point to my favourite part of Part 1: the changes to the provisional tax uplift level. That may sound boring but quite simply I say it is a very good and very quick recognition of the state of play for New Zealand businesses. It was common knowledge from about December last year that to at least meet last year’s profits will be very very challenging for businesses. So a quick reaction by the Crown the Government and the officials at the Inland Revenue Department in terms of actually thinking about these measures—which is actually eminently sensible when one looks at it in hindsight—I think is very very good and acknowledges the key problem for businesses which is a simple cash-flow issue. Yes there is a fiscal cost to this measure but over a few years it does start to level out. The cost of carrying it is the cost. I will make the point that the 2-year horizon of those provisional tax measures for this financial year and the next financial year actually lines up with a recognition of what the Reserve Bank said last week. It sees New Zealand as hopefully starting to come out of its recession in the middle of 2010. That is exactly when these measures start to change and come into play. 
We will discuss later the use-of-money interest issue. The previous member talked about the spread of the two rates—debit and credit—but he made the point which I am very much in favour of that they now relate much more to the 90-day bank bill rate rather than to the official cash rate changes which we have seen a large deduction in recently. The change reflects the working capital borrowing period of many small businesses. They do not borrow overnight; it is borrowing for some 30 or 90-day rolling cash. 
I look forward to speaking on this bill a bit further. I once again acknowledge the cooperation of all members and I look forward to this legislation being in place before 1 April 2009. 
STUART NASH (Labour) 
: 
 I rise in support of the Taxation (Business Tax Measures) Bill because I firmly believe that this country deserves a Parliament that works together to implement legislation that alleviates the pain this recession is beginning to visit upon the small to medium sized enterprises that form the backbone of our country. A small to medium sized enterprise is defined as a company that employs 19 or fewer employees and small to medium sized enterprises employ about 60 percent of all Kiwis. I am not supporting this bill because I believe that it is as good as it could possibly be or because it is part of a plan to drive economic growth and stimulate the economy or even because I think it goes far enough to really make a significant difference—because I do not believe that; far from it. However the Finance and Expenditure Committee has acted in a multipartisan manner—as has been mentioned by the previous speaker and my colleague Mr Cunliffe—over the passage of this bill through to the Committee stage because it is about New Zealand. It has to be about New Zealand in this sort of economic climate and with this recession looming. 
I have spoken to friends who own or deal with small to medium sized enterprises and they are grateful that members from both sides of the House are working together. However they suggested other ideas that would make this a much more powerful bill. As my colleague the Hon David Cunliffe has alluded to Labour has identified a number of issues that could easily be addressed by the Government through Order in Council or a Supplementary Order Paper. Those suggestions would help to better target the requirements and meet the needs of the small to medium sized enterprises sector as it continues to face tough times meeting the challenges of the global recession. 
Despite these words in many respects this is actually a good bill but probably because the bill largely implements ideas that the previous Labour Government had set in motion before last year’s election. Unfortunately for this country and for the small to medium sized enterprises sector—and as alluded to by the previous speaker—the state of the economy has worsened since the election and these measures do not go far enough to alleviate the stress that many New Zealand companies now face. This bill—I say to my parliamentary colleagues and to the people of New Zealand—is a missed opportunity in my view to really exhibit a degree of leadership and foresight that the times now require. The people of New Zealand deserve better than this so Labour will help out. It is simply not good enough just to lift policy from the Labour Party manifesto cloak it up in National Party ideas and call it a solution. This bill does not provide the solution for many who are looking to the Government for a plan. 
I suppose the parts of the bill that I fully endorse are those that were introduced by Labour. The five measures that have been directly lifted from Labour Party policy are first the increase in low-value trading thresholds to apply from the 2009-10 income year; second accounting for financial arrangements also to apply from the 2009-10 tax year; third the extension of fringe benefit tax annual filing to include closely held businesses whose fringe benefit tax liabilities are restricted to one or two vehicles used by owner employees regardless of their annual PAYE deduction; fourth the increase in the provisional tax use-of-money “safe harbour” threshold from the 2009-10 tax year; and fifth an increase in the goods and services tax 6-monthly return filing threshold to apply from 1 April 2009. 
I suppose in a way it is good we have continuity with the Minister of Revenue because when he sat with the previous Labour Government he was the one who introduced these measures and he can carry them through. It is a pity he did not actually take them a bit further because these were simply Labour policies that we would have reviewed and no doubt amended once we had understood the full extent of this recession on the business environment. The National Government could at least have revised these measures to better meet the updated and more urgent needs of the small to medium sized enterprises sector but I suppose imitation is the greatest form of flattery. There are a couple of Labour measures that the Finance and Expenditure Committee did agree with that have been enhanced but they are still Labour ideas nevertheless. 
Mr Cunliffe also mentioned a couple of potential changes in terms of use-of-money interest rates so as to better reflect the current interest rates in the market. Tax deductibility of interest for example is another area that Mr Cunliffe suggested as a measure that the Government might like to consider amending. Those are only two suggestions that would make this bill better by far. 
In conclusion I support this bill but with reservations. My support would be greatly enhanced if the National Government accepted that a bill designed to help 96 percent of New Zealand businesses that class themselves as small to medium sized enterprises would be a better bill if it were to include these suggestions. 
KEVIN HAGUE (Green) 
: 
 The Green Party continues to support the Taxation (Business Tax Measures) Bill as we did during its first and second readings. It provides a modest level of support for a section of the small and medium business sector with which I have considerable experience. The Government has also made some decisions that will provide support to other parts of the small and medium business sector. I referred in my second reading speech to the national cycleway project which will provide a vital boost to many small and medium businesses in the contracting part of the small and medium business sector particularly in rural and provincial areas for which it is an extremely important development. 
In continuing to support the bill the Green Party wishes to again make the point that we are deeply disappointed and frustrated by the lack of coherence in the Government’s response to the financial crisis we face. Several speakers have already referred to the growing magnitude of the crisis and to the scale of the response against that backdrop. I note along with colleagues from Labour that the Green Party had some amendments that we might have wished to make to this bill but we have chosen not to on this occasion and instead look to opportunities in the future to advance some further ideas. In particular I will refer to a number of areas where the Government could have made a difference and has chosen not to. 
The Government could have retained the research and development tax credit and has chosen not to which is a slap in the face for all of those businesses that had already begun planning on the basis of that credit. Indeed the whole business of investment in innovation is extraordinarily important to the way our country finds its way out of this recession. We have talked about a Green New Deal and the need to address not only the financial crisis but also the crises we face simultaneously in the environment and in energy. To do otherwise is doomed to failure. Indeed that kind of approach requires as much innovation as we can possibly bring to the table. For example Denmark launched its world-leading wind turbine technology on the basis of tax breaks over a 5-year period for innovation in new forms of energy generation. We respectfully suggest to the Government that this is an area it needs to be looking to and we offer our assistance. 
In relation to the 9-day fortnight policy measures again those measures may be of some use to some larger businesses although early indications are that the uptake seems to be at the low end of the scale. Part of the reason for that low uptake may be the relatively unwieldy nature of large businesses. The impact of a job loss on someone who works in a small or medium sized business is no less. The Green Party believes that any relief offered to employees of a large business should also be offered to employees in small and medium sized businesses yet that has not been offered. Where is the Government’s innovation? Where is its measure to support those employees in the small and medium sized businesses that are currently haemorrhaging from the very sector that as Stuart Nash mentioned employs most New Zealanders? 
I referred previously as the Minister of Finance did in earlier debates on the Taxation (Business Tax Measures) Bill to the advice of the Small Business Advisory Group. Yet again I have to bring to members’ attention the fact that the Government has failed to move to implement the measures proposed by the Small Business Advisory Group. One of the measures that the group most recently brought to the attention of Parliament was its recommendation for advice on improving environmental performance by offering small and medium sized businesses the opportunity to derive business benefits from recognised or certified sustainability of products and services. The Government has completely failed to act on that. 
CHRIS TREMAIN (National—Napier) 
: 
 I rise in the Committee stage to follow previous speakers in supporting the Taxation (Business Tax Measures) Bill. Everyone has talked about how there has been a bipartisan approach to this bill tonight. We have seen the Greens supporting that and certainly the two Labour speakers supported the bill. They supported it in the way that they have supported the majority of legislation that the National Government has brought to this House throughout the 4 or 5 months that we have been in Government. Members of the public will be interested to see that lots of legislation is being brought to the House and that Labour members are standing up to say that really they do not support it but then they vote for it. With this particular bill it is good to see it go through the House in a bipartisan way. 
The Labour speakers who spoke before the chair of the Finance and Expenditure Committee Craig Foss took time to say that many of the initiatives of the bill were fostered in processes prior to the National Government. A point I make is that there is a saying that goes something along the lines of “Between the idea and the action lies the shadow.” which basically says that there are lots of people who have ideas in this world but it is those who step up to the plate and deliver them who actually make a difference. I think that is what we are seeing with the National Government here. It is almost like the Jeffrey Archer story about Mallory conquering Mount Everest first. Actually he did not. It was Sir Edmund Hillary who got to the top and down again and who delivered on that particular conquest. 
In this bill we are stepping up and delivering a range of initiatives. Labour members go to lengths to say that it is not big enough wide enough or as big as it should be. The Greens said that it was a modest package of initiatives. In fact it has been clearly noted that we are in the top five countries in terms of the fiscal stimulus that we are bringing to the table with a combination of packages brought through both by the previous Government and by our own. The reality is that we are in a good space. That was acknowledged in two recent pieces of literature. Firstly in the Monetary Policy Statement by Alan Bollard that came out just 2 weeks ago Dr Bollard acknowledged that our fiscal stimulus put us in a good position. He predicted that in the fourth quarter we will commence growth again. In just the last couple of days a report by the people from the International Monetary Fund who visited New Zealand acknowledged that again we are in a good space and that there is not a huge need for the wild amount of other initiatives that members opposite are proposing. 
It is good that we are here today delivering on a number of initiatives that will help small businesses out there. Those initiatives are in the Taxation (Business Tax Measures) Bill which I have before me—a range of initiatives that get to the heart of what we are trying to do to blunt the edge of the recession for small and medium sized enterprises and to put them in the best position to grow as we come out of this recession. In making these initiatives we need to acknowledge that those enterprises make up 95 percent of businesses in this country and that they employ some 80 percent of employees. They are critical to the engine of this nation in terms of driving us forward. Let us look at the initiatives that we see throughout Part 1. In clause 4 the threshold where businesses with business-related legal expenditure can claim legal expenses through their tax return is increased to $10000 reducing compliance costs around legal expenses for small businesses. 
In clause 15 the PAYE once-a-month filing and payment threshold is raised from $100000 to $500000 again reducing those compliance costs for small and medium sized enterprises. Let us focus on the PAYE provisions. These small businesses are the heart of our economy. They are the businesses that employ the majority of our employees in this economy. If we are to get through this recession and out the other side we need to protect those jobs. We need to look after the engine that actually employs those people in the first place and that is small businesses. This bill focuses on those small businesses and makes sure they will get through. 
In fact Craig Foss the committee chairman and I were with RCR Energy Systems a Hastings company that employs about 78 people down in Dannevirke and about 50-odd in Hastings. This is an innovative company that employs a range of fitters and turners and boiler-makers to produce high-end energy turbines and boilers for plants all around the country and throughout Australasia. It has a highly specialised workforce in Hawke’s Bay and it is focused on getting through the recession and ensuring that its highly specialised workforce is maintained. If RCR is forced into a position where it has to lay off specialised designers and those sorts of people the reality is that it will be very difficult to obtain those people when that firm is gearing up to come out of the recession afterwards once it starts to get more orders on the book again. A couple of designers are from Indonesia and a couple are from Australia. What we are trying to do with this bill is to blunt the edge of the recession for companies like RCR in Hawke’s Bay and to make it easier for them to get through this recession. They will still be faced with challenges. I am not standing here and saying it will be easy. In fact it is very hard. Orders have slowed significantly for them. But these small steps might just make it that little bit easier putting them in a position to retain their workforces and to come out the other side. 
I will touch on another couple of clauses. Clause 19 focuses on fringe benefit tax lifting the threshold from $100000 to $500000. Again this reduces compliance costs for businesses that are under that level making it necessary to file fringe benefit tax returns above that $500000 threshold only on a quarterly basis with businesses below that threshold allowed to file those returns on an annual basis. 
There are other initiatives in clause 26 which raises the GST payment threshold from $1.3 million to $2 million. That is a really important point. It allows businesses to continue to pay GST on a cash basis as opposed to an invoice basis. That is really important for small businesses because if a business pays GST on an invoice basis it often has to pay the GST to the Inland Revenue Department before it has collected the money through the debtor’s ledger. In terms of cash flow it is a huge impost on those small businesses. They do not have huge amounts of capital or big balance sheets that can afford to have that cash out in terms of GST before it is collected. Section 26 lists that threshold and is one of the key features of the bill. 
The bill has a range of initiatives and once again is looking to make things easier for small to medium sized enterprises and businesses to get through this recession and to put them in the best possible position as we come out of the recession and begin growing as a nation again. I commend Part 1 to the Committee. Thank you. 
RAYMOND HUO (Labour) 
: 
 I rise to support the Taxation (Business Tax Measures) Bill and I wish to reiterate the following three points. First the Labour Party supports small businesses as we support all New Zealand businesses in a positive and proactive way. This bill is targeted at the 96 percent of New Zealand businesses that are classed as a small to medium sized business. As a matter of fact Labour wrote this bill. This bill as it is today was largely written by the previous Labour Government. Secondly we wrote this bill in about August 2008 before the global recession was felt in a tangible way and before we had the opportunity to draft the bill further. Therefore we believe that further measures need to be taken either by amendment or in some other form to improve the bill. Thirdly as I said this bill is targeted at the 96 percent of Kiwi businesses that employ approximately 60 percent of the country’s workforce. Without any doubt those small to medium sized enterprises are the backbone of our economy. 
The Finance and Expenditure Committee of which I am a member had opportunities in the past weeks to listen to and digest submissions from relevant parties and advice from officials. Members of that committee all agreed on taking a bipartisan approach towards helping smaller Kiwi businesses deal with the current economic pressures. We have worked together to identify measures where the bill could be extended and they are written in the committee’s report. 
The Finance and Expenditure Committee recommended that the bill be passed with amendments. The report acknowledged that a number of initiatives in the bill reflect proposed changes in previous legislation or in the Inland Revenue Department’s work streams and discussion documents including the Taxation (International Taxation Life Insurance and Remedial Matters) Bill use-of-money interest rates the uplift of thresholds and instalment regimes. The report makes a number of technical amendments to the bill and it also addresses major issues that were considered by the select committee but did not result in any recommended amendments. However in many respects this is a good bill as far as it goes and it largely implements ideas that Labour had worked on earlier. It contains measures aimed at easing the impact of taxes on the cash flows of small to medium sized businesses and at reducing business tax compliance costs. 
Sadly as I said at the beginning this bill was written sometime in August 2008 before the current recession deepened and worsened. The outlook for our economy has changed significantly and has worsened significantly. The official cash rate for instance has dropped since the measure was first drafted in response to recessionary conditions. It has been dropped to 3 percent actually; one of its lowest levels for many years. 
The currently proposed reduction in the use-of-money interest rate of 9.73 percent is based on December 2008 Reserve Bank 90-day bill rates. Updating this to January 2009 gives a rate of 8.88 percent. Proposing a January annual adjustment allows this to be updated for further changes. As to uplift basis the bill currently proposes 100 percent of the previous year’s income or 105 percent of the income in the year before that as a basis for uplift. However in times of recession the 5 percent penalty on 2-year-old income is unnecessary and potentially punitive. 
Questions must be asked about what the National Government has done in the 6 months since the bill was written in light of the deepening and worsening recession which will hit small businesses hard. Where is the National Government’s robust approach to tax legislation? Where is the National Government’s insight in pursuit of the nation’s economic health? Thank you. 
Hon PETER DUNNE (Minister of Revenue) 
: 
 I hesitate to take a call at this point but a number of things have been said about the parentage and the history of this bill that I am in the unique position to comment on and I thought I should put these comments on the record before the Committee this afternoon. At the outset I acknowledge the work that the Finance and Expenditure Committee has done and I acknowledge the generally cooperative and bipartisan way in which the Committee of the whole House is approaching this bill today. 
The previous speaker Raymond Huo said that this bill was drafted in August last year. That is wrong; it was drafted in January this year. He may have been referring to the previous bill—the more substantive bill that was before the select committee. That bill had its origins in the Business Tax Review 
that was undertaken in 2006-07. That bill was drafted around the time of the Budget last year and was introduced into the House in July last year. So that bill has been before the select committee since that time. 
The changes contained in this bill in terms of their impact on revenue are about a sixfold increase on the changes that were contained in the bill introduced in July last year. So this is quite a substantial measure in its own right. 
I will make some comments about three of the issues that have been raised by a number of the speakers to date. The first issue is in respect of the use-of-money regime. I will break this discussion into two parts. Mr Cunliffe suggested that the previous Government had a plan in mind for a different use-of-money regime than the regime that was implemented in January and that is given effect to in this bill. I need to say to the Committee that what Mr Cunliffe was talking about was the Labour Party’s policy. No work had been done by officials prior to the change of Government on giving any effect to that proposal. So the changes that were agreed to by Cabinet earlier this year and are reflected in this bill arose as a result of work that was done after the change of Government to give effect to work that had been under way last year in respect of the formula. That is as far as things had got at that point. 
Let me make a couple of comments about the issue of deductibility. There has been an assumption over time about use-of-money interest being deductible and a number of taxpayers have from time to time gone to the Inland Revenue Department to seek rulings on the issue. I have to say that there appears to be a measure of inconsistency about that provision. What is happening at the moment is that officials are working through this issue to determine where the balance should be and I give an undertaking to the Committee that we will come back and may well make an amendment to the main bill that is currently before the select committee or include measures in a subsequent bill to be introduced later this year if the outcome of that consideration is that we need to make a legislative change. So I give the Committee that commitment. 
The question was also raised about the deductibility of patent costs. This is an interesting and new issue because it has not featured on the Inland Revenue Department’s work programme thus far. It is not actually on the programme at this point. However there are some issues that I should put on the table about the tax deductibility of patent costs. A number of speakers have raised questions or made comments about it as we have gone through today. It is worth noting that although the maximum legal life of patent protection in New Zealand is 20 years the initial period of protection is 4 years. There are certain renewals that occur after that time. Patents are generally depreciated over the full 20 years but there is not sufficient knowledge at this point about what the average length of a patent is in New Zealand. So it is therefore likely that the length of time will vary depending on the industry type and the nature of the asset. 
The question was also raised about comparability with other jurisdictions and I will give the Committee four examples of what happens in other places. In Australia the patent protection period is 8 years for innovation patents and 20 years for a standard patent. The federal regime in Canada provides for 25 percent of useful life. The United Kingdom has an accounts write-off or 25 percent of preferred. The United States at the federal level provides for a patent protection period of 15 years as a general rule. The Committee will see that there is actually no uniform rate and one of the difficulties we have in determining where we might pitch ourselves vis-à-vis another jurisdiction is trying to determine where that line might be. 
The final question I will comment on very quickly relates to the issue of the change to the provisional tax regime. The real issue here is how much revenue we can afford to give up at this time. This whole measure including the use-of-money interest proposals is around a $450 million package. That is quite a substantial commitment given the size of our economy. The issue as to what we are doing in the long term is that if we were to move to 100 percent there would be no immediate revenue impact in the next couple of years However there are some issues regarding cash flow and some other implications for use-of-money interest that may make it not the attractive proposition that it has been suggested to be. That is something I am sure the officials and the Committee will give some further attention to. 
I simply conclude at this stage by observing—and I do not want to use the analogy of a rolling maul because that has been used elsewhere—that this is an evolving process. 
Chris Tremain 
: Rolling maul is good. 
Hon PETER DUNNE 
: Well it depends; I personally was a fan of good old South Island rucking but never mind. Progressive changes will be made as the situation unfolds over the next year or so. In a very short way this bill puts in place some immediate measures that we felt were a step up on what was contained in the bill last year. These measures came forward in January of this year. We think they have generally been welcomed and supported and they will be a valuable addition once they are implemented in time for 1 April. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I raise a point of order Mr Chairperson. I do not wish to detain the Committee but I want to under Standing Order 106 briefly avail myself of the opportunity to clarify a certain matter that the Minister may have misunderstood or that I may not have expressed clearly. 
The CHAIRPERSON (Lindsay Tisch) 
: The member can seek a call later on. That is not a point of order but he can seek a call. 
Hon DAVID CUNLIFFE 
: Standing Order 106 states: “A member who has spoken to a question may speak again to explain some material part of the member’s speech which has been misquoted misunderstood or misrepresented in the same debate.” With respect Mr Chairperson I say that there is a material part that I believe the Minister has misrepresented. I undertake not to introduce any new material. 
The CHAIRPERSON (Lindsay Tisch) 
: OK; proceed. 
Hon DAVID CUNLIFFE 
: It is certainly my position that in my earlier remarks—and I am happy to check  
Hansard 
—I had not claimed that all of the measures in this bill were in the previous work programme. Indeed some measures were represented in an earlier bill but others were ongoing. I think we used either an official’s work programme or the Labour Party’s work programme. 
The CHAIRPERSON (Lindsay Tisch) 
: That explains it. Thank you very much. 
JOHN BOSCAWEN (ACT) 
: 
 I would like to start by thanking the Minister for his comments of clarification in his earlier speech. As a new member to this House the whole process of select committee consideration was an eye-opener to me. I acknowledge the bipartisan nature of the Finance and Expenditure Committee’s deliberation. I also acknowledge the cooperation of Mr Cunliffe and his team and the chairmanship of Mr Foss. 
I was intending to draw members’ attention to a paragraph in the commentary on the bill in relation to use-of-money interest deductibility. It states: “We are concerned that the existing legislation is not clear about the circumstances in which use-of-money interest is deductible. This uncertainty may cause some taxpayers to incur penalties for mistakenly claiming a deduction for use-of-money interest where it is in fact non-deductible.” In the course of the consideration as a new member of Parliament it was an eye-opener to me that Parliament would have these laws. We acknowledge the law and we acknowledge that the law was uncertain. Members of the public and taxpayers could mistakenly pay their tax and be penalised. It is incumbent on us as lawmakers to pass laws that are certain so people going about their lawful business can comply with them without fear of penalty. 
The provisions of this bill are designed to assist small to medium sized businesses to trade in the current environment. We all know how difficult it is. The small to medium sized sector is very important to New Zealand in just the same way as businesses in Auckland are. The point I was trying to make this afternoon is that it is very important to have a very efficient transport system in Auckland. The deputy leader of the Labour Party seemed to think that I was from Hawke’s Bay. Although it is a very wonderful part of the country—I had a business in Hawke’s Bay—I have long been a resident of Auckland. I grew up in Auckland. I said in my maiden speech that I am an old boy of Otahuhu College and I am very proud of it. I am very much aware of the transport problems in Auckland. The deputy leader of the Labour Party clearly did not listen to my speech because I acknowledged the work that had been done by Labour in the latter years of its 9-year term. 
This bill is designed to assist small to medium sized businesses as I said. It will lift the thresholds for the payment of PAYE fringe benefit tax and GST. It will also reduce the provisional tax uplift for provisional taxpayers. It makes provisions for the deduction of legal expenditure in certain circumstances and it reduces the rates of interest due for underpayment of provisional tax. However it is interesting that Mr Cunliffe said that the bill did not go far enough. Mr Nash talked about supporting the bill despite the fact that it is not perfect. 
I think the real issue is the one that Mr Dunne raised. It is all very well to talk about bills not going far enough and asking where the National Party’s plan is. Mr Dunne talked about the real issue of how much revenue we can give up. The reality is that this Government finds itself in a position where it cannot give up revenue. 
Mr Foss generously talked about the submissions that have been received from the three submitters and in particular the submission from the New Zealand Council of Social Services. Its spokesperson Ros Rice appeared before the committee. The interesting thing about that submission is that the council is very concerned about the economy that this country faces right now. In fact it suggested that far from reducing the rate of provisional tax uplift the Government should actually reduce it below 100 percent. The council said that in its best estimate the average profits accruing to small business in the years ahead during this recession will be at best 80 percent of last year’s income—80 percent! 
The New Zealand Council of Social Services was suggesting that in the calculation of provisional tax taxpayers should be required to base their tax payments on only 80 percent of the previous year’s tax. We all know that we have the ability to estimate down or up but if we estimate down and we make a mistake then we are subject to penalties. One of the reasons that the select committee ruled out the lowering of the rate of provisional tax uplift from 100 percent down to 80 percent was simply that the country could not afford it. 
I believe that one of the reasons the country is not in a position to afford it is the expenditure that was carried out by the previous Government which has not been efficient expenditure. There has been a huge amount of money wasted and I note the Green Party member spoke earlier about a national cycleway. The previous Government less than a year ago spent $1 billion buying KiwiRail and that business has been written down to virtually nil. 
The New Zealand Council of Social Services came to our committee and told us that the country was in recession and that small to medium sized businesses are hurting by the Government’s insistence that people pay their tax based on 100 percent of their previous year’s income. It said that the Government is taxing people too much and asked us for relief but we are not in a position to be able to grant that submission. 
The ACT Party will be supporting the bill. The bill could go further but the current Government finds itself not in the position to be able to do so. Thank you Mr Chairman. 
BRENDON BURNS (Labour—Christchurch Central) 
: 
 I am pleased to rise and speak in this debate the Committee stage of the Taxation (Business Tax Measures) Bill. I acknowledge the way in which the bill has proceeded through the Finance and Expenditure Committee and I also note that my Labour colleague the Hon David Cunliffe has foreshadowed some proposed amendments that will assist with making more of the opportunities that this bill provides to small to medium sized enterprises. They are the lifeblood of our economy. Around 90 percent of the jobs are provided by them. 
This bill will provide modest amending legislation to assist particularly the small to medium sized business sector. It introduces some welcome changes to tax law initiated in large part by the previous Labour Government since when we have had a world economic change of such magnitude that this bill deserves to be part of a much wider set of initiatives; perhaps—as Minister in the chair the Hon Peter Dunne has indicated—something more of a South Island rucking than a rolling maul. 
This is a bill for business as usual and what we see is what we get. There are welcome if modest changes to tax rates and regimes for small to medium sized enterprises but the bill is a small cog that is not yet enmeshed in a much wider wheel. That said some encouraging signals were made to the Finance and Expenditure Committee I thought. For instance the officials were asked to detail how the Inland Revenue Department is acting to do all it can to assist businesses through the obligations that they now meet given that thousands of them started the business year last year at a time when continued buoyant trading was predicted and given that the world outlook has changed so dramatically since that time. 
I am pleased to see that the department has acted and is now publicising some of the initiatives it plans to bring about to assist people in business who are having difficulties meeting instalment arrangements. With a range of options being available the department is emphasising that it is now possible to establish instalment arrangements for taxpayers to pay off their debts. These can be renegotiated in some circumstances. There is scope for write-offs. We are also seeing a media programme being developed so that businesses around the country know very clearly that the department will be there to try to assist them through these very very difficult times. An 0800 number is being staffed by BIZinfo staff and a contact centre team is being briefed to advise taxpayers on how best to meet their arrangements. I think those are good promising initiatives from the department. 
Unlike what was claimed by the member for Napier the bill does not do much to blunt the edge of the recession. It could have done much more to do that. 
Hon David Cunliffe 
: Not even the sharpest edge. 
BRENDON BURNS 
: Indeed! One of the things that came through and the Minister has commented on it in the last few minutes was around the issue of depreciation regimes for patent rights in New Zealand. As the Minister noted in Australia an 8-year write-off period is available for an innovation patent. In Canada it is 25 percent or the useful life of the patent. In Denmark it is 7 years. In France it is the useful life of the patent. It is 3 years in the case of Italy—a very innovative nation Italy. Japan has an 8-year depreciation period and Korea has 10 years. So we are well outside the normal range of some of the other OECD countries with our 20-year depreciation regime. I think the Manufacturers and Exporters Association made a strong submission and I am very hopeful that the Inland Revenue Department will take this into its work stream from here on. 
I also wish to comment as a new member of the Finance and Expenditure Committee on the complexity of tax law and of course this has now been added to by this bill. Several submissions raised concerns around that. Some of them were from bodies that one would have thought should not have any difficulty in dealing with tax legislation. I am thinking particularly of the Institute of Chartered Accountants of New Zealand which noted that tax is getting more and more complex for practitioners. Its members are the specialists so if they are having difficulty reading their way through measures such as this bill then one wonders how accountants in small firms in provincial cities and business people who do not have the full range of professional advice are able to work their way through the sorts of changes embodied in the legislation we have before us now. 
In summary this bill is business as usual. It is a good bill in many respects. 
DAVID BENNETT (National—Hamilton East) 
: 
 As we talk about the Taxation (Business Tax Measures) Bill I think it is prudent to just reflect on the current circumstances that the country and world economies are in. It is probably important when we consider the respect with which both the major parties and the minor parties have shown towards the need for reform in this area and to the need for legislative change. I think that all small businesses throughout the country will be grateful to the National Government for bringing these changes forward so that they can become a reality and for providing the impetus for the changes. 
Hon David Cunliffe 
: It’s a great time to not be partisan. 
DAVID BENNETT 
: I was just about to pay due respect to Labour before I was rudely interrupted by Mr Cunliffe but I think that the way the parties have conducted themselves in the Finance and Expenditure Committee shows that there is a sense of realism out there as to the nature of the issues that our small business community is involved with. There is a sense of realism that people’s jobs are at stake that we want to keep people in work and that we do not want to see our country suffer the strong effects of the recession that other countries will suffer. New Zealand has some particular attributes that will hopefully enable us to get through this recession quicker and in better shape than other countries and we will need to do all that we can to make sure that that becomes a reality. 
We endorse the comments made in this Chamber by all political parties to the effect that we need to work together in order to achieve those results. However that does not mean that any political party can necessarily go back in history to what it thought it might have wanted to do in the past and can take credit for it. This is a bigger issue. It is about more than political parties trying to say that they thought of it a year ago and that it is their idea. The reality is that this legislation is being passed now it will be passed by the National Government and it is something that we need and need desperately. 
It will become part of other things that we will probably need to add to it in the future. This is no silver bullet. Other things will come up over time through advice given by the small business community and also through advice given by Government advisers. People will understand that the Government can take other opportunities to increase the potential for this sector to get through these difficult times. 
I think that the Minister in the chair the Hon Peter Dunne spoke very well when he took the call earlier to give some background to some of the issues around this legislation and also to give his take on some of its practical realities. The Minister probably has had a lot more advice on this legislation than the layperson in the street has had and it is quite refreshing to hear him coming out and putting forward some conducive and respectful advice and some background to this legislation today. 
If we look at the legislation itself there are a few issues in Part 1 that basically may bore members of the general public as they are driving home but they are essentially threshold issues around GST fringe benefit tax and PAYE that will assist small businesses by reducing their compliance costs. This will mean that they have an easier regime to comply with. Small businesses will not necessarily have to comply as rigorously as they have had to do in the past and that is something that I think the Government should have recognised and delivered on a long time ago. 
These people are out there trying to make a start. They are trying to live the New Zealand dream. They have ambitions they have goals they have set themselves a destiny and they want to actually fulfil that destiny. They want to take with them other people in our community to whom they are providing employment and to provide a good level of service. 
When we look at the small business sector we have to understand that their competitive nature means that they can provide services of a very high standard to our consumers in New Zealand and that service delivery sets them apart. They compete on service delivery and on price. So if we can help them by reducing some of their costs that may mean that they can deliver a cheaper price for New Zealand consumers for the goods and services that they deliver. 
AMY ADAMS (National—Selwyn) 
: 
 I am very pleased to rise at this Committee stage to talk to the Taxation (Business Tax Measures) Bill. It is a bill that I have spoken about before in the House and I have watched it with considerable interest as it passed through the Finance and Expenditure Committee. As we have already heard this afternoon it has been very pleasing to hear the multipartisan support for the bill and the way—now so more than ever—in which all parties have really come together to recognise the importance of enacting exactly these sorts of changes into New Zealand law. 
I think that what everyone needs to be clear about is that the small to medium business sector is really at the engine room of our economy. These are the businesses that will see New Zealand through the recession and get us ready to be in a strong position to come out of that recession. As my colleagues on this side of the Chamber have already spoken about we have to foster and protect these businesses as much as we can because if we let them go it is not a matter of flicking the switch and having them back when we are ready to go. If we do not do all we can to protect our small to medium enterprises then New Zealand will not make the sort of recovery that it can and should make out of this recession in time to come. 
Certainly in my area of Selwyn the small to medium enterprise sector is the predominant one. Selwyn does not have a major metropolitan commercial sector; most of the business in my electorate is in the category that is affected by this bill. These businesses are calling for exactly these sorts of changes. So it is very pleasing to see the bill pass through the House and it is very pleasing to see support for it. 
We have heard a number of other speakers this afternoon talk about some of the issues that we looked at closely at the select committee. I think that everyone in this Chamber agrees that we want to do what we can for business in these difficult times. But we have heard from the Minister in the chair the Hon Peter Dunne and I completely endorse what he has to say—that we need to balance some of the ideas that are put before us which may be very valid at face value with our ability to forgo revenue. The Minister has made that point and I think he has made it completely correctly. For every advantage and piece of assistance that we can give to businesses we do have to look at the overall fiscal cost and that is certainly something the select committee looked at very closely as we worked through the various submitters’ suggestions. 
One thing I want to talk about that our committee looked at closely is the work that the Inland Revenue Department is doing around instalment arrangements and the help that can be given to taxpayers who find themselves in a situation where they are not able to pay their tax on time. This is an ongoing issue for the department and certainly in the times ahead it expects this to be an issue that becomes considerably more prevalent. We looked at what the department was doing around that—the instalment arrangements that it was talking about and how it was getting that information out there. I think those discussions were very fruitful and will certainly be taken away by the department to work on. But as we have seen in the bill the changes that have been recommended by the select committee are largely technical in nature and address drafting errors. Fundamentally what we see in the bill are the policy matters that we have already discussed through the first and second readings. 
When one gets down into the detail of the bill and unfortunately this is a bill that one needs to look at the details of in order to get the real flavour of it—it is not just a one-hit “this bill does x”—one sees that it does a number of small things each making important contributions. Mr Foss has talked about his favourite provision being the uplift provision and I am in some agreement with him on that. The change to the uplift rates will make a considerable difference. The interesting thing with tax bills which I am certainly learning as a fellow new member on this committee is that when one starts to drill down into what these benefits mean to a business community they are quite real. In the first reading of the bill we heard that the provisional uplift rate change will put another half a billion dollars into the pockets of small to medium sized businesses—that is $500 million of extra cash flow that will pump through the arteries of the New Zealand business sector as a result of that one change. It is the sort of thing that rolls off the tongue easily and it sounds like a relatively minor change but it is a real tangible stimulating benefit to the economy and it cannot be overlooked. What it means is that in the 2008-09 and 2009-10 years instead of having the 105 and 110 percent uplifts automatically applying it will be the 100 and 105 percent increases. Of course 30 percent of taxpayers are currently on a 95 and 100 percent basis and 30 percent of taxpayers will now be entitled to lower uplift rates of 90 and 95 percent. 
I want to touch quickly on two other matters. One relates to GST and it is a matter that is near and dear to my heart and it is the raising of the payments basis qualification level and keeping it up to $2 million before a business has to go on to the invoice basis. Believe me as a small-business owner one could be talking about hundreds of thousands of dollars that suddenly have to be found when that invoice basis threshold is hit. Once again by moving that amount to $2 million a lot of cash flow will be put into the heart of the New Zealand business sector. It will keep businesses viable which at this time when we are all working hard to protect jobs is fundamental. So that is one provision that I am very very pleased to see. Alongside that provision is the 6-monthly registration basis increase and lifting the threshold to elect to register up to $60000 which are all matters that make a big difference. 
The final matter that I want to mention briefly—and I do not think it has been talked about this afternoon—is a relatively small matter in relation to the deductibility of legal expenses of up to $10000. As a previously practising lawyer and knowing the machinations that are often worked through to categorise legal expenditure of reasonably minor amounts I know that it involves a lot of consultant time—business time—being wasted on what is effectively pretty small bickies. To be able to say that up $10000 legal costs are deductible is exactly the sort of simplicity we need to bring more of into our tax system. So that is a measure that I wholeheartedly endorse in application and in philosophy. 
Does the bill go far enough? Well it will not stop the recession but it will keep businesses functioning that might not otherwise function; it will protect jobs; and as I said at the outset it will mean that those businesses are there to help fuel the recovery when the time comes. The bill is being looked forward to in the community and I know that is certainly so in my patch. It is very much needed and I am pleased to see that it is being delivered. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 In some brief concluding remarks for this part of the discussion from our side of the Chamber I will do something that is unusual around this place and particularly thank our opposite numbers on the Finance and Expenditure Committee. I think the chairman Craig Foss has chaired the consideration of this bill extremely well. I thank the officials who have provided sound advice to us and responded quickly to our questions and indeed I thank the Minister in the chair the Hon Peter Dunne for his undertaking today in the Chamber that he would follow up on some of the committee’s suggestions in the forward work programme including the issue of the patent life deductibility. 
I would like to chip in on one matter of fact and that is in respect of revenue forgone in regard to the use-of-money interest payments. The Minister has rightly pointed out that if all use-of-money interest was negated the fiscal cost would be about $400 million. That is true but the particular measure that the Opposition has suggested today which was a relatively minor realignment to the Reserve Bank’s 90-day bill rate would on Inland Revenue Department advice cost only about $5.7 million. These are incremental steps but I think they are ones that would add positively to the measures that the member who has previously resumed her seat drew attention to. 
In that regard it is worth reminding ourselves that this is not a trivial bill. The fiscal cost of these measures is close to $500 million and I guess that is why there has been a little bit of discussion in the Committee today about the mixed parentage of this bill—the bipartisan parentage of the bill—and it is important to see that because the uplift measure on its own is worth around 20 times the stimulus of say the impact of the 9-day fortnight on jobs. That is a $20 million measure; this is a $450 million - odd measure. That gives us some order of magnitude about the power of tax changes that might sound reasonably boring but if one is doing the books of a small business then as Amy Adams said they are real. So this bill does matter. It matters to real Kiwis to real small businesses out there who are among the 99.5 percent of businesses that do not qualify for the 9-day fortnight under the rules that have been espoused. 
The final point I want to make—and I hope the Government members will forgive me if this reiterates an earlier theme—is that we do have to hold in our minds the relative magnitude of the changes that have been proposed. By my count the total value of the stimulus that is going through now is around $13 billion of which $10.7 billion was from the Labour Government’s 2008 Budget. Of the new stimulus from the National Government around $500 million ostensibly was from the infrastructure package and around $500 million was from this tax bill. That is why we are pointing out that of that $500 million a good whack probably a majority are matters that as the Minister and I have earlier discussed were either in legislation prior to the election or were on the officials’ work programme or were announced by Labour as part of its intention for this term of Government. 
But that does not matter as much as the fact that we are working together as a Parliament right across parties and right around this House to try to do something to take the pressure off ordinary Kiwi businesses during what we know will be a pretty rugged 2009. I have just been rereading the Governor of the Reserve Bank’s testimony around the quarterly Monetary Policy Statement—to the same committee that has deliberated on this bill. He reiterates that he thinks 2009 will be a pretty ugly year but that we will see an upswing in 2010. I hope he is right. I hope that New Zealanders can see their way through this and the Opposition is committed to providing constructive suggestions working with all parties to try to make that as good a reality as we can. Thank you Mr Chairman. 
PESETA SAM LOTU-IIGA (National—Maungakiekie) 
: 
 I endorse much of what has been said this afternoon. I am glad that we have used the word “multi-partisanship” because it is not just about Labour and the National Government. We have heard from a number of other parties that support this bill that support the measures within this bill and that certainly support the purpose behind this bill which is to help our small to medium sized enterprises as they struggle through this world recession. 
Much has been said about the global recession but there was a report out yesterday that said that New Zealand was in good stead in terms of its financial institutions and that those institutions have managed to not get tied up with a lot of the derivatives and the subprime mortgages that affect our friends in the US and the UK. But this is not about a bunch of politicians arguing in the House in Wellington. It is about mum and dad businesses—the small businesses that are out there trying to do good for their families do good for their regions and do good for this country. 
I spoke at a business breakfast where there were over 50 business owners representing a wide range of business interests in my electorate in Ellerslie. The thrust of their opinions and their views was really around taxation compliance relating to GST provisional tax and various papers that needed to be filed with the Inland Revenue Department. They also talked about the need for the Government to understand that the credit crunch is real in this country and that working capital is one of the things that they are finding difficult to attain in order to drive their businesses forward. 
As many speakers have intimated this afternoon this bill is really about freeing up cash flow for small to medium sized enterprises. It is about reducing compliance around some of the filings. The one clause that no one has picked up on concerns the GST registration threshold being raised from $40000 to $60000 for GST turnover. I think that is a huge boost for small to medium sized enterprises particularly sole traders who are going about their work and do not want to deal with this type of filing of papers on a regular basis. 
The other point that has not already been mentioned is around a regulatory impact analysis and the adequacy statement that the regulatory impact analysis team has put forward and determined to be adequate. However the consultation undertaken with regard to the provisional tax uplift rate was deemed to be a little bit on the light side. That is understandable given the time constraints in which we are trying to get this bill pushed through the House. 
 This bill—and many have talked about its other clauses—does not solve the whole crisis that this country faces. But it does add to the mix of initiatives that this Government has undertaken to reform the Resource Management Act as many developers and businesses out there are trying to improve their capital stock their plant and their machinery and are having to deal with regulation and red tape which does not complement what they are trying to achieve. So the changes to the Resource Management Act will certainly be positive. 
The 90-day probationary period for small businesses is a huge boost. My colleagues on the other side of the Chamber may disagree but the feedback I am getting from my electorate from workers and employers who have taken on this type of arrangement is positive. It gives those who would not otherwise have a chance to be employed the chance to prove themselves. Also the KiwiSaver thresholds are being reduced and that has been positive as well. Low-income workers can now afford to join the scheme. It will benefit low-income workers who the Opposition says cannot afford to get on to the scheme. 
Hon Maryan Street 
: Not in the long term. 
PESETA SAM LOTU-IIGA 
: We beg to differ on that. National has held a Job Summit which has been hugely positive. 
The CHAIRPERSON (Lindsay Tisch) 
: I remind the member that we are debating the Taxation (Business Tax Measures) Bill. It is not appropriate to debate other measures in this debate which is very narrow. I ask the member to confine his comments to the bill. 
PESETA SAM LOTU-IIGA 
: In summary I recommend this bill. It has multiparty support and I think it is a bill that will certainly make a difference to our small to medium sized enterprises. 
Part 1 agreed to. 
Part 2 agreed to.  
Clause 1 agreed to.  
Clause 2 agreed to.  
Bill reported without amendment. 
Report adopted. 
Insolvency Amendment Bill 
First Reading 
Debate resumed from 12 March. 
JOHN BOSCAWEN (ACT) 
: 
 We are debating the Insolvency Amendment Bill. As I was saying to the House just prior to its rising on Thursday of the last sitting week insolvency is something I know quite a bit about. That is simply because I have been insolvent. I am sure I am not the first member of Parliament to come to the House having been insolvent or to become insolvent after leaving the House. 
In my case I was insolvent for a period of just on 5 years in the late 1980s and early 1990s. I have to say that the first 2 or 3 years of that period was probably the hardest period of my life. It was a time when I had to negotiate with my creditors to arrange the time payment of my debts. I knew that if just one creditor was not prepared to reach an arrangement with me that person could put me into bankruptcy. It was a gut-wrenching experience when a court bailiff came knocking on the door of 5A Kenny Road to give me notice that the National Bank was proposing a mortgagee sale of my property—a very gut-wrenching experience. 
But I was actually very lucky as I was in my early 30s and I had a chance to rebuild my financial position to get on top of my debts and to pay my creditors. I compare myself with the people today—mainly elderly; not totally but mainly—who have lost some or all of their life savings through investments in finance companies. I think what has happened to so many New Zealanders in the last 2 or 3 years is absolutely tragic and I think it is something that this House really needs to look at and look at very closely. It is an issue of real concern. 
In our jobs as parliamentarians we have probably all met constituents who have come to us with tales of loss tales of misrepresentation and tales of fraud and we have all been concerned. It would be very easy to push those stories to one side and say that the money has been lost and that there is not much we can do but I believe that as parliamentarians we have an obligation to investigate that. 
My view was further supported when the Commerce Committee of which I am a member asked the Registrar of Companies Mr Neville Harris to supply a report into his view of the regulatory structure of finance companies in recent times. Mr Harris’s report makes very sorry reading. In some cases losses have been incurred through simple changes in market circumstances. A person may make an investment by lending money to a finance company the finance company may decide to invest that money into a property development there is a change of market liquidity dries up and the borrower is unable to repay that money. The finance company finds itself in a position where it has no alternative but to default on the people who lent it money. 
I believe however we have seen a number of instances in recent times that point to mismanagement malpractice and possibly fraud. I guess one of the many things that concerns me is the issue of finance companies paying dividends to their shareholders in the period immediately prior to finding that they are not in a position to pay back the people who have lent them money. Many tens of millions of dollars have been paid out to those shareholders. 
I am not suggesting that there is necessarily any fraud in those payments and I am not suggesting that the directors have necessarily done anything wrong in authorising those payments to those shareholders. But we have to ask ourselves whether we should allow accounting standards that enable finance companies to capitalise interest to loans to capitalise fees to loans and then to report a profit that does not actually exist in cash and then to take the cash that comes from new investors to pay out those shareholders such that when it comes time to repay the people who have lent the finance company the money that finance company is unable to do so. 
I say that that is a very important issue to raise in the context of the Insolvency Amendment Bill because one of the provisions of our insolvency law is to provide the official assignee with a right to claw back voidable preferences or in this case to claw back gifts. So if a bankrupt person gives a gift to someone and within a short time finds that he or she is not able to pay his or her bills that gift is able to be clawed back. I suggest that one of the things that we as parliamentarians need to consider is whether we need such a provision in respect of dividends. It concerns me that literally tens of millions of dollars have been paid out from finance companies that then tell their lenders that they are unable to pay them back. 
I should point out that there are many reasons why finance companies have failed and I think it is important to acknowledge that some have failed simply because of market circumstances. Mascot Finance for example has been in the news recently. It was the first company to be given a taxpayer guarantee. Mascot Finance reported the fact that one of its borrowers tried to get a resource consent for a project was unable to do so and that there were delays of many years. So the Mascot Finance directors came to the conclusion that they needed to give notice that they may not be in a position to repay. So there can be quite legitimate reasons for finance companies finding themselves in that position. 
I referred earlier to the report of Neville Harris the Registrar of Companies. It was appended to the annual review of the Ministry of Economic Development. Mr Harris raises a number of issues. He raises the issue of corporate governance and he makes the point that there are a number of companies where directors simply did not know what was going on or they were led—or misled rather—by rather strong-willed chief executives. He also raises the issue of lending practices. In some cases finance companies have lent large sums of money to just a very few borrowers so the loans have been very very heavily concentrated and investors have not appreciated the true risk. 
At the annual review of the Securities Commission Jane Diplock made the point as head of the Securities Commission that the commission was required to authorise or approve the prospectus but—certainly as she perceived the law—the Securities Commission had no capacity to monitor that that money was spent as the directors authorised. Mr Harris in his report also draws reference to the role of trustees. The word “trustee” conveys some substance. It conveys the word “trust” but the reality is that a number of trustee companies are simply privately owned. They are probably perceived to be far stronger than they really are and they are perhaps perceived to be far more independent. One of the points that Jane Diplock made was the fact that entering into a relationship between a trustee and a finance company— 
Mr DEPUTY SPEAKER 
: I am sorry to interrupt the honourable member but the time has come for me to leave the Chair for the dinner break. 
Sitting suspended from 6 p.m. to 7.30 p.m. 
JOHN BOSCAWEN 
: Let me summarise by saying that several billion dollars worth of losses have been incurred through investment in finance companies in the last 2 or 3 years. Those losses have been sustained mainly but not exclusively by the elderly and I think that we as parliamentarians owe it to those people to investigate why those losses occurred and what law changes are required to ensure that sort of thing does not happen to that extent in the future. The health of those people is being affected. In some cases their lives are at risk and we owe it to them to give this bill our earnest attention. 
TE URUROA FLAVELL (Maori Party—Waiariki) 
: 
Kia ora. Kia ora koe i tenei po. Kia ora tatau e hoa ma. 
[ 
Thank you. Greetings this evening. Greetings to us fellow colleagues as well 
.] 
Sometimes I am sure that the listeners who tune into Parliament on the parliamentary channel wonder at the value of terminology such as the official assignee the no-asset procedure preferential creditor Crown preference and the like. The clutter of that sort of jargon can often blur the perfect meaning. So it is no wonder that a previous attempt at legislation on this matter the Insolvency Law Reform Bill in 2006 attracted only one public submission from the Joint Insolvency Committee. I am told that this joint committee was established by the New Zealand Law Society and the Institute of Chartered Accountants of New Zealand. 
Upon doing some research and investigation into this particular matter the issue of fraudulent debts the corruption of moral bankruptcy and the like I found some information on a famous march on Washington in August 1963. In that march the late Martin Luther King described the Constitution and the Declaration of Independence as a promissory note to which every American would fall heir—the guarantee of the inalienable rights of life liberty and the pursuit of happiness. We know that Dr King was pretty famous and at that time he said these words which are quite neat words actually: “It is obvious today that America has defaulted on this promissory note insofar as her citizens of color are concerned. Instead of honouring this sacred obligation America has given the Negro people a bad check a check which has come back marked ‘insufficient funds.’ But we refuse to believe that the bank of justice is bankrupt. We refuse to believe that there are insufficient funds in the great vaults of opportunity of this nation.” 
I wanted to share those words when speaking to this bill because the issues of integrity of accountability of honesty and of truth and justice are right at the core of any move to prevent the write-off of fraudulent debt. I say there is no better way to understand fraud than to draw on the links that we know are still relevant in the equal treatment under the law for all people. This Insolvency Amendment Bill on the floor of the House today is designed to close up a potential legal loophole. It amends the Insolvency Act 2006 to prevent people from discharging debts that were acquired fraudulently. In doing so the legislation boasts that it will ensure the integrity of the no-asset procedure. That procedure which is basically an alternative to bankruptcy was created to help people who find themselves in financial difficulty. What it does I am told in practice is to write off debts of up to $40000 for people who find themselves in difficulty and who do not have any realisable assets to pay off those debts. To qualify for the no-asset procedure individuals have to meet a number of stringent criteria including of course the fact that they have no assets. 
The no-asset procedure was all about a fresh start a new beginning to assist people to restore themselves on the pathway forward. It was an intervention that meant they could once again be contributing and productive members of society without having to face the stigma of being declared bankrupt. But the trouble is that the no-asset procedure was never meant to be a way out for those who had obtained debts fraudulently yet that is what has transpired. It is one of the anomalies of the Act that legislation that came into effect to deal with the discharge of fraudulent debts was in itself rewarding dishonesty. We welcome therefore the move to grant financially distressed individuals relief from debts that they may have incurred but not debts or liabilities that have themselves emerged as a result of fraud. 
The bill goes further than that and advances the issue of reporting and registration of those who have had debts discharged under the no-asset procedure. The bill stipulates that the public register should be amended to record the names of those who have had their debts discharged under the no-asset procedure. The information will be retained for 4 years on the public register after a person has been discharged from the no-asset procedure which all seems fairly sound to us. It also proposes that a permanent public record will be kept of those who have been involved in multiple insolvency activities. Information pertaining to an individual applies if a person has had two or more insolvency events and that also applies retrospectively. 
We would be very interested to hear at the select committee from individuals who have been through bankruptcy as to their perception of the extent of the harm that may cause to their future prospects. A key focus for the Maori Party through all the public policy is on the restoration and maintenance of whanau order. We supported the original Insolvency Law Reform Bill because we believed it had a focus on the rehabilitation of companies and the restoration of individuals. We would not want to see those values compromised in the interests of business relations per se. Although we totally support any investment in business growth and encourage whanau to enter into commercial enterprises we also want to ensure that whanau well-being the greater good of the collective is taken into account when considering individual situations of fraudulent activity. 
The key is to try to prevent financial strife from occurring in the first place. So it makes for an interesting synergy today that this bill follows fast on the heels of the Taxation (Business Tax Measures) Bill. We know that tax laws have often contributed substantially to financial distress. The taxation requirements are too costly and cumbersome producing an environment in which small businesses cannot keep up. In addition there is frequently no flexibility from the Crown via the Inland Revenue Department which assumes first place in the queue of creditors to the detriment of other creditors. Although this insolvency bill does nothing to change the tax laws we are obviously in support of the measures included in the business tax measures bill which will have a direct link to preventing financial failure. 
We hope that this insolvency bill will make it a whole lot easier for creditors for debtors and for whanau. It will allow creditors the opportunity to make better-informed lending decisions—an opportunity that cannot be understated in these difficult economic times. It will enhance the integrity of the no-asset procedure which in itself will have a positive impact on the returns to creditors. We hope that the processes introduced in this bill will achieve the difference we need to make in order to keep companies afloat and will impose the minimum costs on users yet at the same time will support innovation and entrepreneurialism. We do not believe that business failure should be excessively penalised by an overly corrective insolvency regime. Our greatest hope is that individuals who suffer the slur of bankruptcy are once again able to participate fully in economic life. It is because of those reasons that the Maori Party will support this bill at its first reading. 
KEVIN HAGUE (Green) 
: 
 I rise to give support to the first reading of this bill but indicate none the less that the Green Party has significant concerns about some of its aspects which I will go into in a moment. Earlier speakers have outlined the merits of the bill and I do not intend to go over them. Certainly the discharge of fraudulent debts the extension of the no-asset procedure and the voiding of insolvent gifts are all measures that are needed and they are supported by the Green Party. However the extension of insolvency registers is not something that we support and we certainly hope that the select committee will take particular care in seeking and examining submissions on that point. Although the other provisions of the bill relate to loopholes that were found to exist in the 2006 Act these provisions do not. In particular the 5-year register for no-asset procedure puts vulnerable people at risk and undermines the intent of the legislation. It violates the clean slate principle upon which the procedure was established and violates the spirit that redemption is indeed possible. This particular procedure was set up for those in unfortunate circumstances such as broken relationships or the suffering of financial issues due to ill health; both are factors that are recognised contributors to debt. 
These people are not big business fraudsters and financial illiteracy will also be a contributing factor in many cases. Putting such people on the 5-year register will reduce their ability to access clean credit from genuine lenders and combined with financial illiteracy will put them at very high risk from loan sharks and further financial distress. Five years is a very long time for some of the people who will pass through this process. Someone who makes bad financial decisions at the age of 22 for example will be likely to be unable to take up a rent contract open a utilities account or take up a mortgage on a first home until he or she is at least 27 and likely to be in a very different place both financially and personally. If that person then experiences a second insolvency event no matter what its size that event will be treated as a bankruptcy and under this bill that person will be on a register indefinitely. Treating the no-asset procedure as one insolvency event therefore threatens the independence of that process from the bankruptcy process. The two-strike register applies retrospectively so the more than 3100 people who have already passed through the no-asset procedure under legislation that guaranteed them a fresh start will now have a permanent register hanging over their heads should they get into financial trouble again. 
The current process is working well. The filtering of applicants has resulted in 35 percent of them being rejected on the latest figures. As the  
National Business Review  
quoted last week the numbers have not in fact been going through the roof as was initially projected by the credit industry. If the no-asset procedure process becomes more punitive through the 5-year register and potential inclusion on an indefinite register it will put people off dealing with their debt until that debt becomes more than $40000. According to an Insolvency and Trustee Service manager Cristian Pardo some debtors see no-asset procedure as a proactive measure to halt borrowing before it hits that level. This protects both them and further potential lenders. 
The Green Party does not want to protect criminals but believes that these people are not the real criminals; unscrupulous lenders and negligent politicians are. The Green Party understands the need for protection from genuine fraudsters especially when savings and financial literacy are so low. This is why we support the first three provisions of the bill and the creation of a register for those with multiple bankruptcies. But the no-asset procedure currently protects vulnerable people from further distress so they should not be included in that register. The real problems are the credit industry that allows debtors to get into unmanageable situations and this House’s failure to take effective action to regulate that industry. For example we are all aware that major banks in the last year have given 95 percent to 100 percent mortgages to first-home buyers with no assets; now we have a predictable raft of mortgagee sales. A  
Sunday Star-Times  
article from 2006 quoted a very typical example of a 20-year-old youth with an annual income below $20000 who was able to rack up debts with three different lenders totalling $19247—of which almost $13000 was for a car. The vehicle was later repossessed and two loans defaulted. 
The latest figures from the office of the official assignee show that 42 percent of those taken into the no-asset procedure describe themselves as beneficiaries. Before the no-asset procedure was in place a Retirement Commission study found that 72 percent of its sample of people who filed for bankruptcies were beneficiaries. A situation where these extremely low-income people can get themselves into significant debt shows how out of control our credit industry has become. These people already have a difficult time obtaining healthy credit and pushing them further towards the loan sharks for 5 years will almost guarantee a further financial crisis. At the same time the mean indebtedness of those in the Retirement Commission study was only $10600. Do we really want to punish and publicly shame people for life for $10000 they are unable to repay? 
The previous Government did not exactly cover itself in glory in this situation. For example credit companies like Veda Advantage can already publicly list those who have been discharged through the no-asset procedure thus corrupting the intent of the law but the Government has not moved against those companies. The Minister of Commerce in 2007 refused to put a cap on the interest rates charged by loan sharks despite advice from community law centres and budget agencies. In September 2008 after a media outcry over Super Loans Hutt Ltd charging debtors 8 percent interest per week the Minister finally admitted that the current situation was appalling and said she was looking at current credit advertising law with an eye to making changes. But it was way too late and the Government was voted out before it could make good its negligent record. 
Financial illiteracy in New Zealand is shocking and problems will continue until it is addressed. In 2007 the Reserve Bank undertook a study that indicated: “New Zealanders are aware of some of the financial issues that they face but they are ill-equipped to make financial decisions. They do not effectively understand the basic financial terms or instruments or more worryingly the concept of risk and return. Furthermore they do not use existing financial disclosures or credit ratings in a manner that would enhance their understanding of financial exposures.” The results of that study show that 53 percent of New Zealanders did not understand compound interest only 8 percent of respondents said they had financial goals and 80 percent were either not aware of mandatory disclosures or did not use them for financial decision-making. In 2007 the Government finally moved to address the complete lack of financial education in our schools. The Retirement Commission has been making some positive gains in this area. However there is currently still no compulsory requirement to teach financial literacy in the school curriculum and there is no provision for it at all in the primary school curriculum. 
The Green Party is glad the Government is moving to close the major loopholes in this law but in an environment where predatory finance companies are free to take advantage of New Zealanders who are not given the basic financial tools to look after themselves these objectionable provisions are a bear trap at the bottom of the cliff. We support the bill going to the Commerce Committee but strongly recommend to the select committee members that they take a detailed look at the full implications of these objectionable provisions. 
KATRINA SHANKS (National) 
: 
 I rise today to contribute to the debate on the Insolvency Amendment Bill. Let me say first how pleased I am that I have been given the opportunity today to speak to this bill which I am enthusiastically supporting. This is an important bill and I am glad it is before the House. I would like to give some background on what the no-asset procedure is for all those people who are listening; we are very good at using these terms that nobody really understands. The no-asset procedure has been described as a soft bankruptcy procedure. It applies only to debtors who have not previously gone through the no-asset procedure or who have not been declared bankrupt and it remains in place for 12 months only. After 12 months the debtor is discharged from the debt owed at the start of the period. It applies to debts between $1000 and $40000. Entry into the no-asset procedure can be refused by the official assignee. The procedure provides a one-off opportunity for financially distressed individuals to avoid the stigma of bankruptcy and enables them to rebuild their lives and that is really really important in the times we are in now when many people are facing financial stress. Many people require this procedure so that if they go into bad times which are no fault of their own but are due to the economic times we are in and they lose their jobs and cannot meet their commitments they will not have bankruptcy hanging round their necks for a very long time. 
This bill amends the Insolvency Act 2006 to address a small number of issues that have arisen since enactment. The Insolvency Act 2006 was enacted as a result of a major reform of New Zealand’s personal and corporate insolvency laws which came into effect in December 2007. The Ministry of Economic Development proposes that the Act be amended to maintain the integrity of the personal insolvency processes and further to enable better access to the respective public registers regarding a debtor’s previous insolvency. The status quo is not working and it is creating many problems. 
Currently the no-asset procedure allows debts that have been incurred fraudulently to be discharged under that process. The bankruptcy laws which the no-asset procedure is a subset of and an alternative to prohibit fraudulent debts that have been written off. This gap in the law contradicts the overriding public policy objectives of the personal insolvency laws which are designed to grant a debtor discharge from all pecuniary liabilities arising contractually while not writing off debts that have their origin in fraud. The law currently provides that all people admitted to the no-asset procedure must be discharged 12 months after entering the no-asset procedure. Unlike bankruptcy the official assignee does not have the ability to extend the period of discharge to properly investigate any late information relating to a debtor’s termination from the no-asset procedure including objections that are received from creditors and other interested parties. This prevents the official assignee from undertaking a thorough investigation thereby undermining the natural justice process that the official assignee is required to adhere to under the Act. That is why extending the period of discharge under a no-asset procedure is a good thing. 
The insolvent gift provisions in the Act allow gifts that have been made by the debtor donor prior to adjudication of bankruptcy to be clawed back by the official assignee for distribution to all the creditors. The insolvent transaction provisions in the Act were amended as part of the overall insolvency reform in 2006 to promote consistency with the voidable transaction provisions in the Companies Act 1993 and further to reflect a modern and simple drafting style. The Act currently provides that any gifts made in the 2-year period prior to the adjudication of the debtor are presumed to be void but this presumption is rebuttable if it is proven that the debtor was solvent at the time of making the gift. The law also provides that any gifts made by the debtor in the 2 to 5-year period prior to the adjudication can be made void but the official assignee has to prove that the debtor was insolvent at the time of making that gift. Basically that is saying that if someone has gifted money and should not have then it can be clawed back. 
The amendments may have inadvertently weakened the voidable gifts provision under the Act and imposed an administrative burden on the official assignee. These have a negative impact on the returns to the creditors. The public register provisions in the Act record details of persons who have entered into no-asset procedures or bankruptcy for 1 year and 7 years respectively. The problem with these specified periods is that they do not allow future lenders or credit-rating agencies access to information beyond these time frames in order for them to undertake a proper assessment of the creditworthiness of an individual. 
This bill preserves the integrity of the no-asset procedure by preventing the discharge of fraudulent debts and bankruptcy by restoring to the official assignee the ability to recover gifts made by the person prior to bankruptcy. This bill also amends the public register provisions to better enable creditors to make informed lending decisions by ensuring that a public record of people who have been discharged from the no-asset procedure is available for an appropriate period and providing for permanent public records where a person has had multiple insolvency events. 
This bill is much needed and I congratulate the Hon Simon Power on all the hard work he has been putting into getting the bill here today. It is all about getting things done which is precisely what National is doing. The public are amazed by the speed at which this Government is making positive changes after 9 years of inaction by the previous Government. I look forward to participating in the Commerce Committee as we examine this bill and as we hear submissions on it. I commend this bill to the House as others before me have done. I am quite pleased to be standing here to support this bill. I am looking forward to seeing it come to the select committee. I am also looking forward to hearing from the submitters who will come forward to the select committee—creditors those who have been put into insolvency those who have been put into bankruptcy victims and the people who have abused the system. I think we should have a good range of submitters coming forward to give evidence to the select committee so we can make an informed decision so as to ensure that there are no loopholes moving forward. Thank you Mr Assistant Speaker. 
RAYMOND HUO (Labour) 
: 
 I rise to support the Insolvency Amendment Bill. It is a good bill but I do have mixed feelings and to some extent concerns about it. This bill amends the Insolvency Act 2006 by addressing a small number of issues that have arisen since its enactment. Running through the bill’s clause-by-clause analysis I note there are generally four such issues that are addressed. The first one is addressed through the bill’s aim to preserve the integrity of the no-asset procedure by preventing discharge of fraudulent debts. The second one is addressed by allowing the official assignee to extend the no-asset procedure period when an objection is received just prior to a debtor’s expected date of discharge from the no-asset procedure. The third one is addressed by protecting the interests of creditors of bankrupts by restoring the official assignee’s ability to recover gifts made by a person prior to bankruptcy. The fourth one is addressed by amending the public register provisions to extend the period of time that the no-asset procedure will be on the record from 1 year to 5 years and providing for permanent public records where a person has had multiple insolvency events. 
The provisions addressing the fourth issue cause concerns in that these provisions have been added to what would otherwise have been a technical bill. A fundamental question behind those concerns is whether we should have a strong separation between the bankruptcy provisions and the no-asset procedure to make it very clear that a no-asset procedure is a one-off once-in-a-lifetime opportunity for a qualified applicant to have a fresh start. As to the public register we know that the public register’s relation to bankruptcy has been 7 years for many years. The 7 years remains for bankruptcy but this bill seeks to increase the time for having the no-asset procedure on the record not for the 1 year the no-asset procedure is in place currently but for 5 years. Last Sunday in Auckland I had a coffee with one of my former clients who had been helped under the no-asset procedure regime. His initial response to the proposed amendment was “What’s the point?”. Indeed what is the point behind the amendment to increase the time for having the no-asset procedure on the record from 1 year to 5 years? 
There are two further observations originating from the provisions addressing the fourth issue. The first one is that with these provisions being added on it is hard to say that this bill is still a technical bill. The second one is that as the Hon Lianne Dalziel said earlier in this House when we change the provisions around the no-asset procedure it will change the number of people who want to contemplate that regime as an option. I believe that that will affect the fundamental rationale behind the no-asset procedure in the first place. 
What is a no-asset procedure? The Ministry of Economic Development website provides a very people-friendly definition: “Applications are made to the Official Assignee … To qualify for entry you must:”—I am sorry Mr Assistant Speaker; “you” here refers to the applicant not you Mr Assistant Speaker—”have no realisable assets … not previously been admitted to the no asset procedure not previously been adjudicated bankrupt have total debts (excluding student loan) not less than $NZ1000 and not more than $NZ40000 … complete a means test showing you have no means of repaying any amount towards your debts. The Official Assignee can refuse entry into the NAP if: your creditor(s) object to entry or bankruptcy proceedings have been initiated and the likely outcome for the creditor would be materially better if the proceeding continued or you have concealed assets or you have committed an act that would be an offence under the Insolvency Act 2006 were you bankrupt or you have incurred debts knowing you had no means to pay them.” 
 As we can tell certain measures are in place to ensure that no-asset procedure is to be implemented appropriately. The no-asset procedure was introduced as an alternative to bankruptcy under the Insolvency Act 2006. It provides a one-off opportunity for financially distressed individuals to avoid the stigma of bankruptcy and to make a fresh start financially. Of course here a fresh start includes the ability to carry on a business and to travel overseas both of which are prohibited under the bankruptcy provisions. That should be a major difference between bankruptcy and the no-asset procedure. 
A two-tier review of New Zealand’s insolvency laws was initiated in 1999. The review included both personal and corporate insolvency matters and resulted in the enactment of the Insolvency Act 2006 the Companies Amendment Act 2006 and the Insolvency (Cross-border) Act 2006. The Insolvency Act 2006 came into effect on 3 December 2007. When the bill was introduced the no-asset procedure was probably the most debated part of the legislation being a very new procedure. Of course I did not witness how the debate unfolded because I was not here in the House at that time but as a commercial lawyer I can confirm that subsequent to the legislation’s enactment and the putting in place of the no-asset procedure the law firm that I worked for experienced a huge upswing in the number of inquiries. It was a good regime. Again it was designed as a one-off opportunity for someone who had otherwise acted in good faith but who had come across a very poor set of circumstances and hardship in his or her life to get a fresh start. Now an amendment has been proposed despite the fact that the Act is less than 3 years old and the no-asset procedure has been in effect for less than 18 months. 
Therefore I say the first three amendments are fine and they are good amendments but the fourth one causes concern. It causes concern for two reasons. Firstly the amendments in the Insolvency Amendment Bill would otherwise be of a purely technical nature and this would be a good bill. Secondly at this time when there is no shortage of disturbing news from around the world it would be much better for the National Government to focus on preventing more insolvency in New Zealand. Where is the National Government’s plan to prevent insolvency? The International Monetary Fund chief economist has advised world Governments to “commit to do whatever it will take to avoid a Depression . . . Above all adopt clear policies and act decisively. Do too much rather than too little.“ What is the National Government’s economic plan? Certainly it will not help raise our productivity or better prepare New Zealand and New Zealanders for the future if all we can see is nothing but the research and development tax credit scrapped KiwiSaver gutted and the New Zealand Fast Forward Fund trashed. Thank you. 
MELISSA LEE (National) 
: 
 I rise to support the first reading of the Insolvency Amendment Bill. It is very interesting to note that the member opposite who just spoke Raymond Huo asked what the National Government has done about the economic situation. Well I say to him that if the previous Labour Government had performed so well in the last 9 years then National would not now be the Government. 
This bill amends the Insolvency Act 2006 to address a number of small but significant issues that National warned the previous Labour Government about when the legislation was previously being debated in this House. Specifically those issues are about the no-asset procedure. Just like the previous speaker I was not in the House at that time but I have read some of the speech notes and  
Hansard 
 records of that debate. The Labour Government did not heed the concerns and issues raised by some of the National members. Since the law was enacted those concerns have eventuated and now we are here to try to fix some of the problems. 
This bill makes two amendments to the existing no-asset procedure which some National MPs have likened to a “get out of jail free” card. We have had serious concerns about the abuse of this section of the current Act. We also make one amendment to the current bankruptcy procedure and one amendment concerning the availability of information about people who have been through both the no-asset and bankruptcy procedures. 
The changes to the no-asset procedure close a current loophole around fraudulent debt. Currently the no-asset procedure allows debts that have been incurred by fraudulent means to be discharged—yes discharged—whereas the bankruptcy law prohibits them from being written off. The no-asset procedure is a subset or an alternative to the bankruptcy law and when the two laws are inconsistent the law must be realigned. This will maintain the integrity of the no-asset procedure process. This means that if any debts are created by fraud or if the debtor has induced someone to write off a debt by means of a fraud then these debts can be enforced after the debtor is discharged from the no-asset procedure. This means that it will no longer be a case of rewarding a dishonest person which I am sure was not the intention of this law when it was introduced. 
The other amendment to the no-asset procedure is the extension of the period of discharge by allowing the official assignee to extend the period of discharge by up to 25 days in order to undertake investigation into any objections or late information about the debtor’s entry into the no-asset procedure—which is by the way voluntary—putting the debtor on a full 12 months’ notice that he or she should come clean with their debts and assets if they have been concealed in any form to avoid paying his or her creditors. This amendment brings the no-asset procedure into alignment with the bankruptcy discharge provision in the Act extending the notice period by inclusion in the register to 5 years. 
The third amendment relates to insolvent gifts. This amendment reverts back to the Insolvency Act 1967 whereby the official assignee does not have to spend time and taxpayers’ money proving that the debtor was insolvent when making gifts within a 2 to 5-year period prior to his or her bankruptcy. This means that a person is disqualified from the no-asset procedure if the official assignee is satisfied on reasonable grounds that the debtor has concealed assets with the intention of defrauding his or her creditors for example by transferring property to a trust. The official assignee can actually disqualify the debtor from the no-asset procedure. 
The onus of proof of solvency in this case—that is solvency at the time of gifting—lies with the recipient of the gift. I think it is wonderful that the official assignee will not have to spend money and time proving that. Gifts made in the 2-year period prior to the bankruptcy are covered by the longstanding presumption that debtors are technically insolvent for a period of time before they file for bankruptcy. If they are giving gifts during that time I think everyone knows that those gifts are made with the purpose of avoiding payment to creditors. 
The final amendment is one that I am sure banks and the public will welcome and some members in this House have also raised some concerns about this issue. At the moment the name of anyone who goes into the no-asset procedure stays on the no-asset procedure public register for only 1 year. The amendment extends that stay on the public register to 5 years. It also provides for the no-asset procedure and bankruptcy public register to be searchable for those who have been subject to two or more insolvency procedures. 
This amendment is not about punishing people who are destitute and who cannot pay their debts; it is about people who actually do it more than once twice or three times. This provision will allow credit agencies or lenders access to information about an individual’s insolvency history for longer. This addresses the concern that the no-asset procedure was too debtor friendly. The rights of the creditor ought to prevail. 
It seems that with these tough economic times people are using the no-asset procedure as a way out of paying their debts. According to bank workers I spoke to last week there is a significant increase in write-offs by banks as a result of no-asset procedures. Because there is not the stigma attached to the no-asset procedure that there is with bankruptcy people seem to not be afraid to enter into the no-asset procedure in order to avoid their fiscal responsibilities. Perhaps with these amendments we may reinforce a modicum of personal responsibility on those people who see the no-asset procedure as a way to avoid paying their debts. 
I look forward to the submissions to the Commerce Committee on these amendments and to discussing and debating them with my colleagues. I commend this bill to the House. 
Dr PAUL HUTCHISON (National—Hunua) 
: 
 Thank you Mr Assistant Speaker Roy for the opportunity to speak on the Insolvency Amendment Bill. I absolutely concur with my colleague Katrina Shanks who mentioned that the Hon Simon Power has once again put in very practical and reasonable legislation that will be useful for diminishing the regulatory regime and also addresses a small number of issues that have arisen since the enactment of the Insolvency Act 2006. 
As many colleagues have commented the no-asset procedure can be described as a soft bankruptcy procedure. As we all know in the United States the stigma associated with bankruptcy is quite different from what it is here in New Zealand. Bankruptcy is known as chapter 11 and quite a large number of people go through this difficult time but over there people are able to get back into business much sooner than people here in New Zealand are. The balance I think has gone a bit hard here. But this bill helps—in a small way—to redress some of the difficulties that people get themselves into for no reason other than minor carelessness or misfortune. 
It is important to point out that the bill applies only to debtors who have not previously gone through the no-asset procedure or been declared bankrupt. Of course the provision remains in place for only 12 months although an amendment allows that period to be extended for 25 days in certain circumstances. The bill applies to debts between $1000 and $40000 so there are indeed restrictions associated with it. The procedure provides a one-off opportunity for financially distressed individuals to avoid the stigma of bankruptcy and to rebuild their financial lives. As I pointed out earlier I see numerous examples day to day at my constituency clinics where for reasons of carelessness maybe but more often for reasons of misfortune individuals find themselves in very invidious positions. This provision is a practical way of helping them and allows them to be in a much less onerous situation than bankruptcy which of course has a 7-year period. 
The bill amends the Insolvency Act. It makes two amendments to the existing no-asset procedure and one amendment to the current bankruptcy procedure. A further amendment applies to both procedures and concerns the availability of information about people who have been through the no-asset procedure or who have been declared bankrupt. The changes to the no-asset procedure are significant in that they close a current loophole around fraudulent debt and that indeed is one of the very strong points about this amendment bill. It also allows further investigation of a person who is undergoing the no-asset procedure and of course that is very important in case fraud is involved. 
There are four amendments to the Insolvency Act. The first prevents fraudulent debts under the no-asset procedure from being cancelled when a person is discharged from the no-asset procedure. The current Act does not explicitly exclude fraudulent debt under the no-asset procedure as it does for bankruptcy. An example of fraudulent debt would be where a benefit has been obtained from the Ministry of Social Development on false grounds such as declaring false details giving an alternative identity etc. I think everybody in Parliament would be most concerned when that happens and would applaud a mechanism to bring in any individual who tries to diddle the Ministry of Social Development and the taxpayer out of funds. 
The second amendment reverts to the provisions in the Insolvency Act 1967 around gifts made in the 5 years prior to the debtor becoming bankrupt. Those provisions put the onus of proving that the debtor was solvent at the time of the gift on the recipient rather than on the official assignee. That is in line with a longstanding presumption that debtors are technically insolvent for a period of time before they file for formal insolvency and that gifts during that time are given for the purpose of avoiding payments to creditors. 
The third amendment relates to allowing the official assignee to extend the period of time that a debtor is under the no-asset procedure by a maximum of 25 working days. It is important to have a degree of flexibility around legislation like this. It allows for the investigation of any late objections or information received about the termination of a debtor’s entry to the no-asset procedure. 
The fourth amendment extends the period of time that a debtor’s name remains on the no-asset procedure and bankruptcy public registers. There may be a slight downside here to that because it means that an accurate credit history cannot be compiled and it increases the business risk once debtors’ names come off the registers. Some of that risk will be carried by the economy and some may be paid for by other clients of the lenders. That is one of the realities that have to be contended with when we introduce legislation like this. It is indeed the balance we have to reach and this provision seems to be very reasonable and practical. 
There is no doubt that these amendments are required to maintain the integrity of the personal insolvency process. They also promote confidence in the official assignee’s ability to administer these processes effectively and efficiently to maximise the return to the creditors. One of the very useful aspects of this bill is that no agencies are created under it. That is very much in line with the excellent National Government’s commitment to minimising any bureaucratic activity. The amendments will be operated within the existing bodies. 
The bill certainly extends the length of time that debtors remain on the register. It complies with the Privacy Act. In extending the length of time for debtors to be on the register it reduces the risk to future creditors. It is also consistent with the overriding policy objectives of the personal insolvency legislation. 
All in all this is an excellent bill that has been brought forward by an excellent Minister the Hon Simon Power. I am very pleased with National to support the bill in its first reading in the House. 
Bill read a first time. 
Hon SIMON POWER (Minister of Commerce) 
: 
 I seek leave to amend the report date by extending it from 12 May 2009 to 28 May 2009 in light of the fact that the first reading of the Insolvency Amendment Bill was not completed prior to the adjournment thereby allowing 2 months in total for consideration at the Commerce Committee. 
The ASSISTANT SPEAKER (Eric Roy) 
: Leave has been sought. Is there any objection to that course of action being followed? There is no objection; leave has been granted. 
Hon SIMON POWER (Minister of Commerce) 
: 
 I move  
That the Insolvency Amendment Bill be considered by the Commerce Committee 
 and that the committee report finally to the House on or before 28 May 2009 and have the authority to meet at any time while the House is sitting (except during oral questions) during any evening on a day on which there has been a sitting of the House and on a Friday in a week in which there has been a sitting of the House despite Standing Orders 187 and 190(1)(b) and (c). 
Motion agreed to. 
Corrections (Contract Management of Prisons)  Amendment Bill 
First Reading 
Hon JUDITH COLLINS (Minister of Corrections) 
: 
 I move  
That the Corrections (Contract Management of Prisons) Amendment Bill be now read a first time. 
 At the appropriate time I intend to move that the bill be referred to the Law and Order Committee. 
This bill reflects Government policy to allow for the competitive tendering for contract management of prisons on a case by case basis. Legislation providing for the private management of prisons in 1995 was repealed in 2004 by the Labour-led Government. That saw the end of the private management of Auckland Central Remand Prison and the Corrections Act 2004 expressly prohibits the Crown from entering into contracts for the management of prisons. Labour’s decision was purely ideological. It had nothing to do with the management of Auckland Central Remand Prison which was widely acknowledged as being highly successful. In fact it was so successful that the Department of Corrections adopted many of its innovations when it took over the prison in July 2005. Those improvements included education crime prevention programmes physical training and staff dedicated to behavioural assessment. Local iwi also supported the partnership with Auckland Central Remand Prison. 
The legislation that governed the contract management of Auckland Central Remand Prison provided a sound basis for an effective and productive relationship between the contract managers of the prison and the Crown. This Government will therefore re-establish the legislative framework for contract management of prisons based on the previous legislation. We have made some changes that reflect the environment in which prison management must be carried out in the 21st century. Past provisions have been preserved where they remain sound and amended where new provisions that have arisen in the intervening 15 years have made it prudent to do so. 
The Department of Corrections is facing significant pressure on its existing prison capacity. Prisoner numbers over the next 10 years are forecast to grow to the point where an additional 5000 prison beds may be needed by 2018. Demand for prison beds is being driven by an increasing prison population and the need to replace obsolete facilities. The Government must therefore look for innovative solutions efficiency and cost-effectiveness in prisoner management. Allowing private companies to provide custodial services creates an opportunity to benefit from private sector initiative. 
The Corrections (Contract Management of Prisons) Amendment Bill is consistent with the objectives and purpose of the Corrections Act 2004. The Corrections Act requires the corrections system to improve public safety and to contribute to the maintenance of a just society. This must be done through the safe secure humane and effective containment of people who are subject to custodial sentences. The maintenance of public safety is the paramount consideration in all decisions made about the management of offenders. The Government believes that this bill provides an opportunity for innovation in safe and effective offender management that is consistent with the guiding principles of the Corrections Act. 
Another key feature of the Corrections Act is the accountability that it sheets home to the chief executive of the Department of Corrections. Prisoners remain in the legal custody of the chief executive at all times. This will not change when the prisoner is held in a prison managed under contract. The chief executive remains ultimately accountable for the acts or omissions of the contractor. This will drive a rigorous performance management regime. Contractors’ performance will be regulated and monitored through the use of prison monitors and the rigorous reporting requirements imposed by this legislation. 
The bill clearly identifies those things that must be provided for in every contract for the management of any prison. These include performance objectives and standards particularly regarding the secure containment of prisoners; staff selection and training; the provision of rehabilitative programmes to address the causes of prisoners’ offending; obligations to manage the interface with other Government agencies such as the police and the courts; and termination provisions governing the right of the Crown to step in in the event that a contract manager is failing to meet the terms of the contract. 
The bill provides for all prison management contracts to be tabled in Parliament 12 sitting days after they have been entered into. It establishes a specific role for prison monitors. Monitors will be based within specific contract-managed prisons. They will be tasked with assessing and reporting on the management of each prison for which they are responsible. The bill sets up a number of significant reporting obligations with which the contractor must comply. These include reports on all serious incidents within the prison involving escapes escape attempts or prisoner deaths; reports detailing the use of disciplinary powers within the prison and the outcome of all disciplinary proceedings taken against prisoners; and reports providing the details and results of all random drug-testing undertaken within the prison. 
The bill establishes clear rules around Crown liability. It also imposes a duty on the contractor to indemnify the Crown if the actions or omissions of its staff cause loss to the Crown. The bill requires the contractor to carry sufficient indemnity insurance to cover these liabilities. 
The bill does not place any statutory limitation on the duration of the contract that can be entered into. It leaves this to be negotiated between the parties. This approach providing the parties with the freedom to negotiate on duration is one of several key terms and conditions alongside cost performance objectives and a return on investment over time. 
The bill requires contract prison managers to comply with the requirements of several relevant New Zealand laws. These include the Corrections Act and its regulations the New Zealand Bill of Rights Act and those parts of the State Sector Act that invoke the requirement to be a good employer. The bill also requires the contractor to comply with all relevant international obligations and standards. Because all these requirements must be expressed as terms within the management contract failure to comply with any of them will place the contractor in breach of its contract with the Crown. These conditions may seem onerous but it is no less than we expect from our public prison system. This Government will expect both public and private providers to deliver efficient and effective custodial services and to be accountable for the way in which they do so. 
Finally the bill protects the interests of staff who are members of the Government Superannuation Fund. It ensures that existing staff who transfer their employment to contract prison managers are still deemed to be in Government employment for the purposes of their Government Superannuation Fund entitlements. 
One matter that remains to be addressed is around the flow of information between contract prison managers the department and other agencies such as the police and the courts. This is necessary to enable every agency involved to carry out its appropriate tasks duties and functions effectively. The Department of Corrections is in discussion with the Office of the Privacy Commissioner as to how this should be managed. Advice will be provided to the select committee before the bill is considered. 
Allowing for the competitive tendering of prison management on a case by case basis provides an opportunity for innovation efficiency and cost-effectiveness. I consider that this bill will provide a sound legislative framework through which the Government will be able to realise those benefits. Therefore I commend this bill to the House. 
Hon PHIL GOFF (Leader of the Opposition) 
: 
 That was a written speech read word for word by the Minister Judith Collins without any passion conviction or belief in what she was saying. 
We have to ask why the National Government is moving to privatise prisons. I guess the first answer is that essentially this National Government believes in privatisation. National would not admit to it during the election campaign but now it has already signalled that it will take the profit sectors of the accident compensation scheme and give them to Australian insurance companies to make profit from New Zealanders and provide fewer services. Now it is talking about doing the same thing in the prison system. 
Why is National doing it? The first reason is simply blind ideology. Those members have faith that somehow the private sector will manage prisons better will deliver those services for a lower cost and at the same time will provide a very healthy profit to again the overseas companies that will run these prison services. That is an act of faith on the part of National but in that speech from the Minister there was not one iota of evidence that the private sector could provide any of the things that she suggested. The first reason National is privatising prisons is ideology. 
I will say this about ideology if ideology means values. On this side of the House we believe that running a corrections system is a core public service in exactly the same way that running the Defence Force or running the police force is. Those are core public services. In none of those instances have we ever believed that turning those services over to the commercial sector to make a profit is appropriate. This I would suggest is the top of a slippery slope. If we are to privatise the corrections system then I ask why we would not move to do that to other core public services. Of course National members never had the courage to say that before the election. They said that in this term of office there would not be any privatisation. Mr Coleman the Minister of Broadcasting keeps saying that he will not privatise Television New Zealand this term but the message very clearly is that this is the inherent agenda of National—to go back to its roots to privatise everything that it can and to turn over these core public services to the commercial sector so that a profit can be made. 
But the real motivation for this Minister lies elsewhere. This Minister likes to be known as “Crusher Collins” but after the fiasco with Barry Matthews she became known as “Chihuahua Collins” and that is a little bit more like it. I remember seeing a cartoon in a newspaper. There was the prison the barbed wire the big kennel with “Rottweiler” on it and there was this little chihuahua with the Minister’s face and a little pink ribbon on it. That said it all. Heads were going to roll. She failed. She backed down. She talked tough she did not deliver. 
Then she comes to this House complaining that prison numbers over the next 10 years are going up by 5000. This is the same Minister who said that Labour was soft on law and order. Now she is saying that the legislation is too tough as it means that more people are in prison and she cannot cope. In Opposition she was the first person to get up and tell the Minister to take responsibility. Now she will not touch it with a bargepole. She will not take responsibility and she believes that by privatising prisons she can avoid responsibility. It will be the private sector’s fault that it has not delivered what it promised and what she promised. But I tell the Minister that she can run but she cannot hide. She is still accountable and by privatising she will not remove the accountability because we will hold her accountable for what experience tells us will happen in the private sector. 
I will just say that there is one other motivation—and let us be very clear about this—as to why the Minister wants to privatise. Privatisation is a way of forcing down wages and bringing down working conditions. Every private prison in the world has made its profit by reducing staff levels and reducing services. I will give the Minister some examples of what has happened overseas and as to why there is absolutely no evidence for her claim that somehow a superior service at a better cost will be delivered. 
In 2001 the United States National Council on Crime and Delinquency produced a report. It stated that there was “no data to support the contention that privately operated facilities offer cost savings over publicly managed facilities”. That is what the US National Council on Crime and Delinquency said. It said that there was no evidence that services to prisons and conditions of imprisonment were significantly improved in privately operated facilities. In fact it came out with some concrete findings. The report stated that privatisation led to a 15 percent lower ratio of staffing to inmates. That is supposed to make our society safer—a reduction in the number of staff who are running the prisons. The report stated that the management information systems were less well organised in the private sector. It stated that the number of serious incidents was higher in the privately run system than in the public system. It stated that there was a higher rate of assaults by prisoner on prisoner and by prisoner on staff in the private sector. I ask where the evidence is in that report that privatisation of our prisons in New Zealand will produce better conditions better standards and lower costs. There is no evidence there. 
Canada just 2 years ago ended the privatisation experiment in that country. It returned the one private prison it had to the public sector saying that after 5 years it could find no appreciable benefits from privatisation. Canada I say for the Minister’s information has a very similar system to that of New Zealand. 
Then in the United Kingdom there was a report by the National Audit Office in 2003—just over 5 years ago. It stated that the performance was mixed but it pointed out that of the bottom-ranked prisons almost all of them were privately managed prisons. The worst-performing prisons in the United Kingdom were in the private sector. 
I ask this Minister where the evidence is that we will get better results a safer and better society through the privatisation of our prisons. This bill is blind ideology. This is blind faith by the National Government that somehow privatisation will produce better-run prisons at a lower cost. It was private sector people who brought about the financial crisis of the developed world at the present time. 
I want to say that under the previous Labour Government the prison system in this country—the public prison system—appreciably improved. The number of escapes was down by 84 percent under a Labour Government. Drug taking was down by two-thirds. The Minister is very fortunate to have inherited a situation where cellphones can no longer be used in prisons because every prison in this country is jammed. She is very fortunate to have inherited a situation where annually 600 inmates are now getting drug and alcohol rehabilitation where over 1800 inmates a year are getting literacy and numeracy training and where 60 percent of sentenced prisoners are getting work in prison. I say to the Minister that those advances will be compromised under privatisation because the private sector has no vested interest at all in producing better results. It has a vested interest in making a greater profit. If members want to see the ultimate corruption in the private sector then they will see it in the United States where judges were recently convicted of corruption for sending young prisoners to privately managed prisons to up their profit margins. That is the judiciary in the United States. There is clear evidence that if we turn this sector over to private management then there is a vested interest in profit making— 
Hon Judith Collins 
: I raise a point of order Mr Speaker. From what Mr Goff has just said it certainly appears that he is implying that there is corruption in the judiciary. I would just like to get confirmation he does not mean the New Zealand judiciary. 
The ASSISTANT SPEAKER (Eric Roy) 
: I did not take that inference at all. The member has 10 seconds. 
Hon PHIL GOFF 
: All I can say in 10 seconds is that that last comment is a true reflection on the Minister. The Minister should open her ears—I said no such thing. I say prison management is a function for the core public sector. There is no evidence of reduced costs; there is evidence that there will be reduced safety and reduced services such as rehabilitation. 
SANDRA GOUDIE (National—Coromandel) 
: 
 I thank Opposition members for their applause knowing that the Hon Phil Goff has just finished his speech in the House and that I am about to begin mine. So I say thank you for that wonderful applause. 
The Opposition member who has just resumed his seat was the Minister of Corrections—”was” being in the past tense—with responsibility for parole and what a mess he made of that. Yet he was here in the House sounding like the be-all and end-all—the ultimate authority. Well I believe that he is in absolute fantasyland. If he actually looked at the objectives of the bill he might develop a little bit of understanding. Perhaps Opposition members might like to refer to the explanatory note where they will find the objectives of the bill which allow the Department of Corrections to tender and contract prison management on a case by case basis. That will in turn allow contracted prison managers to introduce innovation improve service performance and be more cost-effective. And what did that Opposition member say? He said it is wrong that the running of prisons should offer the potential for profit. Members opposite find that so scary. The Opposition cannot stand the idea that anybody might make even a dollar from offering good services to the public of New Zealand. 
I am delighted to follow my most excellent colleague the Minister of Police and the Minister of Corrections Judith Collins who is making some outstanding changes in regard to the Government and providing services for the continued safety of the New Zealand public. Without a doubt that is being achieved here. The Opposition’s argument that the running of prisons should not offer the potential for growth is an argument without substance. It is simply a catchy cliché that does not stand up when analysed. This bill is about providing for the private management of prisons; the ownership and the overseeing of prisons will remain in the hands of the Crown. It is about management. 
One has to wonder how much Opposition members really understand this legislation. I wonder whether they have even read it. I ask whether any members of the Opposition would like to put their hand up to say that they have read the bill. Well look at that: no hands went up. Not a single hand went up. They have not read the bill. That is quite clear. Look at that! And there are only 8 clauses! What does that tell us? They have a complete lack of understanding. They do not even have an adequate overview of the legislation in the House. They have not read the bill. They do not know what it is about yet they think that they can stand up in the House and criticise a really worthwhile initiative that will serve the public of New Zealand well and that will provide them with the security and safety that they rightly deserve. This Opposition—weak as it is—cannot even appreciate that fact. None of those members seems to have even read the bill. 
One of the other arguments that has been put forward relates to the idea that corrections is a core State function. This is the Opposition’s absolute nanny State control ideology. Labour lost the Government benches because the New Zealand public were sick of that absolute nanny State control where Labour could not see any other option or choice other than it being the absolute controller ruler and arbiter of all. That is why those members are now in Opposition. 
Let us face it most people would agree that just as the private provision of some health and education services is effective efficient and provides choice for the New Zealand public so too can the private management of prisons and that is what this bill is all about. The core standard of care and conditions is set by the State. Even the buildings will be owned by the State. All that is actually happening—and maybe Opposition members might like to listen up or read the bill—is that we are allowing the management of prisons by the private sector. One could not argue about the ability to have some choice in that regard. I would love to hear any further arguments that Opposition members might be able to dredge up. 
Another argument is that there will not be incentives to reform prisoners and reduce the prison population. That argument is wrong as well because this is all based on a contractual arrangement. Opposition members should understand although I doubt that they do that this can be quite clearly determined by the robustness of the contractual arrangement in place in the private provision of prison management. The management problems that have occurred with privatised prisons can usually be linked to poorly drafted contracts which is quite true. These matters can be addressed if good robust contracts are established and put into place. Let us face it: the previous Minister made a mess of corrections and parole. If we look at the report by the Auditor-General we can see that the previous Government has a lot to answer for in terms of the robustness of the services being provided. 
The previous speaker Phil Goff talked about the disadvantages for workers because private sector prisons provide lower pay and fewer incentives in order to increase profits. As I have already outlined the privatisation of health and education services can benefit workers and provide benefits that the public sector may not be able to provide. Employees have the opportunity to negotiate with their employer. Past experience has proven that private prison service providers are more open to direct Maori and iwi involvement which is fantastic. 
The Iwi Whanui o Tamaki-makau-rau—a committee of six Auckland iwi—was heavily involved in the Auckland Central Remand Prison while it was privately managed. The managers and the iwi whanui had a very strong partnership that allowed for extensive involvement by iwi in the prison. The iwi whanui publicly criticised the Labour Government’s decision to return the prison to public management. Maybe the Opposition would like to reflect on that. The iwi whanui chair Te Warena Taua said in 2003 that the Auckland Central Remand Prison was quite rightly regarded as the most innovative effective and culturally safe prison in New Zealand’s history. 
Mr Taua also said that the iwi whanui strongly believed that removing the Auckland Central Remand Prison management contract and preventing further like it represents the biggest step backwards in terms of prison management particularly in the areas of inmate management and rehabilitation and that is exactly what the Labour Government did. It took a huge retrograde step when it closed down the opportunity for private prison management and removed the legislative ability for that to happen. It removed that choice from the statute book. We are now rectifying that gross omission by the previous Government and we will satisfy some of the concerns expressed by Mr Taua the iwi whanui chair at that time in 2003. 
Discussions around the private management of Ngawha prison before the Labour Government removed the provision for private management resulted in agreements with northern iwi Ngati Hine for Corrections Corporation of Australia to run the prison for 5 years with Ngati Hine’s involvement. The two were going to work together. I see that as providing much more successful outcomes for the rehabilitation of prisoners—for their going back into the community and not reoffending. I would like to see Opposition members try to argue their way out of that one because I do not think they have a leg to stand on. Their nanny State ideology is not wanted by the New Zealand public and the sooner they wake up to that the better. 
Hon DAVID PARKER (Labour) 
: 
 What that member calls nanny State I call principle. There are certain functions of the State that ought not to be contracted out. One of those functions is taking away a person’s liberty. That ought not to be contracted out. Where to next? As Phil Goff said earlier where will it go to next? Will it be a private army? Will it be a private police force? Again they are functions that ought not to be contracted out. The National Government’s policy on this fails the most basic principle that this is one of those core State functions that cannot legitimately be contracted out. 
There are some and National Party members are amongst them—and it was not put very eloquently by the person who spoke before me—who try to drive a fine distinction between the allocation of a penalty that deprives someone of their liberty and the deprivation of liberty following sentence. But such fine distinctions cannot be made because it is the private contractor in that prison who makes decisions that affect the liberty of the person who is the prisoner. It is the report of the private contractor that is relevant at the parole hearing which determines how long that person stays in custody. Those are the functions of the State not the functions of private enterprise. 
Shane Ardern 
: Why? 
Hon DAVID PARKER 
: It is for the same reason that we ought not to contract out the army to mercenaries or the police force to a private police force. They are proper functions of the Crown not private enterprise. 
There is an important principle at stake here and it is that some things ought not to be put out of the control and responsibility of the State and into the private sector. The State is held accountable for prison policy through elections. Private enterprise has no such control. Private enterprise is not held accountable for its actions in depriving people of their liberty through elections. There is no control on private enterprise in that way. One might think that if there was not some reason for the basic fundamental principle that one ought not to contract out core State functions then some good should be achieved through contracting out. The international experience on contracting out correctional facilities is now some decades old. We heard Phil Goff recount that the experiment in Canada failed. Canada reverted to State control of prisons. He also adverted to some of the literature in the United States. 
I thought it was notable that the Minister of Corrections did not make any reference to any studies overseas as to the effectiveness of private prisons—because she cannot. She said that we will have an increase in the prison population on the Government’s forecast of 5000 prisoners over the next 10 years. That statement most clearly illustrates that the biggest issue in respect of corrections policy and whether it is succeeding or failing is rates of recidivism—rates of reoffending. 
For there to be any justification for a move to private prisons—and I think there is none on the principled basis but let us ignore that basic principle and look just at efficacy—we would have to be looking at overseas studies that have shown that private prisons have reduced rates of recidivism. But there are no such studies. There are none in Australia. A recent report from New South Wales in Australia on privatisation in the corrections industry which is published in the journal  
Corrections Criminology 
 concludes that there are few detailed studies on the effects that privatisation has on recidivism. There is an update to that and it notes that that remains the case in Australia. There is no evidence in Australia that some of their experiments with privatisation have worked. 
In the United States it is even worse. There are two peer-reviewed studies in the United States on the effects on recidivism of private correctional facilities. I will quote for members the first one entitled  
The Effectiveness of Juvenile Correctional Facilities: Public versus Private Management 
. The very learned authors are Patrick Bayer from Yale University and David Pozen from Oxford University. 
David Garrett 
: There are only two in the whole United States? 
Hon DAVID PARKER 
: The peer-reviewed ones? Mr Garrett is correct that there are only two. The member should know that if he has done his study as I have done. The study concludes that full profit management has statistically significant impacts on recidivism. It has statistically significant impacts on recidivism. The unfortunate fact for Mr Garrett is that the statistics go the wrong way. In 1 year recidivism rates are 5 to 8 percent higher for those juveniles who have been in privately run facilities. The other study is one called the Bales report. Again it is a peer-reviewed study of the experiments in Florida on private prisons. That study found no empirical justification for the policy argument that private prisons reduce recidivism more than public prisons do. 
That is why the Government has not produced any evidence by which it can justify contracting out this core State function—there is no evidence that it improves rates of recidivism. The peer-reviewed articles in fact go the other way. We also heard from Phil Goff and I will reinforce his points about the experiment in the UK. Again there was very poor analysis as to whether overall there have been good or bad results from prisons but the results that are available show that the poor prisons are the ones that have been contracted out to private providers. 
David Garrett 
: Would you like to table those two studies? I’d like to see them. 
Hon DAVID PARKER 
: I can give the member the references. 
David Garrett 
: Just table them. 
Hon DAVID PARKER 
: I am happy to table the information I got from the Parliamentary Library and it is a quote from there. I will give the member the reference and he can look it up. The reference is www.econ.yale.edu/growth. The PDF is cdp863. The member can look that up for himself. There is no doubt that there is no case for this on the basis of recidivism. 
Mr Goff makes a fair point. The only way prisons can make a profit is by cutting the cost of their services. The prisons themselves are provided by the State we are told by Sandra Goudie. Those running the prisons will not be able to reduce the cost of the bricks and mortar so the only thing they can do is cut the cost of services. The only way they can do that is either by paying people less having fewer people or reducing the level of services available to inmates. That last one is the one that concerns me. The other two concern me as well. A reduced number of corrections officers obviously would be poor but if there is not as much money spent on alcohol and drug programmes and if there is not as much money spent on literacy and numeracy programmes and anger management issues and violence issues are not dealt with we will have increasing rates of recidivism. I suspect that that is why the international studies do not show a decrease in recidivism as a consequence of privatisation of correctional facilities but rather an increase. It is because the private prisons cut costs where they can and one area where they cut costs is the programmes that would reduce recidivism. 
The Government instead of privatising prisons should be focusing on how it can reduce rates of recidivism. A move towards private prisons will increase rates of recidivism. New Zealand already has the second-highest rate of imprisonment in the Western World behind the United States. We should not follow the United States further down that route. We certainly should not follow the United States into having privatised correctional facilities. 
I have one last point. The other bit of news we had from the Minister of Corrections in recent weeks was a plan for a 1200-person prison. A 1200-person prison! What a ridiculous prison policy—a 1200-person prison! Gang culture will prevail. 
David Garrett 
: What a stupid argument! 
Hon DAVID PARKER 
: David Garrett says it is a stupid argument. The Roper report into corrections facilities said— 
Mr DEPUTY SPEAKER 
: The member’s time has expired. 
METIRIA TUREI (Green) 
: 
 It is clear that the Green Party is opposed to the Corrections (Contract Management of Prisons) Amendment Bill. Tonight I want to set out a response to the economic arguments that have been put forward by Government members but first I will address the issue of Maori imprisonment and the profiteering from that imprisonment. 
Profiteering from the imprisonment of Maori is simply profiteering from institutional racism regardless of who profits. On this issue the Green Party and the Maori Party diverge and that saddens me terribly. I agree that the Department of Corrections has an appalling record with regard to involving Maori in prison issues and that the 50 percent of the prison population who are Maori desperately need interventions and the restoration of their mauri ora and mana that tikanga Maori within the prison environment can provide. But that will not be the case when the cash is going into the back pocket of some US corporation and when the cash is going into the back pocket of an iwi or runanga feeding off racism in the legal system. 
Racism in the legal system is a proven fact in this country. A 2007 report  
Over-representation of Maori in the criminal justice system 
 
 s 
hows that the analysis of data from apprehension through to prosecution conviction and finally sentencing confirms that Maori are more likely to be apprehended and more severely punished than non-Maori. Judge Becroft of the Youth Court confirms that young Maori are more likely to receive a harsher sentence for lesser crimes than those committed by their Pakeha counterparts. So now we know why the Maori imprisonment rate is five to eight times higher than that of Pakeha. For Maori the cost of this legislation is that more of us will end up in jail. 
Private profiteering provides no protection for Maori and incentivises a massive increase in prison population by the use of the full range of racist filters in the system. Having Maori managers of a prison at the end of systemic economic policy programmes specifically designed to put our people in jail is pointless. We cannot protect our people from that systemic racism if key Maori organisations support the economic levers that put our people in there in the first place. We urge Maori across the motu to condemn this legislation. 
The Government argues that private management will save public money; that is the key reason why it promotes this bill. Yet the facts prove the Government 100 percent wrong on that. The facts from the running of private prisons in the US and Australia clearly show that there are no real cost savings to the public purse. The United States Department of Justice report  
Emerging Issues on Privatized Prisons 
 clearly showed that the privatisation model simply mimicked the public sector in every practical and critical way. The promises from private companies in the US of 20 percent savings simply did not eventuate. Any modest savings that were made came at the cost of reductions in staffing and other labour-related costs. The report concluded that “This amount of savings will not revolutionize modern correctional practices.” which proves Judith Collins wrong. In other words privatisation has no practical impact on the cost of running prisons or on the practice of running prisons. 
An Australian paper “Privatisation and New South Wales Prisons: Value for Money and Neo-liberal Regulation” published just last year also showed that the privatisation of prisons did not result in value for money or a significant reduction in cost. In fact the paper showed that the rhetoric of cost-effectiveness undermined alternative criteria for assessment such as safety educational outcomes and reduced offending. That is where the National Government is duping the public. By misleading the public on the efficiency of private prison management it is diverting attention from the most important issue of all: the effective use of taxpayers’ money to keep our communities safe. Public scrutiny of private prisons will be severely limited. As the New South Wales example shows the actual internal operating efficiencies of the private operator are not made public. An Australian Public Accounts Committee report showed that the actual operating costs for the private prison are not available as GEO Group is a private company that is in competition with other operators in Australia and that information is commercially sensitive. 
Private prisons have a strategic advantage over the public sector because the public sector is required to make that information publicly available. The private sector however is not. This is how the contracts will be managed in New Zealand. This legislation does not protect the public right of scrutiny over privately run prisons. The company that runs the private prisons in the US and Australia—Wackenhut which became GEO Group—is the same company that ran the Auckland Central Remand Prison which John Key described as producing “very good results”. Of course we know that the Auckland Central Remand Prison was run as a loss-leader. So what are the results of the operations of GEO Group and Wackenhut? We can look to the detention centres in Australia and the US for an accurate picture of what our prison system will look like under these companies. 
In the UK Wackenhut received a placing in the  
Observer 
’s hall of infamy Golden Vulture Awards for amongst other things “sadism greed and frightening incompetence”. It has been subject to allegations of sexual abuse physical violence and unsafe work practices. In the US the GEO Group operates 11 immigrant detention centres youth facilities and adult prisons. Its record includes settling a case where it placed a woman in a cell block with male inmates who raped and beat her such that she later took her own life. One hundred and twenty-five inmates were removed from a prison by State authorities for inadequate staff training and inadequate health-care. The prison reportedly served rotten food knowingly made false and misleading statements to State officials failed to keep complete criminal record checks on at least 100 prison guards and violated domestic and international laws on due process and humane treatment. None the less GEO is worth more than US$1 billion and made US$61 million from the US taxpayer in 2007. 
In Australia the Australian Medical Association and others have called for an independent inquiry into the private immigration centres based on staffing problems substandard services and child abuse. Privatisation in Australia was also used as a way to reduce the working conditions of corrections staff. Here in New Zealand we cannot afford more unemployment especially in some of the most dangerous institutions in the country where staff safety is severely compromised by staff reductions. New Zealanders need to know that this legislation will put our friends and family members who work in prisons at greater risk of both serious physical harm and unemployment. 
This evidence begs the question: can the free market be the solution to the problems of a prison system? The key to a successful business is repeat customers thereby providing a perverse incentive to minimise programmes that reduce reoffending yet a reduction in reoffending is the key to keeping our communities safer. Reducing reoffending is a reduction in crime. In an article in the  
Guardian 
 earlier this month George Monbiot talked about the case where two judges in Pennsylvania were convicted of jailing some 2000 children in exchange for bribes from private companies that ran the youth detention centres. Those judges were paid $2.6 million by private companies for helping to fill their jails. In one of the youth facilities run by GEO Group the facilities were so squalid that young people were stepping in their own faeces. 
There is no economic evidence that private prisons are cheaper for the public purse. The economic benefit lies with the corporation which will make a tidy profit from taxpayer money while providing no appreciable difference to the way that prisons are run or to their cost. In this legislation National is simply fulfilling its promise to its backers and the Green Party condemns this policy in the strongest possible terms. 
DAVID GARRETT (ACT) 
: 
 I rise to speak on the first reading of the Corrections (Contract Management of Prisons) Amendment Bill. I am very pleased as an ACT member to speak on this bill. As members in the House know ACT and other parties have advocated for the private management of prisons for some time. Indeed I am told that in the last term of Parliament MPs from two different parties put up bills covering the private management of prisons. 
It is not as members opposite and members to my right might have us believe a hard-right initiative. In fact it is not ideological at all. I was reading  
Hansard 
 a couple of weeks ago. I do not have the quote in front of me but the former Green member Mr Tanczos said he agreed that on all measures such as suicides assaults on guards assaults on prisoners and escapes the Auckland Central Remand Prison was better when run by a private company. But because it was ideologically offensive to him he was opposing it anyway. This is what ideology is all about: “We do not care how well it is run how successful it is how many fewer suicides or attacks there are. If it does not fit Karl Marx we are against it.” That is what we are hearing from that side of the House. 
There is widespread support for the private management of prisons. It is the Greens and Labour that are out of step with public opinion. Mr John Key said “We support what works. We’re not interested in ideology. We’re interested in what works.” and I applaud him for it. Mr Simon Power whom I met with earlier this evening said the very same thing on a related topic. He said: “If you can convince me this works then I’ll be for it.” That is not ideology; that is called pragmatism. Ideology is found on that side of the House. We heard this ridiculous quote from the Labour Party: “In the US judges were convicted of sending people to jail for a bribe.” How many? Where? How many judges are there in the US—1000 50000 or 100000? Labour said: “If we find one judge in the United States who has taken a bribe then that disproves the entire system.” I think that is called a non sequitur. It is a bit like saying that my Uncle Harry smoked 80 cigarettes a day and he lived to be 95 so that proves that smoking is safe. That is what that kind of argument is. Labour said “We found two judges in Pennsylvania who did this and therefore the whole idea is useless; the whole idea is bad.” That is totally faulty logic. 
The Auckland Central Remand Prison was successfully run by a private firm for 5 years. It was not just run successfully but it was run better than public prisons. This was measured by fewer assaults fewer suicides fewer escapes—I will come to them in a minute—and fewer attacks on guards. On those measures that prison was better run. There were fewer escapes. But when there was an escape the prison had to pay. [ 
Interruption 
] A member over there said that there is no incentive. Well it is called a contractual disincentive. There are no lawyers on that side of the House at the moment but if those members asked then a lawyer would explain contractual disincentives to them. If the contract says that if someone escapes then the prison will have to pay it is called a penalty or a disincentive. That is why there were fewer escapes. 
Chris Hipkins 
: A disincentive to report. 
DAVID GARRETT 
: There was a disincentive to report escapes so they covered them up did they? I ask Mr Hipkins which escapes were covered up. 
Chris Hipkins 
: A disincentive to report anything. 
DAVID GARRETT 
: I am listening but there is nothing. A $50000 fine was paid by Auckland Central Remand Prison because of an escape. However State-run prisons could let however many they wanted to escape with no disincentive. We have seen the results of that in the Auditor-General’s report. Fines are a major disincentive to private prisons. Unlike the Labour Party I have not seen the contract that the Minister of Corrections Judith Collins has in mind. Those members have seen it and they know the contents of it. 
Hon Judith Collins 
: They must do. 
DAVID GARRETT 
: They must know that there are no disincentives and no penalties for escapes. I look forward to Ms Collins sending it to me so I can see it. 
The fact is that the private prison was better run. Despite that Labour says: “No we can’t have it. It’s against our ideology.” and Ms Turei said exactly the same only in stronger terms; she brought racism into it as well. 
At age 17 when I knew so much more than I know now I was convinced that the State could provide everything and do it well. 
Hon Darren Hughes 
: Ha ha! 
DAVID GARRETT 
: As I grew up as I am sure Mr Hughes will do one day I realised that the private sector was a more efficient provider of better-quality products whether they be roast chips cars or prison accommodation. It is interesting that members on the other side like to cite American studies. One thing I will do tomorrow is check Mr Parker’s reference to the two studies he mentioned. He has told the House that there are only two peer-reviewed studies. I will get the reference from  
Hansard 
. I say to Ms Mackey that I do not need to write it down. I will check those two studies but I will also look at the footnotes and at the other papers that are mentioned in those two studies. The member had better hope there are only two reports that confirm that private prisons in the United States have worse results. We will see. 
Competition will signal to our corrections system that efficiencies can be made. In that regard the hugely business-experienced Labour Party members have said that the only way we can get more efficient is to reduce costs by reducing services. Well hello? No there are many ways to become efficient. I will give just one example. Instead of prisons buying food from Foodstuffs or Progressive Enterprises at wholesale rates like my local Woolworths they could buy food with expiry dates of next week. That is why the Chinese general store near where I live out in the country is able to compete with the supermarket both in food and alcohol. If we looked closely we would see that the stuff expires in 2 weeks’ time so it is cheaper than the supermarket. That is good business and that is why we shop there. There are lots of ways of increasing efficiency. It is not just a question of reducing services. 
I was very pleased to hear Judith Collins confirm in this House that the days of flat-screen TVs and underfloor heating in prisons are over. What prisoners are entitled to and what they should have is a secure place to sleep do work or train and an adequate diet. It makes my blood boil to know that while pensioners and hundreds of thousands of other New Zealanders shiver in their homes this winter the criminals in our prisons will enjoy the luxury of underfloor heating. I get very angry when I read in the paper about old people having to eat a crumpet for tea and go to bed at 7.30 p.m. because they cannot afford to heat their homes. Criminals who are in prison have committed crimes against our society. They have said: “Your rules don’t apply to us. We’ll do what we like.” The previous Government treated criminals better than law-abiding citizens. This National-led Government has said and Judith Collins has confirmed it in this House that those days are over. 
This bill will not fix our Department of Corrections. As we have seen all too often lately and most notably in the Auditor-General’s report there are deep-seated problems in this department that only a new chief executive can fix. Under the employment law put in place by the previous Government no one can be held responsible. If we read the Auditor-General’s report and the State Services Commissioner’s report we could paraphrase them in one sentence: “There are a heap of egregious failings here. It’s absolutely shocking but no one is responsible”. We are happy to support this bill. 
TE URUROA FLAVELL (Maori Party—Waiariki) 
: 
 Tena koe Mr Deputy Speaker. Kia ora tatou katoa i tenei po. On behalf of the Maori Party I say from the very start that we believe we have to do things far better in returning those who are in prison back to the community to stay and to live positive and productive lives. We have to look at new models and new ways of doing things and this bill the Corrections (Contract Management of Prisons) Amendment Bill is a part of that effort. 
Should Maori have the opportunity to bid along with others to run prisons which could be tikanga-based? Hell yeah! If members did not know this bill is an idea that has been around for some time; it has been a long time coming. As others have said just over a decade ago in March 1999 a Northland iwi Ngati Hine talked with the Corrections Corporation of Australia regarding the proposed site at Ngawha near Kaikohe. The proposal was a joint venture to participate in the administration of a prison. The Australian corporation would run the prison for 5 years and then Ngati Hine would take over the management. The Labour Government pulled the rug out from under the feet of Ngati Hine pushing them to the margins while the State came in and set up Ngawha prison right under their eyes. 
A year later New Zealand’s first privately run prison Auckland Central Remand Prison was opened. Auckland Central Remand Prison was managed by Australasian Correctional Management and lasted a glorious 5 years. I know that “glorious” might be an unusual word to describe anything to do with prisons but we think there was something to celebrate. For once the way in which our prisons are run and managed and how they treat and rehabilitate Maori was being undertaken in a way that was at long last effective for Maori. 
I want to make it quite clear that our support for Auckland Central Remand Prison or indeed for the concept of private management of prisons is motivated purely and simply by the concept of Maori solutions for Maori problems driven by Maori philosophies. We are interested in three key questions. Will private management of prisons be effective in addressing and reducing Maori offending? How will Maori management be different from State management; will iwi be profit-driven? Is something else altogether required—a whare oranga a rehabilitation centre which might be consistent with the policy of restorative justice? These are the questions that we look forward to having responses to during the select committee consideration of this bill. 
But before we get there I want to return to this concept of Maori solutions for Maori problems driven by Maori philosophies which Iwi Whanui o Tamaki-makau-rau promoted as the cornerstone ideology of their relationship with Auckland Central Remand Prison. I think it is important to spend some time refreshing our memories about the achievements that Maori experienced at Auckland Central Remand Prison as it is absolutely central to our support for this bill. Iwi Whanui o Tamaki-makau-rau as referred to by Sandra Goudie was a board representing the six local iwi who were recognised in a formal relationship with the management of the Auckland Central Remand Prison. The six iwi—Ngati Whatua o Orakei Te Kawerau-a-Maki Ngai Tai ki Tamaki Tribal Trust Ngati Paoa Ngati Te Ata and Te Waiohua—were the mana whenua tribes that signed a formal memorandum of partnership with the Department of Corrections with regard to the establishment and support of Auckland Central Remand Prison. 
The detail of the memorandum is actually quite innovative. There is a focus on consultation with iwi and there is a provision to measure the impact of cultural and spiritual values on the design and construction of the buildings. There are procedures relating to the discovery of any wahi tapu koiwi or taonga on the site. Four guiding principles form the very basis of the partnership and they are: establishing relationships with Maori stakeholders recognising and providing for Maori interests being responsive to Maori concerns and ensuring equality of opportunity for Maori. Why on earth would the Maori Party speak against that? 
I want to take us back in time to the basis of the relationship enjoyed between Iwi Whanui o Tamaki-makau-rau and Auckland Central Remand Prison because I think it stands as an example of standards that were set that could and should motivate all of our prisons to lift their game. I do not need to drill too far before we see the ongoing and compounding dysfunction in the current prison system and all of us in this House know only too well that Maori make up just over half of New Zealand’s 8229 prisoners. The question is why we would not look for new ideas for new solutions to encourage innovation and for excellence in the management of prisons. 
The standard that was set at Auckland Central Remand Prison was about improving performance in service provision cultural safety community consultation and attitude right across all levels of management. It was not as some have warned about thinking of prisons as a profit-making industry. There was not a heap of breaches and problems emerging from poor compliance in upholding standards of safety. In fact in practice Auckland Central Remand Prison raised the benchmark in many areas. 
After 150 years of prisons in New Zealand Auckland Central Remand Prison was the first prison to employ a Maori general manager and I take a moment to acknowledge the contribution that Dom Karauria made. It was an institution where the Treaty of Waitangi was not reserved for the library shelves; the principles of partnership protection and participation underpinned all operations and all procedures of management and delivery. I remind the House that the State has legal obligations to strive to respect the rights of incarcerated persons including the protection of their safety and well-being. What we saw with Auckland Central Remand Prison was that it was actually possible to have a penal institution where the emphasis was on rehabilitation and working with inmates to address crime. 
Our colleague Dr Pita Sharples in his role as Associate Minister of Corrections has also suggested that a private Maori prison could build on the work being done in the five Maori units at facilities across the country. We would never say that it is the ultimate answer or the only solution. Our preference of course would be that the chronic issues confronting the State system could be addressed that the risks and safety issues that plague our prisons could be managed and that the well-being and safety of inmates could be upheld. But achievements of this nature are far from a reality at the moment. And so we look to the possibilities of contract management to know that we can actually believe that it is possible to create a culturally safe and appropriate prison. 
Dr Greg Newbold an associate professor in criminology at Canterbury University has publicly confirmed the high standards that were upheld at Auckland Central Remand Prison. In his view the success factors that are associated with private management are that private companies will not tolerate the types of policy failures and management mistakes that we regularly see in our public prisons. Private companies are focused on accountability and credibility and there is nothing wrong with that. Perhaps another surprising source of support was that of Corrections Association National President Beven Hanlon who has acknowledged the current penal system does not work well and also says that there needs to be more accountability. 
The Maori Party is aware that Te Puni Kokiri has been consulted in the process of drafting this bill. Its recommendation was that there should be explicit and measurable performance objectives and standards relating to the rehabilitation of and the reduction of recidivism by Maori inmates. It saw that as a key element by which accountability could be achieved so much so that it should be legislated for and regularly reported on. 
The Maori Party will support this bill being referred to the select committee. Our bottom line is of course that we are opposed to the building of more prisons whether State or privately managed. Our entire aim in fact is to reduce the use of prison as a priority response to offending. But if there are to be prisons and there are Maori inmates then why not also consider opportunities for Maori to manage guide and lead us as partners in the management of prisons? It is an idea that surely is worth considering. 
SHANE ARDERN (National—Taranaki - King Country) 
: 
 I also rise in support of the Corrections (Contract Management of Prisons) Amendment Bill. May I say that I was fascinated by the speech given by the previous corrections Minister now Leader of the Opposition—unkindly described by some of his colleagues as “Phil-in”. He is now the Leader of the Opposition no less and I guess one could argue that he is also the person in the House most likely to have some knowledge of this topic as he was the previous Minister with the corrections portfolio. He said that the whole thing was driven by ideology. I just could not believe it. He was followed by colleagues who spoke on the same theme: that ideology is driving this amendment. To suggest that is to suggest that the status quo is the perfect outcome. It is to suggest that what we have now cannot be improved on and that therefore any suggested change will be a backward change that should not be considered. 
 There is an old saying and it goes like this: “If you always do what you’ve always done you’ll always get what you’ve always got.” If people are happy with what they have that is probably the best position for them to take. But I for one am not happy—and a lot of members on this side of the House are not happy—with the status quo in regard to our penal institutions in this country. We are absolutely dissatisfied with the outcome. 
One example that many have spoken of—and my colleague Te Ururoa Flavell who spoke just before me very eloquently described it—is the situation with the Auckland Central Remand Prison. It was an experiment it was something new and it was something we could look to for guidance to see what worked what did not work and what could be done better. We find when we go back and look at that example—and here is the irony of the Leader of the Opposition’s comments—that it was done away with on the purely ideological ground that we cannot have the private sector involved in the management of our prisons. Members should understand that; it is what the explanatory note of the bill states. We could not have the private sector involved in the management—not the ownership general direction or policy but just the management—of our prisons. The Labour Government did away with that. It introduced legislation to wipe it out when it was just starting to bed in and when its advantages were starting to become evident. 
We know for a fact that about 50 percent of our prison population is Maori. We have to ask some very basic questions about why that is. Why is it the case? What can be done about that? Is the current system working? Is there opportunity through individual management policies for Maori to have a greater role in what is clearly a problem within that racial group? Is that a question or not? The answer is clearly yes there is potentially an opportunity for something to happen. If we look again at the example of the Auckland Central Remand Prison and ask what happened during the private management period we see that Maori themselves took much greater ownership of what was going on in our penal system and the outcomes were overwhelmingly good. 
So why would Labour which has for years purported to represent this sector of society be so vehemently opposed to the notion of contract management of prisons? Why would it? The only explanation—and my colleague Te Ururoa Flavell overwhelmingly stated this—is that Labour wants to keep Maori in a lower socio-economic group in society so that they will keep voting for Labour. Well it is over. That show is over. It ended in 2008 and Labour needs to get used to it. That was the end of that. 
So what is proposed? The proposal in this bill is to introduce private management along the lines of what was in place in the Auckland Central Remand Prison back in 2000 when that prison was built and opened and to allow the chief executive of the Department of Corrections to have oversight of the management of it. 
David Garrett 
: There’s a frightening idea! 
SHANE ARDERN 
: Well that is what is proposed. Everybody has the opportunity to raise those issues in the select committee and I am sure the ACT Party will contribute substantially to that. 
David Garrett 
: A rhetorical observation. 
SHANE ARDERN 
: I know but it is a legitimate concern based on some of the discussion that has gone on in recent times. 
The bottom line is that what is happening now is failing. So what are we going to do differently if we do not accept this proposal that has been put forward? What is being proposed is to put this bill through the select committee process to allow for open scrutiny and proper study a proper survey of what is happening internationally. 
I was interested in some of the comments from the Green Party which used the American example and implied that the judiciary was able to be corrupted. I guess one could find some examples somewhere in the world where that has happened but New Zealand has a proud record. I stand to be corrected but I do not think there has been a single case anywhere in New Zealand where there was evidence of corruption at the top level of our judiciary. So to imply that it could happen by our allowing private management of a prison facility is a step well and truly beyond where most of us are able to leap in our thinking at this stage. 
At the end of the day it is a question of what is next and how we are going to improve the status quo. Here is an opportunity for those on the other side of the House to observe be involved be positive and perhaps have a look at what can be done and not just oppose on an ideological ground. Even though the previous Minister must have evidence that what we have been doing in New Zealand could be done better he certainly will have plenty of evidence that private sector operations in other fields operate well. 
Are Labour members suggesting that our dental services in this country are second-rate? Are they suggesting that in health our general practitioners do not operate to the standards that doctors do in the State part of our hospital system? Their Labour Government used private sector providers to transport prisoners and some shortcomings were found. Are they suggesting that all prison transport should now be managed by the State? Are they suggesting for example that all of our farms in New Zealand should be run by the State? That was tried in Russia many years ago and it did not work. Are they suggesting that all of our roading in New Zealand should be managed and funded entirely by the State? When Labour was in Government it could not do that itself. The Labour Government allowed the private sector into roading despite many of its members having said it never would. Are Labour members suggesting that the private sector has no role to play anywhere in any part of Government policy? 
I agree with Mr Goff that one of the core activities or principles of a democracy or a Government is to protect its citizens and to provide the right set of standards and services particularly in our penal institutions. We agree on that; that is absolute. But is Labour saying that as a result of our allowing private management of some of those services we will see a much lower standard or potentially a hazardous situation? Well there may be an example somewhere where that will be the case but as we know there are plenty of examples in our current system where the State has failed. The worst cases of constituent abuse that I have had to deal with as a constituency MP have been those carried out by Government departments not by the private sector. There is plenty of evidence on both sides of this argument that one is as good as the other provided that the policy framework the regulation and the things that need to be put in place to make sure it is run well are there and are administered. 
CHRIS HIPKINS (Labour—Rimutaka) 
: 
 I have been listening to the Government members opposite speaking on the Corrections (Contract Management of Prisons) Amendment Bill and I have yet to hear any of them put forward a real justification with any evidence of why this bill is necessary or why there will be any advantage in privatising our prisons. I have yet to hear them put anything forward. There has been no compelling justification. International evidence suggests that there is not any compelling justification. In fact this bill will do the opposite of what they claim it will do. The nearest we got was David Garrett arguing that it would be cheaper because the private prison operators could go around all the dairies in Auckland and buy all of their stale food that was past its use-by date and serve that to the prisoners. That was the closest we got to an argument in favour of the bill—that it would be cheaper because they could serve stale food to the prisoners. That was the nearest we got to an argument from the National - ACT - Maori Party Government on why it thinks it is a good idea to privatise our prisons. 
Is it not interesting how as the weeks roll on the sheep’s clothing starts to slip off more and more and the wolf beneath is revealed? This is yet another bullet in the National Government’s gun in its assault on our public services. It is another brick in the road toward privatisation which we know in their heart of hearts National members really support. Last year the National Party travelled the length and breadth of the country saying that if people voted for a change of Government not much would really change; there would be some new faces but not much else would change. But now we know that privatisation is still firmly part of the National Government’s agenda because National has not changed since Max Bradford carved up the electricity sector in the 1990s. It has not changed since it sold off New Zealand Rail in 1993 to crooks like Fay and Richwhite. It has not changed since it privatised the Wellington Airport and now it wants to privatise the prisons as well because that is what National Governments do—they privatise things. 
They do not call it privatising though. The Government is calling this one the “contract management of prisons”. That is a little bit like saying about the accident compensation scheme that it will not privatise the scheme but just open it up to competition which is effectively the same thing. The Government is being very tricky with words here in trying to deceive people into thinking that it is not privatising things when that is exactly what it is doing. The National Party is all about privatisation and this National - ACT - Maori Party Government has no mandate to do that because it went up and down the country last year saying that it would not privatise. Well that is exactly what it is doing with this bill. It is privatising. 
I can tell the House that my electorate of Rimutaka as the home of the largest prison in the country will have a keen interest in this bill. I am very proud to come from Rimutaka. 
Mr DEPUTY SPEAKER 
: I am sorry to interrupt the member. Interjections should be rare and reasonable. There is a lot of noise. I would like to hear what the debater has to say. Please continue. 
CHRIS HIPKINS 
: Thank you Mr Deputy Speaker. I have to say that the residents of Rimutaka will be very interested in this bill because we have had a rapid growth in the population of Rimutaka Prison in the last few years and I think that that is something the community is concerned about. There is absolutely nothing to celebrate about locking more people up in prison. There is absolutely nothing to celebrate about building more prison beds and more prison cells and locking more people up inside them. There is nothing to celebrate about the idea of turning the incarceration of criminals into a profit-making venture for private businesses which is exactly what this bill does. 
We know that the National Government is keen to start hocking off State assets. Because National members promised everyone they would not sell anything this term we know that their agenda in this term of Parliament is to get things all ready so that they can hock them off next time if they get the chance. They just cannot wait to do that. I can tell them that I have news for them—there will not be a second term for this National Government so they have nothing to worry about. They will not get to sell them off because the public of New Zealand do not support privatisation and they do not support the privatisation of our prisons. 
This bill is an integral part of the National Government’s agenda to shrink the size of the State and therefore to shrink away from ministerial responsibility. We can see it coming already: the first private prison escape the first murder in a private prison the first rape in a private prison. The Minister of Corrections “Crusher” Collins will stand up in this House talk tough— 
Hon Judith Collins 
: I raise a point of order Mr Speaker. It is outside the Standing Orders to refer to members of this House by names other than their real names. 
Mr DEPUTY SPEAKER 
: That is correct. The member will call the Minister by her correct name or refer to her as “her”. 
CHRIS HIPKINS 
: Thank you Mr Deputy Speaker. The Minister will stand up in this House talk tough and say that it is not her problem it is the private prison company’s responsibility. That is what this is all about. It is about abdicating the State’s responsibility. Maintaining law and order is one of the most fundamental responsibilities of any Government and this Government thinks that it should be contracted out. The National - ACT - MaoriParty Government thinks that maintaining law and order is a Government responsibility that can be contracted out to the private sector. What is coming next? Will the police be next? Will the Government privatise the police force as well? Will it privatise the Defence Force? 
Grant Robertson 
: Will the Minister privatise the police force? 
CHRIS HIPKINS 
: Perhaps that would help her avoid the little issue she has in Upper Hutt where she is trying to do away with the Upper Hutt police force by merging it with the Lower Hutt police force which she is very quiet on. 
Private prisons are accountable only to their shareholders. Public prisons are morally and fiscally accountable to taxpayers and that is the way it should be. In their quest to turn a buck the private prison companies would be encouraged to cut costs and to cut corners. They would be cutting costs and cutting corners and serving food to prisoners that is past its use-by date. I tell the House right now that that is a bad thing and that the people of Rimutaka would not support the privatisation of their prison. 
I challenge Paul Quinn who is trying to interject to come out to the Hutt Valley—he might find it on a map—and tell those people why he thinks it is acceptable to privatise the management of Rimutaka Prison. He would not get a single vote in Rimutaka if he came out and said he thought that privatising Rimutaka Prison was a good idea. Private prisons would encourage the operators of prisons to cut costs and to cut corners. We would see a lower staff to inmate ratio much less of a focus on rehabilitation cuts in staff pay and conditions and cuts in the level of staff qualifications and staff training. Ultimately if it is about a profit they will cut costs wherever they possibly can. 
Overseas experience in Australia the United Kingdom the United States— 
Hon Judith Collins 
: Aw! 
CHRIS HIPKINS 
: I know that the Government does not like evidence from overseas; it does not like any evidence at all. But the evidence shows there are huge flaws in private prison systems—ranging from bribery corruption and increased violence to increased drug abuse and avoidable suicides. The Government does not want to hear about any of that. 
Private prisons would create huge conflicts of interest. Where would be the incentive for prisoner rehabilitation when the company that incarcerates them has a financial incentive to keep them in there for as long as possible? As David Parker said prison management plays quite a significant role in determining who gets released who gets paroled and so forth. Yet the Government will try to create a profit-making incentive for those prisons to keep people in there as long as they possibly can. Surely we should be talking about ways to reduce the number of people we lock up. We should be focusing on the fence at the top of the cliff rather than putting more privatised prison buses at the bottom of the cliff which is what the Government seems interested in doing. 
There is no evidence that private prisons can be run more cheaply or more effectively. Although the cost per inmate may have been slightly less at the Auckland Central Remand Prison it did not have the larger costs associated with providing maximum security and it had fewer prison officers per inmate and paid them less than the Department of Corrections paid at other prisons throughout the country. The private prison provided a reduced service. It did not admit prisoners after 6.30 at night so if one was looking to having a prisoner admitted after 6.30 at night one would not go to any of the private prisons. Labour passed legislation in 2004 making jails solely the job of the Crown— 
H V Ross Robertson 
: I raise a point of order Mr Speaker. I am sorry to interrupt my colleague but you have already on one occasion raised the issue of interjections being out of order unless they are rare reasonable and relevant. We have had a continual barrage from the other side of the House which is not permitted in the debating chamber. The members should come to order. If they want to make a speech they should take the opportunity next time and do so. That is covered by a ruling from Speaker Statham in 1923. 
Mr DEPUTY SPEAKER 
: Thank you for those comments. 
CHRIS HIPKINS 
: Labour believes that prisons are a public service. National does not. Labour believes in public services is opposed to privatisation and will not support the bill. 
Mr DEPUTY SPEAKER 
: Before I call the next speaker I refer to the points that were made earlier about interjections. They should be rare and reasonable. Although it can be a robust debate I ask members to keep the level of noise down because other members do want to hear what is being said. 
CHESTER BORROWS (National—Whanganui) 
: 
 This is a robust debate. We have to bear in mind that each side of the House has a philosophy. The previous National Government brought in private prison management at the Auckland Central Remand Prison and that remand centre was run by a private provider. That was canned by the previous Labour Government for a purely philosophical reason and the purely philosophical reason it gave was that the State should be the only body to run prisons in this country. That was the only reason. At the time that Labour canned the private running of prisons its members did not go on about what was happening in the United States and they did not go on about what was happening in Australia or anywhere else in respect of the private running of prisons. All they said was that it ran counter to their philosophy so they were going to shut it down and do things differently. Now we have had a change of Government. This particular Government campaigned heavily on the use of private managers to run State-owned prisons because of the benefits that they afford to inmates and the taxpayer. 
I take the previous speaker up on a number of points that he made around the private delivery of prison services within this country. One point he made fairly late in his speech was that we should concentrate on providing fences at the top of the cliff instead of privatised buses at the bottom of the cliff. Who actually owns and operates the buses in the prison system at the moment and who did under the last Government? It is and was Chubb. Chubb was contracted by the Labour Government to provide transport services for correctional institutions. It has done so for years and it continued to for 9 long years under the Labour Government. Labour thought that was a really really good idea. 
Labour members also talked about the privatisation of police services. Of course we know that in this country we have private provision of core police services right across the whole range of police services. If we look at who is driving police prisoners to and from the remand centres and the courts whom do we see doing that? And who did that under the Labour Government? It was private providers. When we needed scene guards at the scene of a serious crime who was doing that? It was security guards. Who was paying their bills? It was a private provider paid for under contract by the police. 
All around our provision of Government services in this country whether it be in the area of health education police corrections or justice we have private providers. I tell members to look at the New Zealand record that is there before your eyes if you care to look at it—I apologise Mr Deputy Speaker before someone jumps up and takes a point of order; I was not intending to draw you into the debate. If we looked at the provision of services at the Auckland Central Remand Prison what would we find? We would find that rehabilitative services were offered at the Auckland Central Remand Prison that were not offered anywhere else for remand prisoners in this country. Under the previous Labour Government if someone was in prison for fewer than 2 years he or she got nothing absolutely nothing in terms of rehabilitative services within a State prison. I am pleased to say the National Government is looking at introducing those rehabilitative services at an earlier stage than that. In fact if people were in prison for a longer period than 2 years they got nothing until they had been there for two-thirds of their sentence. 
Last week I was privileged to attend Rimutaka Prison and the graduation of people from a Sycamore Tree programme run by a private provider. Who is the private provider? It is Prison Fellowship. It was very interesting to speak to some of the prisoners there and to one particular person who was able to tell me how easy it was for him for several years of his prison term to access drugs at any time. They appeared through the flap in his prison cell at 2 a.m. There were no prisoners wandering around the corridors at 2 a.m.; the people doing that were all prison officers who were employed by the State. 
When we look at the way the only privately run prison has been operated within this country we see there were fewer escapes from that remand centre than from prisons run by the State. It had fewer beatings fewer problems fewer people put on report and better outcomes for the people who were there. It was so much better than what was being offered within the State system that when the Labour Government renationalised that particular facility what did it do? It took over all the rehabilitative services that were previously being offered in the private prison because they were so good and because the prison had had such a fantastic record with them. 
Some very good points were made by my colleague Te Ururoa Flavell from the Maori Party in respect of the ability of iwi to be able to contract as private providers of prison services. I was interested last week when I attended the Te Ihi Tu project in New Plymouth. It is currently on its last legs but it is contracted to provide services to the Department of Corrections. The measures that were run over that iwi-based programme were so stringent that when we stack up the review ordered by the Department of Corrections with the response from Te Ihi Tu Trust we find it seems to be very much wanting. I have some real fears regarding the ability of iwi-based programmes to be able to compete on a level playing field with others who are competing for the same contracts as they are being run by the department at the moment. I look forward to the further work that the National Government will do to maintain the level of service delivery across all the needs of the prison population.  
The point that we need to bear in mind is that the owner of the prison facilities will continue to be the State. The fact that we have private providers contracting to provide services is really based on one premise and one premise only: we must get value for money out of the money that we put into the corrections system and the people who go into jail should always come out better than they were when they went in in terms of their ability to live a rehabilitated life within society. If people go to jail having literacy and numeracy problems then before they come out someone should have addressed those problems. Well under the previous Labour Government that did not happen. If a person is one of the 83 percent of people in prison who have a drug or alcohol dependency problem then someone should address that. Whether a person is in jail for more or less than 2 years someone has to address that problem and it was only in the last 18 months of the previous Labour Government that we had anywhere near the number of drug and alcohol rehabilitative beds that we needed in order to be able to cater to that problem. Only 44 people attended drug and alcohol residential rehabilitative services in the year 2006. That figure rose to 174 in the last year that Labour was in Government yet we have a prison population of 8500 people. That was absolutely disgraceful! 
It will be a much better record when we turn around and look at the record of the private provision of penal services in this country. I am proud to be standing here in support of the Corrections (Contract Management of Prisons) Amendment Bill. 
CARMEL SEPULONI (Labour) 
: 
 I stand to oppose this Corrections (Contract Management of Prisons) Amendment Bill along with all of my Labour Party colleagues. Just as Mr Hipkins said earlier I have heard absolutely nothing from the National Government to give us any reason to think that there is a rational explanation as to why we might support this bill at all. The No. 1 concern obviously from members on this side of the House is that National’s desire to privatise prisons is basically déjà vu. Here we go again: privatisation privatisation privatisation. 
Moana Mackey 
: The answer to everything. 
CARMEL SEPULONI 
: The answer to everything. Let us privatise the corrections system and let us privatise our prisons. Let us privatise our police force next! Let us privatise accident compensation let us privatise education and let us privatise health. It is just privatisation privatisation. The agenda is very clear now and New Zealand knows it for sure. Labour said before the election that National would be out to privatise everything and here we go. We have had 4 months of a National Government and the agenda has been made very clear. 
The Labour Party is fundamentally opposed to this move with the No. 1 reason being that we believe that the prison system is a core public service. Given that it is a core public service it would be completely inappropriate to turn it over to the private sector to make a profit from it. I ask why we would want the private sector to make a profit out of people who are offending. Those people are putting public safety and everything else at risk. Why would we want people to make a profit out of that? 
Metiria Turei from the Green Party made a good point earlier with regard to what happened with the Auckland Central Remand Prison when it was managed by the GEO Group which was previously known as the Wackenhut Corporation. She raised the point that basically the prison was a loss-leader and that yes things went OK but the reason that things went OK under that leadership was that the corporation had big plans— 
Mr DEPUTY SPEAKER 
: I am sorry to interrupt the member but the time has come for me to leave the Chair. 
Debate interrupted. 
The House adjourned at 10 p.m.