Swain Paul: Securities (Local Authority Exemption) Amendment Bill — Second Reading 
Swain Paul: Securities (Local Authority Exemption) Amendment Bill — Second Reading 
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Hon PAUL SWAIN (Labour—Rimutaka) 
: 
 Yes Madam Assistant Speaker I agree with the previous speaker Simon Power that it is right to congratulate my old bench mate on attaining that high office and I wish you well as you sail towards the sunset—like my very good self. 
Hon Ruth Dyson 
: To the next stage of her career. 
Hon PAUL SWAIN 
: Yes; she is on the way to the next stage of her career. 
Before I get into the Securities (Local Authority Exemption) Amendment Bill I say that Simon Power made an interesting point in asking what the relationship is between this bill and the Reserve Bank of New Zealand Amendment Bill which is being considered by the Finance and Expenditure Committee. The honest answer to that question is that I personally am not sure. That legislation is designed to bring in some prudential oversight of the Reserve Bank over the non-banking sector. One of the issues being looked at there is the definition of what is called a “deposit taker” and whether a local authority that is issuing debt securities for infrastructure projects for example would come within that definition. This was not discussed this morning at the Finance and Expenditure Committee but I will take it up at that select committee to see whether there is a relationship between these two issues because I think it will be important to get that relationship if it is at all possible. 
The point of this bill—and I congratulate the Minister of Commerce Lianne Dalziel on bringing this bill forward—is an attempt to make it easier for local government authorities to be able to raise funds for infrastructure projects in particular and to finance them through issuing debt securities rather than having to pay for them up front through rates. I think that this is a good thing to do. The argument was that the regime they were under under the Securities Act meant that the compliance costs were high and as a result most councils found it greatly difficult—and some argued prohibitive—to do this. What we are doing is exempting local government authorities from the full disclosure regime of the Securities Act particularly around the prospectus. 
Under this legislation there will be no need for a full prospectus signed by all councillors. Simon Power correctly made the point that if we had to get all councillors to sign off on a prospectus looking to raise debt for an infrastructure project then all it would need is for one councillor to say no and the project falls over. This point was made by submitters. What happens now is that councils are required to put out what is called a financial statement which is required to be signed by two councillors. Obviously if only two councillors were held to be liable then no one would sign it so all councillors are liable for what is called the accuracy of that statement. We had some discussion at the select committee as to whether a councillor could vote against the financial statement if he or she did not agree with it but provided there were two councillors to sign the financial statement the councillors were still essentially liable. Therefore it is incumbent on all councillors to try to make sure that they understand the issue and that they attest to the accuracy of that statement so the issue of liability still holds. 
There was the question of whether like Ministers of the Crown councillors should be not liable and there was some discussion about that. I think that the submissions from Local Government New Zealand raised that matter. The select committee said no in the end. The roles and responsibilities of Ministers are different from those of councillors particularly around accountability and there are a lot more checks and balances in the central government sector. Treasury is all over this stuff like a rash the departments are audited by the Auditor-General and all those things are hidden in behind there. We felt that was not an appropriate comparison. 
However we were still concerned about making sure that there was sufficient disclosure to ensure that people who were investing in these things had some surety so we introduced some other measures. When the local authority issues these things it will be required to refer to the most recent audited annual financial statements in the investment statement that it distributes when issuing debt security. There is a document for people to look at that refers to the last annual statement. They can refer to interim financial statements in the investment statement where the date of allotment of debt security is more than 9 months from the last balance date. That makes sense as well. A local authority would provide financial statements to investors and potential investors on request and free of charge—as there was an issue about whether people would be charged for this—and it would state in the investment statement that the debt securities being offered are not guaranteed by the Crown. 
Some people will think: “I will put my money in here because the Crown is backing it.” because people often do not understand the difference between central government and local government certainly in my own area. When there are potholes they come and see me and I blame the mayor and when it is something to do with central government he blames me. A lot of people do not understand the difference between the two or where the boundaries are so it was important to say that debt securities issued by a particular council are not guaranteed by the Crown unless they are covered by the Public Finance Act 1989. 
The Commerce Committee has done a good job on this legislation under the chairmanship of Gerry Brownlee. Once this legislation is enacted it will be interesting to see whether the issue is taken up and whether some infrastructure projects that are not able to be funded at the moment for a whole pile of reasons are in fact funded. The relationship between this particular legislation and the Reserve Bank of New Zealand Amendment Bill is of interest to me and I will be taking up that matter at the Finance and Expenditure Committee. 
This bill is good legislation. It is in the best interests of councils. It should encourage investment which is a good thing and I recommend that it proceed further through its remaining stages in the House.