Questions And Answers – April 6

by Desk Editor on Thursday, April 7, 2011 — 9:49 AM

Press Release – Office of the Clerk

1. Hon PHIL GOFF (Leader of the Opposition) to the Prime Minister : Does he stand by his statement that dividends from State-owned enterprise energy companies help pay for services like doctors and hospitals, and can he confirm that the dividends …
(uncorrected transcript—subject to correction and further editing)




Energy Companies, State-owned—Financial Returns

1. Hon PHIL GOFF (Leader of the Opposition) to the Prime Minister: Does he stand by his statement that dividends from State-owned enterprise energy companies help pay for services like doctors and hospitals, and can he confirm that the dividends earned last year from the four companies amounted to $732 million?

Rt Hon JOHN KEY (Prime Minister): Yes. The Government will spend in excess of $70 billion this year on a whole range of services, including doctors and hospitals. It will fund this spending in a whole range of ways, including direct and indirect taxes, excise fees, and State-owned enterprise dividends, and through increasing debt. To the second part of the member’s question— yes.

Hon Phil Goff: Why is he intending to sell off shares in profitable companies, whose profits remain entirely in New Zealand and are used to benefit all New Zealanders?

Rt Hon JOHN KEY: Because the Government wants to acquire $33 billion worth of assets over the next 5 years, and it is the Government’s view that that is an efficient way of doing it. It is also the Government’s view that it will actually increase the performance of the said State-owned enterprises.

Hon Phil Goff: How much of the profits and dividends from Contact Energy, a company once wholly owned by New Zealanders—I use the Clyde Dam for an example, which was built and paid for by New Zealanders—are now sent overseas to foreign investors, and is it in excess of $100 million a year?

Rt Hon JOHN KEY: I do not know the answer to that question. But I do know that had Contact Energy not been sold, that debt, which was also from overseas, would have had those dividends going overseas. There is also a very important difference between—[Interruption] Well, actually we owe a lot of money overseas. But the second important issue, of course, is that there is a fundamental difference between Contact Energy and what the Government is proposing under the mixed ownership model, which is that, at a minimum, 51 percent control would be held by the Government. There are also 1.65 million KiwiSaver accounts. There are also the Crown financial institutions, and a wide range of other New Zealanders who would like to buy shares. So it is the Government’s view that the majority ownership would stay in New Zealand.

Hon Phil Goff: When the Prime Minister told the House yesterday that Contact Energy was owned “by a very wide range of Kiwi mums and dads”, was he aware that in fact 80 percent of the shares in that company are owned by 1 percent of shareholders—mainly corporates—and most of the shares are now owned overseas?

Rt Hon JOHN KEY: Yes—and I apologise for rushing out the full answer; I did not want to deter the member from being able to ask another question. But in the interests of making sure there

is clarity, let me read out the whole quote. It is from Pattrick Smellie and says “One of the least defensible criticisms of the Key”—[Interruption]—well, they do not want to actually hear it, but we will go through it—“Government’s partial privatisation plans have been regular references to Contact Energy as an example of a privatised company which lost control to foreigners. Yet nothing could be further from the truth. The reality of the Contact share register is it remains possibly the most widely held share by domestic New Zealand investors.” Eleven years on from the float, in fact, Contact Energy’s shareholders have shown a high degree of loyalty to the company, to the extent that Edison Mission Energy’s attempts to take 100 percent were roundly rebuffed in the early 2000s. Pattrick Smellie says “What it shows is that many small-scale investors have piled into privatised companies like Contact precisely because they want to retain … as much New Zealand ownership as possible.” If the member wants to ask me that question every day, I will look forward to reading out the answer every day.

Chris Tremain: Has he seen any policies on State-owned electricity company dividends?

Rt Hon JOHN KEY: Yes, I have seen at least two policies. The first is that we should hang on to these dividends at all costs because they raise hundreds of millions of dollars for the Government’s coffers. The second is from this statement to the Labour Party conference, and says: “That’s something we got wrong in the last government. … It’s not right that last week a power company paid $230 million in dividends to government. … We will not demand excessive dividends coming back into state coffers”. The confusing thing is that these two diametrically opposed policies come from the same person: the current Leader of the Opposition.

Hon Phil Goff: How can the Prime Minister possibly be right in saying Contact Energy is owned by a wide range of Kiwi mums and dads, when most of the shares are owned offshore, and when 80 percent of the shares are owned by 1 percent of the shareholders: the big corporates; how could he possibly be right?

Rt Hon JOHN KEY: As I said earlier, Contact Energy was privatised in a completely different way from what the Government proposes. The proposals are that there will be 51 percent control; that Kiwi mums and dads will be put at the top of queue; that we will allow the 1.65 million KiwiSaver account holders to have an opportunity to invest; that we will make sure the Crown financial institutes have an opportunity to invest; and that the proposals will go partly towards fulfilling the Government’s plan to have more Kiwi ownership in the form of the New Zealand Superannuation Fund. There are big, fundamental differences between that proposal and Contact Energy, but if we want to go and look at privatisations that were hocked off in a very poor way, let us go and look at what occurred when that member was a Minister in the Labour Government.

Hon Phil Goff: Is it correct, as reported, that TrustPower and Contact Energy, which are now privately owned, have increased their prices since 1998 by 180 percent—

Hon Parekura Horomia: How much?

Hon Phil Goff: —180 percent, which is much higher than the rate at which the State-owned enterprises increased their prices, and how does he explain why the private companies have increased their prices by such a higher rate?

Rt Hon JOHN KEY: I cannot be sure of those facts, because one never knows when they are presented by that member, but—

Hon Phil Goff: I raise a point of order, Mr Speaker. As you will be aware, that answer obviously reflected on the integrity of the questioner. I can table the document that was reported in the paper that said that.

Mr SPEAKER: I think the member’s point was well made. The Prime Minister does not need to answer the question in that way, and doing that will always lead to disorder.

Rt Hon JOHN KEY: I cannot be sure of those facts. I certainly cannot be sure that they are correct, nor have I ever seen them in the past. But I make the point that the bulk of those increases were made under a Labour Government.

Hon Phil Goff: Is he prepared, personally, to guarantee that if his sell-down of shares goes ahead as he has signalled, it will not result in a much higher rate of price increases than would otherwise have occurred, and that significant shares in those companies will not end up very quickly offshore?

Rt Hon JOHN KEY: Firstly, it is important to understand that the majority share ownership will be held by the Government, so that is the first point. Secondly, what controls the increase in price is, of course, the regulation of the industry. I make the point once more that in the 9 years of a Labour Government electricity prices rose by 72 percent. I also make the point that about a week or so ago there was a significant price hike in relation to hedges—

Hon Phil Goff: I raise a point of order, Mr Speaker. This is all very interesting, but I asked a specific question: whether he would guarantee that the sale would not result in shares going offshore and prices rising much faster. He has not addressed that question yet.

Mr SPEAKER: The member needs to reflect a little on that point of order. The Prime Minister is giving an explanation of how the market works for electricity prices. Giving an assurance that prices will not increase is not necessarily within the Prime Minister’s power. He is trying to explain to the House how the prices in the electricity market work, and that is a pretty sensible way to answer such a question, I would have thought.

Rt Hon JOHN KEY: I reflect on what happened a couple of weekends ago. We saw a significant price hike, and I make the point that that is a matter for the Electricity Authority to investigate—and it is doing so. But that price hike took place with three primary players: Genesis, Mighty River Power, and Meridian Energy. They are all 100 percent State-owned enterprises. The prices in the electricity sector are controlled by regulation, not ownership.

Superannuation Rates—Effect of Average After-tax Weekly Earnings

2. CRAIG FOSS (National—Tukituki) to the Minister of Finance: Have after-tax average weekly earnings been rising faster than inflation; if so, what are the implications for rates of New Zealand Superannuation?

Hon BILL ENGLISH (Minister of Finance): Yes, as measured by the quarterly employment survey, after-tax weekly earnings rose 6.8 percent last year. That is significantly greater than annual inflation of 4 percent. This has implications for superannuation rates under Section 16 of the New Zealand Superannuation and Retirement Income Act, which, as I recall, was passed by the previous Government. The fact that after-tax earnings have risen significantly faster than inflation means that superannuation rates get an extra increase on 1 April this year. That extra increase was necessary to maintain the married couple rate of 66 percent of after-tax weekly earnings, which are rising significantly faster than inflation.

Craig Foss: By how much did superannuation rates rise on 1 April 2011?

Hon BILL ENGLISH: There are a number of different rates of superannuation, but to use the total married couple rate per fortnight, from 1 April this went up per person by $11.90 a fortnight. Over a quarter of this is due to the fact that after-tax earnings have risen significantly faster than inflation. That, of course, is not a political assertion; that is a matter of fact according to the measures agreed by this Parliament over the last 20 years and reconfirmed by the previous Government when it passed a new Act in 2001. So the increases in national superannuation prove beyond doubt that after-tax earnings in New Zealand are rising faster than inflation.

Craig Foss: Were superannuation rates accurately and permanently increased for the effects of raising GST?

Hon BILL ENGLISH: Yes, between 1 October 2010 and 1 April 2011 superannuitants received a special 6-month payment to compensate them in advance of the normal cycle for the rise in GST. From 1 April onwards the normal inflation adjustment including the GST impact has taken over, so there is no longer any need for a special payment. Superannuitants can be assured that the increase in national superannuation on 1 April fully compensates them for GST and it is ongoing and permanent.

Craig Foss: How do recent increases in superannuation rates compare with those in the past?

Hon BILL ENGLISH: As I mentioned, the increase in the married couple rate per person since 1 April 2008 is actually now $83 a fortnight. This works out as a real increase of 8.5 percent in national superannuation over the last 3 years, and a significant cause of that has been the reduction in tax rates and the increase in the after-tax wage beyond the increase in inflation. Just by comparison, the superannuation rate went up by 8.5 percent in real terms under the previous Government but it took 9 years to increase by as much as that.

Economy—Projected Fiscal Deficit for 2011

3. Hon JIM ANDERTON (Leader—Progressive) to the Minister of Finance: What is the fiscal deficit likely to be in the calendar year 2011, and what would the fiscal deficit be if there had been no tax cut on 1 October 2010 for the top 5 percent of earners?

Hon BILL ENGLISH (Minister of Finance): It is hard to answer the member’s question in detail, for two reasons. First, the Government uses a March year and not a calendar year, so it is a bit complicated to isolate the calendar year. Secondly, all earners have benefited from reductions in, say, the bottom tax rate. It would be fair to say that if there had been no reduction in, say, the top rate of tax, then the deficit would be smaller. However, tax reductions right across the board have been part of tax packages that have been fiscally neutral—that is, where the Government has given away income tax it has paid for that by taking more tax in other forms.

Hon Jim Anderton: Has the Minister seen the table on the Treasury website that allows revenue from tax changes to be calculated; if so, has he seen that it shows that the cost of the tax cut for the top 5 percent of income earners this year will be $462 million, meaning that the deficit will be worse by that amount this year than it would have been if the top rate had been left unchanged?

Hon BILL ENGLISH: I think that is what I said in answer to the first question. The tax packages that we introduced, on 1 April 2009 and then in October 2010, were both self-funding so the Government’s tax packages have not contributed to the deficit. We have offset income tax cuts with other tax increases.

Hon Jim Anderton: Would not the $462 million a year from the top 5 percent of income earners with incomes over $100,000 a year help to raise $4.6 billion over 10 years, which could be used to help pay for the Canterbury earthquake and give jobless young Cantabrians trade skills to help rebuild their city?

Hon BILL ENGLISH: It has, I think, long been that member’s position that higher taxes are a good thing. We do not believe that they are a good thing, unless they are used for effective purposes. People who had reductions in the top tax rate are also subject to higher taxes on investment housing, and higher effective taxes on overseas owners of New Zealand assets where they may have a share in those assets. They are paying higher GST. The rules have been tightened on social support such as Working for Families to ensure that broader definitions of income are used. So we are satisfied that the tax packages have been fiscally neutral. Of course there are challenges with funding the recovery for Canterbury, but the Government is determined to do a good job and will fund what is necessary.

Amy Adams: What has been the cumulative fiscal impact of tax changes made by this Government since taking office in 2008?

Hon David Cunliffe: More debt.

Stuart Nash: More borrowing.

Hon BILL ENGLISH: The members are wrong about that. The combined impact of the two tax packages the Government has introduced are a net gain, in 2011-12, in revenue of $950 million. That is to say if the Government had had no tax packages, revenue would be almost a billion dollars lower than it will be in 2011-12. I know that the Opposition might be startled about that, but that is the result of the Government changing the tax system to make it more effective and provide better incentives for a stronger economy and more jobs.

District Health Boards—Number of Doctors and Nurses Employed

4. Dr PAUL HUTCHISON (National—Hunua) to the Minister of Health: What reports has he received in relation to the number of doctors and nurses working for New Zealand’s district health boards?

Hon TONY RYALL (Minister of Health): I am pleased to advise that we are making good progress in protecting and growing the public health service. I have been advised that in the 2 years since the change of Government the number of nurses working for our district health boards has increased by over 1,000 and the number of doctors by over 500. Retaining and growing the health workforce is a great challenge facing our public health service. The challenge will continue as demand for better access to services grows as our population ages, and the international demand for health professionals further intensifies.

Dr Paul Hutchison: What other reports has he seen in relation to improving New Zealanders’ access to trained health professionals?

Hon TONY RYALL: I have previously reported to the House that the Government’s new voluntary bonding scheme has attracted 1,400 medical, nurse, and midwifery graduates into specialities and locations where we need more of them. I am pleased to confirm that the Government has expanded this year’s voluntary bonding scheme to include nurse graduates if they choose to work in the specialities of mental health and aged care. Not only have these specialities been added but they have also been made a priority for the voluntary bonding scheme.

Grant Robertson: Can the Minister confirm that it takes at least 6 years to train a doctor and 3 years to train a nurse, and will he show his trademark humility and generosity and give credit for that to the person who is actually responsible for increasing the number of medical staff—the Hon Annette King?

Hon TONY RYALL: No. I do not like to hark on the past.

Grant Robertson: I seek leave of the House to table the latest available data from the Medical Council of New Zealand that indicates that there are 320 extra doctors, not more than 500, as the Minister said.

Mr SPEAKER: Leave is sought to table that document. Is there any objection? There is objection.

Government Spending—Cuts

5. Hon ANNETTE KING (Deputy Leader—Labour) to the Minister of Finance: What programmes does he consider “nice to have” and should be cut?

Hon BILL ENGLISH (Minister of Finance): If the Opposition want an indication of it, it should look at a number of the programmes that the Government has cut in previous Budgets; for instance, reducing funding subsidies for hobby courses in adult education, abolishing the “Wassup!” badges for promoting achievement among Māori students, and reducing the tertiary tripartite funding pool by $55 million, which was just a political agreement between Labour and its union mates.

Hon Annette King: Is funding for Te Rito: New Zealand Family Violence Prevention Strategy, which helps to tackle the growing level of family violence in New Zealand, a “nice to have” or a necessity; if it is a necessity, why has $382,000 been cut from women’s refuges from 1 April?

Hon BILL ENGLISH: I understand that the Minister who is in charge of that, Ms Turia, is involved in vigorous discussion with people who are providing family violence services. The parts of that programme that do not work are “nice to have”; the parts that do work are necessities.

Hon Annette King: Is having advocates for vulnerable children and young people who have witnessed family violence, who have had their funding cut, a “nice to have” programme, and what is the likely impact of these cuts on hundreds of children?

Hon BILL ENGLISH: I think this is an area, like many others, where it is important to be able to have sensible discussion about what works and what does not. I understand that on that issue

there are a range of views among people who understand the issues about whether it works or does not work. We will not shy away from discussing the effectiveness of hundreds of millions of dollars of social programmes—some of which work, some of which do not.

Hon Annette King: Is the $13 million allocated to Te Puni Kōkiri for whānau engagement over the next 2 years “nice to have”, or will this funding be redirected to necessities like skill training, for example, so that young Māori can get a job, rather than to paying for a family meeting?

Hon BILL ENGLISH: The Government is doing a very good job of rearranging funding around skills training. We discovered that a lot of the money Labour had committed to skills training was resulting in thousands of young people getting zero credits and no qualifications. So we are reallocating funding to much more effective skills training.

Hon Annette King: Why are budget advisory services effectively having their funding cut at a time when, under this Government’s policy, these services are seeing almost five times the number of families they are funded for and are having families sent to them by Work and Income? Is it because those services are “nice to have”?

Hon Paula Bennett: They have not had a cut.

Hon Annette King: They have so.

Hon BILL ENGLISH: As is evident from the members’ exchange, when the member says “effectively cut”, does that mean it is less than what Labour promised 3 years ago or something?

Hon Annette King: No, less than what you promised them.

Hon BILL ENGLISH: If the member is trying to give the impression that the Government is cutting funding to social services, she is wrong. This Government has committed hundreds of millions of dollars over the last couple of years to dealing with the effects of the recession. But at the same time as spending more, we make no excuse for thoroughly scrutinising which programmes are working and which are not. Good intentions are not enough.

Hon Annette King: I seek leave to table a letter from the National Collective of Independent Women’s Refuges Inc. to the deputy chief executive officer of the Ministry of Social Development, asking for an explanation as to why it has had $380,00 cut from family violence programmes, advocates for children, and the family violence education fund.

Mr SPEAKER: Leave is sought to table that document. Is there any objection? There is no objection. Document, by leave, laid on the Table of the House.

Hon Shane Jones: Why is spending $2 million on a plastic waka the highest priority Government spending when he is cutting $55 million from industry training for young Māori on the basis that it is a “nice to have”?

Hon Tariana Turia: I raise a point of order, Mr Speaker. I wonder whether the member realises that $33 million was spent on a black waka—by Labour.

Mr SPEAKER: When the House realises I am on my feet, there will be silence. That is not a point of order.

Hon BILL ENGLISH: I think that is a very good point. Why did the Labour Government spend $33 million on the America’s Cup yacht—which apparently will show up here some time? The project the member refers to is a pavilion, not a waka. When New Zealand is on the world stage, with billions of people watching the third largest sporting event on the globe, we want to present New Zealand positively so that everyone sees us as a country that is progressive, multicultural, and economically robust.

Hon Shane Jones: If a plastic waka—[Interruption]

Mr SPEAKER: I apologise to the member. I say to Government members on this occasion that I simply cannot hear with that level of noise.

Hon Shane Jones: If a plastic waka is such a high priority for Government spending, why did the Minister not give any consideration to tendering for such a contract?

Hon BILL ENGLISH: In the first place, most of the money for the project the member is talking about is coming from cancelling other projects. In the current environment, that is as it should be. Of course, the building of the project will be tendered.

Hon Shane Jones: Why does the Minister think this $2 million Tupperware gift—or in this case “Tupperwaka” gift—will improve the daily lives of the members of the Ngāti Whātua iwi?

Hon BILL ENGLISH: The Ngāti Whātua iwi seem to believe that it will improve the daily lives of their members. They are keen participants in showcasing New Zealand to the world. Despite the fiscal constraints, the Government is not cutting back the Rugby World Cup budget. We want to do a good job of it.

Hon Shane Jones: I raise a point of order, Mr Speaker. Is there any dim prospect that we can get a proper answer—

Mr SPEAKER: Order!

Hon Shane Jones: —given that—

Mr SPEAKER: Order!

Hon Shane Jones: —most of the information given to us comes from Ngāti Whātua?

Mr SPEAKER: The honourable member will get to his feet and apologise for that abuse of the point of order system, because I was on my feet and he just carried on regardless. I have already made it very clear to members that when I am on my feet they are to stop, so I ask the member to apologise to the House for that.

Hon Shane Jones: I apologise for speaking while you are on my feet. I apologise, Mr Speaker.

Mr SPEAKER: I thank the honourable member. The thought of being on the honourable member’s feet was all a bit much for the Speaker for a moment.

Hon Trevor Mallard: I raise a point of order, Mr Speaker. And I am standing on one of my feet, anyway. There are two points I would like to make. First of all, during that exchange, the Leader of the House interjected. Secondly—we did not take it up at the time, because we thought you were going to deal with it—Tariana Turia also did not sit down when you stood up. She continued.

Hon Tariana Turia: Oh, he—

Mr SPEAKER: There will be no interjections or the Minister will be leaving the Chamber. There will be no further interjections. The point the member makes is not unreasonable. I accept that I have probably been a little bit tougher on the Hon Shane Jones, but that happens from time to time; I am not unaware of that. I warn Government Ministers—all Government Ministers—that when I am on my feet, there will be no interjections. They will cease speaking and will resume their seats when I get to my feet, because I do it for very good reason. I accept that the score may be a little against the Opposition at the moment on that count, but I am aware of that.

Hon John Boscawen: Does the Minister of Finance agree with his colleague the Hon Pita Sharples that the $1.9 million plastic waka is “authentically Māori”, and does the Government have any plans for other authentic Māori plastic-fantastic inflatables?

Hon BILL ENGLISH: I do not think it should be any surprise that when New Zealand is on the world stage, showcasing this country to a global audience, there will be some Māori content. If the member is advocating there should be no Māori presence, I have to tell him that that is not New Zealand.

Te Ururoa Flavell: Tēnā koe, Mr Speaker. Does the Minister of Finance agree that it is rather inconsistent for the Labour Party to criticise an investment of $2 million in a waka cultural centre—

Mr SPEAKER: I invite the honourable member to reword his question, because the Minister has no responsibility for what the Labour Opposition might think.

Te Ururoa Flavell: Has the Minister of Finance seen any reports that might indicate that it is inconsistent for the Labour Party to criticise a $2 million investment in a waka cultural centre given that a party in this Parliament, namely Labour, invested $33 million in Team New Zealand waka?

Mr SPEAKER: Before I call the Minister I just him to the fact that the question is very marginal, because the Minister has no responsibility for Labour Opposition views, at all. I will allow the Minister to answer the question as long as he is careful.

Hon BILL ENGLISH: As the Minister of Finance I would dearly love to cancel the Team New Zealand funding of $33 million, because it is a “nice to have” and there are necessities we need to fund. But the contract signed by the Hon Trevor Mallard was so tightly specified that we have to honour it despite the fact that it is a very low priority.

Hon John Boscawen: How can it be appropriate for Cabinet to vote funding for a plastic waka to the largest hapū in the electorate of the Minister of Māori Affairs at a time when polling shows he is in danger of losing his seat to Labour, when an election is imminent, and without even putting the project out to tender?

Hon BILL ENGLISH: Of course, the building of this pavilion, which will look like a waka, will be tendered.

Overseas Investment Rules Review—Sale of Forestry Blocks

6. TE URUROA FLAVELL (Māori Party—Waiariki) to the Minister of Finance: Does he still believe that following the Government’s review of the foreign investment rules that “New Zealanders are able to feel that those things that they think are important about New Zealand are … protected”; and what influence did the outcomes of that review have on the Overseas Investment Office’s decision to grant consent for Carter Holt Harvey to sell more than 17,000 hectares of central North Island forestry blocks to a company with ownership spread between 10 countries including the United States, Saudi Arabia, Denmark, and Liechtenstein?

Hon BILL ENGLISH (Minister of Finance): Yes, I do stand by the comment, but I can confirm for the member that the changes the Government made in the overseas investment rules to implement the Government’s approach, as outlined in my comment, had no bearing on that particular case, and that is because the application for consent was received on 3 December 2010, and the new regulations came into force after 13 January 2011. So the application he refers to was approved under overseas investment rules put in place a few years ago by the previous Labour Government and Winston Peters.

Te Ururoa Flavell: What advice was received from central North Island iwi about the decision to sell off 18 North Island forestry blocks to a US-led applicant group?

Hon BILL ENGLISH: The Government would not have sought advice from anyone in particular. Once an application is lodged the Overseas Investment Office deals with it consistent with the Overseas Investment Act and it makes a recommendation to the Minister. It is not a consultative process.

Hon David Parker: How many proposed sales of New Zealand rural land to foreign owners have been declined pursuant to the changes that he made to the overseas investment rules, which he said just then came in on 13 January 2011, noting that the likes of the Crafar farms were declined under pre-existing rules?

Hon BILL ENGLISH: I am not aware of any applications that have reached the point where a decision is required under the new rules, but it is simply a matter of time before they are. My understanding is that overseas investors are taking note of the Government’s concerns about undue aggregation, and also a positive direction for them to have a New Zealand content to their proposals, which would make it easier to get approval.

Te Ururoa Flavell: What checks and balances are in place with American-style corporate investment applications to ensure that commercial exchange to a foreign owner does not erode our own local institutional, intellectual, social, and physical capital?

Hon BILL ENGLISH: Those constraints are laid out in the Overseas Investment Act 2005, which was passed by the previous Government and Winston Peters. Since then the Government has made a couple of extra changes to the regulations that create higher hurdles in respect of rural land.

Of course, the terms of that legislation are always open for debate but we believe they strike about the right balance between protecting things that are valuable to New Zealanders and at the same time allowing the kind of overseas investment that helps to create new jobs and higher incomes in New Zealand.

South Canterbury Finance—Treasury Advice

7. Hon DAVID CUNLIFFE (Labour—New Lynn) to the Minister of Finance: to the

Minister of Finance: Is it correct that Treasury was in the Prime Minister’s office “week after week, month after month” telling him South Canterbury Finance was going bankrupt?

Hon BILL ENGLISH (Minister of Finance): Yes, That is correct. Both the Prime Minister and I received regular updates from Treasury on South Canterbury Finance. The advice for some time was that the company was in difficulty and that there was a slim chance that it could trade its way out of its difficulties, although for quite a long period that was always possible. In the event, it was not able to raise capital or trade its way out. South Canterbury Finance was placed in receivership in August 2010, and payments were made to deposit holders under the Crown Retail Deposit Guarantee Scheme, which was implemented by the then Labour Government.

Hon David Cunliffe: After receiving these warnings, according to the Prime Minister, from the day he was elected, “week after week, month after month”, did the Government put South Canterbury Finance into statutory management by mid-2009 to insulate the taxpayer from risk; if not, why not?

Hon BILL ENGLISH: The process for statutory management is a different one. It is done by a recommendation of the Securities Commission, and it did not make that recommendation. As a general point, because of the size of South Canterbury Finance and a belief that there was always a chance that it could trade its way through, the Government ensured that there was every opportunity for South Canterbury Finance to fix its own problems before there was a call on the taxpayer. As it has turned out, it appears that the company was in so much trouble even by early 2009 that whatever we did would not have made much difference.

Hon David Cunliffe: After receiving such warnings from the day he was elected, “week after week, month after month”, did the Government end the Crown guarantee to South Canterbury Finance to insulate the taxpayer from risk, or did it agree to renew the guarantee; if so, when?

Hon BILL ENGLISH: At all times South Canterbury Finance remained in compliance with the original deed of guarantee. The member will be familiar with that deed of guarantee, because it was his Government that drew it up. Actually, South Canterbury Finance was signed into that guarantee on the morning of the day the current Government was sworn in. So it was not a decision made by us; it was made by Treasury, and it was consistent with the scheme that that member put in place.

Hon David Cunliffe: I raise a point of order, Mr Speaker. I asked the Minister whether he had made a decision to renew the company’s guarantee, and instead he answered that Treasury—

Mr SPEAKER: The member will remember what I said about members resuming their seats immediately. If that was all the member had asked in his question, his point of order would have been fine, but he preceded that part of the question with another part, and the Minister answered the other part of the question.

Jo Goodhew: My supplementary question to the Prime Minister—

Hon David Cunliffe: A very nervous one.

Jo Goodhew: Not at all. What advice did the Government receive on options to recapitalise South Canterbury Finance, and what impact would these have had on the taxpayer?

Hon BILL ENGLISH: Both Treasury and South Canterbury Finance’s independent advisers dealt with a number of propositions over a period of time, and their advice was consistent—all propositions would have resulted in extra cost and risk to taxpayers, and none of them were recommended to the Government. Anyone who wants to check this out can look through the over 100 documents that have been published on the Treasury and Reserve Bank websites. I will take

just one piece of advice from KordaMentha. It said: “SCF promotes the offer as crystallising the Crown’s loss.”—this is referring to one of the offers—“This is not correct. [The] proposal does however cap the Crown’s recoveries. In essence, the Crown carries the downside risk under this structure but has no ability to access any potential upside.” In short, the Government would have been mugs to accept any of the proposals that were put to it.

Hon David Cunliffe: What did he do to save taxpayers $1.2 billion when auditors Ernst and Young in April 2010, 6 months before South Canterbury Finance went under, stated that South Canterbury Finance’s directors’ assumptions “contained ‘uncertainties’ regarding the ‘adequacy of funding and liquidity; sufficiency of capital, and compliance with regulatory requirements’ in its trust deed and its trustee waivers.”, and did the Government renew the South Canterbury Finance guarantee after that warning?

Hon BILL ENGLISH: There is nothing in that that was news. A lot of it was known by mid- 2009. I just want to remind the member that the guarantee he put in place did not guarantee the company; it guaranteed the depositors. It was a deposit guarantee scheme. The Government’s job, bearing in mind that we had an obligation of $1.6 billion to the depositors, was to give the company every opportunity to trade through in order to meet its obligations to depositors before taxpayers. If we had leapt in earlier, there would have been no opportunity for the company to fix its own problems.

Hon David Cunliffe: Will the Minister release in full the offer documents from Permanent Investments, Ngāi Tahu, and the New Zealand Superannuation Fund, which were declined in September 2010; if not, how can he justify his claim that it was prudent to decline this offer, which would have limited taxpayer liability to around half a billion dollars instead of the $1.2 billion and climbing so far taken to book?

Hon BILL ENGLISH: The reason the Government will not issue the full offer documents is because those offers are made under confidentiality agreements. If we release those documents, we will never be able to business with anyone again. Secondly, the member is simply wrong about that proposition. The proposition was scrutinised by officials; his $500 million figure is wrong. Like other propositions, it was going to ensure that the buyers made money and the Crown took all the losses. KordaMentha would make the same conclusion about that proposition as other offers. That proposition meant downside for the Crown and no upside, so it was not accepted.

Hon David Cunliffe: I seek leave to table a Treasury document showing that as of 23 March 2010 Treasury’s estimate of liability in South Canterbury Finance was $696 million, a far cry—

Mr SPEAKER: Leave is sought to table that document. Is there any objection? There is no objection. Document, by leave, laid on the Table of the House.

Hon David Cunliffe: I seek leave to table a Treasury document quantifying in February 2010 the South Canterbury Finance liability at $696 million, and showing the derivation of that amount.

Mr SPEAKER: Leave is sought to table that document. Is there any objection? There is no objection? Document, by leave, laid on the Table of the House.

Hon David Cunliffe: I seek leave to table a Treasury document that sets out a number of resolution options for the Government, none of which conveyed an estimate of liability anywhere near the liability that has actually come to pass.

Mr SPEAKER: What is the date of that document?

Hon David Cunliffe: It is undated.

Mr SPEAKER: Leave is sought to table an undated Treasury document. Is there any objection? There is objection.

Hon David Cunliffe: I seek leave to table a Treasury file note recounting a meeting that took place between Treasury and the Reserve Bank on 3 August 2010, which shows the debate on whether South Canterbury Finance should have been placed into statutory management.

Mr SPEAKER: Leave is sought to table that document. Is there any objection? There is no objection. Document, by leave, laid on the Table of the House.

Hon David Cunliffe: I seek leave to table a Treasury report dated 3 August 2010 that updates the Minister on proposals made that would have limited the Crown’s liability to debt—

Mr SPEAKER: Leave is sought to table that document. Is there any objection? There is objection.

Hon BILL ENGLISH: I raise a point of order, Mr Speaker. As I said in answer to the question, all of these documents are available on the Treasury and Reserve Bank websites. Generally, you have drawn a bit of a line on tabling between those things that are readily publicly available, such as press clippings or items from Government websites, and those that are not. We could go through the whole hundred if the member wanted to table them, but they are all available on the websites.

Mr SPEAKER: I think that is a pretty sensible point the member makes. I mean, I am not to know whether documents are available on departmental websites when members seek to table them, but those who are particularly interested in following issues clearly are. I will seek the member’s guidance: if those documents are from the Treasury website, then I think we have taken sufficient time tabling them.

Hon David Cunliffe: I raise a point of order, Mr Speaker. Under your ruling, earlier leave to table documents was put to the House; on some occasions members objected, and on some occasions they did not. I seek your advice: for those times where members did not object at the time, why would we be pursuing that—

Mr SPEAKER: I am on my feet. My advice is very simple: members should use their discretion when seeking to take the time of the House to table documents. Had the member tabled one or two documents from a website there may have been no objection to it, but since he has taken considerable time of the House to table a number of documents available on the Treasury website, members are clearly not happy. I must say that as Speaker I am not happy about that, either, and that is why we will not consider any more documents from the Treasury website today.

Hon David Cunliffe: I raise a point of order, Mr Speaker. If it were a question of timeliness, why did the Minister of Finance leap to his feet only after I had completed—

Mr SPEAKER: That is unnecessary. The House accepted in good faith the member seeking leave to table a number of documents. That went on for a considerable period of time, and I think he became unreasonable. If the documents were all unavailable to the public I would have no objection, but since they are readily available to the public I think we are taking unnecessary time in the House.

Schools, Building Projects—Hobsonville Point

8. ALLAN PEACHEY (National—Tāmaki) to the Minister of Education: What reports has she received regarding the building of schools at Hobsonville Point?

Hon ANNE TOLLEY (Minister of Education): I am pleased to say that I have received a number of reports. These have included reports on the need for new schools at Hobsonville Point and a detailed business case for public-private partnerships. This has led the Government to decide that the two new schools at Hobsonville Point will be designed, built, and maintained under a public-private partnership. The new primary and secondary schools at Hobsonville Point, northwest of Auckland, subject to satisfactory bids, will be the first New Zealand schools built under a public-private partnership. The new primary school is scheduled to open at the start of 2013, and the secondary school is due to open at the start of 2014.

Allan Peachey: What are the main benefits of building these schools under a public-private partnership arrangement?

Hon ANNE TOLLEY: Although the financial savings in this case are expected to be relatively small, overseas experience shows that the appropriate use of public-private partnerships does deliver a range of wider benefits, including new design, financing, and maintenance techniques. The private sector partner will be responsible for that financing, and for building the property and maintaining it for 25 years of school operations. That means that schools and boards can focus more on teaching and learning, without the added responsibility of managing the property.

Allan Peachey: How will the public-private partnership arrangements work?

Hon ANNE TOLLEY: Very well. The land and school will still be owned by the Government, of course, and the board of trustees will remain wholly in charge of the governance and the day-today running of the school. But the private sector partner will develop the buildings and carry the risk for problems like leaky buildings. A single establishment board of trustees has been appointed to oversee and assist the process in setting up the new schools, and the board will be briefed on public-private partnerships and will work closely with the Ministry of Education throughout the process.

Sue Moroney: How much corporate profit will the Minister allow the private partner to make out of the taxpayer-funded Hobsonville schools, which are being built in the very area where the Prime Minister cancelled the building of State houses because he did not want them in his electorate?

Hon ANNE TOLLEY: Probably about the same amount they will get out of building them in the first place.

Oil Prices—Infrastructure Investment and Consumer Behaviour

9. GARETH HUGHES (Green) to the Minister of Finance: Does he stand by his statement that “[e]very day New Zealanders are making decisions to change their behaviour based on changes in the oil price”; if so, how will those behaviour changes be reflected in Government infrastructure investment?

Hon BILL ENGLISH (Minister of Finance): Yes; what we do know is that in response to price increases, fuel technologies continue to evolve. Vehicles are becoming more fuel efficient, as we see in modern diesel engines, the development of hybrid engines, and also more and more talk of electric cars emerging. I think that if fuel prices continue to rise, we will see a faster uptake of these technologies, and we will continue to see more of what is happening in Auckland now, where Auckland Transport needs to put on more buses to cater for the upsurge in demand for public transport, not all of which is on trains. Most of it is actually on buses, which need to use the roads.

Gareth Hughes: What choices does a shift worker living in Flat Bush, Manukau have, with 91 octane petrol at $2.19 a litre, to avoid those high oil prices, when there is no public transport and that person cannot afford a new hybrid electric car?

Hon BILL ENGLISH: That is the opportunity that Auckland has, now that it has a unified council—to rethink its transport services and its public transport services, so it can meet the needs of the increasing number of Aucklanders who want to use public transport. That growth is most likely to be strongest in buses, and buses need roads that are not congested. If we can deliver an efficient highway network, I am sure we will see a stronger uptake of public transport, particularly if fuel prices keep rising.

Gareth Hughes: Does the Minister agree with Dr Stephen Rainbow from the Auckland Transport Agency, who said bus congestion is a problem in downtown Auckland right now, and “we are not going to resolve that until the central city rail loop is completed.”?

Hon BILL ENGLISH: Well, not necessarily. All sorts of benefits are claimed for the central business district rail loop. We are going through a considered and hard-headed process of analysis

with the city council, to make sure that the considerable expenditure Aucklanders will need to make in the loop will yield the benefits that are claimed.

Gareth Hughes: How will there be enough buses and trains to meet the huge and growing demand, when the Government has effectively capped transport funding for public transport services over the next decade?

Hon BILL ENGLISH: The figures I have seen show that this Government is spending more money on public transport than any Government has ever spent. We have spent quite a bit of time on reorganising the funding and governance arrangements so that there is clear accountability, full transparency in relation to the funding, and strong incentives for improved performance in public transport. So although we have a big roading investment, we see that as being complementary to our public transport policy, and public transport policy has never been in better shape.

Gareth Hughes: Given that petrol is now the most expensive it has ever been in our country’s history, what choices to people actually have, when buses and trains are overcrowded and the Government is spending $10 billion on more motorways that people cannot afford to drive on?

Hon BILL ENGLISH: I agree with the member that ideally our public transport system would be running with sufficient capacity to enable people to have reasonable choice about whether they use a private car or public transport. I imagine that Auckland Transport right now is rethinking how to expand capacity to cater for the increased demand. However, I do not think any increase in demand that I can imagine will have most people giving away the opportunity of having their own car, and the freedom and mobility that that gives them. With that in mind, the Government will continue to invest in a comprehensive roading network in Auckland.

Gareth Hughes: Given that we now have the most expensive petrol in New Zealand’s history, what choice does, say, a Gisborne-based logging company have to avoid high oil prices in truck transport and still get the logs to market, when the State-owned railway company is potentially closing the local railway line?

Hon BILL ENGLISH: The practicality is that even if the railway line was open, or even if it was carrying a lot of logs, companies would still need trucks to get the logs to the railway, and then to get them off the railway and into the port. The fact is that logging operators, whether they like it or not, will have to make the same choices as anyone else—that is, if they can find more fuelefficient trucks and make the logistics of shifting the logs more efficient, then they will be able to reduce their fuel consumption. I am quite sure most logging operators are thinking that through right now, precisely because fuel prices are so high, as the member said.

Gareth Hughes: In the upcoming Budget will the Government change its transport funding and switch to projects that reduce our reliance on expensive oil, and will it plan for more buses and trains that New Zealanders desperately want to take now, instead of wasting $10 billion on more motorways that they cannot even afford to drive on?

Hon BILL ENGLISH: I think the difference of opinion here is not so much about the effect of high fuel prices. High fuel prices are going to force people to make different choices about their transport, whether it is to use more efficient fossil-fuelled transport or public transport. The difference is that we do not see public transport and building roads as being mutually exclusive. We are doing both. We are doing both well. We can argue about whether the level of investment should be higher than it is, but I have to say the level of investment in both is higher than it has ever been in New Zealand, because we believe efficient infrastructure is important in terms of having a productive economy, more jobs, and higher incomes.

Gareth Hughes: I seek leave to table an excerpt from a Cabinet paper by the transport Minister Steven Joyce, which says he effectively capped the funding available for public transport services in 2009.

Mr SPEAKER: What is the date of this Cabinet paper?

Gareth Hughes: It is November 2010.

Mr SPEAKER: Leave is sought to table that document from a Cabinet paper. Is there any objection? There is no objection. Document, by leave, laid on the Table of the House.

Pike River Mine Tragedy—Royal Commission of Inquiry

10. Hon DAMIEN O’CONNOR (Labour) to the Prime Minister: Does he stand by his statement on the Pike River royal commission of inquiry that “we are taking this inquiry absolutely seriously, we are determined to get answers for those families, and we will leave no stone unturned”?

Rt Hon JOHN KEY (Prime Minister): Yes.

Hon Damien O’Connor: Will he be satisfied that he has fulfilled his promise that “we will leave no stone unturned” if the company that planned, built, and operated the mine is unable to fully participate in the royal commission of inquiry; if not, what action will he take to ensure the company can participate?

Rt Hon JOHN KEY: There are a couple of points. Firstly, the company does not need lawyers to fully participate in the royal commission of inquiry—it is not an adversarial court, nor is anyone actually on trial. In relation to the company and the formal request it made yesterday to fund legal representation, the Government is unlikely to respond positively towards that request, because it is our view that the company already has resources to pay for its own legal representation. On the best information we have, it has about $5 million left in the bank.

Hon Damien O’Connor: Does the Prime Minister seriously consider that the statement by the receivers and the company that they do not have the ability to fund and finance the proper information to be delivered is a reasonable excuse; and why does he not do something about it now?

Rt Hon JOHN KEY: It is not an excuse; it is a statement of fact that a lawyer is not required to participate in the royal commission of inquiry. It is also true in our view, unless proven otherwise, that the company has about $5 million in resources.

Benefits and Superannuation—1 April Changes

11. CHESTER BORROWS (National—Whanganui) to the Minister for Social Development

and Employment: How have the 1 April changes provided greater certainty to those receiving benefits and New Zealand Superannuation?

Hon PAULA BENNETT (Minister for Social Development and Employment): This Government has locked the annual general adjustment into legislation to give those who rely on benefits and superannuation real certainty. Last week all main benefits increased by 3.75 percent, to reflect the increases in the CPI.

Chester Borrows: Has there been any increase to assistance for people caring for children?

Hon PAULA BENNETT: Yes, the annual increase was to foster care allowances as well and that was also locked into legislation. Assistance has also increased for the 11,500 people caring for children and receiving the unsupported child benefit.

Hon Annette King: If older New Zealanders are feeling more certain about their future after the 1 April change, why is Grey Power in its latest magazine saying: “The Government is more interested in its big dividends from power companies than the health and welfare of its citizens, many who cannot afford to turn heaters on in the winter. There are more and more people in poverty.”?

Hon PAULA BENNETT: When it comes to superannuitants this Government is very proud of the differences we have made to money in their pockets. Since October 2008 the married rate of New Zealand superannuation has increased from $439.80 per person a fortnight to $522.96—an increase of $83.16, or 18 percent.

Hon Annette King: I would like to table the Grey Power newsletter, which is not available to everyone, in order that people might like to see it—

Mr SPEAKER: Order!

Hon Dr Nick Smith: Are you a qualified member?

Hon Annette King: You are though.

Mr SPEAKER: I say both to the Hon Dr Nick Smith and to the Hon Annette King that I was on my feet. I accept, though, that the first fault was with the Hon Dr Nick Smith. We do not need to table newsletters that are commonly available for people.

Earthquake, Christchurch—Adequacy of Actions and Areas of Concern

12. JACINDA ARDERN (Labour) to the Prime Minister: Does he stand by all his statements made during question No. 6 on 15 March 2011?

Rt Hon JOHN KEY (Prime Minister): Yes.

Jacinda Ardern: What advice has he and Cabinet received on how many apprentices and industry trainees are required to meet New Zealand’s existing and projected skills shortage, including the demands of the leaking building situation and the Christchurch rebuild?

Rt Hon JOHN KEY: I do not have that detail to hand, and I suggest to the member that she puts down a written question to the relevant Ministers. But I can say that the Government has been doing a lot of work with both the Canterbury Development Corporation, the Industry Training Organisation, polytechs, and other relevant organisations to map the upcoming skills needed for the Canterbury region. One thing we can say is that the picture is still developing but so far it looks like the residential rebuild alone will require up to 12,500 full-time workers.

Jacinda Ardern: Why has the Government not required that bids to rebuild up to 10,000 homes in Christchurch include a commitment to take on apprentices?

Rt Hon JOHN KEY: Firstly, those bids have not been taken yet. Many people do not even know whether their own home will have to be rebuilt or whether a new home will be built. We do not have those conditions on new homes that are built in the rest of the country.

Jacinda Ardern: I raise a point of order, Mr Speaker. My question was specific to the tender requirements the Government has already issued and asked why they did not include—

Mr SPEAKER: The member should reflect on the question asked. She asked the Prime Minister why the Government was doing certain things and the Prime Minister gave an explanation. It might not be the answer that member actually wanted, but it was still a perfectly reasonable answer to the question.

Hon Trevor Mallard: I raise a point of order, Mr Speaker. I know we are not meant to litigate answers but this is black and white. It is about a tender that has been issued, and the Prime Minister said it had not been issued.

Mr SPEAKER: The Speaker is not in a position to know whether an answer a Minister has given is correct. That is not the issue. The issue is whether the question was answered. More supplementary questions are available for the member to pursue it. The member has a couple of further supplementary questions to pursue the issue, and that is the way it should be done—not way of point of order.

Rt Hon JOHN KEY: My apologies. I was confused by the question. I thought the member was asking about the 10,000 homes we thought might need to be demolished, not the temporary homes. The answer is that I do not have those contract details to hand. I am not sure of the answer, but I will look into it for the member.

Jacinda Ardern: Does he agree with Registered Master Builders Federation of New Zealand chief executive, Warwick Quinn, who said there would not be enough builders in the coming years to meet demand and that “We may have to look at bringing tradesmen over from China, Philippines or Malaysia”?

Rt Hon JOHN KEY: We have had an indication that there is likely to be a shortage in occupations such as concreters, carpenters, and joiners. It is far too early to know whether that statement is right. The Government is working on a number of initiatives in terms of training new people. I also know that there are a lot of full-time workers in the Canterbury region who could actually work more hours; they have been working reduced hours. We know that there are other workers from around New Zealand. So I think it is a bit too early to know the answer to that statement.


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