Consumer Protection (Definitions ofGoods and Services) Bill

This title is completely inadequate for this bill.

Government Members: Ha, ha!

GERRY BROWNLEE: Labour members immediately start thinking: “My gosh, the member is on to something!”. We see them—the few there are here—suddenly sticking their heads up, and thinking: “Heck, maybe our Minister has made a mistake.” I have to say the Minister of Consumer of Affairs has made a terrible mistake in suggesting that this is a consumer protection bill. It is not about consumer protection. This bill seriously disadvantages consumers in New Zealand by containing a number of provisions that define certain goods and services as being covered by the relevant principal Act. It should be called the “Consumer Opportunity Denied Bill”. That would be a far better way to describe what is inside it. Over the next few hours, as we discuss the various parts and clauses, it will become evident to anyone who wants to listen that this bill is not good for New Zealanders.

The first point I want to make is about computer software being included as a good. I think that is the right way to go. When consumers buy software, of course they should be able to expect that it will work. Of course they should be able to expect that that software will do the job that it is claimed to do. But in the same bill we see that telecommunications of any form are removed. I do not know how much members on the other side of the Chamber know about modern technology, but let me make it very clear to them that unless there is good telecommunications access, a large amount of the software that those consumers buy will be absolutely useless because it will not work without the telecommunication connection. So the poor old software manufacturers are being beaten about the head and told they have to meet the onerous requirements being put upon them by this bill, but the people who actually deliver their service are not included.

Similarly, I note that water is now included in the bill as a good.

John Carter: Water?

GERRY BROWNLEE: Water. A lot of people will say that that is a good idea, and that of course water that is delivered to people’s homes and residential areas should be of a particular standard. But I come from Christchurch, and we have some of the best water in the world. Guess what? Our water will not comply with the requirements of this bill.

John Carter: Why not?

GERRY BROWNLEE: Because we do not have all sorts of purification chemicals tipped into it. We do not turn on taps in Christchurch and smell chorine. This bill will require that the Christchurch City Council tip buckets of chlorine into our drinking water in order that it comply with the water standards—that it get to the so-called A level—and therefore comply with the bill. I want to know whether Tim Barnett is going to vote for the Consumer Protection (Definitions of Goods and Services) Bill, which, in this particular instance, is a clear attack upon the water that we in Christchurch drink daily, weekly, or as often as we can, whenever we are there. He and I know—

Clayton Cosgrove: It’s not often for that member.

GERRY BROWNLEE: Clayton Cosgrove also knows—no, he probably does not—that when we go to other parts of the country and taste the water, which probably has an A standard, we find that it is full of chemicals, full of all sorts of junk that has been tipped into it. Because in Christchurch we have nothing other than pure water that comes straight out of our beautifully clean aquifers—

The CHAIRPERSON (H V Ross Robertson): This is a narrow debate.

GERRY BROWNLEE: —our water will not comply with the Consumer Protection (Definitions of Goods and Services) Bill. So I cannot vote for it. This bill also includes a whole lot of electricity services.

The National Party in Opposition will be strongly opposing not only the title of this bill but the content. During the Committee stage, when we hope the Minister of Consumer Affairs will take a call, we are going to bring to the attention of the Committee a number of examples of the increased cost to consumers that this bill will provide. This bill will increase the cost of services to all New Zealanders, and that is why it would be better described as the “Consumer Protection (Increase in Costs) Bill”. That is exactly what this bill is going to do.

During the debate on the other parts of this bill, we are going to outline the cost to various local authorities in New Zealand of the foolish decision of this Government to include water and waste water as goods under the definitions of goods and services in the various pieces of legislation involved. The consequence of that is to say to the local authorities that supply water to New Zealand consumers that it must be of merchantable quality, and for it to be of such a quality will require a number of local authorities—

David Benson-Pope: What authorities?

Hon TONY RYALL: —including that member’s local authority—to lift the standard of their water, at a considerable cost.

The CHAIRPERSON (H V Ross Robertson): Order!

Hon TONY RYALL: I am prepared to table a document, which relates to the title of this bill, that shows that local government bodies may be faced with a bill of $400 million to lift the level of their water supply so that it meets what is required in this bill. I bet Judith Tizard did not tell the Labour caucus that when she was briefing it on this bill.

The CHAIRPERSON (H V Ross Robertson): We are debating the title.

Hon TONY RYALL: This bill will mean extra costs of $400 million over the next 5 years, and that is why this bill should be called the “Consumer Protection (Rark up the Rates) Bill”. The sum of $400 million—that is what local government says—will be spent on upgrading water supplies in the next 5 years, in order to meet the standards required by this bill.

Georgina Beyer: That’s right!

Hon TONY RYALL: Georgina Beyer, from the Wairarapa, is absolutely right. The sum of $400 million will be spent over the next 4 years, and that will rark up the rates.

This title does not reflect what is being proposed in this bill. This bill is about so much more than just adding items to the definitions of goods and services; it is all about gold-plating electricity, gold-plating water, and gold-plating gas, and consumers will pay the cost. I have not met a consumer who has raised with me as an issue the quality of the gas he or she receives. I have not met a consumer who has raised with me as an issue the fact that he or she wants to pay a lot more to get a higher quality of water. I have met very few consumers who are in favour of paying higher electricity prices, but that is what this bill will require.

It is wrong for the Government to bring in a bill that does not correctly describe what is being proposed. The bill is complex, and the Opposition requires the opportunity to take multiple calls in order to seek comment from the Minister, because there are many, many New Zealanders who want to know what is going on. Later, I will table documents that show that local authorities that are found to be in breach of the guarantees of acceptable water quality standards may, even though they have told their consumers about the problems with their standards, still be found to be in breach of the quality standards, and subject to considerable liability under these Acts. As a result, they will be forced to spend substantial amounts of ratepayers’ money in order to meet drinking water standards. The Government has not thought through the consequences of this bill. I will also table documents from a gas company in a Labour member’s electorate that argue lucidly why the extension of this bill to gas is unnecessary, has not been thought through, and will cost consumers.

The CHAIRPERSON (H V Ross Robertson): Before I call the next member, I point out that I have tried to indicate to members the narrowness of the debate on the title. I draw to members’ attention Speaker’s ruling 90/1, which states: “... when a bill has been considered by a select committee the debate on the title clause in committee is limited strictly to the elements of that clause and any amendments proposed to it.” That ruling was made by Mr Speaker Gray, and also by Chairman Braybrooke. I am going to watch that very carefully.

Mr Chairman, if you want to keep within the Standing Orders, listen to this for the next 5 minutes. Here we go! We are debating the Consumer Protection (Definitions of Goods and Services) Bill. Is that OK so far? Very good—I have had the sign-off from the Chairman, so I must be right.

Hon Judith Tizard: You have used 15 seconds.

JOHN CARTER: That is OK; it is not a problem. I have had a read of this bill, and I worry about the way in which it is titled. In fact, if we think about the words “consumer protection”—

Stephen Franks: What about your mother?

JOHN CARTER: No, we will not worry about my mother at the moment. We will worry about protecting my mother a little later on in the debate.

The problem with this bill is that, in itself, it cannot actually work. It cannot protect the consumer. Let me tell members why. This bill talks, for example, about the fact that one of the things the Government wants to do—if members look at the commentary—is class electricity as a good. So the intent of the bill is to ensure that consumers are protected and to make sure that they get the supply they need. So far, so good—that is the purpose of the bill. The problem is that that means if one is to protect consumers to make sure they get the supply, someone has to make the supply. If that provider of the service does not make the supply—if there is a default—the provider then is liable because it has not supplied the service. That is what the bill says. It is called a “consumer protection” bill.

I put it to the Committee that, at the end of the day, someone will be fined. The authority will say to the electricity supplier: “You haven’t supplied the service to John Carter. He needs the service. You’ve failed; you get fined.” I ask members who will pay. The authority will write a cheque out for $100,000, or whatever it might be—I think we just heard in the Fair Trading Amendment Bill (No 3) debate an amount of $200,000—but who will pay? John Carter will ultimately pay, because John Carter will have that amount spread on to his bill and I, myself, will pay for a service I did not receive.

Now I ask the Committee: how can that be called protection? It is not protection. As a consumer of power, I do not feel that under this bill I will be protected, at all. Of course I want the supply, but I do not want it to cost me any more. I do not want some legislation in this Committee, consumer protection legislation, that would add a cost to my bill just because the lights went out at some stage when someone said I had to have them on for 24 hours, and, therefore, the supply authority was fined under the Fair Trading Act. How can that be protection? The authority gets fined—and I pay! I do not think that that is that funny. It is like saying to the neighbour: “You shoot down to the nearest shop and have a good time, and I’ll pay.” I do not think that that is very much of a protection. [Interruption] Well, I was not going to quite go there, but one can jump to the conclusion. What sort of protection is that? Here I am without a condom and I send a neighbour down the street. I mean, that is not much protection. I tell members to follow the logic. This cannot be a “consumer protection” bill. It cannot be.

By its very principle the legislation might intend to protect the supply. In the case of water it might intend to protect the quality of the supply. It might well intend to protect the discharge of waste water, but, ultimately, it does not protect me from anything at all. I say to the Committee that the Minister has got the title of this bill wrong. If one wanted to call it the “Consumer Continuity of Supply Bill” one might well have a valid argument. But if the Government calls this measure “protection”, the bill should be called the “Consumer Protection of Goods Bill”—or of supply, or whatever—not the Consumer Protection (Definition of Goods and Services) Bill. To suggest that the consumer is being protected, which is what this bill suggests, is not right. As a consequence, I want to move an amendment to omit the words after “Protection”, and substitute the words “(Extension of Provisions) Bill”, or omit the words after “Consumer”, and substitute the words “(Miscellaneous Consumer Law Amendment) Bill”, or omit the words after “Consumer”, and substitute the words “(Extension of Definition of Goods and Services) Bill”, because there is no consumer protection in this legislation at all. That is the problem. That is when we run into trouble. We do not have a proper definition of the bill, and it needs to be defined.

Mr Chairman, I will maintain the tightness you asked for. This bill’s title is seriously deceptive. As one goes through each provision, one finds it has exactly the effect that Mr Carter for the National Party just contended, and ACT New Zealand opposes slogan law. This bill talks of protection without doing anything to deal with the matters raised in the first reading debate, in the second reading debate, and, obviously, by the Commerce Committee and some of the submitters to that select committee.

If we look at the select committee’s report, we see that it acknowledges the submissions that concern gold-plating, mentioned by Mr Tony Ryall from National. It simply states blandly: “We do not consider the guarantee of acceptable quality amounts to a guarantee of ‘gold plated’ supply.” That goes to the core of whether this is an appropriate title for this bill, because it states that the bill is for consumer protection. In fact, the outcome has to be the prevention of consumers choosing what standard of service they want or what price they pay. If we take the example of electricity supply, the supplier under this bill will be required to deliver a standard of service that will satisfy the hindsight judgment of any disappointed consumer claiming to be reasonable. We do not know what that level of reasonability is.

Manufacturers will be responsible, according to the select committee, for failures that result from the acts of third parties or for events beyond human control. What was the classification of the near brownout conditions we had a month ago? Were they beyond human control, or were they a product of the Government deciding to let one of its generators not generate over summer, and wait for 600,000 tonnes of Indonesian coal to arrive? Were they the product of factors outside human control, when we know that if coalmines had been allowed to open—instead of being blocked by the Resource Management Act or having the Hon Chris Carter and his Department of Conservation stop access—there could have been more coal, and there could have been more generation capacity? Is that within human control or outside human control? Certainly our near electricity shortage was very much within political control, and, ultimately, when we imported all those shameful thousands of tonnes of Indonesian coal and started moving them up through the country from Tauranga, it was quite plain that it was within human control to increase the output of power stations south of Auckland.

So what is it that suppliers will have to consider when they look at this provision? Is a drought a matter that they will be liable for, or is a drought a matter that the courts will hold is within human control? Why is it not left to consumers, as it is now, to contract with the supplier, and for the supplier to set a price based on the effect that poor service would have on its reputation? Here is a Government that beefed up its Commerce Act as “consumer protection”. David Cunliffe even stuck a bizarre clause about consumer protection into the Commerce Act, which no one can understand, and then, the Government having passed it, it has suddenly decided that that will not be enough: “We know that was just a slogan; we know that was nonsense so we will stick in another piece of nonsense slogan. We will call a bill the Consumer Protection (Definitions of Goods and Services) Bill, and we will persuade consumers that by passing laws we are protecting them.”

There are no free lunches, and this bill shows a classic case of what happens when politicians decide not to protect consumers, but to befuddle them. This bill should have been called the “Consumer Deception Bill”. Consumer deception is what happens when people are told that a one-size-fits-all formula will be put across the legislation, and then both consumers and producers are handed over to the mercies of lawyers and their hindsight judgment. When lawyers are the ones who decide what consumers ought to have wanted, then, in hindsight, no one wins. The title we have here, in fact—because the “Consumer Deception Bill” is possibly slightly wrong—should be the “Consumer Confusion Bill”.

I was thinking about the title, “Consumer Increased Costs Bill”, but I concur with my colleague Stephen Franks that “Consumer Deception Bill” is a very appropriate title for this bill. I recall one of Stephen Franks’ comments in an earlier speech he made to the Parliament when he called the legislation the “Law of Unintended Consequences”. I think that is quite appropriate. So, in referring to this bill as the “Consumer Deception Bill”, I bring members’ attention to the submission from Local Government New Zealand, which asks for the references to water and waste water to be removed from the bill.

It did that specifically for a number of reasons, and I want to draw to members’ attention some of those reasons. We will look first at section 11 of the Consumer Guarantees Act, which is about “Guarantee as to price”. Local Government New Zealand wants to bring to our attention the fact that the setting of councils’ water standards, prices, etc., is determined by their communities of interest. That is particularly important for rural suppliers, because often the rural supply is for their stock as well as for domestic purposes and they accept a standard that is below the norm. If someone decides that he or she does not like that standard and wants to make a claim against a council, what is the council’s position? It concerns one consumer that the council does not deal with on an individual basis. Councils deal with consumers as a whole. The decision with regard to water supply standards for any given area is based on the majority of that community making that decision. Therefore, the contract is entered into by a majority of the community, and not by an individual consumer. The local government authority questioned how that would be dealt with, and felt that the provisions about water and waste water had a cost. If a consumer can challenge a local authority based on that supply provision under section 11, there is a cost to the community if the community is then required to pay for it—if the council is deemed to be liable. There is an added cost because the local authority will then have to expend inordinate amounts of money to bring that water supply up to standard. So those are all costs that come about from one consumer’s ability to make a claim against a local authority.

The CHAIRPERSON (H V Ross Robertson): This is a very narrow debate.

SANDRA GOUDIE: OK. I turn to some of the other aspects that Local Government New Zealand raised. Of course, my learned colleague has already mentioned the $400 million bill that Local Government New Zealand has recognised as being a part of this cost. Those are all costs that will go on to consumers as a consequence of this bill.

The CHAIRPERSON (H V Ross Robertson): The member must talk about the elements of the clause.

SANDRA GOUDIE: This is the “Consumer Deception Bill” because consumers are not aware of the costs that will be imposed on them through local authorities, as a by-product of this bill. It is a deception. It is a deception on all those consumers. It will be a by-product of this bill, but they are unaware of it. They are unaware of all its inherent costs, which come through because there is uncertainty about how those matters raised by Local Government New Zealand will be dealt with. Section 11 is a prime example of that in relation to price.

Some other matters are also of concern. One is the fitness for a particular purpose contained in sections 6 and 7, particularly section 7. Local authorities are to be subjected to all of those provisions and will have to meet all those standards for one consumer, when the majority of the consumers have made the decision. It comes back to the “Consumer Deception Bill” that Stephen Franks was talking about. What happens if the local authority is supplying water to a particular consumer, there is a force majeure—weather conditions cause the water to be of a standard below that guaranteed—and one consumer holds the rest of the consumers to ransom? It is a deception.

I move, That the question be now put.

The CHAIRPERSON (H V Ross Robertson): In the faint hope that someone will speak to the title, I will give the call to the honourable member, John Key.

I raise a point of order, Mr Chairperson. I took from that an inference that no member had yet spoken to the title.

The CHAIRPERSON (H V Ross Robertson): No, that is not a point of order, and that is not the insinuation that was meant.

As the Chairperson quite correctly pointed out, I rise to take part in the title debate on the Consumer Protection (Definitions of Goods and Services) Bill. If I reflect on that title, I can see quite a bit of merit in it. I do not like to agree with the Government and praise it, and I certainly would not do that in normal circumstances, but I can see some logic in the title.

Hon Member : The member has been lobbied.

JOHN KEY: I have been lobbied from time to time. I can certainly see that there is an attempt in this bill to make the definitions of goods and services clearer, and that some quite interesting goods will be defined as a result of this bill.

A lot of discussion has taken place tonight about electricity. Electricity has been defined as a good, but equally defined under the legislation, with its wonderful title, are gas, telecommunication services, water, and also—most importantly indeed—computer software. Far be it from me to say that the definition of goods and services is not at least discussed in the bill, and it is in some way fitting that those words should be in the title. Like other speakers tonight, where I would express some concern about the title is in respect of the use of the words “consumer protection”. One has to ask oneself whether consumers are truly being protected. There is certainly an attempt to protect them through continuity of supply, although, as we have heard from various speakers, it is very unlikely that that would take place. [Interruption] The Labour senior whip needs protection, and I can understand that. However, I am not sure that he is defined as either a good or a service. I am sure he needs protection, but let me not detract from this wonderful dissertation.

Hon Judith Tizard: He provides great services of very high quality.

JOHN KEY: Does he? I was not aware that he provided services of great quality. I do not know whether consumers are protected by him, but I will take it that they are. Consumer protection conjures up in my mind the concept of someone with a shield, a weapon—some sort of a white knight riding out into the sunset to protect the poor and lonely consumers as they huddle around the fires that are not going, the computer software that has blown up in their faces, the water that is undrinkable, or the gas supply that has been turned off. Will that happen as a result of this bill? I think not. At the end of the day, no one can absolutely guarantee that the lights will be on. The lights are on in the Labour Party, but is anybody home? That is the obvious question, but the answer is not obvious. They have some wonderful members who from time to time make a stunning contribution on the odd bill, but, generally speaking, the lights are on but no one is home.

That has to be very much the same situation under the Consumer Protection (Definitions of Goods and Services) Bill. Where is the discussion about insurance companies and the role they could have played if they had the opportunity to protect consumers? That is what insurance companies do; they offer protection. They do not offer the faint hope that the lights will never go out, that computer software will never go down, that the gas will not work, or that the water will not be of wonderful quality. Insurance companies are there to protect consumers when things go wrong. For the poor consumer who is at the moment huddled around his or her computer, looking to log on; the poor consumer who has turned on the gas fire but it is not working; the poor consumer who is wanting to turn on his or her stove as we speak, the Consumer Protection (Definitions of Goods and Services) Bill is not providing them with that protection, because it cannot if the power is not on. Consumers must therefore look to an alternative source.

I am not sure that this bill does absolute justice to what could take place. I can see that many consumers at the moment are feeling a sense of security, but they have been wronged by this legislation. They will not have continuity of electricity supply, or the quality of water that they require. There is nothing nicer than going home on a cold night and having a glass of water.

I move, That the question be now put.