Wool Industry Restructuring Bill

I move, That the Wool Industry Restructuring Bill be now read a first time. At the appropriate time I intend to move that the bill be referred to the Primary Production Committee for consideration, and that the committee present its final report on it before 16 June 2003, and that the committee have the authority to meet at any time when the House is sitting, except during oral questions, and 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, and outside the Wellington region, on a day when the House is sitting, despite Standing Orders 193, 195(a) and 196(1)(b) and (c). Having said that, I am confident that under the excellent chairmanship of Mr David Carter, and given the wide support for this bill, it probably will not prove necessary to use most of those powers to get the bill considered by 16 June. I do not think there will be many submissions in opposition to this bill.

The bill is the culmination of many years of debate amongst woolgrowers on the means to improve net returns from the sale of their wool. This debate has covered the structure of the New Zealand wool industry, and those activities that should or should not be funded by growers by way of a compulsory levy on wool. The bill is also the outcome of a number of reviews of the industry, of which the one by McKinsey and Co. in 1999-2000 is the latest. McKinsey was commissioned by the Wool Board, with the support of growers, to review the performance of the wool industry, and to make recommendations on how to improve the profitability of wool to growers. The McKinsey report was presented in June 2000, and among its recommendations were the dissolution of the board and the disbursement of its assets. McKinsey also recommended the establishment of separate new commercial and industry-good structures.

Separation of commercial activities from industry-good activities, such as research and development, and technology transfer, should facilitate commercial activities being profit focused and subject to commercial realities. Growers would also be able to decide what industry-good activities they are prepared to fund through a compulsory levy.

In August 2000 a referendum was held in which growers overwhelmingly endorsed by over 90 percent the McKinsey recommendations. Following that, the board, with the assistance of an implementation project team, refined the McKinsey proposals and developed the detail necessary for their implementation. This process resulted in the establishment of the grower-owned commercial companies, Wool Equities Ltd and Merino Grower Investments Ltd, and in the establishment of the industry-good body SheepCo. These three organisations are referred to in the bill.

There was another grower referendum in May last year on detailed proposals. In this referendum, again, the vast majority of growers—over 90 percent of participants—a supported the winding up of the Wool Board and the apportionment of its assets to growers on the basis of sheep numbers. A significant majority of growers who voted in the referendum favoured restrictions for the first 2 years, on the tradability of growers’ shares in Wool Equities Ltd and Merino Grower Investments Ltd. The bill is based on the reform proposals put to growers for the referendum, and reflects the views of grower participants. It also recognises the contribution that a profitable and vibrant wool industry can make to growth in the New Zealand economy.

The bill provides for the dissolution of the board and the allocation of its assets to growers. The board will be converted from a statutory body to a company incorporated under the Companies Act. This company is to be called the Wool Board Disestablishment Company. This company will take over the assets and liabilities of the board and will be responsible for dealing with the board’s residual liabilities and commitments, as well as the allocation to growers of the board’s assets. During the transitional period, ending no later than 30 June 2004, the disestablishment company will collect a levy on wool for industry-good activities. If a levy on wool under the Commodity Levies Act does not come into force by 1 July 2004, wool will cease to be levied from that time to finance those activities.

Provisions in the bill for the transitional levy are similar to those of the Wool Board, but there are a couple of notable differences. The transitional levy will be able to be spent on a smaller range of activities than the current Wool Board levy, and the disestablishment company will have to consult SheepCo on how the levy is to be spent. Further, the basis and rate of the transitional levy will be the same as that of the Wool Board’s levy at the time the bill comes into force.

The bill requires the board to prepare a restructuring plan. The plan will specify the restructuring day on which the board will be converted to the disestablishment company. The plan will specify that a portion of the board’s assets will be allocated to Wool Equities Ltd and Merino Grower Investments Ltd. The restructuring plan will also provide for payments to be made to SheepCo to assist it to seek a levy under the Commodity Levies Act. The plan will include further plans for the allocation of shares to growers in the disestablishment company, in Wool Equities Ltd, and in Merino Grower Investments Ltd. During the period specified in the share allocation plan growers will have the opportunity to cash in their redeemable preference shares, or to convert them to ordinary shares in Wool Equities Ltd or Merino Grower Investments Ltd, depending whether the grower filed for merino or other sheep. The Minister of Agriculture must approve the restructuring planned, including the plans for share allocation, before its implementation can commence.

The Wool Board has already started, through its grower registration scheme, identifying those growers eligible to receive shares, and collecting other information such as the numbers of merino and other sheep farmed by those growers, the purpose of the preparation, and implementation of the share allocation plans. As far as possible, normal tax laws will apply for the allocation of shares to growers, and they will be in accord with those employed for previous producer board reforms—in other words, to leave basically a neutral position post-reform, compared with the pre-reform position.

It is the Wool Board’s desire that the bill be enacted as soon as possible, to enable the finalisation of approval of the restructuring plan to take place in June, and the restructuring day to be 1 July this year. I commend the bill to the House.

The National Party supports and welcomes this bill. After 4 long years this Government is finally prepared to do something that will help New Zealand farmers. Producer board deregulation has been a long, slow, and often tortuous process. Tonight I want to acknowledge the work done by my former colleague the Hon John Luxton, who quite courageously started this process in 1997.

For the sheep farmers of New Zealand this has not been an easy process. Those charged with leading the debate about how we best restructure and present our wool industry have been faced with two quite significant challenges, firstly by the vocal statements of various sectors, which, although small in number, were very inclined to push their own interests at the expense of the industry as a whole. Secondly, and more important, most farmers are notoriously apathetic when it comes to getting themselves involved in issues surrounding the governance of their own industry. I hasten to add that that is understandable for people who have been out working from daylight to dusk to then come in and have to wade through piles of mail and rural papers so that they can at least try to get themselves up to speed with this issue.

Having said that, and as noted by the Minister in his introduction, I point out that the sheep farmers of New Zealand have voted overwhelmingly for the dissolution of the New Zealand Wool Board. As an industry, sheep farmers have collectively and loudly said that it is time to move forward. Of those eligible to vote, 96.9 percent—[Interruption]. I tell Ian Ewen-Street that it is pretty hard to know the opinion of those people who do not vote, and that is the very point I am making. However, 96.9 percent of those who did vote said they are in favour of winding up the current system.

💬 Hon Dr Michael Cullen: Pretty good.

Yes, as Dr Cullen interjects, that is a fairly good mandate—one that members of this House can appreciate. The bill is only a step in the process that is now being initiated. This legislation will ultimately see the establishment of a completely different governance system. To fulfil the commercial activities of Wools of New Zealand, shares will be available to farmers in a company to be known as Wool Equities Ltd, or for merino producers, in a company to be named Merino Grower Investments Ltd. Further, rights to redeemable preference shares will be available. It will be interesting to see the commitment farmers show to the future of their industry in being prepared to accept that opportunity. Having said that, it will be incumbent on the prospectus and on the subsequent governance and management of Wool Equities Ltd to make sure that the company lives up to the expectation being created around it so that it maintains grower support.

I have noted the guillotine that has been given to the Primary Production Committee tonight. However, as chair of that committee, I give my commitment to the House that I will do everything I can to meet the deadline to get this legislation back into the House by 16 June, because I know that sheep farmers are waiting for it. I must say that I have been disappointed that this legislation has not been advanced earlier. It has sat on the Order Paper since last year. I know that will surprise members, but that is how long it has been on the Order Paper, and it should have been dealt with much earlier. We have approximately 12 weeks to call for submissions, to hear those submissions, and to tidy up this legislation. However, I think it is in our interests to all cooperate to do so.

I mentioned earlier that this legislation was a step towards further changes. It is ironic that in my own patch of Banks Peninsula, at Little River, a meeting is occurring as we are speaking tonight between SheepCo, very ably chaired by Mike Petersen, and Meat New Zealand, under the auspices of Geoff Grant. At that meeting they will be presenting what will probably become the next step in this process, which is the formation of a body that combines those producing wool with those producing sheepmeats and other meats from New Zealand. That is a very interesting development. I mentioned the meeting at Little River, and I want to take the opportunity of noting the work done in a rather different but very constructive way by Mr Steve Edge, who is a local identity on Banks Peninsula. He has fought with the system for some time and he can be justly proud of the progress that has been made. He is now using his skills constructively on the board of SheepCo, and I believe he is making a very vital contribution in that regard.

The other point I make in closing is that Wools of New Zealand has started a registration process whereby those farmers who are eligible will have to finish their day’s work and tackle an envelope that looks large, chunky, and complicated. If farmers bother to take the time to fill it in, then they will be eligible for shares in either of the two companies I mentioned earlier. I take this opportunity to implore farmers to do that. It will be of no use at all to come before the select committee and say that they did not know about the process and that they did not meet the deadline, which I think I am correct in saying is 2 May. That process does require farmers to make sure they register their eligibility for the distribution of the assets of the old Wool Board. Farmers must take an interest if they want to be involved.

We are dealing with a very significant industry in New Zealand. Over many generations of New Zealand farmers, the Wool Board has served sheep farmers well. It is fair to say that in recent years there have been question marks over the performance and, more important, the relevance of the Wool Board. I do not think that anybody associated with the governance of the current structures should be criticised. I think that those structures have outgrown where we are today. We are dealing with an industry in which the product usage of wool is far more immense than perhaps many farmers of this country realise. I hope that as we vote now on the process of disestablishing the Wool Board and establish Wool Equities Ltd, Merino Grower Investments Ltd, and, under their auspices, companies like Covita and Ovita, farmers will realise that there is a significantly greater potential than just the production of fibre.

I finish by imploring those farmers to open up that big envelope that has sat on their desks for weeks to check whether they are eligible for this process and for the shares in the assets that will become available. They should complete the form quickly and forward it back to Wools of New Zealand so that it can check their eligibility. I am sure they will find that the hour taken to fill in such a registration form is worthwhile.

This bill is the ultimate response to the decision made by growers at the Wool Board’s 1990 annual general meeting to employ a consultant to undertake an independent review of the sector, with the aim of exploring options to increase the profit potential and the autonomy of growers. As a consequence, the McKinsey report recommended that the Wool Board be dissolved and that the commercial and the industry-good activities—for example, research and development, and on-farm training—be the responsibility of separate entities.

Growers endorsed those recommendations by 91 percent in an August 2000 referendum. Since then new commercial and industry-good structures have emerged to supersede the current New Zealand Wool Board, making it for the most part unnecessary, save for its levying and accountability functions. Following consultation on the precise nature of proposals and after some delay, a second referendum resulted in 97 percent support for the board’s dissolution. The turn-out was only 35.5 percent of all growers, but is comparable with that in other referenda conducted in the primary sector.

United Future supports the first reading of this bill, because there has been a need to address the situation for some time. Woolgrowers have been waiting for some time to rid themselves of the Wool Board. The recommendations of the McKinsey report to dissolve the board and to divide the responsibility for commercial and industry-good activities into separate entities were endorsed by the growers, not by one referenda but by two, as I said previously. United Future will look for the final evidence of growers’ support for those proposals and for the proposals in this bill to come through in the submissions to the select committee from the growers themselves.

The wool industry has been riven by conflict for some time. Perhaps the only unifying force has been a deep-seated lack of confidence in the Wool Board. There has been concern in the wool industry for several years about the industry’s financial performance, and the fact that on behalf of growers the Wool Board spent millions of dollars of growers’ levies on promoting wool, to little or no effect. With that in mind there is some concern about the board’s role in managing its own dissolution. The unpopularity of the board means that any proposal that is put up for the board to disband itself will be popular. It is our job as MPs, therefore, to ensure that the details of the transition are carefully scrutinised.

Even in the final stages of its life there continue to be concerns about the Wool Board’s finances. The board’s reserves were depleted from $160 million in 2000 to $109.1 million in 2001, and $79.5 million in 2002, and are forecast to drop to $67.3 million by the time the board dissolves. Of that, growers will receive only about $35 million in the form of redeemable preference shares in Wool Equities, with the rest of the money going towards setting up the two commercial companies and the wind-up costs of the board. Divided out amongst the 16,000 growers, that equates to an average payout of just over $2,000. It hardly constitutes a windfall for growers, and ultimately they will meet the wind-up costs of the board because those costs reduce the amount available for payouts. However, as long as the Act exists the board will be required to undertake a range of accountability and reporting functions that currently cost growers several million dollars per year.

Such is the cynicism that pervades the industry that growers might rightly ask how much of the wind-up costs will be used for golden handshakes for people who will then be re-employed under the new system. Growers are concerned that the Wool Board could reinvent itself under another name—Wool Equities and its subsidiaries—and conduct commercial activities funded by grower assets in the Wool Board. For example, why should growers’ funds be used on entities such as Ovita, the proposed biotech research company, when the industry could contract out that research? There is also concern that the Wool Board is setting up structures with growers’ money that could be on-sold at a reduced price, leaving growers selling to a cost-plus industry player.

Farmers want to be the ones who make decisions on whether to invest in wool marketing companies or biotech. It is a fair bet that many growers who did not vote in the referenda will withdraw their money as soon as it is available. The alternative proposals being put forward by the Wool Corporation must have the backing of the majority of growers if they are to be considered by the select committee. Therefore, United Future will look to see whether submissions are received along those lines, and at the support that is given to them. I share in the comments made by the previous speaker that this is a time for woolgrowers in the country to get involved in the submissions process. If they do not participate, they will not achieve the outcomes that they desire.

Growers might be arguing that given the board’s poor record of managing growers’ money, all the remaining funds should be returned to farmers, rather than being invested in companies whose likely commercial success may be in doubt. For instance, the bill seeks to achieve all the findings of the McKinsey report except on strong wools, where it recommends the establishment of an integrated structure for buying and marketing most of the wool clip. It could be argued that that was one of the main reasons that growers voted for the McKinsey report’s recommendations, but the board has not been successful in its attempts to form a successful strong wools company, as witnessed by the successive failures—Strong Wool, Growerco, and One Wool, initiated by Wrightsons. Growerco alone cost half a million dollars of the board’s reserves.

The flaw in those approaches was the attempt to control wool prices by creating a giant cooperative to control supply. The industry is too fragmented for it to be able to collect a big enough proportion of the total clip to do that without the will on the part of growers to unite. It also ignores the fundamental problem, which is not supply but demand. Strong wool holds a tiny share of the international fibre market, and virtually the sole remaining users of it are carpet manufacturers to whom the price of wool has become insignificant.

The way to create demand is to come up with more innovative uses for wool, and that comes down to investment in research and development. We support the continuation of industry-good activities through the reduced levy on growers under the Commodity Levies Act. In some cases the market can be relied upon to conduct research and development, but only where it sees an opportunity to generate quick revenue. It has been suggested that instead of being used on commercial activities, the board’s reserves could be used to fund research and development, by supplementing the levy for as long as those reserves last. It should be noted that the proposed levy is 2 percent of wool sales, rather than the 1 percent recommended by the McKinsey report. However, the original levy was based on the proviso that the meat industry would contribute proportionally to on-farm research costs.

We encourage the moves currently afoot to create a single pastoral organisation covering sheep, cattle, deer, and goats, funded by a single levy. This bill could be an opportunity to further that. I note the formation last year of Meat and Wool Innovation and the memorandum of understanding between Meat New Zealand and SheepCo, announcing the common goal of a single pastoral industry board. In the meantime we have fewer fears that SheepCo will become the Wool Board resurrected in drag, since it will be an incorporated society managed by six farmer-elected directors. However United Future would want to ensure that there is strong accountability to levy payers.

In closing, we would again urge wool growers throughout New Zealand to get involved in this next period of time in making submissions to the select committee and in taking ownership of their industry, in order to get the outcomes that they desire.

New Zealand First will be supporting this bill. The restructuring of the Wool Board will be music to the ears of those farmers—96.9 percent of the 17,789—who responded to the referendum. The wool industry reform information document that went out was very comprehensive, and obviously the farmers responded in a positive way. I think that tells us everything with regard to the restructuring of the New Zealand Wool Board.

I want to give a little of the history of the New Zealand wool industry, and to inform some of the people who are not au fait with that industry. In 1773, English navigator and explorer Captain James Cook landed two merino sheep in the Marlborough Sounds, in the north of the South Island. Those two animals failed to adapt to the conditions. In 1814, missionary pastoral stockbreeder the Reverend Samuel Marsden introduced sheep to the Bay or Islands, north of Auckland, and the first reports of New Zealand wool sales in Australia date back to that time. In 1843 stockbreeder James Bell Wright is said to have had New Zealand’s first permanent sheep flock, after landing merinos on Mana Island near Wellington.

Until the late 19th century the merino remained New Zealand’s dominant breed, but its influence began to wane because of its slow-maturing wool and its struggle to cope with the wetter North Island country, newly cleared of forest. Then came the dual-purpose English breeds, the Lincoln and the English Leicester. They became popular as they were highly suited to foraging amongst the early cultivated pastures. An export meat industry developed, and farmers in the South Island began to search for a dual-purpose sheep suited to the drier and easier grassland tracts. From 1910 the Romney grew increasingly popular, and today it is our dominant breed in New Zealand. A distinct New Zealand Romney type has developed with strong wool and prime lamb production, and today it still leads in the manufacture of wool products—mainly carpet and wool yarn. In the 1960s the Romney made up 75 percent of the national flock.

In 1990 New Zealand had around 46 million sheep, and if one looks back to the late 1970s and the mid-1980s one sees the population of sheep was about 70 million then. We have now dropped back to 46 million, which in some ways is good, and in some ways not good. The farm stock that I have seen gives a better quality of wool. I am very confident in speaking on that issue, because my background in the early days was in farming. I farmed at a little place called Tinui, east of Masterton, where my brother still farms, and my experience in the industry has been of shearing over 400 sheep a day—

💬 Dail Jones: How many?

—400 sheep a day, at the age of 17. I want to announce that quite clearly to everybody. I operated six shearing gangs in the 1980s, employing up to 60 people. There were employment opportunities in this industry in the past, and in the future sheep farming will still be one of our major employers in the primary industry area.

I want to touch, too, on the competition at the Golden Shears last year, when Parekura Horomia and Mr English tried to out-shear me. Obviously they needed to go back to the Wool Board training school, to pick up some hints on how to shear sheep.

The income from the farming industry is approximately $900 million, which, as we all agree, supports lots of rural towns like Masterton, Carterton, Wairoa, and other outlying towns. It plays a major role in employment in those places. The wool industry employs a large part of our community—stock and station agents, shearers, employees in transport companies, shipping firms, auction houses, vehicle sales, and many others that pertain to that industry.

The Wool Board has given people opportunities in the past, and no doubt those opportunities will carry through in the new restructuring. There is training for shearers, which the shearing industry relies on to bring through young shearers to cope with the industry. The Wool Board, in the past, has given a lot of Māori and Pākehā the opportunity to own their own businesses, which are now set up around the world—in Australia, Scotland, England, Norway, the USA, and South America. While I was in Adelaide 3 years ago, I saw that two Māori brothers there are now so well established, after learning their skills in New Zealand, that they fly their own aeroplanes to take their shearers to outlying farms in Australia. So I thank those people who have brought the Wool Board to this point in its history.

The other important issue is the sheep industry. I want to give a bit of background on that. The percentages of sheep breeds now in the country are: Romney 59 percent, Coopworth 10 percent, Perendale 7 percent, Corriedale 9 percent, merino 7 percent, half-breeds 4 percent, and others 9 percent. The other important aspect, as I have mentioned in my presentation, is income. About 90 percent of the New Zealand clip leaves the country in a greasy, scoured, or slip form. Currently we are still exporting to places like the People’s Republic of China, Italy, Nepal, the United Kingdom, Japan, Belgium, India, Germany, Hong Kong, the United States, Australia, and other countries. So farmers still play a very important role, and are obviously the ones who form the income from this very important industry that New Zealand relies on. The country was built on this industry and will, no doubt, rely on it in the future. Total export earnings from wool products increased 8 percent to $324.1 million in the 2001 financial year.

Turning to the bill, I say that it provides a structural reform of the wool industry by dissolving the New Zealand Wool Board, dispersing its assets and liabilities, and resolving the number of transitional and consequential issues. The explanatory note states: “There has been concern in the wool industry for several years about the industry’s financial performance”—which has been mentioned by my colleague from United Future—“and return to growers from levy money paid. In June 2000, McKinsey & Company completed a report for the wool industry that recommended the dissolution of the Wool Board and the establishment of new industry-good and commercial structures for the wool industry.” It also states, as I mentioned at the start of my speech: “In a referendum held in April-May 2002, 96.9 % of wool grower respondents voted in favour of winding up the Wool Board.” The explanatory note goes on to state that that will “provide the industry with greater flexibility for commercial activities by giving it the freedom to choose to operate under existing generic legislation, such as the Companies Act 1993:”.

In conclusion, I say that this country was built on the rural sector. Regarding the Wool Board, I say that its time has come. The wool industry must be allowed to compete on all levels in the world’s markets. New Zealand First acknowledges the part the rural sector plays in our economy, and we wish all its representatives well with the passing of this bill.

I rise to support this bill, for all the excellent reasons laid out by my colleague the Hon Michael Cullen.

Those woolgrowers who have tuned into the radio broadcast of Parliament tonight— and I think there will be quite a few of them—will be thanking God that at long last the machinery is being put into place to get rid of a producer board that has cost this country millions. The Wool Board’s ineptitude has lost it credibility right throughout the world. It has given very little back to farmers, yet we were forced to contribute to the structure through the levy payments. I say again that farmers will be delighted to hear that this bill is at last before the House.

I would also like to pay tribute, if I may at this time, to my former colleague and friend, I hope—Owen Jennings. As the then President of Federated Farmers, during the time when he was really active in farmer politics, he pushed for the end of the Wool Board at a time when very few others had even thought about it. Owen Jennings, along with a number of us, suffered the poisoned shafts of derision from time to time from those people who said farmers needed the huge protectionism of the Wool Board’s structure, and needed a board to look after them. Farmers were told they could not possibly manage their own industry, and that they needed the huge structure called the Wool Board to do that.

I say to those people that they should just look at Merino New Zealand today. It is the smallest group of woolgrowers in this country, with the smallest number of kilos of wool, yet it has been highly successful. Why is that? It is because its members have applied very strong controls and have disciplined themselves. They produce a top-quality product and—amazing thing—they have actually gone out into the marketplace to sell their wool. One will see merino breeders in London, in Italy, and throughout the major markets of the world, selling their outstanding product. That is something that never really happened under the old producer board structure that we called the Wool Board.

I say again that it was Owen Jennings who had the vision in those early days to ensure that at least the machinery was started to change the structure. He brought to farmers’ and woolgrowers’ attention the need to put aside the old, worn-out structures that were returning nothing but were costing us hundreds of millions of dollars. Reports came out almost yearly, until finally the McKinsey report came along. Most of us thought it was yet another report that was costing $5 million or $6 million. But by that time the farming community—the woolgrowers—had had enough. They were prepared, when the vote finally came, to accept the recommendations of the McKinsey report.

But in reality it was a fait accompli. The board was finished. The board did not, perhaps, know it, but it was finished as far as growers were concerned. They were presented with a referendum, which, essentially, gave “take it, or leave it” options: to leave the board in place for another 10, 15, or 20 years, or to accept the recommendations of the McKinsey report. Essentially that is what happened—96 percent of those who voted were in favour of dissolving the Wool Board. That was no surprise.

But as a number of speakers have already said this evening, facets of the McKinsey report concern a large number of woolgrowers throughout this country. I was rather surprised to hear Larry Baldock bring to the attention of the House the concept of setting aside about $60 million to set up the biotechnology companies that will take the wool industry forward again. There is no question that biotechnology will take the industry forward. We have products like Karatec that the Wool Board says will really have a wonderful future. The board has finally got the scientists involved, and they have developed a product that may be one of the saviours of the wool industry.

However, we have set up at huge cost biotechnology companies, when there are already existing structures there that we could contract out to, thereby ensuring that we are not investing in bricks and mortar and not—as we will do—dragging in our own people, but using the absolute expertise of people like Diana Hill. A molecular biologist from Dunedin, she is the best in world, as I am sure Dr Cullen knows, and she is an outstanding scientist. People like her have the facilities and just need the dollars, and I am perfectly certain that within a relatively short space of time they would advance the cause not only of the woolgrower but also of the sheep industry as such.

The reality is that this is the end of the Wool Board, but I do not for a moment believe that it will be the end of the wool industry once we have finally demolished that structure. As we know, other mechanisms are starting up already. Within the industry the mercantile firms—they were once known as the Wrightsons, the Williams and Kettles, and the Pyne Gould Guinnesses—are setting up structures now that will ensure that the farmers have plenty of markets to sell to. They are getting out there and they are selling. The market demands that those people do not stay at home, but that they go out and show the world the product that we actually have. So as I said earlier, there are real concerns.

Another aspect that is of concern is that the current directors of the Wool Board are still to be left in place to oversee their own demise. There is real concern at that. A number of farmers have rung me and asked why we do not just get the receivers in. That is a good question. I recognise that there are statutory requirements that the board is obliged to fulfil. There will be liabilities—and they will funded—that the Wool Board will have to ensure are met, but I cannot see any reason that a statutory receiver could not do the same sort of thing. But there is a perception, and other speakers have alluded to it, that once the board gets involved in its own destruction, it will drag that out as long as it possibly can.

I was the only politician who was at the last hurrah, at the Wool Board’s last annual meeting in Invercargill. In his address the chairman referred to an article that he had read that morning in the Southland Times. He said it was horrendous that there was a dreadful article that attacked the board and its contribution to woolgrowers over the years, whereupon the agricultural editor of the Southland Times stood and said he was not responsible for it. That is when I stood up and said I was delighted to inform the chairman that I was there and that the article had come from me. I also received a round of applause and had my hand shaken by all the farmers there, and received some very funny looks from Bruce Munro and some of the board members, and, of course, the delegates who had been paid to attend.

There were about 130 people at that meeting, and I guess there would have been no more than 30 farmers there. If we wanted to encapsulate the contribution of the Wool Board, that meeting would have been about it. It has been one of self-fulfilment, if one likes—of ensuring that the structure is there. Proceedings were sort of “hail fellow, well met” at the annual meeting, but nothing was actually achieved. We had all sorts of accountability provided from all sorts of accountants who pored over the returns from woolgrowers over the years. The accountants said they had accounted for things, and had poured $100 million into one area, and $20 million or $30 million, or whatever it was, into another area. But when we asked them about performance we received rather bland stares, at a time when farmers were looking at receiving $2 a kilo. That has risen to $3.50. Well, whoop-de-doo! There is a heck of a lot of upside to go for woolgrowers, as far as the crossbred production is concerned.

I also make mention of my own situation as a mid-micron grower, who was told by the board and told by the McKinsey report that I have no future. I received the best prices I have ever had after listening to those experts tell me there is no future for such growers. There is always a future in every industry, if people are prepared to go out and find it. Thank goodness the woolgrowers, at long last, are doing that themselves.

This is a good bill. The reforms outlined in it are the result of many years’ debate amongst woolgrowers on means to improve the returns from wool sales. It also recognises the contribution that a profitable and vibrant wool industry can make to the growth of our economy. This bill is good for New Zealand, and I am proud to stand in support of it.

I regret that I have to strike a little note of dissonance in this otherwise unanimous debate. I have some reservations about this bill.

💬 John Carter: We have some about you, so what does it matter?

Some of that member’s best friends are sheep. While I accept that there is a need for industry reform, I am yet to be convinced that this is the right answer. It is clear to me that the Wool Board has not performed as well as it could have over the last 20 years. It is also clear to me that it has become increasingly dysfunctional as an organisation and that change is necessary, but is this format the right answer? I am yet to be convinced of that.

We heard from the Minister—that well-known sheep farmer, Dr Michael Cullen—about the intentions of the bill, and I will not repeat them. David Carter also spoke very fulsomely about them. We have a plan for structural change, and in many ways that had to happen.

My objections fall into two categories. The first is a philosophical one. I am still a member of the old school that believes in the single-desk seller. That is no longer fashionable; I accept that. I believe that having a combined front for our foreign buyers and competitors is a good thing. It is a concept whose time will come again, but at the moment we are going through all the privatisations and corporatisations, just like we did with ENZA. But I will not argue the merits of that tonight; I accept that it will be a fait accompli.

My second class of objections relates to the detail of the bill itself. First, I want to look at the referendum of farmers. The board claims that it consulted widely, and it proudly stated that 97 percent of the people were in favour of these changes. That sounds overwhelming, but it was 97 percent of the voters, and less than 40 percent of growers actually voted. I want to know what the other 60 percent want to do. Are they simply sitting at home and saying they acquiesce? Has there been any attempt—and I ask this genuinely—to find out what that 60 percent actually wants? What do those people feel about the changes? Are they supportive of this bill?

💬 Phil Heatley: There was a vote.

No, I am talking about the 60 percent of the growers who did not vote.

💬 Shane Ardern: They missed their chance.

OK, they missed their chance. But the point is this: were they consulted? Was it the result of apathy? Are they sitting at home feeling disempowered? Are they sitting at home quietly fuming and being totally, totally opposed to this measure? Are we going through with this bill for a minority of growers? I do not know whether that is the case, but I think we should find out. Does anybody know? No, nobody knows. We need to find that out.

Whatever way we look at it, we see the consultation with growers has been inadequate. I really question whether there was consultation. Was there really dialogue? Did people actually go out and ask every grower—or every class of grower, anyway—what growers wanted from the restructuring? No, I do not think they did. I think that the McKinsey report was put to growers, and they either accepted it or rejected it because anything had to be better than the old system. It was not good consultation.

Another area of the bill that I feel uncomfortable about is the requirement that only farmers who are registered will be eligible for disbursements from the Wool Board’s assets. That seems fine on the surface, but we have to look underneath. We see that in order to register to be eligible for those disbursements, a person must have had at least 250 sheep and have been farming on 30 June 2002. Those two figures seem entirely arbitrary to me. They seem to be based on administrative convenience, rather than on fairness. What about smallholders and hobby farmers—those people who have fewer than 250 sheep? Did they pay levies to help the Wool Board to create its assets? Yes, of course they did. So why treat those people unfairly and deny them disbursements?

💬 John Carter: Because this is Parliament.

It is too hard, yes. The system proposed in the bill is convenient. I accept that trying to sort out a refund for somebody with a couple of lambs that are just keeping the lawn of the house block mowed is too hard. It is simply crazy to try to go around everyone like that. But why not use another measure? What about the weight of wool sold through a registered wool buyer or the number of carcasses that went through an abattoir? That would be a pretty simple process. I am not talking rocket science; I am talking about fairness. There have to be fairer methods than this method. If people pay their levies, surely they have to receive their disbursements. The fundamental message I want to get across is that I do not believe that matters of administrative convenience should override fairness and justice. Things simply should not happen like that.

What about the date of 30 June 2002? It is a nice date; it has a nice ring to it. It is the middle of winter, so we are talking about wintering stock and all that sort of thing, but it is just an arbitrary point of reference. I accept that because it is a date in the past there would have been a limited amount of prior knowledge of that date and so there would have been limited jockeying. At least it is better than choosing a date in the future. But the current state of assets in the Wool Board did not come about overnight. It came about over a very long period of time. Those assets accumulated gradually, so why should we pick one specific date and say that the people who were contributing at that date should get all the assets? That simply does not make sense. Surely everybody who has contributed over a period of time should be entitled to a disbursement.

Having said that, I accept that if we go back too far the whole thing becomes a nightmare. We cannot possibly track down everybody. But what about the person who has had, say, 10,000 sheep on his or her farm and who sold them on 29 June 2002? Let us suppose that the person has been farming for 50 years, and has done everything right—except for picking the wrong date to sell. That person gets absolutely nothing. But what has that person contributed? One heck of a lot! What about the converse situation, where somebody—a Queen Street farmer like Dr Cullen, for instance—might have bought a flock of 10,000 sheep on 29 June 2002? That person will get a huge disbursement for having done 1 day’s work, and has probably not even got his or her fingernails dirty yet. Do either of those examples—the person who had a farm for 50 years and sold it on 29 June, or the person who bought a farm just before 30 June—represent fairness or justice? No, of course they do not.

So how should we go about resolving that? It is not very difficult. I propose that we have a 10-year phase-in period that the Government can finish off on 30 June 2002 if it wants. We would go back to 1 July 1992 and we would say that anybody who had owned any sheep in that 10-year period would be entitled to a refund. If a person bought or sold sheep, or bought or sold his or her farm, during that time, then that person would be prorated on the number of sheep he or she had. One could use 30 June each year as the date for measuring that, because it is a nice convenient date, as I said, for the wintering of one’s stock. Again I make the point that I do not think that administrative convenience should override matters of fairness and justice. We are not talking about rocket science; it is a very simple mathematical formula. It is a sliding scale, and I am really at a loss to understand why we cannot institute it. Yes, it is a little more complicated that the proposal in the bill, and, yes, it will take a little more time. But surely that is a small price to pay on a one-off basis for saying that people deserve to get some reward for the money they have put into a board that has become increasingly dysfunctional, certainly, but has accumulated assets. I think that we should distribute those assets as broadly and as fairly as we possibly can.

I say, as a consequence of that, that the Green Party will abstain from voting on this bill. We do not want to stand in the way of progress, however that progress may be defined. But we do have reservations about some of the detail of this bill, as I have explained. I look forward to consulting in a genuine, dialogue-based manner with my colleagues on the Primary Production Committee when we come to debate this bill. I look forward to some significant changes being made to it.

I am delighted to stand and support this bill.

It is always a pleasure to speak after a Government member has spoken on this legislation, given the depth of the speeches we have had tonight from Government members. We are in the forty-seventh Parliament and, once again, we are dealing with legislation that had its genesis in the forty-fifth Parliament. It is high time that this legislation passed through Parliament, and that is why the National Party overwhelmingly supports its passage.

The situation in the New Zealand wool industry is that farmers, in a very long process, have voted overwhelmingly for this legislation to proceed. After the McKinsey report, there was overwhelming support for it; in 2001, about 90 percent voted in favour of it; then in 2002, 96.9 percent voted for this process to proceed. I congratulate the leadership of the industry on steering what can only be described as a difficult process through that period. I say to farmers out there that they should get involved. It is their industry, and it does have a great future. It is still one of the primary industries of this country, and it is still the backbone of this country. It still funds all of the social policies of all Governments, but, in particular, those of the current Labour Government, which is propped up by United Future.

There is no doubt that the Wool Board had outlived its time, and that there was a need for major reform. The concept of processing wool into nothing more than some kind of garment, carpet, or other commodity-type product has well and truly served its time. I think that a new door will open in terms of what we can do with wool. I say to the Government that it should make sure that it resources the Primary Production Committee well. I know that the committee, chaired by the Hon David Carter, will do whatever it can to put the necessary changes or amendments in place.

Obviously, my very good colleague Phil Heatley, who knows a lot about the wool industry, will speak afterwards and demonstrate the depth of his knowledge. He will no doubt enlighten us. There will be a very thorough process to ensure that the legislation is given the scrutiny it needs.

It is interesting to note that the only farmer on the Government side of the House who has bothered to turn up here is Damien O’Connor—probably because he is the only farming member the Government has. There is a further irony in this: when the National Party was in power, Labour campaigned against the deregulation of all the primary industries. It continually said that it would be the downfall of all industries. But here we are tonight, under the leadership of the Labour Party—the same party that said it would be the downfall of our industries—introducing legislation that brings about the deregulation of one of our major primary industries.

The Minister is obviously in charge of far too much, because tonight he had to defer to the Minister of Finance—somebody who, as he stated in his maiden speech, has a great affinity with farmers himself. I invite people to read the Minister’s maiden speech to see what he thought of farmers in general, and sheep farmers in the Hawke’s Bay and Canterbury in particular, when he entered Parliament. I invite anybody who may be listening to read that, so that they can find out that the Minister who introduced the bill tonight clearly has their best interests at heart, and clearly is keen to see this legislation passed.

The bill provides for the structural reform of the wool industry by dissolving the New Zealand Wool Board. It will disperse its assets and liabilities, and resolve a number of transitional and consequential issues. That is really the guts of what the bill is about. It is also about having a structure in place, where initiatives such as that of Keratec can flourish. Once this legislation is in place, there is the ability for outfits that can get involved in research and development through the levy process, to develop—with a mandate from their growers—product ranges that have not yet been thought of. A number of such ranges are included in the Keratec brochure I have here, which some members may be interested in. Who would have ever expected that cosmetics and toiletries could be produced from wool? As with the dairy industry, members will find that a range of products can be produced that are well outside of traditional commodity areas.

There is no doubt that the various structures that will be put in place, such as Covita, will bring about major biotechnology changes in this industry, and will add years of sustainability to the industry and give it strength to go forward. I encourage that. Companies such as Wool Equities Ltd and Merino Grower Investments Ltd will be unshackled from the current regulation and allowed to go forward and flourish. I am sure they will do that. I suggest to farmers that they should get behind and support those companies, giving them the breathing space they will clearly need.

The initiative of Mike Peterson and Geoff Grant in trying to bring together the various woolgrowers’ and meat producers’ structures right across New Zealand is a great one. That initiative should be supported at every opportunity by farmers, the wool industry as a whole, and, hopefully, the Government—even if regulatory change is needed to get it in place. Clearly, those who farm meat and those who produce wool are often the same people. It is a nonsensical process to have the two competing against each other—often in the same structure—for resources, for research and development money, and the like. I absolutely encourage that.

It is also interesting to note that in the McKinsey report it was suggested that mid-micron wool had a bleak future. It is through the investment in research and development that fine wools, mid-micron wools, and coarse wools will develop new product ranges and a solid future for themselves, and will find a very strong way of going forward. Science and genetic research hold the answers to a lot of the problems that exist in the industry. Ovita has been another spin-off, and, once again, that move holds huge opportunities for an industry that was described 5 years ago as one that had no future. In some farming structures, wool was looked upon as a by-product.

I need to acknowledge my colleague from the Green Party, Ian Ewen-Street, because he raised a few points of detail that might get a fair hearing in the Primary Production Committee, of which he is a member. Under the “skinny sheep” policies of the 1960s and 1970s—which made struggle-mustering an art form—he certainly honed his mustering skills. We have seen some of them in the way he has been able to muster together a very desperate bunch of people in the Green Party and turn them up here to vote. It is a pity that that is the case, but that is as it is. I acknowledge him tonight; I know he will make a worthwhile contribution on that select committee.

This legislation is well overdue. I know that the Minister, Jim Sutton, is very much in favour of its passage, despite having reservations about deregulation some time ago. The Minister has done a complete somersault: he was in favour of deregulation in the late 1980s; opposed to it in the mid-1990s, when it was suggested by the National Party; and now seems to be back in favour of it again in the year 2003, as this legislation comes into the House and travels through its final passage.

Finally, I say to those farmers who have not returned their entitlement packages in respect of their share of the distribution of assets, please sit down and take the time to read the information. They need to get involved, and return the package. If they bury their heads in the sand, they stand to miss out.

I am delighted to stand in support of this bill, and urge its rapid process to the Primary Production Committee.

I am more than happy to support this bill. I appreciate the contribution of Mr Benson-Pope, who I understand has driven past sheep in Otago, recognises sheep of the four-legged kind and, consequently, takes quite an interest in this bill. I support him and his speech of “substance”, which added to his poignant introduction.

In doing so, I also say that National supports the bill. Along with my colleagues Shane Ardern and David Carter, I acknowledge John Luxton, who started this process off in the forty-fifth Parliament. Members will recall John Luxton. He made quite a contribution during the 1990s. He had some vision, and worked with all sorts of other people in the industry to see this issue through, and it is now here in the forty-seventh Parliament.

I also acknowledge Damien O’Connor, who has worked on the Primary Production Committee. He is a member of the Labour Party whom I have seen become increasingly frustrated over this issue, as he is an advocate for sheep farmers in this country. He has been increasingly concerned about how the chain has been dragged on this bill—from its introduction to its first reading today. Farmers voted not last week, not last month, but last year. It has taken right through to Christmas last year, then right through to this point, before we had a first reading. No real heart or motivation has been coming from the Minister, Jim Sutton. I am disappointed at that, and I acknowledge Damien O’Connor for containing his frustration at this bill not coming sooner to the attention of the House in a first reading.

I acknowledge colleagues from all sides of the House, including Ian Ewen-Street’s contribution. Although misguided, I appreciate that he has thought about the issues in this bill, and I expect him to raise them in the select committee. I do not want to see him sitting in the committee like a lamb, not raising them. He is a shy, retiring type, but he has put the issues that concern him in this bill on the table. I want him to bring them to the fore in the select committee, and I will remind him of that.

I also remind him that 96.9 percent of the farmers who voted supported the changes we see in the bill that is having its first reading tonight, so the mandate is sound. Granted, just 40 percent of those eligible to vote turned out, but 96.9 percent of that 40 percent voted for these changes. A 40-percent turnout is pretty good. I know that when Mr Ewen-Street has meetings in the upper part of the South Island, he does not get a turnout of 40 percent. He would be lucky to get a tenth of that. So we have to acknowledge that 40 percent is a good turnout.

I know that those 96.9 percent of farmers have been disappointed in the performance of Woolmark and the Wool Board to this point, and particularly in recent years, because many of them have spoken to me and to others in the National Party. There has been a myriad of reasons for that, some fair and some unfair. The point is that we are here tonight to support positive changes—changes that generally come from the industry. There is a general consensus in the House that this bill should go forward to the select committee, and there we will argue out the details. I look forward to that.

The Primary Production Committee has been ready and willing to address this legislation for a long time. David Carter has certainly been ready and willing to do that. In fact, he has been a great lobbyist. I know that he has been in Jim Sutton’s ear; he has certainly been in the select committee’s ear and, along with Damien O’Connor, has been somewhat frustrated that this legislation has not happened sooner. But the vote was taken a long time ago and, as the chair of the Primary Production Committee, he has been ready and willing to accept this legislation in the select committee. As chairperson, he is now under pressure to get the bill through the select committee process. He must hear submissions, return advice to this House, and, of course, see the bill progress through the House. He should never have been put under that sort of pressure.

I am disappointed that the Minister, Jim Sutton, has tended to make choices. He is hopping around the world, addressing what he sees as bigger issues, while a critical issue in this country flounders with uncertainty. I am disappointed in the Minister, and I would like to log that here tonight. The lack of progress with this measure is also something I would like to log with the House. But be assured that as a member of the select committee, working with and helping Ian Ewen-Street, and working alongside Damien O’Connor and others, I will help to improve this bill and build on it.

The bill presently provides for the conversion of the statutory New Zealand Wool Board into a transitional company. We heard details about that tonight. It will be named the Wool Board Disestablishment Co. Ltd. The company will assume the board’s assets and liabilities. It will deal with the board’s residual liabilities, and oversee the disbursement of its net assets to growers. The bill provides for the board’s assets to be allocated to woolgrowers by the issue of exchangeable shares and redeemable preference shares in the Wool Board Disestablishment Co. Ltd on the basis of sheep numbers.

Mr Ewen-Street raised the issue that the date to be met is 30 June 2002, with 250 sheep being the number that one has to be in charge of, in order to be eligible to take a financial interest in those assets through the shares. We could argue all night about how many sheep there should be, and also about the date on which it all takes place, but that is the job of the select committee. I look forward to talking to Mr Ewen-Street and convincing him of the merit of this in that process. More important tonight is that the House gets a clear message out to farmers that now is their opportunity to take part in the industry as it moves forward into the future.

I believe the deadline by which they have to register their desire to be attested for eligibility is 2 May. So, along with David Carter and Shane Ardern, I encourage those farmers to open their folders, fill in the forms, and ensure that their people check them for eligibility well before 2 May. It would be a shame indeed for those farmers—particularly longstanding farmers, those who have had farms pass through the generations, those whose work has been built on by generation after generation—to miss out simply because a deadline has been put in place. So by 2 May, we hope that all farmers who are eligible will have put forward their claim to a share in the future of the industry. I certainly encourage them to do that.

I happily commit this bill to the select committee. The House has my assurance that I will work hard on it, along with David Carter and others.

Bill read a first time.

I move, That the Wool Industry Restructuring Bill be referred to the Primary Production Committee for consideration, and that the committee report the bill by 16 June 2003, and that the committee have the authority to meet at any time while the House is sitting (except during oral questions), and 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, and to meet outside Wellington on a day when the House is not sitting, despite Standing Orders 193, 195(a) and 196(1)(b) and (c).

Motion agreed to.