Wool Industry Restructuring Bill

, on behalf of the Minister of Agriculture: I move, That the Wool Industry Restructuring Bill be now read a second time. The Wool Industry Restructuring Bill was introduced to the House on 11 December 2002. It had its first reading on 19 March 2003, after which it was referred to the Primary Production Committee for consideration. The committee received and considered 33 written submissions on the bill.

This bill facilitates the regulatory and structural reform of the wool industry. It provides for the dissolution of the statutory New Zealand Wool Board and the allocation of its assets among woolgrowers. That will enable a greater separation of commercial and industry-good activities, and will give growers greater control of their industry organisations. Growers will be allocated shares in the commercial entities, and the industry is separately working to seek grower approval for a levy to fund industry-good activities under a new organisation.

The bill provides for the conversion of the Wool Board into the Wool Board Disestablishment Co. The disestablishment company, which will be known as “Disco” to the trendy wool industry, will be responsible for dealing with the residual liabilities and commitments of the board, and for implementing a restructuring plan, including the allocation of board assets to growers. The disestablishment company will also be responsible for the collection of an interim levy on wool and its expenditure for industry-good purposes, after consultation with SheepCo or a successor body established to undertake wool industry-good activities. The restructuring plan will specify that portions of the board’s assets will be allocated to merino growers through Merino Grower Investments Ltd, and to another company, Wool Equities Ltd, for growers of non-merino sheep.

The bill contains provisions concerning the constitutions of the two grower companies, Wool Equities Ltd and Merino Grower Investments Ltd. Those provisions relate to restrictions on share trading during the first 2 years, which were agreed to by growers in the May 2002 referendum, and to voting rights, which will provide added security for grower assets. The bill provides for a grower’s share entitlement to be based on either the average number of sheep the grower has farmed as at 30 June 2000, 2001, or 2002, taken over the years that the grower had sheep, or the number farmed at 30 June 2002, whichever is the greater. That ensures that growers who have progressively increased their sheep numbers over the 3 years are not disadvantaged compared with those who have recently entered the industry.

The Government will be introducing a Supplementary Order Paper to make minor technical amendments to two clauses. The Supplementary Order Paper will amend clauses 20B(2)b and 20C(2)b. Those clauses deal with the allocation of shares to growers, and the changes will ensure that such allocations are fairly made to growers who have both merino and non-merino sheep. Growers of sheep other than merino sheep will have the opportunity to cash in their redeemable preference shares or to convert them to ordinary shares in Wool Equities Ltd. Because Merino Grower Investments Ltd considers it has sufficient capital, the disestablishment company will redeem the redeemable preference shares and merino growers will be paid the appropriate amounts.

The Minister of Agriculture must approve the restructuring plan, including the plans for share allocation, before its implementation can commence. The Wool Board’s preferred restructuring day is the first day of September 2003. That date, if met, would enable share allocations to be made to growers by the end of this year. To that end, the board is working towards having its restructuring plan ready for submission to me later this month. Wool Equities Ltd and Merino Grower Investments Ltd are respectively aiming to have a prospectus and information memorandum ready to be distributed to growers, with a notice of their entitlements, shortly after the restructuring day.

Minister Sutton and I would like to thank the members of the Primary Production Committee for their consideration of the bill, and for the report tabled on 16 June 2003. I commend this bill to the House.

I rise to welcome this legislation to the House, even if it has taken a long time to get here. In the rural community this legislation is a further signal of the massive change that has gone on—a change in attitudes, in farming practice, and in the way that people see the path to a successful future.

It has been a long, hard road to get this legislation here to the House. In 1991, as a brand new MP, I can recall going to a large farmer meeting in Gore to discuss the hugely controversial decision made by the Wool Board then to withdraw its price support scheme. It is not so very long ago that the New Zealanders who produced wool were tied up in price support schemes. At that stage, the board also made controversial decisions like cutting back the contribution to the International Wool Secretariat. To my mind, as a long-suffering levy payer to the Wool Board, the contribution to the International Wool Secretariat really summed up the problems that needed to be solved in the Wool Board. In 1990 the Wool Board donated $90 million of farmers’ money to the International Wool Secretariat—a contribution that it stoutly defended—but, under pressure, it was suddenly able to cut that in half and still argue that it was about the right amount.

So the Wool Board is a relic of a bygone age. It came from a time when the statutory boards were the on-ramp to the protein highway to Britain. They were convenient Government structures that were able to organise the flow of product to the British market. But unfortunately, that market became unhitched from New Zealand some 30 years ago, and it is only today that we are finally putting the board out of its misery, now that its functions have long since ceased to be useful.

The rural community has changed dramatically, and this bill is a sign of that. In particular, the attitudes of today’s producers have changed. It used to be the peak of a farmer’s achievement to become a member of the electoral college, which was the body that decided on who would become members of the Wool Board. There was a very clear career path, and many of the more competent, more skilled, and, certainly, more articulate farmers went down that path. They started out by becoming the chairperson of the local meat and wool section of Federated Farmers, then gradually worked themselves up the tree, and if they were elected to the Wool Board itself, they were then entitled to trips around the world to talk to the board’s customers. The Wool Board had salubrious headquarters here in Wellington. Its members talked to the Minister of Agriculture and to all sorts of important and official people, and the main function of the board was to maintain its political viability.

In that respect, the board let farmers down. I can still remember receiving the receipts for the wool that I was selling, and looking at the line that deducted 6 percent of the gross income. For many years, that exceeded the profits that most sheep farmers in Southland would make. I am pleased to see that over the decade of the 1990s wool producers came to realise that the board was essentially a political body, not a commercial one, and that any organisation that has a guaranteed, statutorily declared income like the Wool Board levy is bound to become lazy and unfocused, and is bound to spend much of that resource on the maintenance of its own political viability. I can remember the Wool Board running a campaign about $5 a kilogram and 5 kilograms of wool on every sheep, and it sounded great. It was a public relations idea, and the board members went around the country, whipping up the enthusiasm of farmers. Within 2 years the price was about half that, because it had dropped precipitously. The Wool Board needs to be more than restructured, and in some respects this bill is misnamed, because it abolishes the Wool Board. I am very pleased to be able to stand in this House and to see that happen.

I want to pay a tribute to the leadership of the farming community, which has finally brought this bill to this House, and which will bring about the ultimate dismantling of the Wool Board. I will mention two people in particular—Geoff Grant and Mike Petersen. Those people represent a new generation of farmer politicians who understand that their main function is to bring about change, not to maintain the status quo, because markets and farming practice change so quickly. Therefore, the organisations that are the conduit between the farmer and the market need to change very quickly. Of course, the Wool Board, because of the statutory protection it was given by this Parliament for so many years, did not change quickly. The changes it went through were very painful, slow, and expensive. However, in the future we will have no cause to have to spend parliamentary time, as we have done a lot over the last decade, on trying to adapt that out-of-date organisation to contemporary pressures and times.

The Wool Board did some good things, and I see that this bill makes the attempt to preserve the desirable aspects of what was there. I want to refer to a couple of organisations that are important to the industry but that need to be subject to commercial pressures, rather than to political sponsorship. The first is Wool Services International. The wool industry is one that has a continuous need for higher and higher levels of understanding of the product, and of the market requirements for that product. Various organisations have contributed to technology transfer in order to increase the skills and knowledge of the industry about the product that it produces.

I also want to refer to the Wool Research Organisation of New Zealand. It has been typical of many publicly funded science organisations, and the Wool Board levy has been virtually equivalent to public funding. The Wool Research Organisation has done some excellent science. It has also chewed up millions and millions of dollars on projects of dubious merit, and in the end there has been no real test by the industry or by the market of the activities of that organisation. However, the intellectual capital that is there in the form of some outstanding people and some excellent ideas can be carried over into the new environment. We want to make sure that that is the case.

I am pleased to see that there has been a very vigorous discussion about the issue of what amounts to public good in the wool industry. A feature of that discussion has been the role of research. In the past the agricultural industry has relied far too much on the Government and on levies to fund its research. It is my hope that the wool industry will follow the path that the meat industry is starting to follow without the automatic funding of the levies, and without relying totally on Government funding for all aspects of research. I hope that the industry will take on some of that role itself and will take responsibility for long-term investment and research, in order to get a better understanding of the enormous potential of the protein-based products that we produce so effectively and so cheaply, and that it will take some of the risks that go with investments that use biotechnology to increase returns.

We stand four-square behind this bill. I know there will be debate about the detail, but it is long past time that the Wool Board was dismantled and the industry was able to get on with its own future, subject to the pressures of the world market and the strong incentives that that puts on participants in the industry to do a good job for New Zealand, as well as for the sake of their own profits.

New Zealand First supports the abolition of the Wool Board, which is really what this bill is about, as the leader of the National Party has just said. However, we will introduce amendments in the Committee stage to provide that the abolition of the Wool Board should be just that, and that the process set out in the bill should not continue thereafter without the oversight of a statutory manager to investigate it. The Wool Board is being disestablished—or got rid of, as one says—but in the view of New Zealand First and, I am sure, of some of the members of the Primary Production Committee, farmers are unsure of what is to come after that. Farmers voted to get rid of the Wool Board; of that there is no doubt. Whether they voted to put the same old faces in different places for the future is a matter of some doubt.

I make no apology whatsoever for saying that New Zealand First’s amendments are based on the submission of Mr Phil Verry of the International Wool Corporation, who has said that farmers do not know what is coming after the disestablishment of the Wool Board, and that we need to take a far closer look at that. A lot of companies are being set up. One needs to understand what they are all about, and, more important, to have the farmers understand what they are all about. The question that should be asked at that stage is whether that is what farmers want. Do they want to have the Wool Board continue in many different guises with, basically, the same people running things, or do they want to stop the board there and do their own thing, and, indeed, to sell off or not to continue with some of the companies that are proposed? The companies are all being set up; many have been set up as we speak, and prior to this legislation going through the House.

It is true to say that people whom we respect have advised the select committee well and diligently. I understand that they had no option but to advise us in the way that they did—that is, to preach caution and to say to us that this bill is the result of a farmer referendum. I understand that the Minister of Agriculture said that if farmers agreed to bring a restructuring plan to him, the Government would implement it. The officials subsequently had no option but to carry on down that line of advice.

However, questions arise in relation to the setting up of the companies—Ovita, Covita, Merino Grower Investments, Wool Equities, Canesis Venture Capital, and Canesis Network, which we only learnt about as the select committee was winding down its deliberations on this bill, and one suspects that there are more companies to come. New Zealand First says that if there is any doubt it should be dispelled, that it is best dispelled by an independent person, and that it is best dispelled by this House preaching caution in these matters. If there is no suspicion, and if nothing is untoward and everything is as it should be, then, of course, the plan should go ahead.

I cannot help but mention the fact that the $100 million that is commonly talked about that the Wool Board has in reserves was built up during World War II—if one believes that—and has been carried forward since then. Many submitters have said they have paid the levies, the Wool Board is being wound up, and they want what is left over of those levies to be paid back to them. But that is not to be the case. That money was put aside in the heyday of the wool industry, and it is a sad story that its heyday was back in World War II, and that it has since been seriously depleted.

💬 Hon Member: It’s wool, not hay!

R DOUG WOOLERTON: My colleague tells me that it is wool and not hay, and he is absolutely right.

We are told that the average farmer—bearing in mind that people with fewer than 250 sheep are, as from 30 June, I think, disbarred from participating in an allocation of cash or redeemable shares, and that we are talking about quite substantial farmers, having ruled those smaller ones out—will receive, individually, in the vicinity of only $1,500 to $2,000. That is an average, and averages are dangerous. So the pot of gold that farmers thought at the beginning of this process would be there for them has been seriously depleted, and I think the mood amongst farmers is very much one of not caring what happens. They just want the Wool Board to go. They are not expecting a whole lot of payout from it, but say there is a curse on its house.

That being the case, I think it is absolutely appropriate that we have the amendments in my name that are before the House to—

💬 Clayton Cosgrove: Who wrote them?

R DOUG WOOLERTON: The member is being facetious; he knows I am not a lawyer. I should have been one, but I am not. Writing amendments is not my cup of tea, and I freely admit that. Nevertheless the amendments are in my name, and they are a precaution. Even though I am not sure whether all the parties of my fellow members on the select committee will vote for my amendments, I am sure they address a concern that all the members on the select committee had to a degree—it is just a matter of the degree to which the matter concerned them.

I sum up by saying that New Zealand First supports the abolition of the Wool Board. It has doubts about the companies that are to be set up, with the same old faces appearing in different places. However, we will address that by introducing our amendments at the Committee stage.

I will take only a very short call on this bill and say to the member who preceded me that one of the things I miss about not being on the Primary Production Committee is being there for his deliberations. He is a humorous member. He says he is not a lawyer, but can I tell him he is probably a better lawyer than he was a farmer—and he might take that as a compliment.

I simply want to say that this bill continues with the restructuring of our primary industries, and it is a good piece of legislation. I pass on a little bit of thanks to a person who has not been mentioned so far in this debate, a bloke called Robin Campbell. He is a farmer who lives just outside the Otago electorate. He is on the AgResearch board and has done quite a bunch of research work in that area. I certainly want to pass on my congratulations to him on the work he has done on this bill, and to the select committee on the work it has done in bringing the bill back to the House.

If the House is prepared to listen very carefully, it will hear a huge sigh of relief throughout the whole of rural New Zealand this very morning, because I believe that this is the day that the Wool Board is finally euthanised—the day on which it will meet its maker. It is appropriate in this second reading to reflect—and the Leader of the Opposition, Mr Bill English, did that—on where we have been and where we have come to on this very day in the year 2003.

I personally think back to the days of the Korean wool boom, which were the halcyon days of the wool industry—the days when the public from the towns and cities went out to the country to pick the wool off barbwire fences to sell, such was the demand for that product back in the 1950s. Then both Australia and New Zealand went into times of having huge stockpiles of wool, for which we could get virtually nothing. So we have gone round in many circles in this industry. In my days of farming in the early 1970s, there was a great wool-acquisition debate, in which it was determined that if some structure acquired all the wool and had an orderly marketing system, things would be brilliant. The growers rejected it then, and I suspect that if they had the same opportunity today, they would reject it again.

It is also appropriate that I give recognition to Owen Jennings, the former member of Parliament who was responsible for drawing to the public’s attention—certainly, he reflected in this House the views of the farming community—the inadequacies of the huge monolithic structure that the Wool Board came to be. Owen worked very hard, at considerable personal cost to himself, to ensure that the Wool Board was finally put to rest. This is a day he can take real pride in.

As I said earlier, the wool industry has lurched from crisis to crisis. Growers had the view that they were throwing good money after bad, and that the auction system was a method whereby they just dumped their product on the auction room floor and hoped that somebody turned up to buy it. Essentially, that was the marketing system we had, and still have to this day. But major refinements to the wool industry have been made. I believe that the archaic attitudes that were displayed in the past are being whittled away very consistently, and that we are now moving quite strongly towards a very commercially focused industry. “Marketing” and “research and development” are the operative words we use today when talking about the industry.

We cannot help but reflect on the days of the Wool Board when farmers were very perplexed—which, I think, is a nice way of putting it—about the world trips its members took, and they saw an attitude of “jobs for the boys”, and so on. The board always talked about accountability. It said it could account for every dollar it spent, but it was interesting to note that nobody ever accused the board of performance. What is required today in this very competitive commercial world is performance, not just accountability.

Report after report was done, until finally the McKinsey report came through and recommended that a vote take place on whether the board should be retained, or got rid of and replaced by some other structure. I agree with my colleagues from this side of the House that the vote taken on the McKinsey report was, in essence, purely on one issue, and it was that the farmers wanted to get rid of the board. In my view, they did not actually vote in favour of the structures that have been put in place by the board. With advice received during the select committee process, I have, with some reluctance, come to accept that to protect the massive tax losses, for example, and to protect the intellectual property of the Wool Board and the Wool Research Organisation of New Zealand, it is necessary to ensure that other structures are put in place when the Wool Board is finally laid to rest.

I think that is entirely appropriate, just as a few years back it was entirely appropriate for merino growers to tell the Wool Board that it was not performing, that they could do a better job, and that they wanted the right of self-determination. It was with huge reluctance that the board finally relented and allowed Merino New Zealand to do its own thing, and, relatively speaking, it has been very successful by comparison.

Other individual growers have done the job that the board should have done. I can think of two highly successful growers in my region, Jeanette and Russell Emerson, who have contributed enormously to the development of the fine wool industry. They would go to Italy and knock on the doors of processors and sell their wool directly. They were vertically integrated—if one likes. There were people throughout the industry who wanted the opportunity to develop the industry the way it should be. They certainly challenged the fiefdom—and that is what it was—of the Wool Board, and finally its hours and minutes are running out, and that is great to see.

Wool has been one of the great products of New Zealand—as a carpet, a furnishing, a suit, or whatever—but we have to understand that, in essence, wool is a protein. Its base is pure protein, and that is where the future lies for wool. I have no doubt that the real future will lie with organisations that can take wool and turn it into a product that the world really demands, not just some sort of article to keep. That is why Canesis has been set up. The Wool Research Organisation of New Zealand is an incorporated society and cannot raise money. It needs those commercial organisations under the very capable stewardship of Richard Bentley—a very commercially focused and performance-focused individual.

Although I accept that it is a huge article of faith to ask the growers of this country to yet again stump up with their money and invest in the industry, I think the bill gives this industry and those woolgrowers an opportunity—and that is all it is—to invest in their own future with a pure commercial focus. Although I personally have very real doubts about where we are heading, sometimes one just has to take that article of faith, that giant leap, and hope that one has appointed the right people. Surely the reality in this commercial world of ours is not the system but the individuals. It is the people who run the systems who will take any industry forward. It is absolutely crucial that we attract and retain the very best people, and I think we have taken a giant step forward in that direction.

I rise to support the bill. First, it is interesting being a member of the Primary Production Committee where there is a great deal of unanimity and consensus—unlike another committee I chair that is highly political. Maybe it is because the issues are rural ones, but we tend to cooperate in a way that I think brings a lot of esteem and honour to this place. Although we all support the bill—[Interruption] A Green member does not, and I apologise. Although most of us support the bill, we echo the words of Doug Woolerton: “We gave it a lot of scrutiny.”

It is worth pointing out that although growers have given us a mandate to do this, and the Government and other parties in the House have said that they will do what the industry wants to do—in this case, restructure—the point should be made, as Mr Woolerton said, that after 2 years growers can sell their shares. I think they will receive in the order of $2,000 or $3,000 each, but they have an ownership cap of around 5 percent. However, I can recall that when the Primary Production Committee was doing the Fonterra legislation at the same time as the fruit legislation, the concern it had was somehow to preserve the cooperative structure of the dairy industry to prevent the sort of corporate burgle and raid that ENZA and fruitgrowers were put through by the Guinness Peat Group.

As a Government we have done what growers wanted. This bill is mandated by growers, and this Government will adhere to that. My hope is that at the end of that 2-year period, before growers decide to sell or retain their shares, they will acknowledge that there are huge issues at stake. For instance, Mr Woolerton has pointed out the huge public good, the research, and the intellectual property that exist within a number of entities in this structure—Covita is an example—and even though there is a 5 percent cap, any person who has run a business could argue that growers could make their industry vulnerable to a corporate raid. But once this bill is passed, that will be a decision for growers. I support the bill because it is mandated by industry, but I hope that at the end of that 2-year period, growers will look very carefully at how their industry could change in terms of corporate raid or outside input, and at how the cooperative structure they have had for many years could change should they decide to sell their shares. It does not take a rocket scientist to work out that 5 percent, plus 5 percent, plus a few other blocks of shares could end up producing a controlling or dominant interest through intangible relationships between entities or growers.

As Gerry Eckhoff pointed out, there has been huge progress in the wool industry. The select committee went to the Wool Research Organisation of New Zealand and saw the amazing things that are happening with wool. As Mr Eckhoff said, with wool being a protein, that organisation is turning it into all sorts of products, and that is a magnificent thing for the industry. Again, I just hope that growers will acknowledge that and the huge value they have if they choose to maintain that sort of cooperative control in their industry.

I support the bill. It is good legislation, and I believe that it will deliver what the industry wants. It is also fair to say that, as Mr Woolerton pointed out, a large amount of the motivation for providing a mandate for this legislation is that growers, for whatever reason, have had a gutsful of the Wool Board. Finally, I say again that I hope growers will think carefully when actioning their shares 2 years hence.

The Greens oppose this bill. We support the disestablishment of the Wool Board, but from that point on we part company with what Clayton Cosgrove has just mentioned. We do not believe that there is a mandate from farmers for this restructuring. As a consequence of that, this is bad legislation. It is predicated on the basis that there is a mandate.

I want to take members through some of the figures to illustrate why I do not believe that there has been a mandate. First, there are around 28,000 woolgrowers in New Zealand. Of those, 12,000, in round figures, have fewer than 250 sheep, and those people were not entitled to vote. Already 40 percent of potential voters were disenfranchised, even though those people paid levies to the Wood Board—sometimes for many years. Sixteen thousand people who owned more than 250 sheep on 30 June 2002 were eligible to vote, but only around 40 percent of those did vote. Sixty percent of the growers were entitled to vote, and 40 percent of them did, so a total of 24 percent of the total number of woolgrowers in New Zealand actually voted.

The next question is why the vote was put as only one question. Why were the farmers given only the choice of getting rid of the Wool Board and accepting the new structure? Was it so hard to have two votes, to ask them whether they wanted to get rid of the Wool Board, yes or no? There would have been an overwhelming vote in favour of getting rid of the Wool Board, but did farmers actually understand what they were getting? Did they vote “Yes, we do want this new structure.”? I doubt it. I do not think that they thought that through, at all. They thought that anything had to be better than the Wool Board.

I am also very concerned that the people who ran the Wool Board—the organisation that has been dysfunctional for many years—have also been influential in the creation of the new structure. Did they engage in true consultation with the woolgrowers? That is a very leading question. I know that McKinsey did a survey, and it believed that it had a mandate from farmers for this structure, but there seems to be some evidence that McKinsey was instructed to come up with the new structure. If that were the case, it may be that premeditation was involved in this consultation. I remind members and farmers of the Wellington Airport case where the company was accused of not doing proper consultation. The company had an outcome in mind. It went to the shareholders and said: “This is what we’re going to do.” It believed that that was consultation! The court found against the company. If there is premeditation in the consultation process, then that becomes legally challengeable. I urge farmers to think about whether there was any premeditation in the way they were consulted; if so, they have a right for that consultation process and the mandate to be legally challenged.

Another question I have about the consultation process is whether the farmers actually understood what the reforms would mean to them in a practical sense. I personally doubt it. I am a woolgrower myself, but the information I received seemed so complex at the time that I just dismissed it. To be fair, though, at that point I had sold all my sheep—I was coming into Parliament—so I was not entitled to vote anyway. I did not really engage, but, on a serious note, I do not consider myself to be an idiot—

💬 Hon Member: Everyone else does!

💬 Hon Member: Can we have a party vote on that?

It is a real surprise! I do not consider myself to be an idiot, but I really struggled to come to terms with the complexity of these new structures. They are needlessly complex. Do farmers, or any members of the Primary Production Committee, or any of the officials, or anybody in the world, understand the intimate interrelationship between organisations like Wool Equities, SheepCo, the Wool Research Organisation of New Zealand, Keratec, Ovita, Covita, merino growers, non-merino growers, and many others that I cannot remember? [Interruption] Gerrard Eckhoff, who assures me that he has led a life of blameless excellence, does understand the complexity of those new structures, and I can only aspire to his intellectual grip. I do not understand it, and I doubt that very many people do. I am pretty well certain that farmers do not.

I am also reasonably certain that farmers do not understand how the assets that were accumulated—primarily from World War II, as Doug Woolerton said—have been diluted over time, and that the control of those assets is slipping away from farmers under this restructuring. Do they really understand what they are getting with this restructuring? Do they understand that the distribution of assets amongst farmers will, on average, come to around $1,500 or $2,000 for a big farmer? A fluctuation in the currency will give them that amount of money. It is a drop in the ocean for a big farmer. We should not forget the 12,000 woolgrowers who are disenfranchised. They could not even vote, because they had fewer than 250 sheep, even though they pay their levies. So what has happened to the $100 million in assets? Do farmers retain control of those assets? I do not think so.

That is bad enough, but the worst for me came after the select committee hearings concluded. At that point, we were informed that two new structures were being introduced into this already complex structure. They were called Canesis Network and Canesis Venture Capital. If their existence became apparent only after the submissions to the committee had closed, how could anyone believe that farmers had given that structure a mandate? They had never heard of those companies, so they could not have given them a mandate. The average cocky would not have even heard of those names. The consultation about Canesis was non-existent.

I believe that there is premeditation in this consultation process, and, as such, I believe it can be legally challenged. I believe that, because there is no mandate for this restructuring. Everything that happened after the abolition of the Wool Board is farcical. I will be supporting Doug Woolerton’s amendment to remove a lot of the latter part of the bill. I think we need to put the Wool Board assets in the hands of a statutory manager and let him or her decide the best thing to be done for farmers.

I point out that the ownership of Canesis Venture Capital consists of industrial members and other investors—no farmers there. The governance of Canesis Network consists of seven directors: two appointed by Wool Equities—that is, by farmers—three by the Wool Research Organisation, which is now pretty much a stand-alone research organisation, and two by Canesis Venture Capital. Therefore, two of the seven votes are from farmers. Is that what farmers voted for?

R Doug Woolerton: No.

I agree with Mr Woolerton; it is not what farmers voted for. They were not consulted, because Canesis Network and Canesis Venture Capital did not come into existence until after the consultation. I am not often a conspiracy theorist, but this structure has my crap-detector going off full bore. It seems to me that this is a classic set-up to rip off farmers’ assets into the hands of corporate raiders.

💬 Gerrard Eckhoff: It smacks of scampi!

It smacks of ENZA, I can tell the member that. I would very much like my thoughts of a conspiracy theory to be proved wrong. I put this matter to the Minister and to the officials—and to their credit the officials have done their best—but I still have serious doubts about this bill.

I delayed taking a call on this bill, because I wanted to allow the members who have been on the Primary Production Committee and have vastly greater experience of the wool industry than I do to speak first. Some of those who are unfamiliar with this bill may be surprised to learn that the issues it addresses have been the subject of considerable debate and controversy within the wool industry over a number of years. United Future had no representation on the select committee that examined the bill, and, as someone looking at the bill from outside this process, I can say that the issues surrounding the restructuring of the wool industry are challenging in their complexity. I hazard to suggest that the MPs who did sit on the committee also found it challenging to untangle the network of organisations involved in this process, and I think they have done a very good job in trying to address the concerns of the 33 groups and individuals who made submissions.

The most important changes that the committee has made have been in response to a lingering concern that the new grower-owned organisations would be vulnerable to corporate raiders who might strip assets by acquiring a majority stake, as occurred following the restructuring of the pipfruit industry. Vulnerable assets include accumulated tax losses and intellectual property, and funds to be invested in the joint-venture biotech firms Ovita and Covita. The draft company constitutions prohibit the sale of shares to non-growers for the first 2 years, and prevent shareholders from holding more than 5 percent. Those restrictions can be changed only by amending the constitution. Fifty-eight percent of growers approved this proposal in the referendum. The committee included a new clause specifying that those safeguards be included in the constitutions. Final approval of the constitutions and the restructuring plans is in the hands of the Minister of Agriculture.

United Future is reasonably satisfied that these changes will help to safeguard the assets of the growers, but the only real way in which that can be guaranteed is if the growers get involved in these organisations themselves. An example of this can be found in the recent announcement of the restructuring of the Wool Research Organisation of New Zealand into Canesis Network, which has resurrected concerns about corporate raiders, as the effort to attract investor capital is likely to reduce grower shareholding. This bill—nor this Parliament—cannot stop that restructuring from taking place.

We have had many calls to put this bill on hold so that there can be a fresh invitation for a mandate from growers across the country. But no one here is convinced that that would produce an outcome any different from the one we are facing right now. In fact, in conversations that I have had, the growers themselves have admitted that if a referendum or a mandate was sought to be achieved in the next few months, there would still be a huge lack of participation. Even if meetings were held in woolsheds across the country for a year to try to explain the new structures, it is unlikely that we would end up with a different result. The structures themselves are complex, and it would take an enormous effort to try to explain them satisfactorily.

In my first reading speech on this bill I urged the woolgrowers of New Zealand to participate, and to become involved in the submission process at the Primary Production Committee, and I do commend the 33 submitters who did come to the select committee. I think they have seen satisfaction in some of the changes that have been recommended. But, without going into great detail, I say that the best way that the growers can ensure their interests are represented is to make sure they become active in the new entities, Wool Equities and SheepCo, which will have interests in Canesis Network.

Other changes recommended include a cut in the number of directors appointed to the transitional company from a maximum of seven to five. The directors may still be selected from the current directors of the Wool Board, despite the widespread disillusionment with those personnel amongst growers, and the suspicion that the reforms are designed to perpetuate their careers. As Doug Woolerton has said, the same faces appearing in new places is of concern, but the answer to that concern is participation by the growers themselves. There is also a fear that those same personnel will install themselves in the top positions of the new entities, as I said. Once again, if the growers want to change the situation, all that they need to do is to get involved in these organisations, and to make sure they vote for those whom they want to lead them. The Minister has yet to approve the final constitutions, but from the drafts it is clear that there will be opportunities for the growers to have a say on who sits on the boards. I would like to say that there could be some improvement to the bill to make it clear that the new directors, particularly those of Wool Equities, would need to face re-election at the first annual general meeting. That is not clear to me in the draft, and I think it would be an improvement to make sure that it was clearly spelt out, so that the growers would know that within a year’s time they could give a mandate to that board through an election process.

The select committee extended the eligibility criterion for shares from a raw number of 250 sheep on 30 June 2002, to incorporate the average over the last 3 years. But calls to set a lower minimum were rejected. Any number that is set will be arbitrary, and although growers with fewer than 250 sheep may have contributed levies over a long time, some threshold has to be set that will overcome the transaction costs of distributing the shares. After all, we are talking about only around $100 for someone who has 100 sheep. Merino growers will not be able to swap their redeemable preference shares in the transitional company for shares in Merino Grower Investments, because it already has enough capital, but the growers will still get exchangeable shares that can be converted into ordinary shares.

Although the committee addressed some of the growers’ concerns, particularly those surrounding the issue of corporate takeovers, others remain. It is still claimed that there is no mandate for the new structure, as the referendum results reflected an overwhelming urge to dismantle the board, rather than necessarily constituting an endorsement of an alternative model. This point has been spoken to by other members before me. Some also point to the low turn-out and say that there is even less of a mandate for the proposed restructuring. By that logic most Presidents of the United States have not held a mandate to govern the United States. President Clinton in 1992 and 1996 was elected on less than 26 percent of the vote.

💬 Mr SPEAKER: Please come back to the bill.

If someone does not vote, then it is very difficult for him or her to complain about the outcome with any credibility. Unfortunately, this malaise is reflected in the industry, and the growers need to think about their own involvement in it. Granted, their interest may not be heightened by the complex nature of the structural reforms, but if the referendums did not offer a mandate for new structures, what alternatives did those growers have in mind when they voted? It would have been impractical to remove the Wool Board yet not think about what would be done in the aftermath. But growers are practical people, and I think that if they do want to have some influence over the new entities, there will come a point where most of them want to go past all the restructuring details, and to find out what the entities might offer growers once they are set up. The best way for them to ensure that the new bodies work for them is to get involved in them.

From the point of view of those running Wool Equities, there will be a big incentive to listen to the growers and to respond to them in order to ensure that they hold their shares. Growers will have representation on the Wool Research Organisation through their involvement in SheepCo and through their involvement in Wool Equities, on the other side of Canesis Network. I believe that we are offering them the best we possibly can.

I am delighted to stand in support of this bill. The National Party, as members have heard over the last few months, has always supported the dissolution of the Wool Board, and National recognises that we do so with the overwhelming support of farmers in the industry.

It all started a long time ago, of course, in the 1990s. I acknowledge John Luxton, who started the process during the forth-fifth Parliament. John made quite a contribution during the 1990s. He had vision. He worked with all sorts of other people in the industry to see this measure go through, and now, in the forty-seventh Parliament, we are seeing this bill pass. One would think that it would be passed today.

I must say that the members of the Primary Production Committee were put under tremendous pressure not just because we had to deal with Ian Ewen-Street’s endless questions, intelligent though they were, but also because of the time frames we had to work with. Ian Ewen-Street is the Green member of the committee. He is the member who galvanises that select committee, there is no doubt about that, but he galvanises it against him. The bill is already behind time. The Hon Jim Sutton promised that this bill would be introduced at the end of November. It was not introduced until 11 December 2002, and David Carter, the select committee chairperson, was under tremendous pressure to ensure that it went through. The Minister promised that it would be passed by early May. It was not. The restructuring date in the bill is 1 July. That is outdated now. Mr Sutton has been behind the game the whole way through, and I think members should acknowledge that.

But we have brought the bill to this stage. It will pass today with the National Party’s support, but there is no doubt that that is because of the select committee process. The select committee was efficient. We listened to concerns and re-listened to concerns. We all received unsolicited mail, and solicited mail as well, and we saw David Carter bring this bill through the whole process. So I acknowledge him and my colleague Shane Ardern as well.

A number of issues that were of concern were brought up during the select committee process. The first concern was about the mandate whereby 97 percent of farmers voted to see the Wool Board disestablished. Concerns were raised as to whether, when they did that, they voted for what would be established in its place in the future. But 97 percent of farmers did vote in favour. Although there was only a 36 percent turn-out, that is a good turn-out in the farming industry. I do not think anyone would argue against that.

💬 Clayton Cosgrove: Better than the National Party.

Clayton Cosgrove, I know, would be delighted to have a 36 percent turn-out of even his board members in his local electorate, so let us not argue about that.

The second issue of concern to people was the Meat Industry Association’s claim on, I think, $41 million of reserves. The select committee considered that. We appreciated the argument but, ultimately, two things nullify it to a greater degree. Firstly, the reserves were actually not recent levies but World War II payments—that applies to some of the issue. Secondly, although the Meat Industry Association acknowledges that it paid part of the more recent levy, that sum was then deducted from the price of lamb. If a $100 killing sheep was sold, $60 would go one way, but part of the remaining $40 was the Meat Board levy, ultimately. So we believe that, to a greater or lesser degree, that particular issue has been addressed.

Thirdly, there was concern about the number of sheep a farmer should own before he got part of the assets. Ninety-three percent of farmers, as I said before, supported the concept of the shareholding being based on sheep numbers. The Greens wanted the number to be 100 sheep, the rest of us were satisfied with 250, and 250 it will be. I do not know how many sheep that Green member runs on his farm, but we felt that 100 was a little low, so we have settled on 250.

The fourth issue was to do with the Wool Board presenting a restructuring plan to the Minister of Agriculture. The information we have about Canesis Network came to the Primary Production Committee late, and we acknowledge that it has come late to farmers. But we believe that we have beefed up the requirements for a report to be made to the Minister, and that concern will be addressed in that way.

So, with those issues addressed, I leave this second reading to other speakers. I hope that they will support, along with the National Party, the passage of this bill.

Bill read a second time.

Instruction to Committee