Status of Redundancy Payments Bill

I want to go through Part 1 quickly, but take the opportunity at this stage to thank my colleague Rick Barker, the author of the original bill, for the work he did in the initial stages on putting this legislation together. I am sure he will be as delighted as I am that we have reached the Committee stage in the House where we can scrutinise the provisions recommended unanimously by the select committee, which we are seeking to progress today.

I also take the opportunity to thank New Zealand First for the support it has given to this bill. In particular, I acknowledge the contribution of Peter Brown to the debate. Peter Brown is a well-known employer in the shipping industry in New Zealand, and he certainly does not deal lightly with industrial relations matters. He is a man for whom I have considerable respect, and I certainly want to pass on my thanks to him for the very careful way he has worked through the issues in this bill.

Part 1 deals with the changes to the Companies Act that are required, and with some definitions in terms of the meaning of “director”, and amends the seventh schedule of the Companies Act to bring about the changes that are necessary. When one goes through the changes that are being looked at in this particular bill, one sees it is about raising the cap on redundancy payments that can be claimed in the case of an insolvency, from $6,000 to $15,000. If one goes further, one finds that the amendments to the seventh schedule are about ensuring that that particular sum of money keeps pace with inflation.

Employees face this particular problem where a company goes belly up—that is, employees who have negotiated a redundancy settlement. I do make that particular point clear to the Committee now. We are dealing with a situation where employees have bargained to have a redundancy provision within a contract of employment. In the process of doing so, they have probably traded away other things. In other words, there has been consideration along the way that redundancy provisions will be included in an employment contract, in exchange for other things. Often, there can be a lesser wage increase as a result of that.

By and large, one is talking about large industries that have the capacity to be sunset industries. The freezing industry is a classic case in point. This bill picks up on the collapse of the Weddel freezing works in particular, but this matter was an issue in my own electorate with the reorganisation of the Alliance freezing works back in the 1980s, the move of Southland Frozen Meat to PPCS and, ultimately, the Alliance, and the reduction of the number of chains necessary, the change in work methods, and things of that ilk. So we are talking about industries where redundancy deals have been negotiated. This bill seeks to ensure that the sums negotiated do not lose their value over time through inflation.

I do not want to say much more about Part 1 other than that, but again I say to the Committee that these particular changes bring this part of the law up to date, and recognise the amount of money that people need at a time like that as they try to put their lives back together. It is a sad thing that, when a company goes belly up and there are problems with the payment of compensation, workers get badly hurt in the process. This bill recognises that and ensures they are entitled to claim a rate of money over and above $6,000, which was the previous maximum.

It is about time the House addressed this particular matter. I know that the Government is doing further work on insolvency law, and will send a bill to the House at some time in the future. I am looking forward, as the chair of the Commerce Committee, to receiving some of that work, so that our committee can get on with it.

I think Part 1 deals with those particular matters quite well, and I thank the members who contributed to that during the debate in the select committee.

I call Paul Adams.

I raise a point of order, Madam Chairperson. I would like you to explain your rationale for allocating the call.

The CHAIRPERSON (Ann Hartley): Mr Adams was the first member to stand up. That is what it was.

I raise a point of order, Madam Chairperson. For the Chair to ascertain who stood up first requires her to move her head around and look. I was standing here while the member was still speaking, and I called and you just did not look.

Mr Sowry, I did not hear you call and I apologise for that, but I have called Mr Adams.

As an ex - racing driver I am always very quick off the mark. Madam Chairperson, you are correct; I was the first one on my feet.

United Future will not be supporting the Status of Redundancy Payments Bill. The report from the Commerce Committee is of considerable concern to me. It states: “We considered the issues raised and on reflection felt that the financial dependence of employees on their employer is greater than that of other creditors who are likely to have many sources of income.” I was very concerned when I read that passage, written by members of the Commerce Committee. I believe that the statement that creditors are “likely”—that is a key word—“to have many sources of income” is a ridiculous statement to have come from the Commerce Committee, and committee members should be ashamed to have made it.

Let us talk about that issue. What is a redundant worker? A redundant worker is one who is deprived of his or her job because it is no longer necessary. In contrast, a creditor is a commercial enterprise or a person to whom money is owed.

💬 Brian Connell: Are you opposing the bill?

Yes, we are. Will employees be paid for all the work they have done up to the point of redundancy? Yes, they will. Will those employees have many other sources that they are likely to be able to apply to for work and then, again, to receive payment from for work that is done?

💬 Hon Richard Prebble: Including welfare.

Yes, the member is correct—including welfare. But what about a poor old sole trader who becomes the creditor of a failed company? I agree with Mark Peck that nobody likes to see a company fail. But here we have sole traders—in other words, people who have chosen to work for themselves and take the risk of undertaking work for a company. Just as a worker expects to be paid for work that is done, a sole trader also expects, when he or she quotes for a contract, to be paid for the work that is done.

💬 Hon Richard Prebble: And is the bank sympathetic?

No, the banks are not sympathetic. Will sole traders be paid for the work they have done, when this legislation is passed? No, they will not. In most cases a small sole trader will not have many sources of other income—absolutely not! What is worse is that the sole trader will possibly be so financially crippled that he or she will be unable to continue working as a sole trader and may, in fact, face financial disaster.

I ask the sponsor of this bill, Mark Peck, where his mercy and compassion is—I hear about that so often from this Government—for those people. Any leader must maintain a good balance between two things: truth and mercy. Both of those factors are totally missing from this legislation. The qualities of being true, genuine, actual, or factual are important—not wondering what one can say that people may perceive as being true. Mercy is the compassionate treatment of a person who is in our care. I believe that this legislation discriminates between a wage earner and a contractor. Both the employee and the sole trader are human beings with families to feed, and both want to work for a living. Discrimination is the unfair treatment of a person based on prejudice.

I have seen it time and time again that in the Government’s eyes there are two groups of people in this country. It is discriminating against one of the groups, and I believe that must stop. Both groups are made up of New Zealanders who are trying to earn a living and trying to feed their families, but one group has made the big mistake, in this Government’s eyes, of deciding to go it alone and call themselves self-employed. This Government has a totally mistaken view of what being self-employed is all about.

There is nothing like having a new president of a political party, and polling at 1 percent, to get that party suddenly to decide that it is on the wrong side of the fence. I am sure that a speech like Mr Adams’ will not go unnoticed as that member tries to find his new place on the list that he is sliding down at the moment.

Paul Adams:I raise a point of order, Madam Chairperson. I would like to point out that we have never said we are on one side of the fence or the other. We are in the centre.

The CHAIRPERSON (Ann Hartley): The point of order is not correct. It is a debatable point.

Exactly. That is the problem that United Future has. It has never been on one side of the fence or the other. It has voted with one side and talked the other way—but do not worry, because the president is sorting it out. Mr Blumsky is going to fix it, and that member will be fixed along with that problem so he will not have to worry about what side of the fence he is on, in the future. He was on Inky Tulloch’s side of the fence, so he is history.

This is terrible legislation. This legislation does one thing: it says to small businesses that supply large businesses that their money takes a lower priority in the case of an insolvency than the redundancy agreements of the staff who are employed in the business. To put it quite simply, when the freezing works goes broke, the staff will get their redundancy, which has been union negotiated, before the contract electrician gets the money that he is owed. So the electrician goes belly-up, but the staff will get their redundancy.

Sitting suspended from 6 p.m. to 7.30 p.m.

The Status of Redundancy Payments Bill puts payment of redundancies for workers who are working for a firm that goes bankrupt ahead of payments for other creditors. That means that the bill, and this part, which is part of the ordering process, says to somebody who has provided goods and services to a business that is insolvent that not only will the staff who have lost their jobs in that business be paid the wages and holiday leave owing to them—and National has no problem with that—but they will be paid redundancy. National totally opposes that ordering, because it will force many other small businesses to go under.

I gave an example of this earlier in the debate, where a business that I know of went into insolvency. Under this bill, the staff would all get redundancy payments, but all the people who had been providing services—the electricians and the people who had sent goods and were owed money—would get nothing. In many cases, particularly where they are small firms and have a lot of money owed to them, they will now get nothing, their priority is reduced, and they will go under.

So employees will walk away with redundancy, but a whole lot of other people lose their employment. That does not make economic sense. Businesses do not support this legislation at all, and I do not know why this Labour Government is so hell-bent on making it as difficult as it can for business. Why is it? What is it that makes Labour politicians get up in the morning and decide: “We must do something more to put small businesses at risk. We must—”

💬 Hon Member: It’s about worker fairness.

The Labour member says it is about worker fairness. Well, the Labour member does not understand that there is no job for the worker without people who put their money on the line and take the risk. For those sorts of businesses, this bill will stop that.

There are a couple of other points I will make about this later on in the debate. In fact, I will make one of them now; as it was such a good point, I could see my colleagues were very keen to hear me out on this. The other point I want to make is that this bill, like all these Labour Government bills that are anti-business, will change the way businesses behave. For example, if a supplier is supplying a company that it knows or hears from the rumour mill is going through a bit of a bad patch, the supplier will say: “I will come and service your machine, but it is cash up front, otherwise I will not do it. Because if I front up and fix the machine, and then you go belly-up, your workers will all be paid redundancy and I will not get anything, and I will go belly-up.”

Winnie Laban thinks that is a good idea, and laughs about it. She thinks it is very, very funny. In her electorate there is a business that went through this process: Hills Hats. She might not know that, or have been there, but it went through this process. If this law had been in place, that business would not be there now. It went through the insolvency and came out the other end, because the creditors managed their way through it. I say to Ms Laban that this bill would have put them under. Is she aware of that? Yes, she is. She is aware of that, and happy to see it go ahead and vote for it—and happy to sit there and laugh about it—even though in her constituency, she knows this bill would have put the business under.

It is the same with large firms, such as Lakeview Farms freezing works in Dannevirke, in the member for Wairarapa’s electorate. What would this bill have done to it? Has she talked to the Everton family about it? No, she has not. Has she talked to the managers of Lakeview about it?

💬 Georgina Beyer: Have they talked to me?

Oh, they have not come to her. She says they have not talked to her, so that is fine. She will ignore it. What do members think about this? She is part of the Māori caucus. Has she talked to the new Māori owners of Lakeview in Levin?

💬 Georgina Beyer: No, I haven’t.

No, she has not talked to them. I want to say to her, that if she had—

💬 Georgina Beyer: Why would I?

Because if this bill had been in place, Georgina Beyer would know that Lakeview in Dannevirke would not have got through its difficulties a couple of years ago. Is she aware of that?

💬 Georgina Beyer: I am.

She is aware of it. So she is aware that if the bill had been in place then, that business would not have got through its difficulties. So, why is she voting for it?

💬 Georgina Beyer: Because I support the bill.

Oh, she is voting for it, because she supports the bill. Georgina Beyer has not talked to the owners or the managers, even though it is in her electorate. She has not talked to them about the bill at all. She knows and admits in the House that if the bill had been passed, the firm would not have got through its difficulties, but she will vote for the bill because she supports it. Well, that is fantastic logic. That is the arrogance that this Government faces. If one is Georgina Beyer MP, one does not have to get down off one’s high horse and talk to some manager in Dannevirke or some owner of a freezing works that is providing a whole lot of jobs. She says that they should come to her. This is the regal approach to politics. That is the arrogance that has this Labour Government in so much trouble. She is not listening, caring, or worrying, but doing what Helen Clark has told her to do. She says: “I support the bill, so I am voting for it. I do not care about the consequences.” I want to say to those Labour members that when the next firm is insolvent—and there will be one—and it pays out its redundancy to its workers, Labour members will be responsible for other firms going broke.

I rise to speak to the Committee stage of the Status of Redundancy Payments Bill, which is a member’s bill in the name of Mr Peck, who is a Labour member of Parliament. May I first say to the Committee that I think that this is an abuse of member’s day, because it appears that what we are actually having is a Government bill put through on a member’s day. The public and those who made submissions did not expect such a silly bill to go through, and if they had known that this was happening, I think they would have lobbied more strongly.

The second thing I want to say to members opposite is that we are dealing with a situation of insolvency, which means there is not enough money. So somebody will miss out, and what we in Parliament are deciding is who will miss out. The argument appears to be a class argument. The people who are on wages are somehow more meritorious than those who have supplied goods. I am pinching this line from Mr John Key, but he made a point to me that I think is a very good one. If one thinks about it, creditors, who are private contractors and people who have supplied goods, have done the work. He pointed out to me that, by definition, redundancy is work that has not been done. One is being compensated for something that has not happened, and may never happen. As was pointed out by Mr Adams—and he is absolutely right—under the present law, workers are guaranteed the first bite of the apple, which is $6,000. For a person on the average wage, that is a couple of months’ income.

People not only get that guaranteed ahead of creditors, but also, if all else fails and people are unable to find jobs, Parliament offers them another safety-net—welfare. But if people are contractors or suppliers of goods, they have already paid that money out, so they are lost. Can they go along to Work and Income and say that their businesses have gone insolvent? As Mr Adams said, try putting that argument to the bank and see how sympathetic it is!

This bill is very unfair. But in addition, it is out of date. Over a third of the population now earn income not from wages but from outputs. People are in the business themselves—as owner-operators of trucks, for example. They are not in the wage and salary business, but this Government is suddenly saying to them that it is going to treat them very harshly. I say to Mr Peck that if he had gone back and done some research, and had had a look at the number of people who have gone bankrupt as the result of another bankruptcy, he would have found very few wage and salary earners. He would have found many, many small businesses—second only to the Inland Revenue Department.

Mr Peck should have done that research, but he did not. He could have done something else. He could have looked at the Government’s own research, because it did a study, the Insolvency Law Review, which was put out by the civil service. That looked at whether we should alter the priority. The Government’s own civil servants told it not to make this change. I ask Mr Peck whether he bothered to go and talk to those civil servants. Did he bother to read the report? Did he bother to find out what research they had done? No. This bill is trying to save a member who is facing redundancy in Invercargill. Instead, he ought to do something about schools being made redundant. That would do something for him.

💬 Hon Rick Barker: Watch out, Richard!

There is Mr Barker calling out. What is the member’s interjection?

💬 Hon Rick Barker: I am just saying “Watch your back.”; Mr Hide is watching.

Mr Hide most certainly is looking after my back. He is also looking after the interests of the taxpayer. I ask Mr Barker what he will say to small businesses in Hastings that find that they will get no money from the next insolvency, because he voted for this bill so that the workers can get the money. Let me make this clear to members. When one reads the bill carefully, one sees that middle management—the people who made the business bankrupt and have the worst claim, morally—can make a claim under this bill, too.

I thank members who have contributed to the debate so far, because they have raised a number of issues that set some clear, delineated points between the parties. Again, I thank Peter Brown for the work that New Zealand First has done in coming to its position on this bill, and for supporting the bill tonight.

I want to go through one or two of the arguments that have been put up. First of all, there were the arguments from Mr Adams about sole traders, and about the position of contractors and the conditions they face as and when difficulties arise. I say to the Committee that the Government has addressed that matter, at least in part. There may be other work still to be done that I am not privy to, but I do know that the Construction Contracts Act—which recently passed through the House and, if I am not mistaken, was opposed by the Opposition—dealt with the issue of what happens to subcontractors when a contract gets into trouble. Essentially, that legislation attempted to deal with that particular issue upfront, before it became an issue at the end of the day. In other words, contractors would be able—[Interruption]; if the member will let me finish—to be paid throughout the process, and to get progress payments for the work they were doing. That was done in response to the very real and tragic circumstances many contractors have faced when they have taken on work as subcontractors on major sites.

I want to come to the issue of sole traders and independent contractors. I remember when we debated the Employment Relations Bill there was huge debate on the other side of the House about including anything at all about independent contractors in the industrial relations legislation. One of the things about this legislation is that it does not attempt to address the issue of small businesses that are facing problems; it is, unashamedly, to do with employees. The current Government does support the principle of pari passu, which Richard Prebble knows well. In other words, it means that like creditors should be treated equally. In this case we are dealing with employees. We are dealing with workers who have the least ability to mitigate their losses in a situation like this. The legislation will apply only to those who, as I said earlier tonight, have negotiated redundancy agreements into their employment agreements—and, in the process of doing so, have probably given something away to get that consideration.

I would hazard a guess that most people who work in mum and dad’s coffee bar, or in a business with two or three employees, do not have redundancy deals. If the business goes belly up, they take their chances like everybody does at the Work and Income office and—hopefully—find a new job. But we are dealing with industries in which there is the possibility of sunrise and sunset. We have talked about the freezing industry. I am pleased to tell the Committee tonight that, in my electorate, people are talking about building a new freezing works. This bill will not put them off doing that. They will go ahead with it, and so they should.

I want to deal with the issue Roger Sowry brought up. In 10 minutes of debate, the only issue he brought up was that of compliance costs. I just want to remind him that today it was revealed that the World Bank survey shows New Zealand to be one of the most favourable regimes in which business can operate. Indeed, in spite of the rhetoric of the Opposition, we have a very business-friendly regime, and this legislation most certainly will not cause any employers to have sleepless nights. It is true to say that, in the submission process, we heard from the Business Roundtable and Business New Zealand, which were opposed to the bill—surprise, surprise—but what we did not hear was any grumbling at all from other businesses that may or may not be affected by the legislation.

I finish on one point, which was made by Peter Brown in one of his contributions the last time we debated this bill. If employers do not want a redundancy deal, they should not enter into one. But if employers enter into one, they should be prepared to pay, because that is what it is about; it is about agreements between employees and their employers. That is what it is about. It is not about a Government saying what the obligations should be.

This bill deals with the unhappy situation that occurs when a business finally goes under. Nobody wants to see that, but neither does anybody want to see what happens to workers when they get thrown on the scrap heap. I know that Rick Barker and others on this side of the Chamber have had to deal with what happens to people when they lose their employment through no fault of their own, and have to try to pay the mortgage and look after their families. In addition, those workers face very long stand-downs. When I was involved with the Ocean Beach freezing works redundancy, I had to deal with tradespeople who had stand-downs of 52 weeks before they could get any income. Had they not received a redundancy package along the way—which, by the way, they agreed to take in a couple of hits in order to assist the company to get out of its difficulties—they would not have been able to meet their commitments, at all.

Not one major business has come to see me to tell me not to go ahead with this bill. They understand the Peter Brown principle: if they are going to have a deal, they are going to honour it.

I listened with interest to the member’s speech, and I think he has very largely hit the nail on the head. I listened also to the members from the National Party and ACT. They made some valid points, and I give them some credence, but I would give them even more credence if they had had the strength of character—I will not say gumption—to record in the commentary of the Commerce Committee that they oppose this bill. There has been not a word of opposition to this bill from anybody. The commentary states: “We”—that is, the whole select committee—“recommend that redundancy entitlements be included within the employee priority. We consider that such entitlements form part of a contractually negotiated package for employees, which may have included trade-offs in relation to wages or salary.” It goes on to state: “We considered the issues raised and on reflection felt that the financial dependence of employees on their employer is greater than that of other creditors who are likely to have many sources of income. We also recommend the exclusion of company directors and controllers from the employee priority.”

The select committee got it 100 percent right. This bill is about an employment contract in total having priority—not half of it, not just wages and holiday pay, but in total. Wages, holiday pay, and any redundancy agreement that is put in a contract will have the same priority. As Mark Peck just said—he echoed my thoughts from before—if the employer does not want to pay redundancy in such situations, he or she should have the gumption not to put a redundancy provision in the contract.

I have been an employer in a major industry, and I know the feelings of working people when they are laid off. It is awful. I know that many workers in many industries are prepared to take a lower wage rise, or have poorer conditions, to ensure they have a redundancy package if things go bad. I heard Roger Sowry talk about creditors, and I have some sympathy for creditors, particularly those that are adversely affected by such circumstances. But they are in the minority. Many creditors have other, ongoing business at the same time, but the working people in a particular industry lose totally. Some people who have reached a rather mature age do not get any further. They have nothing.

💬 John Key: Are you supporting it?

I say to Mr Key that, yes, I am supporting it. I will stand up for the working people of this country. If somebody from this side of the Chamber is not prepared to do that, then I think that is pretty shameful. In this country, working people work pretty damn hard. I come from a country that has suffered from the actions and inaction of people who wanted demarcation, and I am absolutely proud to be part of a country where working people are prepared to put their backs in, prepared to do things, and prepared to look after the employers’ interests.

I heard the Hon Richard Prebble say that Mr Hide is looking after the taxpayer. If he really wants to look after the taxpayer, he will support this bill. When people get a redundancy payment, they cannot go on the dole for quite some time—in some cases, Mr Peck said, for 52 weeks. There is a minimum time when people who have a redundancy package cannot get the dole. That saves taxpayers’ money. This bill helps the taxpayer.

This bill is genuine, and needs to be considered properly. I suggest that the select committee did that. There is no inkling in the commentary that there was any dissent at the select committee. The National Party, in particular, was well represented on the select committee; its deputy leader and the Hon Maurice Williamson were on it, and neither of them is a slouch when it comes to having a say and expressing his concerns. The ACT party was represented by Rodney Hide—

💬 Hon Richard Prebble: He was looking after the taxpayer.

He was looking after the taxpayer. Is the ACT party’s support split on this? I would like to think that perhaps someone in the ACT party is thinking a little bit further about the taxpayer and about the working people of this country. This bill delivers something that I think working people are entitled to. But I repeat: if employers do not want to pay out redundancy, and are nervous about having a redundancy agreement, then they should not put it in a contract. They have a choice. Employers, believe it or not, are not a pack of fools. They know what the industry is about. They know about tough negotiating. They are not bowled over by trade unionists, or by anybody else who comes into the room—they do not keel over like a feather. I know that first hand, because I was one of them. For many years I was a negotiator for waterfront employers.

Curiously, I did the original draft of the Status of Redundancy Payments Bill. I say to Mr Prebble that the people of Tukituki—which was then the seat of Hastings—know full well about this bill. I told them some time ago that I would move this bill, and I am really proud to see that my mate Mark Peck is bringing it to a conclusion—something that I could not do. The very reason that this bill exists is the closure of the Tomoana Freezing Works. The Tomoana Freezing Works is a very interesting example of an insolvency. I want to correct one thing that Mr Prebble has got very wrong. The workers at the Tomoana Freezing Works were offered a wage increase one year, but they said that they did not want a wage increase and would prefer a redundancy agreement. They had some discussions with the boss, and, in the end, forewent a wage increase in return for a redundancy agreement. They paid for their redundancy agreement year after year, and they lost it because of a piece of Tory legislation written by the National Party for its mates. National wrote legislation to cut out the redundancy payment that workers could get, so that creditors—the National Party’s mates: big business and big banks—could get more in an insolvency situation.

It is a well-known fact in Hastings that the workers at the Tomoana Freezing Works lost thousands of dollars in wages, holiday pay, and all the rest that was owed to them. Yet the company that financed the freezing works, Weddel, received all its money. The banks received every cent owed to them; they lost not one cent. Mr Prebble will say that this bill is bad legislation because it would give money to workers and deny it to small, legitimate business. The truth of the matter—and Mr Prebble knows this—is that the people who win the most in insolvency situations are the big banks. All the major trading banks in New Zealand were owed money by Weddel, and all those banks received their money in full. The only people who did not receive their money were the workers. They were restricted because a piece of Tory legislation stated that they could be paid no more than $6,000. I think that is terribly wrong, and we will change it.

I congratulate Mark Peck and the Commerce Committee on their excellent report, which states that the maximum for preferential claims now will be $15,000. I would have liked that figure to be higher than it is, because if people are owed money by way of wages, then they have made their contribution. They have cut the throats of all those sheep, have dressed them, have broken them down, have put them through the freezers, and the product has been sold. Someone has benefited from that. The people who have not benefited are the people who made it happen: the workers. In my view, they are entitled to be paid for their labours. I think it is a shameful position for anybody in this Chamber to say that people who have done the work are not entitled to be paid their wages. I will argue against that anywhere. Mr Prebble is welcome to come to Hastings on any occasion and we will have a debate about it. I will get together the 1,600 or 2,000 workers who were at the Tomoana Freezing Works, and Mr Prebble can get up and say to them that the banks deserved all the money they received and that the workers deserved nothing—and, in fact, that the $6,000 the workers received was too much. That is his position.

I say to Mr Prebble that the 2,000 workers who were at the Tomoana Freezing Works do not believe that for one moment. He is trying to visit poverty upon people like them. He does not care about their lifestyle. I saw much poverty as a result of the closure of the Tomoana Freezing Works. What happened to people’s lives was shattering. Richard Prebble does not care about that, as long as the banks have their money, because the banks support the ACT party. As far as I am concerned, the Labour Party is here for ordinary New Zealanders. We are here for everybody. We want to make sure that people get a fair deal, and that is why we support this bill.

I was really pleased that Peter Brown gave the speech that he did—I thought it was fantastic. It showed that he is concerned about ordinary New Zealanders, and wants to make sure that their conditions are protected. This issue is not about the vested interest of the banks. If the National Party continues on that path, then I say good luck to it. It will need the Status of Redundancy Payments Bill—and so will Mr Prebble, with ACT at 1 percent in the polls and falling. Mr Prebble’s main supporter, Rodney Hide, told the Chamber people should vote for National, because ACT does not need any more support—it is happy to go below 1 percent. I say to ACT that it will need the Status of Redundancy Payments Bill at some time in the future. Redundancy payments in this place are around 3 months’ pay—that is it; members cannot get any more. I say “good on you” to the ACT party, and that it should keep to that line of argument. It shows that the ACT party is a narrow, sectional-interest party.

Is it not extraordinary to hear a party that has no understanding—no comprehension at all—of what makes economies and communities work? That party thinks that money just grows on trees and is there for the picking. If we do not have the risk takers, if we do not have the people who are prepared to take risks and invest their money, we do not get the growth or the jobs that this Government wants to protect the whole time. I have no difficulty in telling somebody he or she is entitled to X number of dollars. That is because that person has put the effort in and should be rewarded for those efforts. But I object to that becoming a very one-sided issue. After the investment has been made, if people are going to lose their shirts this Government says it will forget about those people, their families, and the staff they employ, because it has to look after the vulnerable worker.

We have just experienced probably the biggest flood disaster we have ever known in this country. I have just come from a meeting attended by growers from the Rangitikei and the Manawatu who will have absolutely no income at all this year. The potato crops have been lost, and the pumpkin and squash crops are hanging on the fences—and I have seen them there. And this bill states to those people who have made the investment and got no income—and who are not likely to get any income next year either, because it will probably take them 5 years to get back to square one and recover the position they would have had if the flood had not happened—that the Government is not worried about them, but that the 2,500 employees who work for them will be paid. On top of that, if there is a redundancy agreement this bill states the employees are to receive redundancy payments. And then they can go down to Work and Income New Zealand and get a benefit. We say that is wrong.

If we look at the downstream effect of that, we see it will not only be on the growers—the farmers, and the other producers. We may ask about the effect on the processors and transport operators. And what about the flow-on effect on a business that may well move into liquidation? We have not yet seen the worst of what will happen in those communities. We have seen the visible effects, as we do when we have earthquakes and disasters like that—in this case, floods—but we have not seen the downstream effects on the business people in those small communities. If they go bung—if they have to close the doors—and there is a redundancy agreement, the employee does not miss out. The employee will get paid. The Inland Revenue Department will get its cop, because that is the first charge that has to be paid. After that, of course, there is any redundancy agreement.

On page 2 of the commentary on the bill, the committee stated: “We consider the cap should be raised to $15,000. We recognise that the removal of the cap may detrimentally affect other creditors,”. That is exactly what will happen to the small operators. The 297,000 small businesses out there will be carrying the can for a Government that does not appreciate or understand what makes this community work. We have all the compliance costs that Roger Sowry talked about, and now we have this sort of legislation that states that the workers will benefit from, or get something out of, an insolvency, while the creditors and the owners of the business carry the can.

In earlier days I was involved with a mortgage discounting scheme. Members may remember it. Businesses got into deep trouble. I was in the Rural Bank in those days, and we were giving farmers $40,000 to walk off their farms and buy a house in town, because their liabilities were greater than their assets. They had negative equity. Now what happened to the staff—to the people who had worked on those properties? Although they did not get anything, at least they had a home to live in. But the farmer who had owned that land, had put the investment in, and had raised the money through a trading bank—or, in this case, through the Rural Bank, which is why I was involved—lost everything.

I must confess I was disappointed with Peter Brown, and also Rick Barker, on their definition of a worker in this nation. The whole thing seems to focus back that one is only a worker in this nation if one is on somebody’s payroll. Let me assure members that there are many workers in this nation who are not on payrolls, who take the risks, who go out and work for themselves. What I dislike about this entire legislation is that, yes, there are agreements for redundancy and all those things, but it is basically paying somebody for work that is not done, before it is paying somebody for work that is done. Mr Peck should not shake his head, because that is quite correct about what is happening.

The self-employed small-business people in this country face many challenges, even with Accident Compensation Corporation benefits. Perhaps they have had a tough year. They are just establishing a small business, yet, if they are tired and injure themselves, what is their income from that point based on? It is based on what they have earned in the previous year. If they have not earned anything as such in the previous year, they are really starving. So they have many things.

I do not want to get into a discussion on whether a person on a wage is better off than a self-employed person, because it is not an issue about that. I employ staff, I appreciate staff, and they are the backbone of any company. They are the ones who make or break the business. So I am not getting into a debate about which is better and which is not. But let me give an illustration that may show members how the thinking changes. There is not a right or wrong on this, but let us take a seed. Let us take a pine seed. A worker may see it just as a seed, so he will eat it because he will see it as food. Yet the entrepreneurs in this country will see that same pine seed, and they will decide not to eat it, but to plant it, because they see within the seed a pine tree—that can produce a pine forest, that can produce a timber company, that can employ people. So it goes on. This is where we need both types of people.

We heard Mark Peck mention that the Credit Contracts Act was enacted to cover payments for these small workers. That was great, but this bill now takes away all that advantage. For those workers who have come to the last part of their contract—let us go to the end so the member is happy and agrees with me—maybe on this invoice they have most of their materials, which is what would happen with a lot of tradespeople, and the firm goes turkey up. Right. So they have done the work and they have bought the materials. They have invested their money, but this legislation is telling them they cannot get their money for what they have done, unless redundancy has been paid out to workers who have already been paid for all the work they have done. This is to tide them over for a period, unless they get work. As has very rightly been pointed out tonight, the moment those workers are made redundant, they are able to go down and register for the unemployment benefit. Therefore, from that day on, they get income coming into their families.

What happens to the small contractor who also has a family and children to support? What happens to him? Firstly, he is devastated emotionally, because he is now in a situation where he is likely to face bankruptcy through absolutely no fault of his own, through circumstances and situations that he had absolutely nothing to do with. We talk about agreements. We talk about a redundancy agreement that is an agreement between a worker and an employee for that which they expect in the future.

If we are going to have that sort of agreement, I ask Mr Peck about the agreement where a contractor quotes for a job, puts in the tender, has to be competitive, and is fighting against many others. What about that agreement, where the contractor is saying he will do the work and the client is to pay for it? There is no rationale in the argument that one agreement may stand because someone is on a payroll, but that another agreement does not matter, because the person is not on a payroll, has taken a risk, mortgaged the house, and has taken on workers.

I note that the Act is to come into force 60 days after the date on which it receives the royal assent. I say to the Committee that business people in this country will think that that day is too soon. In fact, I think they will agree that any day will be too soon. I want members of the Committee to be absolutely clear about this: this is a union-driven initiative, and Mark Peck is just the errand boy.

💬 Mark Peck: I raise a point of order, Madam Chairperson. The member knows it is totally out of order to suggest that any member is doing anything other than representing his or her own views in this Chamber, and to suggest that anybody else is carrying the candle for any other organisation in this place is out of order.

💬 Hon Richard Prebble: It is incorrect to suggest that a member is being directed by outside people. But in respect of the idea that he is carrying a message, I have seen people elected to this place saying they are coming here to deliver a message. That is not out of order, and I am surprised the member is not willing to be put up as a supporter of the trade union movement. I did not object when Mr Barker claimed that the ACT party was representing bankers. It did not seem to me to be likely and I am not aware of that connection. If Mr Peck’s comment is out of order, then I wonder why Mr Barker was not pulled up for his.

💬 Hon Rick Barker: Mr Prebble tries to cunningly confuse the issue. He talks about Mr Peck carrying a message. That was not the accusation made; the accusation referred to the term “errand boy”. That implies a contract of service, a master-servant relationship—the person is carrying an errand on behalf of someone and is being directed by him or her. Therefore, it is not about carrying a message; it is about acting under instructions. I have to say to you, Madam Chair, that an allegation of being under instructions and under the control and direction of someone in a master-servant relationship is totally out of order.

💬 Lindsay Tisch: Point of order—

The CHAIRPERSON (Ann Hartley): No, I am going to rule on this—

💬 Lindsay Tisch: Point of order—

💬 Jill Pettis: It won’t be anything new.

💬 Lindsay Tisch: I am on my feet—

The CHAIRPERSON (Ann Hartley): No, the member is not supposed to be on his feet. I have stood up and said I will rule on this. There will be silence while I am ruling. Mr Prebble is quite correct. The insinuation was not that the member was “under the direction” of someone, or that he was being “directed” by someone.

💬 Lindsay Tisch: I raise a point of order, Madam Chairperson.

The CHAIRPERSON (Ann Hartley): Is it a new point of order? I have ruled.

💬 Lindsay Tisch: It is a new point of order. I am not going to revisit what you have said. When I was standing—and I did seek a point of order before you stood up—Labour’s senior whip told me to sit down. I was asking for a point of order, and she interjected. Points of order are to be taken in silence, but the senior Government whip yelled out while I was standing and before you stood. I ask for your guidance and ruling on this matter.

The CHAIRPERSON (Ann Hartley): I take the point of order. I was on my feet, so I had asked the member to sit down, too.

💬 Hon Taito Phillip Field: I raise a point of order, Madam Chairperson. As a member of this Committee, I take offence at another member being referred to, in a derogatory way, as being an errand boy.

The CHAIRPERSON (Ann Hartley): I have ruled on this. I refer members to the rulings on page 47 of Speakers’ Rulings. I have ruled on the matter.

We have established that Mr Peck is an errand boy, and when he took a call he dispelled any view at all that he knew something about business. He tried to defend the indefensible. He stood up and tried to say that workers were the only people in this country who were entitled to be secured creditors. The fantasy that Mr Brown tried to perpetrate in this Chamber was almost unbelievable. The theory that employers do not have to have a redundancy agreement is one thing, but if they tried to run a business in this country without offering their workers such an agreement then all Mr Peck’s union buddies would come down on them like a tonne of bricks, threatening to put them out of business. That is an absolute fantasy, I say to Mr Brown, and he should hang his head. That just does not hang together, at all.

In my opinion the Government has absolutely no right to get involved or to come between employer and employee negotiations or agreements. This legislation is the worst type of nanny State mentality I have encountered since I have been in Parliament. It demonstrates that this Government has a clear, anti-business bias and has a view that employers and businesses have deep pockets they can continually trawl through for easy money and cheap votes, regardless of whether they think it is right or wrong.

The assumption is that all business is big business and has the capacity to pay, regardless of its financial position. That is not the reality—[Interruption] If that member would shut up for a moment she would also learn that that is not the reality. The reality is that businesses employing 10 employees, or fewer, make up 92.5 percent of all businesses in this country, and those employing five employees, or fewer, make up 86 percent. To put it another way, those businesses are not the large meatworks that are meant to be the inspiration for this type of nonsense. In reality those businesses are the small businesses, the mums and dads—I say to Mr Brown—who have mortgaged their homes. They are the very people whom his party purports to stand up for and who have mortgaged their homes to take a risk to get into business.

What will this Government do to them now? When things go bad, what will it do to them? It will clobber them. That is going to win a lot of votes! Will those businesses be able to pay? Of course they will not. Mr Peck should think it through. There will be neither enough cash nor enough assets, because they are small businesses.

Let us use an example. A couple mortgage their house and raise $70,000—and if I cannot get through this in the time I have left, I will take another call and continue. They start in business and things go OK for a while. They employ five people. Suddenly things go awry. Their biggest customer, who owes them a hundred grand, does not pay and suddenly the squeeze goes on. To cut this sad story short, they end up going belly up. It is a low-cost business and they have very few assets. The receivers move in and they find there is $35,000 in the bank, but this is owed to creditors—that is, suppliers, who are the very people Mr Sowry mentioned. They are the electricians and the plumbers who have done the work and are expecting payment, unlike the employees who have not yet done the work. Let us think about what the definition of redundancy is. It is for loss of earnings; it is not for money that one has already earned.

💬 Hon Rick Barker: Rubbish!

That is what one gets paid for, I say to Mr Barker. One goes to work and gets a fair day’s pay for a fair day’s work.

I move, That the question be now put.

I rise to make one further point in respect of the bill—a point that Mr Peck has not addressed. When one looks at the bill, one discovers that the only employees who are excluded are those who are directors. So in many large companies—the freezing works are the examples that have been given—there would be senior managers who would be entitled to redundancy. I ask the Committee where the fairness is in that. I go even further than that—

💬 Mark Peck: What was the point? I missed the point.

The point is this: the only employees who are excluded are those who are directors, or relatives of a director. So the management of a company can get redundancy. I say this to Mr Peck: yes, there are examples where companies go broke when it is no one’s fault; there has been a change of economic circumstance. It might even be the example just given by Mr Connell, where a major creditor fails to pay, but I also have to say to him that in my experience of insolvency, frequently it is the result of mismanagement—of managers making bad decisions. I say to Mr Brown from New Zealand First that I know about the case, which he told us about, of the stevedoring company. Yes, what it did to them was wrong, but I also know that the employees in that case actually did have an opportunity to renegotiate, and they turned it down.

What about the creditor? The creditor does not have such an opportunity. The creditor is told a company is a good company, and has no way of knowing that it is actually going broke. The management may know it is going broke, but the creditor does not, and the creditor loses. I ask where the morality is in this. The very people responsible for the insolvency, who may have been totally irresponsible, are now going to get $15,000 guaranteed to them, and it will be money that is actually taken from small business.

The only people excluded are directors. Well, they are frequently nowhere to be seen. That is a piece of nonsense, and when people get up and say: “The hard-working worker did a fair day’s work, and worked hard. Why should he not be paid?”, I say that, sure, there are many such people, but there are also just as many cases where the management by their actions put the company under, and now this Parliament is saying that those people should be rewarded. Where is the justice in that? I ask Mr Peck where the morality is in it. Where is the business sense in it? It is clearly wrong, and the small business that supplied the goods and services was honest. It supplied the goods and services, and it had no chance. But the management that put the company broke, under this bill is going to be rewarded. Surely the House can see that that is just wrong.

This has been a very interesting debate. Firstly, let me respond to one of the points made by Brian Connell. I have to say that I found his presentation very disappointing. To claim that people who are owed wages and owed holiday pay have not earned it is just ridiculous.

💬 Brian Connell: I raise a point of order, Madam Chairperson. I never said that people who were owed wages or holiday pay were not entitled to that. That is misleading the Committee.

The CHAIRPERSON (Ann Hartley): That is not a point of order. It is a debatable point.

I want to repeat the point. I listened to what Mr Connell said, and I am happy to get the Hansard out. I want to make it clear that he made it very clear to this House that people who were owed money and would benefit from this bill, had not earned it. That is what he was implying, and I say to Brian Connell that that is simply not correct. These people have earned it. It is money that they are owed, wages they have not been paid, and holiday pay they have not been paid. They have earned it, and if Brian Connell wants to stand in this Chamber and say that people who have unpaid wages and outstanding holiday pay have not earned it, well, I am happy to argue with him at any place about that.

As to the point that was made by United Future as to why other people should not be paid, and why these people, the workers, should get some money—which ties in, really, I guess, with the point that Richard Prebble is making—the fact of the matter is that when a business goes bust it is unusual for it to have sufficient money to pay everybody. That is why we have a problem; not everybody can be paid. Richard Prebble’s argument is that the line for people who are owed wages and holiday pay should be moved back as far as it can, contracted as far as it can, so it leaves more money for other people.

He makes a case for the small-business person who is a small contractor, but I make the point to Richard Prebble that the vast majority of money that is taken out of those situations of redundancy is to the banks. I am not particularly down on banks, but I want to give him just two examples. The first one I have spoken about is Tomoana Freezing Works. The banks got every cent they were due. I have got 2,000 people in my constituency who are owed money.

💬 Mark Peck: Thirty-five million.

They are owed $35 million. That is what was owed to the people of Hastings, in the area of my electorate, and the banks, nearly all overseas-owned, got the lot. Richard Prebble says that is a bad thing. It is bad luck for the people of Hastings, good luck for the banks, and he supports that. He does not want to see any redress. Well, I say to Richard Prebble that I am on the side of my constituents. I want my constituents, in any future redundancy, to get their money.

💬 Hon Richard Prebble: What did the banks do wrong?

The banks knew exactly what was going on in the case of Weddel Tomoana. They had a person in that head office every day. They knew all its accounts. They could have put that company under, any time they wished, and they did not. They decided they could not. Instead of putting any company down, which they could have—AFFCO, or otherwise—they in fact decided to down Weddel, and my constituents lost $35 million.

So what we are deciding here is where the balance lies. ACT wants to cut the workers back more and more. The National Party wants to cut the workers back more and more. That is their traditional ground—beating up on unions and beating up on working people. They realise; they think there are no votes for them in this, but they do not care. All they are interested in is big business. They see that if the line has shifted from $6,000 to $15,000 in the small pool of money that is outstanding, then the workers are going to get some more, and some of the banks are going to get less.

Well, I have to say to them, that is just tough. We are entitled to draw the line, and the proposal to this House is to make it $15,000 rather than $6,000. As for what Paul Adams is saying about the other small-business people, well there is a difference here, Paul. These people have a contract. The contract says that in the event that they are laid off—

💬 Brian Connell: I raise a point of order, Madam Chairperson. I understand that it is a convention in this Chamber that members are referred to by their correct names.

The CHAIRPERSON (Ann Hartley): That is quite correct. The member will refer to members by their correct names.

Yes; I am sorry. The member did not take offence but I accept the chastising from the Chair. The point I want to make is that there is a contract here. The contract says—and I give the member the example—that the workers at Tomoana Freezing Works went without a wage increase in return for redundancy agreement.

What that member is effectively saying is that there should be no sanctity of the contract. There is a contractual agreement. Other people who enter into business arrangements with them might have a different contract of agreement. They might be unsecured.

💬 Paul Adams: What about the creditor’s contract?

Well, if that is what they have done their business on—being unsecured—that is the way they have conducted the business. But in terms of the workers, they have decided to negotiate an agreement that has a redundancy clause, and I would have thought that United Future would argue in favour of the sanctity of the contract and said that where a contract exists it should be honoured.

I want to take up a few of the points raised by various members. First of all, I would like to correct any impression I gave to Paul Adams that only employees are working people. I accept the point he made. I know that self-employed people are working people and that they work very hard, and I hope the member takes my correction.

I would like to talk about the people affected by the flood, which was an issue that Lindsay Tisch raised. If I heard him correctly, he is saying that employees of a small business in one of the flood-stricken towns will have lower priority than a contractor who lives miles away and is not affected by the flood. The flood victim is going to lose his or her job, yet Mr Tisch says that any payments made should go to the contractor, who might live in safe surroundings quite some miles away. I find that to be an unusual argument, to say the least.

Mr Connell raised the point that all employers are subjected to heavy-handed tactics by union officials. He seemed to imply that. I think that, from memory, only about 20 percent or thereabouts of working people in this country are in a union. The vast majority of people who work for small businesses are not unionised, and in all probability they do not have a redundancy clause in their employment agreements. So I do not know how he comes to the conclusion that small businesses will be highly saddled with union officials coming in and demanding this and demanding that, when in fact no such clause will exist in most of the agreements. Nobody will come in after the event and say that the business should have had this, and because it should have had it, it has to have it, and has to pay out accordingly. I find the argument a little bit unusual, to say the least.

In terms of the larger employers who do have a unionised workforce, to suggest that the employers are weak-kneed or they cannot look after their own interests is rather insulting. I can only tell Mr Connell that if they are that bad, I had better get in amongst them, because there is still some steel in my spine. I had better get back there pretty damn fast, because if employers cannot front up—

💬 John Key: Intimidated!

Intimidated? I can recall employers who were so tough that they would make the lot of us here look like a bunch of juveniles. Do not go away with the impression that employers in this country are easy meat for anybody! They are hard-working, but they are also hard-nosed. So members should not think that union officials walk into the room and these guys fall over and say: “What do you want? Where do we sign?”. It is a long way from that, I can assure members. As I say, for many years I was an employer in the association of waterfront employers, and we had some right stoushes, I can tell members. I do not think the unions got terribly much that they did not have to work damn hard for. Equally, we employers achieved some quite workable agreements as a result of those stoushes. It is two-way traffic and a two-way dialogue. It is very demanding at the time, but at the end of the day virtually all agreements are like that; there might be a bit of rough and tumble in getting there, but they are agreements. I have yet to meet an employer who has had a gun put to his or her head, literally, or had his or her arm squeezed up his or her back, or anything like that, and signed an agreement.

💬 Hon Richard Prebble: I have.

Oh, the member has?

💬 Hon Richard Prebble: Most certainly, and on the waterfront, too.

Well, I tell that member that the waterfront unionists used various tactics, but I have never seen them go to the extent of the physical action of putting people’s arms up their back, or whatever. I tell Mr Prebble that some of the employers in the days that he is talking about were what I call phoney employers. They did not actually employ the labour; they represented the shipowner who put the ship through the port, and they bowed to pressure that they should not have bowed to. But since port reform, where I had a positive role, things have changed quite dramatically.

💬 Hon Richard Prebble: I had a minor one.

Mr Prebble did have a minor one. In fact, I remember advising people on what they should say to him when he was the Minister. I was quite pleasantly surprised when they came back with the right answers.

I am going to make a contribution because I have been listening to this debate, and from the sound of, in particular, contributions made by Mr Sowry and a few others, one would think that this bill is in relation to something that has not been agreed to in negotiations between employers and their workers. What we are talking about here is a situation where a redundancy package has been properly negotiated to be part of the terms of employment of workers.

I want to take up, first of all, the implication made by Mr Sowry that redundancy payments would send a business belly up. Well, that is just not right. What we are talking about here is, in fact, a business that has already gone belly up and is facing closure, with the workers losing their jobs, and with the employer looking at honouring what has already been negotiated and agreed to in terms of a redundancy package.

I want to make another point in relation to some of the comments that have been made about workers having immediate access to welfare payments after a closure. In my experience that is certainly not the case. There is a stand-down period where holiday pay has to be taken into account, and other moneys that have been paid out to workers have to be taken into account. In some cases there is quite a lengthy stand-down period for those workers before they get payment of a benefit or anything else.

I can appreciate the arguments that have been put forward by some members in relation to the plight of small business. Sometimes those hard-working people have taken a risk in terms of investment. I take on board the points that have been made by Paul Adams. There are a lot of hard-working New Zealanders who make a commitment and a sacrifice in starting a business, and that needs to be acknowledged. Nobody on this side denies that.

What we are talking about is the situation that prompted this bill. It has been aptly described by my colleague Rick Barker, and in the speeches made by my colleague Mark Peck, and I want to congratulate him on sponsoring the bill. It is a situation of closure where a significant workforce is made redundant, and where small communities in rural areas are affected. We have had some colleagues on the National side talk about farmers and their situation. Often these huge redundancies have affected rural towns and farmers. Some of those farmers who have been made redundant have been reliant on working in the meat industry during the killing season to supplement their earnings.

I agree with the points made by Rick Barker in relation to the Tomoana Freezing Works closure, but I also want to identify with the Patea Freezing Works closure because that was a classic example of a whole community that was affected by redundancy. Those workers losing their livelihoods turned that town into a ghost town. The loss of jobs and loss of income affected their children and families, and also affected the whole community of Patea. Other small businesses in Patea were detrimentally affected as a result of that closure. When we talk about employers, under this bill, having to give workers priority where a redundancy provision has already been agreed to, we are taking about the survival of small communities. A lot of small businesses in a small, rural town like Patea are very much dependent on the income of workers. That is an aspect that members also have to take into account. It is not a simple question of our just viewing this matter from a small-business point of view, or from a business point of view; it is also a question of how it affects other New Zealanders—ordinary, working New Zealanders. Closure not only has an effect on families and children; it has a downstream effect on communities and on other small businesses in those small towns.

That is where I think the issue of fairness has to come in. We cannot be one-eyed, because nobody is not going to suffer as a result of a closure of a business. I think all people in small businesses—management as well as staff—suffer as a result of that situation, and I think it is very, very important to have a balanced approach, to consider what is fair and what priority should be given to workers, and to consider the downstream effect that I have been talking about. I think this bill has a balanced approach and a fair approach to the issue of redundancy.