KiwiSaver Bill

It is wonderful to have an opportunity to take a call at the beginning of the Committee stage of what is a very important piece of legislation to the Government, to Parliament as a whole, and, indeed, to this country. The KiwiSaver Bill marks a really important moment in our history as we address a serious problem that this country faces in respect of savings in New Zealand. This is set out in the purpose clause, which leads Part 1 of the bill. Clause 3(1) states: “The purpose of this Act is to encourage a long-term savings habit and asset accumulation by individuals who are not in a position to enjoy standards of living in retirement similar to those in pre-retirement. The Act aims to increase individuals’ well-being and financial independence, particularly in retirement, and to provide retirement benefits.” Clause 3(2) states: “To that end, this Act enables the establishment of schemes to facilitate individuals’ savings, principally through the workplace.”

There has been a demand for this type of legislation for many, many years now. In fact, I recall quite clearly in 1975 saying to my parents as a young 15-year-old: “Why is the National Party using this extraordinary advertising in the election campaign?”, as Cossacks were dancing across the screen. As a 15-year-old I thought: “Why is the National Party using this type of advertising with these Cossacks dancing across the screen?”. I said to my parents: “What is that ad about, mother and father?”. Because, of course, at age 15 I could not vote.

💬 Hon Judith Tizard: Who paid for that?

It would be very interesting to see who paid for those ads all those years ago. But when I was 15 years old I could not understand what that was all about. They said it was to get rid of a workplace savings scheme. We have had a workplace savings scheme in this country before, and it was started in 1974 and was destroyed in 1975 as a result of one Sir Robert Muldoon, now deceased. But, of course, that party sits in this House, and it did not even take a call on a question that was put to the Minister of Finance on the KiwiSaver Bill, as we heard today—not even a call on that particular question.

💬 Darren Hughes: Why not?

I do not know why not. I think those members are ashamed of themselves—ashamed that all these years later, finally, we are back in this House with legislation that will bring about workplace-based savings. This is not the scheme that existed in 1974. We have had to modernise our thinking for a new century since we had the previous scheme. But I am really proud to be part of a Government that is once more encouraging long-term savings in this country through a workplace scheme, the KiwiSaver scheme.

Apart from setting out the purpose clause, this part also sets out the interpretation clause, and also states whom the bill applies to. I think it is important to acknowledge that not only does this bill apply to New Zealand citizens but also it applies to those who are permanent residents in this country, and any people who are able to hold permanent residence in this country, be they Australian citizens or New Zealand citizens. I think that this bill is an important step forward, and I think it is an incredibly important moment in this country’s history as we start to debate the Committee stage of one of the flagship programmes of this Government.

That was Lianne Dalziel, one of 50 members of the Labour Party who stole $882,000 of taxpayers’ money in order to buy an election. It is no wonder she hangs her head in shame and those members were pretty down in the mouth when it came to question time today. She said in her remarks that this is not the same scheme as that in 1974. That was when she was taking a trip down memory lane, to the time when she was 15. But what was interesting was that she was quite right. This scheme is not actually the scheme that the Finance and Expenditure Committee looked at for weeks when it heard submissions. Why? Because Michael Cullen and Helen Clark stole $882,000 worth of taxpayers’ money. They propped up a member of Parliament who, frankly, was a disgrace to this House, and the Sunday television programme rightly highlighted that.

Two weeks ago, after we had heard 71 submissions on the KiwiSaver Bill, Michael Cullen and Helen Clark were so desperate to get themselves off the front page of the paper regarding the disgraceful antics of the Labour Party when it stole $882,000 that Michael Cullen would have been prepared to listen to anything. That happened to be Gordon Copeland, who wandered into his office with some mad idea about mortgage diversion. That is actually why we have seen that change to the bill. Gordon is laughing—

The CHAIRPERSON (H V Ross Robertson): The member will use the member’s full name.

I understand that the honourable member Mr Gordon Copeland supported mortgage diversion. But Michael Cullen did not know anything about it, and neither did the officials.

It is interesting to look at Part 1 of the bill. Clause 3, “Purpose”, states: “(1) The purpose of this Act is to encourage a long-term savings habit …”. That is quite interesting, actually. That is the purpose of the Act—to encourage long-term savings. Maybe the Minister in the chair, the Hon Lianne Dalziel, would like to take another call; she looks as though she is in a happy mood this afternoon and will be happy to take a call. She should explain to the people of New Zealand just this: when is a savings scheme not a savings scheme? It is like one of the riddles that my 11-year-old son reads out to me when I am driving the car. When is a savings scheme not a savings scheme? The answer, son, is when we can put money in and whip it out immediately to pay for a first home. The answer, son, is when we can have our weekly contribution put in and whipped out to pay for the mortgage. The answer, son, is when we can actually save zero of our own money—zero. That is a savings scheme under Labour, and that, apparently, will encourage long-term savings.

Interestingly enough, when Michael Cullen was answering the question for oral answer about this—it is in my little box here, but I can say this off the top of my head—he had the problem that he was so rushed while talking about Gordon Copeland’s mortgage diversion scheme that he forgot to match his answer up with the question. He was asked one of those really tough patsy questions that no Minister wants to get and that needs preparation from many Treasury and Inland Revenue Department officials, so as to be ready with the answer. The question to the Minister was why he would not accept a 2 percent contribution rate for the KiwiSaver scheme. That is a good question—the New Zealand Council of Trade Unions has asked it, and various other unions have, too. The answer was that it would leave many small accounts that would not be large enough to warrant serviceability—oh, and by the way, also that it would not do much for an individual’s retirement savings.

So maybe the Hon Dr Michael Cullen would like to wander along, take a call, and explain this to me. If we have a 4 percent contribution—2 percent made up from an individual’s own savings, and 2 percent from the employer’s contribution—and if we take out 2 percent and put it into a mortgage diversion so it flushes from the savings account through to a cheque account, then what is four minus two? The answer is 2 percent. [Interruption] Thank you, Parekura—Parekura was just working that out.

The CHAIRPERSON (H V Ross Robertson): Order! That is the second time now.

The honourable Minister was working that out for us while he was on his feet. The answer is that we have 2 percent left in the account. Michael Cullen, in his answer to the question today, said he thought that was a really bad idea, so I wonder whether he can tell us why he accepted mortgage diversion. When the officials came to the table and we discussed mortgage diversion in the select committee, they said they did not have time to work on it and did not think it would work. They were unanimous on that. Labour members also looked at the idea and said it was not a good one for a savings scheme.

I have had a good look at some savings schemes. When I went to Singapore in March—it was a wonderfully successful trip; I have written a number of speeches about it—I had a look at the Central Provident Fund model. The Central Provident Fund is quite interesting. It takes 25 percent contributions—I am not talking about 2 percent—and money can be put into three accounts. The first account is a health savings account—Singaporeans save for their health in that manner—the second is an ordinary savings account, and the third is a capital account. I asked about the ordinary account, and was told that it could be used for mortgage diversion. Singaporeans can take money out of it and pay for their mortgage—they put in 25 percent of their income. I asked what the balance was like in the ordinary accounts, which were available for mortgage diversion. Does Mr Hughes know what the answer was?

💬 Darren Hughes: They said: “Oh, what?”.

They said: “Oh, Mr Key, it is funny that you should ask us that question.” The answer was zip—zero; nothing there. There was no one home—a bit like the Springboks were on Saturday night. There was no one home, and not a single thing—not a dollar—in those accounts. It was a so-called savings account robbed by mortgage diversion. Yet Michael Cullen, whose express purpose here is to encourage long-term savings, thinks it is a great idea to raid the KiwiSaver account.

We are in the middle of a great debate about rates in New Zealand at the moment. That was another little issue for the Government to try to work its way through; it has now called for an inquiry into rates. Here is my prediction: the next thing that one will be able to take money out of KiwiSaver for will ultimately be rates. Then it will be to pay the lawnmower man, the guy who comes to cut the hedges, the gardener, the housekeeper, the pool boy, and anybody else who comes to work anywhere around the house. There will be an army of people—an army of Cossacks will be able to come along. That is the idea of savings under KiwiSaver.

The second little point is this.

💬 Hon Judith Tizard: It’s like Desperate Housewives—the National Party MPs’ version.

Sorry, what was that? I did not realise the member was back from Auckland.

💬 Hon Judith Tizard: Who has a pool boy?

Dozens of people have pool boys, I am sure. They have a pool boy. There are dozens of them.

The CHAIRPERSON (H V Ross Robertson): The member will come back to the debate.

The second little point is this. What will happen when people make a contribution—put in 2 percent of their salary—and take it out immediately from KiwiSaver for their diversion, and the employer puts in 2 percent, and the money lasts in that account for 2 years, at which time the employees move down the road to substantially better paid jobs with employers who make no contribution and do not operate a KiwiSaver scheme, so the employees say they will just take the increased cash? What will happen to those accounts? They will have 2 percent in them. The employees will take a mortgage holiday or a savings holiday for 5 years, and then extend that for another 5 years if they want to. There will be no savings.

This is the interesting question: if this scheme is going to be so successful, why, then, when I asked the Minister of Revenue some months ago how much the Government collected under the withholding tax paid on employer contributions—specified superannuation contribution withholding tax—did he tell me it raises $550 million for the Government, yet with KiwiSaver the impact will be $35 million? Either KiwiSaver will not be terribly successful or it will be fiscally a lot more expensive than Michael Cullen thinks—one of the two answers. I suspect that the right answer will be the first one: the scheme will not be very successful at all. We do not even have to get past page 11 of the bill to realise that. We can go about 30 words into this bill. If we go past the title clause and the commencement clause—and, by the way, that date has already moved twice since the Government decided to introduce this bill—we get to the purpose clause. The purpose is to encourage long-term savings by allowing people to put their money into an account and, in the same afternoon, to take it out. If that is Labour’s idea of saving, all I can say is that it is no wonder it has had to make some changes to the bill in the last couple of weeks, because the scheme was doomed to fail when it first started. It was never going to be successful when it had no inducements at all, and now it has even fewer.

Interestingly enough, one of the arguments that has been put up is that KiwiSaver will somehow, because of the changes to the specified superannuation contribution withholding tax, encourage employers—

New Zealand First supports Part 1 of the KiwiSaver Bill. I must say that it comes as a revelation to hear the National Party leadership contender John Key talk in this Chamber, because he talks of a different world. I suspect that he actually inhabits a different world from that of most people. I am sure it is a wonderful world; I am sure it is a great world. Unfortunately, the world he lives in constrains his understanding of where ordinary people in New Zealand come from. It constrains his understanding of legislation that is put in place to help those less fortunate than, perhaps, he is.

I cannot help but think back to the years of “Kiwi Keith”, Muldoon, Marshall, and all those sorts of people. I think about what they would make of a National Party front bench made up of money dealers and people in the financial world. I do not know what they would make of that. Back in times past, the National Party had aspirations, certainly, but it also was a grassroots organisation that actually understood real people, and the real problems and real concerns of working people in New Zealand as well as the elite. We certainly would not have had tripping off the tongue of “Kiwi Keith”, Muldoon, or many of the other leaders of the National Party light-hearted talk about pool boys and people who come to service pools, clean houses, do the windows, do the lawns, and all of that sort of thing.

The sort of people KiwiSaver is aimed at do those things themselves, and they take their kids to school, they struggle, mum and dad both work, their kids do paper rounds, and all of those sorts of things. This bill, more than anything else, is about trying to instil a savings habit into New Zealanders. This is not about the financially secure. This is not about those who deal in money markets. This is not about those who are literate, and more than literate, in financial affairs. This is about getting struggling Kiwis some way on the track to saving.

Mr Key talks lightly about his trips to Singapore—and good luck to him—and how an account did not have this, and so forth, but in the very next breath he will say that KiwiSaver is not needed because the first thing people should do is pay off their mortgage.

💬 John Key: No.

R DOUG WOOLERTON: Well, I am surprised, but he has said it before and he will say it again. But this bill does both. Where Mr Key is right is that it does come as somewhat of a surprise, even to me, that a bill suddenly goes from the select committee without any mortgage diversion component in it, and—

💬 Craig Foss: And hello!

R DOUG WOOLERTON: —and, hello, it appears in the House with a mortgage component in it. I have been around this place a wee while now and I have come to expect little surprises of that nature. If they are good, I can force myself to live with them; if they are bad, we will certainly speak against them. I think that this is an enhancement that we can certainly live with, and we have no hesitation in saying so.

New Zealand First supports Part 1. As we go through the bill we would like to see other enhancements. We are sure that successive Governments will add to it and change it. The bill allows for that to happen, and we think that is a good thing. I will speak to Part 2 when that comes along.

I always enjoy the contributions from the previous speaker, the Hon Doug Woolerton, but I was a bit surprised to hear how excited he is about the mortgage diversion aspect of the bill, because I understand that he voted against it at the select committee. Although Mr Woolerton might euphemistically call it a “wee surprise”, it is a pretty major addition to the KiwiSaver scheme.

I wonder what the addition of the mortgage diversion provision says about the parliamentary process, whereby a select committee can work thoroughly on a bill, seek submissions, hear from the public, then unanimously decide that such a provision is not a good addition to the bill—it votes on it, it reports back, and, hello, 2 weeks later it is slotted back in there. The Minister in the chair, the Hon Lianne Dalziel, might like to rise to her feet and explain to the Committee how that happened, because it smacks of some arrogance to totally override the select committee and insert something into a bill that not just National members, New Zealand First members, or other members of the committee but also Labour members decided was not in the best interests of New Zealanders.

When the Minister last spoke she talked about how this bill addresses the savings problem. We all know what the word “addresses” means in this Chamber. Day after day in question time a Minister can stand up and basically say “rhubarb” and we are told that that addresses the question. If we look at the purpose of this bill, we see that it aims to increase the well-being and financial independence of individuals, particularly in retirement. The purpose of the legislation is to encourage long-term savings, but what we see in it does not necessarily deliver that. What we have seen from the Government is a lot of rhetoric and a lot of words, but in our view what is delivered does not necessarily address the problem of long-term savings. That is why we are concerned about turning a savings account into something that is basically a cheque account whereby New Zealanders can take out money, albeit to divert to their mortgage payments, but none the less they have access to that money to divert to something else that is not about retirement.

I think that is where the Government runs into difficulty in many cases, because it mixes objectives. It seems to be combining homeownership objectives with retirement savings objectives, and I think that is where this scheme potentially has an Achilles heel. Many New Zealanders will be able to buy their first home, then they can sell that home and, bang, they have the funding in their pockets.

Until we address the fundamental issue in this country that some people do not have the capacity to save or to put money away, because they are overtaxed or for other reasons—they may not be earning enough—we will not move towards really addressing the long-term savings issue. Many people whom I have spoken to say: “Well, yeah, I would like to save a little bit more but I am paying for my kids’ school fees and I am paying for food on the table, etc.” If those middle-income New Zealanders paid less tax, they would have more to put away.

In terms of the scheme that has been provided, I would like to hear the Minister explain why she thinks it will contribute to long-term savings when, in the first instance, people can whip out that money, as if it is a cheque account, to put it into something totally different. That was never part of the scheme when the measure was first discussed. It was never part of the scheme when Michael Cullen first dreamt it up. It is something that has turned up in just the last 2 weeks, which brings on all sorts of concerns about process.

It also makes the members who sat on the Finance and Expenditure Committee wonder what they have been doing for months. Also, the members of the public who put their hearts and souls into the submissions and came along to the committee were consulted on one part of the idea, then, hello, the bill is totally different when it comes back into the House. I do not think that is good process. Sure, we often have fine tuning, but to make such a dramatic change to the KiwiSaver scheme requires a lot of explanation. It might be a cute idea that can be debated on the platform, but will it work? We do not know whether it will work, we have not heard from the public on that point.

Thank you for the call on the KiwiSaver Bill. I will start by picking up where my colleague Katherine Rich left off, and say that the process we have witnessed makes a mockery of our democracy. How can a select committee meet, week after week, to examine a bill in minute detail, simply to be ignored by the Minister when the bill is reported back? That is a mockery of our democracy, by any gauge.

💬 Craig Foss: It’s a “mockracy”!

It is a “mockracy”. The Finance and Expenditure Committee heard 72 submissions, and to the best of my information not one of them supported the idea of mortgage diversion. It was not even in the bill, yet here we are debating it as a key component of the legislation. I wonder what went through Gordon Copeland’s head that makes him think he can ignore the collective wisdom of the select committee process. What makes him think he is bigger than that process and can go to the Minister of Finance and do sneaky, dirty little deals like this one?

I turn to the bill proper. Conceptually, of course the National Party agrees that a rigorous, sensible savings culture is necessary in this country. But will this bill achieve that? The answer is clearly no, it will not happen at all. The next question I pose to members of this Committee is: who will pay for it? A significant start would be for the Government to put into the savings scheme the $882,000 it stole from the taxpayers of this country. That would be a good start to a savings scheme, would it not?

Let me turn my attention now to the contributions holiday. Who really believes that having a contributions holiday will support a savings scheme? People will be putting in money and whipping it out quicker than Taito Phillip Field whips out money from his electorate office. That is how quickly the money will be coming out of this scheme. It is not something that any member of this House believes is robust. I encourage members of this House to look at the statistics of countries that have contribution holidays. What do those statistics tell us? Essentially, that these schemes do nothing. People will take their thousand bucks—of course they will—but will they continue to save, or will they whip out that money? That will be the end of the grand KiwiSaver scheme. It will be a disaster, because it is badly structured and badly thought through. It had some merit until Gordon Copeland decided to do his little back-room deal. I am saying that even that is an exaggeration.

The real problem with this bill is that it does not address the fundamental issue, which is that in order for people to save they have to have their tax burden reduced and they have to receive higher wages. If Gordon Copeland is to say the way to get asset-rich is to pay off one’s mortgage, then for goodness’ sake why do we not just give people more money and encourage them to do that? Why go through this convoluted scheme, I ask Mr Copeland? Why does he not just come clean and say that the real issue is that Kiwis pay too much tax? Does this bill address those fundamental issues? No, it does not. Here is a wake-up call for this Government. It should start to deal with the real issues rather than skirt around the edges.

As I have said, the purpose of the scheme is OK, but its method is appalling. The scheme will not work. I look forward to going through all the parts of the bill, systematically dissecting it, and pointing out to members of this House why it will not work. The Government could not even get the starting date right.

I rise to make a brief contribution in terms of part 1 of the KiwiSaver Bill and clause 3, “Purpose”. I think it is relevant to actually read what clause 3 states: “The purpose of this Act is to encourage a long-term savings habit and asset accumulation”—two things: a long-term savings habit and asset accumulation—“by individuals who are not in a position to enjoy standards of living in retirement similar to those in pre-retirement. The Act aims to increase individuals’ well-being and financial independence, particularly in retirement …” In short, this bill is about savings and asset accumulation for retirement.

I say straightaway that when I read some of the commentary—for example, this morning in the Dominion Post—that somehow or other finds a mischief in the mortgage diversion part of this legislation, I have the view that it is simply not looking at this thing holistically. Because the key to having financial security in retirement is, No. 1, having a freehold home, and, No. 2, having some savings in the bank to supplement New Zealand superannuation. Both of those things are relevant. I might say, too, that when some of the commentators say there is no savings problem in New Zealand, then go on to quote the fact that the price of housing in this country has skyrocketed over recent years, and, therefore, if one takes the stock of housing now and divides it by the number of people in the country, that average household wealth has gone up, I want to say to them that it is all very cold comfort for people who are paying rent. Because one is either in the housing market or one is not.

One of the very, very sad things about this country, which goes all the way back to 1975—as mentioned by the Minister Lianne Dalziel—is that we have never had a national savings scheme. I am sure that when John Key was in Singapore he would have picked up that Singapore now has the highest percentage of private homeownership of any nation in the world. Does Mr Key know—because he is a generation younger than me—who used to be number one? It used to be this country. That is the extent to which we have fallen behind in the last 31 years, and it is time we got into catch-up mode.

I would like to thank the three National Party members for the speeches we have had so far and for their compliments to me in relation to the mortgage diversion scheme. Since I have been in Parliament I have never before been portrayed in a way that I personally can somehow change the law of the country just because I decide to do it. I regard that as a tremendous compliment, and I really do thank them for that. On that basis, I think I should really be in line to become the Prime Minister, because I thought she was probably the only one in the whole of the House who could actually do that. So that really is putting me in pretty exalted company, and I am very, very grateful for the compliment.

None of the three National Party speakers in their 4 or 5-minute speeches seem to have actually figured out that the mortgage diversion relates only to 50 percent of contributions. That is the maximum that people can do—only 50 percent. Therefore, the sum the member John Key did before is quite wrong when he said that people would end up with nothing going in. He said 2 percent from the employer would go in and 2 percent from the employee, and then he said the employee would take out his or her 2 percent. No, the employee will be able to take out only 1 percent maximum. That leaves 1 percent of their contribution in the scheme. Therefore, it is 50 percent—or many hundred percent, actually—greater than having nothing at all in the scheme, which would have been the result if there were no mortgage diversion.

So we are really looking here at a win-win situation. I hope the National Party members will get their minds around what this really means, because I think it will be good for New Zealand and I am sure it will be good for savers. I am absolutely convinced the mortgage diversion will be greatly successful. In reality, it was just an idea whose time had come, and people who have thought it through have said that it will try to fulfil the purposes of clause 3. It is really fundamental to the whole purpose of what we set out to do in Budget 2005. I remind members that in that Budget we had a mortgage diversion element in the KiwiSaver scheme. That has been reinstated in a different form and, in my own humble opinion, in a superior form. It will be more effective than the original suggestion, which was discarded by Cabinet back in about February or March of this year. So I just appeal to commentators to consider that.

By the way, I should say that the Dominion Post, New Zealand Herald, and everybody else have picked up that people can divert only 50 percent of mortgage contributions, but apparently the members of the National Party have not.

I rise to speak to the KiwiSaver Bill 2006. First and foremost, I wish to compliment the Finance and Expenditure Committee, which I worked with on this bill. There was good continuity in that committee. In fact, the continuity of the committee could probably be held above the continuity of the bill, with the exception, I guess, of Rodney Hide, who was not a regular in the committee—

💬 Brian Connell: Irregular.

He was an irregular visitor. It was interesting to hear the Minister Lianne Dalziel’s recent comments about Cossack dancing; dancing had something to do with Mr Hide’s absence from the committee.

The only thing in this bill that has remained the same is the title: KiwiSaver Act 2006. In fact, if I lifted up the entire bill and glanced through it, I do not think I would see a page without a change to it. It is changed throughout. The only other thing that has stayed the same from the start is the purpose of the scheme, which is to encourage a long-term savings habit.

Let us look at the initial purpose of the bill and at the submissions that came to the Finance and Expenditure Committee regarding it. If we look at the officials’ report on the purpose of the KiwiSaver scheme, we can see that the submissions were, two to one, either supportive with reservations or moderately supportive with considerable reservations.

I start with the broadly supportive—largely, the financial institutes that will benefit from this bill. First, the Financial Services Institute of Australasia is supportive of the intent of the bill or considers it sets a laudable objective. Secondly, supportive of the need for a culture change and the development of a long-term savings habit is Fidelity Life, which contributed comments in that regard. Thirdly, supportive of KiwiSaver as the means to improve savings rates is Westpac.

In terms of submitters who were supportive with reservations we start to see, right from the word “go”, the reason why significant changes were made to this bill, which I have pointed out before. We start with the Public Service Association (PSA), which said that it considers that “given the right environment, even lower-income New Zealanders may save, but that savings does not just cover financial assets but also includes housing.” However, even with KiwiSaver, the PSA pointed out, people will still under-save. That is a key point.

The second point is that there are potentially broader macroeconomic benefits associated with increased domestic savings. That was pointed out by the Council of Trade Unions, interestingly enough. The Council of Trade Unions also said: “KiwiSaver is not bold enough to prompt a long-term change in savings behaviour.” I think that was one of the key reasons why Dr Cullen made so many changes to the bill from that point in time. Even the Council of Trade Unions believed that the bill was not bold enough to prompt a long-term change in savings behaviour.

Thirdly, were the submitters who submitted that they had moderate to considerable reservations. At the start of the bill, a significant number did. If we look at the officials report, we see that 11 bullet points outline submitters with considerable reservations. Let us look at a few of those. The first one, from the Auckland University’s Business School retirement policy and research centre, stated that the purpose of the scheme was unclear and would not change long-run economic performance.

Let us move to other submitters, like Kelvin Prisk Consulting, ING, Mutual Fund Ltd, and Superannuation Investments Ltd, who said that the “home loan assistance provisions are inconsistent with the objectives of the bill”—again, inconsistent with the purpose. In addition, from the retirement policy and research centre we have comments along the lines of “Confusing saving for retirement with saving for a house through the subsidised first home purchase may aggregate the problem of low individual savings.” It goes on. From Mercer Human Resource Consulting we have: “The scheme objectives will not be achieved, but considerable expense involved.”

We go on. The Association of Superannuation Funds of New Zealand questions whether New Zealand actually has a savings problem, with particular reference to Scobie et al., who really focused on their belief that New Zealand did not have a long-term savings problem. Also, the Business Roundtable submission stated: “Long-run living standards were determined by economic growth and the ability of people to continue to save.”

As earlier speakers have mentioned, the National Party is opposed to this bill at this stage, in its current form. First of all, I would like to thank the members who were present at the Finance and Expenditure Committee consistently. I would like to thank the officials, and also, on behalf of National Party members, to apologise to the officials. The apology is because of all the hard work, the resource allocation, and the time they spent on a bill that arrived at our committee, was discussed, was submitted upon, and then was changed radically last week. I think that is an absolute abuse of process. Last Thursday, about 4 hours before the second reading, two radical changes were made to the bill. They are quite radical.

I would like to take maybe 30 seconds to quickly go over the discussion we had in the committee around the mortgage diversion scheme. I will give that discussion verbatim for 30 seconds, starting now. That is exactly it: there was no discussion around the mortgage diversion scheme. There was no discussion around a fundamental part of, and change to, this bill whatsoever.

💬 Brian Connell: Can we hear it again?

I say to Mr Connell that he can hear it again.

I would also like to replicate verbatim the discussions around the specified superannuation contribution withholding tax changes to this bill. Maybe I will take 10 seconds. This is the discussion, verbatim, over many months that the committee had about this bill, starting now. The silence is absolutely deafening. I ask those listening to the radio out there to please tune in.

The CHAIRPERSON (H V Ross Robertson): The member is not to refer to radio listeners.

I apologise. This is an absolute disgrace and an abuse of process. I have been here nigh on a year, and I have learnt an awful lot in the last week about the process of Parliament and how one can openly and absolutely abuse it.

The title of this bill is the KiwiSaver Bill. There is another “kiwi saver” scheme out there that is quite laudable and that we should all applaud. It does save kiwis. It saves our culture. It looks forward, and it nurtures the environment. That, of course, is the Bank of New Zealand’s scheme for saving the kiwi bird.

I would like to save Kiwis more money. On the pledge card, an amount of $800,000 could have been saved. The Working for Families package could have saved $16 million on its advertising. There are more opportunities. Kiwis need to find their savings from the $200,000-odd talked about in relation to the Service and Food Workers Union issues at the moment. Kiwis could also save money from the $100 that a poor Auckland family is alleged to have paid to an MP, regarding immigration matters. That is what counts. Those are the people on the ground whose problems need to be fixed, long before a bill like this tries to come into play.

This afternoon I asked the Minister of Finance a question, which I will repeat: why did the Minister reject the unanimous opinion of the Finance and Expenditure Committee, plus that of many officials, when he decided to proceed with the mortgage diversion facility? Perhaps Mr Copeland was very convincing in his arguments to the Minister and maybe it is a $35 million cost to the fiscal books, or perhaps it is $500 million over time. If Mr Copeland’s addition to this bill is worthy of that cost, he obviously has a fair bit of pull. As I said, the Minister of Finance could not answer as to why he rejected the unanimous opinion of the members of the all-powerful, great Finance and Expenditure Committee. But he could not. The committee was totally unanimous. Very senior officials within various Government departments rejected any installing of a mortgage diversion scheme right away.

I would like to point to some of the reports and press releases around this bill—especially on the changes last week. The Council of Trade Unions has a very good quote in its press release. Yes, it waxed lyrical around the wonderful—in its opinion—bill, but it states: “It is vitally important that in addition to employer contributions we see a continuation of wage rises so workers are better able to afford workplace savings.” That says absolutely everything: that people are struggling long before they try to make the decision to save for a house.

It is easy to tell a National member of Parliament from a Labour one. The fine member Craig Foss is prepared to apologise to the officials because the Minister, once again, did a backroom deal with United Future and wasted all their hard work—and it was not even Craig Foss’s undertaking. One can tell. If it is a Labour Party member or the Prime Minister, their stand is to never admit a mistake, never apologise, and never pay back. But a fine member, like the National Party member Craig Foss, would take it on the chin.

I would like to raise two points under the purpose of the KiwiSaver Bill. The first one is that the purpose of the bill is: “to encourage a long-term savings habit and asset accumulation by individuals who are not in a position to enjoy standards of living in retirement similar to those in pre-retirement.” I wish the Minister would take a call to answer a question, because there are members of the public out there—those who have just started work, those who have to take two jobs, and those who are working 7 days to make ends meet—who ask how they can enjoy their current standards of living. At their current standards of living, how can they look ahead 20 or 30 years?

A lot of New Zealanders are not in the fortunate position of being able to plan for retirement. They actually struggle just to meet their current standard of living, when there have been huge, huge increases in the local body and council rates made because of central government giving local bodies all those additional responsibilities without giving them the funding to go with it. So it is hard to see how the Government can expect people to change their current behaviour when they are struggling to make ends meet. Just now, when Gordon Copeland mentioned Singapore having a savings habit, he neglected to mention that Singaporeans also have a much higher average wage compared with New Zealanders. It is just like Australia.

The second point is even more interesting. It states that the purpose of the bill is to ensure savings habits, so that those individuals can “… enjoy standards of living in retirement similar to those in pre-retirement …”. It is a big call to expect people to have standards of living similar to those they had before they retired. Actually, I would invite my colleague Mr John Key to take a call in the next part, because he is a self-made man. From nothing he built up a wonderful future for himself, but how is John Key to ensure his after-retirement living standard will be similar to his standard of living now? Well, if anybody were to lead New Zealand to achieve that, I think that most New Zealanders would trust John Key to come up with a better KiwiSaver design than the Hon Dr Michael Cullen.

💬 Brian Connell: A “Key Saver scheme”.

I think this is a great thing. I am sure that the public would have faith in a “Key Saver scheme”, because John Key has proven that New Zealanders, given the right tax relief and the right incentive to work hard, can start to look at saving—not just because the Labour Government has decreed that they should save.

I also add my concern to the worry that was raised by both Chris Tremain and Craig Foss—the hard-working National members on the Finance and Expenditure Committee. Once again, the Labour Government is riding roughshod over the select committee. It is ignoring all the hard work of the select committee. Why bother sending this bill to the select committee for very careful consideration if the select committee consideration will then be ignored? I am surprised. United Future used to claim to be the party that was responsible and that would respect the select committee process.

I move, That the question be now put.

I rise to address Part 1 of this bill. We are talking here of long-term savings ambitions and the effectiveness of bringing them about. The bill seeks to encourage savings as a practice, but the reality is, in its present form, that would appear to be a bit of a dream. Savings are not achieved through compulsion and not through regulation—both those items being the standard currency of this Clark-led Government. I guess what we have here is a mismatch between the political agendas of people within Labour and within United Future. In spite of the excellent work done by my colleagues on the Finance and Expenditure Committee, therein lies the problem. If Government members really want to put it clearly, after the purpose of the bill they should put in the phrase “in accordance with Labour Party ideology”.

One of the advantages of having a family now in adulthood is that it has been possible to study the development of savings habits—or the lack of them—and the stresses they come under as one’s children are growing up into adulthood. It is an interesting comparison to see how need affects habit. In my own case, and in that of many people of my generation, I think it was a Post Office Savings Bank book from my grandmother that started off my savings behaviour. Our children benefited from the same experience. Savings had a high priority, to the extent that when my son was in his teens and his car needed repairs, I suggested that he might wish to contribute to the cost of the repairs from his weekend earnings at a restaurant. His response was: “Dad, I will have to use my savings.”—shock, horror! I had to use mine, instead.

Savings, in my experience, are a blend of training, opportunity, and needs. The needs will always take precedence. Earlier speakers have emphasised the vulnerability of this particular scheme when need becomes predominant. The present Minister of Finance wishes to encourages saving. If he does so sincerely, he should think of the effect of his other financial policies—tax, for instance. But no, the limp legacy of the Labour Government will always be one of over-regulation. To instil long-term savings habits necessitates having money that is surplus to immediate requirements.

What particularly worries me are the compulsory changes that the Minister will make when the scheme proves to be unsuccessful and inoperable, because we will then see more of the same sorts of changes imposed without, it would seem, too much reference to others—and that is a disturbing worry.

Thank goodness that we have the prospect of improvements through the introduction of a “Key Savings Scheme”, which will follow on from this one.

💬 John Key: Definitely will.

We definitely will, because it is not the intention to deny the fact that we need improved savings habits; the issue is just one of how we go about achieving them. And I have not seen anything to date in this bill that would do so in satisfaction of the requirement to introduce a savings scheme.

I move, That the question be now put.