Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters) Bill

We now come to Part 3, clauses 200 to 275, with new clauses 276 to 545 therein, on Supplementary Order Paper 168. The debate on this part includes schedules 1 and 2 and new schedules 3 to 5, also set out on Supplementary Order Paper 168.

Part 1 of the Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters) Bill, which we debated earlier, covers amendments to the Income Tax Act. Part 2 covers amendments to the Tax Administration Act. Part 3, which we are debating now, covers amendments to other Acts and regulations. The principal set of amendments that National will be focusing on in this debate is the set of amendments to the KiwiSaver Act 2006.

They are very significant amendments. What these amendments do, and what Part 3 does, is introduce the whole compulsory employer contribution regime for the KiwiSaver system here in New Zealand. These are the provisions that caused Business New Zealand to come to the Finance and Expenditure Committee and say that New Zealand businesses had been ambushed by the Government, and that the Government proposed these measures in the Budget without consultation with employers and businesses in New Zealand.

That is pretty powerful language from a group that is not known to be anti-Government. Business New Zealand works quite closely with the Government, but it said to the select committee that these provisions ambushed New Zealand businesses. It went further and told the select committee that some of the provisions around the compulsory employer contributions were “employment relations sandpaper”. In other words, the provisions would cause major problems to employment relations in New Zealand as we look ahead.

What did Business New Zealand mean by that? Probably the best example of what it meant by that can be found if we look at clause 219 in the bill, which is on page 363. Clause 219 is a long clause with many amendments to the existing Act, such as sections 101A, 101B, 101C, etc.—it goes right through. The new section that will cause quite a lot of trouble is new section 101B, to be inserted by clause 219. Let me draw the Committee’s attention to what that new section is doing. It states: “The purpose of this section is to ensure that, for contractual arrangements of parties to an employment relationship (as defined in section 4(2) of the Employment Relations Act 2000), compulsory contributions are paid in addition to an employee’s gross salary or wages described in section 101D(3).”

This means that employers may have entered into existing agreements with employees based on an employer’s ability to pay a certain level of wage or salary based on the business’s income. Suddenly, this legislation will require employers to add to employees’ total remuneration package through making contributions under this clause to the compulsory employer contributions. To land that on employers part way through negotiations on an employment relations agreement, when they may be already fully stretched in meeting the obligations of that agreement, is obviously a very significant imposition on employers.

We will be covering a number of the various new sections inserted by clause 219 as this debate goes on, but perhaps one of the features that concerns us most as we look ahead—and a number of features concern us—relates to employment agreements and the negotiation of them. How are employers to handle them? An employer may negotiate an employment agreement with a number of workers, and some workers may say: “Yes, we want to be part of KiwiSaver.”, and the employer may say: “OK, if you want to be part of KiwiSaver we can afford this much as a salary or wage increase. But then we have to consider that on top of that we have to pay our compulsory contribution, so we will agree to this deal for you.” Other employees may say: “No, we’re not going into KiwiSaver.”, so the employer may say: “OK, to make it a fair package, you have to be remunerated a little more to make sure you have an equivalent package.” So a slightly higher wage or salary is agreed on for that person because the employer does not have to make a compulsory employer contribution, which is part of a total remuneration package.

What happens, then, if a few weeks or a couple of months later an employee who gets that slightly higher wage or salary remuneration because he or she is not part of the KiwiSaver scheme, suddenly says they want to be part of the scheme? That person has a right to do that under the law, so the employer is caught. The employer has agreed to a certain wage or salary package on the basis that a person was not part of the scheme, but the person changed his or her mind and now wants to become part of the scheme.

That is the kind of friction that Business New Zealand was talking about. The select committee heard a lot of submissions on this particular issue. A lot of submissions were received on new clause 219. There are a number of other areas, such as the age of entitlement, on which employers make contributions. Other colleagues will be covering the full range of issues, but I wanted to emphasise that first set.

I would like to make some brief comments about the changes to KiwiSaver made in Part 3, and also to direct some comments to the Minister’s Supplementary Order Paper 167, at least in as far as that Supplementary Order Paper will make changes to the KiwiSaver scheme. The changes proposed on the Supplementary Order Paper will assist to make sure that KiwiSaver does work as intended, and to the best effect.

Dr Smith is quite right; we did hear some very compelling submissions on KiwiSaver at the Finance and Expenditure Committee. The select committee proposed a number of changes to the legislation and recommended, for example, allowing employees who contribute to KiwiSaver schemes to phase in their minimum 4 percent contribution, starting at 2 percent on 1 April 2008 and arriving at the full 4 percent as late as 1 April 2011. To be consistent, that option is to be offered to members of complying superannuation schemes, as well, and that is obviously a commendable move. I note that the New Zealand Council of Trade Unions last week issued a statement welcoming, in particular, that change and asserting—I think with a degree of justification—that the KiwiSaver improvements will help those on low incomes. It was speaking in particular about that recommended change, and I think that will encourage what is already a spectacular rate of KiwiSaver uptake.

Just having a look at the other changes recommended by Supplementary Order Paper 167 in this area, I note there will be good consumer protection measures that will require complying superannuation funds to ensure that their fees are not unreasonable. This requirement already exists for KiwiSaver schemes. The Government actuary will be empowered to monitor any fee changes to see whether they are unreasonable, so there is a good prudential oversight regime that will be introduced. These changes will see the introduction of a public register of complying superannuation funds so that everybody can see whether a specific scheme will attract the relevant KiwiSaver benefits. So the changes mooted will increase transparency and make what is already an excellent scheme an even better one.

I will also speak about Part 3, in particular about clause 235 and the provisions thereafter that relate to the mortgage diversion provisions in relation to KiwiSaver. I think that all of us in this Committee recognise the importance of homeownership, not just to provide stability for families, which in itself is a most important public policy goal, but also in retirement. In fact, a free home in retirement is the difference for many hundreds of thousands of New Zealanders between relative comfort and moderate to severe hardship. All of us know that New Zealand superannuation is inadequate if, at the same time, a person is trying to pay rent on a house.

In that connection, I will draw some statistics to the attention of the Committee, prepared for me by the Parliamentary Library. The number of privately owned owner-occupied homes in New Zealand peaked as a percentage of all homes at 73 percent in 1986, but by the year 2000 that percentage had dropped to less than 50 percent. That is a massive drop of 23 percent in just 20 years. By contrast, the percentage of people renting or leasing a home went from 23 percent in 1986 to 44 percent in 2006—almost a corresponding offset. One statistic, the percentage of private homeownerships, went down 23 percent, and there was a 21 percent increase in the number of people renting or leasing.

That brings into focus, I suppose, the tremendous importance of the mortgage diversion part of the KiwiSaver scheme. It can be utilised by people who have been in KiwiSaver for 12 months, and it enables them, under subparagraph (i) of new section 229(2)(i) in clause 235(6), to divert “half of the total contributions deducted for or contributed by the person, received by their KiwiSaver scheme provider;” into the repayment of a mortgage on their home, for as long as that mortgage continues. That of course is a very, very important part of the overall arrangements. That is a holistic approach to savings, because it enables a KiwiSaver member both to pay off a mortgage and to save systematically for retirement, at one and the same time. As a result many will enter their retirement with both a freehold home and a well-diversified portfolio of financial investments. That is the goal we want to achieve through this important legislation.

The first anniversary of people coming initially into KiwiSaver will occur on 1 July 2008, so in practical terms mortgage diversion will start from that point onwards. I can confidently predict that this facility will be extremely popular. Why do I say that? I say that based just on my own personal experience and that of many other people I know. We all appreciate that for young people raising children and endeavouring to pay off mortgages, it is also very difficult at that point in time—when the bills are mounting and there are mouths to feed—also to be setting aside money systematically for retirement. That reality has not changed. In fact, the statistics I have just quoted show that it has actually become worse—much worse—in the last 20 years.

In my view the huge reduction in the level of homeownership rates and the increasing number of people who are forced, long-term, to rent, is now one of the great problems that face our society. So we need to find a way through that, and that is what mortgage diversion does. It is a vitally important component of KiwiSaver, in my view, and one that I have no doubt will make an important contribution to both the social and financial security of hundreds of thousands of New Zealanders as we move through time. I can foresee 20 years from now that this House and all New Zealand will look back on the introduction of KiwiSaver, including the mortgage diversion component, and say that it has profoundly affected the financial and social security of New Zealanders and their families. For that reason, this part of the bill has my wholehearted support. It was something I personally worked very hard to bring into legislation. I am delighted that it was adopted by the Government and I think that in time it will prove to be a very, very important contribution. Thank you.

Gordon Copeland has just spoken on the mortgage diversion scheme and on the part he played in bringing that to its inception. Although I certainly have empathy with his view of the level of homeownership in this country—and he is right; it has dropped significantly, which is nothing for us to be proud of as a nation—I am not so convinced that the mortgage diversion scheme will be as successful as he makes out.

It is an initiative, yes, but the reality is that other issues involved in getting people into their own home, such as the cost of that housing, need to be considered first. There is a lot of debate around once people are in properties where the full amount of their savings should be going. There is a lot of argument to say that the money should be going fully into the house. With the combination of higher interest rates and capital accretion that can be achieved through having our own home, it can be argued that people are far better to have their money going entirely into the savings in those homes than going, by a convoluted process through KiwiSaver with its added bureaucracy, back into the home in another way. However, it is an initiative and part of the scheme, and we will be interested to see how the numbers work out when we go into July next year and see the effect then.

I will focus on Part 3 of the Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters) Bill, largely on the amendments to the KiwiSaver Act 2006. In my 5-minute slot this morning I will focus on three specific areas. The first I will deal with is the age of entitlements debate, which was an area the Finance and Expenditure Committee had quite significant representation on. I will also talk about the salary sacrifice agreements and the position that employers such as the Christchurch City Council found themselves in. I will also touch on the transitional rates and the position we have got to in regard to those rates.

I start with the age of entitlements. This was an issue that did not perplex the committee but that the committee gave some consideration to. It concerns the question of whether we should allow individuals under the age of 18 to obtain all the benefits of the KiwiSaver scheme. Many submissions were received from people from across the board, and particularly from the unions, who felt that the full benefits of the KiwiSaver scheme should apply to 16 and 17-year-olds. Both the National Distribution Union and the Council of Trade Unions were most vocal on this particular aspect of the legislation. The Council of Trade Unions, the National Distribution Union, and the New Zealand Nurses Organisation said that preventing young workers from gaining tax credits and employer contributions was somewhat discriminatory.

The argument behind not providing the credits to 16 and 17-year-olds was that the Government felt that it would take away the focus on education, and that 16 and 17-year-olds should remain in the education system. I take a different point of view, in that I believe that some 16 and 17-year-olds out there are better off in the workforce. They have reached a point in time at that age when, for one reason or another, they have decided that they have reached the end of the road as far as school is concerned. But many of them go on into careers. They become young apprentices and take on jobs where their future is in doing the hard yards of being an employee and learning a trade. Sometimes, their education blossoms for them as they take up an apprenticeship and learn many more skills through doing that.

My argument is that we should be encouraging 16 and 17-year-olds to be saving as early as possible. In that regard, I think it is good reasoning to allow 16 and 17-year-olds to take up that opportunity once they end up in employment.

I understand the argument that by totally removing any age criteria we are allowing many families to take up these tax credits for very young children. It will be interesting to see how many take-ups of KiwiSaver there are by those under 20, which have been taken up by families getting their 5, 6, and 7-year-olds into a savings scheme early on in their life. I think members will find that quite a significant number of families of high net worth are taking up that opportunity.

It is my pleasure to speak to Part 3, and I will address the KiwiSaver aspect of this bill. I would like to talk firstly about the uneven playing field out there. With this legislation I would not like to be an employer or an employee, because the playing field has become really uneven. When an employer goes along and offers KiwiSaver to its employees, that is all very good, but the reality is that not everybody will take it up. Employers may be offering this scheme to encourage their employees to work and save, which is absolutely great, but under this scheme employers are also contributing up to 4 percent going forward. An employer is giving one employee who is taking up the scheme 4 percent, and another employee who has not taken up the scheme is not getting that 4 percent.

The Government says that is fine because the employer can negotiate with its staff, according to who has taken up the scheme and who has not. But, at the end of the day, somebody may leave the scheme because he or she is in financial hardship and needs to have a respite from it, so he or she will lose that 4 percent, or an employee may decide to enter the scheme after he or she has been through a wage negotiation round, and that employee has every right to enter that scheme. But all of a sudden the employer’s payroll is changing. It cannot predict what the payroll will do from month to month, so it is up to the discretion of the employees as to what they will do.

The great thing we have had in the past with salaries and wages is that they have been pretty transparent. When someone goes in and earns $20 an hour, that person actually earns $20 an hour. The person beside that employee who earns $20 an hour earns $20 an hour as well, and that is the way it is. I thought that we brought in the fringe benefit tax a few years ago to keep that situation transparent. To keep things even, those people who got benefits like cars and perks relating to their work would put in a fringe benefit tax and they would be taxed at a higher rate. There was a disincentive so that people got a dollar value for the work they did. In that way we could even out that playing field and there would be a bit more transparency.

Now in the workplace we still have the fringe benefit tax to keep that transparency, but we also have Working for Families, which complicates that situation. We can now have a situation where two people are working beside each other and doing exactly the same job. One person is getting Working for Families and is getting a little more. That person is still doing that same job but is getting a little more. That person could also decide to go into KiwiSaver, and could again get a little more. All of a sudden a gap is created and it is growing between two people who are doing exactly the same job. One is getting KiwiSaver and Working for Families, and the other is not getting those payments but is doing the same job, and the gap is growing. It also works in the reverse, which is quite complicated. One person who is getting Working for Families might not want to go into the next income level because that would affect the Working for Families payments, and the other person is not getting Working for Families and might take that promotion because it does not affect the income that the person is bringing home. By the time we put KiwiSaver into that mix as well, it all gets really murky.

Where is the transparency in the workplace when employers go into negotiations with their employees? We are creating complexity in the workplace. I would ask how employers are meant to act in good faith with their employees all the time, which is what we ask them to do under our labour legislation, when there is a moving feast in front of them. What employers want to do is to reward and pay people an amount of money for the work they do, but how can they do that when there is shifting ground underneath those employees all the time? Employers cannot do that.

I think we will find that, going forward, a lot of court cases will show that employers are not being fair when, in fact, they are trying to be very fair but the rules they have been given create this changing ground underneath them. I would ask how an employee who cannot afford to go into KiwiSaver might feel working beside somebody else who can afford to go into the scheme and who is getting a 4 percent bonus to go into KiwiSaver. The first employee cannot afford to go into KiwiSaver and has not gone into the scheme, so he or she is not benefiting from it. How do those people in the workforce feel? We have to ask ourselves whether we have given employers and employees a fair playing field now.

I speak now to Part 3, which deals with changes to various other Acts and regulations. First of all, a previous speaker Mr Gordon Copeland mentioned the mortgage diversion part of the general KiwiSaver scheme, which is alluded to in, I think, Supplementary Order Paper 168 and in this part. Gordon Copeland is no longer on the Finance and Expenditure Committee since he went out on his own, and I think it is important to note that pretty much after he left there has been virtually no discussion whatsoever, no lobbying for, and no sponsoring of the mortgage diversion facility or that part of KiwiSaver. In fact, commentary has been very, very silent because most commentators believe that, yes, it is a worthy goal or worthy ambition to have some facility like that, but it does not sit very tidily at all within KiwiSaver—a long-term retirement savings scheme—to have as part of that same suite of bills a system that assists and encourages people to borrow money.

I note that even the monetary policy inquiry we had, which touched on all things KiwiSaver, shied away from the mortgage diversion part of KiwiSaver. There is obviously a reluctance to take that part out, but I imagine the Minister’s preference would be to take it out—perhaps to carve it out and let it form some part of other legislation. I do not think that is such a bad idea, and the National Party would welcome such discussions, firstly, to simplify the KiwiSaver legislation and, secondly, to make a more pure and transparent method to homeownership. Further to that, even the Council of Trade Unions did not comment on the mortgage diversion part of it, but it did note how unaffordable New Zealand housing is. It was not talking about the debt of the mortgage; it was talking about the ability to fund a mortgage or to get a deposit for a first home. The council lamented how badly New Zealand wages had fallen behind Australia’s. The head of the Engineering, Printing and Manufacturing Union, Andrew Little, before our committee on other business, recently also noted that. He used the example of how in New Zealand an electrician could get between $70,000 and $85,000 a year, while over in Australia the same electrician was on A$120,000 to A$130,000. He agreed, as part of his submission about some other matters before the committee, that that attraction was pretty hard to resist.

I think it was Mr Tremain and Katrina Shanks who earlier touched on the contributions around KiwiSaver. That issue is alluded to in this part but is not hugely addressed. It is more about home affordability, and KiwiSaver will struggle because—remember—it is 4 percent of gross, not 4 percent of those moneys left, which is about 5.5 percent or 6 percent of net. Quite frankly, when people are saving towards KiwiSaver, over time their annual return after tax will be about 3-ish percent, I guess, and their mortgages will be at 8 percent to 10 percent. Why on earth would they save towards KiwiSaver whilst they still had a mortgage? That is the contradiction that the mortgage diversion part starts in this bill.

I will just touch on the amendments to clause 284 set out on Supplementary Order Paper 168. It defines certain disposals by portfolio investment entities or by the New Zealand Superannuation Fund. I would like to mention that New Zealand is heading towards some dangerous territory here. Admittedly it was not a portfolio investment entity or the New Zealand Superannuation Fund, although they have been doing this; it was the Earthquake and War Damage Fund, I believe, which divested from tobacco stocks, thinking that Dr Cullen wanted it to divest from those, and believing that he would be pleased and happy for it to do so. Now, that is a debate that we should have, for sure, but Ministers of Finance, Ministers of the Crown, and any members of Parliament, of course, must be at total arm’s length from any funds that the Crown owns and from any way that their influence could even be misconstrued. Be they for moral or ethical reasons, if it is set up in the deed of those funds, then they should be left alone.

I also seek the Minister’s opinion and advice on the amendments to clause 263B set out on Supplementary Order Paper 168. I would welcome it if he could explain to us the issues around the Health (Drinking Water) Amendment Act 2007, which is included in the Supplementary Order Paper—or perhaps someone from the various health portfolios would like to participate on that one.

The Opposition would really appreciate the Government responding to some of the concerns that are being raised—for example, the concern expressed by my colleague Chris Tremain about the age limitation on the KiwiSaver provisions in the Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters) Bill.

The select committee was asked many times by people making submissions why the provisions were restricted to people above the age of 18. If we want to develop a savings culture in New Zealand, if we want to encourage saving at a younger age, when people first start to work—and of course they can legally work at age 17—why not enable them to be part of the full KiwiSaver scheme when they can legally work in New Zealand? If the Government is serious about supporting a savings culture with this now quite complex KiwiSaver scheme, it seems wrong to tell young new workers that, sorry, they cannot become part of the full KiwiSaver scheme until they are 18. Where is the logic in that?

If the Minister stood up and said that, at the end of the day, it was a revenue issue, that the whole scheme was costing a lot of money, and that if the Government lowered the age of eligibility down to 17 or 16, it would cost too much money, I could understand that. I could understand the Government making a pragmatic decision about the revenue cost, because KiwiSaver is going to cost the Government a lot of money over the next few years—a lot of money—and there are very significant revenue issues. But we need to understand why we do not let people be part of the KiwiSaver scheme when they start work. It is very clearly spelt out in clause 219, where the age of entitlement is specified. National members are at a loss to understand why new workers cannot get into the KiwiSaver scheme when they first start work. It seems bizarre that they cannot do that at whatever age they can legally start work. That is the first issue, and we would really appreciate hearing the Government’s explanation.

The second issue is covered in the transitional provisions of clause 237. Members on the select committee listened to submissions—often from unions, particularly the Council of Trade Unions—that argued quite strongly that the 4 percent contribution from employees is a big ask for low-income earners. Middle and higher income earners already save. One of the big issues with the KiwiSaver scheme—if it is to work properly—is whether it can help lower-income people to start saving and to get the benefits of saving. So many submissions to the select committee stated that 4 percent is a big ask for middle to low income earners.

Many of them asked why we would not allow flexibility whereby an employer could agree with an employee, as part of a remuneration package, to make a greater contribution, thus allowing the employee to put in, say, 2 percent, rather than the full 4 percent. The Government partially responded to this question by saying that, as a transitional measure, it would allow an employee to put in 2 percent for 2 years, if the employer agreed to put in 2 percent—rather than 1 percent, which is the standard rule for employers that is set out in this legislation. It said it would allow that transitional provision for 2 years, then in the third year the employee would put in 3 percent, to be matched by 3 percent from the employer.

The issue is that the transitional measure is not recognising the position of low to middle income earning New Zealanders. A lot of our people are in that area. People do not realise that the average income of New Zealanders is about $10,000 a year higher then the median income, from memory. It is significantly higher. If we look at the median income of New Zealanders, we see that it is somewhere down in the $30,000 to $38,000 range. It is a huge ask to expect people with families to contribute 4 percent of that gross pay to this scheme.

We should hear from the Government why it was unacceptable to it to have employers agree to make up the difference as part of a total remuneration deal, and why it refused to listen to the representations from the unions that it allow a more flexible scheme.

I am glad that earlier Mr Foss spotted the most critical element of this bill in the massive amendments that are being moved to it, when he referred to the new Part 2A, inserted by clause 263B, which affects the Health (Drinking Water) Amendment Act 2007. This was the deep, dark secret of this bill, and I give him credit for having discovered and revealed it.

I should tell the Committee precisely what this change does. It replaces section OB 1 of the Income Tax Act 2004 with section YA 1 of the Income Tax Bill. More seriously, this change is a drafting change consequent upon the rewrite of the Income Tax Act. It picks up the provision that is in the 2004 Act, which technically no longer exists, and carries it over to the bill. But I give the member credit for his perspicacity in getting to the heart of the issue.

On a less serious note, I turn to the more substantive comments the member’s colleagues have made. Mr Tremain and Dr Smith have raised questions about young people taking up KiwiSaver, why the member tax credit is not available to those under the age of 18, and a range of associated issues. The underlying concern that they have expressed is that this legislation is potentially limiting entry into KiwiSaver by people under the age of 18. I am pleased to inform those members that of the 316,000-odd people who have signed up to KiwiSaver already, just over 16,000 of them are 16 and 17-year-olds. So despite the absence of the member tax credit and despite some of the other incentives such as compulsory contributions not being available to those people, we still have a significant uptake.

💬 Craig Foss: That’ll be by the parents.

The member says that may be by the parents entering into a savings arrangement on behalf of the children. That is quite probable. I can remember many years ago when some of us were young, callow youth, there were various savings schemes our parents entered into on our behalf that, as we grew older and became earners, we were able to carry on. I think precisely the same will happen with KiwiSaver, and I welcome the fact that we are already seeing such a significant uptake.

Dr Smith said earlier that the Government may run some huge fiscal risks here. That is absolutely correct. We have already exceeded 100 percent of our year 1 target for KiwiSaver, and the year from July is barely half over—

💬 Charles Chauvel: An excellent response.

On the one hand it shows that we will run some risks, and, on the other, as Mr Chauvel says, it is an excellent response. People can see that KiwiSaver is a scheme that is entirely beneficial to them and to their long-term interests.

Dr Smith raised a concern about employers having to pay their contribution on top of existing salary or wages they may be paying out and settlements they may be reaching in respect of their employees. He overlooks the fact that employers will be eligible for an employers’ tax credit of up to $20 a week to offset the cost of that contribution. The consequence of that is that in 2008 the employers’ contribution is 1 percent, and the salary or wages that will be covered will be up to $104,000 per employee. That will go to 2 percent in year 2, or down to $52,000; 3 percent in year 3, or down to $34,000-odd; and in year 4, with the 4 percent contribution rate, the subsidy will still cover $26,000 of salary contribution.

Over that 4-year period there is a deliberate phase-in. Employers will be able to restructure their costs in such a way as to not be adversely impacted. If the current trends continue, we will see a substantial proportion of the New Zealand savings market enrolled in KiwiSaver and able to take advantage of all of its provisions—for the first time, perhaps.

I remind the Committee that this country has had a shocking history of long-term savings over a long period. We can go back to the 1970s and the superannuation debacle at that time, the 1980s superannuation debacle, and the mid-1990s superannuation debacle. For the first time KiwiSaver, based on voluntary contributions, has the potential to get us over that crisis that we have all lamented at various times over the last three decades. That crisis has put us into a position where our lament now is: “Look how good Australia is. Look how good Australia has become since compulsory superannuation came in in that country.” I remind the Committee that that was in the mid-1990s. It is a comparatively short transition. I suspect very strongly that if we were to have this debate in a decade’s time, we would be saying that some of the great strengths of the New Zealand economy at that point will be occurring because of the investment through KiwiSaver and the level of uptake.

I think that this scheme not only is very timely, but also is on the right track. It has all the right incentives for people to join. I want to make just a quick comment as I close, in response to Katrina Shanks and one or two others who have talked about—and I think Dr Smith used this phrase—“ambush and sandpaper arrangements” in respect of employers. I think that is most unfortunate. At the time that these proposals were being developed earlier this year, in the context of the 2007 Budget, it was totally appropriate that there be a measure of secrecy and security about their development. I well recall being at the Budget lock-ups where employers were first briefed on the impact of these changes. I did not see and do not remember anyone at those meetings talking about ambushes or other things. In fact, their initial reaction to the changes was extraordinarily positive. If one goes back and looks at their initial statements immediately afterwards, one will find that that was the case.

There will be implications for employers—of course there are—but they are essentially matters to be resolved between employers and employees. I find it somewhat ironic that those groups that spend a lot of time telling successive Governments to butt out of the employer-employee relationships now turn round and say: “Oh, you’ve made it difficult for us because you’re going to require us to talk to our employees, to negotiate with them.” This is the very thing these groups have been telling Governments for years they should be able to do in a free and unfettered way. They cannot have it both ways.

I want to take the debate in a slightly different direction in this 5-minute speech. I want to focus on the Customs and Excise Act 1996, and the two amendments to that Act that will have quite a significant impact on child support payments in this country.

The first is section 280K, which is inserted in the principal Act by clause 263. It deals with the disclosure of arrival and departure information for the purposes of the Child Support Act 1991. Subsection (1) states: “The purpose of this section is to facilitate the exchange of information …”. Section 280L provides for the Inland Revenue Department to have direct access to arrival and departure information, to help it apply the Child Support Act 1991. In that regard, a range of information is to be provided, and I think that is a good thing. Subsection (4) of section 280K refers to the person’s name, the person’s date of birth, the person’s tax file number—all information that I think will be hugely relevant in starting to dealing with what can only be described as the mountain of unpaid child support.

I want to bring to the Committee’s attention some of the figures, which are frightening. I find it unbelievable that parents can have children, then walk away from their obligation to bring up those children. I find it simply quite unfathomable.

💬 Hon Peter Dunne: Unconscionable.

“Unconscionable” is the word that the Minister uses. For the life of me I cannot understand how someone can bring a small baby into this world, see that baby grow, then walk away from one’s responsibility to bring up that child. I accept that people move out of relationships. I understand that. It happens around the world, and that is not going to change. But for a parent to actually walk away from his or her obligation, both financially and on a relationship level, to bring up that child I find totally unconscionable.

Here are some of the figures. Child support debt now has risen to $1.129 billion. That is up from $380 million in 2000. We have seen this exponential increase in parents of either sex—but I have to say mainly men—walking away from those relationships, walking away from their responsibilities to bring up their children. Quite frankly, I find that unconscionable, as the Minister said.

The second point I will make here is that the amount of assessment debt has gone from $192 million to $450 million. As at 31 March, 23,959 liable parents owed more than $10,000 each in child support. Over 23,000 people in this country have walked away from their obligation to bring up their children, their obligation to financially support their children. To allow the State to take over that role is just unbelievable.

Of those parents, 11,793 now live in Australia, and they owe a collective $354 million. Although this side of the Chamber does not support the vision of this bill, particularly the taxation provisions, in terms of the Customs and Excise Act 1996 I believe that there is an onus on this Parliament to come down on those parents, to make it difficult for them to walk away from their obligations. We should not accept, by any stretch of the imagination, their walking away from their obligations. We should come down hard on those parents who are living in Australia. The provisions of section 280K, “Disclosure of arrival and departure information for purposes of Child Support Act 1991”, and the provision allowing that information to go to the Inland Revenue Department, will help us to clamp down on those parents and get them to take on their obligations. I do not know why the Government should have to do that. It is something that parents should do as of right.

Lastly, and in that regard, although both men and women are involved in this issue, 288 fathers earning over $100,000 have total child support debts of $5.5 million. What are those men doing? What do they think? Do they think they can just walk away from their obligation to raise their child? It is totally unacceptable. National supports sections 280K and 280L.

The question was put that the following amendments in the name of the Hon Peter Dunne to the proposed amendments to Part 3 set out on Supplementary Order Papers 167 and 168 in his name be agreed to:

to omit from subparagraph (ii) inserted by paragraph (b) of clause 201(6) the word “share”, and substitute the word “scheme”;

to omit from paragraph (a) of clause 298(3) the words “paragraph (c)”, and substitute the words “paragraph (d);

to renumber paragraph (c) inserted by paragraph (a) of clause 298(3) as paragraph (d);

to omit from paragraph (db) inserted by subclause (2) of clause 402 the words “section LH 2(4)”, and to substitute the words “section LH 2(6)”;

to omit from the heading to section OB 7C inserted by clause 464 the word “business”;

to omit from subsection (2) of section OB 7C inserted by clause 464 the word “business”, and substitute the words “research and development”;

to omit from row 5C inserted in table O1 by clause 466 the word “business”, and substitute the words “research and development”;

to omit from the heading to section OK 4B inserted by clause 480 the word “business”;

to omit from subsection (2) of section OK 4B inserted by clause 480 the word “business”, and substitute the words “research and development”;

to omit from row 4B inserted in table O17 by clause 481 the word “business”, and substitute the words “research and development”;

to omit from paragraph (bb) inserted by clause 482 the word “business”, and substitute the words “research and development”;

to omit from the heading to section OP 11B inserted by clause 484 the word “business”;

to omit from subsection (2) of section OP 11B inserted by clause 484 the word “business”, and substitute the words “research and development”;

to omit from row 6B inserted in table O19 by clause 485 the word “business”, and substitute the words “research and development”;

to omit subsection (3B), other than the heading, inserted by clause 519B, and to substitute the following new subsection:

(3B) Despite subsection (3), this section does not apply for the purposes of section LH 1(2) (Who this subpart applies to); and

to omit paragraph (ob) inserted by subclause (1) of clause 521, and substitute the following new paragraph:

(ob) subpart LH (Tax credits for expenditure on research and development):.