Taxation (Budget Tax Measures) Bill

This is the part of the bill about closing the mortgage diversion facility for KiwiSaver, and I ask members opposite which ones of them campaigned on that provision. Which ones of those members went around the electorates last year, saying: “Here is an opportunity, and we’re going to close it.”? There is not a whisper, not a murmur, not a word from members opposite. What they did on this provision, as on the rest of the legislation, was go around the electorates telling lies. They made absolute promises to leave KiwiSaver alone—apart from a couple of minor changes, they said. They were very detailed in their promises on KiwiSaver. Did they promise this? No, they did not. It is just like the rest of it. Those members say one thing in the electorate, and when they come into the House they do something else.

💬 Hon Darren Hughes: After the election.

They did it after the election, with no notice, and under urgency. What the hell is urgent about this? What is urgent about closing off this scheme? Oh, a couple of hundred people might buy a house. It will take a month or two, and a couple of hundred people might buy a house. What a terrible thing to happen. And we are here. The calendar in the Chamber says that today is Thursday, but it is Friday morning. We were here until late last night, and we are back here this morning to do something that is supposedly urgent. We know that it is not urgent at all. It is doubtful whether it should happen. Frankly, in the end, if there was a proper debate, if the bill went to a select committee, the Labour Party could have come to the point of view that it is a good thing. I think it is fair to say that I agree with the Minister in the chair, the Hon Peter Dunne, that it was not a core part of KiwiSaver. It was a bit of an add-on to an add-on, if he will excuse the relationship with the member.

💬 Hon Peter Dunne: There’s a long story to be told at some point.

There is a long story to be told, and it would have been good if the bill had gone to a select committee. The member is one who has defended, generally, the processes of this Parliament and generally opposed urgency on important matters, so it is somewhat incongruous that he is the person who is sitting in the chair on behalf of the Government. I do not feel too sorry for him. If we sup with the devil, we end up with this sort of thing. But that is the position that he is in. [Interruption]

There is a member over there who keeps on chipping in. I came down to the Chamber after watching her on television, to try to work out whether what she was saying would make any more sense when I was here. And it does not. At that point, after listening to that member, I was tempted to move the closure myself. It was such a poor contribution. [Interruption] Hang on! We have both members going at once. We have the one who knows how to beat Peters, and the one who was beaten by Peters.

The CHAIRPERSON (Eric Roy): We are debating Part 2.

The member was beaten by both of them. In Part 1 he was beaten by me, and in Part 2 he was beaten by Peters. He should get advice from “Cougar Bait” about how to beat Peters.

The CHAIRPERSON (Eric Roy): There are several points I think I should I reacquaint the Committee with. The first is the use of appropriate titles and names in the Chamber; that is one. The second one is that Part 2 is quite a tight debate. Members who stray from the debate and want to bring in extraneous matters may be tempting the Chair to take an early closure. The member has about a minute to go, but this is a timely warning. This is quite a precise and tight debate.

It is, and I am sorry I was diverted. It was such an opportunity to have the two members interjecting at once.

This is a very narrow debate. It is one that I would not put as one of the most important debates the House will have this year. But it is certainly a debate that should not be held under urgency. Because this bill is not going to a select committee, it needs the full attention of the House over an extended period in order to make sure that we all fully understand both this part and the implications of it, especially for people who are trying to buy their first house. The urgency process will stop that from happening.

I am delighted to take a call in response to the very searing speech made by the member who has just resumed his seat, and to put on record some of the history behind this issue.

💬 Chris Hipkins: Take your time.

I may well. When the KiwiSaver scheme was first being put through Parliament, the issue of mortgage diversion was raised. Then it was withdrawn. Then it came through again, very late, in the bill, at the insistence of someone whose name temporarily—hopefully, permanently—escapes me, and it found its way into the legislation.

💬 Hon Trevor Mallard: I hope he’s escaped here too, permanently.

I have not heard from him and, frankly, I have no desire to. Be that as it may, it was promoted as being a way in which people who were getting into their first home could set aside some of their KiwiSaver contributions as a contribution towards the payment of their mortgage. In fact, what transpired once the scheme was put in place was that a number of the banks took the view that any diversion had to be over and above the original mortgage repayments. In other words, the notion that lay behind the original concept of diversion was overtaken already. To some extent, that counted against the intent of the original policy.

I looked at this issue again earlier this year because I was curious to know what the uptake had been, and in the light of the changes to KiwiSaver that were made last December, I thought it was timely to look at just where this particular proposal stood. In fact, we discovered that fewer than 600 people had taken up the advantage. That was at a time when KiwiSaver membership had soared to 1 million. I say to members opposite—it is worth reminding them when they talk about KiwiSaver being gutted—that, in fact, what has happened is that this year, when membership of KiwiSaver passed 1 million, we surpassed our 2015 target. We got there about 6 years earlier. It is hardly a suggestion that KiwiSaver is being run down. So 600 people, max, out of about 1 million - plus members suggests that this is not a particularly prudent investment.

I say to the Green members, who last night voiced some concern about this proposal during the second reading debate, that the reason why we are closing off this scheme is simply that the numbers do not justify its retention. We are saying to the people who are currently in the scheme that their entitlement will remain and it will be a matter for their particular fund provider to determine whether it wishes to offer the facility. But for new entrants we needed to make a closure date, and we selected 1 June as being the most convenient in order to give certainty to people and to give some sense of clarity.

The member who spoke before me questioned why this is being done at this time when a maximum of 200 people—that was his figure—may be adversely affected. I suspect that that is an optimistically high figure, actually. The number of people expressing interest in this scheme continues to diminish.

💬 Hon Trevor Mallard: It depends on whether it went to a select committee for a proper period.

Well, frankly, I do not think the outcome would have been much different. This is a comparatively small measure. It affects very few people in New Zealand. No one will lose from it—

💬 Hon Trevor Mallard: You can’t say you know how many.

I know how many are in the scheme at the moment. There is no great evidence of a huge well of people expressing interest in mortgage diversion. I would make the point that one—

💬 Hon Trevor Mallard: But if someone was just about to go into the scheme in the next few days—

Hang on; I think the member is—

💬 Paul Quinn: Is this a conversation or a debate?

💬 Hon Trevor Mallard: It’s the Committee stage. Grow up and learn how it works.

If the Hutt South battle could go somewhere else, I will answer the member’s question.

The point that Mr Mallard makes is actually the core of this issue, and I want to, if I may, take a moment to go through it. What he is saying, in effect, is that there will be people out there at the moment, potentially, considering the purchase of their first home and worrying about whether the absence of this diversion will affect that purchase. The point I am making is that when the scheme was originally conceived, the notion was that people would be able to divert their KiwiSaver contributions to their mortgage repayments. What has transpired subsequently is that the financial institutions have said: “No, not quite. What we will do is take your normal mortgage repayment and then treat any KiwiSaver diversion over and above that. In other words, you can’t do it first up. You have to be meeting your primary set of responsibilities, and then we’ll look at any additional payments being diverted.”

In other words, the new-home buyer who is wondering at the moment whether he or she is being disadvantaged is not being disadvantaged because he or she would still have to meet the primary mortgage repayments before he or she would—

💬 Hon Trevor Mallard: Because the banks didn’t trust Governments on KiwiSaver.

That, of course, was during the time of the previous Government. The member may not want to go too far down that path. But that is the background to why this provision is being removed. It was a good idea, but it has not worked.

I am happy to stand to take a call on Part 2, and I thank the Minister in the chair, Peter Dunne, for taking a call to explain why this measure is happening. It is unusual to have a Minister in the chair who is happy to answer questions from the Opposition. It is quite a breath of fresh air. Long may it continue!

Labour members believe that this part should have been referred to a select committee. It may well not impact on many people right now, but the fact is there are people already in the scheme; there are people who have taken up this option. And there may well be people who want to take it up, especially as times get tougher and they are facing saving for their retirement, which has become all the more urgent now that superannuation will not be fully funded in the future, given that the Budget stops the Government’s contributions to the New Zealand Superannuation Fund. In that respect, KiwiSaver becomes even more important as a tool for saving for one’s retirement. It is a shame that KiwiSaver itself was gutted right before Christmas. I had hoped that in this Budget we would see a reversal of that, given that we will not be able to afford New Zealand superannuation in the future, and given that many of us on this side of the Chamber will pay taxes—

The CHAIRPERSON (Eric Roy): Please speak to Part 2.

I am talking about Part 2, which is about KiwiSaver. It is a very broad area, Mr Chairman. It is very important, because a number of people who at this time might be looking to keep up their retirement savings would also have a mortgage. At a select committee we would have been able to tease that out. At a select committee we would have been able to discuss whether the balance is right and what impact it will have. As times get tougher, was there likely to be more uptake of this measure? If so, and if there were administrative problems with how it was run, how could we fix them? Labour members think that this change is significant enough to go to a select committee, and it should have. It does not have to be made right now. It does not need to be done today under urgency. Given that New Zealand superannuation is not guaranteed in the future, and given that we do not know how it will be paid for, it is a fact that—

💬 Hon Ruth Dyson: Didn’t John Key give a personal guarantee?

He did give a personal guarantee, but it is all very well to say that New Zealand superannuation will be there, and then cut the funding for it. He cannot have it both ways. Last time Bill English was the Minister of Finance he cut New Zealand superannuation. This time he has found a sneakier way of doing it, coming round the back and saying it will be fine.

The CHAIRPERSON (Eric Roy): I did preface this debate by saying it is narrow. It is about mortgage diversion. Members can make references to other matters but they cannot base their speeches on KiwiSaver per se. This debate is about mortgage diversion.

Thank you, Mr Chair. I think I was misled by the mention of the word “KiwiSaver” in this part, but I will keep my comments to mortgage diversion. However, it is not possible to talk about the mortgage diversion part of KiwiSaver without making reference to superannuation and KiwiSaver. I guess I was also responding to interjections about superannuation from the other side of the Chamber. I believe that it is within the Standing Orders for me to do so. I was not responding to those from Mr McClay, because I could not understand what he was saying, but certainly those from Mr Woodhouse.

💬 Hon Dr Jonathan Coleman: You’re getting personal and nasty.

Mr Coleman should calm down. I am not getting personal and nasty. Jonathan Coleman accusing me of being personal and nasty is like Jack the Ripper criticising domestic violence, as Bill English likes to say. This part of the bill should have been referred to a select committee, because a mortgage diversion process—

💬 Hon Trevor Mallard: I raise a point of order, Mr Chairperson. I am reluctant to do it, especially when no Government member does—

The CHAIRPERSON (Eric Roy): Points of order will be heard in silence. Thank you.

💬 Hon Trevor Mallard: I have been here a long time, and I think that doing—

💬 Hon Member: Too long!

💬 Hon Trevor Mallard: Are you going to deal with him, or—

The CHAIRPERSON (Eric Roy): I will hear your point first.

💬 Hon Trevor Mallard: OK. Comparing a member with Jack the Ripper and his relationship to domestic violence goes beyond a line. Although I do not want the member to apologise, I think the remark should be withdrawn. Even I do not think we should go as far as that.

The CHAIRPERSON (Eric Roy): I did not actually hear the comment; there was too much noise. Has the member to whom it was made taken offence? Because I missed it, I am not even sure whom it referred to. If the member did take offence, it should be withdrawn. The member could perhaps facilitate things by withdrawing—I do not know.

💬 Hon Dr Jonathan Coleman: I would like to speak to the point of order.

The CHAIRPERSON (Eric Roy): Well, I guess I have opened it up by saying that I could not hear it. I will hear only the member.

💬 Hon Dr Jonathan Coleman: The fact is that we have just conferred on this side of the Chamber, and no member here, to our knowledge, made any such comment. Trevor Mallard is being deliberately malicious by inventing comments—

The CHAIRPERSON (Eric Roy): Look, when we raise points of order we should not cast aspersions upon the character of individuals. A point of order should refer precisely to the Committee. That is a general warning. I did not hear the comment; the member does not seem to have taken offence. Let us just park it. The second thing is that the Committee seems to be in a particularly fractious mood this morning.

💬 Hon Steve Chadwick: I wonder why.

The CHAIRPERSON (Eric Roy): Look, here I am about to chastise someone on the Government side—do members see what I mean? I am trying to do my best here. Let us just continue.

💬 Hon Trevor Mallard: I raise a point of order, Mr Chairperson. I want to make it clear to members opposite that I was not suggesting—

The CHAIRPERSON (Eric Roy): Order!

💬 Hon Trevor Mallard: No, it is important. My colleague made the comment; no member opposite did. I just make it clear that I was not accusing any of the members opposite of making the comment. It was a comment made by my colleague about Jonathan Coleman that I heard—

The CHAIRPERSON (Eric Roy): Enough, enough.

💬 Hon Trevor Mallard: —and thought was offensive.

The CHAIRPERSON (Eric Roy): Stop! Halt! Moana Mackey has about a minute to go on mortgage diversion.

Thank you, Mr Chair. It is really hard to make the jokes work when the National members just do not get them. In any case, I thank my colleague—

💬 Hon Trevor Mallard: They are the jokes.

—that is right—Trevor Mallard. I am so pleased that he is my moral compass in this Chamber. I have completely lost my train of thought, now!

Part 2 is about mortgage diversion, and it should have gone to a select committee. I look forward to a National member taking a call to explain why it could not have gone to a select committee. Those members may say that it is unimportant. Well, it might be unimportant for them, but it is probably not unimportant for the people already in the scheme, and it is probably not unimportant for the people who are looking at their bank balances and at last night’s Budget, realising there is nothing in the Budget for them, and asking themselves how they are going to save for their retirement, which they now have to do, as well as make mortgage repayments. The mortgage diversion scheme may well have been an answer for them. But we will never know how many people are in that position, because we do not have the opportunity to ask the public what they think. That has become a little bit of a hallmark of this Government.

As one of the original signatories to the default providers on the KiwiSaver scheme, along with my former colleague the Hon Dr Michael Cullen, and as co-signatory to thousands of Cabinet papers that came through our offices, along with the then Minister of Revenue—who is also the current Minister of Revenue—and Dr Michael Cullen, we went through quite a number of iterations of the KiwiSaver scheme, leading up to what I believe was a significant turning point in this country’s history. I think we should all take some pride in what we have achieved with KiwiSaver, and the fact that a million people are enrolled—

💬 Hon Peter Dunne: Over a million.

—over a million people are enrolled—is a fantastic achievement. It shows that the right decision was taken at the outset, which was to try to turn round the lack of a savings culture in this country. We specifically designed KiwiSaver with the Kiwi saver in mind—that is, to use the inertia that would inevitably exist from having compulsory enrolment, by not having a provision for people to remain compulsorily within the scheme. It would not apply across the board. People would automatically be enrolled in the scheme, and they would have to take steps to pull themselves out of the scheme, which I think is a very sensible way to go. It took advantage of that good old Kiwi mentality of inertia: “I can’t be bothered to do anything about it.” Anyway, it has been a fantastic success in that regard.

💬 Paul Quinn: Why aren’t you in it?

The reason I am not in it is that, unlike a lot of New Zealanders, I exercised my right to pull out of the scheme when I was automatically enrolled in it, because I am covered by the parliamentary superannuation scheme that existed at the time I became—

💬 Paul Quinn: Oh—so, free!

That is right; I am one of the very lucky people who belongs to that.

💬 Hon Members: Greater perks! Free chits!

To be honest, and given that the members have chipped me because somehow they think that this is a lack of faith in KiwiSaver, I tell them that it is quite the contrary. I thought it was immoral to take money from the public purse, for the contribution that I already have, for my superannuation scheme. Actually, very few MPs in this Parliament are covered by the superannuation scheme that I have the privilege to belong to. I know that Trevor is not in it, either, because—

The CHAIRPERSON (Eric Roy): Proper names.

—sorry—the Hon Trevor Mallard was out of Parliament between 1990 and 1993, when a wonderful Minister of the Crown, a guy called the Rt Hon Bill Birch, destroyed the very, very good scheme that was in place at the time. So, there you go! I was chipped by members opposite, but I believe that my decision not to be in KiwiSaver, merely to get the $1,000 contribution, was an honourable position to take.

I was not aware that this provision covering mortgage diversion was to be repealed, so my issue is about process. As I have said, we went through a number of iterations before we arrived at the KiwiSaver proposal. It was interesting to listen to the Minister talk about a man—whose name is apparently not going to be mentioned in this debate—who sat on the select committee. I think it was Gordon Copeland; I will hazard a guess there.

💬 Hon Peter Dunne: I am suddenly feeling unwell.

💬 Grant Robertson: He dare not speak the name.

He dare not speak the name—that is right.

💬 Hon Trevor Mallard: He was “GC”, but he thought he was “JC”.

Well, that is right; I think his direct line of communication outside this place was somewhat greater than others of us might experience.

But leaving all that aside, the point is that I was very interested to hear the Minister say that in fact the banks had responded to the introduction of this provision in what I think is quite a sensible way—by saying that it is not a mortgage diversion facility available for people’s ordinary KiwiSaver contributions; it is actually a mortgage diversion facility available for people who want to pay off their mortgage a little bit more quickly. When we think of the intention of KiwiSaver, and of people improving their equity in their homes, we know that that is the way most New Zealanders have saved over many generations. I think that a lot of people have taken the approach of paying off their mortgage in order to ensure their future, so it is a similar process to KiwiSaver in that regard.

Given that banks have adopted this process of not taking it off the actual contribution to people’s normal mortgage repayments, I am left asking the question: why are we repealing this? It seems as though the banks have adopted a relatively sensible approach to it and, if that is the case, why then does it need to be repealed? As the Minister said, a relatively small number of people are affected. If that is the only reason, is that a good enough reason? That is why I would have preferred this part of the bill to go to a select committee.

The debate on Part 1 was pretty cut and dried; it was black and white. But I am wondering whether the debate on Part 2 will be so cut and dried, and whether this is the right thing to do. Was it the banks that came to the Government to ask it to repeal this provision, or is this simply Gordon Copeland payback? Now that he has gone, we can get rid of it.

💬 Brendon Burns: Divine retribution!

As that member has said, it could be divine retribution. I think these are the issues that we could explore.

I probably would have felt totally comfortable about this provision if it was a straight mortgage diversion for the ordinary mortgage payments. But the fact that the banks and the other KiwiSaver providers have not interpreted it in that way, and have actually applied it in a way that I think is quite sensible, makes me wonder why we should take this out. It seems to be quite a useful alternative that is available to those who want to increase their equity in their own homes, rather than making a contribution to KiwiSaver at a particular time. I, personally, think that the legislation as it was finally drafted in that regard, in relation to the very powerful advocacy of one Gordon Copeland, was intended by him to be a mortgage diversion, so one could pay off one’s ordinary mortgage rates. It sounds from what the Minister has said that the banks and others have responded in a way that, in my way of thinking, is more in keeping with the original design of the scheme than perhaps an open mortgage diversion facility would be. I am quite keen to hear a little bit more about it; I think we should tease the debate out. It has not gone to select committee, and I would be grateful if the Minister could respond to those issues.

Let me take a couple of minutes to respond to the quite useful contribution from the member who has just preceded me. I am aware that as I do so, a bolt of lightning may well strike me. Be that as it may, the member’s analysis of what has happened is quite correct in terms of the way in which the banks have proceeded. As I said earlier, the net uptake is somewhat fewer than 600, across the entire scheme. If that is taken across the number of registered providers, we are down to a handful of numbers per provider, and in some cases probably fewer than 100 per provider. So the economics of those providers’ provision of this particular facility start to mitigate against it.

The second point that I make, which I should have made earlier, concerns my reference to the fact that I looked at this in the light of the changes that were made to KiwiSaver late last year. As the previous speaker said, when mortgage diversion was provisionally proposed, I think that the original concept was that people could divert money directly from their KiwiSaver payment to their existing mortgage payment. In fact, we know now that that has not been the way it has worked in practice. It was seen as an advantage for first or new homeowners, for couples with young families, and presumably for those at the lower end of the income scale, etc. One of the consequences of the shift to the “2 plus 2” contributions last year has been that the maximum net benefit obtained from mortgage diversion has been applied to people earning $104,000 and above, per year. Clearly, then, the social consequences of mortgage diversion—even if the scheme is working as designed—have been changed by the change to that contributions regime.

We have the most perverse of outcomes now—and let us forget for a moment the total numbers of people who might have taken up mortgage diversion. We have in place a mortgage diversion scheme that was conceived to allow people to divert their KiwiSaver payments to pay off their mortgages, but that has in fact ended up being a mortgage diversion scheme that means that people must meet their primary mortgage requirements and then they can use diversion for any additional payments. But, really, they have to be earning over $100,000 for that to be worthwhile. I will make a partly political point: when members opposite talk about 3 percent of taxpayers getting 30 percent of the benefit from the tax cut package—we can debate that separately; and we will—the reality is that this would be exactly that type of instance. The number of people earning over $100,000 in New Zealand is not great, and the number of people earning over $100,000 who are taking advantage of mortgage diversion is minimal. Frankly, to address the provision seemed to be not worth the candle, hence the decision simply to can it.

I want to address Part 2 of the bill, which closes the KiwiSaver mortgage diversion facility. In particular, I want to talk about the extent to which the public of New Zealand were aware of the fact that Part 2 would be coming before the House in this term.

We can refer to what the National Party said about KiwiSaver in this interesting document that I hold in my hand, which some members may be familiar with. This document lists the personal commitments of John Key to the public. We have already heard about the signed tax cut commitments. So what was said about KiwiSaver? I am checking whether closing the mortgage diversion facility was included within these commitments. The document states: “Encourage people to save for their retirement, while making it fairer and more affordable for everyone in these tighter economic times, by retaining KiwiSaver, with contributions at the 2% plus 2% level.” Well, leaving aside the generous interpretation of what the commitment states National would actually do with KiwiSaver—because it did not indicate that National would gut it, would cut it in half, which was what was done under urgency before Christmas—it does not talk about closing mortgage diversion. It does not talk about what is in Part 2.

It would be interesting to know—perhaps from the Minister in the chair, Peter Dunne, or from a member on the other side of the Chamber—what promotion was done of the mortgage diversion scheme. We can see that it was not in one of John Key’s personal commitments. I have not seen a great deal of promotion of the mortgage diversion part of the KiwiSaver scheme. I acknowledge that it was brought in under our Government, but I think members opposite may want to consider that and take a call to tell us how they thought the New Zealand public would find out about it.

I think it is important to set mortgage diversion in the wider context of KiwiSaver. KiwiSaver is, as the Minister in the chair noted, a very popular scheme. It is a scheme that many New Zealanders have wanted to be part of. They have joined up, and over a million New Zealanders belong to the scheme now, and that is a good thing. But what are New Zealanders to make of what will happen to them in their retirement? Part 2 takes out mortgage diversion, and, overall, there is the delay in Government contributions to the New Zealand Superannuation Fund. That is part of the context of mortgage diversion of KiwiSaver. New Zealanders need to know what they will be entitled to in the future in terms of remuneration in their retirement.

On Budget day yesterday, we saw New Zealanders provided with an enormous amount of uncertainty about the future. The Government contributions will now be delayed for up to 11 years. What will happen then? The baby boomers will have retired. What will happen to the next generation of people? What kind of money is being put aside to ensure that future generations in New Zealand will have a secure retirement? KiwiSaver is an important part of that, and both sides of the House now acknowledge that. The previous Labour Government was proud to bring KiwiSaver in, and the Minister in the chair, being part of that Government, was part of that. The mortgage diversion scheme was an aspect of it. Perhaps now, from the arguments we have heard here, there is some justification for what is being done in Part 2, but there is no justification for removing the Government contributions to the New Zealand Superannuation Fund, because that fundamentally undermines the security of retirement of New Zealanders. We know that the New Zealand public have once again been misled by the National Party.

In respect of Part 2, we are not sure whether closing mortgage diversion was put before the public previously. Certainly, in none of the pre-election meetings I was at did I hear about mortgage diversion. It was not even mentioned. I heard a lot about tax cuts. I heard a lot about the fact that taxes would be cut in 2010 and in 2011. I even heard about KiwiSaver generally and the fact that it would be reduced, because that was going to pay for the tax cuts. Unfortunately, that is not happening today. KiwiSaver has been cut in half, public services have been cut, and the tax cuts have gone. It is the triple whammy. Closing the mortgage diversion element probably is the right thing to do, on balance, given what we have heard from Mr Dunne today, but I am extremely sure that the public of New Zealand did not know about it, and that the National Party did not put it before the country.

Here we are sitting in urgency, once again, going through changes that the National Government feels need to be done—undoing what it has already done, in urgency. In December we, along with the entire planet, were aware of the extent of the global recession, and the National Government put in place tax cuts that it knew were unaffordable. It knew they were unaffordable, it knew they were an election bribe, yet it put them in front of the country, in urgency. We are sitting again in urgency, repealing what was put in place in urgency, and removing the mortgage diversion scheme without actually going to the public about it.

Part 2 of the Taxation (Budget Tax Measures) Bill refers to the closing of mortgage diversion for KiwiSaver. When mortgage diversion was first mooted, by the man whose name we dare not speak, it was couched in terms of trying to encourage people into KiwiSaver. For people with mortgages, especially young people looking at buying their first homes, mortgage diversion was to encourage them to get involved in KiwiSaver when they were weighing up their saving options against having to pay off a substantial mortgage over a number of years. Mortgage diversion was an option to try to get them into KiwiSaver and encourage that savings habit; Lianne Dalziel talked about the inertia that many young Kiwis feel when thinking about their retirement savings.

Within those terms of encouraging people to get into KiwiSaver, Bill English tried to sell the gutting of KiwiSaver when we were in urgency before Christmas. Bill English said that the Government had made some changes to KiwiSaver that preserved the incentives that are paid into the savers’ accounts, and a number of other changes, such as the abolition of the employer tax credit and the member fee subsidy. He said that the main change had been to reduce the member contribution to 2 percent, and that the Government believed that change would allow a good deal more New Zealanders to stay in the scheme when times are tough, and for many others to enter the scheme at a lower contribution rate. None of that indicated any suggestion that the mortgage diversion facility was going to be cut. There was absolutely no indication during the election campaign or in the urgency before Christmas that this change was on the agenda. We are supposed to be repealing tax cuts. This provision has been slipped in for some reason—because of retribution or utu; I do not know what the reason is.

💬 Hon Peter Dunne: All of the above.

There we go; we finally get to the heart of it. The system works and it is about retribution!

We heard a lot from the other side of the Chamber about Labour not being prepared to deliver tax credits. But through KiwiSaver, those tax credits were delivered and they were targeted. It was just like the research and development tax credits. It was about targeting them to where they were most valuable and where they would serve the best purpose, unlike this broad-brush, blunt-instrument approach to personal tax credits that the Government is so fixated with.

Just before Bill English started trying to sell the cuts to KiwiSaver, he said: “The reality is that over the next 5 years or so, the fiscal capacity of the Government will be significantly less.” The Minister of Finance was able to predict the constraints that the Government would come under when it came to slashing and burning KiwiSaver, but for some reason back in December he was not able to predict that the fiscal situation the Government was facing would mean that tax cuts would not be delivered. He has told us time and time again that things are worse since December and that the decision on tax cuts was made in a different environment, yet he was able to predict the cut and burn to KiwiSaver. I wonder why he was not able to predict the lack of tax cuts back then. That is a very good question; it is just another flip-flop.

KiwiSaver is about giving people certainty in their retirement. The reason it is not compulsory is so that there is a capacity to maintain universal superannuation. As good as KiwiSaver is, the amount that people can save for their retirement is still entirely dependent on their income throughout their lives. We need to maintain a universal level of superannuation to make sure that there is a baseline level of superannuation that will take care of our elderly. When people have worked hard all their lives, we need to take care of them. This Government is tweaking KiwiSaver, cutting it back, and mucking around with it.

I move, That the question be now put.

It was very interesting listening to Mr Dunne’s analysis in relation to KiwiSaver’s mortgage diversion facility. My learned friend the co-leader of the Māori Party Pita Sharples said that I would be lost for words when I saw the Budget come out; I am lost all right, because there was nothing in there for Māori. I want to talk about the diversion facility. If members understood what Māori people have been through for the last 150 years, they would understand that there has never really been a time, apart from when a Labour Government was in office, when Māori were able to take up mortgages to ensure a better lot for their families.

It is interesting that National members could knock out the 2 percent contribution. They perceived that, going forward, it would impinge on the financial pressures of this country, and they removed it. We get to this stage and the only separate thing that is being rushed through, that is being tailed on to this tax bill the day after the Budget, is getting rid of mortgage diversion. I appreciate that only 600 out of 1 million people have taken it up, but Māori people are now tracking up in the unemployment stakes—37,000 people—and they are losing everything.

💬 Paul Quinn: In what way?

There is a new thing going on that is relevant: it is not only the manual labourers but also people like Mr Quinn who are losing their employment.

The last time that Māori had an opportunity to ensure that they could get mortgages and extend mortgages was when the Labour Government put through benefit capitalisation. This facility was another chance. Michael Cullen said we should not have tax cuts, because they would not work, and the Labour Government was consistent about that. National has done the biggest flip-flop ever. One minute National was saying tax cuts had to be put through under urgency, and now it is taking them away. Taking out mortgage diversion is the same thing. You see, KiwiSaver gave Māori workers hope. For once they could start to save, like a lot of working Pākehās and Asians in this country. It gave them hope. Then we said we would have a bit of a rest, and we pulled the 2 percent contribution.

A lot of what is going on, like the Māori distribution, is projected out 10 years, or out to 2020. But it is not; it is a purposeful removal to stymie. When 18 jobs are lost in Pahīatua and mortgages are affected, this measure certainly affects those people. I appreciated the Minister’s analysis. He said the maximum benefit has been gained by people earning more than $104,000. Let me tell him how the Indians bought all the dairies in this country. They clustered together, they put their mortgages together, and they ensured that they looked after the whānau. What is wrong with that? Why does that not beat the $104,000 benchmark? This is about helping people who have, and putting aside the Māori people.

💬 Paul Quinn: Another “Parekura-ism”.

No, it is not another “Parekura-ism”. This is about Mr Quinn’s people, the people he does not care about. He should sit there and be quiet. He makes believe that this was a Māori Budget, but it gave them nothing. We settled Mr Quinn’s Treaty claim, He was greasing up in our office. We restructured his trust. We made sure that he could go off and do that. He knows that a lot of his Whakatōhea people are being put at a wicked disadvantage.

💬 Paul Quinn: Up a bit—Tūhoe.

Tūhoe, or wherever. Mr Quinn, who sits there smugly with his mates, knows as well as I do that the Budget has broken a lot of promises. In terms of KiwiSaver and mortgage diversion, I plead with Mr Dunne that when this bill goes to a select committee—

💬 Hon Ruth Dyson: If it does.

—if it does—he flip-flops back the other way. A lot of Māori are relying on him. The thing that is missing from Mr Dunne’s analysis is that these things have to be given time. What would happen in 5 or 6 years’ time, when people have built up their KiwiSaver funds?

Before I take the next call I say to members that the Chair is not part of the debate: “you did this”, “you did that”, “what did you do”—[Interruption] Excuse me, I am on my feet. I say to members that the Chair is not part of the debate. [Interruption] Are we listening here? The Chair is not part of the debate and I want members to desist from constant barrages of “you”. I want members who are speaking to address the Chair as “the Chair” and not “you”.

💬 Charles Chauvel: Mr Chairperson—

The CHAIRPERSON (Hon Rick Barker): Point of order, Charles Chauvel.

H V Ross Robertson: I raise a point of order, Mr Chairperson. While—

The CHAIRPERSON (Hon Rick Barker): Excuse me, a point of order was called by Charles Chauvel.

💬 Charles Chauvel: I am sorry, Mr Chair; I was seeking a call and then Mr Robertson was—

The CHAIRPERSON (Hon Rick Barker): I call Ross Robertson for a point of order.

I raise a point of order, Mr Chairperson. While we are on the subject, members might like to look at Speakers’ rulings 63/3 and 63/1. They will note that it is incorrect to move to facilitate interjection. A number of members on the Government side of the Chamber are not sitting in their seats and are using their position to interject on members who are speaking. That is out of order.

I do not need any assistance with this. The member is quite right: it is well ruled and it is well informed. I have been quite liberal about this rule because if everybody was required to sit in their seats the group would be scattered around the Chamber. I am quite tolerant of people moving forward so that this part of the Chamber is engaged when we are having a debate, because I want it to be a debate. But having said that, to sit in a position directly opposite the speaker and make a constant barrage of interjections that are not humorous or witty—and lack a whole range of things—stymies things. We are always open to humour and wit, and a cutting remark adds to the flavour of the debate, but the point that Mr Robertson has made is absolutely correct. I am not going to enforce the rule vigorously or rigorously if people do not take advantage of it.

I raise a point of order, Mr Chairperson. I feel really wounded by those callous remarks from the member directly across the Chamber. I demand that he apologise. I have never taken so much insult since I have been in this House.

The CHAIRPERSON (Hon Rick Barker): I say to the member that I am not going to require that. If the member felt that, he should have made a point of order at the time; he did not. I think this is a draw.

I raise a point of order, Mr Chairperson. Consequent to your ruling about appropriate interjections, is it in order for a member to come into a battle of wits unarmed, as Mr Quinn has?

The CHAIRPERSON (Hon Rick Barker): That is not a point of order; that is an abuse of the process.

I raise a point of order, Mr Chairperson. This is a serious debate, and coming as it does—[Interruption]

The CHAIRPERSON (Hon Rick Barker): Members, can we just get to the gist of the point of order without prevaricating.

I am speaking in support of your ruling. [Interruption]

The CHAIRPERSON (Hon Rick Barker): The next person who interjects on this point of order will leave the Chamber, OK? This is a team warning.

I am speaking in support of your ruling. I suspect that for people who are watching and listening this morning, members are not doing credit to themselves or the subject matter. As you have said, it is one thing to make witty, and sometimes robust, interjections—and I do so myself—but it is another for us to just drone on and drown out speakers. I think we have crossed the line this morning as a Committee.

The CHAIRPERSON (Hon Rick Barker): With respect to the member, I have dealt with that matter. I have done so already in respect of points of order. That was not a point of order; you were relitigating the point that I had raised. If you had wanted to reaffirm it, you should have said so, but it is not a point of order. I have dealt with the matter.

I think the reflection that has just been made by the Hon David Cunliffe is a good one: we need to remember what this debate is about. This particular part of the Taxation (Budget Tax Measures) Bill, Part 2, is about housing affordability. I see Mr Heatley is in the Chamber. I remember that back in 2007 when he was the Opposition spokesperson on housing he welcomed the fact that a select committee of this Parliament, the Commerce Committee, was conducting an inquiry into housing affordability in New Zealand, because it is a real problem for ordinary people in this country. The reason that the mortgage diversion mechanism was originally set was to try to create yet another weapon in the armoury; it was one of the arrows to be used to deal with the problem of housing affordability in this country.

Housing affordability is an issue that has not got any better. If members look at the 5th Annual Demographia International Housing Affordability Survey they will see that 60 severely unaffordable housing markets are listed in that survey. The 23rd most unaffordable is in Tauranga, the 26th in Auckland, the 30th in Christchurch, the 34th in Wellington, the 47th in Dunedin, and the 55th equally in Hamilton and in Napier and Hastings. Members in this Chamber ought to be very concerned about any measures that diminish housing affordability and ought to be debating this issue very seriously.

I take the point that was made by the Minister of Revenue in response to the Hon Lianne Dalziel earlier that because of the changes to the KiwiSaver scheme, there is an issue about accessing the mortgage diversion scheme: it has become accessible only to a particular earning demographic. But surely that is not a reason to cut the mechanism off at the knees and do away with it completely; surely it is a reason to refer a proposal to modify the mortgage diversion scheme to a select committee, have proper submissions on it, and talk openly about how it can be improved so that we actually have yet another way of dealing with the serious problem of being able to afford a house in this country. Instead, what do we have? We are debating under urgency this proposal to cut off the mortgage diversion scheme because of the reason that was enunciated earlier by the Minister in the chair. I make a plea to the Minister and to the Government: for goodness’ sake, this is a serious social problem. Just because only 600 people are accessing the mortgage diversion scheme at the moment is not a reason to destroy it; it is a reason to look at how it could be modified to make it open to more New Zealanders so they can use the scheme properly and afford to buy a house.

On the subject of process, I note that the Minister has been the Minister of Revenue now for two terms of Parliament. Too much revenue-related legislation simply gets put through under urgency—I think the Minister would agree with that proposition. There is not enough scrutiny of revenue-related legislation. I would remind him of his own words just 2 weeks ago at the Institute of Chartered Accountants conference, where he made some observations about how legislation ought to be amended in this area. He said: “The correct process”—in respect of tax legislation—“is for the select committee that is considering the bill to make recommendations to Parliament about changes it believes should be made, and Parliament then decides.” Then he talked about some actions that he took in respect of the bill that was being discussed at the conference. That is the right way to do things.

Tax legislation can be complex. This bill is not particularly complex as far as the merits of the proposal are concerned, but, as I said, it is an important issue. Why on earth is this legislation being rushed through under urgency? Why on earth is it not getting select committee scrutiny? Why on earth are the public not having the opportunity to come along and tell a select committee some of the things that they think could be done to make the mortgage diversion scheme a better scheme, to make it more broadly accessible to the public, and to make it truly one of the tools that can be used to allow ordinary Kiwis to be able to buy a house and enter into house ownership—something that we have always encouraged in this country? We have not really had a proper answer to that question, and I encourage the Minister to tell us why we cannot have an inquiry into this matter, why the mortgage diversion scheme cannot be improved, and why the Finance and Expenditure Committee—or another competent select committee—cannot consider that matter.

I move, That the question be now put.

I have been listening carefully, but I still have not heard anything—from the Minister of Revenue or anybody else—to explain why Part 2 of the Taxation (Budget Tax Measures) Bill is necessary and justifiable. I was on the Finance and Expenditure Committee, which put through the KiwiSaver legislation, and it had a lot of debate about the mortgage diversion facility. I was a strong supporter of this measure going into the legislation in the first place. Given that we have not heard convincing reasons this morning or last night not to let this bill go to a select committee to have some proper scrutiny and discussion, it seems obvious that we should do so. There is absolutely nothing urgent about this bill. There is absolutely no reason why 31 May should see the end of this provision rather than 2 months down the track, just as there is no urgency for Part 1, either. Only 600 people—

💬 Simon Bridges: We’ve got a lot of bills coming up.

Well, it is a very active Government. The Government had a lot of bills coming up before Christmas. It put those bills through under urgency, then it found that they were wrong. We have now used a lot of Parliament’s time repealing those bills with this legislation. Maybe a bit less haste and more speed would be a good idea.

The argument seems to be that only 600 people are using mortgage diversion at the moment. That may well be because mortgage rates have dropped over the last year but the worst of the economic recession has not yet hit people. I foresee a time when cancelling this provision would lead to more people losing their homes because they cannot afford mortgage payments. Let us imagine a situation whereby one partner in a couple loses his or her job, and the other partner is still working and paying into KiwiSaver. They desperately need that money to keep up their mortgage payments, and that is where mortgage diversion can stop people from losing their homes. Maybe there is an argument against that. Maybe I have got something wrong, but how would we know when we are debating a bill that came into the House just as the first reading started, and there has been no proper explanation and no proper scrutiny? That is why the bill needs to be thrashed out properly in a select committee.

The question of housing affordability is a crucial one as more and more families suffer from the recession. That is why the Green New Deal package that the Greens have been proposing builds 6,000 more State houses over the next 3 years—2,000 a year—for families who cannot afford mortgages and cannot even afford private rentals. The housing market generally will be eased if we have more homes—if we have more houses. Government members seem to be extremely exercised and loud about this issue, because they know that they are wrong; they know that it is not a sensible thing to do.

The Greens support Part 1. We will support the bill overall, but we strongly urge the Government to rethink Part 2. Part 2 is not necessary, it is not urgent, and it could leave a number of families in serious strife when the recession bites further. Treasury tells us that unemployment will be 8 percent next year. That is a huge number of extra families in serious strife. There will be a lot of stress and hardship in our society. We need provisions like the mortgage diversion facility to help ease people through. After all, if it is OK for the Government to stop contributing for a while to the Superannuation Fund because it would have to borrow to do so—and we support that pause at this stage; we do not think it is sensible to borrow to do so—why does it not pay for ordinary individuals to stop their saving for a while in order to keep their homes and pay their mortgages? I strongly urge everybody to vote against Part 2.

I take this opportunity to speak on Part 2 of the Taxation (Budget Tax Measures) Bill. Labour supports this bill, but we do so with a great sense of irony. Part 2 is especially ironic because it is another attack on KiwiSaver. Closing down the mortgage diversion facility, and the ability for new participants in KiwiSaver to participate in the mortgage diversion process, is another way in which this National Government, having already gutted KiwiSaver late last year, is trying to attack KiwiSaver and water it down even more. It is just another attack on the ability of New Zealanders to save. We saw in the Budget that was issued yesterday that the Government is saying to people that it does not care about saving for the future, so it is going to stop the payments for superannuation. The Government’s attack on savings for the future of this country is relentless. It continues, and Part 2 is just another example of that attack.

Of course, National members are grinning from ear to ear, and why might that be? They should not have any sense of pride at all in going back on the promises they were elected on, which are at the heart of the bill we are debating this morning. National members know that they have got away with a heist. The 1 April tax cuts are the ones that have delivered to National’s people. A third of the taxpayer money from the 1 April tax cuts went back into the pockets of the top 3 percent of earners in this country—the top 3 percent got a third of that money. So in yesterday’s Budget, when Bill English was crying his crocodile tears, on the inside he was smiling from ear to ear. He knows that the money that should be going into our social services, and into those community and voluntary organisations that have been stripped of their partnership funding money, is already in the back pockets of the top 3 percent of earners in this country. National has already done the damage with the 1 April tax cuts and it does not need to go any further. So guess what? The tax cuts for the rest of New Zealand—the tax cuts that might have made a difference for ordinary New Zealanders—have been canned.

I wonder what John Key’s signature is worth these days. I feel really sorry for those people who out of the goodness of their heart have bought at charity auctions things signed by John Key. That signature is now completely worthless because it is on the bottom of a document in which he promised tax cuts that this bill is now putting to rest. His signature is not worth the paper it is written on—that is now very clear. He has not been able to deliver on his personal commitment. His signature on the bottom of the document that says he gives his personal commitment that tax cuts will go ahead in 2010 and 2011 is completely and utterly worthless, and that is what we are debating here.

The National Government is going back on its promises and it is putting our country in a very bad position going forward because of the way in which it has attacked personal savings. Part 2 is yet another attack on the ability of ordinary, hard-working, everyday New Zealanders to commit to personal savings. Government members are launching yet another attack on KiwiSaver. It is clear that in their hearts they felt that they could not ditch KiwiSaver, because they knew it would be unpalatable to the electorate. They went into the election saying that they would not ditch KiwiSaver, but they are making it as ineffective as they possibly can. This is plan B: when it is unpalatable to ditch the things that they really wanted to ditch—like KiwiSaver, Working for Families, and the Ministry of Women’s Affairs—plan B is to make those things as ineffective as possible, to completely undermine them, and to gut them so that they do not work. Part 2 is yet another example of that approach.

In Part 2 the Government is attacking New Zealanders who are finding it difficult to make ends meet and to keep up their mortgage payments. How many New Zealanders are in that position today? Has the Government looked to see how many people that will affect in the future?

💬 Paul Quinn: 600.

Clearly Paul Quinn does not care about those 600 people. He does not understand that those 600 people have families and that people rely on them. So those 600 people multiply out and out again. And what about the people who might want to use the mortgage diversion facility going forward?

I move, That the question be now put.

The CHAIRPERSON (Hon Rick Barker): The previous Chairperson, Eric Roy, wanted the debate to be relevant and to the point. We are getting very close to being off the subject. I will take one more speech, from Mr Hipkins, and I hope that he is on target.

I intend to talk about the cancellation of the mortgage diversion component of the KiwiSaver scheme, which is what Part 2 does. I think it is relevant to consider why Kiwis are not taking up mortgage diversion, because it has been the key justification for Part 2.

💬 Paul Quinn: Go and check his Twitter site. He admits no one comes to his office to see him.

I say to Paul Quinn that sometimes it is better to remain silent and be thought a fool than to open one’s mouth and remove all doubt. Perhaps he might like to learn from that.

Coming back to the mortgage diversion scheme, I want to take up a couple of reasons that the Minister of Revenue, Peter Dunne, gave as to why people have not taken up the mortgage diversion scheme. The first one he talked about was the shift in contribution from 4 percent to 2 percent. He said that was one of the key justifications for people not taking up the mortgage diversion component of the KiwiSaver scheme. Of course, that shift was something that Labour opposed; we opposed the cutting in half of the KiwiSaver scheme. We see KiwiSaver as being part of New Zealand’s long-term savings future, and as helping to address some of the significant financial issues that this country has, particularly our savings problem. National said that it would be fine, that cutting the contribution down to 2 percent would not have a detrimental impact, yet we are now debating an amendment that has been caused in part, according to the Minister’s own words, by the KiwiSaver scheme being cut in half.

The other thing I want to talk about is that part of the justification for mortgage diversion of KiwiSaver in the first place was that it gave people some certainty when they entered the KiwiSaver scheme that if they found themselves in financial hardship at some point, they might be able to divert their KiwiSaver payments to repay their mortgages. The fact that not many people have taken it up is a good sign, because it probably means that not many people in KiwiSaver are facing financial hardship. But we are now going into some very tough economic times; in fact, they are getting tougher. We have been going through tough times. Why take away mortgage diversion at a time when people may be reaching the point where they want to take it up?

💬 Sue Moroney: What’s the harm?

What is the harm in leaving it there? What is the real harm?

We would have been able to debate these issues quite robustly if the bill had been sent to a select committee, but because it was not sent to a select committee, the only opportunity we have to discuss it is in the Committee stage. So, yes, there has been a certain amount of wide-ranging contributions on this particular change, but that is because this debate is the only opportunity we get to debate it. The public of New Zealand have not had a chance to have their say. Nobody has had a chance to come to a select committee and say he or she would have taken up the mortgage repayment option but for whatever his or her reason was. Rather than giving people an opportunity to have their say, the Government is pushing this bill through the House under urgency. We would think that it would have learnt from its tax cuts experience that pushing things through under urgency generally tends to create problems. It means that it gets things wrong. Five months after National had pushed tax cuts through the House under urgency, it took urgency again to take them away. So urgency is clearly not the optimal way to pass legislation, and it is not the optimal way to deal with this particular issue of mortgage diversion.

Another reason why people are not taking up the mortgage diversion scheme is that they want to maximise their retirement savings. They want as much money as possible to go into their actual retirement savings rather than into their mortgage, because they know—particularly young New Zealanders—that there is no guarantee that by the time they retire National would have made any provision to help with their retirement. The National Government has suspended the Government’s contribution to the New Zealand Superannuation Fund for the next decade. So in 15 years’ time, when the next generation goes to the cupboard to see what is there for its retirement savings, the cupboard will be bare. John Key’s promise that he will resign if superannuation is cut will be very hollow by then, because John Key will have been long gone. So that could well be one of the reasons why New Zealanders are not taking up the mortgage diversion scheme; they want their savings to go into KiwiSaver, because they know they will need their retirement savings when they get to the age of 65, or 67, or 68, which may well be the retirement age by the time the National Government is done, because it is not committed to putting aside money now to meet the significant costs of superannuation in the future. It is more short-term thinking from National.

The Budget is all about broken promises and hidden agendas. This measure was not in the National Party’s election manifesto. It was not on its pledge card. National made specific commitments about KiwiSaver on its pledge card. This was not one of them.

I move, That the question be now put.

Motion agreed to.

The CHAIRPERSON (Hon Rick Barker): The question is that Part 2 stand—

💬 Hon Trevor Mallard: Noes have it.

The CHAIRPERSON (Hon Rick Barker): I have declared the result. I am now on to the next question.

💬 Hon Trevor Mallard: No. You said the Ayes have it, and I said the Noes have it.

The CHAIRPERSON (Hon Rick Barker): With all due respect, the question had been put, the vote had been cast, and I had declared the result. There was no challenge to the question being agreed to.