Questions for Oral Answer

1. to the Prime Minister: Did his Minister of Finance refer to him a Treasury report dated 4 March 2011 and entitled Extending the Mixed Ownership Model which says with respect to privatising shares in publicly-owned assets that “significant participation by foreign investors will be essential to achieve the Government’s overall objectives”?

Yes, I did receive that report. However, the Government has a slightly different balance of objectives than Treasury might have presumed in that report. Treasury placed a bit more emphasis on the proceeds to be gained from the sale, but the Government actually places more emphasis on widespread and substantial New Zealand share ownership. We think it is achievable, given the likely strong demand for shares from the likes of KiwiSaver funds, Crown financial institutions, and Kiwi mums and dads. By holding a stake of more than 50 percent, the Government will ensure there is always majority New Zealand ownership.

💬 Hon Phil Goff: What explanation has Mr English given to the Prime Minister for Mr English telling the House last Thursday, that he, Mr English, had never received that advice from Treasury that significant investment by foreign investors was essential to the Government’s overall objectives?

💬 Rt Hon JOHN KEY: He told me the same thing that I am sure he would have told that member if he had asked. The question was phrased by Mr Mallard in relation to Mr English’s plans. His plans are to ensure that there is widespread New Zealand ownership, not to maximise the share price by flogging shares off to foreigners, as Phil Goff did when he was running the show.

💬 Hon Phil Goff: When Mr English was heading into talks with the China Investment Corporation, did the Prime Minister advise Mr English that he should not promote the sale of State asset shares to sovereign wealth funds, notwithstanding Treasury advice that this would push up the value and price of those shares?

💬 Rt Hon JOHN KEY: No, I did not. The reason I did not is that we would not want to disappoint the China Investment Corporation. It would know, like we know, that New Zealanders will be snapping up those shares, not Chinese people.

💬 Hon Phil Goff: Will he be ignoring Treasury advice that selling privatised shares to foreign investors will increase their value, and therefore prevent the sale or onsale to foreign investors, including sovereign wealth funds, of New Zealand shares in those assets?

💬 Rt Hon JOHN KEY: Yes, I will be ignoring its advice, in just the same way as the leader of the Labour Party obviously followed advice when it came to election publications and what was the appropriate use of parliamentary funds.

💬 Hon Phil Goff: I raise a point of order, Mr Speaker. If the Prime Minister insists on making extraneous comments, you will get disorder.

💬 Mr SPEAKER: The member raises a perfectly fair point that the information given in an answer should relate to the question.

💬 Hon Phil Goff: If he sells shares in State assets to local investors at a lower price, what action will he take to stop those local investors flicking on those shares at a higher price to foreign investors, which is exactly what happened when Contact Energy shares were sold?

💬 Rt Hon JOHN KEY: The member raises an interesting question, which we have also raised with Treasury. A number of options might be available to the Government to ensure that that is not the case.

💬 Hon Phil Goff: Can the Prime Minister explain what those options are?

💬 Rt Hon JOHN KEY: Not today.

💬 Hon Phil Goff: Is the Prime Minister really saying to the House that he has no idea at all, and that, actually, he intends those shares to end up in the hands of foreign investors?

💬 Rt Hon JOHN KEY: No, it means that the Government is considering advice from Treasury. If we want to start talking about things, why does Phil Goff not talk about his capital gains tax today?

💬 Rahui Katene: To the Prime Minister—[Interruption]

💬 Mr SPEAKER: Before I go to the question, I will deal with the interjection on my left. The member should go to the transcript and look at the question. If he thinks the answer was outrageous, he should look at the question.

💬 Rahui Katene: Does he agree with Ngāi Tahu leader Mark Solomon that anyone who wants our assets to stay under New Zealand control should be encouraging the Government to set up partnerships with Māori as the perfect partner; if so, why is it necessary to look offshore when we have multigenerational and credible investment options right here at home?

💬 Rt Hon JOHN KEY: Yes, I agree with Mark Solomon that Māori have proven, as they have gained assets through the Treaty settlements process, that they are very keen investors in New Zealand and are actually very long-term investors in New Zealand.

💬 Hon Phil Goff: When the Prime Minister gave Contact Energy as an example in this House of how to sell shares to local investors, was he aware that nearly two-thirds of the shares sold to those small investors are now in the hands of foreign and corporate investors; if so, how will he stop that happening if he is given the chance to privatise further shares in State power companies?

💬 Rt Hon JOHN KEY: Let me deal with the first part of the question. I am not sure whether the member has ever heard this before, but there is a very interesting article by Pattrick Smellie, called “A Loyal Bunch”, and if members will allow me to read it for just a few moments: “One of the less defensible criticisms of the Key Gov’s partial privatisation”—

💬 Hon Phil Goff: I raise a point of order, Mr Speaker. It is all very interesting to hear what Pattrick Smellie might have to say, but there is a specific question: was he aware that two-thirds of those shares ended up in the hands of foreign and corporate investors; if so, how would he stop that happening? Mr Smellie’s quote has nothing to do with the Prime Minister’s intentions.

💬 Mr SPEAKER: A point of order is being considered. The question is a reasonable question. It asked whether the Prime Minister was aware of that. The Prime Minister can certainly dispute the assertion that two-thirds are in the hands of foreign owners, but that should be done reasonably succinctly.

💬 Rt Hon JOHN KEY: I do dispute that, and I do that on the basis of a report by Pattrick Smellie, which goes on to say: “One of the less defensible criticisms of the Key Gov’s partial privatisation plans has been regular reference to Contact Energy as an example of a privatised company which lost control to foreigners. Yet nothing could be further from the truth. … The reality of Contact’s share register is it remains possibly the most widely held share by domestic NZ investors, 11 years on from the float. In fact, Contact’s shareholders have shown a high degree of loyalty to the Company, to the extent that EME’s attempts to take 100% were roundly rebuffed”—

💬 Hon Jim Anderton: I raise a point of order, Mr Speaker.

💬 Rt Hon JOHN KEY: —“in the … 2000s. … What it shows is many small scale investors”—

💬 Mr SPEAKER: A point of order has been called.

💬 Hon Jim Anderton: It has been a longstanding decision of yours that we are not allowed to table in this House journalistic reports and all the rest of it, let alone listen to them being read out by the Prime Minister in answer to a question.

💬 Mr SPEAKER: Members are perfectly entitled to quote documents. They quote them in questions, and they can quote them in answers. But I am concerned that the answer has gone on more than long enough.

💬 Hon Phil Goff: Are most of the shares in Contact Energy that were sold to local investors now in the hands of foreign and corporate investors?

💬 Rt Hon JOHN KEY: I cannot confirm that fact, but I can confirm that that is not the belief of Pattrick Smellie. [Interruption]

💬 Mr SPEAKER: That will be sufficient. The Prime Minister answered the question and that was sufficient. He could not confirm that fact. That was the answer to the question.

💬 Hon Trevor Mallard: Well, that’s a breach of privilege—

💬 Mr SPEAKER: If the shadow Leader of the House expects me to keep Ministers, including the Prime Minister, to answers like that, the shadow Leader of the House will show some respect to the House and not bellow out unnecessarily after a question has been dealt with.

💬 Hon Trevor Mallard: I raise a point of order, Mr Speaker. I might have a slightly louder voice than the Prime Minister. I was responding to his interjection.

💬 Mr SPEAKER: That is not a point of order. It may have escaped the member’s attention, but I was assisting the honourable Leader of the Opposition, who happened to ask this question. I stopped the Prime Minister from going any further than just answering the question. He was asked whether he could confirm something, he said he could not, and I sat him down. [Interruption] Order!

💬 Hon Phil Goff: Is the Prime Minister saying that he is unaware of the fact that most of the shares sold to small local investors are now corporate and foreign owned?

💬 Rt Hon JOHN KEY: I cannot confirm that fact, and I do not actually think Phil Goff can, either.

💬 Hon Phil Goff: I raise a point of order, Mr Speaker. This House is, as you know, about accountability. There is an answer to the question of whether he is aware of that fact, and the answer is yes or no. Either he is aware or he is not aware. I am not asking whether he can confirm it.

💬 Mr SPEAKER: Clearly, his answer indicated that he was not aware of that fact. But if that is the way—

💬 Hon Trevor Mallard: I raise a point of order, Mr Speaker. I would like to challenge that. He very clearly dodged that—

💬 Mr SPEAKER: No, the member will not challenge that by way of a point of order, at all. The honourable Leader of the Opposition asked whether the Prime Minister was aware that a majority of shares were held by foreign owners, if I recollect correctly; I might not have that exactly right. The Prime Minister, in his answer, indicated that he was not aware of that. He could not confirm whether that was the case. He added a bit at the end of that answer that, in my view, was totally unnecessary. My problem was that there was no way I could get to my feet in time to stop it.

The primary question today was very carefully worded. It was a fair question, and questions like that should be treated with respect. It is very difficult at times to stop Ministers. When they start to flick the odd punch around, it is sometimes difficult to respond quickly enough, because I cannot predict what is in their minds; I cannot predict what they will say. But I point out to Ministers that that question was an absolutely fair question. There was no political statement in that question, at all, and I expect such questions to be treated with respect. At one stage I felt that the supplementary questions were not being treated with sufficient respect—mind you, one supplementary question was not as carefully worded as the primary question, but others were. That is why I stopped the right honourable Prime Minister at one stage during those answers, because I believe that respect was not being shown to the question. [Interruption] I have dealt with that matter.

Economy—Overseas Experiences

2. to the Minister of Finance: What lessons are there for the New Zealand economy on how sovereign governments around the world are managing their finances?

Many developed countries are working very hard to rein in their deficits that were created by a set of unusual economic conditions over the past decade and by different degrees of unwise spending increases. The European financial markets face possible disruption from the fact that Greece and Portugal have defaulted on debts in all but name, and other much larger economies such as Italy appear to be increasingly at risk. This is reflected by the fact that European sharemarkets fell 3 percent last night alone. The lesson for New Zealand is that very good, tight management of Government spending and Government deficits is important. The other lesson for New Zealand is that New Zealanders need to be encouraged to save so that our banks are less reliant on these overseas financial markets to finance economic activity in New Zealand.

💬 Amy Adams: What was the outlook when this Government took office in 2008?

💬 Hon BILL ENGLISH: The updated forecasts that the Government received in December 2008 were alarming. They showed a fiscal mess. Treasury projected perpetual deficits into the future, and Crown debt would have been about 50 percent of GDP in a decade’s time and climbing. The Government has worked very hard over the last three Budgets to get on top of the alarming deficits and ever-rising debt that we inherited, and over the next 6 months it may well matter if international financial markets are disrupted.

💬 Amy Adams: What steps has this Government taken to improve Government finances?

💬 Hon BILL ENGLISH: The Government has struck a reasonable balance between on the one hand continuing to fund activity in the economy during a recession, so that we can support jobs and public services, and protecting the most vulnerable from the sharp edges of the recession, but on the other hand vastly improving the quality of much wasteful Government expenditure. Now that the recession has receded, we are in a position to show a credible track back to surplus in 2014-15.

💬 Amy Adams: What dangers still lurk around the fiscal position?

💬 Hon BILL ENGLISH: I think it is fair to say that the Government faces two risks. One is the ongoing risk of financial contagion in Europe, which could be disruptive in the financial markets from where the New Zealand Government and banks borrow money. The other risk would be a slow-down in China. I hope the country will not face the risk of a Labour Government because of the wreckage it left behind when it was kicked out of office in 2008.

State-owned Assets, Sales—Forecast Cost to Crown of Forgone Dividends and Sale Costs

3. to the Minister of Finance: What is the forecast cost to the Crown of forgone dividends and sale costs as a result of his privatisation plan, according to the final A3 page in the Treasury report Extending the Mixed Ownership Model?

The basic numbers outlined on that page are as follows. According to the Budget 2011 projections, combined dividends from the four State-owned enterprises in question are expected to average $380 million over the next 4 years. This represents a yield of 2.5 percent on the commercial valuations provided by the State-owned enterprise boards last year. By contrast, interest rates are expected to average 5.3 percent, implying a holding cost of $800 million a year, or about twice the dividend returned. So the expected dividends are going to be about half of the holding cost of the value of those State-owned enterprises.

💬 Hon David Cunliffe: Can the Minister confirm whether those numbers include or exclude capital distributions, and say why he has not therefore provided the public with a full costing of his asset sales policy; does he not think the public deserves to have such information in front of them before they go to the polls?

💬 Hon BILL ENGLISH: The member cannot have it both ways and say the dividends are large because of the capital distributions. Well, the capital distributions come from asset sales; that is what—[Interruption] The main capital distributions have come from the large asset sale by Meridian Energy, overseen by the last Labour Government. We would rather pay dividends to Kiwis than interest to foreigners.

💬 Hon David Cunliffe: Did he read the passage in this report to him that states that “a range of issues would make the complexity of the programme substantial.”, and does he consider that some policies are worth pursuing, even if they are supposedly complex?

💬 Hon BILL ENGLISH: This policy is worth pursuing because it will give the opportunity for New Zealanders to invest in New Zealand assets at a time when their savings are reaching record levels. It is good news that New Zealanders understand what needs to happen in this economy, and the Government is going to help by giving them the opportunity to invest their savings soundly.

💬 Hon David Cunliffe: Did he read the passage in the report that states his privatisation plan would take 3 to 5 years for the sales to be complete and would entail ongoing costs in lost dividends, and does he therefore agree that Governments should undertake policies that take time to build and do not necessarily release their full revenue potential in the first year?

💬 Hon BILL ENGLISH: If the member is trying to conjure up an excuse for why his capital gains tax will not raise the revenue he is claiming, and therefore he will have large deficits and more debt, then the answer is no.

💬 Hon Rick Barker: I raise a point of order, Mr Speaker. The Minister is not responsible for speculation about Labour’s possible policy. His answer was all about that. He should answer the question. [Interruption]

💬 Mr SPEAKER: A point of order has been called. It is a difficult one for the Speaker to rule on, because the question asked the Minister his view of policies that take time to implement, and ramp up over time. The Minister in expressing his view, as he was asked to do, used the example of a capital gains tax as the way to respond to that question. I cannot rule that that is unreasonable or unfair, given the nature of the question asked. I think the member asking the question knew the risks in framing the question in that way.

💬 Hon David Cunliffe: Is there any evidence his privatisation policy would “boost [the] domestic capital markets”, as suggested in the report, and would not a better policy address what he has called the distortion that leads to Kiwis favouring unproductive property speculation, and starving productive enterprises of capital?

💬 Hon BILL ENGLISH: The Government, of course, plans to achieve both of those objectives. We have made significant changes that have increased the effective taxation of property and do not tax the gains of hard-working New Zealanders who have increased the value of their business—unlike what he is planning.

💬 Peseta Sam Lotu-Iiga: Which groups of New Zealand investors does he expect to be at the front of the queue when portions of the State-owned enterprises are offered for community ownership under the mixed-ownership model?

💬 Hon BILL ENGLISH: Of course, the controlling owner will be the New Zealand Government, with at least 51 percent, but we expect other groups that have expressed, I have to say, enthusiasm for the proposal to be there: KiwiSaver funds, which of course represent 1.7 million New Zealanders and their savings; mum and dad retail investors; Crown financial institutions, such as the New Zealand Superannuation Fund and ACC; and iwi, who appear to be the most enthusiastic group and who, of course, are long-term holders of New Zealand assets, and would continue to be so.

Accident Compensation—Claims Costs Management and Reduction in Levies

4. to the Minister for ACC: What progress has the Government made in better managing ACC claim costs after they increased from $2.1 billion in 2005/06 to $3.1 billion in 2008/09, and how will these help families and businesses?

The 50 percent increase in claim costs during the last term of Government was not sustainable. We have since reduced costs by 15 percent, effectively reversing the extravagant end of those increases. A good example is the cost of physiotherapy, which more than doubled when the previous Government made it free. Reintroducing a part charge has saved $60 million per year. We have got ACC back into surplus, enabling levy reductions. For households the saving is $250 a year, or $5 per week; for businesses, it is a 22 percent reduction in costs, or $1,100 for the average small business. Reducing the burden of ACC levies by $587 million per year will help the New Zealand economy recover.

💬 Dr Jackie Blue: What success has the Government had in improving ACC rehabilitation rates, and how much has this contributed to the turn-round in ACC finances?

💬 Hon Dr NICK SMITH: Income compensation is ACC’s largest cost. Rehabilitation rates declined significantly between 2005 and 2008, leaving thousands more people dependent on ACC. This Government has put a real focus on improving rehabilitation, with programmes such as Better at Work. We have 2,000 fewer people receiving income compensation as a consequence, and that is one of the reasons we have been able to give households and businesses some relief.

💬 Hon Jim Anderton: Can the Minister tell the House which made the larger contribution to the ACC deficit: the 2008 financial crisis or the move by ACC from partial pay-as-you-go to full funding, and, given that these problems have evened out as they tend to do with long-term investment programmes, will he now apologise for using them as an excuse for ACC cutting access to elective surgery for many vulnerable New Zealanders by 200 percent between 2008 and 2010?

💬 Hon Dr NICK SMITH: I make two points in response. The first is that ACC’s audited accounts showed a loss of $2.4 billion in 2007-08 and $4.8 billion in 2008-09. The member asserts that that loss was as a consequence of investments. Not one dollar of the $4.8 billion loss was as a consequence of loss on investments. On elective surgery, I say that the costs of elective surgery went from $120 million to $240 million. We have just pulled it back by quite a small amount—[Interruption] Can members opposite please explain to me whether there was a more than doubling of accidents that resulted in that more than doubling of costs? Of course there was not; there was simply slack financial management.

💬 Hon Jim Anderton: Did ACC go too far in rejecting claims that it said resulted from age-related injuries, even for 15-year-olds, and was its excess enthusiasm for significantly declining legitimate claims, as shown by increasing ACC losses on appeal, a result of his and ACC’s misleading statements about the financial viability of ACC?

💬 Hon Dr NICK SMITH: In the last financial year ACC spent $234 million on elective surgery. That is more than every year, bar one, in which Labour was in Government. We will do more surgery last year and this year than the average in the term of the previous Government. There will always be a difficult grey area between health and ACC. This Government is absolutely committed to ensuring that there is elective surgery and other rehabilitation for genuine accident victims. There have been some changes in respect of elective surgery, through working closely with orthopaedic surgeons, and I think that will provide a better service for the public.

State-owned Assets, Sales—Policy

5. to the Prime Minister: Does he stand by his statement “we have always been clear that if there was to be any change to our policy on State-owned assets in any way, we would seek the support of New Zealanders at an election, and that is exactly what we will do”?

Yes. The Government said it would not sell shares in State-owned companies in this term of Parliament, and we have not. We said if the policy changed, we would tell New Zealanders and campaign on it in the next election. That is what we will do.

💬 Hon Clayton Cosgrove: In light of his promise not to change his policy on State-owned enterprises before the election, why has Treasury appointed Deutsche Bank and Craigs Investment Partners to prepare the four State-owned energy companies for sale?

💬 Rt Hon JOHN KEY: To do exactly that: prepare them for sale in the event that a National Government is re-elected.

💬 Hon Clayton Cosgrove: Given that Budget 2011 banks $3.6 billion in revenue for asset sales for future spending, does this show that his income tax cuts—42 percent of which went to the top 10 percent—were unaffordable and have left the Government’s books in a very poor state?

💬 Rt Hon JOHN KEY: No. What it shows is that Cabinet made a decision to have a net zero capital allowance over the next 5 years. The way that we intend to do that is to extend the mixed-ownership model as the previous Government did with Air New Zealand.

💬 Hon Clayton Cosgrove: Why is Treasury spending $6 million before the election to begin carrying out his change in policy on State-owned assets, when he promised that “if there was to be any change to our policy on state-owned assets in any way, we would seek the support of New Zealanders at an election,”—if there was to be any change to his policy in any way?

💬 Rt Hon JOHN KEY: We have made it quite clear to the New Zealand public what we are campaigning on. We will be going to the election with that policy, and not one share will be sold prior to the 26 November election. In the rare event that Labour is elected, it can reverse that policy if it wishes.

💬 Hon Clayton Cosgrove: Can the Prime Minister then confirm that New Zealanders can stop the sale of State-owned assets only by voting out his Government on 26 November?

💬 Rt Hon JOHN KEY: What I can say is that this Government is absolutely committed to the mixed-ownership model. We believe it is right on a number of fronts, and we look forward to having that debate with the New Zealand public on the campaign trail.

Māori Electorates—Government Policy

6. to the Minister of Justice: Does the Government have any plans to disestablish separate Māori electorates; if not, why not?

No, because it is not part of the Government’s electoral law programme. This Government’s priority in electoral law has been to put an end to what had become routine abuses of electoral law and public funding by parties whose conduct is repeatedly referred to the police, and to restore freedom of speech by repealing Annette King’s Electoral Finance Act.

💬 Hon John Boscawen: Is it the Government’s intention to abolish the Māori seats once the historical Treaty process has been concluded, as set out in National’s 2008 election policy; if so, what progress has been made toward the goal of abolishing the seats?

💬 Hon CHRISTOPHER FINLAYSON: I have already in the answer to the primary question outlined what the Government’s priorities have been. A constitutional review has been planned and announced by both the co-leader of the Māori Party, the Minister of Māori Affairs, and the Deputy Prime Minister. The issues surrounding Māori seats can be addressed in that context.

💬 Rahui Katene: Is it the Minister’s opinion that disestablishing the Māori seats will do nothing more than create a wedge between Māori and Pākehā at a time when the country is trying to move towards a united Aotearoa; if so, why does he think this debate has been brought back into the public arena?

💬 Hon CHRISTOPHER FINLAYSON: There are a number of interesting questions concerning Māori representation. The issue of Māori seats in Parliament, as I said in my answer to Mr Boscawen’s second question, will be the subject of a constitutional review, which has been outlined by Dr Sharples and Mr English. Those issues can be addressed in that context.

💬 Hon John Boscawen: Is it not true that if Māori voters were on the general electoral roll, they would have 70 members of Parliament working on their behalf, not seven?

💬 Hon CHRISTOPHER FINLAYSON: The member is trying to engage on the question of Māori representation and the other matters I have referred to in answers to these questions. They are part of the review, which has been announced by Dr Sharples and Mr English, and the member will have ample opportunity to make all the points he wishes to make to that review at that time.

Economy, Stimulus—Prime Minister’s Statements

7. to the Prime Minister: Does he stand by his statement that “the Government’s been doing what it can practically to stimulate the economy and to create jobs”?

Yes. The Government has been doing what it can to promote a low-inflation environment, make sure the New Zealand economy is internationally competitive, and make sure that there is an efficient use of resources.

💬 Jacinda Ardern: Is he concerned that Australia’s lower unemployment rate of 4.9 percent and forecast growth of 500,000 new jobs over the next 2 years will see the record number of Kiwis who left for Australia, set in May this year, increase in the future?

💬 Rt Hon JOHN KEY: I think that if one was to raise the top personal tax rate, whack on a capital gains tax, and discourage investment, then that would definitely be the case.

💬 Jacinda Ardern: Does Australia have a capital gains tax?

💬 Rt Hon JOHN KEY: Yes. That is because Australia’s top personal rate is set at 45 percent and the company rate is set at 30 percent, and it has had to buttress a capital gains tax in there to stop people from otherwise organising what are their hideously complex affairs.

💬 Jacinda Ardern: Does he agree with Australian Prime Minister Julia Gillard’s analysis that investment in skills training is vital to growing an economy and creating jobs; if so, why has his Government cut skills funding by $140 million in the last 12 months?

💬 Rt Hon JOHN KEY: The reason funding was cut in certain areas was that there was a very low completion rate of some courses, and this Government, unlike the previous Labour Government, is not the sort of Government that is prepared to throw money at things that are completely, hopelessly failing and are not working.

💬 Jacinda Ardern: Does he stand by his statement in February 2008 that “New Zealand is already struggling under a skills shortage and this exodus”—to Australia—“will add to those worries.”; if so, how deep are his concerns now that this exodus is almost 7 percent higher than when he made that comment?

💬 Rt Hon JOHN KEY: Yes.

💬 Mr SPEAKER: Before I go to question No. 8, I simply say to Paul Quinn at the back of the House that some of those interjections do not add anything.

Capital Gains Tax—Effect on Growth

8. to the Prime Minister: Does he stand by his statement that a capital gains tax would be a “dagger through the heart of growth”?

Yes. I think that the sort of tax system that has six different personal tax rates; GST on some things and not on others; a capital gains tax on some things and not on others; a big gap between the top personal rate, the trust rate, and the company rate; a tax credit that encourages people to rort the research and development tax system; and a large hole in the revenue base over the next few years, leading to even greater Government debt, would certainly be a big blow to the economy. Those sorts of policies simply encourage people to spend all their time and effort working around the tax rules rather than getting on and being productive.

💬 Dr Russel Norman: When the OECD recommended that we tax capital gains in a consistent and comprehensive way, was it proposing to put a dagger through the heart of the economy?

💬 Rt Hon JOHN KEY: It was proposing to put a capital gains tax on the family home. If that is now Green Party policy and Labour Party policy, I cannot wait until Thursday.

💬 Dr Russel Norman: To the Prime Minister—[Interruption]

💬 Mr SPEAKER: I want to hear Dr Russel Norman’s supplementary question.

💬 Dr Russel Norman: When Treasury—[Interruption]

💬 Mr SPEAKER: I apologise to the honourable member. I had no sooner said I wanted to hear the honourable member’s supplementary question than I got a lot of unnecessary noise from the Hon Tau Henare, among others.

💬 Dr Russel Norman: When Treasury recently recommended that we make our tax system fairer by introducing a comprehensive tax on capital gains, was Treasury proposing to put a dagger through the heart of our economy?

💬 Rt Hon JOHN KEY: Treasury was proposing a capital gains tax on the family home—

💬 Hon Member: No, they never.

💬 Rt Hon JOHN KEY: Yes, it was.

💬 Dr Russel Norman: When the—[Interruption]

💬 Mr SPEAKER: Now I want the Labour front-bench members also to cease their interjections. I want to hear Dr Russel Norman’s supplementary question.

💬 Dr Russel Norman: When the Capital Market Development Taskforce recommended implementing a capital gains tax to create a level playing field for savings and investment decisions, was it proposing to put a dagger through the heart of our economy?

💬 Rt Hon JOHN KEY: Although I do not know the particulars of the task force’s recommendations, I can say that if one puts a capital gains tax on farms, if one puts a capital gains tax on buildings, if one puts a capital gains tax on investment properties but not on family homes, and if one puts a capital gains tax on businesses and shares and all of those other things, it slows down growth.

💬 Dr Russel Norman: Mr Speaker—[Interruption]

💬 Mr SPEAKER: This time the Hon Clayton Cosgrove was the last to keep interjecting when I was on my feet.

💬 Dr Russel Norman: Mr Speaker—[Interruption]

💬 Mr SPEAKER: I say to the House that Dr Russel Norman has every right to ask his questions and to be heard.

💬 Dr Russel Norman: Has the Prime Minister seen the evidence that the Australian economy has outperformed the New Zealand economy every year since 1985, the same year that Australia first introduced a capital gains tax, which would supposedly put a dagger through the economy?

💬 Rt Hon JOHN KEY: There are many differences between the New Zealand and Australian economies. If New Zealand wants to have the same mining and exploration activity that Australia has, the Greens might want to support a reversal of their position on schedule 4. But seeing as they are not having that, if we want to adopt Australia’s tax rules, then we will have a top personal rate that is a long way away from the company rate; we will see the need for a capital gains tax, otherwise there is a gaping big hole; we will have a GST system that is not comprehensive; and we will have a top personal rate at 45 percent. I strongly argue that the tax system this Government reformed in 2010 is the envy of many countries around the world. Capital gains tax is applied in New Zealand on intent rules. Personally, I think that with the 33 percent top personal rate aligned with the trust rate, a top savings rate aligned with the company rate, three-quarters of New Zealanders paying a rate of 17.5 percent or less, and half the country virtually not paying tax, in my view that sounds like a recipe for growth. If the—

💬 Mr SPEAKER: The House has its own life and there is no way I can stop it; it wants to live its own life. I let the Prime Minister go on a fair while there, but I was not going to let him go on any further to comment on the Opposition’s policies.

💬 Hon Clayton Cosgrove: I raise a point of order, Mr Speaker. It seems there may be a new convention in the House. I wonder whether you could review the tape and advise us now on your recommendation—what you feel is appropriate—on the length of answers. You have already berated some of our members for the length of their questions. That was an extraordinarily—it was probably record-breaking—long answer, which you let go. I would like some advice, please.

💬 Mr SPEAKER: I thank the honourable member for his lecture. It may have escaped the notice of the honourable member that the Prime Minister was responding to the question. I accept that the answer was longer than I would have liked to see—I agree with that—but as soon as he started to divert into what I perceived to be criticism of that member’s party I stopped him. I stopped him. It was longer than I would have liked to see, but so long as it was providing information in response to the question it was difficult for me to stop it any sooner. I ask Ministers to not go on too long in answering questions.

💬 Hon Clayton Cosgrove: I raise a point of order, Mr Speaker. I am not challenging your ruling, but am I right in concluding that it is now a new ruling that a Minister can take any length of time he or she likes in answering a question as long as he or she does not criticise the Opposition? Is that now your ruling?

💬 Mr SPEAKER: I think the member is really—

💬 Hon Clayton Cosgrove: I’m asking you a question.

💬 Mr SPEAKER: And I am on my feet. The member will be quiet while I am on my feet. The member is being unnecessarily silly. It does not take a lot of thought to see that the answer was longer than ideal. I have asked Ministers not to do that. If Ministers persist in doing that, I will wind them up sooner. But where a question comes from the Green Party, and a fair length of time is taken to respond to it, I totally draw the line at extra time then being taken to attack the member’s party. That is not on, and I stopped the Prime Minister immediately when I perceived that he started to do that.

💬 Hon David Cunliffe: I seek leave for the Prime Minister to conclude his answer with the rest of Macbeth, act 2, scene 1—

💬 Mr SPEAKER: The member will resume his seat and stop trifling with the House.

💬 Hon Sir Roger Douglas: Is it not best that any consideration of a capital gains tax be done not in isolation but in the context of an overall look at business tax, not simply a grab for extra money?

💬 Rt Hon JOHN KEY: I think the member makes the right point, which is that any tax has to fit into the overall tax system that is in place. Of course one can change the mix of taxes, but if one is simply putting a tax on businesses, which a capital gains tax in this environment would do, and putting up the price of rents, which a capital gains tax in this environment would do, one has to ask whether one is going to deliver economic growth. The fact is that Treasury documents show that rents will rise by 6 percent. We look forward to having that discussion with “Supremo” on Thursday.

💬 Dr Russel Norman: Does the Prime Minister agree with former Treasury head John Whitehead, who said: “At the risk of being chased down by an angry crowd with pitchforks and flaming torches, we need to tax more capital gains.”; if not, has he now become the leader of this angry mob, and is that the right role for a Prime Minister to play in this very serious policy debate?

💬 Rt Hon JOHN KEY: I agree with John Whitehead. That is exactly why the Government in 2010 and 2011 made significant moves to tax capital. That is exactly what happened when the Government put in place a number of different changes, including depreciation rules, better administration of the intent rules, etc. In fact, as we know, Labour is trying to put up the case that it is solving a problem that it had when it was in office for 9 years but failed to address. The only reason it is putting up a capital gains tax on Thursday is because it cannot get its numbers to add up—

💬 Mr SPEAKER: The Prime Minister is stretching his luck.

💬 Dr Russel Norman: Has the Prime Minister read the latest OECD country report on New Zealand, which states: “New Zealand is one of the few OECD countries with no comprehensive capital gains tax on any asset class”, and does he not believe that a comprehensive and consistent capital gains tax would be much better than the tangle of rules that he just keeps adding to?

💬 Rt Hon JOHN KEY: I certainly do not believe it would be better. As I say, the OECD is also recommending—to quote the member—a “comprehensive capital gains tax”. It is important that all New Zealanders understand what the word “comprehensive” means. The answer is the family home.

💬 Dr Russel Norman: Supplementary question, Mr Speaker—[Interruption]

💬 Mr SPEAKER: The member will resume his seat immediately, and the House will come to order. It is my understanding that the Green Party has used its six supplementary questions today.

💬 Dr Russel Norman: I raise a point of order, Mr Speaker. My apologies if you were not informed, but we will be using seven today. It should have been given to you earlier.

💬 Mr SPEAKER: The Green Party has only six to use. [Interruption] A point of order is being dealt with. The House will come to order. The Green Party can access more than six supplementary questions only if another party has given them supplementary questions. I have had no notice that any other party has given the Green Party any questions today. The Green Party cannot access seven itself, because it has an allocation of only six.

Water Quality—Rivers

9. to the Prime Minister: Does he stand by his statement on the BBC Hardtalk programme, where he said he didn’t share Massey University scientist Mike Joy’s view on the state of our rivers, saying “he’s one academic, and like lawyers, I could provide you with another one to give you a counter view”?

Yes, and ain’t that the truth!

💬 Brendon Burns: Can we presume that the Prime Minister does not share the counter view of Professor David Hamilton, president of the New Zealand Freshwater Sciences Society, who said that the Yale University research the Prime Minister used to justify his “100% Pure” claim is outdated and has no credibility?

💬 Rt Hon JOHN KEY: Firstly, I have the Yale University report with me. It is from 2010, so I do not think it is terribly outdated because it is a year old. Maybe I could quote from one of the other scientists who presented at the same conference that Mike Joy attended, Ken Hughey from Lincoln University. His slide said that the “Perceived state of NZ freshwater is good—a view supported by science;”.

💬 Brendon Burns: Is the Prime Minister aware that Professor Hamilton leads research on the $90 million clean-up of the Rotorua lakes, which the Government is funding, and that although Waikato University has unsuccessfully requested the data used by Yale University, Waikato University’s own independent research suggests that New Zealand is in about the middle of the international water quality scale, not at No. 2 as the Prime Minister would have us believe?

💬 Rt Hon JOHN KEY: If New Zealand is at the level that the member is proposing, why did he sit around for 9 years and let Labour do absolutely nothing about it other than allow further deterioration?

💬 Brendon Burns: Does the Prime Minister also doubt research by Waikato University PhD student Jonathan Abell, who compared 134 New Zealand lakes with 1,500 internationally and found that our lakes have a water quality score of 66.7 percent, as opposed to the 99.2 percent overall rating the Prime Minister quoted to the House on 10 May?

💬 Rt Hon JOHN KEY: I have not seen the research, but the member is backing up my exact point: there are scientists, and some hold one view and some hold another. Just like lawyers and just like economists, they all have a range of views.

💬 Brendon Burns: Is the Prime Minister aware that the Government’s new National Policy Statement for Freshwater Management does not require regional councils to adopt water quality standards until 2030, and can he identify any other water quality scientist who says the Government’s national policy statement is sound environmental policy?

💬 Rt Hon JOHN KEY: Yes, and that is what the board recommended.

Electricity—Generation from Renewable Resources

10. to the Acting Minister of Energy and Resources: What recent reports has she received on levels of renewable electricity generation?

The New Zealand Energy Quarterly released by the Ministry of Economic Development last month showed that renewable electricity generation made up 79 percent of all electricity generated in the March 2011 quarter. The last time that New Zealand generated that amount of electricity from renewable resources was in 1996, also under a National Government.

💬 Louise Upston: Why is the Government committed to renewable electricity generation?

💬 Hon HEKIA PARATA: The Government is aiming for 90 percent of electricity generation to come from renewable energy sources by 2025. This is because we are blessed with abundant natural resources, and the development of these resources reduces our reliance on thermal electricity generation sources and reduces our electricity generation emissions. The target reflects our commitment to transitioning over time to a low carbon economy.

Railway Wagons—Cost

11. to the Minister of Transport: Does he stand by his statement of 23 June that the price difference between building flat deck rail wagons in New Zealand and overseas was in the order of 25 percent?

on behalf of the Minister of Transport Yes.

💬 Clare Curran: Will he confirm that it makes economic sense to procure these wagons in New Zealand, given that the Government collects income tax when wages are paid and GST when wages are spent, even if Chinese wagons are a bit cheaper; if not, why not?

💬 Hon NATHAN GUY: All that the Minister has asked of KiwiRail is that it gets the best price and quality possible for the tender, and he believes that it has done that. It is up to KiwiRail to take those things into account when it awards a tender. It is not for politicians to intervene.

💬 Clare Curran: Is the Government saying that when it comes to a choice between a Kiwi build and an overseas build, KiwiRail should always choose the cheapest price, even if the price difference is very small; and what is a tolerable price difference?

💬 Hon NATHAN GUY: I come back to the substantive point that there is a 25 percent price differential. The proposal from the Hillside workshops was third equal out of nine tenders. KiwiRail took into consideration all of the differences in the tenders and made its decision. It is interesting that this Government is just following on from Labour’s policy of August 2007 on Government procurement in New Zealand.

💬 Hon Trevor Mallard: I raise a point of order, Mr Speaker. That was a very specific question about not that sale but tolerances and whether the Government would ever approve a tender with a price higher than that of another tender. It was very carefully drafted and very specific. The Minister talked about the old sale, but did not look forward in the way that he was asked to.

💬 Mr SPEAKER: The question actually sought an opinion. It asked the Minister at what point the Government would see this differently, and I think the Minister pointed out in his answer that the Government has required KiwiRail to consider these matters, and therefore he declined to express a view on any price difference. It is difficult for me to pull a Minister back when an opinion has been sought in the question and the Minister chooses to answer it in that way. I accept the point the member is making that the member had tried to get the Minister to express a view, but I cannot get a Minister to express the particular view members might want. When an opinion is sought—

💬 Hon Trevor Mallard: Any view would do.

💬 Mr SPEAKER: Order! When an opinion is sought, it is a bit difficult for me.

Lotteries Funding—Community Grants

12. to the Minister of Internal Affairs: What recent announcements has he made regarding lotteries funding for the community?

Last week I was very pleased to announce that the Lottery Grants Board has allocated $154 million to the community, raised from the proceeds of games like Lotto, Instant Kiwi, and Keno. In addition, an allocation of $6 million will go to the Christchurch Earthquake Appeal to help Canterbury get back on its feet. An extra $250,000 has also been given to the Lottery Canterbury / Kaikoura Community Committee. This is on top of the $8.2 million that was raised for the appeal by a special Lotto draw held earlier this year.

💬 Aaron Gilmore: How will lotteries funding be allocated to different community groups?

💬 Hon NATHAN GUY: The $154 million will be divided amongst 11 regional lottery committees, 11 national committees, and four statutory bodies—Creative New Zealand, the New Zealand Film Commission, the New Zealand Film Archive, and Sport and Recreation New Zealand. A huge variety of organisations have benefited from the funding in recent years, including Age Concern, St John Ambulance, Barnardos, etc. This funding helps to build strong and sustainable communities.