New Zealand Superannuation and Retirement Income Amendment Bill

Thank you very much for the opportunity to take a call on Part 1 of the New Zealand Superannuation and Retirement Income Amendment Bill. This bill went through the select committee with considerable scrutiny from members across the House, and I would like to have been able to say, when I took this first of several calls that I would like to take during this Committee stage debate, that the committee came to some broad agreement about the bill. I could have said that, because that is exactly what happened inside the committee.

We were debating, as members who have been following this bill will know, the establishment of fund investment vehicles for the New Zealand Superannuation Fund. These are a new type of investment vehicle for the Superannuation Fund to enable it to take advantage of investment opportunities, for New Zealand to enable the Guardians of New Zealand Superannuation to structure their investments in such a way as to maximise the returns, provide efficient returns, and also get some cost savings in terms of the management of funds.

The issue that I want to spend a little bit of time on in this call, and perhaps another one, is around what was included by the select committee during our consideration of this bill, and that was effectively the changes to the new section 59A, which is covered by clause 7 of Part 1 of the bill. This was the bit where the committee took advice, as we do, from officials about what we should do in order to ensure that a new and innovative idea such as this is well managed.

On this side of the Chamber we have no difficulty with the idea that the Superannuation Fund—a very successful fund; JP Morgan’s pension fund of the year, we note—should be given some latitude, some opportunity, and some flexibility in how it makes its investments, so that is a good thing. It is a mature fund now. It has reached a point where we believe this is a reasonable exercise. But in discussing the power to create these new fund investment vehicles, we got into a discussion about what would occur if it was not what is described in the bill as a passive holding entity. So if it is a passive holding entity, essentially in layperson’s terms that means that the guardians of the fund have very limited involvement in how it is actually run.

But the opportunity is there for there to be another type of entity, one that is more active in the style of investment that it might undertake. In order for the select committee to be comfortable with that kind of vehicle, we as a committee agreed unanimously to include the idea that the Minister of Finance’s approval would be required, not if it was a passive vehicle but if it was any other type of fund investment vehicle. So what would have been under new section 59A(1B): “The Minister’s approval under subsection (1A)(b)—(a) may be given for any class or classes of investments or entities; and (b) may set conditions as to the governance framework for the implementation and operation of the entities and as to the application of this Act to the entities.”

What this was about was providing some security that, as we entered this brave new world of fund investment vehicles—

💬 Chris Bishop: Ha!

—that we should actually have—thank you, Mr Bishop—some more security. Well, Mr Bishop might, as he laughs, like to answer the question why, when he was in the committee, he was all in favour of the Minister being involved—he was all in favour of the Minister being involved.

💬 Chris Bishop: I wasn’t in Parliament.

Ah! He is now saying he was not in Parliament. We know he was manipulating the members of the committee from behind the scenes. No, I do not mean that—I do not mean that. I would like Mr Bishop, then, to ask the National Party members of the Finance and Expenditure Committee who were on the committee last time—perhaps David Bennett might be an example of that—why they were happy and in fact proposed the introduction of this clause, because that is what happened. The committee, on advice from officials, agreed that this was a protection that should be included in the law when we are trying out a new type of funding mechanism for the fund. But magically on the Table tonight appears Supplementary Order Paper 89 in the Minister’s name removing that section. It removes the section that the committee put in.

💬 Hon Ruth Dyson: Unanimously.

That is right. We need to track this through.

The committee, working in a very collegial manner, in a manner that is responsible, said: “We want to give the Superannuation Fund the opportunity to make use of a new mechanism for its investments, but if it is going to be anything more than a passive entity, then”—[Bell rung] Mr Chair?

The CHAIRPERSON (Hon Chester Borrows): Grant Robertson.

There was such competition! “If it is going to be anything more than a passive entity, there should be a mechanism by which the Minister of Finance now may have some say.” Mr Bishop, when he gets up, will say that compromises one of the core aspects of the fund when it was initially established, so that it should not have ministerial involvement in the fund. We continue to support the fact that the Guardians of New Zealand Superannuation have done a very good job of managing the fund, but it is also important to note that this type of fund investment vehicle was not envisaged when the fund was set up. The idea that actually the guardians would have any active role themselves in investment was not envisaged when the fund was set up. When the fund was set up it was all to be arm’s length, and the fund has done a very good job in terms of managing that investment.

But the time has come, and the guardians came to us and said that they wanted this change, and it was accepted by the committee. But it was accepted by the select committee on the basis of a series of checks and balances that are now proposed by the Minister of Finance to be removed. On this side of the Chamber we are very disappointed that that is the situation that we have come to now, when a committee can go through a piece of legislation and as a House we can come together and say that these are the appropriate protections that would be put in here. So that is to be removed under the Minister’s Supplementary Order Paper 89.

I need to indicate at the outset that the Labour Party, although remaining very supportive of this bill, finds it hard to go against a consensus decision of the select committee on this matter, because we do believe that this is an important change and we do believe that this is one that the guardians themselves were not uncomfortable with. That is my recollection. I was on the committee only briefly when this bill was being discussed, but I do recall that the guardians themselves remained comfortable with the idea that this vehicle would work well with the ministerial oversight in the way we have suggested. It is important to note that allowing the guardians to run fund investment vehicles is an exception to the general rule proposed in section 59 of the original Act. What that said was that the guardians should not be controlling any other entity. They are there to invest, they are there to do their best on behalf of the taxpayer, but they are not there under section 59, as it currently reads, to control any other entity.

The committee, when we discussed this, agreed that the prohibition on control does not preclude the fund from 100 percent ownership of assets, and there are examples of that where they might own a forest but they do not manage the forest. So that is fine. We understood that and that the guardians wanted to work to increase the proportion of the fund invested in the New Zealand assets, and that they realised that in doing that they may have to take a more active role in the way in which these fund investment vehicles were driven. That is fine, but what is not fine is when the select committee comes in and says: “We believe there is a way of managing this that will give confidence to the electorate that we are maintaining the integrity of the fund, that we are maintaining the independence of the guardians. We are not giving them carte blanche to run and manage investments; we are putting in place a way in which the Minister of Finance will have some say on a very, very limited class of investment.”

I think that members on the other side need to get on their feet and tell us why it is that they are going against what was put in as an agreement by their members at the select committee. It is pretty extraordinary, actually, for a Minister of Finance to come to this House with a Supplementary Order Paper that contradicts what National Party members in a committee have agreed to. It may be that time has elapsed and those committee members were not able to convince the Minister when it went back to the National caucus, but I would have hoped that they would be able to do that and ensure that New Zealanders could have continuing confidence that these new fund investment vehicles will be used in such a way as to be appropriate.

One of the key elements that the Minister of Finance was to be involved in was in the question of what kind of governance arrangements there would be around these fund investment vehicles. So again, this is not saying that the Minister of Finance will make any specific decision on a specific investment. It is about the Minister of Finance having some say in the governance arrangements around that, some say in the role that the guardians will play, and some say in the role that perhaps an independent investment manager might play in an investment that is, effectively, 100 percent controlled by the guardians of the fund. That is a very useful and important check and balance.

I would like to agree with my colleague Grant Robertson. I have come to the Chamber to speak on the bill that went through a select committee process. As Grant said, on the Finance and Expenditure Committee, by and large—I was on it in my first term and I am on it again—we get some contentious bills, but how it works is that we work very closely together to come up with consensus. Very, very rarely in my experience do we disagree on anything or put a minority report in. A lot of work goes into this because we understand how important the bills are.

But we also understand that the chair of the Finance and Expenditure Committee is under directions from the Minister of Finance. Of course we know this. It is the reality of the situation. So, again, it is a most peculiar situation that the chair of the Finance and Expenditure Committee, who is no doubt in direct communication with the Minister of Finance on a regular basis in terms of the work of the committee and the bills before the committee, would not have discussed this. I am not too sure where this has come from, and I suspect the Minister in the chair, the Minister for Primary Industries, has no idea either because he is not a finance Minister at all—

💬 Chris Bishop: Not yet.

I was going to be rude but, no, I will not go there. But maybe Mr Bishop does know this because he was in the office. But let us get back to the purpose of this. He wrote a lot of this. You probably wrote this, did you not, Mr Bishop? You know the reason behind this. In fact, I have no doubt that Mr Bishop said to Mr English: “This is how it should be done, Bill.”—wink, nudge—and it was done. That is how it works, is it not, mate? Well done.

💬 Dr David Clark: When you’ve finished ordering those hair straighteners.

Ha, ha! Yes, exactly.

The thing they do not quite understand is that there will be a reason behind this. There will be a reason behind why the Minister of Finance has said that he does not want to have ministerial approval as was set out in this. I am not too sure whether it is because he thinks there may be some sort of liability or conflict, as Mr Robertson has pointed out. As we all know about the Superannuation Fund, one of the fundamental principles behind it was that it was politically neutral, so we did not want to have any political interference, and I suspect that is why it has run so well. In fact, it is just a shame that the contributions have not been put back into it, because its rate of return has been astounding since the global financial crisis—around about 18 percent, if I am not wrong.

But the reason why this piece of legislation, which is reasonably technical, I suppose, in nature, is before the House is because the Guardians of New Zealand Superannuation were in a situation where they effectively controlled an asset but they did not have control of the business entity. It has always been part of the rationale of the fund, I believe, that if it can invest in New Zealand assets, so be it, and that is a good thing. It is a way to boost our capital markets and, actually, control ownership of a lot of investments. In fact, they have invested widely in this country. I think they invest in Z Energy and Kaingaroa Timberlands, but part of the reason for this is that, effectively, they did not have control of the business entity itself.

Where I would like to see some of this being exercised, for example, is this. We are selling a lot of our farmland, our sensitive New Zealand assets, offshore. If there is a good business model where the Superannuation Fund could actually justify the purchase of that, I think that is a preferable option. In fact, since 2005 when the Overseas Investment Act came into play, there have been over 1,000 consents for the purchase just of sensitive land that have been granted. It would be good if the Superannuation Fund was actually an investor in here as opposed to the Americans, the Canadians, the Chinese, the Austrians, and everyone else. But, as has been said, I am not too sure of the reason behind this Supplementary Order Paper 89 or the reason behind the changes. We really do need the Minister down here to explain these, because it is a fundamental change in the way this whole thing is done, and it would be good to know.

But I come back to the purpose of the bill. I do not think that anyone doubts the veracity and the competence behind the guardians and the job they have done. In fact, it has been fantastic, and part of the reason for that is that—well, I was going to say that part of the reason for that is that there has been no political interference; in fact, that is not one of the reasons—they are incredibly competent and they do a magic job of doing it. But we all acknowledge that they cannot have any political interference except in very, very specific circumstances, which is what this bill was actually trying to put into place. But we also recognised that there were some instances where they did actually need to have a measure of control over the operating entity that they were buying into, and that this was to do with the governance arrangements, and in this day and age when there is a lot more focus on governance arrangements—

This bill is one that has been in front of Parliament for some time now, and there has been a change at this level of the debate. One of the fundamental purposes of the New Zealand Superannuation Fund and one of the requirements of how it is managed is to make sure that there is a sense of independence from the Minister of Finance in the way that that fund is organised. It is a very fundamental point of policy in regard to the setting up of the New Zealand Superannuation Fund.

The Finance and Expenditure Committee did, in its great wisdom, consider the issues around the Superannuation Fund at that time, and one of the issues was in regard to land ownership. As that last speaker, Stuart Nash, spoke about, the Superannuation Fund does—contrary to what he says—own considerable amounts of farmland. That farmland is predominantly in the South Island, and those farms are, effectively, businesses in their own right. The issue the Superannuation Fund has is that as an owner of farmland it effectively controls that business entity.

Under the rules of the Superannuation Fund it cannot have control of a New Zealand entity. So, effectively, the Superannuation Fund was engaging in those kinds of purchases in a roundabout way to enable it to get land purchases, to give it that diversity in its book. In doing so, there then comes the issue of where you take it to the next level, around control and management. So it was considered by the Finance and Expenditure Committee, and the select committee felt at that time that the Minister may have the ability to do an approval process for such investments. That was the original intent of what came before the House in the original bill.

Subsequently, that policy agenda of independence, that policy driver that is fundamental to the Superannuation Fund, has been decided to be the predominant policy rather than to look at how that control aspect may work. So to provide for that independence, Supplementary Order Paper 89 takes away that test of having the Minister of Finance as the overall approver or disapprover of an investment, so it maintains that independence.

The other part of the bill, which is a substantive change that was sought, is in regard to investment through passive mechanisms for the Superannuation Fund. Effectively, when you get to the scale of investment that they are at in the market, and the rule is that they are not allowed to control the New Zealand business, it becomes very difficult for them to invest to a significant level. What this bill does is it enables them, through a passive investment vehicle, to hold larger stakes. They will not actually be controlling those enterprises as such, but they will have that passive ability to be a large-scale investor. Basically, the thing we have got to look at in this bill is that giving them that ability to do so, through the fund investment vehicles, basically enables that passive investment by relaxing the control restriction that was section 59.

Taking into account the fundamental principle that you want independence for this body as well, there was no need for the Minister of Finance to have that other test on top of those investments. So that is the rationale behind why the bill is in its current state. It makes sense when you look at the fundamental principles of the legislation and why the Superannuation Fund was set up. It also enables the Superannuation Fund now to have much more flexibility in its investment portfolios and to take advantage of assets that it can actually invest considerably in, for the benefit of all New Zealanders. We do have a small capital market and we do have a small number of significant players in that capital market. The Superannuation Fund is one of those significant players. We would not want to have them limited in their ability to fund the New Zealand market and to assist in the growth of the New Zealand entities by having unnecessarily controlled restrictions. The aspect of the change in this bill, to enable those passive investment vehicles to make substantial holdings, is for the benefit of all New Zealanders and the Superannuation Fund going forward. Thank you.

I want to say from the outset that fundamentally this is a good bill. It is nice to stand here, on this side of the Chamber, and be able to congratulate the Government on taking this step forward and approving some changes to the New Zealand Superannuation and Retirement Income Amendment Bill.

Here we have some positive changes happening, particularly in respect of superannuation in New Zealand, which we know is a big issue that does need to be tackled. This is a Government that in the past has shied away from dealing with this problem. We know John Key has said, for example, that he would not tackle the superannuation age while he was Prime Minister. He has been very clear about that. He has not suggested any other ways to tackle the fact that currently we have five New Zealanders in the workforce supporting one person in retirement, but in a few decades’ time we will have only two New Zealanders in the workforce to fund one person’s retirement. We have got, as a country, to have a mature discussion about this and come up with really sensible suggestions as to how we can tackle this particular issue.

Part 1, of course, is the substantive part of the bill, and so it is good to see that the Government is tackling this issue in at least one respect here by making changes to the Superannuation Fund that are positive. I am sure that they will all be leaping to their feet shortly. I can see Chris Bishop penning some notes, so he will certainly be a contributor who will have something to say about the good things the Government has done.

But also let us not forget that at its outset Bill English called the Superannuation Fund a dog, and it has proven to be an incredibly successful fund. We know that if the Government had continued with the contributions, as was done previously, in fact, it has been estimated—and this is a 2013 estimate—that there would be $10 billion more in the fund, and that is from the forgone contributions. The Government has not been particularly wise in the way it has handled the fund up until now.

On the Finance and Expenditure Committee, of course, we did discuss the fund investment vehicles. What Grant Robertson has said about the nature of the debate is absolutely true, from my experience on the select committee. There was a consensus around the kinds of changes that needed to be made in the bill in order to ensure the correct protections were in place. Because the Superannuation Fund is doing an active type of investment on all taxpayers’ behalf, to give the Minister of Finance some oversight of those decisions on behalf of the taxpayer was part of the conclusion of the Finance and Expenditure Committee that was agreed across the select committee. We did debate long and hard the minutiae of the bill because this is New Zealand’s future. This is our Superannuation Fund that has got huge returns, that is internationally respected, and that is generating wealth for New Zealanders.

We found it our duty to find out more about the nature of the proposed changes. The officials were fantastic. They supplied us with the information we needed to work through those decisions, and to come up with the best recommendations back to this House. I want to put on record my thanks to the officials who served the Finance and Expenditure Committee. Some of them are sitting here in Parliament, ready to advise should we need technical advice now. Thank you to those officials who helped us through that process and helped us work out what the tweaks needed to be to make sure that this Parliament’s oversight was protected, to make sure that we had the right kinds of policies in place that would ensure that this new opportunity was grasped with both hands and taken into the future.

It was a constructive process across the select committee, as it usually is. That constructiveness is rarely seen in the media of course, but I think it is worth commenting on it here. We know that it is a wise move, and we have agreed that it is a wise move. The advice is that it is wise move to have these more active investment vehicles.

Bill English is now proposing an amendment that would remove his oversight of this spending. Part of the reason that this oversight was suggested, of course, is the limits of the Official Information Act. That was part of the discussion that we had. Where was the Official Information Act in all of this? So we went back to look at the first principles. The Official Information Act gives Parliament the protection and the oversight of the spending decisions. Would these new fund investment vehicles be subject to the Official Information Act? Well, actually, no they would not be, in their entirety. However, the fund investment vehicles would be, in so far as the Superannuation Fund itself is subject to the Official Information Act.

The Superannuation Fund, in recommending who the people were who were controlling the projects, would have overall accountability, and we could see that Parliament or any member of the public who had access to the Official Information Act—which is all members of the public—could ask legitimate questions about the oversight of these vehicles via the Official Information Act. Of course, a good deal of material, we would expect, would be withheld for commercial reasons—certainly, for a period of time when these investments were in place. But the principle remains that the public can request information about the governance arrangements, to be sure that these new vehicles are being used in an appropriate way and in a way that benefits the taxpayers of New Zealand.

So we had comfort that these new vehicles had sufficient oversight in place, barring the suggestion that perhaps the Minister of Finance should also have some oversight on behalf of all taxpayers for these new investment vehicles. That seemed a perfectly reasonable point to reach on the evidence that we were given as a select committee, and after the lengthy discussions that we had, so that was what we settled upon and brought back to the House. So it is somewhat surprising to find that the National members on the select committee now support, we are told, an amendment that goes in quite the opposite direction and removes the Minister of Finance from that picture. So I think that people at home watching this debate will draw their own conclusions about what is happening here.

💬 Hon Ruth Dyson: They got rolled.

They got rolled, my colleague says—they got rolled. There is political expediency at play here. Perhaps the Minister of Finance did not wish to be caught in any fund investment decisions that went wrong. Maybe he was trying to remove himself one step further. We think that is abrogating a responsibility that the Finance and Expenditure Committee, after seeing the evidence, thought was a sensible step to take.

This current Government does, of course, have a philosophy of allowing—it will tell us; and I am sure Mr Bishop will correct me if I am wrong—the market to have its way. So a part of that is, of course, having the fund at a distance, at arm’s length, to allow it to make wise investment decisions. We, of course, support that basic principle. That is why it was, in fact, Labour that introduced the bill that brought the Superannuation Fund to life, a fund that has attracted international recognition for being a superior fund and producing superior returns. It has been set up that way.

The changes that were proposed by the select committee were modest but they were there for a good reason: to preserve the oversight of that decision making; to make sure that there was accountability for this new direction that the investments are going to take. So we find it surprising, of course, to come to the Committee and find that the Minister has moved an amendment and that those very same people who argued on the select committee for the merit of a particular proposal now find themselves in the somewhat awkward and embarrassing position of arguing the opposite. I very much look forward to some of the logical contortions and the debates that will follow. We might have a bit of fun in the Chamber tonight as we hear some of those MPs stand up and say that black is white and that, in fact, white is black, and that they knew that all along. I am sure Mr Bishop will have a contribution along those lines. He can be an entertaining speaker, and I hope that we can all enjoy his contribution as he now explains to us why these fund investment vehicles should no longer have the oversight that the select committee agreed that they should.

This is a great fund. The bill is, overall, one we would like to support, because it is a small step towards taking the savings question seriously—a question that this Government has shied away from in so many instances in its seven cuts of the KiwiSaver scheme, in its failure to put contributions into the Cullen fund, and in John Key’s ruling out of tackling the issue of retirement savings costs going up, without a plan to address it. In so many ways it has failed on retirement saving. This bill is actually a positive step, overall, in the right direction, barring this one very unusual contortion, which I am looking forward to members opposite explaining for our entertainment. Thank you.

I rise to take a call on Part 1. The purpose of the amendment to the bill that came to the Finance and Expenditure Committee and that was recommended by that committee, to insert new section 59A, was not to allow the Minister of Finance to interfere in any one investment decision by the Guardians of New Zealand Superannuation but was to exercise some control over what class or classes of investments or activities ought to be allowed through a fund investment vehicle, which overrides the original protection that was set out in the legislation that the guardians ought to be passive rather than active managers of investments.

The reason for the insertion of that provision in the original legislation was sound. It was overseen by Dr Michael Cullen. He was concerned that the fund would come under the influence of politicians—an investment fund that would invest in the sorts of classes of investments that ought not be funded by a superannuation fund, but ought to be funded by a Government. The reason for that—

💬 Chris Bishop: Protecting the fund from his own party.

That deserves a response, actually. No, that was not the intention at all. This side of the Chamber, generally, properly funds things that ought to be funded off the Government’s balance sheet by collecting enough taxation to fund the things that ought to be funded—things like roads, things like—

💬 Eugenie Sage: Schools.

—schools, things like hospitals, none of which would be privatised by this side of the Chamber, but those are things that would be privatised by the National Party’s side of the Chamber. If the National Party privatised them, in order to get its seedy little plans off the books, it would actually be encouraging the superannuation fund of the day to effectively underwrite its mismanagement by paying for some of the things that the Government had not funded through the appropriate collection of taxation.

Dr Michael Cullen foresaw that as a problem because he was, and is, a historian who has seen these things go down in the past. Where that comes unstuck at some future date is when the superannuation fund is wound up and the money is realised from their investment, at a time when New Zealand will be cash-strapped in meeting the increasing costs of superannuation in the future. It is a nonsense if the Government is effectively asking for money out of the economy, to put back into the economy at a time when the economy may be stretched to find a replacement investor. So the reason we had these underlying controls on what the superannuation fund could and could not do was to avoid that eventuality.

Since then we have had a number of changes made by the National Government. It came to power, remember, promising to increase the proportion of the superannuation fund that was invested in New Zealand. How has that gone? I am surprised we did not see any reference to it in this bill, because if there was a place for it to be, it would be in Part 1, where the objectives are for the superannuation fund and what the restrictions are would be restated. The Government has not actually achieved that objective. The reason it has not achieved that objective is not the inability to use fund investment vehicles but that the idea was not sound in the first place.

💬 Dr David Clark: Another broken promise.

Another broken promise by the National Government. In any event, we come to the change that is proposed. There are instances when controlling interests are held in New Zealand - based investments. In order for that to be done more practically, it is good that the Guardians of New Zealand Superannuation will be given the ability to use fund investment vehicles. But it is, none the less, a departure from what was originally intended and lets us get closer and closer to the guardians becoming an active manager rather than a passive manager. That is why the control that was provided for unanimously by the select committee in new sections 59A(1A) and 59A(1B) was appropriate, because it said that for the purpose of holding, facilitating, or managing the investments of the fund, a fund investment vehicle could be used, and the guardians were allowed to exercise that power in respect of passive entities and in respect of any other entities only with the approval of the Minister of Finance.

So to go beyond passive investments required the approval of the Minister of Finance. The Minister of Finance could come back and say: “Having thought about it, I’m going to approve this for a class of non-passive investments.” Now, because the Government is stripping out this provision, it is actually departing further from the original intention, which was to leave the guardians as a passive investor rather than an active manager.

I do not know whether many people can remember as far back to the old superannuation fund that the Muldoon Government—

💬 Grant Robertson: Crashed.

—crashed, after the election; the Kirk fund that was designed by Roger Douglas. The advertisements that were used to knock over that particular attempt at decent New Zealand savings were Cossacks marching across the screen in cartoons, because the Government, through the Superannuation Fund, was going to own and control so much of the New Zealand market place that it would somehow be communism, in the way that these Cossacks were marching across the screen.

Now what are these guys doing? They are allowing, in a general sense, the Superannuation Fund to become an active manager rather than a passive manager. I am looking forward to the day when we see Steven Joyce using his control of the media, as he has through his old linkages, to actually bring back those advertisements to advertise the fact that in this amendment—

💬 Iain Lees-Galloway: I want to see Steven Joyce in one of those advertisements.

Well, actually, those people did not have much hair. They had furry hats, but there was not much under them.

So that is why the Labour Party is opposing the Minister’s amendment, and I want to hear the justification as to why we should, holus-bolus, be allowing active management through these fund investment vehicles without the Minister of Finance keeping an eye on it, because that is what is happening here. Of course, I do not trust the Minister of Finance on this, because he has got it wrong from the start. He called it a dog. He stood up in this Chamber and said that this should be opposed because it was a dog. I do not trust the Government, because it has under-invested in the fund, and we know because the Guardians of New Zealand Superannuation measures how much wealthier we would be in New Zealand if the Government had continued the contributions to the fund. I think I will leave it there—

💬 Hon Paula Bennett: Oh!

Well, actually the Minister in the chair now, the Associate Minister of Finance, who has now taken on finance roles—I would be very pleased for her to stand and say why we should allow the Guardians of New Zealand Superannuation to have this holus-bolus right to actively manage what was meant to be passively managed.

This has become quite an interesting debate tonight—

💬 Hon Members: Here comes the “Professor”.

—quite apart from the fact that I have stood up to contribute to it, by the sounds of it. What has been interesting in terms of this debate—and New Zealand First, for one, was grateful to hear it—is that the Minister of Finance, with Supplementary Order Paper 89 there, amending new section 59A under clause 7 in Part 1, wrote himself out of these decision-making processes. We rejoice in that, because in our interpretation of this bill, at the moment, what we see is new section 59A(1A) and (1B) ensuring and reinforcing that the fund investment vehicles are actually passive investment vehicles. The debate has been interesting in that it would seem that from parts of the Committee, including from members on the other side of the Chamber there, that was a relaxation of control in terms of allowing these fund investment vehicles as an investment fund, but that is not my interpretation, and that is not New Zealand First’s interpretation, of this legislation.

So I put it to the Minister in the chair tonight that some clarification on this issue would be incredibly important in order to get some consensus in the Committee. We understand that at this moment there is no relaxation of controls. The fund investment vehicles are an investment vehicle, and we applaud them as a tool and, particularly, as a means of allowing the Guardians of New Zealand Superannuation to invest in New Zealand, for example.

It was expressly stated in the interpretation of this legislation and in the analysis of this legislation, which New Zealand First wholeheartedly supports, that these fund investment vehicles give the guardians an opportunity to invest in capital or actual machinery, for example, without—and this is the important part—taking control. That is an important distinction. The guardians, to our knowledge, are not taking control. So the fact that the Minister has written himself out of the decision-making process is to be very much applauded. The less the Minister—especially this Minister of Finance—has to do with the control of our New Zealand Superannuation Fund, the happier New Zealand First will be.

It is unfortunate that there was not some provision in the Act originally that said that the Government must contribute to the fund. As was noted previously, we have forgone $11 billion in investment returns because this Government has opted out of contributing to this fund. Again, Minister, I would ask that in the analysis of Part 1, new section 59A in clause 7, we actually do look at that definition of control and at what the guardians are effectively now able to do. Our interpretation is such that they are not taking control of their investments, which would be incredibly important, because then we could easily support the Supplementary Order Paper.

What we would also positively note is that the same amendment and the existing changes to the legislation will, very importantly, not only give them access to new investments but what is also quite significant is that it will actually lower the cost of the guardians’ participation in those investments. So not only are we now positively allowing our guardians to invest in New Zealand, which we applaud, but we note that with the fund investment vehicle tools we now bypass quite a convoluted process that had become, and is currently, quite a costly investment process for the guardians. So these tools are to be applauded, certainly in that instance.

Actually, that is all I have got. Thank you.

I call the much-awaited Chris Bishop.

This speech has been very hotly anticipated. I do not think I have had a speech more anticipated since I spoke to Todd Muller’s SuperBlues group in Tauranga. It is good to see that members opposite are so looking forward to this. Quite to the contrary of the assertions from Mr Robertson, I was not on the select committee that considered this bill, although the Finance and Expenditure Committee did do a good job of considering this bill.

I want to make a couple of prefatory remarks. The first is that this is clearly a sensible bill. Despite the heat and the sort of venom from members opposite, there is actually support for this bill. It is a prudent bill that will allow greater flexibility for the Guardians of New Zealand Superannuation to improve the returns of the New Zealand Superannuation Fund, which it governs on behalf of all New Zealanders.

The other prefatory remark I want to make is that the Superannuation Fund has done a good job. I think that, you know, some time ago that would have been controversial to say in National Party circles. It would have been somewhat controversial to endorse and praise the New Zealand Superannuation Fund, or the Cullen fund, as members opposite like to talk about, but it has done a good job. That does not mean that we should have borrowed money during the global financial crisis and put it into the Superannuation Fund. That does not make much sense. The Government took the view that it was a prudent and considered use of taxpayers’ money not to do that. It does not make much sense to borrow money in order to invest it on risky sharemarket exchanges, because at the end of the day you cannot beat the market in the long run, and that was the view that the Government took. I know that members opposite disagree with that, but I think that most New Zealanders agree that that was a sensible thing to do.

The second thing I would say, and this speaks to one of the issues that has come up in the Committee tonight, is that the independence of the fund is vital. That is exactly why the Minister of Finance is moving, as I understand it, the Supplementary Order Paper in his name to remove from the bill the clause that allows ministerial approval of investment classes. Members opposite, you know, are saying we are tying ourselves in knots on this. I would just point to the Minister’s second reading speech on this, which was when he acknowledged that this issue is a finely balanced one. It is a fine line. There is a diversity of views on this issue, and I acknowledge that the Finance and Expenditure Committee, which I was not a member of, did consider this issue in some detail. But in the passage of time I think that the Government has come to the view that the independence of the Superannuation Fund is so paramount that we should not have Ministers involved in the approving of particular asset classes or particular investment classes. It is very important that we maintain the independence of the fund and we do not have politicians involved in that. It is a finely balanced issue. Members opposite have a decent argument on it, but I also think that Government members have a good argument on this, too, and that is the view that the Government has come to.

I just want to briefly mention the substantive change that the bill makes in this part, which is to allow fund investment vehicles. As members have noted, that was sought by the guardians. This is a useful change, and it is the most substantive change the bill makes. It brings the Superannuation Fund into line with global best practice, which allows it to fund the entities that are formed for the purpose of holding or facilitating or managing investment of the funds. As has been pointed out, this will increase the efficiency and the flexibility of the fund. This will not allow the Superannuation Fund to hold a substantial controlling interest in the underlying operating entity. That is appropriate.

The other change I want to point to is the change in clause 5 of the bill that prevents the guardians from being challenged legally by way of judicial review by dint of the argument that their actions are ultra vires. Again, this was considered by the Finance and Expenditure Committee. This is a prudent and sensible change.

I think that in the past the National Party has been somewhat critical of the New Zealand Superannuation Fund, or the Cullen fund, as members have called it. But I think there is now consensus and unanimity across the Chamber that it is a sensible fund that prefunds the cost of superannuation in the future. As a Parliament we have a duty to try to make sure that the fund operates in the best way possible so that it maximises returns for New Zealanders. The measures that this bill advances will do that.

It is indeed a pleasure to rise and speak. I think I am the first female speaker in the Committee stage of the bill. The reason I raise that is because, actually, when it comes to superannuation, women disproportionately rely on superannuation payments. During the course of our lifetimes, on average we earn less than men do during the course of our working lives, and we live longer. So this bill is of particular importance to the women of New Zealand, so on that basis I am very pleased to take a call. I am a little disappointed in this bill because I thought the New Zealand Superannuation and Retirement Income Amendment Bill may well have been the bill that saw the Government fix up its mistake of stopping contributions to the New Zealand Superannuation Fund. I had hoped that that was what this bill would do. Unfortunately, it does not amend that particular big and costly mistake from the National Government. It does not reinstate the contributions.

Christopher Bishop, when he spoke, gave an excuse for that and said it was because it would be remiss of the Government and wrong of it to have borrowed money to keep those contributions going in the midst of a recession. Well, Mr Bishop, why did your Government borrow for tax cuts in the midst of a recession? Actually, what we know about the New Zealand Superannuation Fund is that the sorts of benefits coming from it, the wise investments that were being made, and the return on that investment would have been a better thing to borrow money for in the midst of a recession than to have tax cuts that simply went nowhere, built no increase in our economy, and did not create any jobs or do any of the things that they said it was going to do.

💬 Chris Bishop: Rubbish. You’ve got no idea what you’re talking about.

Well, the member might well say “Rubbish.”, but he is here debating a bill where National—I think that is the sound of National confessing that the Labour Party gets future planning better in this country that what National can. National said 15 years ago that the Labour Party was wrong to do this and that Dr Michael Cullen was wrong to implement this fund. Fifteen years later, here they are saying yes, it was a dog all right—it was a greyhound. It was a fast-running dog, and it was one that got this country ahead of many other countries—many, many other countries, indeed. I think that is the sound of the National Party saying: “Sorry, we are too focused on short-term gains and can’t see what the future looks like.” It is, in fact, the Labour Party that gets this right consistently, time and time again. I am sure that is what the sound of that speech was.

Part 1 of this bill sets up these fund investment vehicles and what the Guardians of New Zealand Superannuation can do to take some more control of those fund investment vehicles. I cannot stand today in this Chamber and talk about superannuation and vehicles without pointing out to the Committee that one of the reasons that New Zealanders are going to rely so heavily on the outcomes and the proceeds of the investment that this bill talks about is because superannuitants are going to be paying the highest level of vehicle registration under the changes that that Government is going to bring in tomorrow. Most superannuitants are going to be paying $158 for their car registration.

The CHAIRPERSON (Hon Chester Borrows): Come back. Come back.

So that is why Part 1 of this bill is so important. I am going to disagree—as I quite frequently do, actually—with David Bennett. When he spoke he said the reason why we have this and why we have the Superannuation Fund is all about Guardians of New Zealand Superannuation. Actually, no, Mr Bennett, the reason why we have this fund is for people. It is so they can live in some level of dignity and respect when they retire and when they reach their older ages. It is something that I am very proud of and that the Labour Government put in place against vehement opposition from the then Opposition, the National Party. But we did it because we knew that this was going to be something that would see New Zealanders looked after in their older age. The great pity of this bill is two things, really: the National Government has not used this opportunity to reinstate the contributions to the New Zealand Superannuation Fund that us baby boomers are going to need in our older age, and, secondly, it has demonstrated the chaos that National is still in—the day-to-day chaos when the National MPs on the committee recommended one course of action but the finance Minister has done them over.

I am happy to make a brief contribution on the New Zealand Superannuation and Retirement Income Amendment Bill. I want to respond to one or two of the comments that Chris Bishop made—the great hope of the National Party. I have to say that if he is the best debater in the National Party, it has got some very tough times ahead given the lacklustre performance we saw from him this evening. Chris Bishop did understate somewhat the performance of the Cullen fund, as it is colloquially known—the best sovereign wealth investment fund in the world.

Let us actually talk about that. There has been a return of 19.6 percent per annum over the last 3 years. That is a fantastic rate of return that we all, as New Zealanders, should be proud of. That is a fantastic rate of return. But let us look at it from the beginning of the fund, in 2003, when Michael Cullen set it up. Of course, the National Party used all sorts of colourful language about how reckless it was for the Labour Government to be setting it up. But right the way through the entire period, including through the global financial crisis, the average return was 10.3 percent a year. That is a very, very healthy level of return. It does show just how short-sighted the Government was in stopping making contributions to the New Zealand Superannuation Fund in response to the global financial crisis. In June 2013 the fund itself estimated that up to $10 billion had been forgone as a result of that decision.

Why do we have this fund, and why are we making these changes to the fund? The reason we have the fund is that we have a massive retirement boom coming and we need to prepare for it so that we have some savings set aside. This superannuation fund, contrary to what some people might believe, was never intended to cover the entire cost of the baby boomers’ retirement, but it is designed, and intended, to be a contribution to that cost. It is not covering the entire cost; it is covering only a small portion of it. But the question remains: if we have not been contributing to this what is the alternative plan for paying that bill further down the track? The Government does not have one. It is happy to kick it for touch because it knows that the crunch point does not come for another 10, 15, or 20 years further down the track.

So how does that relate to the changes that this bill makes? The changes that the bill makes change the nature of the ways the fund can invest so that it can become a more active investor rather than a passive investor, as was originally envisaged when Michael Cullen first established the fund. Why was it established as a passive investor? I guess, basically, Michael Cullen, I am sure, envisaged that he wanted the best return with the least risk. That would probably be a fair comment. But there are some good reasons why the fund would want to be investing in a different manner.

The question that I have got for the Minister in the chair, the Hon Paula Bennett, asks whether the fact that the fund is now being given the power to be more active in the way that it manages its investments creates an opening for the fund to be investing in services where the Government itself is retrenching. So could we find, for example, that the Superannuation Fund is buying assets that the Government is otherwise selling? Public-private partnerships, social housing—

💬 Sue Moroney: State houses.

State houses. Buying up—or being given—the State houses that the National Government is trying to give away. Are the areas that the Government is exiting areas that the Superannuation Fund—

💬 Andrew Bayly: No.

—could start investing in if it deemed those areas to be sufficiently profitable? One of the members over there says: “No.” How could they stop it? Bill English is actually removing the clause that would give the Minister of Finance the ability to direct what types of investments the fund could make. Therefore is there anything—this is a question for the Minister—that would prevent the fund from starting to invest in areas where the Government is retrenching? And if it can do that—and let us think back to the overall goal of the fund, which is to increase New Zealand’s wealth, the Government’s and the Crown’s wealth, so that we have a provision here to deal with the baby boom coming—how does basically transferring assets from one arm of the Government to the other, which could now happen, help with that situation?

So it is an open question. Is there anything to stop the Superannuation Fund, the Cullen fund, from now investing in those assets that the Government is selling? I am not getting any response from the Government, so I am looking forward to the Minister’s contribution. She is reading intently. I am sure she is looking it up so that she can give a nice, detailed answer to the questions I have been raising, because there is no doubt that this fund is essential. It is required. I hope that the Government will take every step to make sure that we maximise the return out of it, because we are going to need that money when the big retirement boom comes—and it is coming.

Labour supports the New Zealand Superannuation and Retirement Income Amendment Bill. This is one of those little bills that make a fairly minor change. It provides for the Guardians of New Zealand Superannuation to be able to be exempted from liability as they take on the management of passive or active investment vehicles, and it complements the portfolio investment approach so successfully undertaken by the fund to date.

This bill does throw us back, however, on the why, the what, and the how of the New Zealand Superannuation Fund. Now it is commonly accepted by members across the House. This was an initiative of the previous Labour Government and the then finance Minister, Dr Michael Cullen. It has been, in anybody’s book, a spectacular success—a spectacular success. Recent returns averaging around 20 percent per annum is unbelievable for a fund of that size. Average return since inception: 10.3 percent. Cost of Crown capital: around about 4 percent. This is an extraordinary win for every New Zealander, because it means that we will be paying less in our taxes to support Kiwis in their retirement, because of the prudent investments, the spectacular investments, that have been made in this fund.

What did National do? National stopped contributing. National is such a party of short-sightedness that when times got at all tough it stole from the future to bail itself out in the present. And independent advice confirms that that bad decision has cost New Zealand taxpayers—wait for it—over $10 billion in lost profit; $10 billion. And I am taking the conservative numbers. The bottom end of the range is at least $10 billion. So here is the question, members. Members across the Chamber: can any member tell me a single worse financial decision in the history of New Zealand Government? Can anybody tell me a decision by a Minister of Finance that has cost more—

💬 Iain Lees-Galloway: Scrapping the Kirk superannuation.

OK, I agree with you, actually, my two colleagues—you have topped this one. And it was Rob Muldoon—this is the worst decision since Rob Muldoon killed the last great superannuation scheme. Fortunately, National did not quite kill this one; it just stunned it. But that stun gun cost $10 billion, and here we are, back, now trying to get this back on its feet.

Now, we agree with this limited bill. It simply provides for the independent guardians of the fund to have a little more liability protection to cover a slightly broader range of passive and potentially active investment vehicles. Reasonably unexceptional, provided that the structure of governance of the fund holds true, and that is as designed by Michael Cullen: a double-blind system where the Government has a hands-off role in appointing the guardians, who are then by law completely independent of Government policy, so there is no way any Minister of Finance, or any other Minister, could possibly influence the investment decisions of the fund. Nobody told John Key, because he campaigned on breaking the law. He campaigned on twisting the arms of the guardians so that they would put a certain amount in certain different asset classes. However, in New Zealand—and, of course, we want to see more stuff going into New Zealand, but that is not the point. The point was that, really, the Government needed a law change to do that, and it did not bring it back to Parliament.

Is that governance model still valid? Is it still worthy? Of course it is. Is the aim of the fund, which is to smooth the cost of financing superannuation for our children and our grandchildren, still valuable? Yes, it is. Is the fund successful? Yes, it is. It is incredibly successful: 19 percent return over the last few years, 10.5 percent since inception, more than double the average cost of the Government’s own borrowing. This is a spectacular success.

I think this debate points us to a deeper truth: Labour does long-sighted change; National manages from day to day. So that is why the public of New Zealand say: “Oh, yeah, she’ll be right. Things are going OK, can have that lot back again.” But whenever New Zealand is up against it, whenever New Zealand has challenges to rise to, New Zealanders vote for a Labour-led Government, because they know that we have the far-sightedness and the insight to achieve major change for New Zealand. We have done it in foreign policy, with the anti-apartheid movement and the antinuclear movement. We have done it by carving out an independent role in foreign affairs, which has now seen us appointed to the Security Council. We have seen it—

💬 Chris Bishop: Under a National-led Government.

Oh, OK. Those members say it happened under a National Government; so it did, with the Labour Party’s support. But we would not be there if we were not seen as an honest broker, and the reason we are there is because Labour Governments, from Kirk onwards, have championed our independence. But back to the bill, Mr Chair.

The CHAIRPERSON (Hon Chester Borrows): Oh, thank you.

Thank you. I knew you were going to drag me back, so I thought I would get in first, Mr Chair.

The CHAIRPERSON (Hon Chester Borrows): I was distracted by the humour.

So this superannuation bill tells us something very, very important about Labour-led Governments: we do change. We do major change that results in New Zealand being better off. What is the problem at the moment? Those clowns on the Government benches have been happy to follow along behind dairy prices, the earthquake rebuild, and a housing bubble, and they think that is an economic strategy. That makes about as much sense as not paying into the New Zealand Superannuation Fund. It is policy that reinforces old advantage and does nothing to create new advantage and the smart jobs of the future.

So we support this bill, because this allows the fund to play a greater role in the smart jobs of the future by investing actively in New Zealand businesses. But if the Government is going to do this, why will it not touch the tax system? Why will it not touch the banking rules, so that we get more capital where it will do the most good, creating jobs around our regions? Why is it just reinforcing traditional agriculture and giving foreign banks a free rein? Why will it not address the core problems that we all know are hamstringing the New Zealand economy? Well, it does not have either the vision or the courage to get us there. And New Zealanders, as they see Greece up against the wall, as they see dairy prices going down the toilet, as they see Christchurch starting to stutter, and as they see the Auckland property bubble ready to burst, are rapidly coming to the conclusion—the feedback we are getting is—that it is time for a change. The tipping point is coming—the tipping point is coming. The tipping point is coming, and the same far-sighted courage that brought a 20 percent return to the New Zealand Superannuation Fund will be available to future generations of New Zealanders, because the same team that brought New Zealand the Superannuation Fund can bring them the next generation of positive policies for the future.

I would like to speak to the bill for a few minutes—just for a few minutes. It is pleasing to see that in supporting the bill, we are, generally, in agreement. I would also like to pick up a point that Mr Tabuteau talked about and to clarify—

💬 Hon Members: Professor.

—“Professor” Tabuteau—whether this bill does anything to change the activity or passiveness of any investment that the Guardians of New Zealand Superannuation make. The way I read this bill, there is no change. This fund investment vehicle does not allow any change to the activity of investment or to the type of investment that the Guardians of New Zealand Superannuation are able to take. If you think that the power to grant a power of attorney is more activity, if you think that the power to appoint an investment manager is a more active fund, or if you think that the power to appoint a custodian is increasing the activity of the fund, then you are wrong. This does not increase the active management that section 59 has, and will continue to have, to guide the Guardians of New Zealand Superannuation.

I would like to discuss and clarify a couple of issues around the reasons why the Minister of Finance should not be involved, and will not be involved, in the interference of the management of this trust. It is interesting that Labour Opposition members, particularly, talk about Dr Cullen’s plan to have totally independent governance of this fund, and I totally support that notion, but then I am surprised that the Labour guys want interference from the Minister of Finance. As soon as you have got that foot in the door, how is a Minister of Finance to react if—assuming that was he given the authority—as an example, he or she is asked to approve an investment and the investment goes bad? Whose fault is it? Is it the fault of the Guardians of New Zealand Superannuation or of the Minister of Finance? If the investment goes well, who takes the credit? Is it the Minister of Finance, who approved this investment, which was not passive, or is it, again, the Guardians of New Zealand Superannuation who should take the credit?

This fund, as has been noted already, is performing outstandingly. It is the top State-funded superannuation fund in the past 5 years. If we were to allow Mr Robertson or Mr Nash or Dr Parker as a potential Minister of Finance, what would we have? What would we see? What investments would be approved by these people? Well, for a start, I can tell you that there would be a hell of a lot more going straight into their $100,000 house project, because these guys have talked about investing more into the New Zealand Exchange. That is not the purpose of this fund. The purpose of this fund is to have a diversified global fund, across different equity markets, across different countries, and across different instruments, without interference from any Minister of Finance, and that is why this Supplementary Order Paper, which removes the suggestion given by the Finance and Expenditure Committee, must be ruled out. Thank you.

Thank you very much, Mr Chair, for giving me the call. I want to help out my colleague Mr Scott, and I think the best way of being able to do that is to work through a little basic statutory interpretation exercise for the member. I want to refer him—

💬 Chris Bishop: Here we go. Grant the lawyer. Grant Robertson QC.

Thank you very much. That sounds like a good name for a TV programme. I think I may do that—reality TV. Clause 6 of the bill talks about section 59 being amended, and what is really important is what section 59 of the Act currently does.

💬 Hon David Parker: “No controlling interests”.

It says that the Guardians of New Zealand Superannuation of the fund can have “no controlling interests”. That is the whole thing we have been discussing tonight: the fact that the fund, when it was established, allowed for this complete arms-length relationship. The Guardians of New Zealand Superannuation was there to have the overall control of the fund, and what a good job it has done of that.

But if we look at what clause 6 is, it is a new subsection (5)(a) and it reads: “This section—(a) does not apply to a Fund investment vehicle referred to in section 59A …”. So it is changing things, Mr Scott. That is the point of the law. Why would the law be proposed if we were not changing anything?

💬 Hon Member: Wasting our time.

Well, it could be. It would not be a big surprise if the National Party came here to waste our time on a piece of legislation, but, actually, this one clearly says it does not.

And then section 59A goes on to establish the fund investment vehicles and describe what they can do: “All or any of the investments of the Fund may be held in an entity that is formed”—for Mr Scott—“or controlled by the Guardians for the purpose of holding, facilitating, or managing the investments of the Fund (a Fund investment vehicle).” So something new is being created here. Something new that is different and requires us to amend the section of the law that says that the Guardians of New Zealand Superannuation have no controlling interest—

💬 Hon David Parker: So they can have it.

—which means it can have controlling interests. It goes on, which is why sections 59A(1A) and (1B) were added by the Finance and Expenditure Committee.

I want to refer members to the words the committee used in its report. The committee considered these amendments would “provide a suitable balance between allowing the Guardians access to new vehicles to invest the Fund efficiently and effectively as it grows, and complying with the Act’s intention that the Guardians not be involved in the business operations of the entities in which the Fund is invested.”

The select committee “considers it desirable to reinforce the intention that FIVs be passive holding entities, but we also accept that considerations of diversification and risk management might make some classes of asset a desirable investment for the Fund, so the question of effective control of an operating entity might arise.”

So to help reassure the member on one count, subsection (1B) of section 59A, which the Minister is now seeking to remove, talks about the Minister’s approval being required for classes of investments or entities, not the specific investments themselves, not the specific entity that may be created, but classes of them. It is to give a little bit of reassurance that the fund is not going off in a direction that taxpayers would be uncomfortable with, but it is not about the Minister specifying a specific investment or controlling whether or not a specific investment would be made.

That is exactly why those words of the committee that I have read out were unanimously endorsed by the committee, because this does fundamentally change an original premise of the bill.

💬 Chris Bishop: It does not.

Yes, it does—of the Act. Yes, it does, Mr Bishop. Why would section 59 be changed? Why would it be changed if it did not do that? Why would it say: “This section does not apply to a Fund investment vehicle …”? Because the Guardians of New Zealand Superannuation came to the select committee and said: “This is now a mature fund. This is now a fund that we believe can do more to invest in New Zealand.” I think one of the things they said when they first came to us was the possibility of using these fund investment vehicles for investing entities for real property assets, e.g. timber, farming, and investment property assets.

💬 Andrew Bayly: You are so confused.

I am confused? Mr Bayly says I am confused by this law. Mr Bayly should turn round and ask Alistair Scott whether or not anything changes, because he got up and assured the Committee that nothing is changing—nothing is changing here; we should be completely reassured. Well, what is the point, then? Mr Bayly, tell us what the point is.

I rise on behalf of New Zealand First to take a short call in support of this New Zealand Superannuation and Retirement Income Amendment Bill. To be fair, it is not something that I was part of in the select committee, but it has taken only 5 minutes for me to pick up on the fact that this makes common sense.

💬 David Bennett: Sit down, Clayton.

To be honest, Mr Bennett, you remind me of the theme song from Team America: World Police—“I am so lonely!”—sitting over there, so far away from all of your team mates. You are not making a lot of sense, and like Alistair Scott and Mr Bayly, you do not make a lot of sense either. In actual fact, I am supporting your bill, so what are you yelling at me for, anyway? You are a very lonely and confused man, I have to say.

To be fair, there is a serious need, and some investment required, to get the right people looking after the hard-earned money that we are investing for our future. Many of us put aside 4 percent to 8 percent of our money—sometimes more than that—to go into the Cullen fund, which was created by Dr Michael Cullen to look after the future of New Zealanders. I have to say that this bill uses a language that, in my opinion, is very easy to grasp, although there is an ambiguous term in clause 4—amending section 38—which says the explicit purpose is that “(2) The fund is not an entity separate from the Crown.” You have to say that over in your head a couple of times. That has to be probably the most ambiguous part of the whole bill. What it is actually trying to say is that that fund is very much part of the Crown, and a very, very important part of the future of New Zealand. So we support that as well.

The bill talks about FIVs and other acronyms that we all love and hate back home. If anybody is watching, and I am sure that many of you are, an FIV is a fund investment vehicle. That is just a pretty way of looking at the way the Guardians of New Zealand Superannuation, the people looking after those funds, can get better returns for those hard-earned Kiwi dollars going into investments. When we heard Russel Norman speak about this initially, when it was first discussed at the first reading, he talked about his concerns about the Government’s interference in where those investments were going to go. To be honest, the reality is that he does not want it to go into exploration or gas or mining, but the reality is that we should be looking seriously at putting it where we can get the best investments for the future of New Zealanders. We are getting some fantastic returns on investment—around the 19 percent mark. That is absolutely fantastic, and we hope that continues. Obviously, with the Greece debacle at the moment, interest rates and share prices have dropped, along with our Kiwi dollar, and I hope that the Kiwi dollar can come down some more yet.

The purpose of the fund is a fund protection and to return as much as we can to those superannuitants. One of the things in this bill that I commend the most is the Supplementary Order Paper that takes away the Minister’s ability to interfere with that fund and to decide when, or whether, it is a good investment or not. In reality, you need to put a firewall up to create some separation from those Guardians of New Zealand Superannuation—those investors; the people who are looking after New Zealanders’ hard-earned money and are putting it in the right location. So I commend the Minister for putting forward Supplementary Order Paper 89, deleting that subsection completely. This is a bill that we would like to see progress. We think that it sits well for the best part of all New Zealanders, despite the confusing remarks we have had from over on the other side of the Chamber.

💬 Ron Mark: They don’t understand their own bill.

They do not understand their own bill, and, clearly, they have not read it. To be fair, it does make sense, and those people sitting at home can rest assured that their investments are being looked after and are getting very good returns. As Porky Pig famously said one day: “That’s all, folks.”

I raise a point of order, Mr Chairperson. I did not want to interrupt the member Clayton Mitchell while he was speaking. The member referred to viewers at home. I am still a relatively new member, but I believe that that is out of order, and I just wanted to bring that to your attention.

No. I have often heard members talking about drive time, when listeners are driving home in traffic in places like Auckland. I have never heard that that is out of order. It is certainly not a ruling that I have made in the past, and I am not going to uphold it.

It is a wonderful opportunity to speak to the Committee and to those at home listening on their crystal sets to the debate this evening. I think we might have got to the bottom of why the Minister of Finance overruled the Finance and Expenditure Committee and the National MPs on the select committee. I think he thinks the National MPs’ scrutiny of this bill was a bit dodgy. We have heard from Alistair Scott that the bill basically does very little. I was not on the select committee. This is not my area of expertise, but after a 30-second conversation with my colleague David Parker I think I understand clause 6 and clause 7 considerably better than Alistair Scott does. It is clear to me that clause 6 does introduce a new subsection stating that section 59, which says that the fund can hold no controlling interests, does not apply to the fund investment vehicles referred to in new section 59A, and those are new fund investment vehicles that are created by this legislation. That appears to me, as a layman in these terms, as quite a significant change to the original legislation. So we have been wondering tonight why it is that after a lengthy period of scrutiny by a select committee, which, I assume, has a majority of National MPs on it—

💬 Grant Robertson: It does.

—it does, I am told by my colleague—and after the committee unanimously deciding to include new section 59A(1A) and (1B), in clause 7, to give the Minister oversight in certain circumstances, the Minister has come in and said not only that he does not agree with the position the National MPs took but that these bills, after the select committee has considered them, have to go back to the caucus. The National caucus actually said that this was OK when it scrutinised it closely. And I know it scrutinises these bills closely because it certainly looked at the Health and Safety Reform Bill very closely. In fact, Mr Scott and his colleague Mr Bayly must be getting a little sick of being overruled by their caucus and their Minister, with the work they do at the select committee then being overruled by their caucus colleagues because they have been looking at the Health and Safety Reform Bill as well. We know that the caucuses look at them closely, and they would have looked at this bill closely. They agreed with the select committee that new sections 59A(1A) and (1B) should be included in the bill.

So where was the Minister for that conversation? Surely that would have been the point at which the Minister, if he had concerns, should have raised those concerns with his caucus colleagues and sent the National MPs back to the select committee with a flea in their ear. But, no, obviously the left hand did not know what the right hand was up to, which seems to be the usual state of affairs for the National Party at the moment, and it was only after the bill was reported back to the House that the Minister decided to overrule his own colleagues on the select committee.

We know that the National Party does not have an astonishingly good track record on these matters. Chris Bishop raised some issues around this. He said there was a time when the National Party MPs did not really agree with the Cullen fund but they have grown to love it. In the same way, they did not agree with KiwiSaver but they have grown to love that as well. They did not agree with interest-free student loans, and they did not agree with paid parental leave—all the ideas that were generated by the Labour Government alongside the Superannuation Fund to secure the financial future of New Zealanders. They were all things that the National Party opposed, but that it now says it agree with.

I think that just underlines the fact that, actually, the Labour Party is the party of ideas, the party of the future, and the party that thinks about the financial security and the future of the people and the citizens of New Zealand, and the National Party is just the party of “No”. It is no to superannuation, no to KiwiSaver, and no to paid parental leave. It is the party that repeatedly says no to the new ideas. But that is OK, because, being conservatives, those MPs eventually come round to the idea and about a decade later they realise that, actually, Labour was right all along and not just on superannuation, and not just on the matters addressed in this bill. Maybe in 10 years’ time the National MPs will look back on tonight and say: “You know what? Labour was right and we were wrong.” Do not do it to yourselves, National. Get on the right side of history now and vote against that Supplementary Order Paper.

What a fascinating night. I have sat here and listened intently. I have listened to lawyers. I have listened to accountants. I have listened to political people, and I am just staggered that people cannot understand a relatively simple piece of legislation. Let us just go back to first principles. This bill is obviously dealing with a good piece of what has gone on with the New Zealand Superannuation Fund, set up by Dr Michael Cullen, as we all know. It seeks to address superannuation for the future and to have a forward fund to be able to pay for it. We all know that it was set up in 2003 and has achieved outstanding results, but what I want to remind you about are the two key underlying principles that Dr Cullen had for the Superannuation Fund. One was that the fund was going to grow to a size and we wanted to make sure that it did not have control of markets in New Zealand. To put that in context, we have now got a fund worth $29 billion—

💬 Grant Robertson: Could have been more.

—and we know what the New Zealand Exchange is worth, do we not, Mr Robertson? It is worth about $100 billion. So at roughly 29 percent—if we applied it all to the New Zealand Exchange—it would mean we would dominate the New Zealand Exchange. So, quite rightly, we put into place some clauses to make sure that the Superannuation Fund could not control direct investments—right—other than real property.

The second thing is we wanted to make sure it was free from political interference, right? Part 1 of the bill deals with three key issues. Let us just deal with the first one, which is about permitting fund investment vehicles as an appropriate investment vehicle. It is interesting, right? I do not think that many people actually understand what they are. They are actually a very common vehicle for fund managers, particularly if you use a “fund of funds” approach. I am sure many of you know what that means, but for a large fund like the New Zealand Superannuation Fund, you will use professional fund managers to manage certain assets.

What this bill is doing after all those years since the fund was set up in 2003 is trying to modernise the situation at the behest of the Guardians of New Zealand Superannuation. These usual investment vehicles called fund investment vehicles are now going to be established, right? The change permits them to be used to hold non-controlling equity stakes in direct equities or investment funds, and, secondly, to hold stakes or to have influence over managed funds—that example I gave you before—that subsequently invest in equity or debt instruments like Treasury stock, Government bonds, and commercial bills.

The third thing it permits is to hold investments in real property. This is where there is that little nuance I spoke about before—for instance, the New Zealand Superannuation Fund does hold real property in the form of forests and stuff like that, but the Act precludes it from holding directly the shares, or having control over the entire equities, like a company. So there is a difference between having control of the shares of a company as opposed to having control of the real property like forests, land, and all those other good things that the Superannuation Fund is entitled to invest in, and should be investing in. So this deals with this.

The other thing I heard early this evening was all about the passive fund and active fund. Well, can I just correct you on that fault. This bill does not enable it to particularly become an active fund. The purpose of this bill does not address that issue. This is about putting an intermediary between the New Zealand Superannuation Fund, managed by the guardians, and what it has ultimately invested in, right? So we are all on the same page, hopefully, on that aspect. Related to that, at present, the guardians cannot delegate or grant powers of attorney, they cannot appoint an investment manager, and they cannot appoint a custodian. I have got to say to you that it is absolutely unusual for funds not to be able to do this, so what this bill does, again, is to provide normal operating rules for a fund such as a massive, successful fund like the New Zealand Superannuation Fund.

The second thing that Part 1 deals with is protecting the guardians against ultra vires acts that they may undertake. This means that if, for instance, the guardians, through the fund manager, enter into deeds, contracts, or agreements, and all the normal things that you expect them to do, and for some reason those acts are deemed to be ultra vires, this part deals with this, under new section 49A, in clause 5, to permit those activities and transactions to take place and not be subject to a court challenge, provided—and this is the overriding thing—that those transactions were all entered into in the normal course of events and there was nothing unusual about the extent of the activities that were undertaken.

The third thing that Part 1 does is to confirm that the fund investment vehicles are not subject to the Official Information Act 1982 and the Ombudsmen Act 1975. Again, we have heard a bit about this earlier on from the Opposition. Just to be clear, what this bill provides for is that the fund investment vehicles are not subject to the scrutiny of both the Ombudsman and the Official Information Act, but—but—the guardians still are.

Again, what we have got here is a comprehensive set of measures that will mean that these fund investment vehicles can be put in place, like virtually any other fund in the world, and that they can invest in a range of equities, debt instruments, and real property, albeit they cannot control the equities that they hold because, as I noted before, they would have a huge, dominant effect. Just to give you the context in that final point, if you look at the range of New Zealand investments that the New Zealand Superannuation Fund is currently invested in, the highest investment that it has got is Z Energy at 20 percent and Metlifecare also at 20 percent. All the rest are at about 10 percent and 8 percent of the New Zealand stock market.

I think that this is a very good piece of legislation. It brings the New Zealand Superannuation Fund up into modern standards of practice, and for that reason, I commend it to the Committee.

I just want to respond to the points that Mr Bayly made, and the point that the prior speaker—I am sorry, I have just got memory loss—

💬 Andrew Bayly: Mr Scott.

—Mr Scott made in respect of controlling interests. I agree that the effect of clause 6 of the New Zealand Superannuation and Retirement Income Amendment Bill, which adds to section 59 the new subclause (5), says that at the first level, if you have got a fund investment vehicle that is wholly owned by the guardians, then that in itself is allowed, despite the fact that it is a controlling interest in the fund investment vehicle. But then it says—you look through that—it does not allow the guardians to have a controlling interest in respect of the underlying investment that is made by the fund investment vehicle. I know that; I understand that. But the point that we are making on this side is that through these vehicles you are getting closer to the point where you are going to turn the fund manager from a passive investor into an active investor. It might not have a controlling interest, but it is getting closer, in these new vehicles that are being allowed, to actually moving from being a passive investor to an active investor.

Across both sides of the House, that was why the amendment was proposed by the Finance and Expenditure Committee—to reinforce that although we are going to allow these fund investment vehicles, we were not going to encourage the guardians to move from a passive investment role to an active investment role. So we said, therefore, in respect of the power being exercised by the guardians, ministerial approval would be given or withheld in respect of some of those classes of investment. That was the reason, and so we are still waiting to have a contribution from the Minister in the chair, the Minister of Education, as to whether the Minister thinks that the select committee was wrong to say that this was actually moving along the continuum allowing more active investment than has been the case to date. That is a different issue from controlling interests. We still have not heard from members from the other side as to why it was wrong to actually have that greater level of control exercised in respect of investments that are not passive.

The question was put that the amendments set out on Supplementary Order Paper 89 in the name of the Hon Bill English to Part 1 be agreed to.

Amendments agreed to.