Taxation (Transformation: First Phase Simplification and Other Measures) Bill

This is the first go on this part, so we will make sure we keep counting this time. I do not actually have many things to raise in Part 3 of the bill, but I do want to discuss the clauses relating to KiwiSaver, and in particular clauses 205 to 211, which relate to minors—that is younger people, as opposed to those down coalmines—opting out of the KiwiSaver scheme. The bill proposes a new provision that would allow minors who have been incorrectly enrolled into KiwiSaver to opt out before their 19th birthday. This would, as the officials told us, provide some protection to minors who may not know they have been enrolled, and want to exit the scheme. Members who opt out of KiwiSaver under this new provision will have the contributions they have made returned to them, their Government contributions will be returned to the Crown, and their compulsory employer contributions will be returned to their employer.

Members of the committee asked officials how widespread this problem was, because we did find it a little curious that we were coming to Parliament to debate, perhaps, this rush of young people being enrolled in KiwiSaver by parents over-eager to get them in when they genuinely did not want to be, or felt it had happened in an incorrect manner. Officials assured us this was not an enormously widespread problem, but there was a need to provide a provision for KiwiSaver members to do that. So new section 59CB, inserted by clause 210, will allow members who have been incorrectly enrolled in KiwiSaver when they were minors to opt out, up until their 19th birthday. They have to meet these criteria: they are aged under 16 and they have the consent of one of their guardians, or they are acting under their own authority, between 17 and 19 years of age.

I really do want to make a couple of points here. The first is that I do not think it is desirable to be promoting, in any way, the withdrawal from KiwiSaver of people who have been enrolled under the age of 18. The Government has withdrawn the kick-start payment, which was a very attractive reason for a lot of people to be enrolled before they reached the age of 18. I think that is a pity and a shame, and I think it undermines some of the improvements to the savings culture that have been developed as KiwiSaver has gone on. But we do accept that there may be situations where people feel the need to do this. I think it is important to make that point.

I am still a little bewildered about the extent of this and why it has come to the Committee in this way. Minors are only able to join KiwiSaver by directly contracting with a KiwiSaver provider, obviously, as they will not necessarily have an employer, and the providers have the ability to receive and review parental consent. That all should actually be happening. This is to try to cover a situation where, for some reason, a provider has decided that it is just going to accept someone coming in as a minor and signing up for KiwiSaver. The officials eventually said to us—and they say it in the commentary on the bill—“To date Inland Revenue has not received any complaints from minors who have been incorrectly enrolled into KiwiSaver through their employers.” That would be none enrolled through their employers.

So I think the extent of this problem is very limited, but I guess it is a good thing to ensure that people under the age of 18, particularly, are not exploited. The reason the clause goes up to 19 years of age, which we did discuss, is to give time for KiwiSaver members, once they have reached 18 years of age and are in a position to be advocating on their own behalf, to be able to get out of the scheme, should they wish to.

As I say, it is not a clause that I think we would like to see used very often, but it is conceivable people will find their way, through either a rogue KiwiSaver scheme, a rogue parent, or a rogue employer—although there are not any who have done that. It would seem an odd clause, but I thought it was worth noting that it is now possible under this section of the bill.

When the bill came before the Finance and Expenditure Committee we did consider that the wording of the bill appeared to treat an automatic enrolment as a mistake, and only if there was a failure to meet all of those criteria that I mentioned before rather than one of them, and so the committee altered the bill under clause 207 to ensure that if any of those criteria were failed, then the person who had been incorrectly enrolled had the ability to withdraw from the scheme. Unless the Minister of Revenue wants to clarify the extent of the thousands of young people writing to him with deep concern about their automatic enrolment in KiwiSaver, we are happy to support the clause.

I wish to disagree with the previous speaker a little. I think he may be understating the potential of this problem. The Inland Revenue Department may in fact be trying to cut off at the pass a serious concern about minors wanting to withdraw from the scheme. I was not on the Finance and Expenditure Committee so I will defer to those who have wider knowledge, but my concern arises from the fact that in the last Budget the Government cut the KiwiSaver kick-start.

The terms of the KiwiSaver scheme have changed. In Dunedin, my home town, I know that as a result of those changes 14,000—14,000—young New Zealanders, probably first-time savers, the majority of them, will have missed out on that kick-start payment. If someone signed them up and they thought they were going to get that, they may well have felt aggrieved and may wish to remove themselves from the scheme.

💬 Rt Hon Winston Peters: How many thousand?

14,000.

💬 Rt Hon Winston Peters: That’s unbelievable.

It is unbelievable.

💬 Rt Hon Winston Peters: Doesn’t he come from Dunedin?

It is shocking—and the Minister comes from Dunedin. There are 14,000 people missing out on that $1,000 KiwiSaver kick-start as a result of the last Budget. It is indeed an outrage.

So I think it is entirely possible that young people who have been signed up to a scheme where they thought they were going to get a savings boost from the Government will find out later that the Government has taken it from them in the previous Budget, as is its wont at the moment. And goodness knows what we will find out later this week as it plays to the mega-wealthy. I mean, we have seen what the Government is doing with the Panama Papers, and so on. We will see what it does with the Budget this week, but I am betting that middle New Zealand will be cut out of the picture once more by this Government, which is increasingly arrogant, Mr Bishop, and out of touch. Mr Bishop knows it: he laughs, he laughs, and he laughs. He takes this lightly, but I genuinely think that New Zealanders will be disappointed—those people in the middle who are struggling to get by—and I think some of those young people who might have discovered that they have been enrolled in this scheme would quite rightly be aggrieved and may wish to withdraw.

I politely put it to my colleague that this might be an issue and that, in fact, it might be in the interests of Minister Woodhouse to play it down, because it is his Government that has robbed middle New Zealand and is making it tougher and tougher for them, so that it can look after its mates who are the ultra-wealthy. It is this Government that is screwing the scrum in favour of those who have privilege already.

It is my concern that this clause may in fact be there for the right reasons. I would seek the Minister’s assurance that that is the case when he delivers his short address on why the existing system will be able to deliver all the changes in this bill, because he promised me that when he interjected before. I am looking forward to that speech. I hope it is not the Minister just pushing this out into the never-never as though his Government is above explaining itself, because that is becoming a pattern that New Zealanders are becoming increasingly concerned about: a Government that makes changes and says: “Well, to hell with the rest of you. We’re going to make the changes we want because we do not want to engage with the public any more. We’re just going to make the changes that we want to do.”

I come back to the point that is around clause 213 in the bill, where those deductions can be looked at and people can withdraw from the scheme.

I thought it would be useful to carry on this discussion with Dr Clark, because I do not think we are disagreeing at all here, in fact. He does raise a very good point about the impact of the removal of the KiwiSaver kick-start on the very people whom clause 207 alleges to help. The Prime Minister stood up in this House and said that removing the kick-start would “not make a blind bit of difference” to the number of people who were joining the KiwiSaver scheme.

💬 Rt Hon Winston Peters: Who said that?

John Key said that—he said that. It is interesting, Mr Peters, because he said that, and then we got, under the Official Information Act, the advice of his officials, who said that this would significantly reduce the number of people who enrol in the scheme. But Mr Key took his own advice—an unwise course of action—and said: “No, this is not going to make a blind bit of difference.”

Well, what occurred within a year was a reduction—and my colleague Trevor Mallard always says that you cannot have a reduction like this—of 182 percent in the number of 0 to 17-year-olds joining the scheme. In other words—[Interruption] I know, and Alastair Scott is making the point that there was a reduction of 1,188 people on the average new enrolments of 0 to 17-year-olds over the previous 12 months. It fell away. It has collapsed, and it has collapsed for a very good reason, and that is that the kick-start was an incentive to young New Zealanders to get themselves into the KiwiSaver scheme. So I accept the point that Dr Clark is making, which is that it is possible that some of those people who were enrolled will now feel aggrieved about the fact that they were enrolled, because they do not get that kick-start any more. I think that is a legitimate point.

💬 Rt Hon Winston Peters: That’s been a kick in the guts.

It is, indeed, a kick in the guts. It is a kick in the guts for the savings culture that KiwiSaver has developed—the very thing that we have been so poor at in New Zealand for so long: saving. I know the member has a history of promoting savings in New Zealand and the importance of it, but KiwiSaver has made a real difference, and to see that kick-start go in the Budget last year was a huge disappointment to a lot of New Zealanders. As my colleague Dr Clark says, who knows what they will do? So I do just want to put on the record the fact that I share the concerns of Dr Clark.

What this clause did was create the process by which people could withdraw from the scheme up to the age of 19. I still do not want New Zealanders to do that. I still want young New Zealanders to be in KiwiSaver, because, long term, it is important to New Zealand that they are. It is just a pity that this Government has consistently undermined KiwiSaver over the last 8 years.

I think we are reaching a point of harmony in the Committee. It may just be a difference in emphasis. I ask Mr Robertson to consider that it will be, in my estimation, more than 30,000 first-time savers in the Greater Wellington region who have missed out on this $1,000 KiwiSaver kick-start as a result of the changes the Government had made since the last election, where it, increasingly, is skewing the playing field in favour of the ultra-wealthy and is letting people in the middle miss out. I think Mr Robertson and I are, indeed, in agreement that this will create some concern for people and that there may well be people who wish to withdraw.

I agree also with Mr Robertson that we should not be encouraging people to do that—that, instead, we should be encouraging people into savings, and that the movement that was started by the last Labour Government to really push a savings culture is one that is worth taking into the future. I guess we would encourage this Government to take up that cause. For starters, it could look at restoring the kick-start fund that it took out, because that is the harm that has been done. It has changed behaviour, and the Government has had the advice that that has changed behaviour. So that is where, I suspect, the concern from officials came—from the Government’s own advice. I mean, the Government’s best economic advice is that the damage the Government did to that kick-start scheme, which withdrew that entitlement for a lot of first-time savers, will have a lasting impact and that we will see it play out in different ways. So I suspect that is what is reflected in this.

Mr Robertson and I agree. Harmony is breaking out in the Committee, and, actually, Labour is supporting this bill. I think that is something we should also note along the way. We believe in a broad-based tax system that is fair. Of course there are aspects that we will disagree with the Government on. We do not think that it has the tax system right, but we do want to work towards simplification, and that is what a good deal of this bill is about. I am still looking forward to the Minister giving us some assurances that he can actually implement this legislation. I hope that he does not consider himself above giving members of this House and the wider public that assurance. It is a mistake his Government is slipping into, where, increasingly, it is seen as arrogant and out of touch. I hope the Minister himself will rise to the occasion and give that assurance. Thank you.

We are all glad that you are getting on.

Part 3 agreed to.

Schedule agreed to.

Clauses 1 and 2