Overseas Investment Amendment Bill

Oh, thank you, Madam Chair. What an excellent choice, I thought—if I do say so myself, with all due modesty, which is sort of none, really. But at least I won’t shout into the microphone like a new member might.

💬 Kiritapu Allan: Or like Dr Smith—he’s pretty good at it as well, and he’s been around a wee while.

I think one of the issues is this is really all about how to enforce it—and she’s still shouting. I think it’s really important that when we look at a bill like this and we think about why there are so many crossings out and so many amendments in the select committee stage, we think about a very good piece of work done by the Finance and Expenditure Committee—unfortunately, not good enough to change the bill and get rid of it entirely but, certainly, tried hard in the select committee. The reason that there are so many changes in the enforcement part of the bill is that the enforcement of the Overseas Investment Amendment Bill is going to be very difficult. This bill is really all about saying, “Keep those foreign people from buying our land.”, or, in this case, “Keep those foreign people from buying our houses.”, which I think is an amazing issue, frankly. Where are these people going to take those houses if this bill doesn’t go through? I have, since I’ve been in Parliament—a mere 16 years; hardly anything really—

💬 Hon Member: Too long.

—in the scheme of it. Who was that unusual person over there? It was Mr Strange, wasn’t it? Ha, ha! The list MP from Hamilton—list MP from Hamilton.

💬 Hon Member: No, I think he’s from Christchurch.

He’s from Christchurch. Anyway, he’s someone who doesn’t necessarily know what he’s talking about.

When I first came into Parliament in 2002, in that election campaign, people then were talking about foreigners coming to buy our land. I asked that question then on the campaign trail in the then seat of Clevedon. I said, “Where are they taking it?” People didn’t seem to have a good answer, but the foreign people that they were after in those days were the Americans, who apparently were coming into New Zealand, buying up land, and making something of it—like actually putting money into it, investing in it, improving it.

💬 Rt Hon David Carter: Oh, outrageous! They must be rich.

Outrageous behaviour, frankly. They’re not to be encouraged at any time. As the Rt Hon David Carter says, they must be rich. Well, we don’t want those people, do we! We want people who can’t do all of those things! Well, that’s the way it feels from reading this bill. Enforcement of these issues is actually really tough, and, speaking as a lawyer with 20-plus years’ experience before coming to Parliament, I know just how hard it is, because if people really want to get around this, it can be done. That’s the point.

Labour Governments are actually a great thing for law firms and accountancy firms—not that they actually necessarily like them, but they love the fact that it creates a lot more work, a lot more work getting around a lot more regulation. So, thinking of my former colleagues in the legal profession, they must be sitting there rubbing their little hands with glee, thinking, “We’ve got to think of some more schemes.”, and that’s what happens. Whether it’s in tax, whether it’s in anything else, the more rules that we put in, the more money and time and effort is spent in getting around them, and that’s what will happen. The people who will be caught by this will be the people who didn’t go to all that effort and trouble and expense—you know, the genuine people; the people who were actually just wanting to have a home in New Zealand; those people. I actually think most people will not be caught by this, because this is going to be something that a lot of people are going to spend a lot of time and effort getting around.

What is the great damage in somebody coming in and buying an apartment and then living in it, say, for six months of the year or three months a year, in New Zealand—what is the great damage? I’m just wondering about that, because what I know is this: ever since this Government has been in place, there has been no over four-storey buildings built in Auckland in the CBD as apartment blocks. The reason is this: foreign buyers have already got the message they’re not wanted, and what that’s meant is there are now fewer opportunities for people to buy their first apartment, for people to move out of suburbia, as well, into the apartments in the city—that is why.

This Government has already cut the knees out from under the apartment developers—already done that without this legislation getting in place. This enforcement part of the bill will not be needed, because the message is already there: you’re not welcome. We don’t want your money. We just want to use you. That’s what this Government’s message is to the people who otherwise would be—

I’m sorry to interrupt the member. The time has come for me to leave the Chair for the dinner break. We will resume at 7.30 p.m.

Sitting suspended from 6 p.m. to 7.30 p.m.

Madam Chair, thank you. I did want to come down and take a further call on Part 3. It’s been, of course, some time since I was last involved in the debate. But I wanted to raise a point that is new, and that is around the information-gathering powers in Part 3, and, particularly—well it’s sections 40 and 41 of the principal Act, but it starts really at clauses 23, 24, 25 of the legislation in front of us.

I wanted to raise a particular concern that the Privacy Commissioner brought to the attention of the Finance and Expenditure Committee, and that is around the very broad powers of information gathering that the bill would put into the principal Act. The Commissioner noted that the overseas investment legislation already has very broad powers of information gathering in it. He noted—and I think I’m quoting fairly—that he was concerned with the width of powers that this amendment bill that is before us would put in place in the legislation. I think his concerns are valid and do need a little bit of time to be worked through. I will be tabling shortly, as this debate progresses, a Supplementary Order Paper (SOP) to make some of the changes that the Privacy Commissioner had suggested be made, and, in particular, it really is specifically to section 41 of the legislation—clause 24 of the bill.

The thrust of this is that the Overseas Investment Act as it currently stands provides, at the moment, that the regulator already has, in fact, quite broad powers to gather information to ensure that there are not offences being committed under the legislation. That’s, of course, quite appropriate. You would need to have that sort of an investigation power. To be quite clear, it makes it very clear that the regulator can gather information to investigate whether there has been an offence committed. It’s not just once they know there is an offence, so they can check in on offences and they can gather information relating to them. But the way the section has been rewritten in this amendment bill takes that much, much further, and the Privacy Commissioner suggested the bill takes it further than is justified. What it now says is that the regulator can gather information fairly much at will, not only for the purposes of enforcing the legislation and offence detection but also to ensure “monitoring compliance, investigating, and enforcing Act and regulations”, and that’s repeated in a number of places through that change to the Act.

What the Privacy Commissioner noted was that, effectively, that gives now—or that would give if this bill was passed—the Overseas Investment Office (OIO) the power to gather information at will about any property transaction in New Zealand, whether or not it has reason to suspect that an offence has been committed. That is an extraordinary number of New Zealanders who will be caught up in that information gathering, and it really does get into a very, very broad-brush access to large tracts of information about New Zealanders. The Privacy Commissioner noted something like 200,000 transactions a year.

This reframed information-gathering power would give the Overseas Investment Office—under the guise of administering this Act—the right to trawl through all sorts of details about property transactions, as I say, under the loose tenor of the maintenance and enforcement of the legislation: monitoring compliance, investigation. That could extend simply into data collection or interesting research and analytical purposes, but when we want to gather information as a country for those purposes, we have frameworks for doing that. We don’t give an enforcement agency the ability to trawl through huge tracts of information about New Zealanders that are likely to have no bearing whatsoever on their work, simply for the purposes of seeing what they can find.

The Privacy Commissioner was of a view, and expressed this view to the committee, that certainly there were some improvements that were made in other parts of the information-gathering powers in Part 3, but he was very concerned in particular with the recasting of section 41. I know that the Minister in the chair, David Parker, has stood in this House on many occasions and confirmed his support for the important work of the Privacy Commissioner. It is one thing that I know every member of this House takes very seriously—our obligations around New Zealanders’ personal information.

I think this committee should properly turn its mind to whether it is right—under the guise of overseas investment and the changes the Minister has said the Government wants to make; almost as an aside tucked away somewhere, and not something that’s had a lot of debate in this Chamber at all—to give the Overseas Investment Office the power to access huge amounts of information about New Zealanders going about their lawful business in the normal way.

So the Supplementary Order Papers that I will be lodging in this respect are going to go through that section 41 and really try to address the concerns of the Privacy Commissioner. I would certainly invite the Minister in the chair to take a call and to explain to us why there is a need for this—why we’ve gone away from simply offence detection enforcement, which I think we can all agree and accept is a necessary part of making sure that the framework that is put in place is properly adhered to—and why the Minister believes the Privacy Commissioner isn’t right and shouldn’t be concerned about the considerable widening of the information-gathering power.

Now, in the Privacy Commissioner’s own words, he said that the powers that the OIO already has under the primary legislation are extensive and broad. He said they had very, very broad powers of information-gathering activities and authorities, and he is very concerned that that very wide scope of powers would be extended this way.

I haven’t heard in this debate—and I’ve been in the Chamber for the vast majority of the debate—from the Minister why those powers need to be extended; what the problem is they’re trying to address; and why, in fact, the Overseas Investment Office needs to go beyond enforcement. Is this, in fact, a statistical data-gathering exercise designed to give the Government information about the property sector more generally? If it is, I think we should hear that and we should understand exactly what information is to be targeted, how it will be collected, and how it will be used.

If it isn’t for that purpose, then I come back to asking why the extension is in place at all. So in the absence of a response from the Minister, and, of course, one that this side of the Chamber finds to be convincing, I think we do have to err on the side of caution.

I’ve worked with the Privacy Commissioner over many years. He is a very sensible and rational and balanced man—as you would expect of a man in his job. I didn’t always see eye to eye with him, and we could have debates around the information that the Government needed. But Ministers in this House, in my view, should never take his warnings lightly. I think everyone in this House is very aware of the high level of public concern around excessive information intrusions and information gathering by the State—what that information is being used for.

One of the core principles of privacy law—and I know this area reasonably well—is that information gathering shouldn’t be any wider than is absolutely necessary for the purpose, and that the purpose for which it is to be gathered and used must be very clearly set out and adhered to. So there is no compelling reason that we have been made aware of. Certainly, the Privacy Commissioner, in noting that he had worked with officials during drafting, was of the view that he hadn’t been made aware of any good reason why that extensive information-gathering power should be in there. In the absence of a compelling reason, I think it is something this House should turn its mind to, and show that it does value personal privacy and information privacy. And if there is going to be an extension, as I mentioned, that should be very explicitly laid out. I would like to see it recorded in Hansard—the sort of information that will be collected and the sorts of uses that will be put to, so that the Overseas Investment Office can be held to account if they step outside that framework.

When you have a debate on a bill as contentious and as strongly opposed as this one is, it’s very common that the focus is on the headline components of a bill—and that’s as it should be and you’ll hear lots of debate over the course of the evening from this side of the Chamber, as you have to date. But we have to be careful that these small changes, which can be very intrusive, don’t slip through the cracks. This is one of those changes, and, as I said, it does deserve a response from the Minister in the chair, and I very much look forward to hearing it. Of course, if that doesn’t come through, then our SOPs will be tabled, and we will certainly look to make further representations about why the committee should support those changes.

Thank you, Madam Chair. I’m delighted to take a brief call on the Overseas Investment Amendment Bill, Part 3, and I particularly want to focus on the issue of enforcement. But, first of all, I note the Hon David Parker in the chair, and, as it has been some time since we debated this legislation late last week, it is worth pointing out that this is, of course, the legislation where the Hon Shane Jones rolled the Hon David Parker. This is the legislation about which the Hon David Parker has said, “We’re going to stop all overseas investment.”, then it went back up to Cabinet and the Hon Shane Jones suddenly realised that a billion trees would be impossible without some foreign investment, so he won with a substantial Supplementary Order Paper, and, of course, Mr Parker’s here to try and tidy up the mess having been rolled again by New Zealand First.

But I want to talk about the issue of enforcement and I want the Minister to answer this question. We were told as we went through the select committee that the Overseas Investment Office doesn’t have sufficient resources for enforcement. We were equally told as we went through the select committee process that resources would be forthcoming to allow the Overseas Investment Office to do its enforcement properly. So my question is to the Minister: when will those resources be available? Once this legislation comes into play, there are a large number of opportunities, I think, to rort the legislation, and it’s going to require more resourcing for the Overseas Investment Office. As a person associated with agriculture—and I’m sure the Hon David Parker himself knows of many, many properties, farm properties in particular, which have been sold to an overseas investor, they have gone through the process to get overseas investment approval, they have made all sorts of promises about developing the property, spending more money planting this and that, employing more New Zealanders, and from my local knowledge very infrequently do the purchasers comply.

I can quote one or two examples—I won’t, because I think it’s the Minister’s job to know these examples—but I want the Minister to rise to his feet and give an absolute assurance—

💬 Dr Duncan Webb: You’re making it up.

Dr Duncan Webb’s just interjected saying it doesn’t happen. He’s a solicitor. He’s a solicitor in Christchurch and probably helped formulate some of these applications for the Overseas Investment Office. He knows promises are made and he knows they haven’t been kept. So that’s the first question I have of the Minister: when will the resources be available?

The second question I have—and this is one we teased out with the officials at the select committee without success. It is an issue whereby we can potentially see a real loophole with a forced marriage situation. Imagine an overseas investor wanting to buy an apartment in Auckland and this legislation makes it almost impossible—and if not almost impossible, then very difficult. So this overseas investor says, “Well, I’ve got a way to do it. I’ll shack up with some New Zealand person; make out it’s a marriage. We will collectively buy the house in our joint names as joint matrimonial property.” After three or five years, the arrangement splits and there’s a matrimonial settlement—

💬 Dr Duncan Webb: Oh, come on!

Again, Dr Duncan Webb will be the expert on this, but he couldn’t answer the question at the select committee. So then we get to the situation where a matrimonial property programme is established, and I suspect if the original overseas purchaser is really, really keen on that apartment, he or she will have found a way to make sure that it ends up in his or her name. Now, the officials couldn’t answer how the Overseas Investment Office was going to handle that, so I look forward to the contribution from the Minister, and I see he is itching to get to his feet to make sure that loophole has been plugged.

Now, I have another loophole that I’ve thought of recently—

💬 Hon David Bennett: No, there can’t be another one.

No, I think there can. I think there can. What about a significant farm property in the former electorate of the Hon David Parker, the Otago electorate, which he held briefly for three years.

💬 Hon Member: Did he?

He did. He did; it was unbelievable.

💬 Hon David Bennett: I can’t believe it. Nobody would have voted for him.

No, no, people did vote for him in 2002 to 2005, and then they saw the error of their ways.

But this situation would be if an overseas investor wanted to buy a property, looked at it, and said, “That fulfils all my wishes—to have control of that property—but, oh well, I won’t get it through the Overseas Investment Office.” So what he does is he employs a New Zealand farm manager who has very little equity, and he lends to that New Zealand farm manager 99 percent of the equity at very, very generous interest rates to the overseas investor. So the property is for all intents and purposes, as far as the Overseas Investment Office is concerned, owned by a New Zealander, but this overseas investor with 99 percent of the equity has absolute control and can tell the manager exactly what he or she is to do. The overseas investor then gets exclusive use of that property for as long as he or she likes. I think that’s quite a feasible example and that would be a way to rort this legislation. So there are two examples I give to the Minister, and he’s busy beavering with his officials. “Oh, we hadn’t thought of that.”, the officials are saying, so let’s find out whether we’ve discovered two loopholes, because I think we have. I think we have.

While the Minister is seeking advice, I’m going to resume my seat and I’m going to busy my mind with coming up with another couple of loopholes, because I think there’s heaps of them. I think this legislation won’t work. We’ve got to bear in mind why the Hon David Parker said it was introduced, and I remember when he took the call last week he said it had been introduced to drive down house prices. Well, I saw a little piece on the TV news over the weekend where Sydney and Melbourne prices have declined by 5 percent. And if we listened to Adrian Orr, as the Reserve Bank Governor, last week when he came before the Finance and Expenditure Committee, he said he’d express no surprise at all if they came back by 5 percent here in New Zealand with or without this legislation—without this legislation, in fact.

So I say to the Minister, I now have another question for him. If he’s introduced this legislation to drive down prices of houses in New Zealand, I want him to take to his feet today in this committee and tell us what amount he wants to drive these prices down by. I say there will be a lot of heavily mortgaged—[Interruption] No, no, Dr Duncan Webb won’t know anything. He’s what you call cannon fodder in this debate. He’s just being used. He won’t know anything of significance. But I want to know from the Minister: he wants to drive down the price of housing throughout New Zealand, particularly Auckland—at what stage, and what amount, does he want to drive it down by? Then at what level will he conclude that this dreadful legislation has been successful?

The final point I’ll make in talking about enforcement and other miscellaneous matters is I’ll point out to the Minister that while he sees business confidence surveys as junk, can I say to him it’s the Overseas Investment Amendment Bill that is the sort of legislation that is driving business confidence low, and it will drive it lower. This country needs foreign investment. A foreigner can’t buy a farm in this country and take it away with them.

💬 Dr Duncan Webb: Is Teddington on the market?

I know Dr Duncan Webb probably thinks they can, but they can’t. Let me tell him; I’ve been around a bit longer than he has and they can’t take it with them. They can perhaps farm it judiciously and make improvements. I think in too many cases, as I pointed out with the very first question I put to the Minister, they’ve bought the land and made the promises that they haven’t fulfilled, and therefore I want to know how this legislation’s going to be enforced.

💬 Hon David Parker: Madam Chair?

The Hon David Carter.

Responding—

CHAIRPERSON (Hon Anne Tolley): —ha, ha! I beg your pardon.

Did you call me “the Hon David Carter”?

CHAIRPERSON (Hon Anne Tolley): No, of course I didn’t—no, of course I didn’t. Ha, ha!

Ha, ha! I’m happy to take a call and respond to the Rt Hon David Carter. In respect of his query about the 99 percent loan at low interest loaned to the farm manager, of course that would be a silly thing for the overseas owner to do, because the increase in equity in the property would belong to the farm manager. If that wasn’t the reality, because the underlying arrangement was that there was some hidden trust arrangement where the farm manager was, effectively, buying it in trust for the overseas person, then that would be in breach of the Act. In respect of the forced marriage situation—a ridiculous suggestion, and if taken to its logical conclusion would mean that we don’t have any overseas investment rules in respect of farms—

💬 Hon David Bennett: We don’t, now.

—because the same sort of thing could happen in respect of a farm. Well, actually, Mr Bennett—the Hon David Bennett—we do have an overseas screening regime already applying to farms.

In respect of the Hon Amy Adams’ queries relating to concerns about the breadth of information-gathering powers, I agree that the Privacy Commissioner’s concerns should be taken seriously. We believe that they have been. The new section 41(1), inserted by clause 24 of the bill, has as a precondition to the information-gathering powers being operable that the regulator has to have “reasonable grounds to believe that it is necessary or desirable” to be getting that information for reasons that have been particularised in new section 41(1A), which was agreed at select committee following the submissions from the Privacy Commissioner. In respect of the amendments the member proposes, it’s hard for me to comment on them, because despite the time that the member has had, they have not yet been tabled in the committee.

Thank you, Madam Chair. I want to concentrate on new sections 61B to 61F, inserted by clause 33A, of this bill, because this, to me, is the part of the bill that the Government would be most happy to remain absent from the public mind. This is the part of the bill that I think the Government is probably quite happy to have not talked about tonight, and that I think deserves thorough scrutiny, and that probably hasn’t had the degree of scrutiny that it deserves, due to the rushed way in which this legislation has been progressed.

If we look to the commentary on this bill, what we are told is that the purpose of this bill is to provide “that overseas investors could only obtain consent to buy residential land” in circumstances that are outlined. Three points are made—that they would be developing the land, that they would be using the land for non-residential purposes, and that they hold an appropriate visa. What is not included in that commentary is what we find in new section 61D, which says that the Minister actually has completely broad discretion to decide that there are circumstances that mean that it’s necessary or appropriate for him to deem an exemption. The Minister is able to do this, and he’s able to provide an exemption, and, in so considering, the Minister “must have regard to the purpose of this Act”, but other than that, all the Minister—he or she—has to consider is that there are “factors that seem to the Minister to be relevant to the circumstances.”

So what we see here in these sections 61B to 61F are what I’d call the “get out clauses”. These are what I’d call the “Shane Jones clauses”. These are the bits that are there that rightly acknowledge that actually in New Zealand there are circumstances in which overseas investment aids the economic growth of our country, that it actually assists people to get jobs and to get better incomes, and that there are circumstances in which we should encourage that investment. But instead of saying, “Let’s lay it out clearly in law. Let’s make that obvious. Let’s have demonstrable regulations.”, what this part of the bill says is “Let’s make sure we give a whole heap of discretion to whoever the Minister of the day is, so that in the dark of their office they can have a quiet chat with a few people and they can decide that there are factors that ‘seem to the Minister to be relevant to the circumstances.’ ”

I would draw your attention to the way in which these sorts of clauses and sections could be abused, by giving you a very recent example. That example is the disgrace of an amendment that was attempted to be brought to this House as a way of exempting a particular property from the application of this legislation. And what, of course, happened with that amendment? Well, it is a moment of integrity for this Parliament that the Speaker rejected that, and said actually that is not the means for which a select committee amendment can used. But, of course, members opposite weren’t too concerned about that, because what they know and what the Minister in the chair knows is that new sections 61B to 61F mean that any Minister of that Government can sit down with some people that they quite like—

💬 Hon Amy Adams: With their cousin, for example?

—like their cousin, or someone that they would like to invest with in the future, or someone that’s a good friend of someone else, or someone that’s been to similar dinners as they have, and they can say, “Hey, look, don’t worry so much about the Overseas Investment Act in your case, because I’ve actually got these powers, and, in fact, Cabinet has powers to set regulations that can exempt whole classes, or can exempt individuals, from the application of this bill. And so we’ll just do it the way we want to do it.”

I worry about this because I am a member of the Regulations Review Committee, and one of the things that we think about is whether we’re giving broad-brush powers that allow people to do things that are outside the will of Parliament. That is why I started this speech by referring you to the commentary, because nowhere in the commentary on this bill does it say that this bill will apply in the circumstances that members were happy to talk about on the election trail, but also wherever the Minister wants to use the Minister’s discretion. So this is very concerning to this committee, and I would ask the Hon David Parker to address to us the sorts of circumstances in which he thinks there might be other factors that seem to be relevant to the circumstances that would mean that an exemption would be granted.

In giving that example, Minister Parker, I would encourage you to think that perhaps that example may have broader application to this economy of ours, that there are others who may want to invest in this economy that would bring broader benefit, and that the discretion shouldn’t just lie with the Minister of the day. The discretion should be laid clearly out in law so that it is of benefit to all New Zealanders, and not just those who have strong relationships with the Government of the day. These sorts of provisions are highly concerning when a piece of legislation is being rushed through Parliament. They should be brought to the attention of the Parliament and should be addressed.

I’ll respond to the issue that’s been raised. It’s deeply ironic that the National Party criticised the fact that the exemption that we were proposing in respect of the lands that have been controversial, the Te Ārai lands, was actually being done by new section 5 in new schedule 1AA, inserted by schedule 1, because we did not want to confer a general regulation-making power of exemption. That’s why—

💬 Hon Amy Adams: No, you’re doing that as well.

No, we haven’t.

💬 Hon Amy Adams: You’re doing that as well—that’s what 61D says.

We haven’t. Well, that’s actually—this is why members should pay attention when they’re on select committee, because this was well—

💬 Hon Amy Adams: Don’t be patronising.

Well, I’m actually not being patronising. I’m actually asking the member to read the bill.

💬 Hon Amy Adams: That’s pretty patronising.

Well, actually, I would have thought that—

💬 Hon Amy Adams: 61C is in there as well as Te Ārai. You know that.

New section 61C—OK, well, the provisions that are already in new sections 61B to 61E in clause 33A, the exemption provisions, are very narrow, and they were deliberately cast to be narrow because we didn’t want a future Government to be able to do what the last Government did, which was, effectively, by changing regulations and letters of direction, enabling further sale of New Zealand rural land when they said that they were going to tighten it up after the Crafar Farms sale. So one of the purposes of this Government was to have a very narrow regulation-making power in respect of future exemptions from the ban on buying existing homes in New Zealand.

Now, I also share the concern that the member Nicola Willis said, that regulation-making powers ought to be constrained. I have sat on a number of occasions on the Regulations Review Committee, and I agree that regulation-making powers ought to be constrained rather than open-ended. In this case, it’s both, for the reason that I don’t think this particular policy, if it goes through with the will of Parliament, should not be able to be undone by regulations of either this Government or any future Government, and so this regulation-making power is already tightly constrained. Supplementary Order Paper 52 in my name tightens it even further. We were advised by Treasury officials that it was already a tight regulation-making power that had to be related to the purposes, which are to restrict overseas ownership of residential land rather than to enable it, but notwithstanding that, the Government thought we should be even tighter than that.

I would refer the member to page 3 of Supplementary Order Paper 52 in my name, which inserts new section 61BA, “Purpose of exemptions”. This actually goes to the very issue that Nicola Willis has spoken to, and it says that “The purpose of sections 61B and 61C”—which were the clauses the member complained about—“is to—(a) provide flexibility where compliance with this Act is impractical, inefficient, or unduly burdensome but where the purpose of this Act can still be substantially achieved through the terms and conditions of the exemption”. It’s very narrow. The other exemptions are in (b), to “allow for exemptions that are minor or technical;” or (c), to allow for exemptions in respect of two matters: land that’s to be used for diplomatic or consular purposes—so, embassies—and then the other one is for registered charities.

Then there are some other minor ones that are listed also. I’ll read these out for the sake of complexion. This is 61BA(c)(iii) through (vi): “(iii) minor increases in the ultimate ownership and control [of an] overseas [person] if consent has already been granted for [that] overseas [person] to own or control sensitive assets:”—so, for example, if they owned an overseas company, or a company was 29 percent overseas owned and it lifted the shareholding to 32 percent owned, then that wouldn’t require a separate consent; their existing consent could stand—“(iv) security arrangements that are entered into in the ordinary course of business:”—that’s not the sorts of security arrangements that the Rt Hon David Carter has referred to, but the banking industry was concerned that we make sure that we didn’t have mortgages and things caught up in the Act—“(v) relationship property as defined in section 8 of the Property (Relationships) Act” and “(vi) interests in land acquired for the purpose of providing network utility services.”

Those are the only instances where the regulation-making power can be utilised, and it is very narrow. So any future Government that wants to undo this—assuming that Parliament passes it—will have to come back to this House and actually convince the members of Parliament of this House, and front up to the public in New Zealand, in respect of any attempt to undo this legislation.

Thank you, Madam Chair—excellent choice. I also want to address new sections 61B to 61E, inserted by clause 33A, but I’d like to first respond to Minister David Parker’s point about his Supplementary Order Paper (SOP) 52. I think we’re seeing this too often with the bills coming before the House from this Government, where they haven’t done the work before the bills are drafted, and then we end up with an SOP that the Finance and Expenditure Committee didn’t have an opportunity to actually examine and explore, all because the work wasn’t done in the beginning. We’ve got the Canterbury Earthquakes Insurance Tribunal Bill as a great example where, in fact, the officials are very critical, because there wasn’t any consultation done, and the bill’s very badly flawed. I think we’re in the same position here.

Why are we rushing on this? Now, I accept that the TPP—apparently there’s another couple of initials—

💬 Hon Member: CPTPP.

No, the TPP it is, and everything that it all started out to be, apart from a couple of initials that went in in the beginning—that is not a good enough excuse. There could’ve been more work done, and there should’ve been more work done, and the select committee process should’ve been delayed to look at that. I don’t actually believe that it will achieve what the Minister has just said. I still believe that we have, essentially, a “Henry VIII” clause in here for the Minister to do some sort of a deal that is not out there for people to see. So I don’t agree with that.

What is driving this is this headlong rush towards getting some forestry in there, and that’s why these carve-outs have come in—and not very well-thought-out carve-outs. It was very interesting in select committee two weeks ago, when Ian Proudfoot, who is the global head for KPMG on agriculture, came along to the Primary Production Committee and he said—and I think I might not get the quote exactly right—something like, “The last thing we want is another central North Island forest, because it kills rural communities.” Yet that is exactly what they’re aiming to do.

Now, we heard the Minister on his feet today extolling how many jobs they were going to get. That is one side of the equation. We like double-entry accounting here, so what are the job losses? They’ll be significantly more than that. On top of that issue, we have the issue of, particularly, pine forests acidifying the land. Nothing grows underneath the pine trees. So we’ve got all these issues—quite significant environmental issues—because of this headlong rush into this forestry which is ill-thought-out.

I can give you an example of where that goes wrong. In my electorate some years ago, the old Forest Service and the catchment board saw the great wisdom of forestry, and they got up in an aircraft and spread pine tree seeds out the door of the aircraft.

💬 Hon David Bennett: No way!

They did—all over conservation land, or what went on to be conservation land, which is now infesting private property. That is making impenetrable pine forest, choking out all the native vegetation, completely changing the landscape, spoiling the landscape value for trampers because they can’t get through it—all these sorts of things because of an ill-thought-out policy that has really far-reaching consequences, way beyond the today. When we’re talking about forestry, we are talking at least a 25- to 30-year rotation, so we have to think about what’s going to happen in that sort of a time-scale. Then to have something with that sort of time horizon, that we can’t have the select committee extend their time a little bit to consider a very substantial SOP that has far-reaching consequences, is unbelievable and it’s really poor process. I think we as a country deserve far better than that.

I know the select committee were frustrated—at least half of them were; the other ones were doing as they were told—but I think that we deserve better than that in this country. We’ve put a lot of money and effort into getting our country moving in the right direction, and on one Minister’s folly we’re going to wind it back many years, with far-reaching environmental consequences. I think that is a huge shame for New Zealand, so shame on the Minister, shame on the Minister from New Zealand First. I think that rural New Zealand, provincial New Zealand, is far more intelligent than that. They don’t like this one bit.

The irony of that speech is it’s complaining that the screening regime in respect of forestry is now too loose. If this amendment legislation was not passed, there would be no effective screening regime for forestry. That was discussed with the select committee—

💬 Hon Amy Adams: No, that’s not true—completely untrue.

—and has been discussed in the House. It is absolutely true, because unless this legislation passes, forest registration rights are not within the screening regime. Any forest can be purchased, whether it’s a freehold, leasehold estate. It can also be transferred, for multiple rotations, as a forestry registration right. Therefore, if forest registration rights were not included, effectively, there was no right not just of this Government but of subsequent Governments to control it. Because the Government is doing this, a future Government can change those rules. They can loosen them, they can tighten them. If this change was not made, New Zealand would have, in effect, lost the ability to control overseas investment in our forests.

In respect of the amendment that the Hon Amy Adams made reference to her intention to put to the House, it now has been submitted. It says, “Delete clause 24(2)”. The Labour Party and the other Government parties will not be supporting that amendment, for the reasons that the Rt Hon David Carter alluded to earlier: there is a problem in New Zealand with monitoring compliance with overseas investments, where investors promise to do things and haven’t. One of the things that is needed is more information-gathering powers on the part of the regulator to check whether they have. That is the reason, or one of the reasons, why we are making the amendments to the Act, in clause 24, and if we were to go back and agree to the Hon Amy Adam’s amendment, we would be removing those provisions that are necessary to improve the information-gathering powers of the Overseas Investment Office.

Thank you, Madam Chair—so many issues to talk about. I just want to respond on that issue around the forestry. Whilst I don’t really want to focus on that, the issue is: why would you want a New Zealand industry that’s already 72 percent owned by foreigners to be able to get bigger—100 percent? I just do not understand that rationale. I don’t think the Minister has properly addressed that issue in its totality.

The other thing I want to return to is my colleague the Rt Hon David Carter—a very insightful man, I have to say. I think you brushed aside his example, which was the case of a foreigner who works with a farm manager, gives him 1 percent, and then, basically, controls the farm manager. Of course, the Minister said, “Oh, well, that won’t work, and there are plenty of rules.” Well, actually, I don’t think it actually needs to be 99 percent; it only needs to be 75 percent—i.e., the foreigner could own 24.9 percent. But if you were a smart commercial lawyer—and I know there are some frustrated lawyers in this House. I know there are some people who were smart and might be smart, but we need good commercial lawyers, and, unfortunately, not many of those are in Christchurch.

But the issue I want to raise is that if you wanted to be smart—to answer David Carter’s question—what you might do is you would structure the affairs with that farm manager where you might have two different classes of shares with different entitlements. You might have different powers around the directors—one of which the foreigner might own—which would say that his or her right is to have a veto right. Therefore, effectively, by a negative arrangement, they could actually still control what the activities of that business are, and there would be rights around the dividends.

To actually deal with the equity issue that the Minister raised, which is “Why would you do that? It’s a rather silly commercial arrangement.”, what you would do is you would have a bullet payment at the end of the term of the lease or the property arrangement or the partnership or the company—at which point the foreigner would get full value, and at which point he or she would need to sell it—thereby, still capturing the upside. Now, if there were smart lawyers like Dr Duncan Webb, who, if he had actually thought about this for more than five minutes, might have come up with the answer—and I don’t think the Minister has actually properly thought it through. I think that was a very valid scenario that the Rt Hon David Carter put up.

💬 Rt Hon David Carter: Well, he said there’d be no equity because the prices are going to decline, anyway.

Oh well, they’re going down. We haven’t heard about the reduction in the price that he wants in farmland and residential land, and I really would like to hear that figure, because I think many New Zealanders would also like to know what the value of their land or home is when they’ve got a mortgage on it. I think that’s an important aspect.

Now, what I really wanted to talk about was new section—[Interruption] I know. There are so many things in this bill.

💬 Hon Amy Adams: You’re just warming up.

I know—I’m just warming up. Of course, new section 51A, under the subheading “Statement relating to compliance with consent requirement”—and it’s a bit of a theme. The Hon Amy Adams was talking about it, and the Rt Hon David Carter, and I’m sure Mr Bennett’s going to talk about this. This is the issue about compliance. I’ve got to say that the last time I spoke on this bill, right at the close of play last week, I was cut off at the pass, because—

💬 Hon David Bennett: No way!

I was, and I was very disappointed, because we were talking about the Overseas Investment Office (OIO).

As people have noted, we asked the OIO what were their resourcing. We heard that at the moment, they process a few hundred OIO requests a year—and, of course, quite rightly so. In general, I think they do a very good job. But the missing figure that I just couldn’t say last time was that when we asked the OIO about this, they said that their estimation, and it could be much higher, was 4,000 consents a year—4,000 OIO consents that they are going to have to review every year.

Of course, what new section 51A deals with is the requirement for the foreigner to make a statement. We had a long conversation on this because one of the issues was who should be making that statement and whose responsibility was it to make that statement. When the bill first got introduced by the Minister, it placed the obligation on the conveyancer. Of course, we all know what a conveyancer is. It means a lawyer or conveyancer under the Lawyers and Conveyancers Act 2006.

Madam Chair, Madam Chair, Madam Chair.

CHAIRPERSON (Hon Anne Tolley): I haven’t rung the bell yet. [Bell rung] Andrew Bayly.

Thank you, Madam Chair. So what this new section 51A requires is, in effect, that a foreigner acquiring an interest in residential land must make a return, and that interest is defined as “a freehold estate or a lease, or any other interest, for a term of 3 years or more (including rights of renewal,”. Of course, what the foreigner must do is actually write a statement to the best of their knowledge and belief saying that they have met the requirements of new section 51A and also whether, in fact, they are acting on behalf of someone else. So we’ve got nominees—we might have foreigners acting on behalf of other foreigners. So that’s all captured under new section 51A(2), and, on the face of it, that looks fine.

Of course, the question then becomes: who lodges it? That’s covered under new section 51A(5), which states that the foreigner “must, before the instrument is lodged, provide the statement, or a copy of the statement, to the conveyancer who will lodge, or direct the lodgement of, the instrument.” So, of course, by implication, the foreigner can’t make that lodgment, but a conveyancer must. Of course, this is where some of the issues start to arise, because in the context of what I was talking about there and the number of consents—4,000 consents—there is the potential for the foreigner and the conveyancer to misinterpret the rules and, secondly, what it means for the OIO, such as whether, in fact, they know it’s been done, whether it’s been done in the prescribed period of time, and all those sorts of issues.

One of the clauses states that if you don’t do it on time, there’s a $20,000 fee, which sounds quite reasonable on the face of it. But when you’re talking about large chunks of money with large values of land, in the scheme of things, $20,000 is actually a very small fine. In fact, you might take that as part of the business cost of doing this.

The requirement is that they will have to sell the land at some point in time, but the issue I’ve got is how do we make sure that those obligations are met in a timely way, how does the OIO go about doing that, and, of course, there is the resourcing around that and the cost relating to that. We started to talk about the cost that the OIO might have to incur with the additional people, and I’d really like to hear from the Minister what is the estimate of the number of new people that the OIO will have to employ to meet these requirements, because, if we are talking about substantial numbers already doing the few hundred consents at the moment, we are talking about millions and millions of dollars of compliance costs. So that’s just on the first period when the first consent is sought.

The other thing that came out of the Finance and Expenditure Committee was what happens in subsequent rollovers after three years, and how does the OIO go about following those? So if you are having 4,000 transactions a year, quickly, within four years, you’d get to 16,000, and, obviously, it cascades and goes beyond that. The issue is how the whole process is to be managed in a proper manner so that we can make sure that, in fact—if it is the real intent of the Government to make sure that they’ve got some control over it—it is adequately resourced and it actually complies with the bill. I think these are issues that I’d very much like to hear from the Minister on.

The other issue round this whole thing is the rules around the regulator requesting the disposal of property. This is covered in new section 41E—and I know some of my colleagues may have traversed this—and this is the requirement to enforce those conditions. I think that when you’re talking about people who are very sophisticated about the way they’re investing, it’s very important that we have clarity around those provisions and that they are brought to bear quickly at the time that they need to be applied, because otherwise—again, I’d just make the point—even under new section 41E, we’re going to see some potential for these transactions to still slip through underneath the radar and not actually comply with this legislation.

I think that these are fundamental issues which I haven’t heard the Minister speak about. I am dying to hear the Minister talk about it—

💬 Hon Amy Adams: Oh, don’t die—that’d be a shame.

—in a figurative sense—because this is essential to this piece of legislation and whether, in fact, it’s going to work.

I am going to give the call to the Hon Amy Adams, but before I do, can I just make the point that where there is a case for members who have, for one reason or another, limited mobility—and I am conscious that we have a couple of walking wounded as a result of the Parliamentary Netball Team at the moment—it is perfectly in order, where you are having difficulty getting to your feet quickly enough, to gain the attention of the Chair in some way or another.

💬 Hon Amy Adams: Wave my crutch!

CHAIRPERSON (Hon Anne Tolley): Well, I don’t want it going—you could, as the member has done, send the Chair a note. But it is perfectly reasonable.

Thank you, Madam Chair, and I appreciate your forbearance. I have to tell you that the effort of leaping up and down as my colleagues all fought for the call was getting somewhat distressing to me, so I thank you for your guidance and your forbearance.

I want to come back to the issue I raised earlier around information gathering, and respond to the Minister’s response. He has dismissed the amendment that I’ve put on the Table on the basis that he says that it’s important the Overseas Investment Office has the ability to ensure compliance of overseas investors with the terms of their consent. And I’ve got no problem with that; I agree with the Minister. Of course it’s important that an overseas investor, where conditions have been imposed—New Zealand should have a way of checking that those conditions are complied with and enforcing them if they aren’t. That is not the point that I was raising, and that is not the point that the Privacy Commissioner was raising.

The point that I’ve raised in my earlier call, and that my amendment addresses, and that the Privacy Commissioner raised—which, with respect, Mr Parker, has not been fully addressed by the Finance and Expenditure Committee—is that the bill doesn’t limit itself to checking compliance with conditions by overseas investors. What it does is enable information gathering that, effectively, can extend across any property transaction in New Zealand. And that is why I have suggested, as the Privacy Commissioner did, that section 41 in clause 24 of the bill reverts to its original drafting, and that’s what my amendment does.

So simply saying “Well, we need it so that overseas investors can be held to account.” is, frankly, an absurd response in that that is not the issue. That is already possible under certainly the opinion of the Privacy Commissioner, and certainly it would be extremely surprising if that weren’t the case in the core Act. The issue is why the information-gathering powers now extend to non-overseas investors, to transactions that don’t include an overseas investor. And if the Minister is indicating a willingness to revise section 41 to make it clear that those powers only apply to an overseas investor and in respect of a transaction that the Overseas Investment Office has approved or in some way dealt with, then I would welcome that amendment, but right now that is not the crafting and the framing of those clauses that I’ve referred to.

In a similar vein, if you look at the very last clause of Part 3 before we get into the schedules, clause 35—and this is a related point, but I accept that I’m outside the scope of my amendment, at least for now—that one deals with amendments to the Fisheries Act. Now, it’s a consequential amendment, but it’s interesting because the one change it makes is to replace the term—and, again, relating to information gathering—“monitoring” with “information-gathering”. That’s the very point I’m making, that the information-gathering powers have now gone beyond monitoring compliance and detecting offences to information gathering over the whole sector.

So, Mr Parker, I’m sorry. Your response that this is necessary for enforcement and compliance simply doesn’t stack up in light of the wording of your own bill, which I have certainly read and hope you have, and it certainly doesn’t stack up with the advice to the committee from the Privacy Commissioner. Now, his advice to the committee was very clearly that section 41 should revert to the original drafting in the primary legislation. It does not do that. The bill we’re debating right now adds in a newly expanded section 41, and my amendment puts to the House that that is not warranted, it has not been justified, and it is not sufficiently constrained.

Now, Mr Parker, taking to your feet and simply saying “Well, we need it for compliance.” when that is the whole point—that it goes beyond that—is not a response. Now, I would ask the Minister in the chair to either tell us why the power now entitles information gathering across all property transactions or agree to constrain it to circumstances that the Minister himself described, which are circumstances involving ensuring compliance of an overseas investor with their conditions, because this side of the Chamber would have no difficulty with that. But if this debate is going to be meaningful and if the Minister is to have any respect at all in terms of his bona fides in this debate, he will address it on its merits and not refer to some fatuous response that doesn’t deal with the point being made and with the criticisms of the Privacy Commissioner.

I would like to think that he would have read the Privacy Commissioner’s concerns, given his somewhat unfair attack on me earlier in his response, and if he has, he will know that that’s exactly what the Privacy Commissioner said: don’t make section 41 wider, limit it to what’s currently in the Act. What’s already in the Act is very broad and enables detection. I can see from the words that that’s not what’s there.

I move, That the question be now put.

Thank you, Madam Chair. It’s great to be able to speak on this bill, and I’d like the Minister to respond to my comments. I fear he won’t respond, because he’s only responded to issues which he feels he can bat away, and he’s left all the hard questions outside of the ambit of his response. My question is: why is the New Zealand First and Labour Government now selling our land overseas? During the election campaign, it was very obvious they made an issue about land sales and said that no more land should be sold overseas. That was their whole campaign. In fact, a whole political party is based on that, being the New Zealand First Party. And here we come to this legislation here tonight.

This legislation gives an exemption to land sales going through the Overseas Investment Office if it’s for forestry. So outside there, in the public, if anyone’s listening, if there is a purchase of land that is less than a thousand hectares—that means the best land in New Zealand, because it’s in smaller blocks and smaller farms—it’s now got the easy run for an overseas investor. Previously, those overseas investors had to show that they were adding value to that property, that they were going to turn it into something different, that they were going to add a new industry, employ people, invest in that property. Now all they have to do is say “I’m going to put it in forestry.” and they don’t have to worry about improving anything. I can’t understand why the New Zealand First - Labour Government is allowing that to happen, other than the fact that they need to satisfy their promise for more trees.

But it gets worse. The New Zealand Government will, in fact, be paying that overseas investor to buy that land. So for all those people listening, what this bill does is because they’re going into forestry, they will now get those forestry credits and deals that the Minister has given through the Primary Growth Partnership fund, through the regional fund that they are looking at. Their regional fund will enable overseas investors to get paid for investing in forestry. So the Labour - New Zealand First Government that was against sales to overseas people is now paying overseas people to come in and invest and buy land, and they don’t have to meet the criteria they would have had to in the past. That’s the question I want the Minister to answer: is that true, that scenario, or not? Can a foreign investor come over here and now get an easier ride than they would have had before as long as it’s forestry land, and potentially could that person also get paid to do that?

Then it gets worse. We will never know how much they are getting paid. Under the regional growth fund, those kinds of conditions of those contracts are commercial realities that can’t be disclosed at any point or in any form. Under this legislation, the confidentiality clauses in Part 3 will mean that those investors won’t have that information put to the public. In the past, if you had been an overseas investor, that investor would have had to prove in a public form what added value they were going to do to the property. Now that overseas investor gets a free ride, gets paid by the New Zealand Government to do it, and nobody will ever know how much they get paid, apart from a couple of Ministers that are sitting in the chair that signed it off. That is a disgrace to the New Zealand public and it is selling New Zealand down the drain. It is selling New Zealand land for nothing—in fact, giving the people that are going to buy that land a freebie. That makes no sense, and that is exactly the hypocrisy that we see in this Parliament time and time again through these forestry deals that they have to make to ensure they can meet that promise and that commitment.

I say to David Parker, the Minister: don’t stand for that. As Minister, I know there are coalition deals that have to be done, and I know that you’ve signed this with Winston Peters, but, as Minister, in your heart of hearts you know this is wrong. You know that you’re actually paying for overseas investors to come here, take our best land, not have to prove what they’re going to do, and at the same time potentially get a return on that. And I bet you he doesn’t get up and answer that straight. He won’t answer that straight. He won’t do that. He’ll tell you a lot of waffle. He’ll tell you “Oh, that’s wrong.” and that, but he won’t answer it straight.

I’m very happy to respond to that. There is nothing in this bill about paying overseas people to buy or be subsidised to buy land; so I’m not sure where the Hon David Bennett gets that in this committee stage of the debate.

There is still this continuing misunderstanding which was displayed not just by the Hon David Bennett but also by Andrew Bayly. Andrew Bayly asked why, with 72 percent overseas ownership of forestry land—and he’s right with that statistic—would we want to have more. Well, actually, a future Government may not want to have more. Unless this law is passed, a future Government will not, in effect, be able to control overseas investment of New Zealand forest land, because, as I have said previously, and to which no one has been able to disagree with, any forest in New Zealand can be sold as a forest registration right for multiple rotations, for 100 years. And, unless that loophole in the legislation is plugged before CPTPP comes into effect—and the last Government wasn’t going to plug it but we are—New Zealand would have an ineffective screening regime in respect of forestry assets.

In respect of the Hon Amy Adams’ point, we do need information-gathering powers that are broader than monitoring of consent conditions. We need to be able to police the regime as other members have said, including checking whether people are trying to avoid the obligations in respect of residential land. That’s why the balance has been struck as set out in clause 24 of the bill. And I repeat: we won’t be supporting the member’s Supplementary Order Paper.

Thank you, Madam Chair. I’d like to turn the attention of the committee to the part of the bill, within Part 3, obviously, which we’re discussing, in relation to the serving of notices or documents. The significance of this little part of the bill—or the part within the part—is, of course, that notifications to consent holders, and so on, are very important for the purpose of notifying where something might have been done wrong, to put it rather bluntly—for example, conditions within a consent might not have been met, and so forth. So it is a significant area of the bill, notwithstanding that it’s somewhat technical in its nature, and I would ask for your forbearance as I take you through, Madam Chair, and those others listening, a few points that are quite significant in relation to how those notices and documents are to be served.

First, it’s section 54, as it will be, set out in clause 32: we see the address for service specifies that a postal or street address in New Zealand must be given, but later on, in section 54A, we see that it’s, in fact, acceptable to serve notices by electronic means. So it seems to me sensible, and perhaps the Minister has a view on this himself, that, actually, as an alternative to a postal address or a street address in New Zealand, simply the provision of an electronic address—for example, an email address—might be just as acceptable. If I were to reach into the not so distant past, I could almost suggest a facsimile or some other means, but I think an email address would be pretty sufficient for those purposes.

By providing that clear ability to serve notices in an electronic fashion, we would be able to get around some of the difficulties that are set out in section 54A, whereby it’s not always clear where the documents have been served; whereas, by email, that’s much easier to evidence. In terms of the delivery and, indeed the receipt, the service of the document is generally faster—invariably faster, in fact—and it doesn’t require someone to be waiting by the postbox anxiously for the service of a notice at any given time. In the case of someone who might be from overseas, for reasons that my colleagues—in fact, members on both sides of the Chamber—have outlined, that might well be the case in certain situations, forestry or other, and that being so, to provide a means for service of documents electronically would actually be useful in that sort of transnational or, indeed, overseas buyer kind of a way.

A further small anomaly and, again, I would be grateful if the Minister were to address it, is that in section 54A(1)(b)(i) we’ve got a situation where a lawyer or conveyancer who’s provided services to that person, defined as person A, can receive the documents satisfactorily. But I don’t know why it would be that a lawyer for that person in general—for example, someone who has received instructions more recently—could not receive those documents or those notices as well. And I draw the attention of the committee to subsection (4), which states that the section would apply “despite any other rule or law.”, which is a pretty brave statement, I think, in the sense that it displaces the usual notion that an agent can be exactly as implied by the term “agent”; that is to say, someone who is acting on behalf of the person—in this case, the landowner or the would-be landowner—for the purpose of receiving those notices.

So with these slight anomalies, I would encourage the Minister to take a call on that and, in particular, further to those points that I’ve made with regard to subsection (1)(b)(iv), again within section 54A, talking about the fact that an agent in New Zealand can only be the official recipient of a notice if A “is absent from New Zealand,”. But, of course, if A is a person who is still in New Zealand but nevertheless would rather that an agent receives the documents, then there seems to be absolutely no reason that the agent couldn’t stand in the place of that person. And it might be, for example, that the person A doesn’t have good English language skills—perhaps if they’re an overseas person or a member of Parliament—and, for that reason, I think there’s a number of little clarifications that might be usefully advised by the Minister, perhaps, in conjunction with his officials, who, no doubt, are very familiar with the construction of this particular part of the bill.

I move, That the question be now put.