Venture Capital Fund Bill

Thank you, Mr Chairman. I’ll just take a short call just to signal that the National Party will be supporting the bill. We think that we have very much at the moment quite an economy that is slowing. We’ve seen business investment’s fallen from 5 percent to 0.6 percent, job growth’s fallen from 10,000 new jobs a month to 3,000, we’ve got 22,000 more people now on the unemployment benefit, and we have a per person GDP growth which has fallen to just 0.5 percent. It is clearly a situation where we can actually support a bill that is designed to try and encourage a venture capital fund and encourage investment.

We understand that economic growth is the surest way to prosperity, by lifting living standards in New Zealand. It is also quite clearly the surest way to promote good environmental outcomes, because what we see in the world is the countries that have the most money to spend on cleaning up waterways are the countries that have more money than those that don’t. We recognise the need for greater development of venture capital funding in New Zealand’s capital markets.

There is one thing that we can agree with the Government on, and that is that we don’t have enough capital in this country. We are concerned, of course, that the Government has not been able to encourage investment in the way that they should have been. In fact, in some areas, such as in housing and particularly in having apartment buildings actually being built, it has discouraged investment so much that earlier in their term they needed to actually do a quick reverse so that some apartment buildings that were part-built could actually be completed.

What we know is that New Zealanders are great innovators, but the number eight wire mentality of which we are so proud, and inordinately proud, is also a recognition not only of our physical distance from the rest of the world, but also of our distance in terms of access to large amounts of capital and, in many cases, the means to retain in New Zealand the best and brightest, who can help to grow the economy and help to grow science, for instance. So this is something that we believe is useful and that will go some way to assisting the situation that the country finds itself in, with lower business investment confidence and also more people now, unfortunately, not in work, and on benefits.

So it is a bill that we think is a useful thing. It’s one of the only policy papers that we can see from Budget 2019 that is actually pro-growth, and on that basis, we will be supporting it.

Thank you, Mr Chair. It is nice to be speaking on the Venture Capital Fund Bill. Gee, don’t we need something like this? When you think about what’s happening in the economy, we’ve got a GDP of 2.1 percent at the moment, compared to 3.2 percent a year ago. So measures like this are desperately needed in New Zealand to try and stimulate this economy and try and help those innovative New Zealanders to get under way to actually put some money and their time at risk and actually go and do something and try and create more value and more jobs for New Zealanders. So on that basis, we largely do support this bill.

Of course, the Finance and Expenditure Committee has considered a number of these aspects. I think the first one, in clause 24, expanded the role or the purpose of the Venture Capital Fund to make sure that there is an element of making sure that it’s a self-sustaining market, where not only does the Government have to put up money—which is what this bill enables—but it also tries to involve the private sector so we get a much more cohesive and viable and sustainable venture capital industry in New Zealand. I think having that as a purpose is very, very important.

There are a couple of areas that we had a lot of debate on, and I think one of the areas that we’re a little bit concerned about is reflected in clause 32, and it’s also reflected in clause 56. This is where ministerial oversight of this entity, which is now going to be run, obviously, through the Superannuation Fund—one clause is giving the Minister power to direct the Guardians of New Zealand Superannuation to report on matters in its annual report. Specifically starting to interpose ministerial right over the way that the guardians actually operate and report is something that we think we have some concerns about. That’s further provided for in clause 56(1)(h), where the Minister can now direct the guardians to give regard to the Government’s commitment to a more inclusive economy.

So here we are, we’re talking about the cutting edge of creating new businesses, the time when they’re most risky—this is dealing with the valley of death, as it’s termed in investment circles—and we’ve got a Minister being able to now interpose some additional requirements on it and, particularly, have regard for wider economic considerations. This, I think, is a mistake. We need to support this industry. We need to be razor-sharp in our focus, and I think all this is doing is providing a whole lot of gobbledegook for what should otherwise be a very clear purpose, which is to support these nascent companies to grow and be successful and create jobs, as I spoke of before.

The other element that we’re very concerned about, and we kept asking the officials about, is that here is a fund being created of, roughly, $300 million and there is absolutely no purpose or measurement of results as to what this fund will achieve. Given that we’re talking about a $300 million investment, to actually have no target for return on investment for a venture capital fund is very, very unusual. In fact, I’m not sure that there are any funds around the world, whether it’s a private equity fund or whether it’s a venture capital fund, that will not have a targeted rate of return.

I think this is another example of a Government not wanting to measure things. We’ve seen it in a whole host of other activities, whether it’s health targets, where we’ve seen the degradation and removal of those types of targets, or social outcomes. Here is another example of setting up and spending $300 million and not being prepared to put a measurement on what should be the target return from these. We’ve got issues like recycling of capital, which is all very good, but unless you have a financial measure as well as an outcome in terms of jobs, etc., you will never know whether the $300 million that’s been provided for in this bill is actually going to be successful and create the jobs that we want in the future. Personally, I think that’s a real mistake and it just highlights, again, the lack of commercial nous from the Government in terms of dealing with these types of investment products, where they don’t have much understanding at all.

The question was put that the amendments set out on Supplementary Order Paper 416 in the name of the Hon David Parker be agreed to.

Amendments agreed to.

Parts 1 and 2, Schedules 1 and 2, and clauses 1 and 2 as amended agreed to.

The committee divided the bill into the New Zealand Superannuation and Retirement Income Amendment Bill and the Venture Capital Fund Bill, pursuant to Supplementary Order Paper 414.

House resumed.

The Chairperson reported the Venture Capital Fund Bill with amendment.

Report adopted.