Estimates Debate — Finance and Government Administration Sector

Members, I understand that responsible Ministers are available to speak to the Votes in the finance and government administration sector volume (B.5, Volume 5). I also understand that the Speaker will be available, should members wish to respond to any question relating to any of the Votes under his responsibility, and if members would kindly advise the Chair so that I can invite the Speaker to join us, that would be appreciated.

The question is that Vote Audit, Vote Communications Security and Intelligence, Vote Finance, Vote Internal Affairs, Vote Office of the Clerk, Vote Ombudsmen, Vote Parliamentary Service, Vote Prime Minister and Cabinet, Vote Revenue, Vote Security Intelligence, Vote State Services, and Vote Statistics stand part of the Schedules.

Thank you, Madam Chair. We are living in extraordinary times, which requires an extraordinary response. We have had an extraordinary health response in this country, and on the back of that extraordinary health response, which has been so successful, we are now building an economic response to the extraordinary times. That was the story that we heard in the Estimates hearings in the Finance and Expenditure Committee.

We went into lockdown on 25 March, and at that stage, the Government had been engaged in making Budget decisions—making Budget decisions for ordinary times. But in that time, in an extraordinary time, the Government had to move very quickly to make different decisions. It was those different decisions that we examined in the Estimates hearings. We heard about the Budget Economic and Fiscal Update. In terms of the Budget Economic and Fiscal Update, we heard some worrying news that because of COVID-19, there would be a fall in GDP, there would be a rise in unemployment, and there would be a contraction in the economy. At that time, according to the Budget Economic and Fiscal Update when it was printed, unemployment was predicted to rise to 8.3 percent, and perhaps peaking at 9.8 percent in September 2020.

As it turned out, by the time we actually had the hearings—so between the time when the Budget Economic and Fiscal Update was promulgated and we actually spoke to Treasury and to the Minister—we heard, in fact, that we were doing a little bit better than had been feared; that jobseeker benefit numbers weren’t as high as had been forecast; that a peak of 8 percent unemployment might be the most likely scenario; and that, in fact, because of our extraordinary health response, our economic response, economic conditions would now be better.

We heard from the Minister that part of the reason that we were looking better was because our economic response was focused on people; that we were committed to, in a simple word, jobs, jobs, jobs, keeping people in employment, keeping people in touch with employment, and keeping businesses going. So the wage subsidy was used, first of all, to keep people in employment, and it was used as a way of supporting businesses. For small businesses, some of the most difficult bills to meet are the wages, and, following that, other expenses. By helping small businesses to meet their wages expense, we helped them to stay in business.

Some of the programmes we heard about are quite interesting in that they also help people to stay in employment. The school lunch scheme, which we discussed in relation to Flaxmere—it was an example that the Minister gave us—obviously provides healthy food to children in schools, but it also provides an employment opportunity in the regions, an employment opportunity that helps people to stay in contact with their jobs.

We heard that Māori would be disproportionately affected by the virus, by the pandemic, and recognising this concern, the Budget allocated $900 million to Māori economic development in order to ensure that Māori in particular are served by the Budget.

We heard from the Minister of Revenue about the small business loan scheme, a loan scheme the objective of which was to get cash into businesses quickly. It was quite a straightforward and simple scheme; people could access it very quickly. At the time that we heard from the Minister of Revenue, about $1.4 billion had been rolled out for the small business loan scheme. About 85 businesses have accessed it, and about $16,500 per business. The whole objective there was to keep businesses going.

This is an extraordinary Budget, but what it is is a Budget that is supporting people, it is supporting jobs, it is supporting the economy. It is a responsible Budget; it is a focused Budget. Above all, this Budget, and the things that are being done in Vote Finance and Vote Revenue, show that this is a Government that can be trusted with the economy and is trusted with the economy. It is a Government that is doing extraordinarily well because it is focused on people—a responsible, grown-up, mature Budget for extraordinary times. I commend it to the House.

As chair of the Governance and Administration Committee, I’m here to briefly summarise the main findings of the portfolios under the select committee. Now, the committee has a wide range of portfolios, including Vote Internal Affairs, Vote Statistics, Vote Parliamentary Service, Vote Office of the Clerk, Vote Prime Minister and Cabinet, Vote Ombudsmen, and Vote State Services.

Now, in addition to this, a total of seven Ministers are responsible for appropriations in Vote Internal Affairs. The appropriations for these Votes largely remain steady. Vote Statistics appropriations for 2020-2021 increased by $41.2 million. The increase is mainly to boost funding for the next census, which will take place in 2023. Appropriations for Vote Ombudsmen also increased substantially. The proposed increase of 33 percent reflects the expanding monetary role of the Office of the Ombudsmen.

A common feature for all these Votes is the impact of the COVID-19 pandemic. While the pandemic has had some net impact on the progress of a number of programmes and projects, it has exacerbated digital services in many Votes. The Votes also made various contributions in the Government’s response to the pandemic.

The committee discussed issues of interest in each Vote. In Vote State Services, the committee spent quite some time on the Public Service’s response to COVID-19. We were told that there is an expectation that each agency will review its performance.

In Vote Internal Affairs, the committee discussed a range of issues, including the three waters reform and the fire and emergency levy, which has increased by 40 percent.

In Vote Statistics, the committee discussed the lessons learnt from Census 2018. The five-yearly census is the flagship of New Zealand’s official statistics system. A major problem with the 2018 census was the very poor response rate for Māori, Pasifika, and other populations that were hard to reach online. The Government’s response to this issue is to fund an engagement strategy to work with various stakeholders and fund many more staff in the field. Census 2018 reviewed a number of gaps in the Government’s overall data systems. Examples are data about iwi affiliation and use of Te Reo Māori. We were told that a data investment plan was being developed by the Government data system. Now, it would be good if the Minister could give us the time frame for the plan. The next census is just about three years away, so we should maximise this variable in building up our administratory data.

In Vote Office of the Clerk and Vote Parliamentary Service, the committee was particularly interested in issues relating to the two Votes working together, and also we looked at the Francis review, parliamentary accommodation, and security and other issues.

In Vote Prime Minister and Cabinet, the committee focused on the Department of Prime Minister and Cabinet’s response, or involvement in responding, to the COVID-19 pandemic. The day before our hearing with the department, two new cases of COVID19 were announced—two people who left managed isolation on a compassionate exemption to travel from Auckland to Wellington without being tested for COVID-19. Naturally, we were concerned about this. We were also concerned about other anecdotal evidence of procedures not being followed.

The above is a quick summary of the findings of the Governance and Administration Committee. I’m sure other committee members will make their contributions and ask some questions. Thank you.

Thank you, Madam Chair. So we’re going to start a wide-ranging and detailed debate on the financial policies of this Government and the country and what needs to happen at a time of great peril for New Zealand—

CHAIRPERSON (Hon Ruth Dyson): Or the Estimates.

Focused on the Estimates. When we look at the Estimates, there are billions and billions of dollars being spent by this Government. Three areas that I want to focus on today: jobs, around debt and tax policy, and in infrastructure.

So we start with jobs. We’ve seen—what are we up to?—$13 billion set aside for wage subsidies in an attempt to tide people over. So the question of the day is: who’s got the best policies to create those jobs to get New Zealanders back to work, at a time when we’re losing more jobs than ever in our history? We’ve got, on the one side, a Government which seems to believe that the best approach to get jobs is for the Government to borrow money and buy them. So we’ve seen various schemes—$1.1 billion to hunt possums and plant flax bushes, build pools in Gisborne, and various other projects.

Now, some of that may be well-justified, but our view is that the primary creator of jobs is actually private sector investment. We trust New Zealanders—owners of businesses large and small around the country—to make the judgment that they’re going to risk their money to hire a new person, to expand their business, to take a chance, to start a new enterprise. The best thing Government can do is create an environment where they feel confident to do that. The recipe for that hasn’t changed particularly—it’s about keeping taxes low, it’s about pushing back the tide of regulation, not adding to it, and not changing the rules all the time and allowing investment to flow. So I’d be interested in getting a sense from the Minister about getting his policies around jobs.

Secondly, in the tax and the debt area, the Budget and the Estimates are proposing that we’ll end up borrowing up to $200 billion over the next four years. To put that into context for people tuning into this debate, we know that New Zealand spends about a billion dollars every year on Pharmac to keep us all alive in terms of cancer drugs and all the pharmaceuticals that we need to survive. In the last four months of the financial year, we were borrowing that sum—a billion dollars—roughly every four days. So $1.6 billion a week is how you got to the $28 billion over the last four months of the financial year. It’d be interesting to know how rapidly we’re borrowing right now and what this Government’s plan is to get on top of that debt. It seems to just be spiralling, and a very gradual approach.

So one of the questions is, now that we know that members of this Government, or supporters of this Government—coalition supporters of this Government—believe that tax is love, and presumably they want more love and they want more tax, we want to have a clear idea where the Government stands on that.

Thirdly, in the area of infrastructure—tens of billions of dollars set aside in this Budget, $12 billion at the start of the year for various infrastructure projects, and there’s been a lot of announcements, a lot of press conferences. Shane Jones has got his high-vis on on a number of occasions. Grant Robertson has got his high-vis on on a number of occasions—he’s put his hard hat—

💬 Rt Hon David Carter: Big jacket.

Big jacket. Well, yes, it may be large, but I’m not making any comment on that. But they’ve got their high-vis on, they’ve got their helmets on, and they’ve announced a whole lot of stuff. But I go back to the first announcement of an infrastructure project, right back at the start in February 2018, when Shane Jones went along and said, “The first big announcement for infrastructure is going to be the roundabout down the road from my house in Waipapa.”—that was going to be the first thing. When we asked him why all this money was being spent in Northland under the Provincial Growth Fund, he said, “To the victor goes the spoils.” Surprise, surprise, people were a little bit cynical about the nature of that spending. That cynicism has been compounded in the last couple of months when this Government’s announced all these shovel-ready projects are ready to go, but we’re going to dribble them out as it suits the timing of this Government for the photo opportunities and the high-vis. No doubt I’d like to just hear whether Grant Robertson, the Minister of Finance, shares the view that when it comes to announcing infrastructure projects, the moto should be “To the victor goes the spoils, and we will use this in a nakedly political way”, and I’d hope that he would be able to disabuse us of that view.

I thank the member for his laser-like focus on the report of the Finance and Expenditure Committee on the Estimates for Vote Finance, Fiscal Strategy Report, and the Budget Economic and Fiscal Update. To answer the member’s questions—and, in fact, I’ll start at the infrastructure point and work my way backwards.

No, I don’t support that particular phrasing from Minister Jones. He would be the first to say that, on occasions, some florid phrases come from him, but I do want to at this time acknowledge his work in the infrastructure space. During this term of Government and funded in this Budget is the Infrastructure Commission, which finally is responding to the requests of the business community to have some certainty via a pipeline of work. Similarly, that is what the infrastructure reference group work that’s funded in the Budget was about. It comes on top of the significant investment in infrastructure, including the New Zealand Upgrade Programme and the $12 billion, adding this $3 billion to it, taking in total, I believe, the expenditure over the five-year period that infrastructure and capital gets funded through the Budget to around $50 billion—so significant investments there in infrastructure. I think the member would concede that for New Zealand, we have an infrastructure deficit, and we do as a country need to do better than we have over many decades. Looking ahead, that’s what this Government has tried to do and continues to do with that investment.

In terms of the question around tax and debt and borrowing, yes, like any Minister of Finance, I would rather not be borrowing the sums of money that we are today, but I think the member will also recognise we are facing a one-in-100-year shock to the New Zealand and global economy, and therefore the response to that needs to be proportionate. New Zealand is in a very, very strong position going into this situation because our levels of public debt are so low and the cost of borrowing in the world is incredibly low. As the member will be aware from other exchanges that we’ve had, in actual fact, as a percentage of GDP, the cost of borrowing for New Zealand is about the same in this financial year than it was in 2016-17, when we were borrowing at a considerably lower rate than we are today.

💬 Hon Michael Woodhouse: How long are the rates locked in for?

So those interest rates are predicted, Mr Woodhouse, by most economists to be low for a relatively long time, putting us in the very strong position to be able to manage that.

When it comes to what we do, though—and, obviously, we, in this Budget Economic and Fiscal Update, have the COVID Response and Recovery Fund, a $50 billion envelope of funding, and the Government’s been very clear that we will spend that as is necessary. We won’t borrow it if we don’t need to. We have said that there is $14 billion left on the table from that $50 billion fund. I note that the member has chosen to be a part of a party that is spending that money now on projects that aren’t actually going to deliver jobs for many years to come. I would say to him that if he is concerned about levels of debt, then he should actually be a little bit more careful and perhaps have a word with one or two of his colleagues around not using that as some kind of slush fund for their projects but seeing it as actually our COVID Response and Recovery Fund.

On the member’s first point around jobs, I don’t think it reflects well on the member to talk about the Jobs for Nature Fund in the way that he does. Actually, right around New Zealand, communities are welcoming the fact that, actually, there is an opportunity to not only create jobs but also do some of the really important work in protecting our waterways, in making sure that we get rid of pests in our environment. The member knows, because I’m sure he’s been down there in the Mackenzie Country and elsewhere, hearing from people about the importance of getting rid of wallabies. Finally, we have, actually, an opportunity now to get down there and do that work, create jobs. As the economist Joseph Stiglitz had put it, this is the kind of policy that’s doing double duty. It’s doing something good for the environment and it is creating jobs—up to 11,000 jobs from that package.

I agree with one thing that the member said, though, and that is that it is a partnership between the private sector, the public sector, local government, iwi, and others all putting our shoulder to the wheel and making sure that we’re working together to create jobs and create the environment where those jobs will happen. This is not going to be an easy time. We know that for many New Zealanders, they are doing it tough. What this Budget does and what the report here shows is the Government is doing everything it can to cushion the blow of a one-in-100-year shock.

Thank you, Madam Chair. When it comes to the question of jobs, the Minister may have noticed that the National Party this morning has been talking about enabling people to have access to their KiwiSaver in emergency times such as this if they’ve lost their jobs or if they’ve been made redundant in order to start a new business, and backing them to create their opportunities and create their businesses, and having a go. I’d be interested to see whether he thinks that’s a good idea or not, or whether it’s just a question of Government borrowing money to create temporary jobs.

Also, I’d be interested to know around the question of light rail, so let’s drill into the detail. I’d just be interested to know, for example, how much the Government has so far spent on that light rail project, because it’s not just the money that’s being spent, because this was announced right at the very start as an absolute priority for the Government. They were going to build light rail down Dominion Road. It was never very clear whether it was going to the airport or not—there was some dispute about that—or whether it was rapid transit or a slow train, and there was dispute about that—

CHAIRPERSON (Hon Ruth Dyson): I’m sorry to interrupt the member. It seems the more senior members are, the less able they are to change their—would you mind sitting down; thank you—habits of previous procedures. The House has agreed for both committee stage and this debate that it’ll be more like a conversation with the Minister, a question and answer time. So that’s the first thing. If you could try and narrow your focus. Don’t aim for five minutes—that’s not a target any more in these debates—but also if the member could speak to the appropriations that we’re discussing, that would be icing on the cake.

Thank you, Madam Chair, and I would encourage you to stop the Minister from talking for five minutes in answer as well, and then we’d be all square.

So the question I have, then, is how much has been spent so far on the light rail project, because it has been a big distraction in that whole infrastructure space—we’re talking about investment in infrastructure. We’re talking about $12 billion that this Government had set aside for infrastructure at the start of this year—which is in this Budget—and, recognising the context of that, they came in in Government and they cancelled all National’s projects because they didn’t like them, because Julie Anne Genter did not want to give in to the car fascists, Phil Twyford said we’d over-invested in roads, and Shane Jones likes roads but only if they’re in Northland. As a result of that, all those projects were stopped, because those members focused on light rail. Three years later, nothing’s happened with light rail, and so I want to know how much has been spent down that cul-de-sac while nothing else happened. I’d be interested in the Minister’s answer to that query.

I’m under instructions to keep my answers very short because we’ve got to share the love, as it were, around in that regard—$1.8 billion was set aside in seed funding for this piece of work. The Minister of Transport would be the appropriate Minister to ask for the exact amount, and I believe that opportunity may or may not have been taken when that Vote came through.

Thank you, Madam Chair. I do hope that time permits to ask the Minister some questions around the quality of the spending in Budget 2020, but I want to focus, actually, on the Crown revenue projections. The numbers I’m quoting are from page 38 of the summary document, which the Minister will be familiar with. Now, what’s interesting is that the actual Crown revenue for 2019 was $93.5 billion. Even though the effects of COVID only hit in the last three months of the fiscal year, the forecast for the year just ended is $89.5 billion, and that’s a $4 billion drop, where I think the projections for revenue initially were higher than that. So that’s a really big thump in the Crown revenue projections.

Despite that, and for all that we’ve gone through over the last five months, the forecasts for this financial year that we’ve just started is $87 billion—a drop in Crown revenue of just $2.5 billion. Now, I find that heroic in the extreme, particularly when you then see a forecast for the following year for it to bounce back by $7.5 billion, to $94.6 billion, and up to $104 billion in the year after.

Now, the question is this: were those projections made for Budget 2020 prior to the full effects of COVID-19 on Crown revenue being understood; has the Minister seen a revised projection of Crown revenue, and, if so, what has that done; and, thirdly, because, in my estimation, this could have a significant effect on the operating balance before gains and losses and, therefore, the need for the Government to take action, what would that action be? Would it be to borrow more or would it be to spend less, and how will the Government respond if those several—possibly—tens of billions of dollars of projected revenue do not eventuate?

Again, keeping the answers as short as I can, the very short answer to the member Michael Woodhouse’s question is yes. Those projections were largely done before the full effects were understood. Our system of Government is an excellent, transparent, and open one, which means the pre-election fiscal update (PREFU) will provide him with the answer to his last question. My statement about what would occur in terms of the middle of that—and, yes, of course it will have an impact on the operating balance before gains and losses. My statement about what would occur in the middle of that is that, broadly speaking, both the advice from Treasury and also what we’re hearing from outside economists is that the New Zealand economy has done better coming out of lockdown than was expected, but the global economy and projections for the global economy are significantly worse. The net effect of that will bear out in the PREFU, but I think we can all see that as we’ve learnt more about this particular virus and its impact on the global economy, it is the downside scenarios we’re seeing more of, rather than the upside.

I thank the Minister. The last question wasn’t exactly answered, although I did think it was implied in his answer, and that is: would the Crown borrow more to close the gap, or would it look at quality of the spending?

In a previous answer to Mr Goldsmith, Mr Robertson has said that the projections are for interest rates to stay low, but that’s not actually how borrowing is done. It’s done on the actual interest rates that the Crown pays over a set period of time, which—I’d be interested to know the duration of the locked-in interest rates that are being obtained. But I would be keen to get the Minister’s sense of whether there is an openness to actually look at the quality of spending and make reductions in what are, effectively, some big, big plans for spending, or whether we’re just going to borrow more.

I thank the member Michael Woodhouse. Sorry, I apologise for not having answered that third point, and this, unfortunately, will be the last contribution due to the timings that we have—

💬 Hon Paul Goldsmith: Half an hour—you had half an hour.

No, no. Apparently, I’m told I don’t, so there you go.

💬 Rt Hon David Carter: No, we can have a bit more of you, if you want it—you’re welcome to do it.

A bit more of me, Mr Carter? That’s the first time he’s ever said that. The problem is it will reduce the other calls. But anyway—

💬 Rt Hon David Carter: That doesn’t matter.

Fair enough, fair enough. Look, I’m so popular, Madam Chair, I’m happy to stay.

In answer to the member’s question, it will always be a mix of all of those things. It’s not just a choice to look at value for money; it’s an obligation, and it’s an obligation on any Minister of Finance to assess every single bid that comes through, and then go on assessing it in terms of its implementation. It would certainly be true that as we were going through the COVID Response and Recovery Fund, we’ve had to move swiftly. I think we all agree that a no-regrets approach was the way to do that, but that means there is an even greater obligation to assess whether or not that spending remains value for money.

What I would say is that we remain in a strong position to borrow. There are a variety—and the member will be very well aware of this—of lengths of times of Government bonds as to how they’re issued and how they work in in terms of what the interest rates are on them. So that will continue. We are very mindful of what we are borrowing and very careful about how it is being spent.

💬 Hon Paul Goldsmith: Supplementary—well no, not supplementary—

Can I just take a minute. So, Minister, are you happy to stay on for a bit?

💬 Hon Grant Robertson: I can, but it just takes the time off the other—the agreement that we’ve got.

💬 Hon Paul Goldsmith: The agreement was half an hour with the Minister, so we’re keen to have it.

CHAIRPERSON (Hon Anne Tolley): But he’s been here more than that.

💬 Hon Paul Goldsmith: No, no—not for finance, he hasn’t. He’s been doing foreign affairs and nonsense like that.

The issue that we have is that these are timed debates, and we’ve got—right now, I’m down to about one hour and 25 minutes, I think, for my allocations for Labour members. We’ve had the Minister of Finance in the seat for 30 minutes. He’s happy to stay, but we’ve still got about seven or eight other Labour Ministers that still need to answer questions. So I’m just in this quandary of having to try to manage efficiently the House time with our Ministers in the chair.

That’s exactly the difficulty with long speeches. That’s what the people in the Chair have been saying all the way through this debate, which is that long speeches, long questions, and long answers actually eat into time. So the Minister’s indicated he’s happy for another five minutes. Let’s make the best use of that, and away we go.

Well, here’s a very short question: can the Minister outline for us some examples of reprioritisation of spending in the last few months and any reductions to existing spending, given the gravity of the time?

Well look, obviously, in terms of the time we’ve got, I could come back to the member with a list of the conversations we’ve had with various areas, but perhaps I’ll take one that’s actually in this area here, which is within Vote Finance. Treasury has reprioritised a significant amount of its work, including on things like monetary policy reform, which I think is really significant and important, and has directed that to COVID. So every Government agency and every department takes a look at its spending to see how it can best use it. Right at the moment, there’s more pressure on public services than ever, so, actually, most agencies are looking for further funding to do just what they need to do, let alone any other reprioritising.

I just want to—while we’ve still got the Minister—to ask some quite specific questions as a Christchurch member of Parliament, and I’m referring to page 31, 32, etc., around some of the—

💬 Hon Grant Robertson: 31, 32 of what?

Of the appropriations, Volume 5. The Minister may not have time and may not have the information. I accept that. It would be great if he could perhaps send me a memo. I just want an update on the Christchurch projects that he’s responsible for through Vote Finance. So we’ve got the Convention Centre—that’s well under way. I’d like to know when that’s about due to open. I’d also like a breakdown, then, of how much central government money went into it—first, how much money came from the city council—and, equally, an update on the Metro Sports Facility. The land is available. I don’t see much activity there, but, again, I’d be grateful—and, again, the balance between Government money and city council money. Finally, there’s the stadium, which is, equally, one that’s been announced. I haven’t seen a lot of progress and I think, as we enter the campaign, as a Christchurch member of Parliament, I’d like to know an update on those three major projects for Christchurch.

I’m happy to do that, and, obviously, I don’t have the specific dollar numbers but I’m happy to get back to the member with those.

In terms of the Convention Centre, all but done. The Convention Centre is a project where obviously the very final stages of it got delayed because of COVID, but, essentially, it finished as a project. In terms of Metro Sports Facility, good ground works are there. Last time I went past it there were a reasonable number of people working on it and that project is advancing. The money is all there; the work is being done.

The stadium is a little different, and the member will be aware that we put in place the acceleration fund that has provided $300 million, of which a large chunk of around $220 million was available for the stadium. That money is there. It is done. It is the other funders who are still working through some of their issues.

💬 Rt Hon David Carter: The council?

Yeah, the council. What we did do was release some funding so that some early site works could be done in advance of the final agreement on the funding. But from our perspective, the money is on the table and ready to go.

I would wish to discuss with the Minister around the three waters reform. The Minister will be aware of significant expenditure and the significant piece of work. But, effectively, what has happened is the Minister and the Government has announced $761 million towards the three waters.

CHAIRPERSON (Hon Anne Tolley): Oh! You’re now on—

Yes. Well, either Minister, but if they want to change—yes, I am on internal affairs.

CHAIRPERSON (Hon Anne Tolley): Internal affairs—right, OK. So we’ll just invite the Minister. This is internal affairs, is it? [Interruption] She’s willing to answer, so—

OK. That’s fine. Sorry, Madam Chair, new Minister—my apologies. The issue I wish to ask the Minister about is—the Minister recently announced $761 million towards three waters, and in the appropriations, in the Estimates, on page 174—it’s actually in the Estimates and reports of the committees on the Estimates—the Minister said that the Minister has told us about a water services bill that the Government will be introducing in conversation across the sector about the service delivery arrangements for the three waters systems. We asked the Minister whether the bill will be introduced prior to the election and she said that it was her intention but subject to parliamentary agenda. At a minimum, she said she would like the sector to see what the Government is proposing.

That is exactly where I’m getting to. So $761 million has been announced as a first draft of the water reform money, and my understanding is that the Minister is basically saying “If you want the money, you sign up to my deal.” So what I’d like the Minister to explain to the committee is what is her intention? Because my understanding from the sector is that that is less than clear at this point, in terms of the structure of water delivery.

I’m happy to take a call on this particular issue, knowing that we’ve had two years of conversation around the perilous state of the water infrastructure system across New Zealand, highlighted by the Havelock North campylobacter event that happened in the member’s area. What we did ensure as we had the conversation about the extent of the challenge was the state of the system and the amount of investment that’s required, but also potentially what a reform option could look like if councils, the 67 territorial authorities who deliver water, aggregated their services, created scale, to be able to better ensure greater consistency across the country in the way that they deliver safe, healthy drinking-water and, importantly, the way in which the system can improve freshwater outcomes so that we’ve got clean rivers to swim in, lakes, and oceans.

So part of that conversation, in relation to the question that the member has asked, is what is it going to take for the councils around the country to be able to have a different conversation? Much of the conversation that we’ve had to date has been based on a joint approach to, firstly, stand up a dedicated regulator, which we have passed the legislation for, which is Taumata Arowai. The enabling legislation that determines the roles and functions of Taumata Arowai is the water services bill, which, again—I am hopeful that, at the very minimum, the bill will be able to be tabled in the House, if it hasn’t already been done so.

Then the other part of the conversation is in the service delivery area. This is where the sum of funding, around $761 million, towards the stimulus package and supporting Taumata Arowai has been already announced. Now, that funding is a part of the conversation to help steer councils into the reform programme. It’s an opt-in process. This is the second week of a two-week consultation phase with councils that has been undertaken by a joint steering committee made up of local government representation as well as leaders from the sector to be able to have exactly the conversations I think the member is asking about, which are: will the sector have greater clarity on the reform that’s being proposed? Will they be able to work out the issues and concerns that they have in relation to the nature, scale, role, and function of these multi-regional entities? And will they be able to embark right now on a programme of action to be able to invest in their infrastructure? My answer to all those three questions built into the member’s contribution is yes, they will.

In terms of the $761 million, $50 million will be made available to support the role and function of Taumata Arowai. The rest will be distributed. We have not yet announced how that will happen because we want to hear back from the consultation round about what the concerns are. But when the decision will be made, loosely based on population and geography, I consider that many councils have already made a commitment to a programme of action, so this initial stimulus amount of funding will bring forward, probably in year two and year three, what has already been forecast in the asset management plans. It will be a welcome reprieve for councils who are continuing to struggle with reduced revenue.

I hope that answers the member’s question. It is very—

💬 Rt Hon David Carter: Very long answer.

Well, actually, it was very precise in relation to the range of issues. But I hope that that answers the member’s questions.

In summary, it didn’t completely answer the question, because what I was wanting to know was—and the response to what the Minister told the select committee. At a minimum, she said she would like the sector to see what the Government is proposing. Now, there’s consultation going on right now. I accept that. But members that I’m talking to say to me that they still don’t know what the Government is proposing in terms of the final structure. Will the Minister be announcing to the Parliament or the people of New Zealand before the election what the final structure is?

Can I just—having confirmed with the Clerk, the bill was tabled yesterday. So there will be access to see the detail of the bill, and that’s really important, and I gave an undertaking at the select committee that that was my intention. I was a little bit ambitious to indicate that we might get to first reading. That’s probably not going to happen, but they will have access to the bill.

I’ve got questions for the Minister of Internal Affairs.

For internal affairs? Yes. Thank you very much, Minister Mahuta.

Madam Chair, it might be just useful if I give an update on time frames, just so the Opposition are aware that New Zealand First has about 20-odd minutes left for their allocation, so if you’re getting truncated answers, that might be the reason.

Each party has to manage its time. So it’s really up to Ministers and individuals asking the questions and whips to keep track of it.

I’ll keep it brief. So I would like to talk to the Minister about gambling, in relation to offshore gambling. So when we had the Minister in front of the select committee, we had a long chat about the increase of people who are partaking in offshore gambling, especially during the lockdown—the percentage of new people who were getting into gambling, the people who were spending far more time in gambling.

What I’m keen to know is if the Minister has an update for us on the scale of the problem and the scale of the harm that’s being caused. The reason that I’d like to understand a bit more about that is because I’m keen to also then ask her about the work that is being undertaken at the moment in terms of policy to regulate that market, where we’re at in that work, how far along the track we are, and when that is likely to be introduced. I did note that she said it wouldn’t be introduced in this term of Parliament, but if she’s lucky enough to be back again, how quickly are we likely to see this? Also, just specifically around loot boxes—so not just online gambling but in-game purchases for loot boxes has been something that’s been talked about a lot by the industry, and whether or not that would come into that regulation that she’s potentially working on and whether or not she believes that that has some form of value and is actually creating harm.

Inland Revenue reports that around about $42 million in GST is collected from offshore online gambling. My recollection is that there is approximately $200 million being spent by New Zealanders in an unregulated market in an offshore online environment. Loot boxes would require regulation to bring them into the Gambling Act. At the moment, they are not covered in any way, shape, or form. With regard to timing, if I’m back here, as fast as I can do it I’m going to regulate.

Last one? OK, the last question I have is: in select committee the Minister said that the New Zealand Lottery Grants Board is considering diverting some money from Lotto, as a COVID-19 fund to help replace some of the funding normally given to communities through charitable trusts. So I’d just like an update on whether that’s happened and how much of that has been granted.

In answer to the member’s question, an announcement will be made in the next two days—I believe it’s around about two to three days—on that very item.

Is that the completion? Are we on to revenue now? Yes, thank you very much, Minister Martin. Welcome to the Minister of Revenue, the Hon Stuart Nash.

Thank you, Madam Chair. Obviously, one of the biggest issues in this whole appropriations debate—or two issues, really—is the flow of revenue into the coffers of the Government in order to cope with what is an extraordinary situation. The obvious point to be made is that the flow of revenue is not sufficient to cover the cost of the spending; therefore, we’re in an enormous amount of debt, and then related to that is the impact that it’s having in terms of jobs.

Now, the Minister might have caught up with some suggestions that our party has made this morning in order to make it easier for entrepreneurs to start up. One of the proposals is allowing people who have been made redundant during this crisis to be able—because one of the great concerns is that if you’re suddenly made redundant, and say you’ve got a $100,000 redundancy, which would be a good thing, roughly a third of that goes in tax. So there’s been widespread concern around the impact that that has on people who are facing unemployment afterwards. So our suggestion this morning has been to allow them to have that tax as a credit against a new business setting up, and I’d be very interested to see whether the Minister thinks that’s a good idea and whether that’s something that he would be setting aside money for, or why he hasn’t in the appropriations so far outlined today.

Thank you, Mr Goldsmith. It’s not a policy that has come across my desk at this point, or a suggestion. I do apologise—I haven’t caught up with this morning’s policy announcement, but, look, I’m keen to take a look at it. I won’t rule it out now, but I’m keen to take a look at it.

Then, secondly, of course, we’ve got a large number of people who are facing unemployment, and the Minister has responsibilities around KiwiSaver and the rules around that, and the Government spends roughly a billion dollars subsidising New Zealanders into that KiwiSaver—$500 a year kick-start payment. Again, a suggestion that’s been made today is to allow people who have lost their jobs to access up to $20,000 of that KiwiSaver fund to start a new business, and I’d be interested in the Minister’s attitude to something like that, recognising the extraordinary times that we’re facing and the possibility that there could be hundreds of thousands of people lost. There’s nearly 400,000 New Zealanders right now on the wage subsidy, which comes to an end in the next few weeks, and there’s a great deal of uncertainty, frankly, as to how many of those will actually lose their jobs. The Minister of Finance has outlined many programmes that the Government will spend borrowed money on to try and create short-term jobs for those people, but we fundamentally believe that it’s entrepreneurialism in New Zealand across the private sector that will generate most of those jobs. So I’d be interested, in terms of that KiwiSaver appropriation and the rules around it—which have hitherto been pretty tight; you can only withdraw it for a first home—whether he is of a mind to entertain that ability for people who have lost their jobs, may have been made redundant, having access as an emergency measure to that sort of money in order to start a business.

CHAIRPERSON (Hon Anne Tolley): I’ll just remind the member that we are actually on the Estimates for 2021. So lots of ideas, but they need to relate to the Estimates.

Yes, indeed. Thank you.

Thank you. I’m less enamoured to this idea for two reasons. First of all, Kiwis are able to access their KiwiSaver accounts: one, of course, is first-home buyers, and the second is in extreme hardship, you’re allowed to access KiwiSaver funds to pay bills. KiwiSaver, as we all know, was set up as a retirement scheme, and I think every Kiwi has bought into that. There are contributions both from your employer and your employee. If people are made redundant, they are eligible for the COVID-19 Income Relief Payment programme, which is the same payment they would get on the wage subsidy. So it’s not as if, if they’re made redundant after the wage subsidy, they’re cut loose and that’s the end of that.

What I would say is that there are inherent risks, of course, in starting a new business; there is no doubt about that. In a normal course of, you know, pre-COVID business as usual, there were between 3,000 and 4,000 New Zealand businesses that failed every year. Obviously, in the deep recession we’re in at the moment, that is going to change significantly. We do understand that. My advice—and I suppose, Madam Chair, if you’ll indulge me for one second, I’m speaking here in my role as Minister for Small Business. I do believe what we’ve done is we’ve put a number of processes in place—for example, $40 million of extra money into the regional business partners advice programme, which is up to $5,000 worth of vouchers. I just do think that there are other ways to perhaps raise capital or to retrain if someone has been made redundant and they have a good idea around how to set up a business. For me, it does come down to that risk premium: less risk if someone is buying their first house—of course, there still is risk, but less risk; you could argue no risk at all. In fact, you’re mitigating personal risk if people draw down KiwiSaver funds in times of extreme hardship to pay bills. But I just think that drawing down KiwiSaver funds to start a business presents a level of risk to retirement savings that I, certainly, would feel uncomfortable about.

So I suppose the broader, more philosophical question is, if people are choosing between keeping those funds in, say, a conservative default fund earning not very much and invested offshore, whether or not we should trust New Zealanders to decide whether or not they want to take a very much higher risk, as the Minister has correctly identified, in setting up a business and starting a business—and that every New Zealander has a different view as to what risk they’re willing to take.

Just another question in the revenue space. Government has brought in various rules around the brightline test—the previous Government brought in a two-year brightline test for people buying and selling houses within two years needing to pay tax on the gains, and that’s been extended to five years. There is a very open question as to how effectively that is being policed by Revenue, and I’d be interested to see what resources have been allocated to policing that new part of the tax code and what kind of results we’ve seen in terms of revenue gained and his confidence that that area of law is actually being properly enforced.

Sure. In terms of the brightline, the extension obviously applies to taxpayers who acquired interest in land on or after 29 March 2018. There’s been about $90.9 million of additional revenue assessed. For the period for 1 July 2019 to 31 May 2020, the Property Compliance Programme has assessed return on investment of about $8.96 to every one dollar spent. The manual review—this will be interesting—of brightline transactions found the final compliance rate for 2016 tax year was about 73 percent. So there is a lot of work to do here, and it’s hard to know whether the role is around education or people are being deliberate in the way that they are structuring their affairs or not paying tax when it is actually due. Inland Revenue has put a lot of resources into non-compliance. Obviously, in the COVID environment, a lot of resource was taken out of business as usual and put towards programmes like the Small Business Cashflow (Loan) Scheme and the wage subsidy scheme, both of which Inland Revenue—well, Inland Revenue obviously manages the Small Business Cashflow (Loan) Scheme, and it worked very closely with social welfare to implement the wage subsidy scheme. But please be assured that Inland Revenue takes compliance very seriously.

As the Minister, one of the things I talk about a lot is the integrity of the tax system, and we need to ensure that the integrity of the tax system is maintained, hence the reason why resource is put into ensuring that New Zealanders do comply. As the member is well aware, the final obligations on ensuring that people pay their tax does rest with the taxpayer, but often the taxpayer does need a little bit of educating in terms of what their actual obligations are.

I’d be interested if the Minister could sort of give some further explanation on that 73 percent compliance that he talked about there on the brightline test, because on the surface of it, it seems very, kind of, reasonably straightforward that if somebody buys a house and sells that house, that within that period—it seems relatively black and white and reasonably easily evidenced and not much room for discussion. So is he happy with that sort of rate, and just how vigorous is his department being in policing that?

The related question is, notwithstanding the crisis that we were facing, we’ve obviously got a real revenue crisis as well, and potentially a debt crisis, and so it is important that Inland Revenue remains focused on doing its basic job, which is collecting money and making sure that it comes in as per the law. So I just want to get a clear sense of, when the Minister says business as usual is being put on hold, just what work is being done, and can you assure New Zealanders that the Inland Revenue remains focused on its core task?

I can assure the member that Inland Revenue does. In the 2020-21 Budget, over $550 million was set aside for services to customers, including informing the public about their entitlements and obligations. Am I happy with 73 percent? No, I’m not at all. I’m not happy until, in fact, we get 100 percent compliance, if I’m honest. Why aren’t people complying? I actually agree with the member. I actually think it is very clear. It is black and white. But I think what happens—and this is my own personal view—is that people think, “Well, shivers, it’s only one property. I can get away with this.”, and as a consequence they try and get away with it. What they don’t understand is Inland Revenue has Land Information New Zealand data. We now are requiring people to put GST on every transaction. So it is easy for Inland Revenue to match houses bought and houses sold—well, it is easier, I should say, for Inland Revenue to match houses bought and houses sold, which they are doing, and they will continue to do this vigorously and to pursue those who are not following the rules.

As the member mentions, at this point in time, when revenue is dropping and we are in the middle of a 100-year recession, we need to ensure that Kiwis meet their tax obligations. One thing I should mention is that one of the things that Inland Revenue has done during the COVID period, and I think it’s done very well, is say to taxpayers—if a taxpayer is having difficulty meeting their tax obligations due to COVID, then we have been very, very clear to contact Inland Revenue or contact your bookkeeper or your accountant or go online and, for goodness’ sake, enter into an instalment arrangement, and Inland Revenue has the ability to write off use of money interest which would normally accrue on debt that is overdue. So I would just encourage anyone who is struggling with their tax liabilities to please get in touch with Inland Revenue or your accountant or bookkeeper and do not bury your head in the sand.

I’ve got a question for the Minister in the chair, the Hon Stuart Nash. I know the conversation so far has been significantly around tax compliance, but I want to take the Minister to page 310 of the appropriation for revenue and seek from him an update on some of the projections that were made around Budget time—a Budget presented in May, probably well and truly finalised late April. If you look at corporate tax revenue, for instance, it was projected to decline by nearly 20 percent in the year 2019-2020. That year’s now closed, so the Minister, I assume, has had his officials in his office telling him whether that decline of 20 percent was accurate.

CHAIRPERSON (Hon Anne Tolley): We’re just having difficulty finding the page. What Volume—

Page 310 of the Budget appropriation. He’ll be on top of his portfolio. He’ll know these figures off by heart because as a revenue Minister he needs to know how much money’s coming in, as he’s acknowledged the 100-year recession. So I want an update on corporate tax revenue to the end of this last financial year, end of June 2020. I want a further comment on the suggested decline in corporate tax revenue in the next financial year, 2021, which was a decline of 10 percent.

Similar questions around GST revenue—it was expected to decline by only 1.7 percent in the 2019-20 year but expected to decline by 4.9 percent in the year that we’re now in. So, again, he’ll have an update, I assume, as to how much it actually did decline in 2019-20 and whether the further projection of 4.9 percent decline is accurate. Then I want to take him to the paragraph between, which says positive revenue growth is forecast to return in the year 2021-2022. It seems to me that in light of the economic situation out there, and the figures I’ve just asked him to comment on in regards to GST, corporate tax—and I haven’t talked about an income tax—it’s very unlikely that Inland Revenue’s revenue source from taxation is going to return to pre-COVID levels in the very near future.

All I would say to that is the member is well aware that the Government releases a pre-election update and—

💬 Rt Hon David Carter: So the member doesn’t know.

Well, you will have to wait until that pre-election update is released, and at that point, you will have all the figures that you have asked for.

Vote Prime Minister and Cabinet, Vote Communications Security and Intelligence, Vote Security Intelligence, Vote State Services, Vote Finance, Vote State-Owned Enterprises, Vote Revenue, Vote Ministerial Services, Vote Office of the Clerk, Vote Parliamentary Service, Vote Audit, and Vote Ombudsmen agreed to.

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