Public Finance (Fines Collection Costs—Budget Measures) Amendment Bill

Members, we now come to clause 4. This is the debate on clause 4, “Section 73 amended (Payment of fines to local authorities and other organisations that conduct prosecutions)”. The question is that clause 4 stand part. Chl

Thank you, Madam Chair—

CHAIRPERSON (Barbara Kuriger): Oh, sorry—can I just let the Minister go first?

CHLÖE SWARBRICK: Absolutely.

CHAIRPERSON (Barbara Kuriger): Thank you.

Thank you, Madam Chair. Look, this is a very narrow clause. It simply replaces “10%” with “14%” in relation to the payment of fines to local authorities, in relation to how much the Crown retains from those fines to, effectively, cover the costs of running the administration of it.

The Government chose that figure of 14 percent based on advice to align this with, basically, the fees charged by private debt collectors when collecting infringement fees for local authorities in order to ensure that they were recovering their costs appropriately. The ministry’s advice to increase the proportion of fines retained to 14 percent was based on its understanding of the nature of fees charged by private providers, but it was also taking into account that the proportion of the fine retained by the ministry is a contribution towards the costs of collection, whilst private debt collectors are profit-driven.

In that instance there, the alternative for councils would be to use an external, private debt collector, and, of course, they would—based on this advice—charge a higher percentage because, of course, they would also be taking a percentage of that as profit. So 14 percent is looking at what the underlying costs are, which is, ultimately, why we’re making that change—to ensure that it’s a cost recovery model.

Third time lucky—Chl

Thank you very much, Madam Chair. So, as I was alluding to—unfortunately, in the wrong clause, as you so dutifully pointed out—what we are talking about here is a context and a backdrop whereby we have had, over the past 15 or so years, a successive number of inquiries commissioned by successive Governments which have told us that local government is massively underfunded and under-resourced to do the work that it does. Now, this is particularly pertinent here because what we’re looking at with this clause is, as the Minister himself has just said, that increase from 10 to 14 percent in terms of what the Crown can recover.

So my questions for the Minister are particularly related to any consideration that he, as Minister for Local Government, or indeed Minister for Auckland, may have given to that broader context of the resourcing which is available to local government in this country, given that he is looking to take more of that funding through this increase in the proportion of cost recovery to the Crown. Just to run through some of those reports, for those who are following along at home and may like to have those citations, we’re talking here about the likes of the Shand inquiry, we’re talking about the Productivity Commission review of the Shand inquiry—which, actually, New Zealand First asked us to do back in the 2017 to 2020 term; I’m dedicating this to the Hon Mark Patterson—and then, of course, we had, most recently, I believe tabled at the end of last year, the Future for Local Government Review.

All of these reviews and inquiries have told us precisely the same thing: local government is not resourced to do what it needs to do to meet the challenges of our time, let alone the increased responsibilities and mandate that are placed on it by successive amendments to the Local Government Act 2002. It does not have the ability to generate the revenue necessary to meet those challenges and those tasks. As, actually, former Mayor of Wellington Celia Wade-Brown was just alluding to, the fact that we have had—and consistently are seeing through the rate-setting processes with the long-term plans having gone out to consultation with communities over the last few months—councils under immense pressure when it comes to setting their rates. I know that the Minister has had a lot of engagement with this in Auckland when it comes to his water plans.

So my specific question to the Minister is: what consideration, if any, in the development of this legislation—and particularly in this clause when it comes to the Crown’s ability to recover the cost—did he have for the ability for local government to generate alternative revenue streams? And that unfairness in the context of the OECD, will we see far higher proportions allocated to the use of local government in relation to central government?

Thank you, Madam Chair. My question is about the 10 and 14 percent—the relationship of that. My question to the Minister, which has been asked but not answered, is about whether the costing is about individual fines or the quantum; the volume of fines, and how that relates to the so-called cost recovery. Because if we look at the volume of fines, actually there’s been a bigger volume and, therefore, the cost recovery would have got smaller—in fact, to the point, probably, the evidence would show that there would be a negative cost recovery element required. So we haven’t had that specific question answered.

On the back of that, I would like to speak to my tabled amendment, which is to say that rather than saying from “10 percent” to “14 percent” for the cost recovery, I think that a better amendment would be just to make it 0 percent. We don’t seem to have, from the discussion in the Chamber, an evidence base by which to measure the costs that need to be recovered. We haven’t had answered whether it’s by individual fine or by quantum. The most prudent thing to do in the absence of evidence, which I have asked about, is to, basically, make the effect of this bill neutral. That way, we would probably be able to pass it, we could all go home, and we wouldn’t have to stay here all weekend.

But it is contentious when we’ve got this 4 percent increase and we still haven’t got to the point of how that was achieved. If I look at the numbers, we’ve got evidence that the spend by the courts in collecting fines was $43 million and $99 million in 2023. So there’s been quite a leap there, and that’s why I’m suggesting that if we’re looking at the volume of fines, the cost recovery would seem to go on—if you thought of a graph, instead of the numbers going up and the graph going up, the graph would go down. So that is why I think my tabled amendment would help to get us out of a spot of bother. We could actually just make it sort of fiscally neutral impact, but we could still go ahead and pass the bill. So my amendment just simply says, “In clause 4, replace ‘14 percent’ with ‘0 percent’.”

Now, I’d be happy to not have that happen if I could understand from the Minister what the mathematics is underlying the suggestion of the 4 percent. We’ve heard it’s cost recovery of debt collectors, but there are no numbers around that and I’m really curious to know: what debt collectors were consulted with? What numbers did he look at? Were there a range of debt collectors across a range of councils across New Zealand?

Just a little bit more sunlight on that would help us to get a better handle on what the problem is that we’re trying to fix. In the absence of that—and I’m an optimist, so I do hope that the Minister will answer it—I’d suggest that my amendment is an easy way out of a tricky situation that would help us to progress this bill, fiscally neutral, just replace “14 percent” with “0 percent”. That way, even if there’s no evidence of whether the costs are going up or down in terms of recovery and whether actually a profit is already being made, at least we could be seen as being responsible because we have something that is not purporting to say that it’s based on evidence when, so far in this debate, we haven’t heard any evidence. So I’m really keen to get the Minister to respond to that, please.

The Hon Dr Duncan Webb. Oh, sorry—the honourable Minister.

Hon Dr Duncan Webb: Aw, you called me, Madam Chair!

CHAIRPERSON (Barbara Kuriger): You’ll get a turn.

Thank you, Madam Chair. I appreciate the member’s question. We will not be supporting her tabled amendment, because, of course, what that tabled amendment does is it would, effectively, mean that we would not be achieving cost recovery and, instead, we’d be having to take money from other parts of government to, effectively, fund this particular function of ensuring that people pay their fines. So whilst that member might seem that putting it down to 0 percent is a good idea, that would mean we wouldn’t be getting cost recovery, which means we’d have to be getting general taxation to pay the cost of this—which is not good policy and we are avoiding that.

The Hon Dr Duncan Webb, and it’s only second time lucky for you.

That’s right. Don’t worry, I can have a third round later. I’d be very happy to do that.

CHAIRPERSON (Barbara Kuriger): We’ll see. Depends how relevant this contribution is.

Hon Dr DUNCAN WEBB: This is bang on, because I want to talk about the amount of this increase here. There are a couple of things that come out of it. In particular, in the statement, it talks about the impact of this particular increase on members of the public. This Government that we’ve got is very keen to look after the squeezed middle, I think they call them, and they talk a big talk about low-income New Zealanders, but the impact statement says, “Low-income individuals are likely to be disproportionately impacted by increasing costs.” You know, I hadn’t thought about this, but, of course, they’re the ones who are likely to be unable to pay on time in the first place, and so they’re the ones who are going to get whacked with these increased costs. So I want to know from the Minister whether he actually turned his mind to the question of what impact this would have on New Zealanders who are struggling to get by with costs going up, and so on, and this, in fact, is an increased cost.

The other thing is this: he’s chosen—it’s been plucked out of Minister Goldsmith’s head—this 4 percent figure. He said it’s because he uses the Consumers Price Index (CPI). It’s actually a 40 percent increase on 10 percent. He said he used CPI, but that makes no sense, because if we use the CPI every, say, five years, eventually you’ll get to 100 percent. That can’t possibly be right to take 100 percent of the fine. Look, my colleague Ingrid Leary is always the radical on this side of the House. I’m the moderate! So I proposed in my tabled amendment just a mere reduction to 5 percent to really address the fact that the most struggling New Zealanders are the ones who are going to be most heavily hit with this.

Now, I do have some other amendments, and I’ll take guidance from the Chair on where they fit, because, in fact, the other amendment I have is one which talks about giving the court a discretion, because, in many ways, it would be appropriate for the court to have some discretion, because it does in respect of many aspects of fines, and it would be appropriate for the court to have discretion in respect of whether or not this 14 percent goes left or right. So that’s an additional proposition that I have for the Minister. But my real question is this—and the reason I want to change that figure is because this impacts those who are struggling the most. It doesn’t impact people who pay their fines on time because they’ve got good life admin and plenty of money to do it. My suggestion is that what’s proposed in this bill and what’s outlined in the impact statement is, in fact, really just too tough on working New Zealanders, who are struggling to make ends meet—

Hon Simon Watts: Who you didn’t want to give a tax cut to!

Hon Dr DUNCAN WEBB: There you go—Mr Watts over there—

CHAIRPERSON (Barbara Kuriger): So that’s the statement. Can we have the question for the Minister?

Hon Dr DUNCAN WEBB: Well, the question for the Minister is twofold. I have asked it. The first question is: will he agree to my amendment to reduce that increase down to a gross 5 percent figure? And the second one is: when he set that number of a 40 percent increase, what consideration did he give to the impact on members of the public, and did he take into account the advice set out in his impact statement that says it will disproportionately impact—and I’ve got it here somewhere—low-income New Zealanders and also Māori and Pasifika? I’m sure it says that in there as well. Those, Madam Chair, are my questions.

I listened very carefully. I think there were two questions. The first was: will we support his tabled amendment? The answer to that one is no.

The second is in regards to the impact. Well, the point of this clause is that it is about how much the Crown retains of that particular fee, and it is not to do with the fee. Those are two separate issues. This is just the percentage retained, and, ultimately, that is very different from what the fee will actually be. So, ultimately, this actually impacts how much the local council would be getting from that fine, not what individuals would be paying. So, therefore, they are two very separate issues, and the answer, as I said to his tabled amendment, is no.

I’m just going to say, before I take another call, that we are talking about the change here proposed, from 10 percent to 14 percent, and that’s all we’re debating right now.

Thank you, Madam Chair. I have a new line of questions on this change, clause 4, from 10 percent to 14 percent that will be able to be deducted by the Crown from fines imposed by councils in the prosecutions of those. They are straight questions, and I hope the Minister can give me answers to my six questions.

So the first is: on the average fine imposed by, or on behalf of, local authorities, what percentage of that amount that the Crown deducts represents real costs? I ask that because even though we’ve been presented by a cost statement along with the papers, we haven’t got any numbers in that around what the real costs actually are for the Crown.

My second question, which relates to that, is: if it is 100 percent, is the Crown at the moment subsidising the prosecution of parking fines on behalf of local government? Is it the case that taxpayers are paying for local governments to levy parking fines and then enforce them? That’s a really useful thing for the committee to understand.

My third question is: if it’s not 100 percent, then what are those real costs? Because we’re talking about the cost recovery element here, so I want to understand. These are fines imposed for offences prosecuted by, or on behalf of, local authorities and other organisations. So that’s not the prosecution of those. Prosecution of those actually sits with the local councils already. Most local councils conduct the prosecutions themselves. So is this a back-office cost that the Crown imposes on its regulation-making power to make those prosecutorial powers, or is this another cost represented somewhere as a back-office cost? I’d like to understand what those real costs are. That’s the third question.

The fourth question is: which payment providers collect fines on behalf of local providers now? In the documents presented alongside this bill, we heard that some councils have elected to use private providers already. However, the Minister, in answer to questions to me, told me that it was the Ministry of Justice only that collected these fines. There are two points that I’m getting at there. And, to assist the Minister, the Ministry of Justice uses private providers to levy its payments, but then I’m also asking: if the Ministry of Justice is not providing that service to the local councils, then who is?

My fifth question is: does the increase from 10 to 14 percent include any money awarded by a court in respect of any loss or damage? The question there is about what kind of money that’s being collected here will be subject to the 4 percent increase, given that my other questions have been about whether this is, in fact, cost recovery or whether it’s another kind of fee, levy, or penalty, as I described it in my second reading speech.

My last question to the Minister is: is an Order in Council the appropriate way for councils to have their parking fines set? This is relevant to clause 4 because it goes alongside the regulation-making powers that are done by Order in Council. And this goes to a wider set of considerations, here, that we have not yet had a chance to debate: what is the appropriate policy for parking fines? Should they be high? That disincentivises people to park their cars in a certain area, and that is a policy decision, so why is it being made by Order in Council?

My question there is: should it not be in the primary legislation? We haven’t gotten into that yet. But, on the other hand, we’ve got this power that applies in exactly the same way to the court fees. You argue the toss pretty differently if you’re applying the same sorts of values there. If fees are going up for people to have a conversation about whether they were, in fact, parked there, about whether the fine was levied in the right way or in the situation that my colleague Ingrid Leary described where there’s been some kind of administrative error, then you’re making it harder for people to engage in the system, and, ultimately, that affects those people who already have high barriers to access to justice. So we need to understand the Minister’s justification here for using Orders in Council instead of primary legislation or, at least, properly understood secondary legislation mechanisms, which the primary bill gives effect to.

Thank you very much, Madam Chair. I’d like to return to the line of questioning that I put to the Minister earlier, which, unfortunately, we’re yet to elicit a response to, and that is particularly around the considerations that may have been given to the impact on local government revenue. In fact, we have heard a lot from this Minister, including throughout the election campaign, when it comes to the money that local government has to play with to meet the challenges of our time and that infrastructural deficit.

We heard just before in responses to other questions, particularly from the Hon Dr Duncan Webb, that the Minister was saying that if we did not make this increase from 10 percent to 14 percent, then we would end up with, basically, the shortfall being paid for out of general taxation. Now, this is a really important point and a question that I want to get a response from the Minister on, because, actually, not all too recently, we had a bill in front of this House in the form of the Housing Infrastructure (GST Sharing) Bill from the ACT Party, and we had a really interesting contribution from a member, which called this “a sensible piece of pragmatism which is sorely missing in this House.” Going to the point that this was about GST or Government revenue sharing, which the Minister has just said that he is opposed to with local government. That contribution calling this “a sensible piece of pragmatism which is sorely missing in this House” was from none other than the Hon Simon Watts, now our Minister of Revenue.

To that effect, my question for the Minister is: whether those statements that he offered in response to the questioning from the Hon Dr Duncan Webb, about how he does not intend to use general taxation in order to help support local government, is to be seen as a movement away from the kind of support that we’ve seen not only from the ACT Party historically but also actually from New Zealand First, who’s campaigned on policies such as GST sharing. So my question—

CHAIRPERSON (Barbara Kuriger): We’re a bit out of scope. So I want to see the question in scope, please.

CHLÖE SWARBRICK: My question for the Minister is: did he have any meaningful consideration for other revenue-raising measures that local government may have in the consideration of this legislation?

Well, I just want to remind members that this is a very narrow section in this bill. It is simply about replacing 10 percent with 14 percent. As I answered that member when she asked her question earlier about the total cost impact, all of the entities which are affected, the total amount that this will cost for all entities, including local government, is $285,000 in the next financial year.

I move, That debate on this question now close.

The question is that the Hon Dr Duncan Webb’s tabled amendment to clause 4 to replace “14%” with “5%” be agreed to.

The question is that Ingrid Leary’s tabled amendment to clause 4 to replace “14%” with “0%” be agreed to.

The Hon Dr Duncan Webb’s tabled amendment to insert new clause 4A to provide compensation for victims and complainants is ruled out of order as being outside the scope of the bill.

The Hon Dr Duncan Webb’s tabled amendment to insert new clause 4A to provide discretion to the court in the percentage of fines retained is ruled out of order as being outside the scope of the bill.

Clause 5 Schedule 1 amended