Business Payment Practices Act Repeal Bill

Members, the House is in committee on the Business Payment Practices Act Repeal Bill. We come first to Part 1. This is the debate on clauses 3 to 6—“Repeal of Business Payment Practices Act 2023 and related matters”. The question is that Part 1 stand part.

Thank you, Madam Chair. It’s great to see that the Minister for Small Business and Manufacturing has engaged with the debate, and I know how passionately he feels about competition law, having sat on a couple of select committees with him.

I do have some questions around the general policy statement at the beginning of the bill, in Part 1, which talks about what the purpose of this repeal is, because there’s a really interesting statement where it has been asserted that small businesses will not have time to search for payment data on the Ministry of Business, Innovation and Employment website and that, even if they do find it and interpret it correctly, it’s unlikely to impact their decisions about who to do business with. Now, I find that quite an astounding explanation of what the purpose of this repeal is.

There’s an assertion that small businesses don’t have time to do their due diligence. In fact, small businesses, in my experience, are more likely to do due diligence on anything to do with their business because it is such a vulnerable place for them to be in a market awash with big players. So it behoves small business to make sure that they are dealing with reliable, trusted business associates in their supply chain, and, certainly, in my time when I had a TV production company, I made sure I did my due diligence to find out as much data as I could about those that I was transacting with.

There’s also an assertion that even if they can find it and interpret it correctly—now, this seems very patronising language to be putting into the explanation of why you would be repealing an Act. It is suggesting, as one of my colleagues quite rightly said in the debate, that small-business owners somehow do not have the capacity to interpret data in a way that maybe big business does. I’m not sure what the comparator is here. Perhaps it’s that they may not be able to interpret it sufficiently compared with the public sector or compared with those people who are employed in high-paying jobs. I’d really like to know the assumption that the Minister made that led to these assertions that small-business owners do not know how to interpret data in a way that others perhaps may be able to.

Then it goes on even more to say that it’s unlikely to impact their decisions about who to do business with. Now, that seems to me to be a real admission that there is a David and Goliath situation in the market, and certainly the report that the Minister alluded to that came from Australia and the review of their legislation also acknowledged that there are market-dominant players and that it’s difficult for small business sometimes to have as many choices.

So this here seems to be an admission by the Minister in this repeal bill that there isn’t a fair and competitive landscape that small business can compete in. Now, that seems to me to go against the purposes of the bill and to show that, actually, what the Act does is it does have that mechanism to try and level the playing field. So I’d really like the Minister to provide some answers about that. It’s simply not good enough, in my assertion, to say “Oh well, businesses won’t be able to do much about that anyway, so too bad.” when we have an Act in place—and we have an Act in place until later today, I suspect—that does the very thing that the Minister, I would have thought, wanted to do, as I said at the start of my contribution, which is to make the landscape more competitive, fairer, and better for all business.

The other thing is that the Minister, in his contribution, has alluded to a plan. I just want to put on the record that this is a smart Minister who knows that, in 100 days, we haven’t seen many plans from this Government, if any.

So he’s saying he has a plan, but, as I raised in the second reading, there is proportionality available through the regulation mechanisms. The Minister knows that very well. He and I have worked together on proportionality in terms of other frameworks to do with the Reserve Bank, and that seemed to satisfy him. So I’d like to understand why, in this particular case, the Minister isn’t able to apply that proportionality principle. Is this just politicking, as has been asserted by the Hon Phil Twyford, or has he got some real reservations about that?

Thank you, Madam Chair. I just want to address a couple of those issues, and thank you for the contribution. I have already acknowledged and said that there is an issue with businesses, particularly smaller businesses, paying late, so there is no disagreement across the House. The issue, as I’ve continuously said, is that it is an issue of how do you address this. And the proposed approach that the Government put forward in the previous bill, which we’re going to repeal, was not a viable solution—that is the essence of it. And what I’ve put up is a number of initiatives—seven of them—to try and deal with the issue of late payment. Now, I don’t need to go through a process of requiring a new bill to do those; most of those can be done without requiring new legislation. That’s the first point.

The second point that she raises around the explanatory note is this issue about small-business owners knowing where to get this data. And the first issue is whether they know that this data is available. Now, I think there’s an issue of understanding where we sit. We sit in this grand House here, and we’re very aware of Government agencies, but, actually, when you get out and you talk to small businesses—and I quoted the three locations in my earlier speech: Porirua, West Auckland, or Tauranga—many of them do not know and wouldn’t be able to quote you the full name of what we would colloquially refer to as MBIE—Ministry of Business, Innovation and Employment—and wouldn’t even know where to find this type of information. Even if you ran a very expensive process to try and make them aware of the data, many would not know it, because simply they do not understand Government entities, unlike members of the House. And I back up that statement by saying that in the review in Australia, where they’ve had this arrangement in place since 2020, the Minister, in his summary of the scheme, noted only 1 percent of Australian entities knew where to find this information. That’s a crucial part of it.

But the third element that she raises, even if you can find the data and you’re smart enough to find it, is, as I said in my opening speech, that data could be 10 months out of date. So, then, the business owner’s got to sit there and work out—interpret, calculate, whatever you want to call it—whether that data is still appropriate. And I’d put it to you that 10-month-old data about payment systems, about when they paid the money, is actually quite unreasonable and actually not that effective and useful for a small-business owner. As I’ve said on countless occasions, and as I kept saying during the select committee process, why doesn’t the Government recognise that they can go to four credit agencies—and I gave the cost—for a mere sum of $35, get up-to-date information on payment systems and times, and actually get a lot more information that’s absolutely relevant to due diligence considerations, rather than spend at least many millions for the Government, but multiple millions across industry coming up with an out-of-date system?

Thank you very much, Madam Chair. I’d like to ask you, Minister, to consider the statements that you’ve just made about how you want to really improve things. I’d like you to read and listen to the submissions that are made to you in this exchange that are proposed amendments that would do what it seems to be your intention to strengthen rather than soften the approach in this situation. So I won’t talk to all those amendments now, because I want to have a meaningful exchange.

But I, first of all, want to talk about the issue of whether there is any red tape in the one that you’ve just raised about people actually seeing this information that you’re talking about. So my understanding of this situation is that the reporting that would be done is on key issues, and, every six months, a big corporation—a very big one—would have to actually gather and report that information about if they are actually delaying payments, etc., and then they would give it to the Ministry of Business, Innovation and Employment (MBIE), who are our biggest agency. So it’s not the same as Australia, because we have MBIE; it’s a little bit different. The companies that are involved are not the same as Australia either; it’s also a different group of companies, so the negotiation was down to $33 million, and $10 million of suppliers. So they’ve got 10 million bucks out there that they’re owed at any one time and they’re not paying that group of suppliers—that’s the mischief that we’re getting at. So I’d love your comments on this.

So my understanding is that’s the data we’re gathering and we’re getting it to be reported at MBIE, which is the body in New Zealand that does things like—for small businesses, it’s the place you go if you want a builder for an employment agreement. So I would dispute that people don’t know, and I wondered whether you would have information that is about whether people use the builder, for example, which is a product that MBIE has put out for small businesses. I, for one, have used that builder, I know lots of small businesses that have, and I wonder if you’ve got any data about something that’s an established product used by small businesses and whether it’s used in this country, because it’s not really the same when we’re talking about Australia with a different threshold of amount, etc., and a different entity involved. So I’d like to know whether you gathered that data at all.

I note that when this Act that you are repealing was going through last time, you actually suggested a trial. You did it by a Supplementary Order Paper (SOP), you suggested a trial—I’m sorry, Madam Chair—the Minister, in his other capacity, as a member of the Opposition at that time, put up an SOP which was to suggest a trial. One of the Amendment Papers you’ll see is about a proposal which does just that in this situation: it extends the time so we can see what the effect is. So I would like the Minister to consider that and I’d like to come back and discuss that with him at a later time.

But I’d like to go through the recommendations from the Australian report, which the Minister is relying on, and talk about that. The Minister, as I understand it, has said today that what he wants to do is strengthen this, that we have a problem, we need to strengthen it, and the Australian report has given some concern to him and that he has a lot of faith in the Australian report. So one of the things the Australian report, for example, does is that it suggests a prohibition on this kind of behaviour. That’s actually what it does. It says, “Don’t get rid of this; add to it. Look at a prohibition.” I’d like the Minister just to think about that one issue at the moment, and I will come back and talk about the others, but I don’t want to flood him, and I would love an exchange. So would he consider a prohibition on this kind of behaviour, where we say that it’s not OK for businesses? There’s no red tape involved in that. None. Absolutely no red tape if we say, “It is not acceptable for you to not pay your creditors.”

So I would point him to the amendment on this point that talks about a prohibition, and it says that there’s a prohibition, so we wouldn’t just repeal; we would replace and we would do a prohibition on the late payments of over three months. Now, that’s quite a generous time frame, so I haven’t gone for something that’s the sun, the moon, and the stars here. Why aren’t we today, rather than taking away the one thing we’ve got, looking at this and saying, “Let’s not throw the baby out with the bathwater; let’s improve it, let’s put a prohibition in.”? If we’re relying on the Australian report, it’s right at number one of the bullet points: prohibit unfair payment practices; do that.

So I won’t put all of them. I’ve got other amendments. I’d like the chance to talk to them, and my colleagues would like the chance to talk to their amendments. But I’d really like you to address why we are not prohibiting behaviour that we all agree, in this House, as far as I understand it, is actually really despicable behaviour. Why aren’t we prohibiting it?

Thanks, Madam Chair. The issue around payment terms—there is a difference between suppliers and contractors contracting with a business and agreeing payment terms and whether in fact the entity that should be paying meets the contractual arrangements. If that occurs and they do not fulfil the bargain of the agreement, then that’s subject to rules around that.

One of the initiatives I’ve noted is making sure of, and raising the awareness of, existing redress options under the Fair Trading Act. So I’ve already noted that that is one of the specific things as part of the package of things I’d like to do to make sure that people are aware that there are redress options under the Fair Trading Act.

But your wider issue about payment times and mandating it—it’s interesting that you’re looking at the Australian response. I read the Australian response very carefully because it’s a very similar scheme. You made some points that it was different, organisationally different, entities involved, but, actually, largely, in the main, it’s very similar. But the Minister states very carefully and specifically, “Several stakeholders propose mandating maximum payment times for small businesses.” On the face of it—and I think all of us think, well, maybe that could be an option, although people could contract out of it.

Initially, I considered mandating payment times might be an effective approach, but following deeper analysis, including considering those in comparable jurisdictions overseas, I found mandating would create problems that would overwhelm its usefulness and do more harm than good for small business. These problems include complexity in trying to identify critical payment times, creating perverse incentives for existing fast paths to slow their payments to avoid the mandated time, unwillingness of most small businesses to actually identify problems, and large businesses reducing their procurement from small businesses in favour of others. So I don’t accept the idea. I think conceptually it would be great to do it, but, in practice, I don’t think it’s actually a viable option.

Thank you, Madam Chair. The Minister for Small Business and Manufacturing has mentioned his opening speech several times, and there are a number of issues from that speech that I think we will want to discuss during this stage of the bill, and, in particular, the seven or so steps he proposes we should be taking. But I want to talk about something else the Minister said in his opening speech, which suggests that we do have the space to go through each of those options and have a thorough discussion of them.

He described the process for the original Business Payment Practices Bill, and he said—and this is almost exactly the right words; I couldn’t find the actual written transcript, the Hansard, but I did listen to the speech twice—that that bill was ram-roaded through the select committee. That’s pretty much an exact quote—ram-roaded through select committee. So I went and looked at the select committee process for the original bill. It was referred to the select committee on 8 November 2022. It was reported back on 26 April 2023, so it spent 169 days at select committee, and reading the select committee report, we can see a number of amendments and changes that were made in order to make the particular model work better, because, obviously, that’s what select committees do. There is the National Party’s minority view in there, of course. Then there’s the committee membership, so you can see the people who participated in the discussion, including Andrew Bayly, who is now the Minister. So it was quite an extensive process, which was responsive to what other people suggested with respect to that bill. Yet the Minister has described it as being ram-roaded through select committee.

Here we are in urgency, and this particular bill is being rushed through—a first reading, a second reading, the committee of the whole House stage, and a third reading—bang, bang, bang—following after each other. I suppose there are two thoughts here. One says we are entitled to a very generous committee stage on this bill. The Minister has mentioned in his opening speech seven other measures that he wants to take, and I would like to examine those in the committee of the whole House. I think we’ve got plenty of time—I hope—available to discuss that, but, more importantly, the Minister has described a process of 169 days as being ram-roading a bill through select committee. Yet here we are in urgency debating this amendment bill—bang, bang, bang, bang.

So I just wonder if the Minister could contrast the two processes—given that we don’t have the luxury, because we haven’t been afforded it, of discussing his bill fully at select committee—and tell us how he feels that this discussion should go. In particular, I would like to note for the benefit of the committee those seven measures. I am going to ask the Minister to go through them at various stages, because he has talked about them already in his speeches and, I think, he has opened up discussion on them. So, if you could, Minister, just tell us a little bit about what the difference is between ram-roading something—it was 169 days—and this urgency process.

Thank you, Madam Chair, I wanted to ask you about one of those things that you’ve raised—oh sorry, Madam Chair; I wanted to ask the Minister for Small Business and Manufacturing about one of the things that he’s raised as an alternative to this, because there’s been a lot made about e-invoicing.

Now, I’ve actually got no problem with e-invoicing—fill your boots. I’m thrilled to see e-invoicing promoted, and I’m also thrilled to see Government invoices paid on time. Those are good measures. But what is the problem with doing both? I mean, this is a situation where we could build on this bill some more teeth. I’d be thrilled to see that too. And we could have e-invoicing. Why is the Minister saying we have to pick one or the other? Because what I’m worried about is the signal that this sends. It goes to my friend the Hon Phil Twyford’s point about gaslighting—right? He talked about that this is fundamentally behaviour that is anti-competitive, it’s mean-spirited, it’s undermining the productivity of our small businesses, it’s hurting real, live people, and yet it’s being described as somehow helping them, to take away this one tool. Why aren’t we adding tools rather than taking them away? I’d like an answer to that before I go on. So I’m happy to sit down and have that exchange.

But if the Minister’s not ready to talk, I’d like to also respond to the comments made about using the fair pay system, or the fair-trade agreement. The Minister has suggested that he thought about prohibiting this behaviour, and the report clearly recommends prohibiting the behaviour from Australia. He thought about that, but he decided against it because it would be better, as far as I’m hearing it, to point these businesses towards the legislative ability to look at this. That’s what they could do.

Well, they could also do it by contract. Often, these payments aren’t being paid even in a contractual time frame; they are often a breach of contracts which say, “invoice will be paid within seven days” or “invoice will be paid within a month”, and they are being breached. They are breaches of contract. Those tools of actually suing on that are not working because they’re expensive. So prohibiting and allowing a specific focus on it is quite different from that. It’s the Government taking the lead in these situations, saying, “That’s not OK. That’s just not OK.”, versus a civil reaction. There’s a lot of things that would breach our law that people can’t do a lot about, and it’s that Government lead.

I also wondered if he could talk about the nudge effect of the legislation. So when Government does something—like it prohibits smoking or it actually does something like this, it says, “It’s not OK; you will report.”—it’s a process of public scrutiny, and it’s, basically, changing the norms and values of your society. It’s saying that this is not OK. This nudge effect has clearly had a place here, because I told a story earlier in one of my speeches about somebody at Fonterra, and my understanding is Fonterra no longer don’t pay people months in. So there is a nudge effect of this legislation. It says, “It’s not OK; you’re going to have to report on it.”, and you get a change in behaviour. If you take away the Government’s saying, “It’s not OK.”, and you say, “It is OK.”—because, effectively, that’s what we’re doing today: we’re saying it’s OK not to pay your people until we come up with, perhaps, some scheme where you may volunteer a different approach under your code, or we will work in a different way. Until then, we’re saying it’s OK now not to pay people.

What has the Minister been advised with regard to the nudge effect of this behaviour, whether in fact it’ll now send a signal out saying, “It’s OK”? Because that is of great concern to me, that this 3 percent of businesses, or it’s actually even less, that are in charge—

CHAIRPERSON (Maureen Pugh): The member’s time has expired.

Thank you, Madam Chair. I’m particularly interested in Part 1. In the general policy statement, it says, “However, the Government’s view is that most small businesses will not have time to search for payment data on the Ministry of Business, Innovation, and Employment’s internet site and that, even if they can find it and interpret it correctly, it would be unlikely to impact their decisions about who to do business with.” Can the Minister please talk through, or point the committee to, the evidence behind this statement, and can the Minister inform us which small businesses, if any, were consulted with to come to the view? Because we are, effectively, being ram-roaded through legislation to repeal something. We’re getting used to it, but it is a very poor way to make legislation. So I’m very interested in seeing what the Minister’s instructed the Ministry of Business, Innovation and Employment to do to create a more user-friendly internet page for the register of information and about business practices so that small businesses and small and medium enterprises can quickly access information and intercept it without undue delay.

I’m really interested in, in particular: what were the stakeholder consultations that were conducted to proposing the repeal of the Business Payment Practices Act to Cabinet? What consultations were done prior to proposing this repeal to Cabinet? How were the concerns and feedback, if there were any, from those discussions, from those consultations, from businesses and other relevant parties taken into account? So I’m assuming that the Minister has done due diligence and the Minister, not wanting to take 160-plus days to get some legislation done, has gone out and has consulted widely with businesses, the small and medium enterprises, before doing such a ludicrous act as repealing something without having consulted anyone. I’m sure the Minister wouldn’t have done something like that, so I’d really like to hear from the Minister about all of the work that’s gone in to creating or to building this repeal and who has participated and what their input has been into it.

This would be helpful so we can understand that the Minister’s not simply breaking stuff because the Minister likes breaking stuff but is intent on actually engaging with the community, engaging with small and medium enterprises, and engaging with our business communities to ensure that there is good legislation, because, without that, we can’t have faith that this Government knows anything about business. Without that, we can’t have faith that this Government cares about our community. Without that, we can’t have faith that this Government wants to see thriving communities with innovative, risk-taking businesses and individuals who are willing to engage and make this place a better country.

So if the Minister could come back to that: what stakeholder consultations were conducted prior to proposing the repeal of the Business Payment Practices Act to Cabinet, and how were those concerns and feedback, if there were any, from businesses and other relevant parties taken into account? And I’ll come back to those other earlier questions if the Minister would like to respond, but I’ll leave it there for now and, hopefully, hear a response.

Thank you, Madam Chair. I’ve got a few points there. It’s funny, the issue about interpretation of the ram-raiding, when I used the word “ram-raiding”. Obviously, the previous Government chose to use its majority to push through the changes; I acknowledge that there were amendments made, but it was driven through even though National was very clear, and, I think, ACT were very clear, to put a dissenting report in the select committee’s report back to the House. But the issue around ram-raiding was one of the Government choosing to use its majority.

Now, the issue around the urgency and why we’re doing this today, and why this particular piece of legislation is going through today, is the issue of: if we do not do this quickly, the Ministry of Business, Innovation and Employment is required under legislation set down by the previous Parliament to actually start incurring costs, and that is why we need to do this as soon as practicable. That’s why this issue is being pushed through and is being done under urgency, for that very reason. Also, many, many businesses are also asking—the 3,000-plus businesses that this will affect—me the same thing: please provide clarity around whether we need to incur significant amounts of money to upgrade our IT systems to be able to reflect these changes. As I’ve said before, many of those larger businesses have enterprise resource planning systems that are quite difficult to upgrade. That’s why we’re giving them the clarity to do it now quickly so people can stop work, because the simple fact is, as I keep saying, this is not about letting people off the hook; the system simply does not work. As the Australian Government’s review of their own system has shown, on the recent report on it, it is not a practical way of getting a better outcome, and that’s why I have proposed a whole range of additional measures, because I do want to make sure that both businesses and the Government make sure they are paying on time.

Now, you talked about the nudge effect, which was raised before. The simple fact: if the Government starts paying on time in 10 working days—and we hit a target of five working days for payment times if people use e-invoicing—that will be the greatest nudge, because, as members across the way will know, the Government accounts for about a third of the economy, and that’s where the Government in the last term should’ve first of all directed its own focus. It’s actually wrong to be able to say, “Look, business, you go and spend tens of millions of dollars and not worry about our own House.” That’s what I’m doing. I’m going to be working with the Minister of Finance. We don’t need to do legislation; we can do it by the Minister issuing a directive. We do need to consult with the Crown entities; it will take approximately two to three months to do that, and we can bring about that change very, very quickly. So that is why we’re doing it.

In terms of the code, I’ve spoken to, and I’ve made a public announcement—Business New Zealand has also publicly acknowledged that they’ll bring in a code. We’re going to be working on that as a matter of priority, but, hopefully, they are going to take the lead—and, of course, I’ll be involved in that process—following the Government’s processes to pay people very promptly, and particularly if they use e-invoicing.

Thank you, Madam Chair—excellent choice. I’m sure that the Minister for Small Business and Manufacturing didn’t agree with my characterisation of this bill as sort of venal kind of deference to vested interests—

Hon Paul Goldsmith: Gaslighting.

Hon PHIL TWYFORD: And gaslighting. Thank you for putting that on the record. But I want to give the Minister an opportunity to convince the committee that that characterisation wasn’t fair. And I think that the way that he can do that is by providing us with the data, the analysis, the modelling, the projections that informed his decision. I want to be assured that it’s not just reckons and ideology and political shortcutting.

A Green colleague earlier asked what data the Minister had or what consultation was done to inform his assertion that small and medium enterprise (SME) owners will not use the public disclosure database. And I too would like to know what that’s based on. Is it just reckons or is there actually some information, some facts, that underpin that?

At the heart of this argument is a trade-off—a trade-off between imposing a compliance cost on the country’s largest corporations in order to deliver a benefit to SMEs and to create a more competitive environment for our small and medium sized enterprises. I’d like to know what cost-benefit analysis has been done to inform where the Government has come down on that trade-off. Has the Minister been able to have the benefit of some kind of quantifying of the compliance costs to big business? Surely that modelling shouldn’t be too difficult to obtain. What’s the likely cost, what’s the incidence of it, the number of corporations that would be affected, the frequency, and so on?

Thirdly, what makes him think that a voluntary code of conduct will change behaviour, when we’re talking about an entrenched pattern of behaviour that confers substantial financial benefit on the late-paying corporations, at the expense of small businesses? What are the facts on this? What is the data that the Minister has drawn on to justify his assertion that a voluntary code of conduct is a credible or serious alternative to the law that is being repealed today?

I would suggest that Helen White’s Amendment Paper that would, essentially, retain the current law but give it a trial period would be a much more thoughtful and responsible approach. If the Minister, in fact, does agree that this is a serious problem affecting small businesses, as he says, unless he’s got a watertight case, based on the modelling, based on the facts, then surely a more responsible approach would be to allow the legislation to continue and, effectively, a trial period and do an evaluation after four or five years. Why not take the Australian approach, which is not to throw the baby out with the bathwater, but to see how the approach, the legislation, can be strengthened or improved or streamlined?

Look, this “reckon” thing—I’d just say to the member the Hon Phil Twyford: how can you get a qualification on a system that hasn’t actually taken place? No one could answer that question. That question cannot be answered. The only place where it has taken place is in Australia, and it’s been in place for two years, and so they’re the best people to look at what the impact is.

I’ve quoted the statistics before, particularly around the take-up of the scheme over there and the usage of the scheme, and the recommendations of the Minister who actually did the review are interesting. What he said, was—and, again, I just quote—“I recommend: better protecting the rights of small businesses regarding unfair trading practices and unfair contract terms”. We’re not talking reckons here; we’re talking about a Minister who has actually reviewed the scheme that’s been in place, which the Labour Government just obviously picked up and carried over here without much further thought. I’ve just noted previously that one of the seven initiatives is raising awareness of existing redress options under the Fair Trading Act.

The second point is increasing the adoption of e-invoicing. I’ve already said countless times in the House that one of the greatest drivers of productivity—and if you just pick up or google Xero’s report, they talk about an $8.5 billion uplift for the New Zealand economy if small businesses, in particular, pick up and do one more app. If that one more app happened to be e-invoicing, the productivity gains to New Zealand, they estimate, are $8.5 billion, right? I am very keen, as the small-business Minister, and this Government is very keen, to promote e-invoicing, because of the productivity gains.

So what we’ve said is we’re going to require Government agencies and entities, in time, to be capable of e-invoicing, both to be able to receive and to send, and to incentivise businesses to do it, because they’re going to have even quicker payment times. That is not about regulation; that is just smart thinking about how you try and make things happen in the economy without resorting to regulation, which the Labour Government loved to do.

The third thing: elevating the importance of prompt payment of suppliers and of procurement practices. Guess what! What are the one of the other seven initiatives I noted? The other one is that we are going to ask the Ministry of Business, Innovation and Employment to publicly disclose the payment times for Government agencies. We are going to do that. That is the biggest nudge you will see, because that will drive CEOs of our large Government agencies, and, in time, the Crown entities—nearly 100 entities spending over $50 billion a year—to promptly pay. All these things are actually recommended by the Australian Government, and that is what we’re proposing to do with the reforms that I’ve set out many times, that I’ve spoken about in the House.

I move, That debate on this question now close.

Madam Chair, thank you. Look, I’m really appreciating the responses from the Minister for Small Business and Manufacturing. They are genuine responses to the questions and so I do think that’s really useful. I’m hoping that we can have a little bit of the exchange that we were promised when we brought in the new way of doing committee of the whole House stages. I do have just a few questions for the Minister, which I’m hoping he can answer fairly promptly, so I’m not going to spin out the time I’ll take; I am going to get to the question.

It is to do with one of the seven measures that the Minister talked about in his first speech and again in his second speech. I took notes from both speeches and it was talked about again now. And that is the fact that small businesses can go to some credit ratings entities and get a report on a business for the sum of $35. I just wonder if the Minister—OK, he asserted there’s four or five of them readily available in New Zealand. Could he please name those agencies? It would be useful to know who they are.

Thank you, Madam Chair. I too wish to thank the Minister for Small Business and Manufacturing for his genuine engagement. I think, over the last 98 days or so, we haven’t seen a great level of engagement at the committee of the whole House stage, and for the Minister to listen to the speeches and then engaging meaningfully at this point is very useful. He has referred to a number of his speeches and some of his thinking around what he plans to do in this space, as Dr Deborah Russell has said, and so that does open up the conversation in our questions in a back and forth exchange, I think, to really get a sense of why he has brought those into the debate.

So, on that note, the Minister has just mentioned in his previous answer about the public sector and requiring the public sector to be prompt with their payments. I couldn’t agree more. I think leading from the front is a very good idea. Government procurement, we know in the social enterprise space, can make a huge difference to the NGO sector and to social equity. I’m wanting to know why the Minister wouldn’t consider just including that requirement of the public sector in the existing framework that has been set up by the primary bill. Because, as the Minister has quite rightly said, the Ministry of Business, Innovation and Employment is just about to start to create those regulations and therefore it wouldn’t be that problematic, in my view, to simply tweak this current system to require that public sector requirement. That’s my first thing.

The second one, picking up on what he said, was about the fact that there wouldn’t be a need to legislate, because the Minister of Finance would be able to give a directive. I’m really keen to know what that entails because, as has been pointed out, we are doing this under urgency. There’s been a lot of use of urgency from the Government, and using a ministerial directive is quite a strong and unusual point of action that can be taken but in quite limited circumstances. I want to know if the Minister has considered whether there could be a judicial review of that ministerial directive, what advice has he received about the use of the ministerial directive, and can he assure us that there wouldn’t be some kind of “Henry VIII” element to it, given that he is planning to put in some fundamental changes without going through the normal parliamentary process.

My third question is to just pick up some new points on the voluntary code that were raised by the Hon Phil Twyford, because voluntary codes—there is some cynicism from our side of the House in terms of thinking: is this just a PR exercise? The late payment practices that are currently being endured by small business have been around for ever and so we we’re deeply cynical about the offer of big business to suddenly say that it wants to set in place a voluntary code. That could sound like a PR stunt. So I’m wanting to know what advice has he had from officials about the efficacy of a voluntary code. I’d like to know, in that voluntary code, which he himself has raised in the debate, how many violations of the code would it take for there to be some kind of ramification? Would big business be able to violate it as a trend? Or would there be a capped number of how many times they would have late payment practices before that code would kick into effect? And what kind of consultation would go into that code? Because I’m sure that big business would have an opinion about that. Were small businesses consulted or will they be consulted in the formulation of that code to work out what those violations would be?

The other question is sanctions. If there’s a voluntary code, what are the sanctions? Will there be sanctions and will it hinge on reputational risk? Because that is what the existing Act does. And, Madam Chair, before I come to the end of my time, I’d just like to advise you, I do have an amendment I’d like to put to the Minister before I have to leave, which I think might actually help him out. So these are just my questions on the voluntary code. And also, would the code be made in a public kind of forum? Would it be done behind closed doors? Again, what official advice has he had?

Turning now to my amendment, that I think I’d really like the Minister to consider very seriously, because when we look at what we’re trying to do today, and I think there is agreement across the House that paying bills late is bad practice—I think that’s one thing we can agree on, but we have very different views about it. So what could perhaps help the Minister is, instead of under clause 3, repealing the Act to simply replace the purpose section 3(b) of the Business Payment Practices Act with a new subsection (b) “Require large entities to advise contractors on written notice of any late payment”. This is an amendment under my name.

Now, of course, we need the definition of “late payment”. So I would insert in section 5 of the Act that “Late payment means any payment that falls outside a large entity’s own payment terms and conditions.” This speaks to the fact that we are not advocating a prescriptive regime that says a big business has to pay within 10 days or within one month. What we are saying is: by all means retain your self-governance, retain your payment practices, but make sure you stick to your own rules, because, then, small business will be on notice of what the payment terms are, will have the certainty it requires to be able to plan its cash flow, and will know that if, for example, the payment terms are three weeks, that the cash flow has to meet that. And there will be certainty that at the end of that three weeks, payment will be made, cash flow will be happening, and it will be able to then pay its own contractors and suppliers.

So the other element to this, then, is a new clause 5A. This is a part that technically would enable the legislation to do exactly what the new purpose would say. And if I dissect it—so I’ll read it to you. It’s new clause 60A “Large entities must advise contractors by written notice of any late payment as soon as is practicable, once it is aware that such payment will be late.” Now, “large entities”, we know that that is the entities that have the cap of $33 million of revenue or $10 million owing to third parties, which I had thought the Minister was comfortable with when we had amended that in the primary legislation at select committee. So we know what large entities are. This is not going to affect smaller business. So all the talk from the other side of the House about compliance costs, simply, for most business in New Zealand does not apply.

Then we’ve got “Advise contractors by written notice”—now, this is really important. I’m not suggesting it be by letter, but it could be by e-mail, text, or any form of evidence-based communication, because if there are disputes, obviously there needs to be a record of the communication—“of any late payments”—we’ve talked about that. That means late according to its own payment practices, and then “as soon as practicable”. That’s a very reasonable kind of test. We see that in a lot of legislation. It’s not requiring big business to go through hoops. It is saying that is what is reasonably practicable to do in the circumstances.

The really interesting bit for me here is that this is once it is aware that such payment will be late. So I’ve even added a mens rea element to this that there needs to be awareness by the big business. Now, that could be, if the Minister was minded to and wanted to be really generous to big business—it could actually require evidence that there was true awareness by somebody—an employee, a manager, somebody who was part of that business or it could be deemed, and that would be my preference, Minister, through you, Madam Chair. I would like to see that deemed, so that where there was some kind of trail of communication, or perhaps there was an invoice in the system, there would be a deemed awareness that that payment would be late if it was not made according to the practices of that business at the time.

So, Minister, I’d really—through you, Madam Chair—like you to consider my amendment, because I think it’s a nimble way to achieve all the things that you would like to achieve while making sure that we don’t dismantle something that did go through a select committee, that did have this voice of small business, that can be tweaked to have the public sector element that the Minister would so like to see and that I support. So, Minister, I’m very keen for you to show the generosity in your answers that you have previously and to continue this back and forth, because I know that my colleague Dr Deborah Russell has got a number of questions on the seven elements of the new regime. And given that you’ve brought them into the debate—through you, Madam Chair—we would really like to interrogate your thinking on that. I look forward to your answers, Minister.

I’m sensing it’s going to be a long Friday, because the questions are—

Hon Scott Simpson: Or Saturday, maybe.

Hon ANDREW BAYLY: Or Saturday, because I’m sensing the questions are becoming not as direct and rather on a different tangent, if I can put it that way. To be asked, “Who are the four credit agencies?”, well, I think there’s Centrix, Equifax, and illion, and I can’t remember the fourth, but I’m sure if the member pulls out her phone, she might be able to find the fourth.

Now, in terms of the issue around the issuing of a directive, as I made clear in my opening speech—in my initial speech—I’ll be working with the Minister of Finance, and also in her capacity as Minister for the Public Service. There are three options, actually, for how we might bring about the changes in terms of payment times. In respect of Government agencies and after consultation with Government entities, that could either be by way of a directive, it could be by way of a Cabinet decision, or it could actually be through the procurement rules, but probably most likely by way of directive, and the Minister can do that pretty easily.

In terms of the amendments to the bill—and I note there’s quite a few Amendment Papers being put up by members of the Opposition—one thing I’d say to them is that if we repeal the bill, which is the Government’s intent, then obviously you cannot attach the amendments to a bill that no longer exists. And I would suggest that some of the suggestions from the last member, who was obviously trying to be helpful, those are the type of things I would expect to be taken up in the industry code which will be developed and, hopefully, in place by the end of this year, which I would expect, because that will pick up some of those elements. But, in terms of the amendments that have been put forward, unfortunately they cannot apply to a bill that no longer exists.

Oh, fine choice. Thank you very much. I rise for the first time in the committee of the whole House stage. I just also acknowledge the Minister for Small Business and Manufacturing for his attention, I think, during the speeches and also during this committee stage. Ngā mihi nui, ki a koe.

What we do know, Minister, is that this bill would adversely impact Māori, Pasifika, and vulnerable Pākehā communities. So a question is: which small Māori businesses has he consulted? There are 21,000 Māori-run businesses here in Aotearoa, and I’d just like to know if you’ve consulted one around this particular issue.

I think that it’s insulting to say that small businesses wouldn’t know how to navigate through a particular process. I think that’s insulting, when, you know, these are intelligent professionals who are able to start a business and contribute. You said the Government contributes to 33 percent of this country’s economy; 29 percent—over a quarter of New Zealand’s GDP—is contributed by small businesses. So we’ve got to ask the question, because that is a huge amount: over a quarter of the country’s GDP is actually contributed by small business.

So I just want to know which of these small businesses—and, in particular, Māori and Pasifika small businesses—has the Minister consulted to ensure that this bill helps those particular businesses to survive. Unfortunately, 35 percent of companies, year on year, are filing for liquidation. Why? It’s because they’re not paid on time. Four months is a long time for any small business to wait. Like I said in one of my speeches, it impacts on those who have to pay the bills, on those who have to feed their whānau, and on those who have to fill their vehicles.

So the other question I have for the Minister is: how can he give assurance or security to those vulnerable communities, and especially those firms that employ Māori, Pasifika, and vulnerable Pākehā people, that they’ll be able to pay their bills on time? That’s what the impact is of this bill: it’s not just small businesses but the impact of those who work for those small businesses. If there is no mechanism to hold big corporations to pay on time, how does the Government ensure that those corporations pay on time? This gives them a back door out—it actually gives them a back door out. So I want to know: you’ve taken this mechanism out, what is the mechanism that this Government is going to use to ensure that those companies pay those small businesses and those whānau who are working for those businesses on time, and those who own those businesses are able to pay those who work for those businesses, but also that those who are working for those small businesses are able to pay the bills, feed the whānau, put petrol in their car, pay their medical bills?

We’re in a financial crisis at the moment, in terms of it’s really, really difficult for our whānau out there at this particular time. This bill puts more pressure on those whānau. It’s going to put more pressure on small businesses.

So those are some of the questions that I ask the Minister. I respect the Minister. I look forward to the answers to those questions.

Thank you, Madam Chair. Thank you to the member Rawiri Waititi for those kind words. Just on the issue of failure of companies, there are many reasons why nine out of 10 businesses fail over 10 years, and a lot of it is due to undercapitalised businesses simply not having enough capital. A lot of it is to do with the fact of poor management and the way they market their companies. The reasons are varied. So to attribute it always to late payment is not actually correct. But I take your point. Late payment can affect businesses, and cash flow is the lifeblood of any business, and so I acknowledge that. That’s why I’m very conscious of dealing with that specific issue. I think what we’re proposing is actually a much more practical approach to actually getting a better outcome.

In terms of Māori businesses, I recently had dinner with some Pacific and Māori business leaders, and the member might be interested to know that I have reestablished the ministerial small-business advisory group. I’ve had 40 people to a meeting three weeks ago and I’ve got another meeting with them, I think, the week after next, where I’m actually seeking the view of many people from across the small-business sector, whether they’re in tourism, whatever sector they are, they are being represented, and I’m asking these sorts of questions of them because I want to make sure that when we’re responding, as the Government, to the issues, we’re responding to the needs that small businesses have identified, not some Minister sitting in the chair opining on it and coming up with a view and imposing $3 billion worth of additional regulatory cost, which we saw over the last six years.

Thank you, Madam Chair. I want to go back to the question I asked earlier when I asked the Minister for Small Business and Manufacturing which were the four or so credit ratings agencies, and it’s for a practical reason. I took myself to have a quick look at those websites to have a look at the sort of information that is available from those credit ratings agencies, and there are, in fact, a variety of credit reports available. But—to the Minister, respectfully—the information that is available from those credit agencies does not seem to be the same sort of information that is available in this Business Payment Practices Bill that would have been made available by that.

So the particular information that’s made available in the Business Payment Practices Bill is not the creditworthiness of a supplier of an entity, it’s not their credit record, and so on. What the Business Payment Practices Bill supplies us with is information about how long an entity takes to pay.

I’ve actually had a longstanding interest in this. Back in the Parliament of 2017 to 2020, I had a member’s bill in the ballot looking at requiring companies to disclose information about their payment practices time. I was alerted to that by David Cormack, who I know will be known to many of you. He came and talked to me about some of the difficulties around businesses getting paid, and so we looked at having at least a disclosure regime so that businesses would have to disclose how long they took to pay invoices. Now, that information is available. Businesses do have creditors’ ledgers which record where they owe money to and how long it is since they were paid, and, actually, sometimes that’s not related to their creditworthiness—famously, Fonterra was taking a very long time to pay its bills, for no good reason.

My concern here, Minister, and I would like to hear your thoughts on it, is the extent to which the information that is sitting in the Business Payment Practices Bill can be obtained—sorry, it’s not in the bill; if it was, this wouldn’t have been brought in—by small businesses who want to know how long it is going to take for them to get paid. So it’s a different set of information, and I couldn’t find it, and certainly not at that low price you’ve quoted of $35, on the various credit ratings agencies.

So there are a couple of things there that I guess you could address. One is the extent to which businesses can get that information, or that length of payment time, but also whether—you know, perhaps they could get it one way or another, but is that available at what you have suggested is the low cost of $35, or would they, in fact, have to pay a higher fee to those various credit ratings agencies in order to get that kind of information?

I’m going to take a call from Hūhana Lyndon. I’m looking for any particularly new questions. It’s a very narrow bill, and, as the Minister said before, it’s very hard to amend an Act that’s about to be repealed. So very specific questions for the Minister from here on in, thank you.

Thank you, Madam Chair. I’m just really wanting to go to the heart of the matter, I guess, and our fundamental principles and relationships of Te Tiriti o Waitangi. Consultation is one thing—and having a dinner recently is awesome with Māori business—but, ultimately, what, in the lead-up to introducing this legislation under urgency, did the Minister undertake to engage with te Iwi Māori—te Iwi Māori and the relationship with the Government through Te Tiriti.

I haven’t heard an answer for my colleague Scott Willis in terms of stakeholder engagement, and then we’ve heard the response to my learned colleague Rawiri Waititi. But in terms of the Te Tiriti relationship, what guidance or offers of advice did you receive from iwi Māori, and did you receive any advice from Crown officials in terms of how compliant this legislation is with Te Tiriti? Kia ora.

Thank you very much, Madam Chair. Thank you, it’s really a pleasure to take a call on this bill. It was a bill that I was responsible for when I was the Minister for Small Business, and it is a real concern to see that it’s being repealed without any real active programme in place.

So the first point I’d like to ask the Minister for Small Business and Manufacturing is in relation to the information provided to support the repeal bill. I do understand that there is no regulatory impact statement provided with this legislation. I would just like to ask the Minister if he’s considered still doing some sort of analysis, because, while he is repealing the bill, it still requires some level of analysis to understand what the impacts are on small business by not implementing this regime.

So the problem that the initial bill was attempting to address was access to finance for small businesses. And we know—we all, I think, agree—that that would be the number one issue that small businesses struggle with: accessing finance. New Zealand is right up there in the world as being one of the poorest countries to provide small-business owners with some way of accessing finance. No doubt, the Minister will have heard stories, as I did, of small-business owners who mortgage their own home, who go into debt simply to be able to make the next wage round. So what this bill was attempting to do was to free up regular payments—from those large companies that wait to the last minute in order to accrue interest on that that that income, that money—to enable small businesses. So that’s my question to the Minister in relation to what analysis on the regulatory impact statement might be done.

Secondly, my question is: what are his plans in order to enable small businesses in New Zealand to have greater access to finance? Because that is the outstanding question that is not addressed when you simply repeal this legislation. Just having a voluntary code, or just ensuring that Government pays, does not address the heart of that problem. What I put to the Minister—and I’d be really interested to hear his feedback—is that while this Government has come in claiming to get a lid on inflation, to bring inflation down, which we all want to see, what we are actually seeing is some unintended causes in the economy, as a result of cost cutting, of reducing spending. There’s been some really interesting reports—Bernard Hickey, one of these—that are saying that inflation is actually being pushed out and up into the economy. We’re seeing this through increased rates, through increased compliance costs on small businesses, through new fees, through user-pays—

CHAIRPERSON (Barbara Kuriger): Can we come back to questions for the Minister, please.

Hon GINNY ANDERSEN: So what these additional costs that are pushing up inflation and putting an additional burden on small businesses—what is the Minister’s plan? Maybe it’s in the eight points that he’s mentioned that we haven’t heard what they all are. What is the answer to enabling small businesses in New Zealand to have access to finance, so that we don’t have mum and dad businesses with their home getting a second mortgage in order just to make payments. Because that is the fundamental problem that we still—I don’t see—have an answer for, and I’d be very keen for the Minister to speak to that.

I’d just like to raise one issue in relation to the legislative statement that’s been presented to the House. In particular, the Government’s views that most small businesses won’t have the time to search for payment data and so we’ll just throw it out. I just think I’d like to hear a little bit more from the Minister. That can’t be the whole reason: they don’t have time to do it, so we should just throw the baby out with the bath water. I don’t see that as a sufficient justifying reason to scrap this bill that would help small businesses.

The other point I would just like the Minister to speak on is that it states in the explanatory note that “information on late payers is already available from credit agencies.” My point to the Minister is: that’s different, that whether someone’s got a bad credit rating, it is not the same as actually being able to pay on time or being a good payer. So I’d just like some more information about what other information is available, whether it be Government or small businesses. If we’re going to scrap this register and it’s going to be voluntary, what else can small businesses have as tools? Someone can have a great credit rating but can be a lousy payer of their bills, but do it on the last day or, like, the day after—that’s still not fair on small businesses.

I move, That debate on this question now close.

The tabled amendments to Part 1 in the name of Arena Williams, Helen White, and Ingrid Leary are ruled out of order as being inconsistent with the principles and objects of the bill.