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Questions and Answers - March 14


Solid Energy—Financial Position

1. Hon DAVID PARKER (Labour) to the Minister of Finance: Does he agree with the Prime Minister that one of the three main reasons for Solid Energy’s precarious financial position was that “they added gearing to a company that historically had not had gearing”; if so, why?

Hon TONY RYALL (Minister of Health) on behalf of the Minister of Finance: Yes, I do. The fundamental cause of Solid Energy’s problems is that the investments that the board made did not generate the returns that the board expected, and the situation became a perfect storm when coupled with the collapse of world coal prices in 2012.

Hon David Parker: Does the Minister of Finance stand by his own acknowledgment yesterday that in the case of Solid Energy it “would have been better with no debt. In retrospect, that is easy to see; at the time it was not.”; if so, can he understand why New Zealanders are so disappointed to have a Government that can be wise only with hindsight?

Hon TONY RYALL: Yes, and, of course, that is the benefit of hindsight. At the time that the former Minister for State Owned Enterprises wrote to that company, it was clear that, as we were expressing to all State-owned enterprises, there was a need to lift improvement.

Hon David Parker: Why does his Government continue to deny responsibility for foolishly pressuring Solid Energy to hugely increase its debt and dividends at a time when coal prices were dropping?

Hon TONY RYALL: The Government did not hugely pressure Solid Energy to increase its dividends and its borrowing. The Government is absolutely clear: it is the responsibility of boards to balance dividends, debt, and capital, and that is exactly why, in 2008, Mr Mallard wrote to the board of Solid Energy and said that a long-run ratio to dividends to net profit after tax—65 percent—was something that Ministers were not uncomfortable with.

Hon David Parker: Is the Minister aware that Mr Palmer, at the Commerce Committee this morning, said that he had said to the Government that this call for higher gearing for a company that was exposed to a volatile price for commodities and a volatile exchange rate was wrong, and that his Government had said to do it anyway?

Hon TONY RYALL: As the member heard this morning from Mr Palmer, dividend decisions are made by the board, and the board takes responsibility for those dividend decisions. If asking boards to consider debt and dividend policies is not right, why did Mr Mallard do it in 2006 and 2008?

Hon David Parker: Did the Crown Company Monitoring Advisory Unit, as it was then, and the Minister of Finance’s own Treasury—of which the unit is a subset—say in advice dated 26 May 2009 to the Minister of Finance, to Mr Joyce, and to the Minister for State Owned Enterprises that setting a blanket 40 percent debt target risked being seen as simplistic and unrealistic?

Hon TONY RYALL: Probably they may have said exactly the same about the Labour Government’s 35 percent debt target, which Mr Mallard told them about in 2008. But, look, let us be absolutely clear here. The board’s responsibility is to manage debt, dividends, and investment. Clearly, wrong decisions were made in terms of some investments that have not generated the return that that company wanted. What the member fails to tell the people of New Zealand is that in the second half of 2009, coal prices strongly rebounded, reaching substantial price levels that continued right through until 2011.

Hon David Parker: Does he agree with Mr Palmer that after the then Minister of Energy and Resources, Mr Brownlee, had put out his “Sexy Coal Brownlee” video, after the Minister of Finance turned the first sod for lignite developments and the Prime Minister also expressed support, and after the Government said it wanted Solid Energy to expand solid coal production and borrow more money to do it, the Government knew it was asking Solid Energy to both increase debt and increase risk after Mr Palmer said that it was wrong to undermine its balance sheet?

Hon TONY RYALL: That member is trying to rewrite history for his silly political purposes. The fact of the matter here is that after 2009 the international coal prices rocketed. They went up significantly. In fact, under that party opposite, the value of Solid Energy went from about $500 million to $2 billion. The fact is that it is not the debt that has caused the problems at Solid Energy; it is the fact that a number of investments have been made that have not generated the return that the board expected, and coupled with a major collapse in coal prices in 2012, we have what has been described a “perfect storm”.

Hon David Parker: In respect of one of those failed investments, is he aware that Don Elder and Mr Palmer both said that the reason the biofuels investment did not make any money was that Mr Brownlee and his Government removed the biofuels sales obligation that was previously legislated?

Hon TONY RYALL: Mr Speaker—[Interruption]

Mr SPEAKER: Order! [Interruption] Order! A question has been asked. It requires and deserves an answer.

Hon TONY RYALL: The member seems to be suggesting that this would have been a profitable investment only if it was subsidised by the New Zealand taxpayers. The company must have known about that decision when it was made, and it can make investment decisions in response to Government policy change. The fact is that those investment decisions, dividend decisions, and debt decisions are the responsibility of the board, as set out in the State-Owned Enterprises Act 1986—passed by a Labour Government.

Hon David Parker: Did the letter from the Minister of State Owned Enterprises on behalf of himself and the Minister of Finance as shareholding Minister in 2009 ask Solid Energy to increase its debt levels?

Hon TONY RYALL: Together with every other State-owned enterprise, Ministers did write and ask the board to consider increasing the debt levels. Mr Palmer, recognising that this is the prerogative of boards, wrote back to the Minister and said that the board is best placed to understand the earnings volatility and balance sheet risks of the company, and I am sure that that is the view that the board had when Mr Mallard was writing to it about dividends and debt in 2006 and 2008. Goodness me, have they not forgotten a lot?

Hon David Parker: Would the Minister be surprised that given this company had one shareholder—the Crown—Mr Palmer found very influential the request from the Government, its only shareholder, to increase production, increase dividends, and increase debt?

Hon TONY RYALL: Now Mr Parker is saying that the board should not increase coal production when we had record coal prices from the end of 2009—

Hon David Parker: I raise a point of order, Mr Speaker. That was not my question at all. My question, if I would be able to re-put it—

Mr SPEAKER: Well, I think that is the quickest way forward, but it would be helpful if I could actually hear the question as well, so if we could have a bit of silence from both sides of the House.

Hon David Parker: If I can recall—I will not be able to recall the exact wording—

Mr SPEAKER: Order! The member has—[Interruption] Order!

Hon David Parker: Is the Minister surprised that the former chair of Solid Energy Mr Palmer said that given that the company had only one shareholder, the Crown, the request from the Crown to increase production, increase dividends, and increase debt was very persuasive?

Hon TONY RYALL: It is the responsibility of boards to make these decisions. If they cannot make those decisions, why bother having them? Labour passed the Act in 1986, and the fact here is that we are now hearing from Labour that when the coal prices were at astronomical levels in 2009, 2010, and 2011, the company should not have increased coal production. That is bad economics.

Rt Hon Winston Peters: Is it not the case that forcing greater debt and extracting excessive dividends from Solid Energy was fraudulent in that there was no real revenue stream behind them—

Hon Steven Joyce: What a load of rubbish.

Rt Hon Winston Peters: I know you are—

Mr SPEAKER: Order! [Interruption] Order! That is a good demonstration of what happens when there is an unhelpful interjection across the House. Would the Rt Hon Winston Peters please ask his supplementary question.

Rt Hon Winston Peters: Is it not the case that forcing greater debt and extracting excessive dividends from Solid Energy was fraudulent in that there was no real revenue stream behind them over those years, and that the dividends, in fact, came from increased borrowing, because otherwise would Solid Energy be bankrupt today; and why should not we believe an experienced business operator and Government appointee like Palmer, rather than a bank teller like you?

Hon TONY RYALL: What I can tell the member is that this is a situation where the board made investment decisions that simply did not generate the rate of return that was expected of them and, coupled with a significant collapse in world coal prices, the company found itself in the position that it did. There is nothing fraudulent about the behaviour of the board, and I think the member should reflect upon that accusation.

Rt Hon Winston Peters: Why should we not believe Mr Palmer, who was a serious Government appointee in the past and has a serious business record, when he points to the Government using the device of forcing greater debt and extracting excessive dividends from Solid Energy as a deceptive way of massaging and flattering the Government’s true fiscal position; why should we not believe Mr Palmer, and not a former bank teller like you?

Mr SPEAKER: Order! Would the Minister answer just the first part of that question.

Hon TONY RYALL: On behalf of the Minister of Finance, who I think was actually a Treasury official and did not work at the bank, I am sure that Mr Palmer did not say some of the things that Mr Peters has alleged that he said. But I agree with Mr Palmer when he told the committee this morning that dividend decisions are made by the board and he takes responsibility, as I am sure Mr Palmer said that the board takes responsibility for its investment decisions. Coupled with the significant collapse in world coal prices, that is why the company finds itself in the position that it is in.


2. Dr JIAN YANG (National) to the Minister of Finance: What reports has he received on the outlook for the economy?

Hon STEVEN JOYCE (Associate Minister of Finance) on behalf of the Minister of Finance: The Reserve Bank today issued its latest Monetary Policy Statement for March. It kept the official cash rate unchanged at 2.5 percent. The Reserve Bank also slightly revised up its outlook for the economy from its projections in the December Monetary Policy Statement. However, it did note that the recovery remained somewhat uneven, with demand and output expanding and consumer confidence increasing. On the other hand, it noted a continued drought would have a negative impact on economic output. Overall the central bank now expects annual average real GDP growth

to rise from just over 2 percent in the year to March this year to around 3 percent in 2014 and 2015 before easing back a little in 2016.

Dr Jian Yang: What are some of the factors driving the Reserve Bank’s forecasts for growth over the next few years?

Hon STEVEN JOYCE: The Reserve Bank notes that reconstruction in Canterbury is picking up and will be a key driver of economic activity over the forecast period. Residential investment in other parts of New Zealand is also expected to increase as a result of mortgage interest rates remaining low. The Reserve Bank also expects export growth to be slightly stronger in the latter part of the 4-year forecast period than it projected in December. It notes that the outlook for growth among our trading partners has improved since that December statement. The bank’s projection for private consumption is broadly in line with its December Monetary Policy Statement forecast. It expects household savings to pick up to 1.2 percent of total disposable income by 2016, from a negative 0.1 percent in 2012.

Dr Jian Yang: What are the Reserve Bank’s latest forecasts for the cost of living over the next few years?

Hon STEVEN JOYCE: The Reserve Bank expects consumer and price inflation to remain subdued through the rest of 2013 before gradually rising to the mid-point of its 1 to 3 percent target band. Headline annual inflation is projected to be 0.9 percent, 1.4 percent, and 1.8 percent in the March years to 2013, 2014, and 2015 respectively. These forecasts of low inflation are good for New Zealand households, particularly those on lower or fixed incomes. In addition, average floating home mortgage interest rates are now around half what they were 5 years ago in 2008. For a family with a $200,000 mortgage, that is saving them around $200 a week.

Dr Jian Yang: What alternative economic and monetary policy approaches would put at risk the low inflation and low interest rates currently enjoyed by New Zealanders?

Hon STEVEN JOYCE: Well, there are a number of alternative policies that would put substantial benefits of current low inflation and low interest rates at risk, and that would, of course, cost New Zealand households dearly—for example, trying to artificially and substantially devalue the exchange rate or going soft on inflation; or, for example, opposing the Government’s share offer programme and instead borrowing billions of dollars more to pay for priority assets like schools and hospitals; or, for example, just pulling out the photocopier and printing more money. All of those things would send interest rates and inflation through the roof, directly affecting New Zealand households and families. They are, of course, the cornerstones of the Labour-Green opposition—

Mr SPEAKER: Order!

Hon David Parker: How can the Minister of Finance claim to be a responsible manager of the economy when as shareholding Minister of Solid Energy he so clearly mismanaged that at the cost of many, many jobs and many tens, if not hundreds, of millions of dollars just a year after he had the debacle of the loss of hundreds of millions of dollars extra through the mismanagement of the Crown Retail Deposit Guarantee Scheme, where they did not even look as to whether there was interest and increased loans on the back of taxpayers following the grant of the guarantee?

Hon STEVEN JOYCE: The member has an interesting take on history given that it was the former Labour Government in 2008 that set up the deposit guarantee scheme, with the support of the Opposition at the time because of the difficulties of it. Of course, that deposit guarantee scheme has come at some cost to the country as the member points out, but has actually helped underpin the New Zealand financial markets, which is one of the key reasons why we have come through the global financial crisis alongside Australia in better shape than just about every other OECD country. Once again we learn that the member has very little understanding of finance whatsoever.

Solid Energy—Financial Position

3.GARETH HUGHES (Green) to the Minister of Finance: Why did the Government approve increased debt for Solid Energy on 28 May 2009 despite the latest company report at the time

stating that coal prices were falling and “we expect this downward trend to continue through 2009 and into 2010?

Hon TONY RYALL (Minister for State Owned Enterprises) on behalf of the Minister of

Finance: The Government did not approve the debt at Solid Energy. It is the responsibility of the Solid Energy board to make investment decisions on the structure of the balance sheet. I would say to the member that, in fact, coal prices bounced back significantly in the second half of 2009 and peaked in 2011, which I think demonstrates the level of volatility in this area. As Mr Palmer said, the board is in the best place to understand the earnings volatility and balance sheet risks of the company.

Gareth Hughes: Does he dispute, then, the testimony of John Palmer this afternoon, and why did the Government ignore the clear opposition by the Solid Energy board to increasing the debt loading that has seen its debt just balloon?

Hon TONY RYALL: I cannot comment on the first part of the member’s question but I can say quite clearly that it is the responsibility of the board to manage the balance between debt, dividends, and capital investment. The problem here with Solid Energy is that a number of investments were made that have not delivered the returns that might have been expected of those. Coupled with the significant collapse in world coal prices, that is why the company finds itself in this position.

Gareth Hughes: Is John Palmer then correct in saying that the National Government encouraged Solid Energy to take on debt to adopt an expansionary strategy, and if so, was it smart to take $164 million in dividends out of the State-owned enterprise in the same period when debt ballooned from $13 million to $313 million over the same period?

Hon TONY RYALL: The level of dividends that were paid by Solid Energy is extremely moderate in comparison with the cash flows that that company was generating during a period of huge international coal prices. Everybody in this House knew about what was happening in Australia—the huge boom in coal prices, profits, and investment happening over there. The Government did ask for increased dividends, but the dividends that it received would not be at all unusual compared with the 65 percent of net profit for dividends that Mr Mallard indicated in 2008 was appropriate for a company like Solid Energy.

Gareth Hughes: Has the Minister subsequently instructed or requested Solid Energy to see a reduction in debt or a reduction in debt expansion?

Hon TONY RYALL: The Government is working very closely with the banks and the board of Solid Energy in respect of the future of the company. The company has been severely impacted by the significant collapse in coal prices—40 percent during 2012. Its export volumes fell 27 percent in one quarter alone. This is the reason why Dr Elder, I think it was, described the company facing a perfect storm.

Gareth Hughes: I raise a point of order, Mr Speaker. My question was not about Solid Energy or the banks. The question was what the Minister is doing about debt—

Mr SPEAKER: Order! And I have listened very carefully to the question and I am quite happy that the question was adequately addressed with that answer.

Gareth Hughes: Was he ever advised that the high New Zealand dollar was, to quote John Palmer this afternoon, “A major factor in Solid Energy’s demise.”, and is this yet another victim of this Government’s monetary policy?

Hon TONY RYALL: The world coal prices and the returns to Solid Energy are impacted by a whole lot of things, but the most significant driver was the collapse in world coal prices. There was, actually, a 27 percent drop in exports in one quarter alone. That is the reason why this Government is now working closely with the banks in respect of how it gets this company moving into the future. I would say that that member opposite has opposed everything that Solid Energy has done to try to get its books back in order.

Gareth Hughes: I raise a point of order, Mr Speaker. I do not think the Minister addressed the question at all.

Mr SPEAKER: Yes he did. If you listened to the answer, he clearly did address it. He said it was one of the factors, and then went on to elaborate with others.

Gareth Hughes: Why does the Minister continue to blame biofuels for Solid Energy’s demise when it was his Government that removed the biofuels obligation, it was his Government that reduced the financial support, and it was his Government that has seen the carbon price drop from around $20 a tonne to about $1 a tonne?

Hon TONY RYALL: I simply do not believe that a Government commitment to remove the biodiesels obligation is responsible for the collapse of Solid Energy. I would ask the member to look at what is happening in Australia, where, I think, Mr Tinkler is on the verge of being arrested, because he will not front up to the collapse of his coal company. A number of American companies’ values have collapsed by almost 70 percent. This is an international phenomenon that has affected coal companies throughout the world. That is the reason why Dr Elder today described the matching of the collapsing coal prices with the investment decisions that had been made as a perfect storm. This Government is responding to that by working closely with the banks and the board of Solid Energy to see what we can do, because we have got so many people who rely on this company.

Gareth Hughes: Does the Minister think that the perfect storm he is referring to is, in fact, National Party policy and National Party decisions, and that that is the reason we are seeing Solid Energy in such strife?

Hon TONY RYALL: I am sure the Minister of Finance is very impressed to know that his policies have an impact on the coal companies in the United States, coal companies in Canada, coal companies in China, and coal companies in Australia that have all been dramatically affected by the collapse in world coal prices. The problems with Solid Energy come from the investment decisions not generating the returns that were expected, together with the collapse of world coal prices during 2012. This Government is responding to that by working with the banks and the board to do what we can to salvage as much of this company as we can.


4. JONATHAN YOUNG (National—New Plymouth) to the Minister of Energy and

Resources: What recent reports has he received regarding increased production of methanol from New Zealand gas?

Hon Member: Speaking of gas!

Hon SIMON BRIDGES (Minister of Energy and Resources): There is a lot of natural gas over there. I have seen reports that Methanex plans to invest almost $80 million to increase its New Zealand production of methanol. This reflects the improving and secure natural gas supply in this country. This will involve adding capacity at its current Motunui site as well as restarting the Waitara Valley site later this year. By the end of this year its operating capacity is expected to increase from 700,000 tonnes to 2.2 million tonnes. I am encouraged that businesses such as Methanex are confidently expanding their operations in this country.

Jonathan Young: How will Methanex’s expanded operations in New Zealand benefit both the local and the national economy?

Hon SIMON BRIDGES: There will be many benefits to the member’s region as well as to New Zealand. There will be more jobs—some 500 more, a mixture of contractors and full-time workers—there will be more equipment and materials bought mainly from within this country, and, of course, there will be wider benefits to the economy. The increased scale of Methanex’s business will also generate more taxes over the long term and, through increased export revenue, assist with the country’s balance of payments.

State-owned Enterprises, Ministers—Statements

5. Hon CLAYTON COSGROVE (Labour) to the Minister for State Owned Enterprises: Does he stand by all the statements he, his predecessor and other Ministerial colleagues have made regarding the State-owned Enterprises portfolio?

Hon TONY RYALL (Minister for State Owned Enterprises): Yes, within the context they were made, though. I suspect in the next 30 seconds I may want to change my mind. I can vouch for most of my predecessors, though I probably could not vouch for Mr Mallard when he said: “It will be up to SOEs to come up with robust business plans that can preferably be funded off their own balance sheet …” .

Hon Clayton Cosgrove: If the intent of the 2009 letter to Solid Energy penned by his predecessor in respect of increasing gearing and dividends was not to encourage borrowing by Solid Energy at increased levels or a demand for increased dividends, why was it sent? What was its purpose?

Hon TONY RYALL: Letters were sent to all State-owned enterprises in 2009—

Hon Clayton Cosgrove: Solid Energy.

Hon TONY RYALL: —including Solid Energy. They are—[Interruption] To make it clear that the Government did expect—

Hon Clayton Cosgrove: I raise a point of order, Mr Speaker. My question was about the letter sent directly to Solid Energy—not letters sent to a variety of State-owned enterprises but the letter that was sent, which the Minister has, to Solid Energy directly.

Mr SPEAKER: I appreciate that, and the Minister was answering the question—

Hon Clayton Cosgrove: No, he wasn’t. He was talking about the other letters.

Mr SPEAKER: Order!

Hon TONY RYALL: The Government wrote to Solid Energy, as it did to every other Stateowned enterprise, seeking to have improved levels of performance and contribution to the economy. It is up to the boards—

Hon Members: More debt.

Hon TONY RYALL: Members opposite seem to think that the debt is the problem for Solid Energy. I have said so many times today that it is not the cause of Solid Energy’s problem. It is the board’s responsibility to manage the structure of the balance sheet. The purpose of the Minister’s letter was to say, just as Mr Mallard wrote to them a year earlier, we expect better performance in dividends.

Hon Clayton Cosgrove: Is he aware of the Treasury proposal document of 2009, the recommendations of which his Government signed off, whose purpose was to increase the gearing of Solid Energy and, to quote the document, was designed to “stretch” the State-owned enterprise; if so, has that stretch been successful, or has in reality that stretch perpetrated the almost total breakdown of that company at his Government’s hands?

Hon TONY RYALL: No. As I have said earlier on, it is not the debt that is the cause of Solid Energy’s problems; it is the fact that a number of investments were made that have not generated the level of return to sustain those investments or their continuing, coupled with the collapse in world coal prices. In respect of the Treasury advice, it would not surprise me, because Mr Mallard in 2008 told the company—

Hon Clayton Cosgrove: I raise a point of order, Mr Speaker. The document and advice that I referred to was not from one Trevor Mallard. It was the 2009 advice—

Mr SPEAKER: I appreciate that.

Hon Clayton Cosgrove: —that talks about stretching—

Mr SPEAKER: Order! But if you think about the member’s question, it started with whether he was aware of the Treasury document. The Minister was just going on to talk about what was in that Treasury document. If the member is satisfied with the answer, we will move to the next supplementary question.

Hon Clayton Cosgrove: Is the former Chairman of Solid Energy, John Palmer, correct when he told the select committee clearly today that contrary to the Prime Minister’s claim that Solid Energy had asked for a billion-dollar capital injection, and that the Prime Minister had refused that billiondollar capital injection, Mr Palmer confirmed that no billion-dollar capital injection request was ever made—no figures were mentioned?

Hon TONY RYALL: I would have to accept what the Prime Minister and Mr Palmer said because I do not think they are necessarily divergent. What I can tell you is I do know that the Prime Minister received advice on the financial implications of what was being discussed with Solid Energy. I have got to remind the member again that the company’s problems come from the investments that were made and the lack of return, and the collapse of coal prices.

Hon Clayton Cosgrove: Is he aware that the former Chairman of Solid Energy, John Palmer, confirmed to the select committee today that no action, none, was taken by any Minister in this Government since 2009 to require a change in direction, in business direction, no request was made to change business direction or to reduce expansion, and the only action that one can find on the record was 18 months of discussions with the company, which generated in zero action by this Government as it was asleep at the wheel?

Hon TONY RYALL: I am advised by comments made by colleagues on this side of the House that that is not a fair representation of what Mr Palmer said, and therefore—

Hon Clayton Cosgrove: I raise a point of order, Mr Speaker. Nick Smith was not on the select committee, other Ministers were not at the select committee, and yet again this Minister makes it up.

Mr SPEAKER: Order! But that is very much now debatable. I was not at the select committee—[Interruption] Order! The Minister is attempting to answer the question, and I would like to hear the answer to the question.

Hon Clayton Cosgrove: I raise a point of order, Mr Speaker. The Minister has questioned my word. First, that is out of order. Secondly, he has said that from comments around him—

Mr SPEAKER: Order! Frequently Ministers disagree with words that are quoted by an Opposition member. That happens quite frequently in this House.

Hon Clayton Cosgrove: I raise a point of order, Mr Speaker.

Mr SPEAKER: Is it a fresh point of order? I will take a fresh point of order. If the member is intending to continue a repeat of the same point of order, then no, I have ruled that the question was being answered. I will give the Minister the opportunity to further answer the question, if the member so wants. But if he does not want a further answer, he does not have to have one.

Hon Clayton Cosgrove: I raise a point of order, Mr Speaker.

Mr SPEAKER: Is it a fresh point of order?

Hon Clayton Cosgrove: Yes, it is. With respect, I am not challenging your ruling at all.

Mr SPEAKER: Would the member just come to the fresh point of order.

Hon Clayton Cosgrove: Certainly. You stated that it is a precedent in this House that members say the member is incorrect, and you are absolutely right. That Minister did not say that. He challenged my word—

Mr SPEAKER: Order! I think we are now relitigating what I have already ruled on. I am giving the Minister the opportunity to complete the answer that was interrupted, if the member so wants. If the member does not, then we will move to further supplementary questions or to the next question.

Hon Clayton Cosgrove: Yes, I do. Get him to answer. Yes, I do. I have accepted your invitation.

Mr SPEAKER: Does the Minister want to further elaborate on the answer that the Minister had given?

Hon TONY RYALL: The Government has made it very clear, and this is certainly my view, that following the scoping study in 2011 this Government took action to deal with the issues that were raised in Solid Energy’s scoping study. That scoping study identified a number of issues that

made that company vulnerable, including investments in a number of areas that were not generating—[Interruption]

Mr SPEAKER: Order!

Hon TONY RYALL: It also identified very high head office costs—[Interruption]

Mr SPEAKER: Do not continue to ask me what I did.

Hon TONY RYALL: —and vulnerability around the projections for coal prices. And together with the collapse in coal prices during 2012, the company finds itself in this difficult position.

Maternity Services—Neonatal Intensive Care Units

6. BARBARA STEWART (NZ First) to the Minister of Health: Is he satisfied that the current number of beds and staff in neonatal intensive care units throughout New Zealand is enough to service our growing population?

Hon TONY RYALL (Minister of Health): Yes. There are six neonatal intensive care units, which provide specialised intensive care services for very unwell or premature babies, for the whole of New Zealand. From time to time mothers and babies are transferred between the units. This can be a very difficult time for families. The most important consideration is the safety of the baby. A new $7.3 million unit is currently being built at Dunedin Hospital and is expected to be open by the end of this year.

Barbara Stewart: How can he be satisfied when 33 expectant mothers in 2012 were transferred out of the Waikato to a location away from their families, and can he assure the public that the safety of these women and unborn children will not be impaired?

Hon TONY RYALL: The number of these neonatal intensive care unit beds has increased by about 10 percent since 2008; the birth rate has dropped and slowed in those last few years. It has always been the case that babies are moved between these units. I know it is incredibly disruptive. That is why we are investing to improve the one in Dunedin, because it was substandard and not up to what you would expect. I am confident that the safety of mothers and their babies is the priority for all of this being dealt with by the national clinical neonatal network.

Barbara Stewart: Does he believe that transferring expectant Waikato mothers to cities as far away as Invercargill, at a cost of $8,000 to $11,000 on air transfer alone, is a good use of Government funding?

Hon TONY RYALL: Yes, I do, because it is about protecting the mother and the baby, and that is why they go to a neonatal intensive care unit. I know it is incredibly disruptive for these parents, but we have a level across the whole country. It is a network. Mothers and babies at times do need to move around those units and that is why we provide support around that. But the priority has to be the baby and the mother. That is the commitment of this Government, and that is why we are moving to improve neonatal facilities, particularly in Dunedin, that have needed upgrading and improvement for many years.

Barbara Stewart: Does he have any plans to increase the number of beds and staff in other neonatal intensive care units throughout New Zealand to ensure that expectant mothers will not have to undergo lengthy, costly, and potentially unsafe hospital transfers?

Hon TONY RYALL: Yes. I can tell the member that the Government is investing $7.3 million in the new neonatal intensive care unit in Dunedin, which is expected to be open by the end of this year.

Accident Compensation Corporation—Injury Prevention

7. CHRIS AUCHINVOLE (National) to the Associate Minister for ACC: What is ACC doing to encourage safe sporting and fitness practices?

Hon JUDITH COLLINS (Minister of Justice): ACC is working with industry leaders and other partnering organisations to reduce injuries suffered in sporting and fitness activities. Two examples of this are RugbySmart and ActiveSmart. For example, since the inception of

RugbySmart, serious rugby neck and spinal injuries have gone down, from double digits annually to three or fewer per year. The British Journal of Sports Medicine regards this as the world’s best community injury prevention programme. In 2013 RugbySmart has the potential to reach 12,000 coaches, 2,000 referees, and 150,000 players.

Chris Auchinvole: Is there an initiative that is more widely focused on general fitness?

Hon JUDITH COLLINS: Yes. ACC has also launched ActiveSmart, which is a programme for walking, running, cycling, and multisport—although, obviously, not boxing. ActiveSmart has a free website and smartphone app that give easy access to tailored training plans and tips. The New Zealand Rugby Union has endorsed ActiveSmart—and I understand, from the interest shown by members on the opposite side, I could arrange a briefing for them.

Family Court—Proposed Legislative Changes

8. DAVID CLENDON (Green) to the Minister of Justice: Why is she proposing changes that may deny people legal representation in the Family Court?

Hon JUDITH COLLINS (Minister of Justice): The member’s question is, unfortunately, misconceived. Where people need legal representation in the Family Court they will get it. This is not changing.

David Clendon: Given research shows 88 percent of New Zealanders in the Family Court— [Interruption]

Mr SPEAKER: Order! I am sorry to interrupt. I cannot hear the supplementary question. Could we have a bit of decorum, particularly on this side of the House.

David Clendon: Given research showing that 88 percent of New Zealanders in the Family Court elected to be represented by a lawyer, why is she denying them that chance when the Family Court’s own website says self-litigation in the court “requires a substantial understanding of the legal process.”?

Hon JUDITH COLLINS: Again, unfortunately, the member’s question is misconceived. Most of the cases that will come into the Family Court relating to care of children matters will be able to move through to mediation in the family dispute resolution process, which was, in fact, suggested by the expert reference group set up to look at the Family Court system. In fact, what we are looking at is up to six different sessions of mediation to help people resolve their issues. Unfortunately, that—

Andrew Little: The Minister’s misleading the House.

Hon JUDITH COLLINS: I raise a point of order, Mr Speaker. I would ask that the member be asked to withdraw and apologise for that comment.

Mr SPEAKER: If the Minister has taken offence, then the member who made the comment should stand and withdraw and apologise.

Andrew Little: I would like to know what the comment is that the Minister has taken offence at.

Mr SPEAKER: I do not need to repeat the comment, but I heard it. The Minister has taken offence. The member will stand, withdraw, and apologise.

Andrew Little: I withdraw and apologise.

Hon JUDITH COLLINS: After six sessions of mediation a judge will then be able to actually triage the matter. So if it were a simple matter about where, for instance, Johnny is going to spend this weekend—

Rt Hon Winston Peters: I raise a point of order, Mr Speaker. The Minister began by saying, for a second time, that the question was misconceived. The question regards the issue of legal representation at the Family Court. At no point—even now, after that long answer—has she got anywhere near traversing the issue of the absence of legal representation.

Mr SPEAKER: No, I think the Minister is certainly attempting to address the question. It is difficult because of the interjections, but it certainly is absolutely appropriate for the Minister to

stand and start her answer by saying that she does not accept the arguments that have been put forward. I call the Hon Judith Collins, if she wishes to finish.

Hon JUDITH COLLINS: Yes, I would like to say to the member that if he would like to have a full briefing—and I understand that he is on the select committee and he is working really hard on it—I can provide that to him, with more detail that he might not already have.

David Clendon: Although I am sure that the Justice and Electoral Committee and others would appreciate information that is clearly not in the Family Court Proceedings Reform Bill, what is her response to the six Christchurch Family Court judges who warn that explosive violent incidents will be more likely to occur, leading to an increase in domestic violence and an increasing risk to the safety of court staff and judges?

Hon JUDITH COLLINS: That was an opinion expressed by a judge, but there was no evidence to support it, and it seemed to be that he was speaking about lawyers apparently stopping their clients from becoming violent in court. Well, I have never seen that happen yet.

David Clendon: Why does the Minister dismiss the concerns of Whangarei lawyer Dr Christopher Perry and the 4,740 other concerned New Zealanders who signed a petition asking for her reforms to be scrapped?

Hon JUDITH COLLINS: Because the petition included completely incorrect statements, and, actually, I thought that the comments by that particular person were, in fact, not only misconceived but actually all about self-interest.

David Clendon: I raise a point of order, Mr Speaker. [Interruption]

Mr SPEAKER: Order! I am dealing with a point of order from David Clendon. Does the member want to table some documents?

David Clendon: I seek leave to table a document. The document is titled “2013 Family Court Reform: The impact on NZ families’ access to justice in an age of austerity-driven reform”.

Mr SPEAKER: The source of the document, please.

David Clendon: The author is Maria Kazmierow, a family law barrister and mediator, and the document is dated 11 March of this year.

Mr SPEAKER: Leave is sought to table that document. Is there any objection? There appears to be none. It can be tabled. Document, by leave, laid on the Table of the House.

Tax System Changes—Employee Car-parks

9. Hon DAVID CUNLIFFE (Labour—New Lynn) to the Minister of Revenue: What reports has he seen regarding his proposal to apply fringe benefit tax to employee car parks in the Auckland and Wellington central business districts?

Hon STEVEN JOYCE (Minister for Economic Development) on behalf of the Minister of

Revenue: Mr Speaker—[Interruption] If I could just address the member, I have received a number of reports—[Interruption] Oh, thank you.

Mr SPEAKER: Order! If the Minister would proceed with the answer, please.

Hon STEVEN JOYCE: I have received a number of reports.

Hon David Cunliffe: I raise a point of order, Mr Speaker. I am not offended by the Minister having trouble seeing the questioner, but he would not look at the Minister sitting next to him during—

Mr SPEAKER: No, that is not a point of order, but it is a good example of how points of orders can come if the Minister does not get on with the job of answering the question.

Hon STEVEN JOYCE: I have received a number of reports from Inland Revenue Department and Treasury tax officials on proposals leading up to and following the consultation paper for recognising salary trade-offs as income, which, I note for the benefit of the member in the House, was released back in April 2012. Policy consideration of this issue began, in fact, in 2010. The

review was part of a package of base broadening and integrity measures, which included other matters such as the treatment of mixed-use assets and widening the income definition for social assistance purposes. As the member will be aware, the bill is currently before a select committee and the Government will carefully consider the select committee’s report to the House.

Hon David Cunliffe: Does he agree with analysis by independent accounting firm Lock and Partners that shows that the compliance cost of collecting his car-park tax is over $30 million per annum, about double the revenue that the Inland Revenue Department suggests it would collect?

Hon STEVEN JOYCE: On behalf of the Minister of Finance, it is fair to say, I think, that the report is perhaps a bit of a stretch in its estimate of compliance costs.

Hon David Cunliffe: I raise a point of order, Mr Speaker. To assist the Minister, he was asked as the Minister of Revenue but he is replying on behalf of a different Minister. Perhaps he is confused or would like to start again.

Mr SPEAKER: He is to answer the question on behalf of the Minister of Revenue.

Hon STEVEN JOYCE: Can I thank that member for his assistance, and say that my view is that the numbers on the report that the member raises are perhaps a bit of a stretch, indicating, as it does, a cost of $5,000 per annum for medium businesses and $8,000 in compliance costs per annum for large businesses. But, nevertheless, officials have been asked by the Finance and Expenditure Committee to look at compliance cost issues and it certainly would be unreasonable to have a tax if the compliance costs are very high. So, once again, we look forward to the response from the select committee.

Hon David Cunliffe: Given these compliance burdens, why did he break John Key’s pledge to “not entertain suggestions of applying FBT to on-premises carparks” and to “remove a substantial amount of the paperwork” from the fringe benefit tax system, or does he agree with the finance Minister, Bill English, that Mr Key’s promise is now worthless because “the tax environment has changed”?

Hon STEVEN JOYCE: I would say that I think a fair amount has changed since that statement was made back in April 2005, which was when Don Brash was leader of the National Party. Since that time we have had three leaders of the Labour Party, and maybe a fourth leader of the Labour Party—

Mr SPEAKER: Order! That does not help the answer.

Hon David Cunliffe: Does he agree with commentator Vernon Small that the car-park tax is one of “a series of petty tax increases that are more about the elusive Budget surplus than fairness and good tax design.” and includes measures like the paper boy tax, increased prescription charges, increased petrol excise, student loan costs, and his equally popular proposals to tax private cellphone use and accommodation for rebuild workers in Christchurch?

Hon STEVEN JOYCE: That was a very long question, but in terms of the characterisation reported by the eminent Dr Small, the issue in regard to fairness is actually quite an interesting one. I think the officials can make the case that this actually would create more fairness, because currently different types of car-parks in cities are treated in different ways. Nevertheless, the compliance costs are important. In fact, if the Government chose not to go ahead, it would actually be, I think, characterised as not particularly fair in relation to different car-parks. But, of course, practicality comes into it as well, and that is why we are watching closely to see the outcome of the select committee’s deliberations.

Hon David Cunliffe: Does the Minister of Revenue consider that he can now continue in his portfolio, given that there are reports that “National Party officials at the very highest levels” have told media that they are “trying to shift the heat to Dunne”, and that this is a blatant abrogation of the confidence and supply agreement with United Future, which demands “confidentiality, collective responsibility, and recognition of his position as Minister of Revenue”?

Hon STEVEN JOYCE: I think there is an old statement about believing half of what you hear and a third of what you see, and I think it would apply in this particular instance.

Hon David Cunliffe: I seek leave to table analysis by independent chartered accountants Lock and Partners showing that the compliance cost of this tax is twice the recommended—

Mr SPEAKER: And is it available publicly? I suspect that it is not.

Hon David Cunliffe: No, not publicly.

Mr SPEAKER: Leave is sought to table that document. Is there any objection? No, there is none. Document, by leave, laid on the Table of the House.

Hon David Cunliffe: I seek leave to table a copy of the confidence and supply agreement between the Minister of Revenue’s—

Mr SPEAKER: No, that is certainly available.

Hon David Cunliffe: I seek leave to table this rather endearing little moniker “No car-park tax. Stop John Key’s—”

Mr SPEAKER: No. That is not necessary to inform the House.

Hon David Cunliffe: I raise a point of order, Mr Speaker. This is not yet readily available—

Mr SPEAKER: And it certainly—[Interruption] Order! The member will resume his seat. [Interruption] Order! And it will not be tabled, either.

Child Health Services—Free Doctors’ Visits for Under-sixes

10. SHANE ARDERN (National—Taranaki - King Country) to the Minister of Health: What progress is the Government making on access to free GP visits for children aged under 6?

Hon TONY RYALL (Minister of Health): More children than ever are now able to see a general practitioner at no cost, thanks to the Government’s $30 million zero fees for under-sixes scheme. More than 350,000 children are now receiving free doctors’ visits during the daytime, and 95 percent of children aged under 6 have access to free general practitioner care after hours. In 2006, under the previous Government, only 77,000 children were receiving free doctors’ visits during the day, and there was no scheme providing free after-hours doctors’ visits.

Shane Ardern: How many general practices are now providing free doctors’ visits to children under 6 during the day?

Hon TONY RYALL: Of the just over 1,000 general practices in the country, 1,004 have opted to provide zero fee doctors’ visits to children under 6. Recently 12 general practices located in the North Shore, Auckland, Blenheim, Templeton, Rolleston, and Invercargill joined the zero fees scheme, which has enabled 3,500 more children under 6 to see a doctor during the day at no cost. So that is 96 percent of children under 6 who can go to a general practitioner for free during the day and after hours, compared with only 23 percent in 2006. I am sure the member will join with me in thanking general practices around the country for helping out children in this way.

Education Sector—Matters Leading to Resignation of Secretary for Education

11. CHRIS HIPKINS (Labour—Rimutaka) to the Minister of State Services: What reasons did the State Services Commission give him for Lesley Longstone’s resignation when he was briefed by them on 6 December 2012?

Hon Dr JONATHAN COLEMAN (Minister of State Services): On meeting with the State Services Commission on 6 December, I was advised that Ms Longstone and the State Services Commissioner were in discussions about her standing down as chief executive. This reflected their joint view that there had been a number of issues that had not gone well during 2012, including the relationship with her Minister, and that a change of leadership was necessary to enable the Ministry of Education to move forward.

Chris Hipkins: Did the Minister of Education convey any specific concerns about Lesley Longstone’s performance to the State Services Commission; if so, what was the nature of those concerns?

Hon Dr JONATHAN COLEMAN: It made it clear that there were issues in the relationship, but I have also had advice from the State Services Commissioner that to discuss performance issues would be a breach of confidence.

Chris Hipkins: Did the Minister of Education indicate to the State Services Commission that Lesley Longstone had undertaken any action that was inconsistent with the Government’s direction; if so, what did she do?

Hon Dr JONATHAN COLEMAN: I am not sure whether there was an indication that Ms Longstone had undertaken any such action, but it was clear that there were issues in the relationship between the Minister and the chief executive.

Chris Hipkins: Did the State Services Commissioner indicate to him at the briefing that Lesley Longstone’s resignation was contingent upon her receiving a payment; if so, did he indicate his agreement that such a payment should be made?

Hon Dr JONATHAN COLEMAN: To the best of my recollection, the resignation was not contingent on a payment. However, as subsequently became evident, there was discussion around a payment. But I would emphasise, as I did the other day, that I did not sign off on any payment until after the resignation.

Chris Hipkins: When did he indicate to the State Services Commission the Government’s agreement to Lesley Longstone receiving $425,000?

Hon Dr JONATHAN COLEMAN: My recollection of it is that it was on 18 December, when the package was put to me following her resignation—or following not the public announcement but the formal conveying of her resignation to the State Services Commissioner.

Chris Hipkins: Does he agree with the State Services Commissioner, who described Lesley Longstone as “a highly competent and dedicated individual” and stated that she could be reemployed elsewhere within the Public Service; if so, why does he believe that the public do not have a right to know exactly why it is that she received a $425,000 payout as part of her resignation?

Hon Dr JONATHAN COLEMAN: I am happy to say why she received that payout. As I said the other day, there was a certain part that was part of her contract around paying out holiday pay, but there was also a view that to move the—

Sue Moroney: She’d only been there 12 months.

Hon Dr JONATHAN COLEMAN: Well, it was contractual. There was a view that, actually, in the context of a $12 billion vote there were things that needed to be done subsequently in education, and there was a mutual agreement that a change of leadership at the ministry was necessary in order for that to occur.

Gambling—Spot Prize Draws

12. KANWALJIT SINGH BAKSHI (National) to the Minister of Internal Affairs: What recent announcements has he made about reducing unnecessary red tape under the Gambling Act 2003?

Hon CHRIS TREMAIN (Minister of Internal Affairs): This week I announced that the Government is considering changes to regulations around spot prize draws. I have released a consultation document, which includes a proposal that spot prize draws at these events should not be classified as gambling. This would mean event organisers do not need to apply for a licence to run spot prizes and can focus on their events rather than red tape.

Kanwaljit Singh Bakshi: Why are the changes to the current regulations necessary?

Hon CHRIS TREMAIN: Changes have been called for by organisers of events such as fishing competitions and sports events. Problem-gambling organisations report that there is little risk of problem gambling, if any, associated with spot prizes at these events, so I do not believe that rigorous rules are necessary. Event organisers should not have to worry about complying with the

Gambling Act when considering spot prizes. They should be able to get on with providing fun activities for families and for their communities.


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