KiwiSaver Bill

Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this

I move, That the KiwiSaver Bill be now read a second time. When I introduced the KiwiSaver Bill into Parliament back in March, I said that it represented a landmark in social and economic legislation in New Zealand. I am heartened to see that through the process of submissions from the public and consideration by the Finance and Expenditure Committee the bill is now even more firmly and strongly placed to improve the income security of ordinary New Zealanders in retirement. KiwiSaver will encourage people to change the way they think about saving for retirement and, more important, change the way they act. It will provide impetus, ease, and opportunity for a broad range of New Zealanders to establish a long-term savings habit.

From its inception, KiwiSaver has been designed to make saving compelling rather than compulsory. With a relatively simply mechanism of automatic enrolment, organised in the workplace, KiwiSaver allows for deductions at source, provides benefits of economies of scale, and reaches a high proportion of the population who are able to save. The Government is also encouraging participation through supporting KiwiSaver scheme members in a number of ways. First, we will meet the cost of administration through the Inland Revenue Department. Second, a $1,000 upfront contribution will be provided to each new KiwiSaver scheme member. Third, the Government will provide a scheme fee contribution at a capped level to savers in approved KiwiSaver schemes.

A number of submissions on the bill suggest further measures the Government could take to foster a stronger savings culture through KiwiSaver. Many raised the need for tax concessions or incentives for savings. Others noted the need to promote or facilitate employer contributions. I am pleased to announce that the Government has responded to this feedback from stakeholders. As a further initiative to encourage KiwiSaver participation, employer contributions to KiwiSaver schemes will qualify for an exemption from the specified superannuation contributions withholding tax up to a limit of 4 percent, or the contributor’s own amount, whichever is the lesser. The Government will introduce a Supplementary Order Paper to give effect to this change.

A targeted specified superannuation contribution withholding tax exemption represents a moderate and prudent means to encourage businesses to help their employees reach their retirement savings goals. While employer contributions to KiwiSaver are not compulsory, such contributions may form part of the total remuneration package that employers provide to attract or retain skilled staff in a tight labour market. By exempting employer contributions to KiwiSaver from specified superannuation contribution withholding tax, we are increasing the value of the benefits employers can choose to offer their employees. The exemption, as I say, is capped at whichever is the lesser: the employer’s contribution or 4 percent of the employee’s salary or wages. This cap is a sensible measure; it will prevent excessive salary sacrifice arrangements from being entered into for the purpose of reducing a person’s tax liability, rather than saving. It reduces the risk of abuse, while also aligning with the basic savings requirements for KiwiSaver. In addition, the cap will limit the specified superannuation contribution withholding tax exemption’s fiscal cost. This is estimated to be around $35 million in forgone revenue in 2007-08, increasing to $104 million in 2008-09 and $162 million in 2011-12.

Many other new features of the bill serve to further strengthen KiwiSaver as a long-term retirement savings vehicle for working New Zealanders. I acknowledge the work of Shane Jones and the Finance and Expenditure Committee in this regard. Among the main changes are the extension of the implementation date from 1 April 2007 to 1 July 2007. This change is a further example of the Government’s responsiveness to the feedback from stakeholders. Changing the KiwiSaver start date by 3 months will ease the time pressure for employers and potential KiwiSaver scheme providers to prepare, and therefore help to ensure implementation will be as effective and efficient as possible for all involved.

Another significant change made in response to submissions is the decision to allow employer contributions to consist in part or even all of the 4 percent or 8 percent KiwiSaver contribution rates. In practice, an employee may contribute 2 percent and an employer would contribute the other 2 percent to make up the 4 percent rate. This amendment to the bill will be welcomed by many. It provides flexibility for employers in the range of remuneration options they can offer employees, and also provides an incentive to join KiwiSaver for employees who would otherwise struggle to save 4 percent on their own.

I would like to touch on another major amendment to the bill—a change to the opt-out period. New employees will be able to opt out of KiwSaver from the end of week 2 after starting their job, until the end of week 8. The opt-out period has been changed to allow employers to send employee details to Inland Revenue only once a month and therefore reduce their compliance costs. Because Inland Revenue will not be advised of new employees until later, a longer opt-out period was needed. This is just one example of many where Kiwi-Saver has been designed to be as user-friendly to employers as possible.

The effects of KiwiSaver will be far-reaching and these need to be clearly and widely communicated to all New Zealanders. It is also important that such a unique initiative should have its own unique visual identity. That is why a strong, distinctive logo has now been launched to help achieve awareness and recognition of KiwiSaver. The logo will be used on all communications and material for employers, employees, and KiwiSaver scheme providers, so it should become a familiar sight to most New Zealanders in the years ahead.

This Government wants to see a larger proportion of ordinary New Zealanders making realistic savings plans for their retirement. We have already helped to create a secure environment for planning retirement income by restoring the level of New Zealand superannuation, initiating the New Zealand Superannuation Fund, and introducing the State Sector Retirement Savings Scheme. The State has been leading the way back into workplace-based superannuation under this Government. KiwiSaver will complete the strong foundation we have put in place to support New Zealanders to prepare for their future.

The main criticism that has been made so far—apart from niggly ones around the edges, which, no doubt, we will hear more of this afternoon—is that the scheme should be compulsory. This Government does not favour compulsory individual superannuation, in part because we believe it is a risk for a consensus around an adequate base provided by New Zealand superannuation. Those who thus save significant amounts are less likely to be willing to contribute taxation to a secure and adequate New Zealand superannuation base, which a significant proportion of the population will continue to rely on for their security in retirement.

The debate is, of course, an open one and in the future, if any Government wishes to introduce a compulsory scheme, KiwiSaver will, in fact, make it easier by the very simple measure of removing the opt-out provision in KiwiSaver. On that matter, I leave the bill to the good wishes of the House.

JOHN KEY (National—Helensville) Link to this

I rise on behalf of the National Party to engage in the second reading of the KiwiSaver Bill. Let me say that a Government that has its back to the wall makes policy on the hoof. Just 2 weeks ago I sat in the Finance and Expenditure Committee when the issue of mortgage diversion was raised by Gordon Copeland, the United Future member. Mr Copeland told the select committee that he wanted to introduce the concept of mortgage diversion.

When we discussed that concept in the select committee, at that stage not only did Labour members find no favour with it—in fact they rejected it out of hand—but on top of that, the officials told us that it was not possible to report back in any reasonable time frame on mortgage diversion because it was too complex, the systems were too extreme, and the analysis was far too weighty to be able to make that decision in a 2-week period.

Hon MARK GOSCHE (Labour—Maungakiekie) Link to this

The previous member’s speech illustrates why he will never be the National Party leader: because he is lazy, basically. If he had read the report that he put his name to, as a member of the Finance and Expenditure Committee, he would have seen something very interesting under mortgage diversion. I will read a couple of sentences: “Therefore, and because of time constraints, we were advised that mortgage repayments would be best handled through financial education and the contributions holiday mechanism. Even so, we feel that such a facility has merit and would be welcomed by scheme members, and is consequently worth further consideration.” But the problem with John Key is that he is so busy preening himself he forgets to read the papers. That is why, in his electorate, they recently put out a party fund-raiser for $30 a week, and they did not tell the policeman who was coming along to speak, as a member of the New Zealand Police, that he was actually coming to speak at a National Party fund-raiser. That is the laziness of the man. That is the lack of attention to detail that means he will never be the leader.

I would say this at least about Craig Foss, Mr Tremain, and Dr the Hon Lockwood Smith: they do their work. They read the papers. They come to the select committee, ask sensible questions and, even more important, they actually know what the committee report stated, because their names are on it. They did not object to it; there is no minority report actually stating that the National Party opposed the bill. National members signed up to the statement that mortgage diversion was a good idea.

The Finance and Expenditure Committee considered whether to incorporate a mortgage diversion facility into the KiwiSaver Bill—to allow the diversion of contributions towards the repayment of a mortgage—because the entire committee felt it was not a bad idea. However, some of us were worried about the effect it would have on those low-paid workers, whom we on this side of the House are very keen to see “saving for their future.” I have to say that, apart from Mr Key, the rest of the committee worked on that assiduously, and we worked together very cooperatively. We listened to the views of Opposition members, and they listened to the views of the Government and of other members. We were very constructive. But a member actually has to be looking at the papers, engaging in the business, and listening to the submissions before that member knows what he or she is talking about.

John Key showed that although he is National’s finance spokesperson, he actually did not know anything about this bill. He is very busy thinking about the future leadership, about how good he might look on camera, and about how many people know how famous he is. He told us, in fact, that the committee should not have sub-committees, because if we go to Auckland and hear submissions but only as a sub-committee, the public might not know anybody there except for him—because he is the one who is famous. [Interruption] Mr Woolerton remembers that slight on the rest of the committee. John Key is so far up himself it ain’t funny. That is why he does not take any notice of what is in the bill.

What is in the bill is good. It is actually taking account of those people from the industry who came along and said: “We think this is moving too fast.”, so the committee has delayed it by 3 months. The industry has said that that is good, is sensible, and shows that Parliament works. It also said that a whole lot of other changes were necessary to make this bill better, in terms of compliance costs for employers. I know that my colleague the Hon Lianne Dalziel had a lot of input behind the scenes on behalf of small business, to make sure that compliance costs were brought down. As a result, the select committee has done that in a very positive way, while working together as we should.

What we have now is simple, low-cost, and voluntary. I think that is hugely important. The scheme is workplace based. That is something that New Zealand workers and employers have not had. So one after another, people from industry and people from business have come in and said: “We like this; we think it’s great.” Some of them said they supported compulsion, but most of them said they would like to see the scheme remain voluntary.

We have made some changes. We have made sure that those low-paid workers who do want to save—and we had a lot of those low-paid workers come before the committee and say they wanted to be able to save—are able to do that, and so the ability for employers to contribute to the accounts of their workers is a good way of resolving that issue. I felt like Jeanette Fitzsimons—a little concerned for our low-paid workers. So I think the compromise is, in fact, a good one, because if the employer can put in 2 percent and the employee puts in 2 percent we have to a large degree resolved the issue that Jeanette Fitzsimons and the Green Party were concerned about. We in the Labour team were also concerned about it, as were New Zealand First, United Future, and most members of the National Party—except one member—and that is why we have made that very positive change.

The change will be welcomed. We heard from submitters who said that some of the best savers in New Zealand are the lowest paid. Why? Because nobody will lend them money. They have to save for everything they need, so they have a savings ethic because it is forced upon them. This measure actually gives them an avenue for looking forward to a couple of very positive things. The first is saving for their retirement and, equally important for low-paid people, the second is looking at the opportunity to save to buy that first home through this KiwiSaver proposal.

The $5,000 that each saver might be able to get—which means that a couple could get $10,000—is a big deal to New Zealanders, but not to John Key. He is totally out of touch with the reality of ordinary New Zealanders. He still thinks that he is somewhere up in the clouds with Merrill Lynch, but members over on this side, and the select committee members, I have to say, except him, actually understand that this will be a good step-up for many, many New Zealanders who are dreaming about homeownership, or thinking: “I want to save for my retirement.”

That $1,000 contribution from the Government is a great start. I met with a lot of workers over the adjournment, at a number of meetings I attended throughout Auckland, and their eyes lit up when I told them about KiwiSaver, because those people have a genuine desire to take care of their futures. They have a genuine desire to see their families in their own homes, and this KiwiSaver Bill, which is supported by the vast majority in this House for all the right reasons, will actually give those people great hope in the future.

We had to make some changes, as I said, in respect of the start-up dates. Since the bill has been reported back, sensible measures have been announced in terms of employer contributions being tax free. As well, the mortgage diversion promoted by United Future’s very good member, Gordon Copeland, has now become a reality. I welcome that, and the committee welcomed that—and that is stated in the report.

Again, I go back to John Key, the would-be leader of the National Party, and ask him please to learn to read the report that has his name on it, so that when he stands up in the House to make a speech, he does not make a complete idiot of himself by talking about the mortgage diversion scheme as if it were something the select committee and the Government said was impossible, when the committee actually said it was worth further consideration, and possible in a very short space of time. The scheme is not hugely complicated at all, in my view, and nor was the committee ever told that it was. We were told that the banks had some difficulty with it, not that it could not be done through the bill.

But we have done it now. That is how Parliament works under an MMP system, and that is why the National Party will always be in Opposition—because it does not know how to work with anybody else. It cannot even work within its own ranks. We constantly see John Key disagreeing with the very good member Dr Lockwood Smith. Dr Smith comes to the House having read his papers, and, although he does disagree with us from time to time, at least he has some logic to his arguments. They are not based on lazy, slack work attitudes like the arguments of John Key, but are based on some of the work that Dr Smith actually does with his colleagues who sit around him.

I am very proud of this bill, and of this Government. This is momentous legislation. In 20 or 30 years’ time people who are sitting in their own homes, or who are comfortably retired with a decent nest egg, will thank this Parliament for this bill. I am proud to be part of the select committee that has done such good work to put this bill into a better shape than it was in when we first received it. I know that when we finish this debate in the House in the next week or so, the bill will be in an even better shape.

CRAIG FOSS (National—Tukituki) Link to this

I thank the previous speaker, who constantly praised the work ethic of National members. We are a team, a solid team, and we have a couple of key men. The compliments the previous speaker gave us are a compliment to our entire new intake—the 21 new, energetic, ambitious National MPs who will be over on that side of the Chamber before they know it.

I attended virtually every Finance and Expenditure Committee meeting where this bill was discussed—I perhaps missed one somewhere along the way—but I am struggling to recognise some of the committee members from the other side of the House because so many of them sat in various seats to try to hold up Labour’s quorum throughout the discussions around this bill. I think that the previous speaker, Mr Gosche, attended the meetings most of the time, but I struggle to identify most of the other members. I guess that points to how important Labour sees that committee to be—the once-powerful Finance and Expenditure Committee. The Labour stooges were mere “bums on seats”, if you like, to borrow the education analogy. They were there just to provide a quorum. As we know, when the pressure starts to mount, the Minister of Finance, Dr Cullen, will pull one of his strings, something appears, and those members all jump very high.

The National Party opposed this bill at its first reading, and we oppose it again now. As John Key said previously, given the fundamental shifts that were announced at lunchtime today, we will be reserving our judgment over the next week so we can study them further. At first cut, it looks like a reaction to some bad polling. At second cut, we will examine the changes further. I suggest that we probably knew more about the changes announced today, and knew about them earlier, than many of the Labour members, because we are sure they were quite a surprise to them.

The KiwiSaver Bill was promoted as a great scheme to increase the retirement cash holdings available to all New Zealanders for their future. Sadly, the bill has now devolved and been traded away, quite possibly in exchange for non-movement in the indexation of personal tax rates, as United Future has argued and as the Minister announced in the 2005 Budget. Sadly, it has probably been traded away to nothing more than a cheque book. Perhaps it is more like a piggy bank with one hole in the top and one hole in the bottom, because that is essentially and effectively what the changes announced today are.

Essentially, from what we see at the moment of some of the large players, the taxpayer is giving up taxpayer funds to subsidise the mortgage book. How will this help with living expenses? How will this help to pay for the price of petrol? How will this help the thousands of Grey Power members—whom New Zealand First members had a go at yesterday—who are trying to get by? I ask members to tell me how this will help New Zealanders as they struggle through the current shambles of this Government.

I have great respect for the process and integrity of Parliament. I have watched Parliament over many, many years, and I fully respect the processes in this House and in the committees around it. I feel very privileged to be on the once all-powerful Finance and Expenditure Committee—well, it used to be all-powerful. Obviously, it is now stacked and Dr Cullen is pulling the strings all over the place.

The Finance and Expenditure Committee spent many days and many hours on this bill. Officials spent, I guess, thousands of hours, and thousands of dollars, on preparing for and drafting this bill. We studied this bill at length. Officials from different ministries, the Inland Revenue Department and the Ministry of Social Development, actually worked together—which was something quite unusual in this instance—to try to prepare the bill for presentation to this Parliament for debate. Well, obviously the bill has changed. The bill that was sent to the Finance and Expenditure Committee, which submitters studied, on which thousands of hours and thousands of dollars of resource were spent, and which submitters believed was coming through, is now totally different as a result of the changes announced today.

Totally contrary to what the previous member said, I recall a perhaps 2 or 3-minute discussion about, in particular, the mortgage diversion changes announced today. I recall the Labour members shaking their heads and having a bit of a giggle—basically, that idea was not going to fly. When the officials from the Inland Revenue Department and the Ministry of Social Development were asked directly whether they were prepared, whether systems and regulations were prepared, whether everyone was ready, and whether they could handle mortgage diversion, their answer was very simple, loud, and clear—no. Yes, it had been talked about for perhaps further consideration. Little did we know at that time—and in my eyes it was a total abuse of parliamentary process—that that consideration was going on up on the seventh floor and, as the Government was under a bit of pressure, it decided to roll it out and try to get some good headlines.

I congratulate the United Future members on leveraging their votes to bring this policy in. I know that they are very keen on it, so, in that sense, I say well done to them.

Fundamental changes to the bill have been announced today—the mortgage diversion scheme and the changes to the exemption for the specified superannuation contribution withholding tax. In a nutshell, the changes mean that the taxpayer is helping to fund the mortgage payments of those who have a mortgage—it is not even necessarily first home buyers in this instance. What an abuse of process! The bill we considered at the Finance and Expenditure Committee was, I think, about 250-odd pages long. We had hardly any discussion about these two fundamental changes. Many submitters were very, very concerned about the haste with which this bill has been introduced. That was before the fundamental changes that have been announced today.

That brings me to the commentary on the bill, which the previous speaker alluded to. I will quote to the House from the commentary in relation to the concern of many members of the committee. This concern relates to the default provider provisions, the process around which, again, has just turned to custard. Default providers spent hundreds of thousands of dollars on preparing themselves and their institutions to handle KiwiSaver as per the bill they received, which was the bill that we considered. They did not even consider the mortgage diversion scheme or the change in its tax structure. The commentary states, under the heading “Default provider provisions”: “Some members were concerned that the Government progressed the default provider provisions of the bill, matters on which submissions were received, prior to the select committee reporting back to the House.”

Quite simply, the bill was an ongoing, moving beast at the time, yet, in relation to default providers, Mr Cullen is on record as saying it would be very hard for them to lose money—and, in fact, after today’s announcement it will be even harder for them to lose money around this and they will be limited to about four or six providers—yet it was totally skewed for the large providers. Essentially, Australian-owned banks will be the big winners out of this, and, perhaps, Kiwibank.

KiwiSaver was supposed to be a drive to increase savings. It failed. It is hand in hand—or should I say fist in fist—with the taxation bill, a delay in the start date of which was also announced today. It will fail. Here is an example in relation to KiwiSaver. A person on $50,000 invests 4 percent of that money, via a KiwiSaver fund, into US shares. That person will be taxed on his or her dividends, plus 85 percent of the capital gain times his or her marginal tax rate, whatever that might be. It is double taxation. If that same person, who has an income of $50,000, invests the same amount—4 percent, or $2,000—directly into US shares, he or she will be taxed on the dividend only. How on earth is that supposed to help New Zealand’s savings and the efficiency of our markets?

There were about 71 direct submissions on this bill. I believe that we are nudging 4,000 submissions on the capital gains tax bill. In Mr Cullen’s press release today, he talks about how he listened to the impact on submitters and we had a delay in the start date. OK, that is fair enough, but I certainly hope he considers the weight of those submissions, because almost every single one of those 4,000 submitters is saying that the proposed taxation bill, which is hand in hand with the KiwiSaver Bill, must be radically changed. It is an abuse of parliamentary process. If this bill is changed as radically as this 3 hours or so before its second reading, what on earth are we to expect to be lined up for the taxation bill?

R DOUG WOOLERTON (NZ First) Link to this

New Zealand First supports the KiwiSaver Bill. We support it because we have always supported incentives to save. In the past we have supported compulsory superannuation, and we supported superannuation as proposed by Dr Cullen a few years ago—which, I might add, is proving to be very successful.

It saddens me a little that the National members of the Finance and Expenditure Committee are speaking—at this point, anyway, although that may change later—as fairly practised, experienced, financial operators, which they are. They have a deep understanding of matters financial, but they are not the people this bill is aimed at. The reason New Zealand First supports the bill so strongly is that it aims to encourage a savings mentality in this country. Unfortunately, we have lost a savings mentality since the days of what we like to call the right-wing economic changes during the 1980s. The experiments of those days have shown that the Government should give messages, give encouragement, and, where possible, give education or enlightenment on financial matters.

It is all very well for Mr Craig Foss. I acknowledge his expertise in this area. I acknowledge the expertise of John Key in this area, and, with due respect, that of Mr Tremain and Dr Lockwood Smith. But that is not the way that most New Zealanders understand finance. Those members understand finance in a way that most New Zealanders do not. In our view, this measure is an honest attempt to go some way to get people started on the ladder of financial independence, not only through direct financial savings but, now, through a mortgage scheme. I am sure that my colleague Gordon Copeland will be spending a lot of his time explaining that scheme, because it is a particular hobby of his. So even though professional financial managers may pour scorn on this bill, New Zealand First sees its value to get people with rather less financial literacy involved in saving.

We also congratulate the Government—even though the news has just come out today—on introducing some sort of financial incentive in the form of a tax-free employer contribution. We think that more of that sort of thing should be done. It has been very much out of favour in recent years, but it is now coming back into favour. We think that is a marvellous thing.

I think this bill will succeed in the community. The National Party members are correct—there is a tight financial market out there. It is tough for people on lower incomes, and that is why the employer contribution is so vitally important in this scheme. People simply have not been saving by their own initiative. So this Government has accepted what I believe is the responsibility of a Government and has said it must lead the way. New Zealand First says hallelujah to that.

There was discussion in the select committee about the rate of contributions, and members heard that discussed by previous speakers. There are arguments for making the contributions very low in order to help those who may find it very, very difficult to put in anything at all. Others say the financial institutions would not want to be involved at that low level. Members heard that discussion earlier. People said we should have contributions as high as 4 percent on both sides of the employer-employee scale. I think, personally, that the balance is about right, but that can be seen and tested in future years. As Dr Cullen said in his introductory speech, there is the ability for people to change this scheme. There is the ability to make it compulsory if that is what is decided in the future. There is the ability to enhance the scheme in other ways as Governments of the day see fit, and as people make demands upon those Governments and search for ways to look after themselves.

When we are talking about the default providers, I think it is important to understand that there was some criticism about the process, as Mr Foss read out from the commentary. The Government had to move ahead with those default providers and talk to them, and they had to bid for the business—to use my term, which is not the correct term—before this bill was presented to the House. I must say that I shared some of those concerns, as well. I was happy, in the main, that the National Party put in that rider in the commentary in relation to those provisions. It is quite clear, in our view, that those businesses that have been established in New Zealand for many years and that have a household name will have some advantage for capturing and growing the business. The select committee made its best endeavours to search for a way to even the playing field in order to get in newer, more entrepreneurial providers. I suggest that may not have happened, but we will see who the providers are at the end of the day. I suspect they may be the traditional ones.

I do not want to take up any more of the time of this House. I just wanted to say that New Zealand First is not just a supporter of this bill but an enthusiastic supporter of this bill. People will opt out of the scheme from time to time. I do not think we should be afraid of that. I think it is something that will take many years to become accepted as part of the New Zealand psyche, but I give my congratulations on a great start.

JEANETTE FITZSIMONS (Co-Leader—Green) Link to this

The Greens support the KiwiSaver Bill as a useful step towards addressing the rather dangerous lack of savings in our society. The household debt-to-income ratio has risen to more than 120 percent—largely on the expectation of increasing equity in people’s houses. If the housing market were to crash, we would have a lot of insolvent people. Something needs to be done. This scheme is an easy way for people to save, with automatic deductions from their pay, and with the opportunity to opt out if they have other ways they would rather do it.

The Finance and Expenditure Committee has ironed out quite a lot of wrinkles in the bill, with the extension of time to implement the changes in order to make sure things can actually be ready to go on the due date, and with a number of ways to reduce compliance costs and risk for employers—for example, by making it clear they are not financial advisers and not to be held accountable for that, by limiting the information they must give to the Inland Revenue Department to what they actually receive from their employees, and by simplifying the reporting requirements. That is all good work we managed to do. But the effect of the bill will be limited in terms of how much saving it can encourage, because so many people do not earn enough to contribute 4 percent of their gross income to a savings scheme. The minimum wage in New Zealand is low compared with other countries, and it is not being raised fast enough.

The bill is designed to encourage people to start saving when they are young. That is because it will give them the longest time over which to accumulate some retirement savings and because it builds in a habit early. That is why the incentive in the bill is linked to first home purchase as a way of getting young people involved. But young people do not earn a lot. They probably earn the least they are going to earn at any stage of their lives. So for many young people 4 percent will be more than they feel they can contribute.

I argued—as the unions argued—that there should be an option to save 2 percent. That is not because 2 percent will accumulate a huge amount of savings for retirement but because it gets a habit in place from the time of the first job. The time of the first job is when we need to get people into saving. That argument was opposed by the rest of the committee on the grounds that if we gave a 2 percent option, then people who could afford to save 4 percent might save only 2 percent, and savings might go down. The reality now, though, is that those who could save 2 percent but not 4 percent will not save at all. Not only will they not save at all now, but later on, when their incomes rise and they can afford to save 4 percent, they will not have the habit of saving, and they may never have the habit of saving. Or they will start saving in their 50s, once the mortgage is paid off and the kids have left home, and they will not have enough time left to accumulate what they need for a decent retirement income.

There is no way of proving whether I am right or whether the other committee members are right, or whether the total savings will be more or less, but I have a very strong instinct that tells me that without the ability to contribute 2 percent, a lot of young people will never get started, at all. Of course, once they have got their first home, there is not the same incentive to join the scheme later.

As a compromise, the bill has been amended to allow employers to contribute half of the 4 percent. When employers do that, the employees will have to contribute only 2 percent. When employers take that step, that will be good, but how many of them will do so? Will the owner of the little cafe who has to be forced to pay the minimum wage now voluntarily contribute an extra 2 percent to a superannuation scheme on top of that? I think many will not. Many of the employees who work in those situations are the most vulnerable and needy of all. It is great that Fletcher Building has made an announcement that it will contribute to the superannuation scheme, and I expect there will be a number of big industrial worksites that will contribute, as part of their employment relations negotiations. Probably they will pay a bit less in wages and a bit more in superannuation contributions. But many smaller employers, whose workers are among the worst paid, will not actually take that opportunity.

Finally, if we are to try to reduce household debt, which is actually the first step towards increasing household savings, we must do something to control the behaviour of the banks, and that, of course, is completely outside anything this bill does. Consumer debt is being forced down people’s throats in a way that has never happened before. Credit card limits are being constantly expanded and mortgage extensions are being thrust at people. Every night in our living rooms we see advertisements saying that we should let our home pay for our overseas trip and increase our mortgage to get a new car. Bank staff are being forced, under performance agreements, to sell credit to their families and friends in their off-duty time.

This is a huge push by the banks to get people into debt, and I really wonder whether the existence of a KiwiSaver scheme will be enough to counter the constant advertising that says we can have all these goodies in life if we just borrow more. Billions of dollars are being spent to foster a culture of borrowing and indebtedness, and we are hoping that the existence of a workplace savings scheme will counter that big push and all of those inducements. I think we underestimate the role that advertising plays in people’s behaviour.

I have not heard any expressions of Government disapproval of that behaviour by the banks. I have not seen Michael Cullen meet with the heads of the banks and say that it has to stop or the Government will find some measure to control it. The attitude just seems to be that it is the market working and the banks can do what they like. So, in addition to this bill—which we do support, because it is a positive measure—let us tackle the lack of savings and household indebtedness at the source.

HONE HARAWIRA (Māori Party—Te Tai Tokerau) Link to this

Tēnā koe, Mr Assistant Speaker. Tēnā tātou te Whare. Tēnā koe ngā hui. In yesterday’s debate on the Westpac New Zealand Bill, National MP Mr Chris Tremain pointed out how petty it seemed to be talking about technical adjustments to an Order in Council when, in the space of a week, we had been saying our final farewells to our queen Te Atairangikaahu, welcoming our new king, Te Arikinui Tuheitia, and swearing into office New Zealand’s 19th Governor-General, the Hon Anand Satyanand. That is kind of how I feel about the second reading of the KiwiSaver Bill.

A couple of weeks ago, during the parliamentary adjournment, a report on the nation’s social well-being was quietly released—a report that confirmed that although those on one side of the seesaw are becoming heavier with wealth and profit, those on the other side are teetering dangerously close to falling off. There are huge differences in wealth and income between the top earners and those who face the daily grind of poverty, those we know as te pani me te rawakore. It is simply getting worse and worse. The Social Report 2006 confirmed what many people had been warning Governments about for years—that for the last 20 years, while the spectacular wealth of the rich has increased, the relative wealth of the nation has decreased and the income gap has widened. The report stated that a lot more people are on low incomes now than ever before, with 19 percent living below the 60 percent threshold in 2004, compared with 12 percent in 1988. The report also stated that the number of poor people who spend more than 30 percent of their income on housing has more than doubled in that same time.

So for those of us in this House who make the decisions as to how social and economic policies like those intended in the KiwiSaver Bill will affect the nation, the question we must ask ourselves is whether this state of affairs is acceptable. Well, if one belongs to the Ronald Reagan club, one would probably say: “Yeah, why not? A rising tide lifts all boats.” Well, I am sorry to tell people this, but Ronald Reagan was wrong. I have been to Washington, DC, the capital of the greatest capitalist nation in the world, and have stood in the streets of the crack dealers, the drunks, the prostitutes, and the crippling poor—and just up the road I could see the White House. Ronald Reagan’s theories are little comfort to those Māori and other people in this country who struggle every day to put food on the table and to pay the power and the rent.

The 2001 census stated that only 47 percent of Māori lived in their own homes, compared with 71 percent of non-Māori. Today, even Pākehā will tell us that it is bloody hard to scrape together the deposit for a home, when the rent they pay to live in some dive is crippling them and their families. The census also noted that 61 percent of Māori shifted home, compared with 49 percent of non-Māori, and that the main reason for doing so was to get a job. That migration is killing rural economies. In half of the country’s regions there has been more than a 50 percent shift, as people up and move.

This ain’t no accident. This is death by design: the decimation of our home towns, or, as the Government now calls them, “limited employment locations”. The Government now has a policy of saving millions of dollars by actively creating regions of economic desolation and blacklisting areas marked out to be deserts of deprivation. A couple of weeks back members may have seen the article about 412 beneficiaries being warned that if they did not shift quick smart, they could lost their benefit. Surprise, surprise! With that hanging over their heads, people are moving out of the blacklisted areas. Guess what? Now all the local mayors are jumping up and down. New Plymouth’s Mayor, Peter Tennent, said it was unhelpful and that it undermined our smaller communities, and Marlborough District’s Mayor, Alistair Sowman, said the region was crying out for workers, and that the blacklist would put people off moving there. Combined Beneficiaries Union president, Helen Chappell, said that the limited employment location scheme makes little sense, because what we lose on the swings we gain on the roundabouts. In other words, people may shift to an area that is cheaper for rent purposes but dearer for buying food. It is hardly worth it, simply to keep a benefit of $150 a week.

How does all that affect the KiwiSaver Bill? It is really quite simple. How tough is it to ask those who are already struggling to survive to dig deeper, to find the extra 4 percent of their already low incomes to put into the Government’s grand new superannuation saver scheme? The reality is that over the last few years, rents and mortgages have skyrocketed, and the number of people experiencing severe hardship has increased as well, to the point where Family Budgeting Services coordinator Jarrod Rendall reckons that many of the people he sees simply could not afford the 4 percent required under the KiwiSaver Bill. People needing help from budgeting services are already in debt, and the extra 4 percent would mean cutting out essential items like food for many who are on low incomes. That is just too big an ask.

This House must face up to the issues of crippling poverty, high mobility, regional downturn, and beneficiary bullying. These are our people; these are our citizens. Members should not get me wrong; the KiwiSaver Bill has a lot of merit. At its first reading I commended the Government for its commitment to establishing a workplace savings scheme, and said that the Māori Party welcomed the idea of using Kiwi savings as a home deposit. The reality is that right now, as we speak, this Government is implementing a plan to strangle 259 limited employment locations, and to no one’s surprise they are the towns that a lot of Māori people call home. They are places like Te Hāpua, Mitimiti, Rangi Point, Mōkau, Kāwhia, Port Waikato, Reporoa, Rotokawa, Ruātoki, Tokaanu, Maraetai, Waitahanui, Wairākei, Matahiwi, Matawai, Tikitiki, Whangarā, and so it goes on. Those are the towns that today’s bureaucrats want to kill.

The strange thing is that a lot of those towns are like that because yesterday’s bureaucrats put them there in the first place. Te Hāpua was never a metropolis, but it was a strong and thriving community with a post office and a shop, and a lot of people worked in forestry and fishing. Bang, no more post office, so the shop closed because people could not get money any more. Bang, no more forestry, because some clown in Wellington decided to privatise the industry. Local contractors were undercut by the big boys, and there was unemployment. Bang, Māori got fishing quota, and within 10 years there were fewer Māori out fishing than ever before. There was more unemployment.

Places like Te Hāpua, Mitimiti, and the 257 other doomed home towns are the life and soul of our whānau, our hapū, and our iwi. They are places that our people all around the world come back to: their tūrangawaewae—the places that they, and no doubt many members in this House, still call home. Yet, with one slash of the pen, this Government plans to shut those places down, to push our people out the door, and then to tell them not to forget to keep something aside for KiwiSaver. It is hard for the Māori Party to support this bill, because we cannot see that the working poor and beneficiaries are genuinely being looked after, so as to become financially secure and self-reliant into the future.

Finally, I was interested to note the comments from Investment Savings and Insurance Association chief executive Vance Arkinstall, who reckons there are still some major doubts about whether the KiwiSaver Bill will be sufficiently compelling to many New Zealanders. Perhaps instead we should be learning from Ngāi Tahu, who have just launched the world-first Whai Rawa scheme—a long-term savings plan to support whānau independence by increasing personal wealth. Each year Ngāi Tahu will make an annual distribution to the scheme. Whānau will be invited to save their own money too, and, where whānau are able to contribute, the rūnanga will match their savings. That is Kiwi ingenuity; indeed, that is iwi ingenuity. Ngāi Tahu whānau can choose to contribute their own savings and see them matched dollar for dollar by their own iwi. The long-term plan for financial security and independence is iwi saver. That is a concept the Māori Party and everybody else can surely support. Kia ora tātou.

The ASSISTANT SPEAKER (H V Ross Robertson) Link to this

Just before I call the next member, for the benefit of the previous speaker I refer him to Speakers’ rulings 45/4 and 5 of Speaker Jack, Acting Speaker Young, and Assistant Speaker Braybrooke. The member is new, and I have shown some tolerance and understanding.

GORDON COPELAND (United Future) Link to this

I very much rejoice in the second reading of the KiwiSaver Bill. In many ways a bill such as this—which is based on a workplace savings process, and, in fact, is a voluntary process—is about 30 years overdue. It was way back in 1975 when Rob Muldoon decided to can the newly announced State savings scheme for New Zealanders. I believe that was actually one of the worst decisions a Government has ever taken in my lifetime.

That decision was taken at about the time when the State of Singapore launched its State savings scheme. At that stage the Singaporean economy—and the standard of living—was a mere fraction of what it was in this country. Today, when we look at our two countries, we see that we are a long way behind Singapore. One of the reasons for that is the tremendous spurt and transformation of its economy that has occurred as a result of the Singaporean State pension and State savings scheme.

I would like to say today to the members of National, now that I know they are reconsidering their position on the KiwiSaver Bill, that they should put their minds forward on the horizon and ask what is genuinely good for New Zealand and what will grow our economy. For goodness’ sake, National should not go down the road of a previous National administration that pulled the plug on something that had such potential to deliver so much for New Zealand. We are all living with the consequences of that decision today. As the previous speaker from the Māori Party, Hone Harawira, has clearly outlined, with the degree of poverty that exists in our country those results have not been positive for New Zealand. I think National members should recall that important part of history when they are making their minds up about whether to support the bill. I encourage them to support the bill, because it is good for New Zealand.

I am very pleased to say that United Future has had a massive input into the design of the bill as it is now emerging. In the last Parliament, as part of our 2005 Budget bid, we asked the Government whether it could bring into the bill some way of specifically helping Kiwis to get into their first home. That initiative has been adopted by the Government. Since I have been on the Finance and Expenditure Committee, I have seen the papers that the officials produced for the Government of that time. Those officials said that that initiative would be incompatible and inconsistent with what the Government was trying to achieve.

United Future was there at the time, saying to the Government: “No, it’s not. Getting into your first home and paying off a mortgage is the root to a good standard of living in retirement.” One has only to look at the difference between people who own their own homes and go into retirement mortgage free and those who are still paying rent to see the reality of that. It makes an enormous difference. We are delighted, therefore, that we were there at the time to say to the Government: “No, no, no. Please overrule your officials, because this is a worthwhile thing to do.” As a result, we will see many more New Zealanders get into their first homes through the $5,000 per saver subsidy from the Government than would have been possible without this bill. United Future was there at that time.

We were there again to consider this mortgage diversion arrangement. When Dr Cullen outlined to me in the 2005 Budget—or preliminary to it—that he would put a mortgage diversion scheme into KiwiSaver, I thought to myself that it was a fantastic idea. I could see immediately that it could be a critical success factor, because I knew that many, many people in our country could not service a mortgage and also save for their retirement at the same time. They simply have not got the income to do so. As many people have said, with the record levels of household debt we now have, that is more difficult to do than ever before for most families. Therefore, to have the ability to divert part of their KiwiSaver contribution over to servicing a mortgage, so that they could do both at the same time, I thought—and I still think—was a win-win situation.

I was therefore very, very disappointed when I found out, in about March this year, that Cabinet had decided to drop the mortgage diversion aspect of that original scheme. It did so on the basis that there were questions about compliance costs and a lack of interest from the Bankers’ Association. Well, KiwiSaver is not about the Bankers’ Association; it is about helping ordinary New Zealanders to obtain the ability to buy a house, the ability to service a mortgage, and the ability to save for their retirement—that is what it is all about. I could not care less about whether it is inconvenient for the banks, because they simply need to wise up, and I am sure they will. I am sure the banks will embrace the mortgage diversion scheme as it has been announced today, because it is in their interests to do so. Banks also have an interest in making sure that people have the ability to service mortgages, because, as Jeanette Fitzsimons has pointed out so eloquently, they are in the business of lending money to make money.

I want to say also that the mortgage diversion scheme, which I will probably speak a bit more about in the Committee stage of the bill, really does address a very important point for New Zealanders and for families. Let me give members an example of a person who is on the average wage of about $43,000. This person will, under the bill, contribute 4 percent, or $33 a week, of that amount to KiwiSaver. Under the mortgage diversion scheme, however, that person, who is saving $33 a week, will be able to divert half of that, or $16.50 a week, to the servicing of his or her mortgage. That will make a huge difference.

Many submitters came to the Finance and Expenditure Committee and said to us that their great fear about KiwiSaver was that people would join in order to save money for the 5-year period required so that they could get the $5,000 subsidy from the Government as a deposit on their first home. The submitters added that when those people had done that, probably all that would remain in KiwiSaver for the next 25-30 years, while they paid their mortgage off, would simply be the $1,000 contribution the Government had put in. The submitters said that that was therefore not great, because they would be administering, potentially, thousands of small accounts with no additional funds coming in.

I believe that was a fair evaluation by those submitters of the potential that this bill had, without the all-important mortgage diversion aspect to it. Now, with the mortgage diversion in place, many more people will stay locked into KiwiSaver, and will continue to give credit knowing full well that they can then take 50 percent of what they put in back out. In a funny kind of a way we got to a point where Jeanette Fitzsimons said to the select committee that we should have a 2 percent option. In a funny kind of way, if we look at it now, we see that people put their 4 percent in but can take out 2 percent to service their mortgage. So their net contribution will be 2 percent. That in itself will bring a lot more people into the loop. Incidentally, I would like to thank the Green Party and the Māori Party for voting in favour of the mortgage diversion option at the select committee.

I must say there are days when I find that I really am in the right party in being part of the radical centre, and being able to come to issues like this with a degree of common sense, without trying to get into the ideologies of the right or the left. I find it interesting, for example, that John Key’s comments today really had little credibility when he perhaps forgot to mention that the National Party had also voted against mortgage diversion at the select committee. At the end of the day it was just a question of letting the volume go down a bit and of people actually sitting back, having an objective look at what is a common-sense idea, and saying: “Yes, that is OK; let’s go with it.” Actually, that is all that happened.

I say to Craig Foss, that the fictional ideal he has come up with, that somehow there was some sort of trade-off against the adjustment of tax brackets, reminds me of a lot of people who read The Da Vinci Code and do not know the difference between fact and fiction—and people are right into fiction when they go down that line, I assure him. The reality is much different. It is just a question of people having the wit to adopt an idea that will be good for New Zealand and good for our future.

There are a couple of other things that I think it is important to state. The commentary on the bill talks about insurance and annuities. I want to talk about the life insurance aspect. In my experience it is quite important that while people are paying off a mortgage, trying to save for retirement, and so forth they also have life insurance. I have seen tragic examples of breadwinners with no life insurance who have died and left behind wives and children. We have included this to remind people and scheme providers that they can provide a life insurance option as part of their scheme. In that case, the savers would need to pay in their 4 percent plus the cost of the premium on the policy. They can do that through the existing mechanism quite simply, and I would encourage scheme providers to do that, because it will be helpful to those people.

Another issue that we debated and I got some clarity on was the ability of scheme providers to use an Inland Revenue Department number, so that people have the one number for KiwiSaver and the scheme provider all the way through. That will reduce compliance costs, which is also a positive aspect.

CHRIS TREMAIN (National—Napier) Link to this

Late changes to the KiwiSaver scheme announced today are generally positive, but like much of the KiwiSaver scheme they come as last-minute alterations—as rushed and piecemeal legislation. Mr Copeland rejoices in the new legislation and Mr Cullen says it is landmark legislation. I have nicknamed the bill “The Great KiwiSaver Sailor”. It is a lot like the Titanic when it first left Southampton for New York. It was a huge ship, grand, and impressive. It was one man’s baby, complete with all the bells and whistles and the things to make people go “Wow!”, but it was built with serious design flaws and was heading towards a field of very large icebergs.

From the outset, the National Party believed that this important legislation required significantly more thought and better design. It has been rushed through to meet an unreasonable deadline. Last-minute changes to the bill prove this. Last-minute tax changes to incentivise employers’ contributions are a hint. Dr Cullen acknowledges that the scheme will not work without ongoing incentives. As Mr Key said today, it is policy on the hoof. Last-minute changes were made 4 hours before this second reading today. Last-minute changes to allow mortgage diversion are an acknowledgement that the initial thinking, which tried to connect the retirement savings scheme with a first homebuyers scheme, was faulty.

Let me explain how desperate these measures are. Let me explain where this boatbuilder may be taking this boat. The best example of the new measures is the change in the support of the mortgage diversions. The initial scheme did not propose mortgage diversions; the initial scheme proposed that new homebuyers would enter this scheme to take advantage of the new home-loan option—a means of saving $10,000 by way of a $5,000 input from the Government and a $5,000 input by the individual over a period of 5 years. That is an admirable goal, but it gives no consideration to the points that Hone Harawira raised earlier. The fact is that many hard-working Kiwis do not earn enough take-home pay in the first place. In fact, they are so overtaxed that saving is a distinct dream. Recent economic growth projections, with the likes of 0.1 percent and negative 0.1 percent growth earlier this year, are certainly not putting us on any path towards improving that situation for the average Kiwi. It is my opinion that the Government should be focusing on policies that take economic growth forward in leaps and bounds.

In addition, the bill gives no consideration to the fact that many Kiwis will use KiwiSaver to get their initial homeownership payout, then will simply abandon their account and leave it dormant. They will continue down the track of building their retirement savings through the traditional Kiwi means of paying off their mortgage. That is how most Kiwis have created a nest egg in retirement. They have been able to build equity over a period of time, stay up with the market, and use that equity in their retirement. But the Government, in its rush to keep the ship on track, knowing that many Kiwis will bail the ship once they have their $10,000 out for their homeownership requirements, will be in a difficult situation. In this situation—and this is about Gordon Copeland’s mortgage diversion thing—the select committee rejected the idea in the first place. Even though Mark Gosche stood up this afternoon and told us that we supported that, he failed to read a particular part in the commentary on the bill that states: “Therefore, and because of time constraints, we were advised that mortgage repayments would be best handled through financial education and the contributions holiday mechanism.” The fact of the matter is that we decided not to go with it. Yet, 4 hours before this reading, a press release has come out from Dr Cullen and we are now having to deal with these policy changes on the hoof.

So these latest changes—last-minute boilermaking—seek to further keep the Titanic afloat. But really these changes are like patching a gaping hole in a hull of paper. This piece of legislation has from the beginning been veering off course and Dr Cullen has sought to bring it back on track with additional legislation and last-minute incentives.

Let us have a look at some of the icebergs that have got in the way of this Titanic, and I will speak to five particular key areas. Firstly, there is the responsibility of employers in this particular legislation. Secondly, there are employer compliance costs, which have been well overlooked. Thirdly, there is the issue of compulsion. Fourthly, there are contribution rates. Lastly, there is the KiwiSaver implementation time frame.

Let us come to the first point of employer responsibility for decision making. In the bill, employers were initially going to be responsible for making the decisions. That has now changed and they will not be responsible. However, the reality is that employees will be faced with four to five default providers, with four to five potential prospectuses in front of them. It will fall to employers to understand those prospectuses, and I suggest to members today that most of those employers will be faced with employees coming to them and saying: “Hey boss, sure there’s been some ads on TV, but to be honest with you, I haven’t got time to read through a 50-page submission. What do you think?” As per normal in those sorts of situations, bosses will be faced with trying to give some advice to their employees. I ask members not to overlook the importance of the employers in this situation. It is critical to get employers on side from day one.

Secondly, I want to talk about employer compliance costs. In the Finance and Expenditure Committee, Jeanette Fitzsimons tried to play that out—to understand what the compliance costs were for employers, because she could not just see it. The fact of the matter is that employers will be responsible for making—or helping to make—many of these decisions. They will have to change their software in order to comply with the new requirements for deducting the KiwiSaver contributions. In particular, when the cost of refunds comes up—with the ability to be able to opt out after 2 weeks—the issues involved in getting a refund after a 2-week contribution are significant and will have huge compliance costs.

The third point is the issue of compulsion. At the moment, the compulsory register only applies to new employees, who may opt out after 2 weeks. There will be significant issues around employees who move from job to job and work on a short-term basis; they are covered in another part of the bill. However, there is significant complexity in the refund situation.

The fourth point is the issue of the contribution rates of 2 percent, 4 percent, and 8 percent. Obviously the New Zealand Council of Trade Unions wanted the rates to be as low as possible, but it was just impossible for us to see the impact of a 2 percent payment and how it would deliver any sort of significant growth to employees.

Lastly, National believes the KiwiSaver implementation time frame is too tight. We do not believe there is enough time within which to wind up superannuation schemes. We believe that the marketing and knowledge that needs to be imparted to employers and employees will be difficult within the time frame. We are really concerned that if the scheme is not launched correctly, there will be a loss of credibility in the first place. The last-minute changes that have been made are just that; they are last-minute cries to try to bring this mighty ship back on to the straight and narrow and to avoid the icebergs in order to ensure the scheme’s success. National was given just 4 hours’ notification of those last-minute changes and is reserving its decision on this bill going forward. National believes that the legislation—while having merit—has been too rushed and has not dealt well with many of the issues, especially the ongoing incentives to ensure that people not only take up the scheme but keep it rolling on. We believe that it is critical to ensure a good launch of the scheme so that it does not become the Titanic of the savings industry and so that this makes it across the Atlantic to New York.

SHANE JONES (Labour) Link to this

I rise to take a brief call in relation to the KiwiSaver Bill, and I speak as the chairman of the Finance and Expenditure Committee, which both considered and deliberated over this bill. Firstly, I pay a particular acknowledgment to the officials from Treasury and the Ministry of Economic Development, and the formidable team at the Inland Revenue Department, who assisted the committee. When our committee is confronted with either proposed legislation or concepts that have a highly technical dimension to them, we are reduced, in many respects, to trusting the quality of the advisers and the integrity of the work they do. Although there were moments of tension from time to time—as one would imagine in any creative process—I want it to go on the record that we were well served by that group of people.

Of course, this bill really endeavours to deal with a deeper problem that our economy has, which is how to mobilise a pool of savings. Two schools of thought were trotted out in front of us. One was from the Business Roundtable, which insisted that we read an ever-increasing number of tedious and unreadable reports produced by people who are ideologically opposed to the concept of a savings scheme such as this. I am happy to report to my colleagues in the House that I spent not one minute following the quality of advice in those reports. The second was from practitioners in the industry, who are working on a regular basis with families up and down the country and who are confronted by the practical difficulties that mums and dads have when they become kaumātua, grandfathers, and grandmothers, etc. The savings that those families have amassed in their lifetimes may be inadequate, and the families are left to rely on the State-sponsored scheme.

Those practitioners had a great deal of influence on my mind. They served up a host of very practical examples as to how a savings scheme—of a slightly different nature, but serving a similar purpose—has worked to the benefit of the Australian economy. Indeed, earlier this week, in one of the financial dailies, no one less august than a former captain of the New Zealand All Blacks team, David Kirk, pointed out that one of the key differences between our economy and that of Australia, where he is spending most of his business career these days, is that there is a very deep and extensive pool of available funds in Australia. That has assisted companies like Macquarie and the Westfield Group, and the latter, in particular, has created great status and huge wealth by investing in the United States of America. So minds sharper and far more practically experienced than those of our friends from the Opposition are actually endorsing this scheme.

What are some of the changes that have been made to the scheme? Firstly, there was concern as to when participants should be enrolled and when they could bail out. The committee did move in a direction in which we sought to ensure that all workers, with the exception of casual workers or agricultural workers, will be signed up the moment they begin their jobs. From there, they will have the opportunity within a 50-day period, as I recall, to opt out. In addition to that, we had a great deal of debate over the 4 and 8 percent savings figures. In the end, a number of us, although persuaded by some of the passion, I suppose, associated with the arguments put forward by Jeanette Fitzsimons, felt that the very small sum—dare I say the miserly sum—left in an account had we gone for the 2 percent figure would not really be a fund that would be handsome in any manner or form at the end of a person’s working life.

Yes, I note what Mr Copeland said earlier—the mortgage diversion option was discussed by our committee. As the report states, committee members felt that the option had merit, but time exigencies worked against us. I, as the chair of the committee, am happy to see that the option has arrived as a further improvement to this scheme. There is a fear that the scheme either will not be embraced or will not attract people to enrol in it, and that employers may be tempted to work against the interests of the scheme. I do not agree with that, in any manner or form. Employers have a great example to follow in terms of Fletcher Building, which is itself putting money towards the savings of its employees. That, of course, will enhance the sense of loyalty and commitment that an employee has for that enterprise. I think the exaggerated claims about the attitude of the employer community are precisely that—exaggerations. This is a New Zealand enterprise, and both employees and employers have a vital stake in making it work.

Before I resume my seat I would like to say that members of the committee, including Rodney Hide—who, unfortunately, we saw very little of; or fortunately, depending on the mood of the day—worked quite collectively on this bill. Inevitably, there were differences, but I rather suspect that senior members of the Opposition have read the mood of the country well. The mood we saw in Jenny Shipley’s time, when she campaigned up and down the country to undermine Winston Peters when she was meant to be in coalition with him, no longer prevails. There is actually an acceptance out in the community, built on the success of the Cullen fund, that a savings scheme that enjoys a contribution from the State, that is a shared responsibility of employers and employees, that has a subsidy to assist in the administration of the scheme, and that has State-sponsored literature, etc., regarding the scheme—all those interests—will mean that the country, certainly over my lifetime, will be better heeled. It will be better prepared not only to reacquire assets that have disappeared disproportionately overseas but also to enhance a savings culture amongst our young people.

There was such a culture, I believe, at the time when I went to school, with the old Post Office savings scheme. There are two things, or three, that I remember about starting school. The first was my being the monitor who collected the milk. Some would say I have not moved a helluva lot beyond that! The second was learning about the establishment of the Post Office savings scheme, and the third, obviously, was getting the strap on a regular basis. Well, the strap has disappeared, and the milk scheme no longer exists, but, thank goodness, through our Government, the savings scheme and savings ethic has been reintroduced, and will grow as a consequence of this bill. Kia ora tātou.