KiwiSaver Bill

Hon LIANNE DALZIEL (Minister of Commerce) Link to this

It is wonderful to have an opportunity to take a call at the beginning of the Committee stage of what is a very important piece of legislation to the Government, to Parliament as a whole, and, indeed, to this country. The KiwiSaver Bill marks a really important moment in our history as we address a serious problem that this country faces in respect of savings in New Zealand. This is set out in the purpose clause, which leads Part 1 of the bill. Clause 3(1) states: “The purpose of this Act is to encourage a long-term savings habit and asset accumulation by individuals who are not in a position to enjoy standards of living in retirement similar to those in pre-retirement. The Act aims to increase individuals’ well-being and financial independence, particularly in retirement, and to provide retirement benefits.” Clause 3(2) states: “To that end, this Act enables the establishment of schemes to facilitate individuals’ savings, principally through the workplace.”

There has been a demand for this type of legislation for many, many years now. In fact, I recall quite clearly in 1975 saying to my parents as a young 15-year-old: “Why is the National Party using this extraordinary advertising in the election campaign?”, as Cossacks were dancing across the screen. As a 15-year-old I thought: “Why is the National Party using this type of advertising with these Cossacks dancing across the screen?”. I said to my parents: “What is that ad about, mother and father?”. Because, of course, at age 15 I could not vote.

JOHN KEY (National—Helensville) Link to this

That was Lianne Dalziel, one of 50 members of the Labour Party who stole $882,000 of taxpayers’ money in order to buy an election. It is no wonder she hangs her head in shame and those members were pretty down in the mouth when it came to question time today. She said in her remarks that this is not the same scheme as that in 1974. That was when she was taking a trip down memory lane, to the time when she was 15. But what was interesting was that she was quite right. This scheme is not actually the scheme that the Finance and Expenditure Committee looked at for weeks when it heard submissions. Why? Because Michael Cullen and Helen Clark stole $882,000 worth of taxpayers’ money. They propped up a member of Parliament who, frankly, was a disgrace to this House, and the Sunday television programme rightly highlighted that.

Two weeks ago, after we had heard 71 submissions on the KiwiSaver Bill, Michael Cullen and Helen Clark were so desperate to get themselves off the front page of the paper regarding the disgraceful antics of the Labour Party when it stole $882,000 that Michael Cullen would have been prepared to listen to anything. That happened to be Gordon Copeland, who wandered into his office with some mad idea about mortgage diversion. That is actually why we have seen that change to the bill. Gordon is laughing—

R DOUG WOOLERTON (NZ First) Link to this

New Zealand First supports Part 1 of the KiwiSaver Bill. I must say that it comes as a revelation to hear the National Party leadership contender John Key talk in this Chamber, because he talks of a different world. I suspect that he actually inhabits a different world from that of most people. I am sure it is a wonderful world; I am sure it is a great world. Unfortunately, the world he lives in constrains his understanding of where ordinary people in New Zealand come from. It constrains his understanding of legislation that is put in place to help those less fortunate than, perhaps, he is.

I cannot help but think back to the years of “Kiwi Keith”, Muldoon, Marshall, and all those sorts of people. I think about what they would make of a National Party front bench made up of money dealers and people in the financial world. I do not know what they would make of that. Back in times past, the National Party had aspirations, certainly, but it also was a grassroots organisation that actually understood real people, and the real problems and real concerns of working people in New Zealand as well as the elite. We certainly would not have had tripping off the tongue of “Kiwi Keith”, Muldoon, or many of the other leaders of the National Party light-hearted talk about pool boys and people who come to service pools, clean houses, do the windows, do the lawns, and all of that sort of thing.

The sort of people KiwiSaver is aimed at do those things themselves, and they take their kids to school, they struggle, mum and dad both work, their kids do paper rounds, and all of those sorts of things. This bill, more than anything else, is about trying to instil a savings habit into New Zealanders. This is not about the financially secure. This is not about those who deal in money markets. This is not about those who are literate, and more than literate, in financial affairs. This is about getting struggling Kiwis some way on the track to saving.

Mr Key talks lightly about his trips to Singapore—and good luck to him—and how an account did not have this, and so forth, but in the very next breath he will say that KiwiSaver is not needed because the first thing people should do is pay off their mortgage.

KATHERINE RICH (National) Link to this

I always enjoy the contributions from the previous speaker, the Hon Doug Woolerton, but I was a bit surprised to hear how excited he is about the mortgage diversion aspect of the bill, because I understand that he voted against it at the select committee. Although Mr Woolerton might euphemistically call it a “wee surprise”, it is a pretty major addition to the KiwiSaver scheme.

I wonder what the addition of the mortgage diversion provision says about the parliamentary process, whereby a select committee can work thoroughly on a bill, seek submissions, hear from the public, then unanimously decide that such a provision is not a good addition to the bill—it votes on it, it reports back, and, hello, 2 weeks later it is slotted back in there. The Minister in the chair, the Hon Lianne Dalziel, might like to rise to her feet and explain to the Committee how that happened, because it smacks of some arrogance to totally override the select committee and insert something into a bill that not just National members, New Zealand First members, or other members of the committee but also Labour members decided was not in the best interests of New Zealanders.

When the Minister last spoke she talked about how this bill addresses the savings problem. We all know what the word “addresses” means in this Chamber. Day after day in question time a Minister can stand up and basically say “rhubarb” and we are told that that addresses the question. If we look at the purpose of this bill, we see that it aims to increase the well-being and financial independence of individuals, particularly in retirement. The purpose of the legislation is to encourage long-term savings, but what we see in it does not necessarily deliver that. What we have seen from the Government is a lot of rhetoric and a lot of words, but in our view what is delivered does not necessarily address the problem of long-term savings. That is why we are concerned about turning a savings account into something that is basically a cheque account whereby New Zealanders can take out money, albeit to divert to their mortgage payments, but none the less they have access to that money to divert to something else that is not about retirement.

I think that is where the Government runs into difficulty in many cases, because it mixes objectives. It seems to be combining homeownership objectives with retirement savings objectives, and I think that is where this scheme potentially has an Achilles heel. Many New Zealanders will be able to buy their first home, then they can sell that home and, bang, they have the funding in their pockets.

Until we address the fundamental issue in this country that some people do not have the capacity to save or to put money away, because they are overtaxed or for other reasons—they may not be earning enough—we will not move towards really addressing the long-term savings issue. Many people whom I have spoken to say: “Well, yeah, I would like to save a little bit more but I am paying for my kids’ school fees and I am paying for food on the table, etc.” If those middle-income New Zealanders paid less tax, they would have more to put away.

In terms of the scheme that has been provided, I would like to hear the Minister explain why she thinks it will contribute to long-term savings when, in the first instance, people can whip out that money, as if it is a cheque account, to put it into something totally different. That was never part of the scheme when the measure was first discussed. It was never part of the scheme when Michael Cullen first dreamt it up. It is something that has turned up in just the last 2 weeks, which brings on all sorts of concerns about process.

It also makes the members who sat on the Finance and Expenditure Committee wonder what they have been doing for months. Also, the members of the public who put their hearts and souls into the submissions and came along to the committee were consulted on one part of the idea, then, hello, the bill is totally different when it comes back into the House. I do not think that is good process. Sure, we often have fine tuning, but to make such a dramatic change to the KiwiSaver scheme requires a lot of explanation. It might be a cute idea that can be debated on the platform, but will it work? We do not know whether it will work, we have not heard from the public on that point.

BRIAN CONNELL (National—Rakaia) Link to this

Thank you for the call on the KiwiSaver Bill. I will start by picking up where my colleague Katherine Rich left off, and say that the process we have witnessed makes a mockery of our democracy. How can a select committee meet, week after week, to examine a bill in minute detail, simply to be ignored by the Minister when the bill is reported back? That is a mockery of our democracy, by any gauge.

GORDON COPELAND (United Future) Link to this

I rise to make a brief contribution in terms of part 1 of the KiwiSaver Bill and clause 3, “Purpose”. I think it is relevant to actually read what clause 3 states: “The purpose of this Act is to encourage a long-term savings habit and asset accumulation”—two things: a long-term savings habit and asset accumulation—“by individuals who are not in a position to enjoy standards of living in retirement similar to those in pre-retirement. The Act aims to increase individuals’ well-being and financial independence, particularly in retirement …” In short, this bill is about savings and asset accumulation for retirement.

I say straightaway that when I read some of the commentary—for example, this morning in the Dominion Post—that somehow or other finds a mischief in the mortgage diversion part of this legislation, I have the view that it is simply not looking at this thing holistically. Because the key to having financial security in retirement is, No. 1, having a freehold home, and, No. 2, having some savings in the bank to supplement New Zealand superannuation. Both of those things are relevant. I might say, too, that when some of the commentators say there is no savings problem in New Zealand, then go on to quote the fact that the price of housing in this country has skyrocketed over recent years, and, therefore, if one takes the stock of housing now and divides it by the number of people in the country, that average household wealth has gone up, I want to say to them that it is all very cold comfort for people who are paying rent. Because one is either in the housing market or one is not.

One of the very, very sad things about this country, which goes all the way back to 1975—as mentioned by the Minister Lianne Dalziel—is that we have never had a national savings scheme. I am sure that when John Key was in Singapore he would have picked up that Singapore now has the highest percentage of private homeownership of any nation in the world. Does Mr Key know—because he is a generation younger than me—who used to be number one? It used to be this country. That is the extent to which we have fallen behind in the last 31 years, and it is time we got into catch-up mode.

I would like to thank the three National Party members for the speeches we have had so far and for their compliments to me in relation to the mortgage diversion scheme. Since I have been in Parliament I have never before been portrayed in a way that I personally can somehow change the law of the country just because I decide to do it. I regard that as a tremendous compliment, and I really do thank them for that. On that basis, I think I should really be in line to become the Prime Minister, because I thought she was probably the only one in the whole of the House who could actually do that. So that really is putting me in pretty exalted company, and I am very, very grateful for the compliment.

None of the three National Party speakers in their 4 or 5-minute speeches seem to have actually figured out that the mortgage diversion relates only to 50 percent of contributions. That is the maximum that people can do—only 50 percent. Therefore, the sum the member John Key did before is quite wrong when he said that people would end up with nothing going in. He said 2 percent from the employer would go in and 2 percent from the employee, and then he said the employee would take out his or her 2 percent. No, the employee will be able to take out only 1 percent maximum. That leaves 1 percent of their contribution in the scheme. Therefore, it is 50 percent—or many hundred percent, actually—greater than having nothing at all in the scheme, which would have been the result if there were no mortgage diversion.

So we are really looking here at a win-win situation. I hope the National Party members will get their minds around what this really means, because I think it will be good for New Zealand and I am sure it will be good for savers. I am absolutely convinced the mortgage diversion will be greatly successful. In reality, it was just an idea whose time had come, and people who have thought it through have said that it will try to fulfil the purposes of clause 3. It is really fundamental to the whole purpose of what we set out to do in Budget 2005. I remind members that in that Budget we had a mortgage diversion element in the KiwiSaver scheme. That has been reinstated in a different form and, in my own humble opinion, in a superior form. It will be more effective than the original suggestion, which was discarded by Cabinet back in about February or March of this year. So I just appeal to commentators to consider that.

By the way, I should say that the Dominion Post,,and everybody else have picked up that people can divert only 50 percent of mortgage contributions, but apparently the members of the National Party have not.

CHRIS TREMAIN (National—Napier) Link to this

I rise to speak to the KiwiSaver Bill 2006. First and foremost, I wish to compliment the Finance and Expenditure Committee, which I worked with on this bill. There was good continuity in that committee. In fact, the continuity of the committee could probably be held above the continuity of the bill, with the exception, I guess, of Rodney Hide, who was not a regular in the committee—

CRAIG FOSS (National—Tukituki) Link to this

As earlier speakers have mentioned, the National Party is opposed to this bill at this stage, in its current form. First of all, I would like to thank the members who were present at the Finance and Expenditure Committee consistently. I would like to thank the officials, and also, on behalf of National Party members, to apologise to the officials. The apology is because of all the hard work, the resource allocation, and the time they spent on a bill that arrived at our committee, was discussed, was submitted upon, and then was changed radically last week. I think that is an absolute abuse of process. Last Thursday, about 4 hours before the second reading, two radical changes were made to the bill. They are quite radical.

I would like to take maybe 30 seconds to quickly go over the discussion we had in the committee around the mortgage diversion scheme. I will give that discussion verbatim for 30 seconds, starting now. That is exactly it: there was no discussion around the mortgage diversion scheme. There was no discussion around a fundamental part of, and change to, this bill whatsoever.

PANSY WONG (National) Link to this

It is easy to tell a National member of Parliament from a Labour one. The fine member Craig Foss is prepared to apologise to the officials because the Minister, once again, did a backroom deal with United Future and wasted all their hard work—and it was not even Craig Foss’s undertaking. One can tell. If it is a Labour Party member or the Prime Minister, their stand is to never admit a mistake, never apologise, and never pay back. But a fine member, like the National Party member Craig Foss, would take it on the chin.

I would like to raise two points under the purpose of the KiwiSaver Bill. The first one is that the purpose of the bill is: “to encourage a long-term savings habit and asset accumulation by individuals who are not in a position to enjoy standards of living in retirement similar to those in pre-retirement.” I wish the Minister would take a call to answer a question, because there are members of the public out there—those who have just started work, those who have to take two jobs, and those who are working 7 days to make ends meet—who ask how they can enjoy their current standards of living. At their current standards of living, how can they look ahead 20 or 30 years?

A lot of New Zealanders are not in the fortunate position of being able to plan for retirement. They actually struggle just to meet their current standard of living, when there have been huge, huge increases in the local body and council rates made because of central government giving local bodies all those additional responsibilities without giving them the funding to go with it. So it is hard to see how the Government can expect people to change their current behaviour when they are struggling to make ends meet. Just now, when Gordon Copeland mentioned Singapore having a savings habit, he neglected to mention that Singaporeans also have a much higher average wage compared with New Zealanders. It is just like Australia.

The second point is even more interesting. It states that the purpose of the bill is to ensure savings habits, so that those individuals can “… enjoy standards of living in retirement similar to those in pre-retirement …”. It is a big call to expect people to have standards of living similar to those they had before they retired. Actually, I would invite my colleague Mr John Key to take a call in the next part, because he is a self-made man. From nothing he built up a wonderful future for himself, but how is John Key to ensure his after-retirement living standard will be similar to his standard of living now? Well, if anybody were to lead New Zealand to achieve that, I think that most New Zealanders would trust John Key to come up with a better KiwiSaver design than the Hon Dr Michael Cullen.

MOANA MACKEY (Labour) Link to this

I move, That the question be now put.

CHRIS AUCHINVOLE (National) Link to this

I rise to address Part 1 of this bill. We are talking here of long-term savings ambitions and the effectiveness of bringing them about. The bill seeks to encourage savings as a practice, but the reality is, in its present form, that would appear to be a bit of a dream. Savings are not achieved through compulsion and not through regulation—both those items being the standard currency of this Clark-led Government. I guess what we have here is a mismatch between the political agendas of people within Labour and within United Future. In spite of the excellent work done by my colleagues on the Finance and Expenditure Committee, therein lies the problem. If Government members really want to put it clearly, after the purpose of the bill they should put in the phrase “in accordance with Labour Party ideology”.

One of the advantages of having a family now in adulthood is that it has been possible to study the development of savings habits—or the lack of them—and the stresses they come under as one’s children are growing up into adulthood. It is an interesting comparison to see how need affects habit. In my own case, and in that of many people of my generation, I think it was a Post Office Savings Bank book from my grandmother that started off my savings behaviour. Our children benefited from the same experience. Savings had a high priority, to the extent that when my son was in his teens and his car needed repairs, I suggested that he might wish to contribute to the cost of the repairs from his weekend earnings at a restaurant. His response was: “Dad, I will have to use my savings.”—shock, horror! I had to use mine, instead.

Savings, in my experience, are a blend of training, opportunity, and needs. The needs will always take precedence. Earlier speakers have emphasised the vulnerability of this particular scheme when need becomes predominant. The present Minister of Finance wishes to encourages saving. If he does so sincerely, he should think of the effect of his other financial policies—tax, for instance. But no, the limp legacy of the Labour Government will always be one of over-regulation. To instil long-term savings habits necessitates having money that is surplus to immediate requirements.

What particularly worries me are the compulsory changes that the Minister will make when the scheme proves to be unsuccessful and inoperable, because we will then see more of the same sorts of changes imposed without, it would seem, too much reference to others—and that is a disturbing worry.

Thank goodness that we have the prospect of improvements through the introduction of a “Key Savings Scheme”, which will follow on from this one.

DARIEN FENTON (Labour) Link to this

I move, That the question be now put.

Hon LIANNE DALZIEL (Minister of Commerce) Link to this

Part 2 contains three subparts, which are very important to the implementation of the scheme. Subpart 1 talks about becoming members of KiwiSaver, Subpart 2 deals with the allocation of people to KiwiSaver schemes, and Subpart 3 transfers between KiwiSaver schemes. So those really are the operational aspects of the KiwiSaver legislation.

It was interesting to listen to other members’ contributions to the debate on Part 1, because they are relevant to this part, as well. This part gives effect to the objective of the legislation, which is to encourage people to take up savings. As the Minister of Finance said in the second reading debate, this is not designed to make savings compulsory; he said that it was designed to make savings compelling rather than compulsory. Of course, I too recall the Post Office Savings Bank books that we had, with the little squirrel on the front. I think “saving for a rainy day” was the message we were given in those days. I certainly did not have parents to bail me out for anything I wanted to buy in my time growing up. I worked from the time I was old enough to go in with my dad and earn a few dollars at the office by putting things in numerical order. Then I worked in a dairy after school, and then I worked in a hospital. I spent my time working to support myself, for quite some time.

JOHN KEY (National—Helensville) Link to this

That speech made by the Minister of Commerce was touching in this regard: she spent quite a bit of time down memory lane talking about how she had saved up for the white boots she got when she was 16—

R DOUG WOOLERTON (NZ First) Link to this

I will take up John Key’s challenge, because as every financial adviser knows, one can always put aside a dollar for savings. I am not talking about the financial advisers in the money markets that John Key deals with; I am talking about the budgeters, the people who talk to other people about how to extend their dollars in order to make the home budget work, as his mother did. His mother would have understood that, just as my mother would have. It is a matter of making savings a priority and it is a matter of getting the habit of saving into one’s psyche. People know—and Mr Key knows this, but he has forgotten it because it is a very long time ago for him—that the important thing is to make the effort to save and to make saving a habit. Anybody who does budgeting, or who does household budgeting, knows that.

I suggest that in many, many homes across the country, when the man of the household is not doing as he should, it is the mother, the lady of the household, who will quietly put aside a couple of bucks each week for what she knows will be a rainy day—or for the skates that the Minister in the chair, Lianne Dalziel, was talking about—

KATHERINE RICH (National) Link to this

I thank you, Madam Chair, as I rise to speak to Part 2. We have heard a lot of members talk about the savings culture and how things have changed over many generations. I have to agree with that, because I recall speaking with my own grandparents about their attitudes towards money and saving. Many of the generations before my own generation would never take out loans. And if people did, they would do it for something important—certainly not for something flippant like going on a holiday.

Things have changed, and to a certain extent I think there are a number of reasons for that. Banks are always telling us to take out more loans. Credit card companies are always marketing themselves, and encouraging people to take out additional credit. Things have changed over a period of time. Even in the schools there has been a small change. Years ago schools used to encourage banking. Kids used to bring along their 20c or 50c a week to put it into their savings account, but many schools do not do that any more. I think the changes have chipped away at a culture of saving. I listened to my colleague John Key’s comments about the rise in debt even in the last 6 years. When we hear the figure of $60 billion that is being talked about, we feel it is a figure so large that it is hard to imagine that amount in physical bills. So something has been occurring.

I proffer the view that the Government has played a role in that, by giving people the impression they do not need to save because the Government will always be there to let them off the hook if they rack up some debts. Later on today we will be debating the Child Support Amendment Bill (No 4)—legislation that will let liable parents who have child support debts off a pretty hefty amount of child support. Since when has the answer to having a debt been to write it off completely? I do not know. But I think all those decisions made by the Government contribute to the idea that if times are tough, the Government will write off people’s debt. There is not the same attitude towards personal responsibility as there was previously. Some younger people think it is OK to rack up a huge debt just so they can travel overseas, thinking they will pay it off at a later time.

I wonder what role this bill will play in terms of changing the culture of New Zealanders. That is my concern. When we look at the bill, we see that the scheme is not a compulsory one but an opt-out one, so it will be very easy for a young person to decide that he or she wants to have his or her income now. I remember that when I was first a public servant, many moons ago now, the department I worked for had quite a good superannuation scheme. The Government chipped in $2 for every $1. Well, a lot of young people—admittedly we were all in our early 20s—thought they wanted their cash then. They did not want to put it into superannuation savings, thinking that retirement was decades away.

Even if a scheme with certain advantages is provided, it is another thing to try to encourage people to take part in that scheme. That is what I am interested in, and I would like the Minister in the chair, the Hon Lianne Dalziel, to take a call and explain how, in an opt-out scheme, those people can be encouraged to put in their funding, and how it will be explained that even in their early years—in their first employment—it is to their advantage to do so. Unless we do that, we will not change the culture in this country and we will continue to have Kiwis who think it is OK to outspend their income on their lifestyle, and to take out loans and use credit for luxuries as opposed to important assets like homes, etc.

The other point is that in this bill, the Government is promoting homeownership again, at a time when the Governor of the Reserve Bank is trying to get Kiwis away from their infatuation with property. I am still concerned about those mixed messages. If this bill is about saving for retirement, then that is something quite different from homeownership. I think this scheme runs the risk of muddying the water and not doing a good job of encouraging people to save for their retirement, so they can have a better lifestyle in their later life.

BRIAN CONNELL (National—Rakaia) Link to this

I thank Madam Chair for the call on Part 2 of the KiwiSaver Bill. I start by saying that the speech by Lianne Dalziel was one of the finest Tory speeches I think I have heard in this House for a long time. Right at the heart of her speech was capitalism; people who work hard are rewarded. Mind you, the mind boggles at the thought of Lianne Dalziel in a pair of knee-high boots.

I want, now, to tell my own story in relation to this bill, one that sums up the Labour Party’s attitude to saving. When I was about the same age as Lianne Dalziel in her story, I was saving hard. When Mum and Dad gave me threepence or sixpence for an ice cream—this story does go back a long time—I would take the money and I would save it. Then when all the kids in my family—and there were six of them—ran out of money for ice creams, Mum or Dad would say to me: “Don’t be mean, Brian, share your money.” All that time I had gone without ice creams. And now the Labour Government comes along and says I have to share that money, and Mr Employer has to share the money, because it is not fair.

It is typical, is it not? Here we are, debating Part 2 of a bill where we are spending more time dealing with the process of the bill than actually getting it structured right in the first place. My colleagues have quoted chapter and verse as to what is wrong with the bill, but the slow-witted members of the Government are still struggling to understand why someone earning $40,000 a year will simply not be able to afford to take up the opportunities that this scheme offers; it simply will not work.

I have some questions for the Minister in the chair. Clause 9 is headed: “Meaning of new employment”. I ask the Minister whether, if an employee who is in the scheme changes employment, the scheme is portable, and is fully vested, and the employee can go. I ask the Minister to take a call and answer whether employees can take their contributions from one scheme, and go to another employer, if that employer is not an exempt employer under the definition of this scheme. I should be grateful if the Minister in the chair would take a call and answer that question. The fundamental flaw in this bill is that it will not bring about the behavioural change that is necessary if we are going to have a savings culture in this country.

CHRIS TREMAIN (National—Napier) Link to this

I rise to speak on Part 2 of the KiwiSaver Bill. I want to take this opportunity to get to the heart of some key issues of this part of the bill. I will canvass clause 7A, “Outline of how people become members of overall KiwiSaver scheme”; clause 8, “Who automatic enrolment rules apply to”; and clause 9, “Meaning of new employment”. I will particularly focus on the compliance costs around this bill, and temporary employees for a period of up to 28 days, and—if time permits—round it out by having a look at the time limit for opting out.

Clause 7A outlines how people become members of the overall KiwiSaver scheme. This is an issue which vexed the Finance and Expenditure Committee when we first considered the opt-out versus the opt-in provisions. Initially, when the bill first came to us it was an opt-in situation. It was not until the select committee changed that particular rule that it moved to the opt-out position. The bill now essentially provides for opting-out, and gives employees the opportunity to do so after 2 weeks.

Clause 8 deals with who automatic enrolment applies to. There is an interesting point here that the Minister of Commerce may like to take a call on to give me an answer. Clause 8(b) states that it applies to people of the ages of 18 through to 65, so, unfortunately, when the Minister Lianne Dalziel, at the tender age of 15, first conducted her working life and first started saving towards her new pair of boots, she would have been unable to make contributions to KiwiSaver at that point. The vexing question—and I would be interested in her taking a call here—is what happens to an employee at the age of 64. Do these employees opt in for a year, and will they receive the $1,000 remuneration at the end of that year? Will the Government be forking out a significant amount of money to an employee aged 64 who is on $30,000 and may have contributed only $400? Will the Government be forking out $1,000 to those employees?

I move to clause 9, “Meaning of new employment”. Again, this was another vexing issue for members of the select committee, purely because of the compliance costs that surround temporary employment, which is specifically covered in clause 9A. This was something that the select committee focused on, because the definition of “temporary employment” and who can be involved in the scheme is very important. Members will see that there is a new, unanimous clause dealing with casual agricultural employees that moves them outside the scheme until they become permanent employees. More specifically, it deals with employment that is “under a contract of service that is for a period of 28 continuous days or less.” This is another question I would like the Minister to consider. Is this period long enough, given that a significant number of employees in our workforce move from job to job? I suggest to the Minister that the compliance costs around these temporary employees will be significant.

I turn to the officials report, to delve through what would happen if an employee enrols in the scheme after the 28-day period, decides to opt out after a 2-week period, then leaves that employment for another job. Let us go through the process. The employee starts the job and a deduction is made from the first pay. The employee then sends an opt-out form to the Inland Revenue Department. A deduction is made from the employee’s second pay. The opt-out form is received by the department, it is processed, and the employer is advised to cease deductions. The employer then has to send the deductions, dating from the first pay, to the Inland Revenue Department. The department provides a refund to the employee via the employer. Do not tell me that is not a significant process for an employer to go through! I suggest that the compliance costs surrounding temporary employees will be significant.

Hon LIANNE DALZIEL (Minister of Commerce) Link to this

I think it is worthwhile responding, just briefly, to the questions that have been asked. Persons aged 18 or under may opt in only by contracting directly with a provider, and that is catered for in clause 26(1). The employee’s contribution belongs to that person and is portable to a new employer. I think the question was asked by Mr Connell, and I refer him to clause 14(1). The employer contribution, if it makes up 4 percent, has to vest immediately and is portable. I refer the member to paragraph (ii) of new clause 56A(b).

CRAIG FOSS (National—Tukituki) Link to this

I would like to pick up on one of the earlier speeches in which Dr Cullen mentioned that he wanted savings to be compelling and not compulsory—that this was not a scheme of compulsion. I tend to argue that that is not absolutely clear, because there are compulsion traps all over this bill. It may be an opt-out bill but if, say, under this bill someone starts a job tomorrow, and has 2 weeks to opt out, that is OK, the person is out. In a year’s time the person starts a new job and is asked again whether he or she wants to opt out. The choice is made to opt out, and that is fine.

However, if someone starts a new job tomorrow and chooses to opt in, that is fine. The person is in the scheme. If the person starts another job in a year’s time, he or she is still in. The person could take a holiday or do the mortgage diversion scheme, but he or she is still in. So talk of it being voluntary, nice and gentle, and just helping everyone on is not the total truth. This is almost compulsion by stealth.

During the consideration in the Finance and Expenditure Committee the officials pointed out the number of new job events a year and I was staggered. I think they said there are 1.1 million new job events every year.

JOHN KEY (National—Helensville) Link to this

I want to go back, if I may, to the issue of mortgage diversion and talk about that for a minute. Some New Zealanders may be considering going into KiwiSaver, and it is important they understand a few things. The first is that if they want to have mortgage diversion, so they put their money into KiwiSaver and decide to elect to have mortgage diversion, they cannot do that for 12 months. That is the first thing.

The second thing is rather interesting, and the Minister might want to check this with her officials or take a call on this herself. She may know the answer. In Michael Cullen’s Supplementary Order Paper 52, from memory, clause 194A states: “The Minister of Finance may make a recommendation under subsection (1) only if the Minister is satisfied that a mortgage diversion facility that is provided … (a) there is no compulsion on providers to provide a mortgage diversion facility:”. There is no compulsion. That is interesting.

So people may sign up for KiwiSaver, and be one of the low-income New Zealanders whom Mr Woolerton thinks the National Party does not understand. But he is wrong, because many of our supporters are aspirational New Zealanders who want to do better, and want to pay less taxes. They are New Zealanders who do not want to be booted off Pete Hodgson’s waiting list. They are New Zealanders who do not want to have $882,000 stolen from them to buy an election. They are New Zealanders who do not support Taito Phillip Field rorting his electors and running a cash business in his office. They are New Zealanders who are sick of seeing Helen Clark breaking the rules whenever she wants. They are New Zealanders who thought that an election spending cap meant that a party stuck to it. They are New Zealanders who thought that when they signed up to a Prime Minister who said that she was going to set new standards, that did not mean she would take $882,000 because her party was down 3 percent in the polls and spend whatever it took. Those people are decent, hard-working New Zealanders, and they support National because they understand what we are all about. But now they are thinking that under mortgage diversion they will be able to divert something into their mortgage, but lo and behold, here we have a little clause in the bill that says there is no compulsion on providers to provide a mortgage diversion.

No wonder the 71 submissions we heard on the bill did not talk about mortgage diversion. That is right, it was not on the agenda last week when we had a Government that was not in a complete freefall in the polls. Was it not interesting, I might add, when I spoke in the general debate? I pointed out to Trevor Mallard that the polls were going south for Labour. Trevor Mallard looked at me, as Pete Hodgson is now, and said: “No, no, they are going up.” Well, that is not what we found out on Agenda on Saturday morning. The UMR Insight poll—Labour’s pollsters—only 4 weeks ago had Labour three points out in front, because I saw it, which was very interesting. Two weeks ago, when mortgage diversion was not even on the agenda Labour was four and a half points behind. Now it is more than four and a half points behind. []

So no wonder Mark Gosche is giving a longer speech than I am, and I am on my feet. Mark Gosche knows that $882,000 of taxpayers’ money was paid to prop up not only his re-election but, for goodness’ sake, Taito Phillip Field’s re-election. Labour used taxpayers’ money to do that. Labour members are very quiet over there; they know that mortgage diversion may not apply to these issues. I find that very interesting, and I think New Zealanders will find it very interesting when they have a look at this legislation.

The real truth is that KiwiSaver is the same as any savings scheme, and that means that people will engage in savings schemes if they are matched by an employer. We know that. The take-up rate in schemes such as the State Sector Retirement Savings Scheme is about 47 percent, I think, from last memory, and that is matched dollar for dollar up to 3 percent. So the real issue here is: will employers embrace KiwiSaver? That is the only question one has to ask. Because if they will embrace KiwiSaver then I agree that more New Zealanders will actually take up the savings pledge. I agree with that.

My question for the Government is, in its rush to get Taito Phillip Field and its $882,000 of theft off the front page, why did it not do something to make the scheme more attractive to employers? Because the Government has made it slightly more attractive to employees—it has got rid of the specified superannuation contribution withholding taxes so employees get the full benefit going in—but there is no change for an employer. If last week an employer was putting $1,000 into an account over the course of a year and $300 was going to the Government for withholding tax, and $700 was going into the account, now $1,000 will go into the account. So that is good for employees, they are happy, but the employers have no benefit.

PANSY WONG (National) Link to this

Part 2 has 40 pages, and it is really interesting that the Labour members seem, for the first time, to understand what is in this bill. That is why they are getting very nervous and excited. They now realise that this legislation will not save them in the polling, even though the Minister of Finance pushed it out as if it would be the saviour for Labour. Part 2 has 40 pages dedicated to procedure and definitions. In fact, there is a distinction between new employment and new jobs, which apparently are quite different. I wonder whether the Minister in the chair, the Hon Lianne Dalziel, would like to take a call and say whether the Government will propose a subsidy to employers for administering this scheme or learning how to comply with all these 40 pages of requirements. Last time the Labour Government introduced payroll legislation that affected employers, instead of making an employer’s job easier, it actually provided a subsidy to employers who furnished PAYE returns. Instead of reducing compliance and making life easy for employers, it is continuing with the Labour hallmark of putting people on welfare—introducing welfare and putting taxpayers’ money into that.

It is interesting that in my hand I have one of the little red books—no doubt it is part of the $882,000 stolen by the Labour Party for election expenses last year. The Labour Party spin machine states that some people talk about a Budget surplus as if there was a pile of money building up in the Government’s bank account, when, in fact, all the money was spent on current and future New Zealanders. What it is really trying to say is that all the money was spent on stealing last year’s election for the Labour Government—$882,000! Now it is fine for the Government to preach to New Zealanders on spending. Why would New Zealanders need incentives to spend, when they have a Government that steals over $800,000 of their money to use on spin?

Then the Government turns around and says it is for the good of New Zealanders that they should learn to save. It is interesting that the Minister, just now, said this bill is not for people who cannot afford to save. So, firstly, we want to know what measures the Government has for those people in order to get them into a position where they can afford to save. The other interesting thing is that the Minister said that this bill is for people who can save but will not save. Well, that is the Labour Government making a huge judgment call and accusing New Zealanders who, it says, can save but will not save. I say that the Labour Government provides a very poor example to people, by failing to ensure there is less wastage of taxpayers’ money. It should not have given local government all those additional responsibilities without funding. Local government is taking so much off individuals through tax for council rates that that ensures they are in the position of being unable to save.

I hope the Minister will take a call and say how she on the one hand champions the reduction of compliance costs, yet on the other hand has 40 pages in Part 2 of the KiwiSaver Bill that do nothing to encourage anybody to save but rather put a lot of additional paperwork and administrative barriers in the way of employers, and equally of employees.

Our fine National member Craig Foss once again gingerly pointed out that all that talk about KiwiSaver being voluntary was rubbish. It is not quite voluntary.

CHARLES CHAUVEL (Labour) Link to this

I move, That the question be now put.

Hon LIANNE DALZIEL (Minister of Commerce) Link to this

I have found it very interesting to listen to members of the National Party commenting on the KiwiSaver legislation. I have been trying to understand what they are trying to say, but the message seems to be so fundamentally mixed. They have missed the point of the effect of their Government’s decision in 1975 to end a superannuation scheme that might have made John Key’s comparisons with Singapore sound sincere—we might have been in a similar position to Singapore today if a superannuation scheme had been allowed to continue since 1975. But, no, National Party members have always known better than everyone else in terms of what will do and, talking about buying elections, that 1975 decision will stand this country in ill stead for a very, very long time.

This is about making a difference. It is about turning things around. The scheme that Dr Michael Cullen introduced in order to smooth out the superannuation scheme that exists for all of us was the first big step this Government took to right the wrongs of the past. This bill is the next big step that we are taking. I cannot understand why National Party members are so opposed to a scheme that will enable people who have the opportunity to save to actually become savers—a scheme that will inculcate a savings culture in this country that we lost the opportunity to pursue in 1975 with an outrageous promise we could never afford to keep.

Pansy Wong and Katherine Rich both talked about families who do not earn enough to save. Both ignored the Working for Families package, which was the alternative under our Government to a pack of tax cuts that would have destroyed those families once and for all. Pansy Wong and Katherine Rich also ignore the impact of the Employment Contracts Act on ordinary working people in this country who, throughout the 1990s, saw their pay and conditions of employment slashed. We saw wages and conditions of employment coming down in New Zealand, as they went up in Australia. National Party members ask why people went from New Zealand to Australia. They went because the Employment Contracts Act drove them overseas.

National Party members talk about the lack of depth in our capital markets, and then watch with envy Australia, which is awash with money because of a compulsory superannuation scheme entered into a number of years ago. What I think is incredible about the National Party’s absolute gall in terms of the position it has adopted—I am not allowed to use the “h” word to describe it—is that it ignores the reality of the opt-out provisions for new employment. The opt-out provisions are there for new employees so that they do not have to stay in the scheme if they do not want to. But National Party members completely ignore the fact that this legislation enables any New Zealander to opt in. All National Party members want to do is bag us and bad mouth us. They have done the same with superannuation; they have been making it into a political football ever since I was 15 years old. I hope this is the end of that.

Not one single National Party member has stood up and said that the party will get rid of this scheme if it ever becomes the Government. I believe that the Labour Party will be in Government long enough for this scheme to become completely part of the New Zealand psyche. Everyone will want to have a KiwiSaver account. I agree entirely with contributions that have been made in this Chamber that have suggested it is parents who will tell their kids not to let it happen again, and to get themselves a KiwiSaver account as soon as they start a job and never let it go. The reality is that KiwiSaver will give people the base for their first home. But it will also give them the base for a retirement income that will supplement New Zealand superannuation. New Zealand superannuation will still be in place when they are older, and the simple reason is that this Government has taken responsibility for it once and for all. I am really proud to be part of a Government that has made superannuation part of its commitment to New Zealand, and will continue to do so.

JOHN KEY (National—Helensville) Link to this

The only thing worse than Charles Chauvel’s best speech so far, which we heard a few moments ago—“I move that the question be now put.”—was Lianne Dalziel’s speech just before. She told us she was opposed to New Zealand superannuation. It is no wonder that Labour spent $882,000 trying to buy the last election—if it had come in with that policy, it would be spending $3,882,000 of taxpayers’ money. Lianne Dalziel told us she did not like what the National Government did when it came into office in 1975. It got rid of the scheme that was in then, and introduced New Zealand superannuation. It is a universal scheme that all New Zealanders can access, it is world-acclaimed for being elegant in its ease to look after, and it does not differentiate between people in and out of the workforce. It is a scheme that works tremendously well, and Lianne Dalziel just told us she does not like that scheme. That is very interesting from a Labour Minister. It is no wonder that Labour stole $882,000 of taxpayers’ money to buy the last election.

This is very interesting. I draw members’ attention to the contribution rate in Part 3, which is either 4 percent or 8 percent. Maybe someone would like to explain to me how someone in New Zealand earning $43,000, the average wage, and who is getting overtaxed, will be able to afford to put in 4 percent of his or her gross income. The fact is that that person will not be able to make that contribution, and the Minister and the Government know it. That is why the withholding tax that currently earns the Government about $550 million will be reduced by only $35 million once KiwiSaver comes in. The Government knows that the only people who will take up KiwiSaver are higher-income New Zealanders who will use this scheme to drain out a little bit to repay their mortgage through mortgage diversion and who will actually have the higher tax benefit when they either pay it themselves or pay it through the scheme.

A second group of people will use clause 87, which is all about how to apply for a contributions holiday. This is the way it works. Employers have to tell people that they have been compulsorily opted into the scheme. The Government thinks the reason people do not save is that they have inertia. I have a different theory on that.

CHRIS AUCHINVOLE (National) Link to this

Let us consider again the parts of this bill. We heard Minister Dalziel, the Minister in the chair, suggest that this bill is not supposed to be compulsory, but compelling. Again this begs the question. If the Minister means “compulsion” but is using “compelling” as a device, then it is a sham. It is not an inducement, it is, on the Minister’s own admission, dependent on inertia. The problem with that is that if inertia does not work—and it will not work—what will come then?

Minister Dalziel gave a personal indication of a series of recollections of her own savings habit and used the phrase “against a rainy day”. Well, that used to be the philosophy, then along came a previous Labour Government with Rogernomics. We were told, in a business sense, that stacking money away was an improper use of funds, it was wasteful, it should be put into assets, debt levels should be lifted, and we should get our money working. In my own case we used to scrimp and save as we established our own private company. We tried to avoid taking drawings in our first year’s trading to build up a reserve against a rainy day. But the emphasis on rainy days is not what we are talking about here.

The purpose of the bill is establishing a savings habit to benefit those in retirement, etc. It is about establishing a personal system of wealth accumulation. The recent inclusion of mortgage diversion, the opt-out system, and the holiday provision all auger ill for the success of the system. That is why so many comments are coming from this side of the Chamber.

Let us reflect again on our actions when we were young and at the stage of building systems of wealth creation. I well recall that when I was 12—I remember being 12—I confidently put my holiday pocket money of 5 shillings on a horse being ridden by a young jockey called Lester Piggott. I was shocked to find, when he did not win, that I did not get my money back. I have never bet on a horse since.

The next venture was later in life—and this one is pertinent—when I was contract milking cows in Whangarei with two of my brothers and we actually had money surplus to our requirements.

CRAIG FOSS (National—Tukituki) Link to this

I wonder why more Labour members are not speaking to this bill, apart from the Minister in the chair, the Hon Lianne Dalziel. If this bill is supposed to be such a flagship, if it is supposed to be such a platform, and if it is supposed to take pride of place on the illustrious pledge card, why on earth are we not hearing more speeches from the Labour MPs? I can see only one Labour member of the Finance and Expenditure Committee on the other side of the Chamber at the moment, and I think that speaks volumes.

I guess it is because Labour members do not actually understand the bill because it keeps changing. The bill they studied, the bill they examined, the bill that was taken to the Finance and Expenditure Committee in the first instance, has radically and fundamentally changed. For example, when I picked up Supplementary Order Paper 52, which sets out the Minister’s amendments, off the table, it was still hot. The ink was still smudgy—that is how fresh it is. That is how much the legislation has been changed and it is an example of the haste with which the Government is trying to push the bill through.

I invite any member opposite to take a call to speak for the bill, not just to waste time trying to get this thing passed and get it into tomorrow morning’s papers, so that there are no more Taito or pledge card stories in the papers. Members opposite should have faith in their party. I guess it is a credible indictment of the confidence and faith they have in their Minister of Finance that they are not speaking on the bill into which he has put so much political capital.

A lot of people have said that it is better to pay off a mortgage than to invest. That is not absolutely true. Sometimes it is true, but if people have a mortgage at 5 percent and they can invest it at 10 percent, then it is a bit of a no-brainer to me to string the mortgage out. There is an inherent conflict between saving, in a financial asset sense, under a superannuation scheme and a first home buyers scheme. That confusion has been compounded by the mortgage diversion scheme that has been put into place.

Why on earth would people try to build up financial assets when inflation is out of control? Inflation is through the band of 1 to 3 percent. Inflation has been north of 3 percent for the last 18 months and it will be near 4 percent for the next 18 months. Those who have done Econ 101 somewhere along the way will know how corrosive inflation is to financial assets, but how beneficial it can be to fixed assets such as property. Within the environment in which this bill is trying to encourage New Zealanders to save for their superannuation there is the disincentive out there in the real world of inflation bursting out of the band north of 3 percent for the next 18 months—an anticipated consumer price index of 4 percent, or even up to 6 percent in some projections.

Why on earth in the real world would people save for a superannuation fund as a financial asset? We know that consumer price index inflation is corrosive for financial assets and that this bill could have the exact opposite effect to what it intends to do. It could pour more money into the property market and increase the base level for first home buyers’ homes because of the taxpayer subsidy and the incentives this bill gives some first home buyers, and all it will do is raise the floor.

Frankly, when we look at the $1,000 per annum provision, or at the $3,000 or $5,000 provision after 5 years, we have to consider that the average price of a house in Hawke’s Bay, for example, is something like $280,000 or $290,000, which means $30,000-odd for a 10 percent deposit. How on earth will this bill help in that instance when we remember that inflation is going through 4 percent? Property inflation will go to 5 or 6 percent, increasing the value of the properties that this bill is supposed to be encouraging people to buy. It is such a vicious circle.

The Minister is screwing up her face—perhaps she does not understand it. This is a simple, real-world example. I will give an example about ice skates in a minute, I guess.

Part 3 is about contributions, etc., but it has been mentioned that this bill goes hand in hand with the Taxation (Annual Rates, Savings Investment, and Miscellaneous Provisions) Bill, which is also before the Finance and Expenditure Committee. In the words of the Minister of Finance, the KiwiSaver Bill has to be in place for the Taxation (Annual Rates, Savings Investment, and Miscellaneous Provisions) Bill to go through with the changes he wants to bring in. But let us make an example here, because the previous speaker spoke of low-income New Zealanders. The KiwiSaver Bill is in conflict with that taxation bill.

R DOUG WOOLERTON (NZ First) Link to this

I think that if anybody wants an example of why the Finance and Expenditure Committee is such an interesting place, they need only listen to that last speech from Craig Foss. As I said while in that committee—which is a committee I did not particularly want to be on; I regard it as a punishment, as a matter of fact—I take a great deal of interest in looking across the table. I watch my National colleagues looking at these sorts of bills and money matters, and I can just about hear the cash registers going “Chonk! Chonk!”. It is all very predictable. I admire these gentlemen, but they have a one-track mind—financial investment at a very high level or, in the case of Chris Tremain, real estate. So the question is: what they are going to do—what are New Zealanders going to do—about bills and money matters? How can they avoid them? How can they leverage off them, or get around them? Or how can they not pay them? Those are the questions that go through National members’ heads.

I want to tell my colleagues in National yet again—and I suspect that this will be a recurring theme—that 98 percent of New Zealanders do not think that way. Ninety-eight percent of New Zealanders think about saving. They think about putting a little bit aside each week and each month, and slowly building it up over the years. They are still trying to instil the habit of saving into their children and families. If—God bless them—some people can aspire to having a pool boy, lawn boy, tennis boy, cleaner, or all the things John Key takes as normal family add-ons in his life—

KATHERINE RICH (National) Link to this

Just to follow on from the comments of the last member, Doug Woolerton, I agree that parents will continue to encourage their children to consider some kind of superannuation or savings programme. The issue, though, is actually getting younger people to take one up. Going back to my own experience, I recall that when I first worked for a Government department we had a superannuation scheme. There was a great incentive to join the scheme: basically, one doubled one’s money. If employees put in $1, the Government put in $2. But even with the best incentive, younger people decided that they wanted to have their own cash and to have a bit more to go out with on the weekend. Even though the incentives for them to take part in that scheme were put in black and white, the employer still could not get people to join up, to have a vision of what their life would be like when they turned 65, and to put money aside for their retirement.

We need to talk more about the cultural change that needs to happen, but I do not have the same faith that the Government and the previous speaker do that this bill will change culture, at all. KiwiSaver is quite a complex system. The Government will argue that the incentives are there, but actually they are not. The system is a pretty loose arrangement whereby one can opt out if one wishes. It is a pretty loose arrangement whereby one can decide to have a contributions holiday. Well, we all know that people will go and do that. They will dream up some reason why they have to postpone putting away a nest egg and have a contributions holiday. A number of people will opt out right from the start.

As we have heard from John Key, there is no incentive for employers to put this scheme in place; there is no incentive for employers to offer a scheme to their staff. I will get on to the subject of what this bill will do for small-business owners in New Zealand. This bill will impose upon them a very complex system. I would like to hear the Minister Lianne Dalziel talk about the complexity that a small-business owner will face when he or she sits down at the end of every pay period to work out whether it is 4 or 8 percent of an employee’s wages that goes into the scheme. In many cases the amount of wages will change over pay periods, so the contribution will often not be just a direct credit—it will have to be changed for every period. Small-business owners will have to monitor whether someone has opted out and will have to keep tabs on who has made a request for a contributions holiday over a period of months—not to mention do the PAYE and GST. And what happens if an employee has a student loan to pay off, or is paying child support or some other court debt? It just adds to the complexity that small-business owners will face when they are just trying to work out what to put in their staff members’ pay packets at the end of every pay period. It will not be easy.

We assume that people are aware of the laws of this country, but I know one thing for sure. Here we are passing a bill that is 205 pages long. We cannot hope for one moment that the knowledge of what is in here will be firmly implanted in each small-business owner’s head. It will not be, so this will be fraught with difficulty. I would like to hear the Minister talk about what kind of education programme will be in place and what ideas she has to try to minimise the complex nature of this bill so as to make it easier for small-business owners to implement it within their workplace. Employers will try to establish what to pay someone at the end of a week, a fortnightly period, a month, or whatever it is, but that amount will change, and it will take a lot longer for some small-business owners to work the process out. I think that is something we should talk about here.

It was interesting to hear the Minister talk about the dancing Cossacks of 1975. It was quite a long bow to draw to suggest that that is the key reason the savings culture has died in New Zealand. Some of the members across the way were not even born in 1975, so it is hard to imagine how their attitude to saving has changed. For us to hear lectures about National buying elections is ironic, coming from a Government that spent billions of dollars on the student loan scheme.

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

I rise to speak to the amendment in my name to clause 55. The Finance and Expenditure Committee considered the question of whether a 4 percent contribution rate would be beyond the scope of people on low incomes to afford, and particularly the young people whom we are trying to encourage into this scheme. They are, of course, at the low earning end of their careers and may well find that 4 percent is more than they can manage. I presented the case for an option of a 2 percent rate, as in fact did a number of submitters. A number of union groups in particular argued that their members would find 4 percent difficult, and that if we wanted to get them into the scheme we needed to give them the option of 2 percent. The contrary argument was that if they were given a 2 percent rate, people who could quite well afford to save 4 percent might save only 2 percent and that would be a negative consequence.

In my view, though, the important thing is to get people started on saving while they are young and not wait until their income is such that they can manage to put aside 4 percent, because at that stage they do not have a savings habit. At one stage it appeared that the select committee had accepted my arguments, but then somehow the position changed and in the end nobody else was advocating for this point of view.

I want to give the House the option of reconsidering that and I will be moving an amendment to clause 55, to insert at the beginning of subclause (1)(b), before the words “8%”, the words “either 2 % or”, and in subclause (2) to insert 2 percent into the range of options to which employees may change their contribution rate. I hope members will consider again the reasons behind this amendment. I do not believe it makes the bill too complex to administer if there are three rates rather than two and savers are allowed to select their contribution rate to suit their own personal circumstances.

It is true that the mortgage diversion scheme the Government has proposed and the employer contribution scheme, both of which came up right at the end of the discussions, have gone some way towards these. If an employee is trying to pay off his or her mortgage and also wants to save, he or she can contribute 2 percent to each and if an employer is prepared to put in 2 percent, then that reduces the employee’s contribution to 2 percent to qualify. Both of those are steps forward.

However, it does not cover the situation of an employee who cannot even afford a mortgage or a house at all, and wants to save 2 percent but works for an employer who is not interested in contributing in this way. An employer who is simply paying the minimum wage, and would pay less if he or she had that option, is certainly not going to add a 2 percent contribution to an employer’s superannuation. I hope the Committee will consider this amendment and look at improving this otherwise pretty good bill even further.

CHRIS TREMAIN (National—Napier) Link to this

I take this opportunity to canvass Part 3, and three clauses in particular—the contribution rate; clause 72, which covers interest on money in the holding account with the Inland Revenue Department, which I will start with; then the contributions holiday.

I would like the Minister to give New Zealand a commitment regarding clause 72, which covers interest on money in the holding account. What happens is that from the start of contributions, money from the employer is put into the Inland Revenue Department. It sits there for 3 months before it is passed on to the default provider that the particular employee has chosen. I want the Minister to give us a commitment that the Inland Revenue Department will not be taking the margin on that interest. I want New Zealanders to know that there is no margin on the money going into that account for a 3-month period, and that the full amount, plus interest that the Inland Revenue Department provides, will be going into the accounts of the KiwiSaver scheme providers. I am looking forward to an answer on that point.

What I would like to canvass in particular in Part 3 is the contribution rate. It was an interesting issue that vexed the Finance and Expenditure Committee, and Jeanette Fitzsimons has raised it today, as well. Clause 55(1) focuses on that contribution rate. The key point with this bill is that there will be two contribution rates—firstly, a default rate of 4 percent, and, secondly, an 8 percent rate, which employees can choose to contribute against. I would like to talk members through the different submissions that the select committee received on these rates. Mr Woolerton was present for these, but Mr Hide was not available.

The first submission we received was that employer contributions should be supported, if not required. We heard that from a number of union organisations—from Eriksen and Associates, and a number of different submitters. I guess that is why we have ended up with clause 56, which states that contribution rates may be changed by Order in Council. So at any time we could see a change to this bill, to make employer contributions compulsory. I want employers out there to know that that clause is there, and that at any time this bill could be changed, simply by Order in Council and not by an Act of Parliament, to make employer contributions compulsory.

I come back to the submissions. The second submission was that a more flexible range of contribution rates should be supported, to allow more choice and to encourage greater participation, and Jeanette Fitzsimons has come to the Chamber this afternoon with her amendment to add a change to 2 percent. A number of submitters stated that 2 percent would be a rate that many employees could afford. In fact, the Hon Mark Gosche was an advocate of the 2 percent rate, and stood up on many occasions to fight for it. But there are a number of reasons why the 2 percent rate was not put into the bill, and I will go through them. Firstly, it was felt that a greater number of small savings accounts with very small totals would eventuate, and that was a concern. The second point is there was a concern that a greater number of people would take up the account in the first instance, with only a small amount, just to get the $1,000 incentive payment. That is where the committee spent quite a bit of time deciding—and Jeanette Fitzsimons put this forward—whether we should be putting up only a $500 incentive instead of a $1,000 incentive for people who save at the 2 percent rate. We basically decided it was getting too difficult at that point and on the principle of “keep it simple, stupid” we focused on two contribution rates—4 percent and 8 percent.

Another reason why the 2 percent rate was not considered was that a very accurate table the officials gave us showed us the contribution rates needed to achieve a 70 percent income replacement in retirement. That also takes into account New Zealand superannuation, which my colleague John Key pointed out was introduced by Mr Muldoon in the 1970s and we still have it to this day, albeit somewhat changed. The table conveys important information. It shows us the contributions that employees would need to make to get to a level that would give them 70 percent income replacement in retirement.

STEVE CHADWICK (Labour—Rotorua) Link to this

I move, That the question be now put.

BRIAN CONNELL (National—Rakaia) : Thank you for the call on Part 3. I start by saying that Lianne Dalziel and Doug Woolerton have both lamented the fact that we do not have a savings culture in New Zealand society. I say to them that is why I was such a strong supporter of Lianne Dalziel’s speech, when she told us about her savings scheme for her skates. That was the savings culture this country had—and Doug Woolerton knows that. If we work hard and put a bit of money aside, we save. But the point is that it is called personal responsibility. That is what is lacking at the moment—personal responsibility.

Some members of the Government know about that. Taito Phillip Field understands personal responsibility. He understands savings schemes. He is working towards his own benefit. He is working hard, and he is making sure that every bit of money that comes into his electorate office goes into his savings scheme. I tell members that Taito Phillip Field is doing his bit for international relationships as well, by trying to send some of our money and hard-working labourers off to Samoa. And do people know what? There are members of the Government who have actually taken the time to go to Samoa to see that savings scheme in action. I have to say that it is a first-class scheme—if one is a rogue.

But I tell people that other members of the Government think that savings scheme is pretty good as well, because they have an adjunct to it. Rather than wasting the Labour Party’s own money on electioneering, they decided to save it $886,000 by spending taxpayers’ money on its electioneering. So I tell people that those guys have worked out personal responsibility—when it suits their own purposes.

I now turn to clause 55, “Contribution rate”. In particular, I will look at subclause (1)(a), which states that 4 percent of employees’ gross salary or wages can be used for contributions. I ask my colleagues to keep that figure in their minds and to overlay that fact with this: when we talk about mortgage contribution rates, or diversions, those are capped at 2 percent. If we contribute 4 percent, we are allowed to use 2 percent, with the exception that we are only allowed to use 50 percent of that amount. So the mortgage diversion component is only 1 percent. Doug Woolerton knows that a 1 percent diversion into anything is hardly a workable figure. I mean, that is about the support that New Zealand First has. He knows that is not critical mass, and that it simply will not work.

There is more of an inherent contradiction in the Government’s position, and it is this: was 2 percent not rejected by the Government as the entry level into the scheme? Jeanette Fitzsimons has picked that up. She has put an amendment before the Committee for consideration, and the National Party is thinking long and hard about supporting that amendment. But the Government said that 2 percent would not provide enough money to develop a savings culture in this country. That, of course, contradicts the very thing the Government is setting out to do under this legislation, which is to create a savings culture. But Government members just do not see the inherent contradiction.

Still, Doug Woolerton maintains that members of the National Party do not get savings cultures. Well, I say to that member, there are members in this party who have developed their wealth by working hard and saving hard—by taking that 40c an hour and turning it into good money by the sweat of their brow—and we do not want to see that culture undermined by the Government’s putting in place a savings scheme that simply will not work.

Michael Cullen knows that KiwiSaver is flawed. When he ran off and did his deal with Mr Copeland, he overlooked the fact that in his haste to put together a 2 percent cap on mortgage diversions, he badly undermined his own policy.

CHARLES CHAUVEL (Labour) Link to this

I move, That the question be now put.

JOHN KEY (National—Helensville) Link to this

I am pleased to engage in Part 4 of the KiwiSaver Bill. Before the dinner break there was a very interesting situation. My good friend from New Zealand First Doug Woolerton had made some interesting comments in the debate. He spoke about the desire to have KiwiSaver rolled out to lower-income New Zealanders, which is something the National Party fully supports. Interestingly enough, he made the point about how difficult it is for lower-income New Zealanders to have enough money—enough after-tax dollars—in their hands. He did not go so far as to mention that if Labour had not stolen $882,000 to pay for its election campaign, New Zealanders would all have a little more. But he had an opportunity, when the rubber hit the road, to vote to have a lower contribution for New Zealanders who earned a little less and could not afford, initially, to put their money in.

I was shocked, because the vote on that amendment was much closer than I thought it would be. Had ACT been in the Chamber, the vote would have been 61-60—that is how close it was. When I went upstairs earlier, Jeanette Fitzsimons was there. She said to me: “Mr Key, I thought it would be Mr Woolerton who would have voted for that—caring for those lower-income New Zealanders.” I said: “Jeanette, my apologies to you, then, on behalf of New Zealand First and Doug Woolerton. He talks tough when he is on his feet in the House, but the truth is that he did not want to support lower-income New Zealanders to be able to afford to put 2 percent in.” It took the National Party to front up.

That is why National will be on the Government benches in less than 2 years’ time. The people of New Zealand know a good thing when they see it. One thing that they know is not a good thing is the KiwiSaver Bill, and they know this for a number of reasons. Within the bill there are a number of substantial issues. Those issues are partly around the bill’s complexity. One of the things Part 4 does is provide for a default provider. The way a default provider works is that if a person goes to his or her employer and does not specify whom he or she want the funds to be managed by, then that person is allocated on a rotation basis of the default provider. At this stage we do not know who the default providers are.

It was a very interesting exercise on the Finance and Expenditure Committee. Some of my fellow members on that committee, including Mr Foss and Mr Tremain, who are very hard-working members, and Dr Smith, who is an incredibly hard-working member, had some really interesting questions to ask about default providers. They failed to get the sorts of answers we would have liked. Many of those default providers went to quite considerable expense, including one of them who told me that the time scale for the application—the request for proposal—to be a default provider was so tight that the default providers could not courier the documents down and be sure they would get there. They flew a person from Auckland, with the documents. They then put that person in a taxi at Wellington Airport—this is an absolutely true story. It turned out that the roads were so badly maintained under a Labour Government—those taxpayer dollars were being used to prop up its re-election campaign as opposed to fixing the roads of Wellington—that the taxi could not go the normal way, and the person ended up paying $228 for a taxi ride to get the document out to Lower Hutt, where it was delivered. That is what the default providers went through, and they know that it was not worth putting the time and effort into that expense, unless the bill was changed.

We know from Michael Cullen that the first round of changes came when his back was to the wall last week. My prediction is that before the next general election, substantial changes will be made to KiwiSaver, because the Government knows that it will not work in its current form; it knows that the private sector and the default providers that are covered under Part 4 of the KiwiSaver Bill have gone to tremendous expense to try to become a default provider. Those default providers know that that is a waste of time, a waste of money, and a wasted exercise, unless some changes are made.

In fact, tonight, during the early part of the dinner break, I wandered over to the new Treasury building—another mausoleum being built by a Labour Government that houses one or two bureaucrats in every second building in Wellington. There was a huge celebration when the Prime Minister was there to launch yet another building. There I ran into one of New Zealand’s most pre-eminent fund managers—someone who is definitely involved in KiwiSaver. When I spoke to that person—whom I will not identify, for good reason—that person said to me: “It’s a disaster, we can’t understand it, and it’s only worse if you look at overseas tax bills.”

R DOUG WOOLERTON (NZ First) Link to this

New Zealand First is pleased to be supporting Part 4 of the KiwiSaver Bill.