State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill

Hon TREVOR MALLARD (Minister for State Owned Enterprises) Link to this

I move, That the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill be now read a first time. At the appropriate time I intend to move that the bill be considered by the Commerce Committee, and that the committee report finally to the House on or before 30 April 2007.

The purpose of the bill is twofold. Firstly, it permits a merger of AgriQuality and Asure to occur, provided that shareholding Ministers are satisfied that a merger is viable. Secondly, the bill allows shareholding Ministers to direct the board of AgriQuality not to provide certain services under the Animal Products Act 1999.

To understand why a merger of the two companies is being contemplated, it is necessary to briefly review their history. AgriQuality and Asure were established as State-owned enterprises on 1 November 1998 from the former MAF Quality Management. The reason for establishing these companies as State-owned enterprises was to improve the efficiency of the services provided by both organisations and to separate the service delivery function from the policy and regulatory advice provided by the Ministry of Agriculture and Forestry. They were created as separate State-owned enterprises because they had distinct product offerings, and the operations of the new entities faced distinctly different challenges at that time. They were also structured in a way to ensure that there was minimal market overlap, as competition between the two was not envisaged.

Much has happened in the 9 years since AgriQuality and Asure were established. Consumers have become much more demanding about food safety and traceability, thus placing greater pressure on companies like AgriQuality to provide comprehensive end-to-end food safety solutions. The New Zealand economy has also become more vulnerable to biosecurity threats as the international community has become more interconnected—and probably we have become aware of some of the threats we were not aware of previously, as well. This has placed greater value on the provision of an integrated and comprehensive biosecurity response capability. AgriQuality and Asure currently compete to provide these services. Better New Zealand - wide outcomes could result from a more collaborative approach, particularly in the provision of a highly skilled and coordinated standing army, should a major biosecurity threat such as foot-and-mouth or a similar disease strike.

In respect of the key provisions of the bill, it is right to consider the merger of the companies for the reasons I have already mentioned, should the business case currently being developed make financial and strategic sense from the perspective of the shareholders and the Ministers, but on behalf of the taxpayers.

To enable a possible future merger, legislation is required to remove one company, or both, from schedules 1 and 2 of the State-Owned Enterprises Act 1986, and to consequently amend a number of other enactments. The bill enables this to occur. The bill also provides that certain matters are not affected simply by reason of the merger of the two companies. For example, a merger cannot be used by a third party to claim that there has been a breach of contract, and an employee cannot claim that there has been a technical redundancy effectively through the merger.

Part 2 enables that a merger of the two companies is time limited. It expires 2 years after the date on which the bill receives the Royal assent. The bill enables shareholding Ministers to direct AgriQuality’s board of directors not to provide export red meat inspection services under the Animal Products Act 1999 without specific authorising legislation preventing AgriQuality from providing export red meat services, which could breach Part 2 of the Commerce Act 1986. The bill also specifies how the direction must be given to the board of directors and how direction must be notified. Furthermore, it provides that the board of directors of AgriQuality must comply with that direction. I commend the bill to the House.

SHANE ARDERN (National—Taranaki-King Country) Link to this

I rise on behalf of the National Party in opposition to the proposals laid out in the bill by the Minister, for a number of reasons. The first, and most important, is that the reason the two companies were set up in the first place was to provide a source of competition within the two structures, one doing meat inspection and other doing food safety—completely different roles. It is interesting to hear the opposition from the two Ministers. Let me read what the Hon Paul Swain, one of their former ministerial colleagues, said at the time: “It is the second time that member has criticised the Opposition for doing its job. The point of the legislation going to the committee”—then presumably further on—“is so that the Opposition can ask the hard questions.” Well, here the Opposition is doing its job, and the Ministers’ colleague who criticised the Opposition last time for doing exactly what I am doing, is over there chirping back; so nothing changes, just the people on either side of the House.

The reason why National is opposed to this bill is that we are seeing another intervening socialist ministerial directive telling these guys how they should do their job. At the end of the day, there is no evidence to say that the competition that has been provided by having the two separate entities has any less merit now than it had then. As the Minister leaves the Chamber I just want to point out to him that the Animal Health Board chairman and chief executive have raised very serious concerns about the proposal, because they have some major doubt as to whether the tuberculosis and possum eradication process can continue under the proposed merger in the way the Minister is proposing.

I wonder whether the Minister has had a submission from this organisation; if not, I suggest that it gets its submission in quickly to the Commerce Committee, because I understand that that is the committee hearing submissions on this bill. The Chief Executive of the Animal Health Board, Mr William McCook, told farmers that TB levy payers had enjoyed real benefits from competition between TB testing contractors. I know, as a farmer, that that is correct. I know, prior to the set-up of the two entities, we used to be dictated to as to who would come to the farm, when they would come to the farm, and what they would do when they were on the farm, and it was just tough if we did not like that. If we could not comply with that, then we were penalised. Since there has been competition in regard to that, we have had a far more conciliatory and far more organised approach to that, with a much more cost-effective provision of service. So I tell the Minister that he needs to listen carefully to the Animal Health Board and its members, because they have done a fine job in getting TB in this country under control.

Further, I understand that one of the concerns the Minister has is the issue of meat inspection. I invite members to go back to have a look prior to the division of AgriQuality and Asure from the Ministry of Agriculture and Forestry structure they came out of, and what used to happen in our meatworks in regard to meat inspection. A cartel held farmers and the meatworks to ransom. It used to demand exorbitant fees to provide that service. Its service was often found to be wanting. As an effect of that we had the highest killing charges in our meatworks of any of the OECD countries. Here we are, a competing nation, exporting our products to the world, and what we have is a Government structure piling thousands of dollars of costs into that structure for no net gain to anybody—not in terms of quality, not in terms of what the meat inspectors are there for in the first place, and not in terms of market access. There is no gain.

So I invite members to go back and look at that and ask the question whether having the ability of another suitable organisation that would be recognised internationally, and having the ability of that organisation to say “I will” or “we might” compete in this area, has brought huge benefits. I have no understanding of what it is that has brought the Minister to his conclusion that these two organisations should be merged and then come under the jurisdiction of the Minister himself.

The two State-owned enterprises were created, as the Minister said, in November 1998 out of the corporatisation of the MAF Quality Management business units. AgriQuality’s core business is the provision of food safety and biosecurity services. I agree with the Minister that we need to do whatever it takes to ensure that we have solid biosecurity structures in place; on that I have no disagreement with the Minister. But what I do disagree with the Minister over is that merging, and thereby reducing the number of organisations that can have input or provide technical advice, or respond in the case of a biosecurity incursion, is not the way to make sure we achieve that outcome.

I remind the Minister of what happened on Waiheke Island at the time of the foot-and-mouth hoax. We had the Ministry of Agriculture and Forestry scurrying around trying to round up enough people to get out there and find out whether this was a real foot-and-mouth incursion, or a hoax. Media people were travelling to farms, and travelling back and furnishing their reports in Auckland and other such places before the ministry could get there. That says a lot about the resourcing, but how will merging these two organisations together, thereby presumably reducing the amount of expertise that exists, help in that matter? For the life of me, I have not heard anybody submit to me that this would somehow or other have assisted on that particular occasion. The Minister has a lot more questions to answer than he has given answers to, and I am sure we might hear some of those answers during the course of this debate, but I doubt whether they will come from that Minister.

So I suggest that the Government makes sure that all the relevant bodies are able to submit to the select committee and that it does stand back and not just take advice from those within various departments that have vested interests. It should stand back and listen to the stakeholders themselves—the farmers, the meat companies, the biosecurity agencies, and all those who feed into the various aspects of this bill—to justify where the improved efficiency the Minister speaks of can come from, when one turns what is now a competitive environment into a monopoly service provider, and justify also to the select committee how it is that it will increase the resourcing into certain areas such as biosecurity, when one actually reduces the efficiency of the service provided. I would like answers to those questions, and I am sure they may be forthcoming in that select committee.

The aim of the bill, as the Minister put it, is to merge AgriQuality and Asure New Zealand, and to give the Minister himself powers to direct those agencies where and when they should or should not poke their beaks, as it were. It defies logic how Ministers of the Crown will ever be in a position to have that kind of micromanagement, advice, or expertise to ensure we get the right outcome. I just say to the Minister that wherever this has happened before, the outcome the Minister was seeking has always been the opposite of that set out by those groups who have advised the Minister on it. I suggest that the Minister should also take a look at some of the articles being written by some within the agricultural sector who are overwhelmingly opposed to what is being proposed. He should take the time to go through the detail of some of their argument so that he can have a clearer view of what he is trying to achieve and whether this will achieve it.

I think that this is a backwards step. I think it is a mistake. I hope that during the select committee process the Government will come to realise that and drop the idea altogether, although its track record suggests that that would be unlikely. If the Government does go ahead with this, I can see further amendments, not too far down the track, to what is being proposed.

MARYAN STREET (Labour) Link to this

I rise to speak to the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill 2007. I thank the member opposite, Shane Ardern, for his comments, and I look forward to the National Party’s constructive contribution at the Commerce Committee when it is considering this bill.

The two entities,AgriQuality and Asure New Zealand, were, as has been traversed already, established in November 1998, but I think it is important to remember what the functions of the two organisations were in order to work out the sense of now contemplating a merger. The AgriQuality core business was the provision of food safety and biosecurity services—that is, its business was to inspect live meat, as it were—whereas Asure New Zealand inspected dead meat, or processed meat. Those two functions were important and, perhaps in their day, justified establishing separate organisations—although personally I would query that, as well; I am not sure whether it was altogether sensible to separate out those two functions. It was as though in 1998 the corporatisation model was being extrapolated out to another level again, beyond that to which it was originally intended to apply. It is one thing to create a State-owned enterprise for the purpose of establishing greater efficiencies in delivering public services, but then to split those out into two different organisations with different functions was a kind of atomisation of the process that really did not stack up, or has not stacked up in recent times.

I want to traverse a little of that history. The corporatisation move was established under the fourth Labour Government in the 1980s, and it resulted in a lot of improved efficiencies in businesses that were core business of the State. Certainly, when the key export earner of the economy is agriculture, it is right and proper that the State has a direct and hands-on function in the administration and quality supervision of that part of the economy. But to separate out the functions into two different organisations—and for my own understanding more than for anything else, I refer to them as live meat and dead meat; people will understand what I mean by that: the meat inspectors, and the inspection of processed meat—was to carry corporatisation to an extreme.

It becomes important to say that a number of things have changed in the intervening years. There are two things that make the consideration of a merger, and therefore this bill that is in front of Parliament, a sensible suggestion and a sensible proposition from the Government. First of all, consumers now require higher and more transparent standards of quality than they used to. Although that is no reflection on the standards that were met in the past, it does mean that if two State entities were to compete with each other—which is the proposition that gave rise to this bill—then the interests of consumers are not likely to be observed or met in that instance. The second thing that has become important in the course of the intervening years has been the need to track meat—the need to track live and processed meat in order to be able to determine, in the event of a biosecurity risk, the precise herd from which a piece of processed meat has come, and, therefore, to go back to that particular farmer and that particular herd and contain any identified risk.

The images that will come into the minds of the public in the consideration of this bill will be those ghastly images from the late 1990s of the burning of herds in the United Kingdom, which showed the need to track back exactly where the biosecurity risks came from. My colleague on the other side of the House referred also to the recent putative outbreak of foot-and-mouth on Waiheke Island. That is a very good contemporary example. Although, of course, it came to nothing, it was an essential test.

It is the view of the Government that creating the possibility for these two Crown entities to merge will, in fact, provide a greater efficiency, in that if there ever were a need to separate out the two functions, the time has long since passed for that to be the most effective way to administer the quality standards we need, not only to assure consumers here and abroad but also to maintain the integrity of our biosecurity protections in New Zealand. Those twin challenges have emerged over the last few years—the higher expectations of consumers, and the need to identify, contain, and sheet back to its origins any biosecurity risk.

The purpose of this bill is to put into legislation a way of preventing these two bodies from competing with each other in the provision of export red meat inspection services, and to allow for the merging of the two organisations at some point. It is interesting and pertinent to note that the Public Service Association (PSA)# welcomes the announcement of this legislation. The PSA national secretary, Richard Wagstaff, has stated: “The benefits to PSA members at these enterprises and the New Zealand taxpayer will be significant. It’s a common-sense solution to issues that hamper efficiency and effectiveness.” He went on to state that the two enterprises must provide an integrated service in order to protect New Zealand’s biosecurity interests, that that is almost impossible to achieve if the two organisations are running against each other head-to-head in competition, so a merger will promote a more strategic and responsive capacity to address biosecurity threats. I welcome those comments, because the PSA represents almost totally the workers who work in both organisations, and they have been the ones who have experienced some career instability and uncertainty, which has affected recruitment and retention. Certainly, their endorsement of the potential merger of the two organisations is significant, in that it comes from those who are the experts within the two organisations.

In conclusion, I think it will become obvious what the benefits of the potential merger are. I look forward to debating this matter when it comes before the Commerce Committee. Thank you, Mr Assistant Speaker.

NATHAN GUY (National) Link to this

I rise to take a call on the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill. This bill is all about the merger of two State-owned enterprises that are in direct competition with each other. We in the National Party think that competition is quite a good thing. These two State-owned enterprises compete for a variety of services. They compete for TB testing. Asure has about 40 percent of that market share; AgriQuality has most of the remainder. They compete for biosecurity work, they compete for livestock inspections, and now AgriQuality wants to move into red meat inspection. Of course, the Labour Government and the Minister for State Owned Enterprises say no. They say that this is terrible because they say we cannot have State-owned enterprises competing. So the Minister says no to competition, yet there is a whole list of State-owned enterprises already competing against one another.

We have had AgriQuality and Asure in front of the Primary Production Committee since I have been in Parliament in the last 18 months. We went down and visited Asure in Belfast on the outskirts of Christchurch. It is doing a fantastic job, and it is a very, very good operation. We have had AgriQuality out on our farm doing our TB testing, and doing a very, very good job. It has a very professional approach and it gives great service. So when I look back through the collection of financial reviews in 2004 and 2005, one really strikes a chord. I quote from the comment made by the select committee on the merger in the bill that is in front of us now: “This merger will reduce competition in the provision of the quality assurance services, significantly disadvantaging the New Zealand primary sector.” So up will go the meat inspection charges, up will go TB testing, up will go the price that people pay at the supermarket counter, and so it will flow on.

Then I looked through the Bills Digest, particularly with regard to this bill. I will quote from it: “The Government would prefer to see SOEs collaborate and coordinate their activities rather than compete against each other at a cost to the Crown and taxpayers.” Well, what about this? We have Meridian Energy, we have TrustPower, we have Genesis Energy—the list goes on and on.

R DOUG WOOLERTON (NZ First) Link to this

When I was on the Primary Production Committee, which is the select committee that these two organisations used to—and presumably still do—report to, I remember one thing that stood out above all others. These two organisations went at it in the courts. They sued each other. I listened carefully to the words of Shane Ardern—a man I admire and whom I think I would like to call a friend—and some of them did not ring true. They were not the words of the Shane Ardern I know. I know what Mr Ardern thinks, and he does not like waste. He does like competition, that is true, but he does not like waste. This State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill will eliminate waste, because in this situation the so-called competition is actually illusory. There is very little competition, in real terms, between these two companies. There is fighting, there are court cases, and there are takeover bids—there are all of those things—but I am not too sure that there is true competition in the way there should be.

I liked the words of Maryan Street, who said that this is State-owned enterprise privatisation to an extent that is ridiculous. I think she used the word “atomised”; I would just about go to the word “vaporised” as far as these two organisations are concerned. That is quite true. I think it is eminently sensible that some cooperation and collaboration be brought into it—in other words, that common sense begins to prevail again. It is a matter of ideology. I can understand the ideology of both the Labour and National sides when it comes to services—because that is what we are talking about here, at the end of the day—and how they are delivered through Government agencies, which I think it would be fair to say is Labour’s preferred model; or trading enterprises, which is the National Party’s preference.

If these two companies were to be merged and, for some reason or another, voters had a hiccup and put National into Government, I would be very, very surprised if National split asunder these two organisations. I think that would be most unlikely. So I think the competition we are seeing now is illusory and that efficiencies can be made. New Zealand First supports this bill.

It saddens me that too often when we have a debate like this we forget what it is all about. This bill is about ensuring that the food products that leave our shore, the products that set the standard of living for almost all New Zealanders, are paramount. It must be, and it is essential, that these companies that oversee our product quality are absolutely beyond any shadow of doubt when it comes to their efficiency and diligence. Companies overseas, and other countries, will use anything they can—any little slip-up—to bar our products from their shores. Mr Guy knows that, Mr Ardern knows that, and Eric Roy, who I see is getting ready for a major speech, knows that, because I have heard them talking in the select committee.

I think that to regard these operations as services is right and proper, and it is right that the Government exercises some control over them. Certainly, I think it fits the New Zealand First model, because we are interested in one thing: that the products leave our shores in the highest possible bracket as far as finance and quality go, so that we can return the goods to this country. I do not think it is excessive to say that when companies are fighting each other, are in takeover mode, and are in the business of going to the lawyers rather than getting on with their job, that must indeed result in them taking their eyes off the prize. It must be a situation that is not conducive to good business.

I think that New Zealand First will support this bill right through. I will be interested, like Mr Ardern and the other speakers, to see what comes out of the Commerce Committee. I hope the wise heads on that committee do not overlook the service aspect of this bill, and I hope they do not get bogged down in ideology. I know that Mr Guy, Mr Ardern, and Mr Roy will not do that, and I ask them to restrain some of their colleagues who have a bent for that sort of thing. So New Zealand First supports this bill. Thank you.

KEITH LOCKE (Green) Link to this

The Green Party supports the essence of this State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill, which merges the two organisations and creates a non-competitive model for such things as our meat inspection services. But we do have some concerns about the bill, which is why we will be abstaining. We think there is a problem with the merger in that the system may become too bureaucratic.

We would prefer that the merged entity was not a State-owned enterprise, which is not really a very transparent model and not terribly accountable. It could be a bit too bureaucratic and repeat some of the problems that have accompanied Asure New Zealand over the years. Asure New Zealand was in a terrible mess, particularly in terms of relations with its staff. It laid people off and there was all kinds of skulduggery a few years ago. Apparently, that has been largely sorted out now, but if this bill creates just one organisation using an State-owned enterprise model without more transparency, we could find that the organisation is not efficient and that there are other problems associated with that model. So we would favour some more transparent form of Crown entity rather than a State-owned enterprise.

I see two problems in using a competitive model in this area. I have some experience in this area. I was at one point in my career a meat grader at the Gear meatworks. I worked closely with the meat inspectors, who at that time worked under the Ministry of Agriculture and Fisheries. So I am pretty aware of what they do, at least in terms of operations on the mutton chain and beef chains.

I can see two problems with the competitive model. The first is that if firms are competing for a contract and want to get their costs down, the easiest way to do that is to employ less qualified staff—they do not have to be paid as much—and to push the meat through a bit quicker, which is quite easy to do. Of course, mistakes follow, and the product can create problems for New Zealand when it is exported and the mistakes are discovered overseas. We are talking here, to a large extent, about an export industry. I know, from the way things work, that if firms are put into that competitive model to get costs down, what suffers is quality, and that is something we want to protect at all costs.

My friend Shane Ardern has talked about the fact that on the farm different inspectors come in to check for TB. Even there the competitive model may have some problems. But I think that with TB, either it is there or it is not, and with a bit of quality testing it can be worked out whether each contractor is performing its duties. But with the sorts of things that meat inspectors do on the chain in a meatworks, there is a fine line, often, between what is acceptable as a disease and what is not.

For example, pleurisy is one of the common diseases that comes down the chain, and whether the animal is deemed to have pleurisy depends on the amount of pleurisy. There is a shifting dividing line; it is not an exact science. A lot of meat inspection and meat grading is not an exact science. I can imagine that under a competitive model, to try to please the farmers or the meatworks, the inspector might put that line of where pleurisy exists more in the direction of the meatworks and the farmer—at the cost of our overseas markets. That could easily be done if we got too much into this competitive model.

My experience with the Ministry of Agriculture and Fisheries model in the past was that meat inspectors did not have any pressure on them to push the line in the wrong direction, or to push the meat through too fast. They were just doing their job to the best ability they had. So the Green Party certainly thinks that a non-competitive model is best, but we just do not want it to be too much of a bureaucratic model or an inefficient model. Thank you.

TARIANA TURIA (Co-Leader—Māori Party) Link to this

Tēnā koe, Mr Assistant Speaker. Tēnātātou katoa. I am pleased to have a chance to speak about the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill. I do not know a great deal about it, but I have listened carefully to what people have said in the House today. I guess we have an interest in the way in which this nation assesses the quality of animal products and materials, and in particular the way in which it invests in the export red meat market, given the number of Māori people who are involved in farming.

This bill is about services, and we do support it at this first reading. The Māori Party has taken an interest in the way in which quality outcomes and services can be achieved through two key State enterprises established to do so—AgriQuality Ltd and Asure New Zealand Ltd. Part of our interest concerns how a merger can be planned between two very similar enterprises, and it would appear that the process is thoroughly agreeable to all parties, despite all the flexing of muscles between these agencies.

We have on one hand Asure New Zealand, bound by its mission: “Whāia ko taikākā, Building Consumer Confidence”. Its stated mission is to provide “simple and efficient solutions to complex food safety issues”, with key values such as objectivity, know-how, and integrity. It is already well on the way towards creating a trusted partnership. Importantly, it has already established relationships with the Ministry of Agriculture and Forestry, based on the State-owned enterprise model. On the other hand we have AgriQuality Ltd, an entity that last week issued a release saying that it was committed to creating value for its ultimate stakeholders, the New Zealand public. It then went on to further suggest that in the past 7 years we have witnessed immense changes across the international global supply-chain and regulatory environment, and that there is now a strong case to be considered for merging the two companies. Both companies are firmly focused on creating value, which will benefit the agricultural and food industries in New Zealand, with a particular focus on enhancing their reputations for the good of the New Zealand public.

There has been a bit of an X factor as far as the Māori Party is concerned. I want to draw to the attention of this House the fact that one of these entities, AgriQuality Ltd, is chaired by a NgāiTahu person, HēnareRākihia Tau, and that a NgātiPorou and NgātiKahungunu person, Tom Mulligan, is a director of Asure New Zealand Ltd. Too often in this House we hear about issues of disparities and problems that the Government has identified in another sector that seem to be disproportionately falling upon Māori, yet every day throughout this land Māori directors, managers, leaders, and entrepreneurs are helping to shape the society that we are a part of. I am thinking of some of New Zealand’s finest leaders and movers and shakers who are on boards—people like June McCabe, a director of Television New Zealand Ltd and New Zealand Venture Investment Fund Ltd; Taari Nicholas, a director of Transmission Holdings Ltd; Mavis Mullins, a director of Landcorp Farming Ltd; Sir Paul Reeves, a director of Mighty River Power Ltd; Dr Mere Roberts, a director of the Institute of Environmental Science and Research Ltd; Tem Hall, deputy chair of the New Zealand Forest Research Institute Ltd; Professor Ngātata Love, a director of New Zealand Post Ltd, and Witi Ihimaera-Smiler, a director of Learning Media Ltd—and that is to name but a few. The great thing is that this is a sample of much, much more to come. We have a wealth of talent out there in governance and in leadership, which this bill demonstrates.

We believe that the bill reflects the desire for cooperation, in that it will prevent AgriQuality Ltd from providing export red meat inspection services. It would appear to be good business sense for the business case of AgriQuality Ltd not to be in competition with Asure New Zealand Ltd. At the end of the day, the Māori Party would prefer to see State-owned enterprises collaborate and coordinate their activities rather than compete against each other, with a cost to the Crown and, more important, to taxpayers. It would appear really good business sense to maximise the commercial and non-commercial ownership benefits of both entities. If they were private enterprises, then I would probably agree with Shane Ardern in regard to competition, but they are not. So merging AgriQuality and Asure must mean that there will be more efficiencies.

In its most recently completed financial year, AgriQuality Ltd had a total operating revenue of $79 million, had total assets of $54.6 million, and had 750 fulltime-equivalent staff. The needs of stakeholders in the dairy, meat, horticulture, and food industries are central to the New Zealand brand. The proposal to merge AgriQuality and Asure will now mean a far more effective surveillance and monitoring of food, from the paddock right through to the shop shelf. In the interests of safe and wholesome food, for opportunities for our future export markets, and for the sense of confidence we have in Māori as successful managers, governors, and directors, we are happy to support this bill at its first reading.

GORDON COPELAND (United Future) Link to this

United Future will be supporting the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill, at least for the first reading and referral to the Commerce Committee, on which I serve as deputy chair. The whole question of assurance, particularly with regard to New Zealand’s meat export products, probably takes on an added significance today compared with the recent past. The development of new technology is one of the reasons for that.

I remember when the House was debating very vigorously the microchipping of dogs about a year ago. At that time, I attended a meeting in Hamilton where vets were saying to farmers that it was necessary for New Zealand to microchip cattle and other animals that produce red meat, because our international markets demand the ability to trace a particular cut of meat from the plate of the consumer, whether in France, Britain, or elsewhere, right back to the exact animal it came from. That has happened because of the way in which mad cow disease and other transmitted diseases have been highlighted, and the consciousness of consumers today who want to be assured that the products they consume are safe to eat.

The spotlight is also on the question of carbon miles, I think it is, which is the amount of carbon used to send meat from New Zealand, for example, to export markets in Europe.

Hon LUAMANUVAO WINNIE LABAN (Minister for the Community and Voluntary Sector) Link to this

Kia ora, talofa lava, and warm Pacific greetings. It is my pleasure, indeed, to stand and speak in support of the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill. This bill makes for good common sense and is very well supported by the sector.

I wish to make a couple of points about it. The bill provides for a possible merger between the two State-owned enterprises—AgriQuality and Asure New Zealand. The bill does not force a merger or require a merger; it simply enables a merger between the two State-owned enterprises to take place. It is good to see that both AgriQuality and Asure New Zealand have both agreed to work together to explore the possibility of a merger. Rākihia Tau, Chair of AgriQuality, has expressed his company’s strong support for this initiative, and Asure New Zealand has also agreed to cooperate. In a recent media statement, the Chair of the board confirmed Asure’s willingness to cooperate fully in the preparation of a business case to assess the economic viability of the merger.

Unions also support the bill, and, as my colleague Maryan Street said, the Public Service Association, which represents meat inspectors employed at Asure and staff at AgriQuality, says that the benefits of a possible merger to union members and the taxpayer are significant. It is really heartening to see the two State-owned enterprises and the union in agreement at such an early stage, as this Labour-led Government prefers to see State-owned enterprises collaborating and cooperating together where they can, instead of competing with each other and spending taxpayers’ money to do so.

The bill will also prevent direct competition between the two State-owned enterprises and companies in delivering export red meat inspection services. Our Labour-led Government is committed to value for money and value for people, and to competing in the global market to maximise gains for New Zealand quality product, quality service, and quality business. That is the Kiwi way. That also feeds nicely into an important provision of this bill. It authorises shareholding Ministers to issue a direction to AgriQuality to prevent it from providing export red meat inspection services. It is very important that the interests of the wider public and the sector are represented, and this bill allows shareholding Ministers to do that.

If in the future it is seen as viable, and AgriQuality and Asure merge, there will be many benefits for taxpayers and the sector. As outlined earlier by our Minister for State Owned Enterprises, Trevor Mallard, there will be cost efficiencies from having a single national provider. There will be improved integration of national biosecurity capability, which is a point not to be missed, I might add, given the increased vulnerability of New Zealand and other nations to breaches in biosecurity in today’s interdependent, interconnected, and global world. There would also be the ability to provide better information for consumers about where their food comes from, and additional revenue opportunities from offering quality assurance services to the wider food industry. A single integrated service provider would be better placed against international competition.

Again, Rākihia Tau, Chair of AgriQuality, sums this up better than I can in his recent media statement when he said: “The possible merger of AgriQuality and Asure would have the added advantage of allowing effective traceability of food from the paddock right through to the supermarket shelf, strengthening access to international markets across the breadth of the supply chain. Any move in this direction will see our reputation for producing safe and wholesome food products enhanced with the potential to benefit the wider agricultural and food industries in New Zealand.”

A previous speaker, Nathan Guy, made many assumptions about this bill—for example, that there would be increased costs with this process, and that competition is good. We are not disputing that. It is also important to have the pragmatic business savvy to collaboratively work out the best bang for our buck for business consumers, taxpayers, and the State. Each has a role to play in order to keep the checks and balances of our respective responsibilities to ensure we get a win-win for New Zealand. It is also important that we support AgriQuality Ltd and Asure New Zealand Ltd’s decision to work together to explore the possibility of a merger and to not make assumptions and pre-empt the process at this stage.

This is a common-sense bill. It is also an example of a proactive Government working on behalf of all New Zealanders to ensure that where opportunities that benefit the taxpayer and industry exist they are acted on, properly explored, and, if viable, fully implemented. I congratulate my colleague the Hon Trevor Mallard for his leadership in introducing this bill, and I look forward to discussing it further at our Commerce Committee. Thank you, Mr Speaker.

ERIC ROY (National—Invercargill) Link to this

I was sitting up in my office and I heard this bill being debated, and I felt I should come and make a contribution. I do so for several reasons. I am a little confused as to why we are having this State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill. The bill sets out a provision for a merger or a takeover, although that is not actually defined. But before I get on to that I will talk about some important principles that this House needs to engage in before it goes any further with this bill.

There are perhaps two key elements to our prosperity as an exporting nation of primary produce. One is that we can assure the consumer—the purchaser—of the quality of that produce. Ninety-odd percent of our primary produce, particularly in the meat area, is exported. We need to have an unequivocal, unchallenged assurance that the product is safe and wholesome. After that comes a whole range of things about the processing being done in a sustainable way and the upholding of animal welfare issues. All of that stuff helps, but right at the top is assurance. We have had two State-owned enterprises providing that assurance—AgriQuality Ltd and Asure Ltd.

Is there an issue that the model we have now has not been confirming, assuring, and asserting the absolute quality and safety of our products? No speaker has stood up and said that is the case. We would hold that AgriQuality and Asure have done it well because they are mandated to do so and because they abide by the Codex Alimentarius laws, which are the meat hygiene phytosanitary requirements that must be met before that assurance can be given. Both companies have done that, so there is not an issue in that regard. The second thing is the supply to the market, which requires farmers to produce lambs at such a rate that it becomes a viable land use option.

That is where I have some difficulty. As I go round New Zealand and talk to provincial New Zealanders and farmers, I hear several cries. But one cry that I hear everywhere I go—and Government members will have heard it—is: “The cost of compliance is killing us. Everything we do is going up a little bit more every year.” I will give one very good example of that. The Holidays Act came into force on 1 April. The meat companies tell us that it will cost them $1 a lamb. OK, it is a fine principle. We have actually redefined the cake and the workers are getting a bit of a bigger slice, but someone else is getting less. The cost of compliance—that is where it fits.

DARREN HUGHES (Labour—Otaki) Link to this

I rise to take a brief call on the first reading of the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill. It has been very interesting to sit through the debate and listen to the contributions that have been made by all the parties. I offer my sympathies to the Hon Luamanuvao Winnie Laban. The member for Invercargill, a National MP, just told the nation that they are cousins. It seemed a very nasty thing to do in the debate. What amazes me about this Parliament is how many people do have cousins on the other side of the House; quite a few have been named. I actually have one but I am just too proud to fess up about which one of them it is. I keep it quiet that our family managed to produce someone who ended up in the New Zealand National Party—my goodness! It is obviously a big country that we have here where members of a family can be on different sides of the House.

The bill is an unusual one because it amends the State-Owned Enterprises Act only to enable something to happen. It is does not actually direct the merger, but, clearly, a lot of work and thought has gone into that in order for it to come to legislation at this time. I am not sure whether we have had a bill similar to this one before. It amends quite an important piece of the reforms from the 1980s and then leaves that provision in the bill in order to bring together these two businesses, if that is what the shareholding Ministers want to see happen.

Up until now, of course, AgriQuality’s core business has been the provision of food safety and biosecurity services, and Asure has focused on the provision of export red meat inspection services. They have gone along those separate paths. Then the issue arose last year when AgriQuality signalled it wanted to move into an area where Asure has been working. I guess that is what prompted the shareholding Ministers who own both companies to ask whether it is in the best interests of the taxpayers—the whole country—as the owners to have competition between two things they already own if that competition ends up reducing the worth of both companies. That is what is being looked at here.

I do take the point that was made by Mr Roy about the costs; service users of these two agencies do not want to see their costs continuing to go up. I would like to think that maybe there will be some efficiency gains that will flow right through to the people who are having to pay to have these inspection services done. As every speaker has noted, biosecurity is a very important part of our country—making sure our reputation is intact for what is a very heavily dependent agriculture industry—and a sector that, of course, has a world reputation that is the envy of many countries. We have to make sure that that continues to survive in that way. I support the first reading of the bill and its referral to the Commerce Committee.

Hon PETE HODGSON (Minister of Health) Link to this

I move, That the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill be considered by the Commerce Committee, referred to Commerce Committee