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

ERIC ROY (National—Invercargill) Link to this

I am keen to get some answers in relation to some questions that I raised in the first reading of the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill. You see, there are a number of things I do not understand, and there are things that I need to get my head around in terms of some quite significant issues that concern not only the meat industry but the way in which we conduct an assurance programme, because that is what these two companies, AgriQuality and Asure, are responsible for. There is also an issue in respect of contract work with the Animal Health Board, and my colleague the Hon David Carter has tabled a Supplementary Order Paper on that, which I am sure we will be talking to later.

In the first reading of this particular bill I asked the Minister to outline why these two companies needed to be merged, and why we were debating this legislation. National intends to oppose the legislation unless good reasons are given as to why this is the best way forward. I say to the Minister Trevor Mallard that the two elements that we need to have identified—

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

The answer to the first question is a relatively simple one. When we have two State-owned enterprises with a large workforce in one and competition from the other, we have in place a very clear redundancy arrangement. If any significant work shifts from one to the other, then tens of millions of dollars in redundancy gets paid. It could well be the case that the same workers end up working for the other company, or inexperienced meat inspectors end up working for the other company, and the Crown or farmers going forward will bear the cost of that. I think that is not a good cost to bear.

ERIC ROY (National—Invercargill) Link to this

This may not be a very long call. I think the Minister in the chair, Trevor Mallard, raises an interesting point. He says that I may well be prepared to take the risk. At the end of the day, the person—the farmer or the supplier—who supplies the product about which this assurance is given does pay the cost. It is a deduction from the product at the end of the day. That is the very point that I wish to represent to the Minister: that in fact it is the farmers, the suppliers of the stock, who pay at the end of the day, and they have a very clear view that they want competition. I tell the Minister that I am not persuaded that this redundancy thing is a huge issue.

In terms of the meat industry assurance issue, these people are sometimes contracted in. They are not all employees of each agency; they operate on fixed contracts. Is that not right? The Minister can respond to that question.

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

Going back to the original point, I think the member is making too much of the question of competition in this area now. There is one supplier. It is a State-owned enterprise. In just about every competitor country there is one supplier, and that supplier is a Government department. The reason is that people internationally, generally—not universally, but generally—require meat to be inspected by a responsible Crown agency or a State—

COLIN KING (National—Kaikoura) Link to this

Speaking to the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill, I appreciate the Minister’s being so forthright. It is refreshing and quite candid of the Minister to come out and answer those questions. But I would like to say, as we consider Part 1, that I think it would have been a lot better had the bill gone to the Primary Production Committee. I would like the Minister to tell us why it did not go to that committee, because those organisations, those State-owned enterprises, in effect come before the Primary Production Committee, and we as farmers find it quite challenging to be a third party to a lot of the debate.

Really, when we look at the bill, we look between the lines—to borrow a line from Minister Maharey today—and when we see that the Government wishes to prevent this competition from occurring because it considers it would result in a net cost to the Crown, we look a bit deeper into some of the activities that we know about in relation to AgriQuality Ltd. We want to see why, in fact, the Minister is trying to prevent a State-owned enterprise from going belly up because of the transactions it was involved in, such as Target Pest and things like that.

We do not have a lot of confidence around some of the explanations and trade-offs on redundancies that the Minister speaks about; we look at the side of the debate around meat companies. I pick up some challenges that the Minister, likewise, obviously picks up—for example, that there has to be a measurement of costs going forward, and the Minister talks about the fact that within 3 years there will be a Commerce Commission examination of costs going forward. That can all be forgotten about if the meat companies and the Commerce Commission agree to walk away from it. But I put it to the Minister, as my learned colleague Eric Roy mentioned—

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

I am happy to do that. The bill went to the Commerce Committee because we have a lot of faith in Gerry Brownlee and his ability to chair, and the House made the decision. Members from within parties, of course, could have substituted from one committee to another if they thought they had the expertise to add value, and their whips agreed with them.

R DOUG WOOLERTON (NZ First) Link to this

New Zealand First supports the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill, because this bill gives the opportunity to merge those two State-owned enterprises. Those State-owned enterprises, I might say—and the Minister can confirm this to us—had a court case between them that lasted for 6 months or a year, or something like that. It was quite outrageous. As the Minister has said, the competition that people talk of here as being something dear and wonderful and not to be lost is illusory. This is a situation of a State-owned enterprise competing with another State-owned enterprise that is contracted to a Government agency, and to some other quangos here, there, and elsewhere. So the competition is illusory, and even the Supplementary Order Papers we see in front of us are couched in terms of providing some competition at some time in the future. In the case of the Minister’s Supplementary Order Paper, that will be when two-thirds of the industry agrees to that.

The industries we are talking about are industries that export their product overseas, to countries that do not like the meat they import to be ticked off by a bunch of cowboys down in New Zealand. They want the Government’s stamp. OK, they are happy enough with a State-owned enterprise’s stamp, because they understand that that is a Government stamp. But it is they, not we, who are demanding those things, and I think that it makes a lot of sense to merge the companies, even though this bill does not do that. It gives the opportunity to do that, and I think there are gains to be made here. When there is no real competition, the only other thing to be done is to get the price down, or to get the costs down of the institution that gives the service. That is what I think is in the Minister’s mind here, and we applaud that. Transparency is a great thing. But the smoke and mirrors business of having two State-owned enterprises competing, and then our saying that we have fair competition in the market, is a nonsense.

I know that when it comes to the TB testing contract, some crunching was going on, following a court case, and so on and so forth. There was an advantage to farmers. Because one chief executive officer basically wanted to stick it up the other chief executive officer, farmers received a good deal.

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

I agree with the last comments made by our colleague from the New Zealand First Party, Doug Woolerton. I often agree with comments he makes, and the last one he made about the important role meat inspectors play and the skill they require is absolutely right. Other than that, I disagree—which is a rare thing—with everything he said in his speech.

I would like to challenge one or two of the proposals put forward by the Minister. One is that because the Crown would be exposed through the redundancy law—or through the potential gaming, I guess one would call it, of the redundancy law—between one Crown entity and another if they were to merge under the Minister’s proposal, we therefore should have a new clause in Supplementary Order Paper 120 that stops that from happening. Yes, I guess that for an Associate Minister of Finance who is protecting the Crown’s asset, that is a responsible position. But the first question that springs to mind is whether a private industry company finding itself in the same circumstance—where a merger is to take place between two entities providing the same service—would get that kind of protection. What we see under Part 1 is one standard for the Government and another standard for all the rest of the workforce.

The second point the Minister made, which is also one that our colleague from New Zealand First made, is that two State-owned enterprises are competing with each other, and therefore this concerns some kind of quango or non-competitive environment. Well, that does not show a failure in the structure; it shows a failure in leadership from the Minister and from the chief executives, who are appointed or employed by the Minister. That is what that shows.

Here are the facts. After the reforms of the late 1990s that set up the current structure, meat inspection costs went down. That is what happened; they went down. There is no guarantee now that those same costs will not go back up once the merger puts the entities back together. What assurance can the Minister give us—and I will be pleased to yield to him so he can give us that assurance—that meat inspection costs will not go up substantially under the new proposed structure that is being put forward here today? Those are the reasons why National is opposing this bill here tonight.

I say to the Minister in the chair, the Hon Trevor Mallard, that there are some problems in this current State-owned enterprise structure. We accept that; I do not think anybody denies it. Some problems occur when the situation arises of two State-owned enterprises taking each other to court. There is no doubt that that is not a well-organised way to run a business. But what is the root cause of that? Is it the fact that there are two entities, or the fact that there is a total lack of leadership? So I ask the Minister whether meat inspection prices will go back up, or will—

MARYAN STREET (Labour) Link to this

Day after day I come into this Chamber and search for some kind of consistent ideology coming from the Opposition. Finally, today, I found a sliver of ideology, and it is around competition. It is for that reason only, not for any sensible reason, or practical or common-sense reason, that the National Party has chosen to put a minority view in the report of the Commerce Committee and to proceed to oppose this bill.

The common-sense situation that we find ourselves in when looking at these two existing State-owned enterprises has already been explained. If there were to be competition from AgriQuality for the meat inspection services that Asure New Zealand provides, there is likely to be a very substantial contingent liability over redundancies. It would seem to me that if Asure is doing its job adequately—and by all accounts, and especially according to its interim report for the 6 months ended 31 March 2007, it is in fact doing extremely well in its job—then there is no need for additional competition to provide alternative services. There has not been, nor was there represented at the select committee, to my recollection, any submission complaining about current costs and cost structures relating to meat inspection fees and services. There was none, and there is no reason to believe that that should be any different under this legislation. In other words, if members opposite look at Supplementary Order Paper 120, which stands in the name of the Minister, they will see that in fact that issue has been covered.

But it seems to me, also, that the introduction of competition is wrong on two counts here. First of all, what is the sense of having two State-owned enterprises competing with each other? That is an unnecessary waste. The other reason is that, quite frequently, when competition has been introduced into all sorts of facets of life, corners have been cut in order to provide the lowest cost structure. Corners have been cut.

This is one area where, for a whole raft of reasons, corners must never be cut. They must never be cut, in order to preserve New Zealand’s reputation in the export market. They must never be cut, in order to preserve the integrity and the expectations of Treaty partners such as the UK and the United States, with regard to the purchasing of meat products. Further, corners should never be cut in the delivery of inspection services that allow for proper tracing of disease or infection. Such cutting of corners would undercut the integrity of our borders and the protections that are required in order to maintain the quality of our product and the reputation amongst our customers that New Zealand currently enjoys.

The whole purpose of this bill is to avoid unnecessary waste in order to make sure that this slim thread of ideology that the National Party clings to, despite all sensible opposition and sensible arguments to the contrary, should not prevail, and does not apply.

CHRISTOPHER FINLAYSON (National) Link to this

Having heard that thoughtful and intelligent contribution from Maryan Street, I have a question that I would like to ask the Minister. It relates to section 4(1)(a) of the State-Owned Enterprises Act. I think he was the member for Hamilton West when this legislation was passed—

ERIC ROY (National—Invercargill) Link to this

I wish, if I may, to respond to the comments made initially by Maryan Street, because they do relate to Part 2 and the whole issue about competition and the probable impacts she foresaw of that degrading the service and putting at risk the integrity of the system. There simply is no chance of that happening. As my colleague Chris Finlayson said, there is the obligation to sue. But Codex Alimentarius is itself one of the most robust international agreements that exist. If we looked around the world for treaties and agreements that have the degree of robustness that Codex Alimentarius has, I suggest we would find very few. New Zealand has such a vested interest in assuring its programme that no meat company, nobody who is exporting, and nobody who is producing would countenance the thought of doing anything that would negate, devalue, or put in question the robustness of the assurance that is in there. So I do not see that as being an issue.

Again, I would refer members to the point I made in the first instance. When I was talking about Supplementary Order Paper 120 in the name of the Minister and about the explanatory note of the bill, I pointed out he had mentioned talking internationally about having agencies other than the Crown involved. I applaud that; I think that is good.

I want to tease out a little more about the competitive model, because under clause 9 of the bill as first drafted, Part 3 of the Commerce Act would not apply to any merger of the two agencies. I thank the Minister for now putting in some triggers so that the Commerce Commission could have a look at that. I am referring, on Supplementary Order Paper 120 in his name, to Subpart 3, clause 12(3)(a), which states: “the Minister of Commerce and the Meat Industry Association of New Zealand (Incorporated) agree that an investigation and a report under subsection (1) are not necessary;”. There is a trigger that can allow the Commerce Commission to look at the practice and see whether there is price gouging, overcharging, or anything else that we are concerned about in the competitive model.

But I have to say that the Boston Tea Party story comes to mind when I read that subsection. The very agencies that can trigger an inquiry, by talking to and requiring the Commerce Commission to hold one, do not have representatives of the producers on them. The Minister of Commerce has overall oversight of—fiduciary responsibility, or whatever it is for—the behaviour of State-owned enterprises. The Meat Industry Association represents the industries that do the processing, but there is nobody who represents the producers. At the end of the day, if there is unseemly charging, or if the lack of a competitive model brings up some issues that the Commerce Commission should look at, the producers do not have a trigger that they can press. I have tabled an amendment in my name that says we need to include Meat and Wool New Zealand in that loop. That will complete the three elements that are quite important there.

As I say, the notion we have here brings to mind the Boston Tea Party. If the State and the industry association say they are not happy, then the Commerce Commission can be required to do an examination. But in the event that they are not convinced of the need for an examination and the prices are up, who pays them? That is the end of the line. That comes off the product price received by producers. Anybody who is out there talking to producers finds that is the No. 1 issue.

Right now the sheep industry is not in good shape. The Minister needs to put his hand up and say that he hears the cries of anguish about the meat industry, which is in serious trouble. One of the things that producers continually say is an issue is the cost of compliance and the lack of a competitive model. This Labour Government took the competition out of accident compensation. Hooray! Oh yes, it thinks that we have to have one State-controlled situation to deliver that. I can cite the figures in my own case to demonstrate the cost of that: there has been a 250 percent increase. I have never had an accident compensation claim, and there has been a 250 percent increase. It is right across the board. The Meat Industry Association would say that the cost to producers is 90c a lamb, or some such figure, but has that triggered the Commerce Commission to look at it? No, the industry has just passed the costs on, back to producers, and it comes off the bottom line. So why should we be so encouraged about the provision in clause 12(3)(a) on Supplementary Order Paper 120?

After our debate at the first reading, yes, the Minister listened. He has done something, but it has not gone far enough, because at the end of the day he who pays the piper needs to call the tune. Be it the Boston Tea Party or the Meat Industry Association, if there is a tax, then there needs to be representation. Any member of this Committee who wants to vote against the amendment I have put forward should stand up and explain why, when we are setting up a monopoly agency, producers should not be included in the loop that can trigger an examination by the Commerce Commission. I look forward to receiving any response, particularly from the Minister in the chair, the Hon Nanaia Mahuta, who seems to be otherwise engaged at the moment, on that very point. Thank you, Mr Chairperson.

GORDON COPELAND (Independent) Link to this

I may want to take a couple of calls on this State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill, because I want to talk about the chain of events that has led to Supplementary Order Paper 120 in the name of the Minister, and also about the amendment that I have put forward in respect of Subparts 3 and 4 of the bill.

I was on the Commerce Committee that heard the submissions from the Meat Industry Association. Its representatives pointed out that the effect of this bill, which is undeniable, is to create a monopoly in respect of red meat inspection services. The member Maryan Street said that that was the status quo anyway, but she failed to mention that there is a big change here, because although in practice there is a monopoly now, there was also at least the possibility that AgriQuality Ltd would come in to provide red meat inspection services in competition with Asure Ltd. That is the very thing that this bill removes, thus creating an actual monopoly in every sense of the word.

After the submissions came in to the select committee I entered into discussions with the Minister Trevor Mallard about the fact that that was an unacceptable result and that it would lead to the possibility of price gouging, etc., in the provision of red meat services because there is now an actual monopoly. As Chris Finlayson has pointed out, that is very much inconsistent with not only the purpose of the State-Owned Enterprises Act but also the purpose of the Commerce Act, which we in Parliament enacted in order to ensure that competition exists and to ensure that where a monopoly exists, it is subject to oversight by the Commerce Commission. This bill pretty much negates all of those safeguards, as it was originally drafted.

The Minister, to my pleasure, said that he was open to amending the bill to ensure that at least the potential for competition would be allowed to continue. By the way, he also said that he was happy for the Commerce Commission to review the way in which prices had operated; hence we went away to draft a Supplementary Order Paper. I might add at this stage that he said to me that his view was that two-thirds of the total of New Zealand’s trading partners should agree to accept red meat inspection from non-Crown agencies before the Government would be prepared to trigger competition, but that was just the starting point and matters have moved on significantly from there.

I then worked with the Meat Industry Association and we made an important change to the wording, so that instead of the two-thirds idea, we would make specific reference to New Zealand’s trading partner, singular, or trading partners, plural. As I mentioned in my second reading speech, that is because there are three major blocs of trading partners in respect of red meat exports—that is, the European Union, the USA, and China. We drafted some clauses that would say that if any one of those major markets was to agree to that change in red meat inspection services, the New Zealand Government would then allow competition to proceed.

The detail of that wording was communicated by my office to the Minister’s office by way of an email on 1 May, and a reply came back that same day. I will read that reply to the Committee: “Trevor”—meaning the Minister Trevor Mallard—“agrees to the proposed United Future New Zealand amendments, but would prefer that they are adopted at the Committee of the whole.” That situation was considered subsequently by the Commerce Committee, of which I am the deputy chair, where the Labour members present signalled their support for the amendment that I had brought to the committee. That amendment was contained in the minority report of United Future, and at that stage National also indicated its support for the amendment. So the Government had on all occasions agreed, both in writing to my office and through its members on the Commerce Committee, that it would agree to draft an amendment along those lines, and that was done.

A press release was issued and was widely reported in the media. The Meat Industry Association and the meat growers were delighted. It was also agreed that when the Supplementary Order Paper came back, it would be in my name. However, the Minister returned suddenly from overseas and immediately communicated to me that he would go back on his office’s written agreement to the wording that had been suggested by the Meat Industry Association. In fact, he said that he was going back to where he started, and that two-thirds of the total market would have to agree to the provision of red meat inspection services by non-Crown agencies before the Government would open up to competition.

That is why there is now no Supplementary Order Paper in my name. I immediately signalled to the Minister that I was withdrawing my support and that I regarded that process as dishonourable and, indeed, a betrayal of the agreement that he had previously communicated in writing to me. I think that that is bad enough, but much more important is that it is also a betrayal of the thousands of red meat producers in this country. I know that those producers will not forget that the Government, having given its word, subsequently went back on it. Thank you.

I seek leave to table the written response of the Minister’s office, dated 1 May 2006, whereby he agreed to the amendments I had proposed.

Hon DAVID CARTER (National) Link to this

It is with delight that I rise to speak to Part 2 of the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill. I start by acknowledging the work that Gordon Copeland did with regard to trying to correct this legislation and make it at least partly acceptable to the red meat producers of New Zealand. I would suggest, after listening to Mr Copeland as he recounted the history of his involvement with Mr Trevor Mallard, that Mr Copeland has had lesson 101 in politics. He trusted the Minister, and he has been let down completely.

I had the opportunity of sitting on the Commerce Committee when the submitters and the objectors to this legislation were heard. Mr Copeland sat just alongside me at that select committee. I have absolutely no doubt that if Mr Copeland had not accepted the word of Mr Mallard that a reasonable and effective amendment would be allowed in Mr Copeland’s name and would be supported by the Government, then Mr Copeland would not have supported this legislation in the select committee. Now what we have is a Supplementary Order Paper, which has been tabled by the Minister today. I have had a brief opportunity to read Supplementary Order Paper 120 as I rushed in from Wellington Airport, and it is correctly called a sop. It is absolutely meaningless in terms of delivering any opportunity of competition to meat inspection services.

Let me start discussing Part 2 by acknowledging the real reason for this legislation being before the House. It is because of the demand made by the New Zealand Public Service Association Inc. (PSA), a demand by the largest union in New Zealand. It is very interesting that the legislation appeared in the House in the same week that the Labour Party was finally able to raise the money to pay back to the taxpayer $850,000 that it had stolen during the last election campaign. The timing is worth noting. Suddenly the Labour Party, known to be short of funds, comes up with $850,000 in the very week it delivers the legislation that the PSA has been asking for since the original two State-owned enterprises were set up.

I listened to a number of contributions on the way in from the airport just now. The first one I would like to comment on is that of New Zealand First member Doug Woolerton. What became clear with Doug Woolerton’s contribution is that he has absolutely no idea of the effect of this legislation. He has been led like a little puppy dog to Winston Peters’ desk, and Winston Peters told him he is supporting the legislation. That is the sum total of the work that Doug Woolerton has put into this legislation.

The second contribution I heard was from Maryan Street, and that is worth commenting on. What she said, if I recall her comments correctly, is that no one came before the select committee and argued against the exorbitant rates that are now charged for meat services at our meat processing plants throughout New Zealand. That is true. No one came and complained, because despite the fact that only Asure now provides those services, there is the potential for competition. Maryan Street then went on to say that by removing the potential for competition, fees would not increase. That is the sort of argument we would expect from a person who is a born socialist, a person who has never been in business. Members should mark my words: the PSA would not have demanded this legislation, and Labour would not have delivered it, unless the PSA saw an opportunity to march the fees up via unreasonable wage demands. That is what this legislation will deliver.

George Hawkins laughs about this. I have just been in North Canterbury, amongst rural constituents. They know the effect of this legislation. I guess it will not be a huge issue in George Hawkins’ electorate—if Helen Clark even lets him contest an electorate at the next election—but this will be a big issue amongst rural New Zealanders. Our red meat producers are actually not enjoying the buoyancy they have had in the past 3 years. They are under extreme pressure at the moment, and the last thing they want is another level of cost put on them because the PSA sees an opportunity to deliver a real blow to wage negotiations—a real blow that is then passed on to the industry. That is what this bill is all about.

I congratulate Gordon Copeland on the amendment that I see in his name. It is a step in the right direction. It is about noting what is happening in the international community around the acceptance of non-State entities delivering certification. I want to continue my call because I want to take the opportunity to talk about a Supplementary Order Paper in my name. But with regard to the Gordon Copeland amendment, I will finish by stating that if the Committee saw fit to pass that amendment, it would make a considerable difference to the acceptance of this legislation amongst our red meat producers.

I will move on to discuss an amendment I have placed before the Committee. It was put forward quite some time ago, so it had the opportunity of being widely circulated amongst members. The basis of this amendment is to change clause 10, and the reason it is before the Committee today is that at the moment the Animal Health Board effectively delivers TB services to cattle farmers throughout New Zealand. It is doing a very good job. One of the reasons it has been able to do this job and to hold costs for the farmers is that it has been able to competitively price TB testing amongst these two State-owned enterprises. It was aware of the strength of the PSA as it signed contracts, which are running as we speak, to the two organisations providing TB testing services to various parts of New Zealand.

Therefore, the Animal Health Board specifically said that if this merger took place, it would reserve the right to cancel those contracts and immediately look elsewhere. This is about sanctity of contract. But Mr Mallard, because he saw that this could further lessen competition between these enterprises, has specifically said that any contracts in place, regardless of clauses that are subsequently written in by the Animal Health Board as the purchaser, are null and void, and that under no circumstances can those contracts be cancelled simply because this merger takes place. That is completely unfair to the beef farmers throughout New Zealand.

Brian Donnelly is surprised to hear of this, but I know that discussion has been occurring between agricultural representatives and Mr Doug Woolerton, and I would have hoped Mr Doug Woolerton had taken the opportunity of informing the New Zealand First caucus so it would at least be aware of the issue. But the puzzled look I am getting from the Hon Brian Donnelly suggests that that is the respect with which this amendment is being treated by the New Zealand First Party.

So I certainly hope the amendment gains support here tonight. It is an important amendment. Why should the Animal Health Board not be able to cancel its contracts if this merger takes place? Why should it not be allowed to go out there—in what is a competitive market, with the private vet practices throughout New Zealand—and gather the best, most efficient, and price-effective means of delivering TB testing in this country? I say that Mr Mallard is doing a great disservice to our beef industry by not agreeing to support my amendment.

I go back to my first point. The legislation before the House is about a demand from the PSA, the largest union in New Zealand. This legislation will cause a complete rift between the employees involved in meat inspection services at our meat plants throughout New Zealand. It will inevitably lead to a rise in costs, which again will be passed on to the farming community in New Zealand. That is the last thing this industry needs when it is under so much pressure at the moment to maintain profitability against a rampant exchange rate caused by Dr Cullen’s reckless spending of taxpayers’ money, and against sheep meat prices that are under extreme pressure, particularly in our premium markets of the European Union and the United Kingdom.

This is an important piece of legislation on which the Government has clearly conned Mr Gordon Copeland completely. The Minister gave his word. We know how much Mr Mallard’s word is worth tonight—he gave his word to Gordon Copeland that he would support a sensible amendment placed before the Committee tonight. But when he finds he can muster the numbers without Mr Gordon Copeland, he will ram this legislation through, insensitive to the damage it will do.

MARYAN STREET (Labour) Link to this

I just want to take a brief call in response to some of the issues raised by David Carter in his speech. In particular I state my very profound objection to the kind of politics that David Carter alluded to. I know farmers are very good at dog whistles, and that member is obviously very good at dog whistle politics. But to suggest—to imply—that there was a connection between the Labour Party repaying some money and the appearance of this bill, in connection with the Public Service Association (PSA), is a despicable suggestion and it is not worthy of that member. If it is worthy of that member, it is not worthy of this House.

I take absolute exception to what he said on two grounds. Firstly, the PSA has never been an affiliated union of the Labour Party. Secondly, the political neutrality of the public service is also safeguarded and is an important value of the PSA. If the members opposite find that the PSA does not like them, then they have to look at themselves about why that might be the case. To advance their opposition to this bill on those grounds, I find reprehensible. If the member sits there and smirks because he is incapable of understanding the critical nature of the point that he implied, then there is no hope of the Opposition ever understanding the role of the public service and, more than that, the role of unions within the public service. I take extreme exception to what he said and this will not be the end of the matter. Thank you.

CHRISTOPHER FINLAYSON (National) Link to this

I thought we were here to discuss competition law, because this is a very interesting bill and I am addressing Part 2. It seems, and I think I am right, this is the only time post-Fonterra that there has been, as it were, a bypass of the Commerce Act, and perhaps the Minister will correct me if I am wrong.

When briefly dealing with Part 1 earlier this evening, I began by referring to section 4(1) of the State-Owned Enterprises Act, which sets out a fundamental purpose of the State-owned enterprise concept and that is this: “The principal objective of every State enterprise shall be to operate as a successful business, and to this end,”—and this is the first one—to be “(a) As profitable and efficient as comparable businesses that are not owned by the Crown;” So that is a fundamental principle and it is one that is borne out when one reads, for example, the second reading debate on the State-Owned Enterprises Bill on 11 December 1986. I refer members to Hansard, Volume 476, at page 6117 when the then Minister of Justice said: “The Bill provides for a clear separation of commercial and non-commercial objectives. The State-owned enterprises will be able to be held accountable for performance and return on taxpayers’ investments against clear commercial objectives.”

What we have in Part 2 of this bill, however, is the removal of competition and the bastardisation or subversion of the State-owned enterprise concept. This really is an extraordinary part. Indeed, I had to read clause 5(1) a couple of times before I actually believed it was there. It was a direction given to the board of a State-owned enterprise that the State-owned enterprise not engage in what, as I have said, is its core business. It must not engage in any activity that amounts to competition in the market place. Having created State-owned enterprises, this Government, the heir to the Lange Government, does not want competition between those State-owned enterprises.

As I said, this is a naked bypass of Part 2 of the Commerce Act. It is a step on from the Fonterra exemption in that it precludes competition even if there is no merger, and that is a very important point. It is worth pointing out that ordinary mortals who breach Part 2 of that Act can expect to be very harshly treated indeed, and I refer the Committee to sections 80 to 82A. Even, in certain circumstances, exemplary damages may have to be paid. It really is a most unsatisfactory situation.

Subpart 3 of the bill is also quite an extraordinary subpart. Although no merger has actually taken place, it is something the Government is considering. Just in case it decides it will merge the two State-owned enterprises, it is taking steps to ensure that Part 3 of the Commerce Act will not apply. Again, compare this situation where the State-owned enterprises are being placed above the law, with the position of mere mortals, and I refer the Committee to sections 83 and 85 of the Commerce Act.

As Mr Carter has said on a number of occasions—and it is what inspires his Supplementary Order Paper—clause 10 is a real shocker, particularly subclause (1)(a), because it compels the Animal Health Board to continue its contracts with the State-owned enterprises, notwithstanding what it may have negotiated earlier, on an arm’s length basis. So much for sanctity of contract! The board contracts in good faith and at arm’s length with a State-owned enterprise and then legislation is introduced that, if it comes into effect, will override sanctity of contract.

In my submission, if State-owned enterprises can compete then State-owned enterprises should compete and be subject to the rigours not only of the State-Owned Enterprises Act but also of the Commerce Act. If the Commerce Commission had to consider any authorisation by these two State-owned enterprises under Part 2, then I am sure no clearance would be given because, as is well known, there are two fundamental questions. Has there been a loss of competition? The answer is yes. The next issue is “Where is the countervailing public benefit?” and there is none. That would be so too with any application under Part 3. These matters should go to the Commerce Commission but what the Minister is saying is that the State-owned enterprises can be above the law.

I want to conclude by saying something briefly about the Minister’s Supplementary Order Paper, which again, I think is hopeless. A monopoly is created but it is a regulated monopoly. This is just another name for Labour Party regulation. The Minister has killed off competition, yet has created, by this Supplementary Order Paper, a new layer of bureaucracy. It is notorious that these Part 4 inquiries can be horrendously expensive and lengthy. I wonder whether the costs saved by the Government by this legislation may well be illusory and may be outweighed by the costs that will be incurred by these lengthy Part 4 inquiries.

In my submission, from a competition law point of view, ignoring the New Zealand Public Service Association and all the other dramatics that were mentioned just after the dinner adjournment, this is bad legislation. It confuses the concept of what a State-owned enterprise is supposed to be about, it denies to those State-owned enterprises the full rigours of the Commerce Act, and it introduces a new subpart to the Commerce Act that can result only in increased costs and regulation; and that is unsatisfactory.

Hon DAVID CARTER (National) Link to this

I want to respond to the rather spirited contribution from the Labour member Maryan Street when she objected to my connecting to the New Zealand Public Service Association (PSA) the $850,000 that was paid back from the Labour Party—

COLIN KING (National—Kaikoura) Link to this

Part 2 of the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill refers to State-owned enterprises. I can attest to what my colleague David Carter has said. From my own point of view, the first time I heard about this bill was when the Meat Industry Association came to me with huge concerns about the bill’s intent. When I spoke on Part 1, I asked why the Minister did not direct this bill to where it should have rightfully gone—the Primary Production Committee—and he came back with the glib answer that he had absolute confidence in Gerry Brownlee, and I do, too, but I am now not too sure about Maryan Street when she comes out with comments that clearly indicate that a lot of stuff is happening well and truly above the heads of backbench Labour MPs.

This bill is of huge concern. When we look at the whole structure, the bill has been to a select committee and come back; we now have the Minister’s Supplementary Order Paper, which, quite frankly, endeavours to rewrite the whole process. It is a last-minute introduction that does nothing to give confidence to farmers and the wider meat industry that a deal was not done via the Public Service Association (PSA). From the diatribe before us at the moment, it appears that the Government is trying to run a dollar each way. My honourable colleague David Carter alluded to the possible reason for this: to repay the debt that Labour incurred through its overspending by $857,000 at the last election.

Quite honestly, it is very hard to understand, given the logic of what has made New Zealand what it is, why we should be considering this bill. The only sense I see coming out of it all is in some of the amendments being proposed. One amendment that I strongly endorse is Eric Roy’s amendment that as far as having the Commerce Commission and the Meat Industry Association decide whether prices in meat inspections services have gone up, that a third party, Meat and Wool New Zealand, should be included. That would certainly bring in farmer input, because it is meat and wool farmers who pay the levy, be it beef, dairy, lamb, or whatever. There is a principle that guards all levy payers—that is, no tax without representation. I make that point very clearly. I hope that through this whole debacle—it has turned out to be a farce in relation to the amalgamation of Asure and AgriQuality, for whatever reasons; I leave those who are listening to the parliamentary debate to draw their conclusions—we at least factor in the significance and the input of whoever pays the bill, and at the end of the day that is the farmer.

It is with a great deal of sadness that I look at Part 2 where it talks about the Government requiring 66.6 percent of the total New Zealand post-mortem red meat exports when it comes to a decision on where to allow competition to occur. When we consider the whole process as it goes through, to see Subpart 4, “Ongoing negotiations and obligations concerning examination services”, tacked on in a Supplementary Order Paper gives me the impression that this bill treats rather lightly the importance of the integrity that has been built up over 125 years since the first shipment of frozen meat left Port Chalmers. To see it turned into a political football involving the PSA, as it is at the moment, is something that I cannot understand.

It is sad that the Minister who is handling this bill is not in the chair, because he was quite forthcoming earlier—before he shot away—in giving answers. I would be very, very interested to know how all this balances out. When we consider that in the last financial review we did of Asure we found that it was carrying the redundancy responsibility on its books, to roll that out as a reason why the Crown wanted to stop that from happening is quite misleading, because the contingency liability sat there all the time and was accrued and rolled over.

It gives me a huge amount of concern, having been largely on the outside of this debate from the select committee point of view but having heard this diatribe here tonight, and standing here as a farmer representing my constituents, the farmers of North Canterbury—where my learned colleague David Carter was today at the Tamania bull sale, enjoying the company of the farmers—that we are doing this for reasons that do not represent the best interests of the meat industry going forward. In actual fact, this legislation is a sham.

NATHAN GUY (National) Link to this

I take a call on Part 2, which is really the meat of this nonsense bill.

Hon DAVID CARTER (National) Link to this

In talking to Part 2 I want to conclude my contribution with one point that has not been raised in the debate that I have heard so far, and that is the very strange way this merger has actually been proposed. This legislation allows the merger to proceed if the Government decides it wants the merger to proceed. At first sight, that seems a very, very strange way of doing things, unless one realises the connection between the Labour Party and the New Zealand Public Service Association (PSA). In the normal course of events most Governments would do a cost-benefit analysis to work out whether there would be any benefit in putting two State-owned enterprises together, and then, if there were, that Government would usher the legislation into the House to enable that to happen.

But Mr Mallard, who is not known for his economic prowess, has done it a completely different way. He has put the legislation before the House, which he will make sure passes the Committee stage today; then, he says, we will initiate a cost-benefit analysis, and if, by chance, the cost-benefit analysis comes up suggesting that a merger will occur, the Government will take it through the Cabinet process and decide that a merger will take place. Yes, I say to Mr Finlayson, this is exactly what Mr Mallard is doing.

In actual fact, I have heard quite recently that despite Mr Mallard saying, when this legislation was first put before the House, that members should not worry because the Government would do the work and make sure that the cost-benefit analysis stacks up, the decision has already been made. Those members of the two boards who will not be involved have already been told that their jobs have finished. It has been agreed that there will be an interim board involving some members from each of the current boards of Asure New Zealand and AgriQuality. In other words, despite the promise that the Government will look at it fairly in the light of a cost-benefit analysis, Mr Mallard and the Labour Government have already decided that the amalgamation will occur—despite any cost-benefit analysis. I suspect, to be fair to Mr Mallard, some cost-benefit analysis will be trumped up. In fact, I suggest that it will show a saving of around $2.5 million. Even with an industry worth as much as this to New Zealand, the Government, in order to satisfy the demand of the union, is prepared to put this merger through on the trumped-up saving of $2.5 million.

I want also to talk briefly about my amendment to clause 10, which attempts to save $2 million for all the beef farmers of New Zealand. At the moment the Animal Health Board does a very good job, and farmers pay the lion’s share of the costs of operation of the board. Farmers put in $50 million every year for the TB eradication process. This legislation will immediately up that cost by 4 percent next year, but the same testing result will be achieved and for the same sort of coverage around New Zealand. The Animal Health Board has estimated that the cost to New Zealand farmers will be another $2 million, instantly. I support completely Eric Roy’s amendment, which would at least bring Meat and Wool New Zealand into the consultation process. That is a good move, and I certainly hope Mr Mallard will stick to his word, which he gave Eric Roy in the House earlier today, and support the amendment. But, frankly, his ability to stick to his word, as shown in the way he treated Gordon Copeland, gives me absolutely no confidence at all that we will be successful with that amendment; not until it is finally voted on tonight.

The last point I want to make is that the Supplementary Order Paper put forward by Mr Mallard is a real sop. New subpart 3, in new clause 12, states that the Commerce Commission must, within 3 years, investigate the prices charged for meat inspection services in New Zealand. We might think that sounds all right, but look further through the small print. Who pays for that investigation? Well, knowing the Labour Party we say it would probably be the farmers of New Zealand, and that would be dead right. The cost for this investigation by the Commerce Commission, which is normally funded by the Crown, will be passed on, in this particular case, to the farmers of this country—because Mallard hates New Zealand farmers.

This legislation is outrageous. It will cost the farming industry dearly. It is all about satisfying the long and lengthy demands of the PSA.

ERIC ROY (National—Invercargill) Link to this

I seek leave, after consultation in the Committee, that the vote on the Minister’s Supplementary Order Paper, to add new subpart 3 in new clause 12, and the Supplementary Order Paper in my name be taken as separate questions. The Minister’s Supplementary Order Paper is something of an omnibus measure, and there is good reason for us to separate out clause 12, given the way the debate has gone.

The CHAIRPERSON (Ann Hartley) Link to this

The next amendment, a typescript amendment in the name of Gordon Copeland to the new subparts following clause 11, is now out of order as it is inconsistent with the previous decision of the Committee.

Hon DAVID CARTER (National) Link to this

The debate has been well canvassed, so I will not take long, except to say that it is with great sadness that we note the progress of the Supplementary Order Papers. We thought that we had an agreement with the Minister, Trevor Mallard, following Eric Roy’s involvement in suggesting Meat and Wool also be involved in the consultation process. It was certainly our understanding that the Minister has agreed to that, and I think it is a great shame that that has been lost.

I take the opportunity of repeating what was said earlier in the Committee in the debate on Part 2. This is a bill to satisfy the Public Service Association (PSA). There is absolutely no doubt about that. Bill Falconer, chairman of the Meat Industry Association, said to the select committee that the association was first advised of this legislation in June of 2006, not by the Government but by the PSA, which requested a meeting with the Meat Industry Association. When that meeting was convened it was the PSA that announced to the Meat Industry Association that a deal had been done with Labour caucus members, with Ministers, and with the Prime Minister, and that the Meat Industry Association had better get used to it. The Meat Industry Association then followed with a letter to the Minister of Agriculture, the Hon Jim Anderton, requesting a meeting as soon as possible to discuss this issue. Mr Anderton totally refused to meet with the industry. That is how our Minister of Agriculture treated this issue—he refused to meet the industry.

Next, the legislation finally came before the House and it was sent to the Commerce Committee, where the Government at that stage thought it had the numbers because Gordon Copeland sat on that committee for United Future. Mr Copeland, to his credit, listened to the submissions. He knew that this was dangerous because of the costs that would then be imposed on the meat industry. He had a deal done with Mr Mallard, again, that a Supplementary Order Paper would be tabled that would lessen some of the damage of the legislation—something that would be done in association with the Meat Industry Association and to its satisfaction. When that Supplementary Order Paper was finally produced by the Minister today, Gordon Copeland was completely let down. He now regrets that he supported it through the select committee, because he knows that this is some of the worst legislation that we have passed on the meat industry since the employment relations legislation and the accident compensation legislation were passed by the Government in its earlier years.

Suffice to say, we will watch with interest, as the PSA now has the ability to impose substantially increased charges on our meat producers throughout New Zealand. We will watch that, and we will certainly hope we see a responsible union. But, on past performance in this industry, I do not think that will be the case.

DARREN HUGHES (Labour—Otaki) Link to this

What a sad position the Hon David Carter finds himself in now that he is reduced in Parliament to being the official spokesperson for Gordon Copeland, an Independent member of Parliament. David Carter takes it upon himself to explain Mr Copeland’s position and how he is feeling about the bill in that regard.

My only reason for taking a call is briefly to put on record in Hansard that Mr Carter and consistency were not great friends this evening when he claimed in the Chamber that the Minister, Mr Mallard, had come to an agreement with Mr Roy on his amendment. That is not correct. I suspect that Mr Carter knows that is not correct, and, as he has taken his opportunity in his speech to put that claim on the record, I want to make sure that no one is under any belief that what he said was correct. It is wrong. He should stick to his new role of speaking on behalf of Mr Copeland on these matters. I think he is much better suited to that than to misrepresenting the position of the Hon Trevor Mallard on these matters.