Debate on Crown Entities, Public Organisations, and State Enterprises

The CHAIRPERSON (Hon Rick Barker) Link to this

The House is in Committee for the consideration of the debate on the performance in 2008-09 and current operations of Crown entities, public organisations, and State enterprises. The debate on the performance of Crown entities, public organisations, and State enterprises is a series of debates on individual financial reviews of Crown entities, public organisations, and State enterprises as reported by select committees. A total of 3 hours is allocated for the debate. The debates on the individual financial reviews should be relevant to the performance in the 2008-09 financial year and current operations. A member may have no more than two calls on each financial review. I understand that members have indicated the Crown entities, public organisations, and State enterprises they wish to debate. The first entity I understand members wish to debate is the Energy Efficiency and Conservation Authority.

JACQUI DEAN (National—Waitaki) Link to this

I am very pleased to be the first speaker in this debate addressing the Energy Efficiency and Conservation Authority, because it is a good-news story. In fact, it is such a good-news story that doing research for this particular Crown entity was nothing short of a pleasure.

I will run through some of the achievements of the Energy Efficiency and Conservation Authority over the period under review. First of all, we might as well start with the really good news, which is the home insulation scheme. It has been not only a great success but a resounding success and a milestone, with a number of New Zealand homes—I do not know the figure; perhaps the Minister of Energy and Resources may help me on it—given up to $1,800 to assist them with the cost of insulating their home. That is good news for those homeowners. It is hugely good news for all of us in New Zealand—

Hon CLAYTON COSGROVE (Labour—Waimakariri) Link to this

At the Press South Island forum last month the Prime Minister made a very interesting comment that if National were to go down the privatisation path, the most likely candidates for part sale would be State-owned energy companies. It is very interesting. The alibi that the National Government has used when raising this issue—firstly, when Bill English spilt his guts and let the cat out of the bag over State-owned enterprises in respect of Kiwibank the day after the Budget—is that for a number of assets there will need to be further capitalisation. National says in respect of further capitalisations that there is not enough money or enough cookies in the jar, and it is reluctant to use taxpayers’ money, so these assets should go on the block.

It is interesting to look at Genesis Power. In February 2010 Genesis Power announced a $64.6 million half-year profit. Given that demand for electricity is already on the rise, and is expected to continue to be, even as we move out of the recession, it is likely on projections that Genesis Power will continue to expect large profits in the coming year and in the future. It dampens down, if not negates, the National Government’s alibi that it wants to get rid of either in part or in whole those particular assets, especially as the Prime Minister said it would be energy assets because they will require further capital. In the case of this particular asset, and others that I am sure my colleagues will deal with later, it does not require—certainly not at the mid-point—further capitalisation.

It is very, very telling that in the Press forum the Prime Minister made specific reference to the partial privatisation of energy companies. He essentially said that they will be the ones on the block, the first cabs off the rank, if National was to win next year’s election.

Let us look at all the State-owned enterprises and at the ethos and ideas around selling energy companies and entities like Genesis Power. The Minister of Finance has said that mum and dad Kiwis will be able to buy a slice of assets like Genesis Power, and that this will be great as it will put a great injection into our capital markets. The only problem with that argument—and mum and dad Kiwis all around are not silly—is that they already own Genesis Power, Meridian Energy, and others such as Kiwibank, Solid Energy, and the like. Kiwis already own those and they have already paid for them. In some cases, Kiwis have paid for them twice as the previous Government had to buy back assets that were on their knees, thanks to the National Government of the 1990s selling them. Mum and dad Kiwis already own those assets. Mr English, Mr Power, and Mr Brownlee are challenging mum and dad New Zealanders to put up for a second time or shut up—put up money they have already spent in purchasing these assets through their taxes, and somehow feel good that they can buy them back again.

Then there is the issue of who would purchase a percentage of a State-owned asset like Genesis Power. In a recession where 70-odd percent—through the electorates it ranges from about 67 percent to 76 percent—of New Zealanders earn $40,000 or less per year. Once they get their little, measly tax cut, and they take into account that it is negated by a 2.5 percent rise in GST and 5.9 percent inflation, they are $30 to $50 a week worse off. Somebody who earns $1 million a year—like some of the mates of members on the other side of the Chamber—will receive $1,000 a week as a result of the tax cuts. I think we can work out that Kiwi mums and dads in most of the communities will not be able to afford to buy a slice of an energy asset like Genesis Power.

It will not be the 70-odd percent of New Zealanders who earn $40,000 or less per year, who are $30 to $50 a week worse off. They will not have the discretionary spending power to amble down to the stock exchange, have a chat to their broker, and spend $1,000 to grab a slice of Genesis Power, as Mr English—generous fellow that he is—said to. It will not be those people, because they will not have the discretionary spending power, thanks to that crew over there; it will be many of Mr Brownlee’s mates, including one of his best ones, Mr Henderson of Christchurch, although he is in a bit of shtook at the moment. It will be Mr Brownlee’s mates who are earning $1,000,000 a year, and who, thanks to Mr Brownlee, will get $1,000 a week back in tax cuts. That sort of person will be able to mosey on down in the Daimler to the stockbroker and say that they will have a chunk of that asset, thank you very much. I suspect it will more likely be some of the people that Mr Brownlee and others deal with on a daily basis. Those large financial overseas institutions will be, as they were in the 1990s, licking their lips to see whether they can grab hold of a slice of a Crown entity or a State-owned enterprise like Genesis Power, Kiwibank, or Solid Energy.

Hon GERRY BROWNLEE (Minister of Energy and Resources) Link to this

There was a man, the Hon Clayton Cosgrove, speaking with all the power, conviction, and passion of a reformed smoker. I say that because he is a reformed asset salesman. Everyone knows that this country’s assets were put on the block at ridiculously low prices by the Roger Douglas - led Government of the 1990s. They also know that the National Government, and John Key, the Prime Minister, have said there will be no asset sales in this term of Government, and that if there is a change in policy we will tell people before we go into a general election, unlike our political opponents, who just cannot trust themselves to stay away from such a policy. So what we see is Mr Cosgrove practically unable to give a speech—and he practically would not have a speech if I did not come to Parliament each day, because that is the only thing he can talk about—because he, by and large, just wants to get in there and do it. He wants to get in there and have a cigarette—I am sorry, he wants to get in there and sell some assets, but he cannot, so he accuses everybody else of doing exactly what he wants to do.

The issue is a straw man, as far as this Government is concerned. We could not have made our position clearer. What we know is that when John Key says something will happen, it happens, and when he says something will not happen, it does not happen.

I will now turn to the issue Mr Cosgrove spoke about: New Zealanders’ power prices under the State-owned enterprise model. During the period from 2000 right through to 2008 the retail electricity price for New Zealanders rose by 73 percent, or three times the rate of inflation. Over the last short time we have been in Government, we have constructed a proper review of the structure of the electricity market and of the way electricity is sold in this country. Then we constructed a bill, which has been through a select committee and is currently awaiting its second reading in the House. During that process we have seen a significant change in behaviour from retailers in the electricity sector, with the real price-rise for electricity being just below that of inflation in the term of this Government, unlike the rampant increase of three times the rate of inflation under the previous Labour Government.

It is also worth noting that this Government has been concerned about how warm New Zealanders are in their homes, and it has made a commitment to provide insulation and clean heating for New Zealanders, with very substantial grants. The previous Government said it would divert State-owned enterprise profits for that purpose. Well, it talked about it, but never quite got around to doing it.

One other point on which I would like to congratulate the Minister for State Owned Enterprises is that, particularly in the electricity sector, while prices have been stable, profitability has been high, and he has been insistent that the performance of the businesses themselves should not be measured simply by how much they can charge their consumers. One of the things we are seeing is that we have genuine pressure on prices to remain low, along with genuine commitment inside the State-owned enterprises to increase their performance and thus their profitability. In the end, that is a revenue stream that all New Zealanders benefit from.

I worry about Mr Cosgrove and some of his ridiculous claims. They tend to deny the fact that is clear and evident to everyone—that State-owned enterprises are performing extremely well at the moment. State-owned enterprises are dynamic organisations, and formulate their own planning as to how they might move forward. When Trevor Mallard was Minister for State Owned Enterprises it seems it was OK for New Zealand Post to enter into some very interesting sort of arrangements, or for the Kordia Group to engage in some very interesting and quite big loss-making arrangements. Mr Cosgrove comes into the Chamber and wants to make a case that everything is all doom and gloom and bad and sad because the National Government is now overseeing this particular portfolio, this particular suite of investments. I think that the taxpayers and residents of this country should be very, very satisfied with the work of the Minister. They should be satisfied with the progress of State-owned enterprises in making a greater contribution to this country’s economy.

Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this

Meridian Energy is one of the three State-owned power generators and is subject to some very similar issues to those debated in the Genesis Power debate. I refer back to the previous Government speaker, Gerry Brownlee, who said in respect of the Government’s privatisation policy that it would tell voters before the election what it was going to do to them. That would be lovely, except that National did not do that last time. What John Key told the voters last time in respect of one State-owned enterprise—Kiwibank—was that a National Government would never ever sell Kiwibank. National said that it would not raise GST, and it said the vast majority of Kiwis would be better off after the Budget. But of course the majority is not, because the Government forgot to include the rate of inflation in the calculator, and that has left average Kiwis $30 to $50 a week worse off, even before we take into account other increased costs like those for early childhood care.

The point is that nobody believes this National Government any more. No, a small minority does. But 53 percent of New Zealanders, when polled recently, said they would not believe any commitment that the Prime Minister might give on State-owned enterprises like Meridian Energy. They believe he will change his mind—again. And which Prime Minister is it: the one who will never ever sell, or the one who is dressing up to bring something to the electorate before the election? It is what we expect from this Prime Minister on this subject. This is the same Prime Minister who says Ministers are no longer responsible to him for their behaviour under the Cabinet Manual or for their behaviour under the Standing Orders of the House. So as recently as today we saw the extraordinary spectacle of an Attorney-General who, once again, has been caught out for not giving a full and complete declaration on pecuniary interests. That is a sham but is exactly what we would expect from this Government.

In respect of Meridian Energy, as a major energy generator it is absolutely, intimately tied up with the nature of the rules under the Electricity Industry Bill, which is soon to be dealt with in Parliament. The Max Bradford reforms of the 1980s were a complete disaster. They were supposed to drive down the long-run price path for electricity. Instead, it rose—at least it rose for residential consumers. It went down, of course, for major industrials like the Tīwai Point smelter. It went up for mum and dad consumers like the old lady across the road from my electorate office, who told me that in the first week after the Budget she had found that the rise in her power price more than ate up anything that she was going to get out of superannuation. It more than ate it up. She is typical of New Zealanders up and down the country, who are shivering in their cold and musty flats because they cannot afford power.

New Zealanders cannot afford power because, amongst other things, this Minister has told companies like Meridian Energy that they must improve their financial performance. Well, let us think about that. Meridian Energy, as a generator, has a bunch of dams, and it has power lines running from the dams. It cannot do much other than turn the tap on and off, or raise the price. So when the Minister was challenged in front of the Commerce Committee about why he had failed to ask the generators not to raise electricity prices, the best that this Minister could say was that pricing was a blunt instrument. We know it is a blunt instrument, but why has the Minister not lifted a finger to protect New Zealanders from rampant power increases? Why is he condoning increases above the rate of inflation and above the impact of the emissions trading scheme? The reason is that there is a quiet wink and a nudge with the Minister of Finance that the Government could use the dough. That is the bottom line. I tell the Minister that it is within his power as the Minister for State Owned Enterprises simply to issue a directive under the State-Owned Enterprises Act that would forbid Meridian Energy or Genesis Power from raising prices faster than—take your pick—the general consumer price index, the effect of the emissions trading scheme, or that plus 5 percent. You name it! The point is the Government has not lifted a finger to protect ordinary New Zealanders from rampant power price increases.

Ah, well, we come to part two of the story. What might be the medium-term solution? The Government would say it is to privatise the State-owned generators, because doing that will keep prices down. Yeah, right! The Government would privatise them so that the boys in Merrill Lynch—the Prime Minister’s old firm—can make a quiet killing on the transaction. What would the effects of privatising Meridian Energy have been if it was privatised 5 years ago? Under the previous Government, Meridian Energy invested in certain assets in Australia, particularly in Southern Hydro. It made a cool billion dollars profit off those transactions, which it returned to the taxpayer. That profit was returned to the Crown in the form of a couple of big cheques when we did the last long-term hold review, because Meridian Energy said it should not be its own bank. We said no, it should not. We said that money belonged to the taxpayer, so Meridian Energy should return the capital. It did that.

Now, let us imagine what would have happened if Meridian Energy had been privatised. It would have returned the profits all right—but to its private shareholders. It would not have gone into the “People’s Bank” or the consolidated account. It would not have been offset against taxes; it would have simply been somebody else’s dividend cheque. We have heard enough of the sham of saying mum and dad Kiwis should not be prevented from buying a few shares in Kiwibank—in something that they already own. Why would mum and dad Kiwis pay twice? They have already paid for Meridian Energy through their taxes, and that is why they are already entitled to the dividends—like the billion dollars from Southern Hydro. Meridian Energy is a prime example of an asset that should not be sold.

Let us move on to the next little story that the Minister has been spinning. He said to the Finance and Expenditure Committee that the performance of our State-owned enterprises has been terrible, which was in direct contravention of the previous speaker, Mr Brownlee, who said the performance of the State-owned enterprises has been just fine. Of course, Mr Power was not above quoting the annual results at the depths of the recession last year, rather than taking a long-run average, because if he had done so, he would have found that the performance of the State-owned enterprise portfolio is within a couple of hundredths of a percentage point of the performance of the NZX50—that is, apples with apples, horses for courses, State-owned enterprises are just as good as private businesses already. But admitting that would not suit National’s ideology, would it? It would not suit National’s mantra that the only way to get performance is to privatise. That is simply not true; there is simply no evidence for that. It is perfectly possible for companies that are State-owned to perform well. National should ask Air New Zealand about that. Air New Zealand has performed well as a Crown entity under State ownership. So has Meridian Energy; so has Genesis Power. The Minister knows very well that Air New Zealand is largely Crown-owned and would have been sold to the knackers yard, had the previous Minister of Finance not intervened.

Of course, the one to take the cake, if the public has any doubt about these issues, is Kiwibank. It is no wonder that 85 percent of New Zealanders want to retain Kiwibank. They know we have a terrible savings deficit, they know we are bleeding red on our international accounts, they know very well we have to make our financial sector stronger in the interests of all New Zealanders, and they know that Kiwibank is a critical strategic piece on the chessboard. So what does that lot of clowns want to do? The National members want to flog Kiwibank off, supposedly to mum and dad Kiwis, knowing very well that it will end up in the hands of its Australian competitors. That is a shame. National should be building up the New Zealand financial sector, not selling it to the wolves—not selling it to the wolves. I ask why Bill English and John Key cannot agree on this matter. I ask why it is that John Key says “never, ever, ever” and Bill English comes out the day after the Budget was released and says “What about selling Kiwibank?”.

Hon SIMON POWER (Minister for State Owned Enterprises) Link to this

We are nearly halfway through a debate on some of the State-owned enterprise matters in this financial review estimates debate, so I thought I would take a call at the midway point on the broader range of State-owned enterprises that have been selected by members for debate this afternoon.

CHRIS AUCHINVOLE (National—West Coast - Tasman) Link to this

I will speak on Meridian Energy. Meridian is a very high performing State-owned enterprise. I have always been impressed with the people I have dealt with at that organisation, with the work that they do, with their commitment, and with their professionalism. Meridian is the largest State-owned electricity generator in New Zealand. In total, its generation capacity is 2,600 megawatts, and it produces on average 30 percent of electricity in New Zealand. It has over 180,000 customers.

Hon TREVOR MALLARD (Labour—Hutt South) Link to this

I will take a call on this debate, and start by complimenting the Minister in the chair, the Hon Simon Power. He has been relatively precise in this debate. I think that in his sartorial elegance he looks the part of Attorney-General already. It is good to hear someone who is beginning to get his head around some of the issues that face State-owned enterprises. I make it clear, as the previous Minister for State Owned Enterprises, that I know that these issues are not simple; the power pricing one is a classic one. I am the first to accept that probably right from 1999, or even from 1998, when some policy decisions were made by the Labour Party and then Labour Government, we did not get it right. My view is that when in late 1998 to early 1999 there was a signal of the privatisation of Contact Energy, the Labour Party then should have made it clear that we would reverse that move and bring it back into State ownership—we would have refunded the money to the people who had bought it—and then the policy issues about energy would have been a lot simpler. It is clear that most people know that the conflict between being a regulator and being an owner has been one that has bedevilled Governments of both sorts.

I want to make it clear that there are two ways of sorting that matter out. One of them is the way of National. Clearly, the energy companies, as the most valuable, are sitting at the top of the National Government’s sale list. Those companies form the group about which Mr Whitehead at the Finance and Expenditure Committee indicated that public perception testing was going on in relation to privatisation—and, you know, that is the right of the Government. It is the right of the Government to test public opinion as to whether the energy companies should be sold. But I am hopeful of getting Labour policy to a point where we make it clear that if at any stage there is any privatisation, then that will be reversed. People will have their money refunded, but we will get back to the point of having a coherent policy.

I think there is work to be done on energy policy, generally, as well as in the area of State-owned enterprises. As the Minister knows, I have some sympathy for the State-owned enterprises, and for the possibilities they have as businesses that need further capitalisation. I accept the point of view of a number of Government members that further capitalisation is not always the highest priority for a Government at a particular time. I myself have promoted approaches that would involve subsidiaries of State-owned enterprises being involved in joint ventures, and I think that that is a positive approach. For example—and I know that the Greens would not be happy with this—we can see whether we can ever crack the coal-based hydrogen fuel cell approach, which works now. There is no doubt that it works; between the Coal Research Association and Industrial Research Ltd, we see it happening.

There is a no-emissions hydrogen production that goes into a battery that can drive a car. It happens in New Zealand; it happens in my electorate already. The trouble is that it is too damn expensive. But over a period of time I am sure that as research goes on, we can reduce that. But the question then is whether we want to have all of that production and distribution within a State-owned enterprise, or whether there is room for partnerships at the subsidiary, or subsidiary of the subsidiary level, where that approach can be taken. I want to make it clear that I do not think coal is sexy—I am not with Mr Brownlee at all on that—but I do not want to rule out its use at some stage in the future. But even if people do not like that example, or do not want to take that approach, there are within Meridian, for example, three or four areas where a subsidiary is currently generating electricity within boilers. It is a really good, world-leading technology that Meridian owns, and something that almost certainly will not be properly developed in New Zealand, because we do not happen to run most of our home heating through boilers. But the ability to generate electricity within a boiler system and then recycle it back into the grid is something that has a lot of potential. It is likely to be most used in the north-east United States and within Europe.

But I think we need to look for partners so that we keep some skin in the game, rather than do what we have too often done in the past, which is sell off that technology and lose all further rights to it. We should use the intellectual property we have in order to develop and have an ongoing return for New Zealand—and eventually to the taxpayer—without our having to put a hell of a lot more money into a risky European - North American venture. If we put it in as intellectual property and lose, that is not the end of the world. But if we have a potential for getting money back, then that is something that should be done.

In a similar way, I think we need to keep on being innovative in relation to the way we finance some of the other State-owned enterprises. I was involved, as far as Kiwibank was concerned, in what was effectively their second-level capital arrangements. The bank has, in order to fulfil its prudential requirements, what is effectively preference capital. Therefore it is not debt, and it means that the bank can lend more.

LOUISE UPSTON (National—Taupō) Link to this

I am thrilled to be able to stand and speak on Mighty River Power during this debate on State-owned enterprises. Mighty River Power is a significant organisation in the Taupō electorate. It is an integrated energy generation, trading, retailing, and metering business, and a successful one at that.

I start by coming back to a point that the Hon Trevor Mallard made in his address on Meridian Energy. He talked about the fact that power generation is a particularly complex issue. He conceded that in the 9 years of the Labour Government it did not get it right. That explains a lot. It explains the 70 percent increase in power prices, which is four times the rate of inflation.

Mighty River Power’s generation capacity is significant as it is the hydroelectricity generator on the Waikato River. It has nine dams located along the Waikato River, as well as geothermal plants—one of which I want to speak about in more detail—in Taupō and the Bay of Plenty regions, the Southdown cogeneration station, and also bioenergy production. It is also looking at developing a wind generation programme.

New Zealanders want their State-owned enterprises to do well, and we are fortunate to have as Minister for State Owned Enterprises Simon Power, who is demanding that they do better than they have done. They are doing well, they are providing dividends to the Crown, and the Minister gave as an example what Mighty River Power has delivered to the Crown in terms of a dividend. But there is always the opportunity to do better. We are an aspirational Government. We are aspirational for our State-owned enterprises, and we are aspirational for all New Zealanders. The opportunity to do better is always there.

More than 90 percent of Mighty River Power’s generation now is renewable, which is very much in line with where we are heading as a country against a background of issues around climate change. If we look at Mercury Energy’s performance against that of its competitors, we see that it has been making gains in its market share, which is fantastic news. It is great for the organisation, great for New Zealanders, and great for the Crown.

I want to look at the exciting year that Mighty River Power has had, and I want to talk specifically about the Nga Awa Purua geothermal power station. I was fortunate to be at the opening of that station with the Prime Minister recently. The Nga Awa Purua power station is a joint venture with the Tauhara North No. 2 Trust. It is a great example of a partnership with the local iwi. It was launched only a matter of weeks ago. It generates 140 megawatts and powers 140,000 homes—the equivalent of Taupō, Rotorua, Hamilton, and Tauranga—which is pretty impressive for a power station that uses renewable energy. Its total budget was $430 million. Of course, it was opened under this Government, and I am proud of the achievements of this National-led Government. One of the highlights of this power station is that it has the largest single-shaft geothermal turbine in the world, with a total of 9 kilometres of pipeline. New Zealand is leading the world in geothermal electricity generation, and I am proud of that. The other thing that is important to note in terms of Mighty River Power is that the construction carried out during this period played an important part in buffering the Taupō community through the recession, because of the number of employees that Mighty River Power has managed to keep throughout this time. It does not end there. In terms of geothermal development, the next power station off the blocks is Ngatamariki Geothermal Power Station, and the resource consents are under way for that. We are looking forward to yet another geothermal power station opening in the Taupō electorate.

I want to talk about some of the challenges that Mighty River Power faces. One of them is the fact that the recent drought has had a significant impact on the ability of its nine hydroelectricity power stations and dams along the Waikato River to generate electricity. Might River Power has done a lot in terms of giving information to the public about the lake levels and their impact on it. Thank you.

TODD McCLAY (National—Rotorua) Link to this

It gives me pleasure to stand and speak in this debate, and in particular to talk about Mighty River Power. Before I do I will make a few general comments, then come on to talk about Mighty River Power and about some of the work it is doing in my electorate and the wider Bay of Plenty. We have heard from the very hard-working member of Parliament for Taupō, Louise Upston, about the work that Mighty River Power has been doing in the Waikato and in her electorate.

Stakeholding Ministers are custodians of $25 billion worth of investments by taxpayers in State-owned enterprises, which represents slightly more than 20 percent of the net worth of the Crown. Additionally, State-owned enterprises hold about $47 billion in assets, and paid just over $647 million in dividends in the 2009 financial year, which included $150 million in special dividends from both Meridian Energy and Mighty River Power. The responsibility of stakeholder Ministers is to ensure that this investment delivers an appropriate return, and we have heard from the Minister that to date the returns have been unsatisfactory although improving.

For the whole State-owned enterprise portfolio there are annualised returns of 1.5 percent for the 6 months ended 31 December 2008. We have had record low interest rates under this Government, but if some of that money had been just put in the bank during that time, there might have been a higher return. That rate of return increased to 4.4 percent for the 6 months ended 31 December 2009. However, stakeholder Ministers consider that there is still plenty of scope for improvement in this area, and Ministers and officials will continue to work with individual State-owned enterprises during the current business planning round to develop appropriate performance expectations. I believe that the New Zealand taxpayer would encourage Ministers and officials to do just that.

I come now to Mighty River Power. I was doing a bit of research before my speech today, and I found that in the 2008-09 period Mighty River Power generated revenue of $1.1 billion and made a post-tax profit of $160 million. Its subsidiary companies contributed $43 million but incurred some losses, and in its annual return Mighty River Power indicated that it would pay an ordinary dividend of almost $80 million, representing 50 percent of the net profit after tax.

I will come to my electorate of Rotorua and talk about some of the work that Mighty River Power is doing there, particularly in the geothermal electricity generation field. In the 2008-09 financial year Mighty River Power’s renewable generation rate increased by 36 percent, and its geothermal production increased from 9.5 percent to 20 percent. The geothermal power station at Kawerau was opened at the end of November 2008, which was a very good month for my electorate, and at the time that station represented the largest geothermal development in New Zealand for 20 years. I notice that that power plant in Kawerau was revalued on 30 June last year at $500 million, which is an increase in value of $240 million. I recognise and congratulate Mighty River Power on completing that project well ahead of schedule, and certainly under budget.

JOHN BOSCAWEN (ACT) Link to this

I predict that the coming year will be a record year for electricity generators owned by the State—a record year. I say that because I believe that Government-owned electricity generators Mighty River Power, Genesis, and Meridian Energy will make more money than they have ever made before. In 2 days’ time we will have the emissions trading scheme, which will contribute substantial extra profits to the Government-owned generators—windfall profits, not just to the Government-owned generators but to the privately owned Contact Energy and TrustPower. Why is that? In essence, the emissions trading scheme makes electricity produced by burning coal and gas more expensive.

Genesis, with its Huntly power station, will have to pay for the cost of the emissions given off from burning coal and gas in the production of electricity. The way the electricity market works is that the wholesale price is established approximately 80 percent of the time by Genesis. Genesis is usually the most expensive generator, and when it is called on to produce electricity for the New Zealand market it sets the price.

From 1 July Genesis will be able to increase, quite reasonably, the price of electricity. We have already seen electricity companies move to take advantage of that. The first of those was Mercury Energy. How interesting it was to hear Louise Upston—

JONATHAN YOUNG (National—New Plymouth) Link to this

I am very happy to speak on Mighty River Power. We have heard some excellent information about this State-owned enterprise, and about its success particularly during times of drought. Just recently I visited Lake Karapiro and drove over the dam that I used to walk over many times as a young boy. I swam in the lake, went down the slide, and watched people water-ski. The Rowing World Championships will be held on Lake Karapiro in the not too distant future, and those rowers will have a lake full of water. We would not believe it now, but we have come through a tremendous drought, which has affected Mighty River Power’s dividends.

This is a Government that believes in improvement; it really does. It is a Government that is focused on improvement in the return to the taxpayer of value for money. The Minister for State Owned Enterprises mentioned that towards the end of December 2008 the annualised return on equity was 1.5 percent, but that has increased for the 6 months to the end of 31 December 2009 to 4.4 percent. We have to acknowledge that that is three times the rate of return. This is during a time when power costs, in terms of inflation, have been dramatically less than in the era of the previous Government, when between 2000 and 2008 we saw an increase of four times the rate of inflation, at 66 percent. We are achieving this improved rate of return on equity because we are expecting and driving for greater efficiency.

In Mighty River Power’s statement of corporate intent, one of its key objectives is to be as profitable and efficient as comparable businesses that are not owned by the Crown. It is good to see that we are seeing that sort of rate of return. We know that in 2008-09 Mighty River Power generated revenues of $1.1 billion, and that came through not only its generation but also an increase of 1.7 percent growth in its customer base during that financial year, which has continued to increase. By the end of 2009 there was a an increase of 50,000 customers, so the total customer base was 400,000. Indeed, this is a State-owned enterprise that is not only generating electricity from 90 percent renewable sources but also has increasing support from the people of New Zealand. We are happy to see that. It has shifted a number of its premises to Rotorua, and the member for Rotorua, Todd McClay, forgot to mention and asked me to pass on that 60 jobs have come to his city because of that. He is very, very pleased about that.

The shareholding Ministers continue to look for a range of measures in terms of performance. To this end, shareholding Ministers asked officials to establish a range of financial performance indicators to be used across the portfolio, covering shareholder returns, profitability, efficiency, leverage, and solvency. There are many market forces and disciplines brought to bear in our State-owned enterprises. We have to congratulate Mighty River Power on its great financial result during a time when the water source and supply was severely depleted. In fact, it had the highest capital return for the 2008-09 financial year out of all the Government-owned generators. It credits this to its focus on energy trading, a large hydroelectrical component in its portfolio, and a strategic move into geothermal generation. We heard the member for Taupō, Louise Upston, speak about that and how it brought a great increase. Thank you.

STUART NASH (Labour) Link to this

If members were to give me $1 and I was to promise them that I could turn it into $10 over 8 years, would they invest with me? Absolutely, if I was going to turn $1 into $8 over 10 years. I tell members that that is what Kiwibank has done. With an initial investment of $80 million, this bank is now worth $800 million by some valuations. The National Government wants to sell Kiwibank. Those who doubt this must have their heads in the sand.

Some of my colleagues have outlined the economic and financial reasons for not selling Kiwibank; members could write a book about these. A few of them have been outlined by Mr Mallard and Mr Cunliffe, but I will outline a few philosophical and social reasons why this bank should not be sold. Why would we sell it? We are talking about a bank—Kiwibank—that was set up by the Government in 2002. It was set up against strong opposition from the National Party, but it was set up because there was a belief that the major Australian banks were gorging profits off ordinary New Zealanders and that we needed to have a say in our market. We needed to have some influence. Kiwibank was Jim Anderton’s vision backed up by the passion of the previous Labour Government for New Zealand and for New Zealanders.

It is a fact that the four major Australian banks send profits offshore that are greater than the entire profit of all the companies listed on the New Zealand Exchange. About $2.6 billion in profits is made from Kiwis and sent offshore annually by the Australian-owned banks. Kiwibank returns profits to New Zealanders—to us, the New Zealand taxpayers. The Inland Revenue Department recently reached a settlement worth close to $2 billion against the four major Australian banks over tax avoidance. If Kiwibank had been owned offshore that would have been five banks, but Kiwibank is our bank.

How many New Zealanders do members think have invested in Kiwibank? How many New Zealanders do members think have put money directly into Kiwibank?

Hon LIANNE DALZIEL (Labour—Christchurch East) Link to this

It is a pleasure to contribute to this debate with particular focus, in this aspect, on Solid Energy. It was quite interesting because, in preparing for this debate this afternoon, I decided to google three words: solid, energy, and sale. A report popped up as the No. 1 item. I will quote from it, because it is really relevant to the debate that we are about to have on this State-owned enterprise: “There would be few Ministers in the John Key Cabinet more enthusiastic about the prospects for state-owned coal miner Solid Energy, and its partial sale, than Resources Minister Gerry Brownlee. So the height from which he jumped on [Solid Energy’s] chairman, John Palmer, for suggesting such a thing shows just how nervous the Govt has become about discussing the ‘P’ word at all. With the furore created by Finance Minister Bill English’s thinking aloud about part-sale of KiwiBank only just put to bed, Palmer’s decision to air his personal views about the politics of asset sales was ‘unhelpful,’ as they put it in the Beehive.” Well, it may have been unhelpful, but it was pretty accurate and it was fairly truthful, I would say, as a rough assessment of the situation. The truth has been very unhelpful to Government members on this issue.

The article goes on to state that Solid Energy, despite all of the furore, will be the first cab off the rank should the Government get a second term. I think that it is important to reflect on that, because we have been told time and time again that the Government has a commitment in place, but that the commitment is for this term only. It is a one-term commitment—that is the exact phrase used by the Prime Minister just recently. Members on this side of the Chamber are perfectly well aware that John Key is regretting that one-term commitment, because it has tied his hands in terms of what Government members would really like to do at this stage in the cycle. He is certainly absolutely determined to go to the polls next election without that particular constraint, and we all know what that means. The Government of the day, if it was not constrained by the commitment that had been made in the lead-up to the last election, would be selling assets.

I also have a theory as to why National made that commitment when it probably did not need to in order to be elected. I think that it had suffered from the campaign that it had run in 2005. It realised that, under MMP, there was no guarantee that it would win an election when it was caught out in such an obvious set of conduct that, when brought to the public eye, actually led to a change in the result of the election.

In respect of Solid Energy, I think that the Minister of Energy and Resources should reply now to the point that we have the very clear impression from the report we received from that State-owned enterprise that the Government is doing all the preparatory work for its sale anyway. Government members are working extremely hard to make sure that this company is readying itself for at least a partial sale, but I suspect that that will be for a complete privatisation. This agenda has been part of National’s less-than-public face, and it definitely wants to go to the next election without having that constraint on it.

If we look at what John Palmer said when he gave his speech—and I will come back later to whom he checked that speech with before he gave it—we see that Solid Energy is a classic case. The fact is that Solid Energy was described by John Palmer as being a lower political risk than other State-owned businesses like Kiwibank. His expression was that that debate was vastly different to the emotional discussion surrounding State-owned Kiwibank. Well, we have just heard from the previous speaker, Stuart Nash, who spoke on Kiwibank, all the reasons that the New Zealand taxpayer, the New Zealand people, does not want to see that bank sold. It has taken on an important role in our economy in light of the strategic positions of the other four banks, which repatriate significant profits from this country on an ongoing basis. I think that the Government is relying on the fact that people do not feel so connected to their mining company. Solid Energy does not quite engender that same sense of warm fuzzies that Kiwibank certainly does—the passionate loyalty, as my colleague said.

But when we think of the Government’s reaction to John Palmer’s speech, we know that it has been quite extraordinary. Gerry Brownlee said that he had overstepped the mark, but I think that the only reason he overstepped the mark is that he said it in public. That was the only thing that overstepped the mark. He told Bill English that he would give that speech before he gave it to the NZX AGM. So, to get slapped down by the Minister of Energy and Resources is somewhat ironic. I am not allowed to use a certain other word that begins with “h”, but irony I can certainly use. There is an irony in the fact that the Minister of Finance knew about the speech before John Palmer gave it. Mr Palmer delivered that speech knowing full well its repercussions. I believe that the Government wanted him to float the privatisation of Solid Energy as an idea, and that Gerry Brownlee has been shedding crocodile tears in order to cover up for the fact that he is absolutely onside with what the chairman of Solid Energy said.

It seems that the reason Bill English floated the Government’s real position on asset sales the day after the Budget was also to get feedback. When there was a huge public backlash, National members all suddenly ducked for cover. But sale is not off the agenda; talking about sales is off the agenda. Fortunately, in this Parliament, we get to expose the Government’s somewhat ironic position on that matter.

I will also comment briefly on the example of Air New Zealand, used by John Palmer as the best way to structure ownership so that we get the best of both worlds. But he failed to comment on how Air New Zealand got to the position that it is in today. There was a State sale, Air New Zealand was asset stripped, and there was a Government bail-out. That is how Air New Zealand got to the point it is in. So it seems to me to be somewhat ironic that the Government is using Air New Zealand as a classic example of how to privatise, although obviously not to New Zealand’s benefit.

Don Brash was very open about the desire to privatise Solid Energy back in 2005. It was absolutely on the table then, and my contention is that it is still on the table; it has just been covered up by a bit of cloth, which the Government intends to pull away straight after the next general election. Solid Energy provides an enormous return on investment to the Crown, as the select committee report makes clear. That is why it is crazy to think about selling it. But, more important, it owns very important strategic assets that we do not want in foreign hands. It is absolutely vital that we hold on to Crown ownership. We have seen from the strategy supported by the Government that it is using a soft sell approach, which states that mum and dad investors need something rock solid to invest in, because they do not trust the share market, and they do not trust finance companies any more. But I ask how long it will remain in mum and dad’s hands when offers come flooding in from overseas, because that has not been a way of protecting ownership within New Zealand at all. I think that the Government has to think of a different way, especially in regard to these core assets.

The Prime Minister has started using an expression to float ideas that might be unpopular with the public. He says: “We will kick the tyres.” Well, I see that as a warning sign. Every time he uses that expression, I draw breath. He says: “We will kick the tyres on MMP. We will kick the tyres on the policy of State asset sales.” As he said on 24 May of this year, the Government’s State asset sales policy was a one-term commitment. I think that is the real issue. “Kicking the tyres” is an expression that the Prime Minister has come up with in order to enable the Government to float ideas that it knows the public will not like.

SUE KEDGLEY (Green) Link to this

I congratulate the MidCentral District Health Board on its review of the quality of aged care, through a special audit it undertook last year when the board was worried about the number of complaints it was receiving about the quality of care in MidCentral Health. The board was worried that the issues that were being raised could be endemic, so it decided to conduct a special audit of eight facilities operated by the MidCentral District Health Board. It found instances of abuse and numerous, wide-ranging, and systemic problems that it said had caused significant risk to the safety of residents and had resulted in an unsafe environment for residents. The board said that many of the issues and problems that it found were breaches of the district health board contract and of the legislation. There were things such as medication errors, untrained staff dispensing medicines, acute shortages of staff, people who had had falls and so forth not being attended to, and people who had illnesses that had not been detected. I could go on and on.

The picture that emerges from reading the MidCentral District Health Board special report is the same picture that is emerging from an investigation that Luamanuvao Winnie Laban and I are conducting around New Zealand. We have now held about 12 public meetings, and we have also met with aged-care nurses and aged-care workers privately, because, of course, many of them are not able to speak publicly about the situation for fear that they would immediately lose their jobs.

The same picture is emerging of institutional neglect and, in some cases, even abuse. To give members an example, last night I met with 20 aged-care workers who said that there are widespread acute shortages of staff in the sector, particularly at weekends where it is commonplace for only half of the number of staff who are meant to work in an aged-care facility to be on duty. One of the reasons is that they are paid, if they are lucky, only 50c an hour extra to work at weekends, so there will mostly be casuals, students, and untrained people working in the weekends and in the evenings.

One nurse I met last night was in charge of 64 residents, and another nurse was in charge of 70 residents. I asked them what happens when there are no staff in the evenings and the weekends, and they said that, basically, they leave residents in bed all weekend. The only thing they can do is literally just leave them in bed all through the weekends and through the evenings. They said that they are simply unable to attend them, and they gave me examples. We have had many reports of people who have had a fall who were left for an hour or so before someone discovered them, and of people being unattended for hours on end, because there literally were no staff. From my own experience, when I visited an aged-care facility over a 6-week period, I found a complete absence of staff. There was no one to be seen, and residents were just lying in their beds day after day after day.

The aged-care workers also talked about showers. Apparently, most residents are being showered only twice a week, and, if they are lucky, three times a week. They are not even being toileted enough. Aged-care workers will tell residents that they are sorry that they do not have enough staff, and that the residents will have to wait for an hour or so. Residents are not being walked properly and not being fed properly, because meals are just being left with them and they cannot feed themselves. They also get dehydrated, and so on and so forth. The other concern is that apparently it is becoming routine for aged-care workers to dispense medication, even though, as the Minister pointed out in the House, that is technically illegal.

Hon TONY RYALL (Minister of Health) Link to this

I am pleased to have the opportunity to speak in this debate on the MidCentral District Health Board entity. Mrs Kedgley is correct in pointing out that the MidCentral District Health Board has undertaken some of its own work to look at the status of rest home auditing and monitoring in its own region. It is done within the context of a quite serious situation that this Government inherited. It is set out in the report that informed the work of the MidCentral District Health Board, which is the quite damning report of the Auditor-General. Mrs Kedgley acknowledges that report, even though she is travelling around the country with the people who are damned in it. That report sets out very clearly the failure during the period 2002-08 to correctly monitor performance in our nation’s rest homes. This is very much the theme picked up in the MidCentral District Health Board report.

The Auditor-General said that despite knowing about a number of shortfalls in the monitoring of rest homes in New Zealand as early as 2004, the previous Government failed to act on the issue of rest home monitoring and auditing.

Dr PAUL HUTCHISON (National—Hunua) Link to this

Thank you for the opportunity to speak in this debate on the performance and current operations of Crown entities, public organisations, and State enterprises, and it is with great pleasure that I speak on the MidCentral District Health Board and the health service in general. Undoubtedly, National has reignited life in New Zealand’s health service, and the MidCentral District Health Board is one of the classic examples.

Let us look at the board’s performance against the basic performance criteria over the last three quarters. Firstly, diabetes and cardiovascular health services came up from fourth in the country to third in the country. That has to be pretty good. Then we get to the “better help for smokers to quit” health target, and in that area the board came up from twelfth in the country to fifth in the country. That is very, very good progress indeed. Increased immunisation is, of course, absolutely vital for the children of New Zealand, and the board came from sixteenth in the country up to ninth in the country, which is a great result. On the issue of shorter waits for cancer treatment radiotherapy, the board has come up from nineteenth in the country to first equal. So the MidCentral District Health Board deserves to be congratulated on the clear, evidence-based progress it has made over this period of time.

There is absolutely no doubt that under National we have seen, as I said earlier, a reignition of life in New Zealand’s health system, in stark contrast with the previous 9 years, when we saw increased bureaucracy and wastage, a dismal productivity result, which was basically zero, as was clearly identified by successive Treasury reports, and very, very poor value for money.

What is extremely important for the MidCentral District Health Board, as for district health boards around the country, is workforce. In 2010 we have just realised that our nursing workforce, for instance, is now 46,000, which means a total of 1,000 more nurses than the previous year. That is a very good result, given the difficult times. Let us just think about what happened under the previous Labour Government. All it could do was strategise about workforces. There was committee after committee, strategy after strategy, and nothing whatsoever happened.

Under this very good National Government we have seen immediately the creation of Health Workforce New Zealand, under Professor Des Gorman, and there are some very innovative things going on there, but also the voluntary bonding scheme, which has worked extremely well. It includes graduate doctors, midwives, and nurses, and it has been oversubscribed for a second year in a row, with 501 new health graduates just joining the scheme. It was salutary to learn this afternoon that we now have 1,400 doctors, nurses, and midwives accepted into the scheme, which offers a student loan debt write-off or cash incentives to stay in New Zealand. Labour had plenty of time to do a creative initiative like that, but it failed to do so. It is vitally important for district health boards like MidCentral District Health Board. This year’s intake includes 45 midwives, 392 nurses, and 64 doctors. In fact, almost half of new midwifery graduates have joined the scheme. Of course it takes time for those improvements to work through.

What we have today is the legacy of Labour’s dismal performance, but fortunately we also have the reignition of New Zealand’s health service, through the National Government.

Hon DAVID PARKER (Labour) Link to this

At the time of this debate last year, the Government was trying to convince New Zealanders that the accident compensation scheme was fundamentally broken. It was exaggerating the problems that the scheme had so as to try to justify the very fundamental and negative changes the Government wants to make to the structure of accident compensation, including privatising some of its public functions. How did the Government go about it? A year ago it was saying that the scheme’s liabilities were out of control. It had had some bad luck, I have to admit, occasioned by the international financial crisis decreasing the rate of return on investments. If we have a lower rate of return on investments, and we are reliant on a pool of investments to fund the long-term costs of claims—for example, someone who is a tetraplegic and might be on the scheme for decades—then of course we need a bigger pool of investments in order to meet that future cost.

The increase in the scheme’s liabilities, which is the way that number is expressed, was used as an excuse by the Government to claim that the scheme was fundamentally broken. The Government revalued the long-term cost of care by making some very negative assumptions about the rate at which claims on the scheme would be made, and refused to do what everyone in this House knew needed to be done, which was to extend the date for fully funding old claims. By that I mean that progressively over time the scheme is moving towards having enough money in its accounts to fund the “whole of life” costs of existing claims, rather than paying it on a “pay as you go” basis every year. The Labour Party had campaigned on putting out that date for full funding from 2014 to 2018, I think it was, although it might have been 2019. The National Government knew that needed to be done but refused to do it until finally doing so under the cover of its legislation at the start of this year, I think it was, when it should have done that earlier.

Here we are, a year later, and the Government, through the Minister for ACC, Nick Smith, came to the select committee and said a few things. He said huge progress had been made over the last year—those were his words, “huge progress”—so much so that the scheme is now in a stable financial position, and is expected to make a $2 billion surplus this year, some of which comes from increases in rates of return on investments, but some of which is an operating profit—that is, the scheme is collecting more in levies than the “whole of life” costs of the claims in this year. What a remarkable change we are being asked to believe! The truth is that the Government had been exaggerating the problems with the scheme in the first place, and it has been caught out.

The problem for the Government is how, having been caught out, it can justify the substantial changes it wants to make to the scheme. It wants to privatise what is currently a public scheme. Why? We have to ask ourselves in this Committee why the Government wants to do that. It is not because the scheme costs too much. Even the Treasury report to the Minister of Finance last year stated it was “Not clear that levies are excessive”. Now, we would all like levies to be lower, and maybe they were pushed up too much last year; the scheme has certainly had a surplus this year, so it did not need all of that levy increase. But Treasury is right in stating that it is not clear that levies are excessive. We know that because at the select committee last year, because of the Labour Party inquiries we had some cost comparisons with Australia, and there is nowhere cheaper in terms of total levies than New Zealand.

In addition, we know that with the State-run monopoly, which does not have to make a profit on capital—it just has to cover its costs; it does not have to return a profit to its shareholders—the administration costs of the scheme are the lowest of any in the world. There are none lower. That has been proven by the study that was done by PricewaterhouseCoopers in Australia a couple of years ago. Our scheme is already cheaper. We know it is comprehensive. We know that the no-fault principles that underlie the scheme mean that we do not waste money on insurance company margins and on lawyers’ bills, fighting over liability issues. The money goes into rehabilitation, care, and income-related compensation, so where is the case for privatisation? It is not there. But this is ideology that is driving the Government; it is not reason.

The latest thing we have heard in the last week comes from the Government’s appointee as chair of the Accident Compensation Corporation (ACC), John Judge. What has he said in the last week? He said we should have financial penalties for doctors who have been involved in treatment that has led to accident compensation payments because the treatment did not go properly. Does that not sound remarkably like moving in the direction of the American system? Not only is it litigious and wastes all this money on litigation, which the scheme avoids in the New Zealand system—which is one of its real attributes—but, more important, perhaps, we know what happens in the United States. The United States spends twice as much as a percentage of GDP on health care in America as we do in New Zealand but its people live shorter lives. That is because money is wasted in the health system because there is such a defensive method of medical practice that people do not take any risks. They do not take any risks, for fear of being sued and for fear of the personal consequences to them as doctors and nurses, and, as a consequence, a lot of money is wasted. What does that mean? It means that instead of two people getting a hip operation, the system can afford only to give it to one person. That is why, in simplistic terms, despite spending the US medical system spending twice as much as New Zealand does, people have a lower life expectancy than we have here.

In addition, they do not do things like spend money on prevention. That is another thing that has gone wrong in the last year. The ACC board cut ACC’s accident prevention plans. It cut the Otago medical school - designed falls prevention programme, which delivers services to people who are over 80 years of age who have already had a fall. We know that statistically those people are at risk of having another one. We can reduce that risk, and therefore reduce the risk that they will break a hip and have to get that fixed, with the attendant cost. What happened? ACC cut it. Do members know how much it was saving?

Hon PANSY WONG (Associate Minister for ACC) Link to this

The Hon David Parker lives in denial. Let me just take up some of the points he made. Nowhere have I seen in the report back from the Accident Compensation Corporation’s financial review David Parker registering his concern about the $2.7 billion losses of the accident compensation scheme in the years 2007-08, and the $4.8 billion losses in 2008-09. He said that those were manufactured by a National Government. He forgot that those accounts were signed off by the Office of the Controller and Auditor-General. I challenge Labour to write to the Auditor-General’s office and say that it helped to sign off an account that had a manufactured or exaggerated loss in accident compensation. We do not have to take seriously anything that member says, because he was wrong. The independent Audit Office signed off last year on the fact that accident compensation had made a loss of $4.8 billion.

Why did that loss come about? Quite simply, some of it was out of the corporation’s control, but it was largely due to the incompetent leadership exercised by the Labour Minister for ACC, which was in three areas that I will share with everyone.

First, there was an increase in entitlements without any consideration being paid to the impact on levies. I will draw on the example of physiotherapy; I think most people will remember that. In 2004 the claim cost for physiotherapy was only $55 million. By 2008 that cost had gone up to $144 million. If the National Government did not do anything, that cost was forecast to increase to $232 million. Why? Once again, Labour directed the corporation to provide so-called free physiotherapy. We could see that a lot of clinics had put up signs saying that physiotherapy was free. Well, I am afraid nothing is free; someone has to pay for it.

Second, there is the non-earners account. When National came into Government in 2008 the first news that we heard was that the accident compensation scheme needed a top-up; there was a $300 million deficit in that account. The claim costs for the non-earners account had gone up from $600 million in 2004 to $1.2 billion in 2008.

Third, there is good news about the administrative cost of the Accident Compensation Corporation. At the end of this financial year the administrative costs of the corporation are down by 7 percent. So it was not true when the Hon David Parker said that those costs could not be improved. Under good governance and under good leadership they can be improved. They have gone down by 7 percent in the area of international and domestic travel, and of taxis and parking. In administration, the savings in the head office of corporate overheads has gone into front-line services.

I have good news for Labour members, who keep talking nonsense and saying that the rehabilitation and management of those claims have not improved. One of the biggest problems facing the accident compensation scheme’s $6 billion outstanding liability is related to claims for people who have been on the scheme for 2½ years. What a waste of human resources!

I am very proud to say that although Labour is in denial, we are so proud to have a Minister for ACC, the Hon Nick Smith, who exercises the leadership that is very much needed in steering the accident compensation scheme. I know that Labour members hate to hear this but a former National Government introduced the accident compensation scheme to New Zealand, so we are the very proud party that wants to make sure that any problem caused by Labour will be remedied. We are glad that we have a very capable and able Minister for ACC, who has put the accident compensation scheme back on a sound footing, and who has made sure that everybody is covered.

LYNNE PILLAY (Labour) Link to this

Mr Chair.

MICHAEL WOODHOUSE (National) Link to this

I think I observed the same glint in the eye of the Opposition spokesperson for ACC, David Parker, as he had last week at the estimates review of the accident compensation scheme when he heard that it had started to turn the corner financially and may have improved its financial performance to about a $2 billion surplus. It did not seem to me that Mr Parker’s enthusiasm at that news was genuine applause for what I think has been an excellent turn-round in the scheme; it is more an indication to him and his colleagues that somehow it is now OK to take the foot off the pedal for the scheme’s performance, and that some of the steps this Government has taken were not necessary. Well, nothing could be further from the truth. It is worth remembering that at the time Mr Parker was last involved in a Government that oversaw a result where the scheme had $2 billion in it, it was a $2.4 billion deficit. The previous Government’s response was to make the scheme even more flaccid, particularly in respect of rehabilitation rates. The result for the following year was a $4.8 billion deficit. So although I am really encouraged that the scheme seems to be in the process of a turn-round plan, even if it is something like $2 billion in surplus, it needs to be weighed up in the context of the previous 2 years, which showed an audited and signed-off result of $7.2 billion of deficit. The vast majority of that was overseen by the previous Labour Government.

Mr Parker talked about the Government using unreasonable assumptions to inflate the unfunded liability. I will give members one example of where those assumptions were particularly unreasonable under the previous Labour Government: despite medical and rehabilitation inflation going well above the consumer price index, the consumer price index was the only thing used to measure cost increases. That severely dampened down the unfunded liability, and it just could not continue. The chickens came home to roost when the revaluation occurred, and we saw a blowout of about $10 billion in a couple of years. So no one who knows about the accident compensation scheme can place any sort of credence on the assertions by Labour and Mr Parker that the scheme’s financial position over the last few years has been anything other than very tenuous and that it did require the sort of remedial action that this Government has put in place.

I am delighted to see in such a short period of time the message about improvements in performance not only being received and understood but actively and enthusiastically supported by the staff who administer the scheme. The most pleasing aspects of the sorts of performance indicators that the Minister for ACC, the Hon Nick Smith, talked about in the estimates review last week were in respect of rehabilitation performance. He gave us an update for 11 of the last 12 months. We saw some tanking performance in terms of outcomes in rehabilitation from 2008-09. The 10-week exit rate was below 65 percent. Those administering the scheme set themselves a quite ambitious target of 69 percent. They are now tracking at about 71 percent, well ahead of their target. For the 9-month exit rate, they were down to as low as 89 percent, I think. They set a target of 91.5 percent, and they are now at 93 percent. What does that mean? It means that far fewer people are going into long-term claims. The rehabilitation performance for long-term claims has dropped by about 14,700 claims to 13,500 claims. Those sorts of numbers have a very, very significant impact on the corporation’s financial performance.

Investment performance has been talked about a lot. The scheme has consistently performed above the benchmarks for the market. Even when it made losses in the 2008 year, it was still performing well ahead of the general average and against its budgets, so it simply is not true to say that this massive dip in the scheme’s financial performance in 2008-09 was somehow the result of the dip in investment performance. Yes, there was a little bit of that, but it certainly was not the material factor. I think that the warning bell should be sounded in respect of the fact that the Minister advised the committee that although it is looking pretty strong over the year, there was about a $150 million dip in returns in the last reported month. So that recovery in terms of investment performance is still pretty lumpy.

Overall, I think this is a very, very good news story. People should not be fooled by the smoke screen that Labour continues to throw up in respect of accident compensation performance under its tenure. There is a long way to go before we can achieve the sorts of stability that accident compensation deserves. I look forward to that occurring.

LYNNE PILLAY (Labour) Link to this

Mr Chair.

Hon STEVE CHADWICK (Junior Whip—Labour) Link to this

I raise a point of order, Mr Chairperson. I sought clarification on speaking slots for this portion of the debate. I was advised that if Government members did not take their calls, we could stand to take a call. My colleague Lynne Pillay stood to take a call when no National member stood. We were following guidance, and without wanting to trifle with the Chair, I point out that you tried to seek closure on this debate. I seek some clarification on that step that you undertook in the Chair.

Hon TREVOR MALLARD (Labour—Hutt South) Link to this

I raise a point of order, Mr Chairperson. I go to the question of whether the allocations are fixed according to the Standing Orders or whether they are a guideline. My understanding is that they are a guideline rather than a fixed allocation. I apologise; I was not in the Chamber when this was first raised, and I have come in and I have been looking for the appropriate Standing Order—if I am pointed to it and I am wrong, I apologise—but my understanding is that they are guidelines as opposed to an allocation by way of the Standing Orders. Although I accept that there will be an opportunity, presumably in a later debate, for people to pick it up, I would appreciate a ruling on the strictness of the allocation interpretation and whether that is fixed in the Standing Orders or whether it is something that is less formal.

CHRIS TREMAIN (Senior Whip—National) Link to this

The first point that I will raise is that I am surprised that in the middle of a vote we are having this debate. My understanding was that the Speaker’s ruling is that once we have commenced a vote, we should continue with that vote. The second point I raise is that there is a longstanding tradition that this speaking number is based on proportionality, agreed prior to the debate, and that was canvassed. There was plenty of opportunity before the debate to come back and argue the position that members wanted more or fewer calls. We agreed before that National would have 18 and that Labour would have 12.

Hon TREVOR MALLARD (Labour—Hutt South) Link to this

I would now like to not quite withdraw and apologise but pull back somewhat. I have had time to get advice and have a quick look at the Standing Order; I accept that the ruling you made earlier is correct. I apologise for the interruption.

NICKY WAGNER (National) Link to this

I am delighted to join the debate this evening and to talk about the New Zealand Symphony Orchestra, which is the national orchestra of New Zealand. It is a Crown entity, and it operates under the New Zealand Symphony Orchestra Act 2004. It has 90 full-time players. The orchestra was founded in 1946 as the National Symphony Orchestra of New Zealand, and was administered by Radio New Zealand until 1989, under the name NZBC Symphony Orchestra. It is currently based in the Wellington Town Hall.

The orchestra is funded by a Government grant, box office proceeds and partnership income, and sponsors and funders. The Crown funding for the New Zealand Symphony Orchestra this year is $13.446 million, and at the most recent financial review, the Government Administration Committee identified no matters to bring to the attention of the House. New Zealand Symphony Orchestra Ltd did not appear before the committee.

During the recession, the arts have had to work very hard to maintain audiences and box office returns. Sponsorship and additional funding has also been hard to find, so it is not surprising that based on a business-as-usual scenario, a statement of intent of the Symphony Orchestra indicates projected operating losses over the next 3 years. Those losses will reduce the working capital to $61,000 by June 2013. The implications of that forecast for the New Zealand Symphony Orchestra and its current business model are being closely monitored.

The New Zealand Symphony Orchestra continues to advocate for the development in Wellington of an orchestra studio and scoring stage. Its members are very keen to establish a world-class facility, capable of recording orchestral scores for the film industry. That is the only post-production facility not available in Wellington at present, and they believe that it is an opportunity for income generation. There would be demand for only one scoring stage in New Zealand, and it would provide Wellington with a complete suite for post-production and a competitive advantage for its film industry. The studio would also become the permanent home for the orchestra, and it would provide recording facilities for a range of other organisations in film, music, and tertiary education.

The mission of the Symphony Orchestra is to enrich the lives of New Zealanders through artistically excellent concerts, presented throughout the country and abroad by a full-time, full-strength, professional symphony orchestra of international standing. Indeed, the orchestra is well-recognised internationally. It has sold over a million CDs in the last few years, and this year it has been invited to tour some of the most prestigious concert halls in Europe. It will also visit the 2010 World Exposition in Shanghai, and Beijing. The orchestra will earn almost $800,000 in performance fees for the 2010 European tour concerts.

The New Zealand Symphony Orchestra is a well-established and well-loved part of the New Zealand arts scene, and we are delighted that it is recognised and in demand internationally. I wish orchestra members all the best for their 2010 tour.

RAHUI KATENE (Māori Party—Te Tai Tonga) Link to this

What about those All Whites, eh? Has it not been exciting to watch their progress up to, and through, the FIFA World Cup? Has it not been exciting to see the rise in support for football here in New Zealand? Has it not been exciting to see the way Māori Football NZ has tried to run a campaign to make football a credible alternative to rugby and rugby league? And has it not been exciting to listen to Winston Reid and Rory Fallon, both All Whites, speak of their desire to return home and inspire Māori and Polynesian youngsters to follow football? Yet if we were to talk to the manager of Māori Football NZ, Phillip Pickering-Parker, he would tell us that the All Whites had in the past been invisible to New Zealand youth, who lacked visible role models, whether Māori or non-Māori.

Nowadays roughly 50,000 to 60,000 Māori youth across both genders are playing football, yet when we look at the 2008-09 financial review of Sport and Recreation New Zealand, we do not see football. It is invisible in the review of the performance and current operations of Sport and Recreation New Zealand. I commend the initiative, the vision, and the commitment of people like Wynton Whai Rufer and Phill Pickering-Parker, who have done so much to generate energy for the new growth sport of football. Phill Pickering-Parker, of Ngāti Manawa, is an amazing legend. After his own football career took him from Kawerau to South London, he has now become a qualified elite coach to Aotearoa’s budding football stars. It is all about the mentoring and development of our young players—something that one would have thought was an appropriate role for Sport and Recreation New Zealand to take on.

There are other notable omissions from the 2008-09 financial review. Yes, the Rugby World Cup is there, with its $1.5 million for volunteers, but there is nothing to support the Aotearoa Māori Women’s Rugby Sevens Team, who took out the Roma Sevens final against France and Italy just 20 days ago. These young women are great ambassadors for their country, their whānau, and their culture. They are seven-time international winners, having won the Women’s Rugby Sevens championship in 2002, 2003, 2004, 2005, 2006, 2007, and 2010. What is even more exciting is that women’s rugby sevens will be an Olympic sport in 2016.

The opportunity to compete internationally and to enjoy world-class success is an amazing experience for our young Māori men and women, and provides automatic career openings for many of them. Yet although the team is supported by the New Zealand Rugby Union through its Māori board, Whakapūmautanga, no funding has followed. The team is celebrated across Aotearoa, and has received support from Te Puni Kōkiri, the New Zealand Community Trust, and the First Sovereign Trust over the years, yet it has received nothing from Sport and Recreation New Zealand. It is hard to fathom why.

Third time lucky? Perhaps I will try basketball. We have been aware of young Māori players who are selected for the Junior Tall Blacks yet struggle to attend the tournaments due to a lack of funding. Again, nothing in the latest review indicated support for this high-growth area of sporting excellence.

What about waka ama? There is nothing in the report. I know that my two young nieces who went to a world championship in Tahiti a couple of months ago had to fund-raise really hard. They had quiz evenings and sausages sizzles to enable them to get there.

Every year the National Māori Sports Awards show that Māori sportspeople are demonstrating their incredible talents and abilities in every sporting area across the world. We see Māori world champions represented in sporting areas as varied as woodchopping, wood sawing, cue ball, rowing, tae kwon do, and body-boarding, yet the only reference we see in the report of Sport Recreation New Zealand that addresses Māori and Pacific communities describes the need to invest in Māori and Pacific Island participation in sport because Sport and Recreation New Zealand is worried about the prevalence of inactivity and obesity. Otherwise, we see the justification for the involvement of Sport and Recreation New Zealand in schools as that it wants to support schools in responding to an increasingly risk-averse attitude.

I refer the Committee to the amazing initiative in my electorate, the sports academies at Aranui High School, and their mission to motivate Māori and Pacific Islanders.

CHRIS TREMAIN (National—Napier) Link to this

Tihei mauri orā. Whāia te pae tawhiti kia tata, whāia te pae tata whakamaua kia ū, kia tīna.

[Behold the breath of life. Seek the distant horizon so that it is closer, but the horizon closest at hand must be held on to firmly, and cherished.]

That whakatauākī teaches us to reach for the stars and pull them close to us. If there is something in New Zealand that we do extremely well, it is following that proverb when it comes to sport. Across the globe and around this nation we go after our goals in a big way, and we reach for the stars and pull them close to us. If there is a team that has done that in the last couple of months it has been the New Zealand All Whites. They have gone out on to the international stage and done an amazing job. We saw the way New Zealanders got behind that team throughout those three games. We supported Ricki Herbert, Ryan Nelsen, and guys from my own electorate—for example, Shane Smeltz and Mr Paston. They did a wonderful job on that stage. They made us feel proud.

Sport and Recreation New Zealand stands behind that team and helped it to get there. If we look at the appropriations throughout last year and this year in helping that team to get to the World Cup, we will see there was a $250,000 appropriation to help with the preparation, and further on there was a $300,000 appropriation to help with the campaign proper. But when we think about the contribution that this nation gives to its sports teams in comparison with what other nations give to help their teams on an international stage, it really does fade into insignificance. If we look at what the Italians did to help their team get there, and at what the English did, we see that we really do box above our weight, which is absolutely amazing, and long may it continue. Long may we continue to follow that proverb I read at the start of my speech.

In respect of Sport and Recreation New Zealand, there are two areas I want to focus on. The first is the funnel it is opening up to ensure we continue to stay on the international stage and stay champions. The second is on KiwiSport at the bottom level, where we encourage our children to develop the skills that are necessary to give them the competence to get out and play sport. I am proud to say I was with Sport Hawke’s Bay on Monday at Te Awa School with Pip from Sport Hawke’s Bay. It has started a scheme called Parents in Schools, where it is bringing dads—particularly dads—into the schools in the mornings. So the dads, instead of just dropping the kids off at the gate and shooting off to work, are being asked to come into the school, shoot a netball or throw a rugby ball around and give the kids the skills to get them started so when they do start to play competitive sport they do not feel embarrassed in front of their peers.

We have seen that amongst all the amazing sports trusts around New Zealand. They are a key part of our community, binding the community together and ensuring that there are volunteers and coaches to help the children get the skills they need to compete. Sports trusts are absolutely amazing organisations, and I am fully behind them. It is great to see Sport and Recreation New Zealand supporting them.

The point I want to finish on is the impact this Government has made in terms of taking sport to a whole new level with high-performance sport. The announcements Minister McCully has made in the last couple of weeks are absolutely fantastic. It is great to see what we will now be investing in the Millennium Institute of Sport and Health in Auckland, a great organisation. It was originally started by Graeme Avery, I might say, and Allan Peachey. Allan Peachey, from this House, started, through his school, in association with Graeme, and they got it off the ground. Now there is $40 million going into that. Throughout the country, throughout the motu, as Mr Horomia might say, we are seeing centres of excellence being set up. There is an amazing initiative going on in the North Shore, in Wayne Mapp’s electorate and in Jonathan Coleman’s. There is a centre of excellence for sailing and water sports, and we will soon see what will happen there. In the Waikato, David Bennett’s area, there is the rowing on Lake Karapiro, and it is absolutely fantastic to see what is going on there. We are seeing centres of excellence being set up. We are investing money into these sports to make sure our sportsmen and sportswomen continue to be on the international stage, up where Kiwis want to see them. I am fully behind what Minister McCully has done. The appropriations for Sport and Recreation New Zealand are absolutely sensational. There is a cycling bid out there that I know a number of regions are bidding for. Hawke’s Bay will be giving that one a damn good shot. Kia ora.

JOHN BOSCAWEN (ACT) Link to this

The National Institute of Water and Atmospheric Research Ltd (NIWA) has been the subject of many questions to both the Minister for Climate Change Issues and the Minister in the chair right now, Wayne Mapp, over the last 7 or 8 months.

NIWA is responsible for maintaining our climate records, having taken over this function from the Meteorological Service of New Zealand in 1992. In the early to mid 2000s NIWA produced a graph showing that New Zealand was warming even faster than global averages. This new temperature series, which was based on only seven measuring sites throughout New Zealand, showed that the warming trend in New Zealand was 0.9 of a degree centigrade per century.

The New Zealand Climate Conservation Group and the New Zealand Climate Science Coalition combined to investigate the New Zealand temperature record. They started with the official graph and the raw temperature readings, both published on NIWA’s website, and they found that there were big differences between them. The raw data, which is simply the data of the temperatures recorded over the last 150 years, showed no trend whatsoever—no warming. It was only the adjusted data that showed the 0.9 degree warming. There was no explanation of the differences on NIWA’s website.

Most of us will know that there are very many good reasons to adjust data. There may be gaps in the series, the site for temperature readings may have shifted, or there may have been a change in the environment, such as tarsealed car-parks, or a change over time from rural land to urban land. There can be valid reasons for making adjustments, and the technical term for these adjustments is referred to as a schedule of adjustments. It is quite normal to have a schedule of adjustments and, in fact, it is essential to have a schedule of adjustments because it helps us to keep track of the reasoning behind those adjustments and it allows other scientists to cross-check the work that has been done.

But this is where it gets interesting. When NIWA was asked to produce the schedule of adjustments, it became very evasive. When it answered requests, it talked about the standard reason for making adjustments and it referred to numerous papers and methodologies for doing so over the last 20 or 30 years. But NIWA refused to provide that schedule of adjustments to the New Zealand Climate Science Coalition when it asked for it, just over 12 months ago. At that stage the New Zealand Climate Science Coalition and the New Zealand Climate Conservation Group approached the ACT Party seeking assistance. We asked questions of the Minister for Climate Change Issues and also the Minister of Research, Science and Technology. We tried oral questions in Parliament, and we received evasive answers. We tried written questions, and again there was evasion. We asked ourselves what they were trying to hide. All we wanted was a schedule of adjustments for the official climate series, so that scientists, not politicians or political parties, could check the analysis. All we wanted was some basic science.

As scientists, NIWA should have welcomed the scrutiny of its data and its methods. Instead, it blocked us at every step. It eventually became clear that NIWA simply did not have a well-organised database with an accessible, up-to-date, or defensible schedule of adjustments. It also became clear that NIWA was in breach of its statutory obligations under the Public Records Act.

What we know is that the raw data showed no warming in New Zealand whatsoever. I see the Minister of Research, Science and Technology is nodding his head.

Hon Dr WAYNE MAPP (Minister of Research, Science and Technology) Link to this

I think that speech could be characterised by the member who has just resumed his seat confusing the shaking of one’s head with the nodding of one’s head. Most people can tell that when someone shakes their head they are disagreeing with someone. If they are nodding their head it would imply that they are agreeing with someone. Apparently Mr Boscawen cannot tell the difference between those two actions. I think that probably goes to the very heart of the ACT Party’s confusion on this issue of temperature records.

It is simply untrue to suggest that the data is in any way faulty, flawed, or erroneous, or that it does not show any climate change. The member has asked literally dozens, if not hundreds, of written questions on this issue, and has been provided with extremely extensive information. However, he still trots out his interpretation of that information, and I believe the ACT Party, to its embarrassment, will have its campaign to discredit the temperature records of the National Institute of Water and Atmospheric Research (NIWA) disproven by the science.

I want to take members, and indeed the public, through three key points about the data. There are two series involved here. The first is The NIWA ‘Seven-Station’ Temperature Series. The oldest record goes back to 1858 and, as has been indicated, it has been subject to adjustments, for a variety of reasons. Sites have shifted. One site in particular in Wellington in 1928 changed altitude by 120 metres, from Thorndon to Kelburn. It is an a priori fact that when altitude is changed, there is a change in temperature, and therefore adjustments have to be made. I acknowledge that Mr Boscawen acknowledged that. A schedule of adjustments is necessary.

KEITH LOCKE (Green) Link to this

The New Zealand Transport Agency in many ways has done a good job, but it is handicapped by two things. Firstly, the Government—particularly the Minister of Transport, Steven Joyce—has set very strong policy guidelines, and has laid down the seven roads of national significance that the New Zealand Transport Agency now has to fund. The most controversial of these is the Pūhoi to Wellsford motorway, sometimes called the Holiday Highway. It is not really essential to have that road turned into a motorway at this stage with the low density of traffic on it, and it would be at the huge cost of a couple of billion dollars over some years. The benefit-cost ratio for that would clearly be at the bottom of the heap in terms of priorities for the expenditure of Government money on transport, when in the broader Auckland region it is quite clear that the priority should be public transport.

If members look at the expenditure of the New Zealand Transport Agency across the country—it has a 3-year planning horizon from 2009-2012—they will see that the total expenditure is to be $8.7 billion over 3 years, with only $900 million of that for public transport, and only $51 million for walking and cycling. So members can see that public transport, and walking and cycling, are sort of afterthoughts; the New Zealand Transport Agency still sees itself largely as a roading agency.

The agency does mention in its list of national projects a few good public transport projects, like the New Lynn transit developments, integrated ticketing for Auckland—which is very important and should be hurried up; some progress is being made there—and railway station improvements in Auckland and Wellington. It also mentions the development of public transport along the important artery of Dominion Road in Auckland, and the Dominion Road priority lanes. The problem there is that the Auckland City Council, which has some control over things, is cutting back on all of that and putting things other than buses on the bus priority lanes, which is not a very good development.

In the area of cycleways, of course, the Green Party is working with the National Government on a national cycleway. Unfortunately, that has not been translated too much into the urban setting yet; the New Zealand Transport Agency is not really helping very much there. But members can see that the idea of a walkway and cycleway over the Auckland Harbour Bridge is very popular. Piles of people went over the bridge when there was a big protest in that direction a year or so ago, which I was on. Even though that walkway-cycleway over the Harbour Bridge has had various estimates of $20 million to $40 million in cost, which is minute in the scale of the overall New Zealand Transport Agency budget, the agency has not gone along with that. Although the cycling and walking advocates have said they would do a public-private partnership, and would charge people per ride or per walk and virtually pay for it themselves, the agency is very reluctant to go along with it, so that is not terribly good.

One of the good projects—and it is mentioned somewhere in the broader New Zealand Transport Agency documents, particularly in the Auckland documents—is the idea of an underground extension of the Britomart terminus to connect with the western line around the Mount Eden train station. It is mentioned in the transport agency documents, at least, that $6 million has been given to look at the route for that rail tunnel, but in terms of longer-term projections it is in the never-never whether it will ever be built, and when it would be built. The tunnel would cost a lot less to build than the Pūhoi to Wellsford extensions. It would cost roughly $1.5 billion, although it is not fully costed out at this point. The Green Party says that we should get on with critical public transport infrastructure in Auckland, particularly the loop beyond Britomart to connect with the western line. Thank you.