Questions to Ministers

Economic Recovery—Commentary

1. Dr RUSSEL NORMAN (Co-Leader—Green) to the Minister of Finance: Does he agree with National Bank Chief Economist Cameron Bagrie that we are not seeing an export-led recovery, and increased activity in “spending centric” sectors such as housing is “not the stuff of a durable, long-term, sustainable upswing”?

Hon BILL ENGLISH (Minister of Finance): No, not exactly. I think it is a bit soon to jump to conclusions about how far the New Zealand economy can rebalance. It took a long time to become too much dominated by consumption and debt, and it is going to take a while to turn into a more strongly export-driven* economy. I would certainly share with the chief economist the concern that a continued high exchange rate makes it harder for our exporters to grow at the speed that will successfully rebalance the economy.

Dr Russel Norman: Does he believe that he has taken sufficient measures to rebalance the economy, given that New Zealand has been running current account deficits at a time of record export prices, meaning that despite earning more than ever for what we are selling offshore, we are still not paying our way in the world?

Hon BILL ENGLISH: We think we have taken considered and balanced measures to push the economy in the right direction. We could, of course, have taken much more dramatic measures— say, for instance, balancing the Government’s Budget a couple of years ago by making widespread cuts. But we proceeded to borrow and increase Government spending in a way that makes it a bit harder to rebalance the economy, but that is what was required in the middle of a deep recession.

Mr SPEAKER: Order! I apologise to the Minister, but this question was asked by the leader of the Green Party and we are getting unacceptable interjection from members of the Labour Party, who are making it hard to hear the Minister’s answer. He is not being particularly provocative. He appeared to me to be giving a thoughtful answer to the question asked. I ask members to be more reasonable, please.

Dr Russel Norman: Has he seen Treasury’s forecasts for the current account deficit deteriorating over the next 3 years to 6.9 percent of *GDP by 2015, and does he think that if these projections come to fruition, that will be successful management of the New Zealand economy?

Hon BILL ENGLISH: I think that Governments for the last 30 years have found it difficult to manage the current account deficit, because if you could manage it directly then you would make it much smaller than it is. That is one of the challenges in New Zealand. We believe we have been making decisions, and will continue to do so, that will improve our savings and export performance over time and that are likely, but not guaranteed, to improve the current account deficit. I happen to be a bit more optimistic than Treasury forecasts about where we will get to, because I see

significant changes in New Zealanders’ behaviour around their understanding of what the economy needs for growth—which is exports, not debt—and their own personal decisions around savings.

Michael Woodhouse: What has the Government done to shift spending into the tradable* sector?

Hon BILL ENGLISH: Among a number of things, we have changed the balance of the tax system so that there are higher taxes on consumption and property speculation, and less tax on work and saving. We are working hard on the productivity of Government, which uses a lot of resources—more than it should for the output that it achieves. We have curbed spending increases in Government and we have also focused strongly on the competitiveness of our export businesses, trying to help them manage their costs down and help invest in their innovation so they can perform better.

Dr Russel Norman: Is he not concerned that this economic recovery looks disturbingly similar to previous economic recoveries, which are focused on retail, housing, and consumer spending, rather than exports and import substitution, and that after 4 years we still are seeing a recovery that looks disturbingly like the previous 10 years of the New Zealand economy?

Hon BILL ENGLISH: No, I am not overly concerned about that. I think things that would be of concern would be, for instance, if credit growth and borrowing took off, and there is no sign of that. But I am pleased the member is concerned about that balance, because a lot of our discussion around his policy proposals and others is focused on the fact that they want the Government to spend more and they want to stop meaningful export activities such as the oil and gas sector or dairy farming, which are critical—both of them—to New Zealand’s future export success. If the member wants to support a rebalanced economy, he should support those things, not oppose them.

Dr Russel Norman: Does he agree with the *Governor of the Reserve Bank that the high exchange rate is stopping the rebalancing of the New Zealand economy, and what kind of measures will he take in order to lower the level and the volatility of the New Zealand exchange rate?

Hon BILL ENGLISH: I do agree with the Governor of the Reserve Bank on that point. The measures the Government is taking are to influence those things we can influence. We cannot actually set the level of the exchange rate. If we could, then we would just drop it 10c tomorrow. But we are focusing on the competitiveness of our exporters, making sure they have got the benefit of good infrastructure, a skilled *workforce, and sensible regulation and cost from central and local government.

Dr Russel Norman: Has he read the Statistics New Zealand* latest business operations survey, which shows that 46 percent of export businesses surveyed rate the high and highly volatile exchange rate as the single biggest impediment to export growth, and should that not be the central focus of Government economic policy ahead of those other matters?

Hon BILL ENGLISH: I am surprised that it is only 46 percent; I would have thought it would be more, actually. The Government focuses on those things it can influence. To actually have a direct impact on the exchange rate you need to have a couple of hundred billion US dollars in the bank—and we do not; we actually owe hundreds of billions—and it helps if you are not a democracy. That is a feature of those countries that do directly manage their exchange rates, but that is not where we are.

Dr Russel Norman: Has the Minister of Finance seen the measures taken by the United States and the United Kingdom in terms of quantitative easing, which have had a significant downward pressure on their currencies, and even the quite unorthodox measures taken by the *Swiss National Bank, which have all had downward pressure on their currencies and have helped their tradable sector?

Hon BILL ENGLISH: I think you would describe the measures taken by the UK and US central banks as emergency measures. If they were fortunate enough to be in the situation of the New Zealand economy they would not be doing quantitative easing or money printing, because although that solves some shorter-term problems, it is storing up *longer-term problems for those

economies, which will require further difficult adjustments that might well take 10 years to get through. We do not have to do that. We are able to get moderate growth in this economy without resorting to those emergency measures.

Dr Russel Norman: Is the Minister of Finance not saying that we will continue with orthodox economic policies that, according to Treasury’s projections, will result in a 6.9 percent current account deficit in 2015? If we go down that path we will have no option but to borrow more and to sell more assets in order to meet that current account deficit.

Hon BILL ENGLISH: We will continue with policies that are focused on improving performance where it matters, and that is in terms of savings, both household savings and Government savings—and both of those are going to continue to improve quite significantly over the next few years—and improving export performance. I look forward to the member’s support, particularly on the export side, where I would hope that he could get behind measures that will help the competitiveness and the sustainability of our biological production industries and of our oil and gas industry, because more jobs, more growth, and more investment will come from the success of those industries. The member and his party are known for opposing not only their expansion but the existence of those industries.

Dr Russel Norman: Does the Minister agree that one of the most important measures that could be taken would be to drive more capital into the productive sector—and that is why we have been proposing a capital gains tax, amongst other measures—and that, in fact, what we have seen over recent years is that lending into the housing sector has increased while lending into the business sector has actually declined?

Hon BILL ENGLISH: As has been discussed a number of times in the House before, the Government considered the option of a capital gains tax and both the *Tax Working Group—in fact, every tax working group that has looked at it—and this Government decided that, on balance, although there are some merits in the idea, it was not the best policy decision. We believe that the measures we took in the 2010 Budget regarding taxation of property will lead to collecting around $2.5 billion more tax from that sector, and that is going to have a longer-term effect in reallocating capital into the export sector.

Dr Russel Norman: In light of Treasury’s projections that under current policy settings the current account deficit will deteriorate to 6.9 percent of GDP by 2015, is he not concerned that his Government is simply repeating the same mistakes of the previous Labour Government, where we allowed a high and growing current account deficit, doing nothing as our external debt grew and standing by while another housing asset bubble formed; and is it not time that we changed direction, or will we just have to keep building up debt and selling off assets to finance the current account deficit?

Hon BILL ENGLISH: Well, we are certainly making progress in that respect, because a current account deficit even at 6 percent would be considerably lower than what it was 3 or 4 years ago, when it was 8 percent for a number of years, and that certainly was an imbalance in the economy. In the shorter term there will be pressure on the current account because of the rebuild of Canterbury, which has an extensive imported component, and because business investment intentions are now the highest they have been for 5 years, so our businesses are gearing up to import more machinery and services and to improve their productivity and output. But in the long run we believe that the change of behaviour of New Zealanders and their attitudes to savings and a more competitive export sector—a much more competitive export sector—will assist in closing that current account deficit to sustainable levels, which are probably somewhere around 3 to 4 percent.

Hon David Parker: Does the Minister not realise that a near zero Budget, projections of decreasing export earnings, and rising net international liabilities to the end of the projection period are proof of his Government’s failure to properly rebalance the economy?

Hon BILL ENGLISH: As we have been discussing, we certainly agree with the view that the economy has not yet successfully rebalanced and that there are some headwinds to achieving that as

we move away from being a debt-funded, consumption-driven economy to being a savings-driven, export-driven economy. That is going to take some time, particularly when we have had a recession and a major earthquake along the way. We believe that we are making progress, and the fact that we are likely to grow faster than the UK, the US, Canada, and all of Europe, and at about the same speed as Australia, is an indication we are probably on the right track.

Rt Hon Winston Peters: Given that the biggest problem our exporters face is, as the *IMF has said, a grossly inflated dollar—by about 20 percent, the IMF has said—does he intend to go on just making sympathetic noises and doing nothing?

Hon BILL ENGLISH: The question with the exchange rate is what measures the Government could take to have an impact. We could swap to a whole bunch of disastrous policies, and that would collapse the exchange rate. We do not intend to do that.

Hon David Parker: How can the Minister say that his plan is working when all the projections show exports dropping and the current account deficit and net international liabilities getting worse; and is it his intention or the Prime Minister’s intention to give another pre-Budget speech next week, this time entitled “Sticking to a Plan that is not Working”?

Hon BILL ENGLISH: No, but I will be giving speeches saying there is no way we will adopt the Labour Party’s silly plans.

Job Creation—February 2012 Numbers Compared with December 2008

2. JACINDA ARDERN (Labour) to the Minister for Tertiary Education, Skills and

Employment: Does the most recent National Employment Indicator show that there are more or fewer jobs now than when his Government came into office in 2008?

Hon STEVEN JOYCE (Minister for Tertiary Education, Skills and Employment): The *National Employment Indicator indicates there were 12,000 fewer jobs in February 2012 than there were in December 2008. I would point out to the member, though, that the National Employment Indicator is an experimental series and it does have a number of shortcomings, including the fact that it ignores self-employed workers in the results. A better measure of the number of people in jobs is the *household labour force survey, which was released just this morning. That showed an increase of 36,000 jobs compared with the September 2008 quarter. If you consider the impact of the global financial crisis and the Canterbury earthquakes, this is actually a very considerable achievement and reinforces the Government’s aim of creating the right environment for competitive businesses to establish and grow in, creating more jobs and higher wages.

Su’a William Sio: Is he aware that there are 55,000 more unemployed since his Government took office, when the Prime Minister promised to do something about it—

Rt Hon Winston Peters: How many?

Su’a William Sio:—55,000 thousand—and given that unemployment now is the highest in 18 months, when can the New Zealand public expect to see the so-called brighter future?

Hon STEVEN JOYCE: In fact, the number of people who are obtaining an unemployment benefit has been reducing over the last 12 months, and in fact the number of young people on an unemployment benefit has now dropped to around 15,000. So that is good progress. But the member omits from his question the context of the challenges that the Government has been facing economically. Of course, we have had the Canterbury earthquakes, which have been very damaging to Canterbury.

Hon Members: Oh!

Hon STEVEN JOYCE: Well, people in Canterbury are still concerned about them. We have also had the global financial crisis, and the interesting thing about the global financial crisis is that it has hit most countries considerably harder than it has hit New Zealand.

Su’a William Sio: Is he aware that the number of unemployed has gone up by 9,000 in the last 3 months alone, and when will his Government admit that its failed policies of merging departments, selling assets, and clamping down on beneficiaries are not creating growth or employment?

Hon STEVEN JOYCE: The household labour force survey shows that the number of jobs in the New Zealand economy has gone up 9,000 in the last 3 months.

Rt Hon Winston Peters: No.

Hon STEVEN JOYCE: That is correct, and, Winston, you should read the bit of paper. It has gone up 9,000 in the last 3 months. The number of people available for work has also increased by 18,000, which has given us the highest labour force participation rate since late 2008, which is very encouraging. The member needs to look across the seas and look at what is happening in the rest of the world, where we have massive unemployment. The current Euro-level unemployment rate is now nearly 11 percent, and across the whole of the European Union it is 10 percent. So New Zealand’s unemployment rate is actually pretty reasonable by comparison.

Jacinda Ardern: Given today’s announcement that the number of young people not in training, education, or employment has increased to 87,000, will he review his Government’s policy to cut *Youth Transition Services for anyone over the age of 17?

Hon STEVEN JOYCE: I do not think the member’s assertion is remotely correct in the second half of her question. But I would point out that there are some interesting numbers within those “neets”* figures. The encouraging part of the “neets” figures is that the number of 15 to 19-yearolds who are “neets” has dropped down to 8.9 percent. I think that is very, very encouraging from the point of view of everybody who is working—

Hon Trevor Mallard: From where?

Hon STEVEN JOYCE: From nearly 10 percent, Mr Mallard. For the 20 to 24-year-olds the number has gone up. I have checked that with the *Department of Labour and *Statistics New Zealand, and they said that has flown through from the previous numbers for 15 to 19-year-olds. So what that shows is that our policies are having some good impacts on the 15 to 19-year-olds, but the high levels we inherited prior to that are still moving through the system.

Jacinda Ardern: Do he and the Government now acknowledge that his job growth predictions are wrong, his predictions that unemployment would decrease are wrong, and his assumption in the welfare reforms that Kiwis do not want to work has been proven wrong; and when will he apologise to the people of New Zealand for the reduction in the number of jobs and opportunities available to them?

Hon STEVEN JOYCE: The member is wrong. The reality is that the number of jobs in the New Zealand economy has lifted by 9,000 in the last quarter. This is actually now, according to the household labour force survey, the highest number of jobs this country has ever had. We also have an unusually high participation rate, and that has resulted in a lift in the measured unemployment rate. But actually there has been some good success. There is always more to do, but I would note in regard to the member’s concern about “neets” that during the last 5 years of the Labour Government, when unemployment was lower because of the stronger world economy, the “neets” figure never went far below 10 or 12 percent.

Budget 2012—Economic Programme

3. Hon TAU HENARE (National) to the Minister of Finance: What will be the Government’s approach in the Budget to ensure it remains on track to fiscal surplus in 2014/15?

Hon BILL ENGLISH (Minister of Finance): Consistent with previous Budgets, the Government’s approach will be balanced and considered, but in particular, the measure of achievement will be whether the funding is working and getting results, rather than whether Ministers or departments get more funding.

Hon Tau Henare: What progress is the Government making in controlling its spending?

Hon BILL ENGLISH: What is important to the Government is that the spending is effective, and that is just as important as how much spending there is. But one measure of the change in spending is this: in the four Budgets between 2005 and 2008, the permanent increase in total Government spending was $15 billion across those four Budgets. In the four Budgets up to the one that will be delivered in a couple of weeks, the deliberate and permanent increase in spending will be $750 million. So in the four Budgets to 2008, the increase was $15 billion. In the next four Budgets, it is $750 million.

Hon Tau Henare: What decisions will the Government take in the Budget to ensure it continues to keep spending under control?

Hon BILL ENGLISH: The most important decisions will be those that are focused on getting better value for the considerable spending the Government already makes in the areas of law and order, in health, and in education. The next important decisions will be containing the amount of spending, and, as has been already discussed publicly, there will be little net new Government spending in Budget 2012.

Hon Tau Henare: How will the Government be able to deliver better results from public services while keeping firm control on its spending?

Hon BILL ENGLISH: Probably the most important thing is to understand how Government spending actually contributes to the outcomes that New Zealanders are expecting from Government action. So in the area of education we need a good understanding of how spending $13 billion in education does contribute to young New Zealanders achieving level 2 of *National Certificate of Educational Achievement, which is regarded as the entry-level qualification for any further skills or training, or how our extensive spending on the police and courts and corrections contributes to reducing reoffending and therefore prisoner numbers, at the same time as maintaining a safe community.

Foreign Affairs and Trade, Ministry—Job Cuts Proposed in Cabinet Paper

4. Hon PHIL GOFF (Labour—Mt Roskill) to the Minister of Foreign Affairs: What is the percentage reduction in foreign policy or diplomatic staff he has set out in his paper to the Cabinet Committee on State Sector Reform and Expenditure Control, dated 26 April 2012?

Hon MURRAY McCULLY (Minister of Foreign Affairs): As a former Minister, the member should know that it is normal for Cabinet Committee and Cabinet discussions to take place confidentially. For that reason, if such a paper existed, it would not be in the public interest for me to provide the information that he seeks. I understand that yesterday the member released what he asserted to be material from Cabinet Committee papers. If his question refers to those, he will already have the answer he seeks.

Hon Phil Goff: Since I already have the answer, why is he slashing 53 foreign policy positions—that is the people who do the diplomatic work, nearly 10 percent of his diplomatic staff—from the ministry, when his friend, former senior ministry diplomat, Charles Finny*, said last year that there were already “huge staffing gaps” in the ministry, which required core ministry work to be farmed out to expensive private consultants.?

Hon MURRAY McCULLY: The original ministry proposal was that 64 foreign policy positions would be disestablished. More recent discussions have centred around a number in the mid-50s, although that is still a matter being discussed between the Government and the ministry. Were that to be the position where things settled, about half of those positions would be represented by current staff and around half by current vacancies.

Hon Phil Goff: Notwithstanding his denial on *Morning Report this morning, will he acknowledge there is a major morale problem in the Ministry of Foreign Affairs and Trade when his ministry’s own survey, which I have got in my hand, shows that more and more people are disillusioned and disengaged, “significantly more” than any other State sector organisation, and

when last week his important trade negotiation division said that confidence was shot and they cannot retain talented people?

Hon MURRAY McCULLY: The member claimed to be deeply concerned about staff morale within the ministry and about damage to New Zealand’s foreign policy interests from this process. If he wishes to identify the persons responsible, then he just needs to find himself a mirror.

Hon Phil Goff: I raise a point of order, Mr Speaker. [Interruption]

Mr SPEAKER: Order! A point of order has been called.

Hon Phil Goff: I asked the Minister whether he would acknowledge that there was a significant morale problem within the ministry. He went on, then, to say that I was responsible for everything. It used to be the chief executive officer. Now it is me, apparently. But he has not answered the question.

Mr SPEAKER: That is an interesting point the member raises, because the question asked whether the Minister would acknowledge that there was a significant morale problem. The Minister tended to indicate, in his answer, that he does not think there is but if there is, then he blamed the previous Minister. That is an answer. Whether it is a good answer or not is another matter. The member does have further *supplementary questions. He is a very experienced member, and I am sure he is capable of pursing that further.

Hon Phil Goff: An answer, but not as we know it! My supplementary question to the Minister is why is he recommending the closure of the embassy in Stockholm when he said to the Foreign Affairs, Defence and Trade Committee just months ago: *“we put a high value on those Scandinavian relationships, which is why we did not take a step of closing that post”—a decision not to close the embassy, which he said was *“the result of careful reflection and consideration”; and why has he flip-flopped in a matter of months?

Hon MURRAY McCULLY: As I have said on a number of occasions publicly, the question of closure or opening of missions overseas is a matter for *Cabinet. The discussion that took place in the original change document did raise the prospect of changes in Europe. In the letter of 22 March I canvassed a range of options for the ministry to advise further on. Those matters are still to come before Cabinet for a final decision.

Rt Hon Winston Peters: Will the Minister admit that he inherited a ministry that was being properly funded and that foreign aid was heading towards 0.35 percent of GDP, and that these cuts simply indicate that he has no influence at Cabinet, which begs the question of him why did he seek the position in the first place?

Hon MURRAY McCULLY: I would have used the word “lavish” to describe the funding when the Government came into office. What I can say is that in 2008 the Ministry of Foreign Affairs and Trade sought from the then Minister of Finance an extra $212 million a year in 2011-12 terms. In the first year in office as Minister, I took $115 million off the table and in the subsequent year a further $20 million. Now we are looking at a further reduction of $24 million to $25 million this year, which would still leave over $50 million of the funding advanced by that member as Minister in 2008. I think I will stop there, because the Minister of Finance is starting to ask himself whether maybe we should do more.

Hon Phil Goff: In addition to the $9.2 million that he has spent on the change process so far this year, is the additional $3.296 million that he has admitted to me will be spent next year on change consultants, the total financial cost of the change process that he estimates for next year, including internal staffing costs and redundancy costs; if not, what will be the total cost of this botched process?

Hon MURRAY McCULLY: The member has been told before, that the figure of $9.2 million is a budget not an expenditure level to date. What I can say to him is that the manner in which we have tried to assist the ministry in making some final decisions at an early time is designed to ensure that we can move on to business as usual as quickly as possible and save as much from the

change budget as possible. The specific answer to his question can only be given once all of the decisions have been made.

Hon Phil Goff: As the result of the latest changes that he has in his paper, has the ministry changed the contracts of any of those consultancy firms, which he is aware will require compensatory payments to them; if so, what will be the cost of that?

Hon MURRAY McCULLY: I am not aware of any arrangements of that sort.

Counties Manukau District Health Board—Improved Services

5. JAMI-LEE ROSS (National—Botany) to the Minister of Health: What decisions has the Government made in relation to providing better services at Counties Manukau District Health Board?

Hon TONY RYALL (Minister of Health): I am pleased to announce that the Government has given Counties Manukau District Health Board* the official go-ahead* for the design phase of the new clinical services block at *Middlemore Hospital. This clinical services block will include three new theatres, as well as replacement of the existing 11 aged theatres, a 40-bed assessment and planning unit, and an 18-bed high-dependency* unit. This whole project began under the National Government in 2009. The Government is contributing $100 million towards the $208 million total cost of the project, which when completed will provide better health services for the people of one of the fastest-growing* and most important parts of the country.

Jami-Lee Ross: Can he tell the House what other improvements are being made to Middlemore Hospital as part of this development?

Hon TONY RYALL: This $208 million redevelopment also includes the refurbishment of the **Edmund Hillary Block with 31 extra beds, and an addition of 33 beds and an upgrading of services in the adult medical centre for assessment, treatment, and rehabilitation in-patient* wards. Over the last 3 years, the Government has increased spending at the Counties Manukau District Health Board by over $180 million, with 180 more doctors and over 300 more nurses. Despite the tight financial times, the Government is providing better care for people in the Counties Manukau area.

Moerewa School—Ministry of Education’s Actions

6. TE URUROA FLAVELL (Māori Party—Waiariki) to the Minister of Education: What support did her Ministry offer to Moerewa School before the decision was made to close the satellite senior class and send in a Commissioner, Mike Eru, and what is the purpose of his appointment?

Hon HEKIA PARATA (Minister of Education): Because of the complexity of this situation, this answer might be just slightly longer for the detail. In 2008 Moerewa School* applied for, and was granted, a change of class to become a year 1* to year 10 school. It has had the same support from the Ministry of Education as any other school with this range of classes. Since 2010 Moerewa School, without Ministry of Education approval, has decided to retain the year 11 to year 13 students. It formally applied to retain these students in September 2011 and was declined, and was instructed to end its informal arrangement with Kia Aroha College*. It continued to receive the same support from the Ministry of Education as any other year 1 to year 10 school, including offers of professional learning and development, and student achievement function support. As part of normal New Zealand Qualifications Authority* processes, the authority visited Kia Aroha College, where serious concerns about the quality assurance practices were raised, especially for the school’s informal satellite class in Moerewa. This lead to a full audit, which highlighted very serious deficiencies. When the very poor results for these senior students were reported by the New Zealand Qualifications Authority, and with the board’s explicit refusal to cease the informal arrangement and transition these students, I lost confidence in the board. When Moerewa School reopened at the

beginning of term 2* with senior students still illegally enrolled, a commissioner was appointed to undertake governance roles.

Te Ururoa Flavell: Have New Zealand Qualifications Authority audits of any other schools reviewed a sample as big as 85 percent of student results, as was done at *Moerewa; if so, what were the results?

Hon HEKIA PARATA: The process followed by the New Zealand Qualifications Authority in relation to Kia Aroha College’s unsanctioned satellite class at Moerewa is a response to a unique situation. The satellite class at Moerewa has been acting illegally, and the results that it claimed it was achieving were dramatically different on the evidence of the audit. When normal processes identify specific concerns, the New Zealand Qualifications Authority formulates a response that best fits the circumstances, whether it be for a school, a particular department, or a year group. On occasions there has been intensive sampling of results of a class or a department within a school when there have been serious concerns. Fortunately, this is rather rare.

Te Ururoa Flavell: Will the Minister take the same action against every other school where Māori children are *underachieving; if not, why not?

Hon HEKIA PARATA: Our Government is focused on raising achievement for all students, and I want to work with every school where there is underachievement.

Schools, Charter—Advice Received

7. Hon NANAIA MAHUTA (Labour—Hauraki-Waikato) to the Associate Minister of

Education: Has he read or received the Ministry of Education advice provided to the previous Minister of Education, which states charter schools “have not consistently led to significant increases in achievement”?

Hon JOHN BANKS (Associate Minister of Education): No, I have not received that specific piece of advice. As the member said, it was sent to the previous Minister. No one is claiming that any initiative in education policy works all the time, every time, everywhere. If there is such an initiative, I wonder why that member’s party did not introduce it over the 9 years that it was in Government. What we do know is that the New Zealand model of charter schools will benefit from knowledge of successes and failures overseas.

Hon Nanaia Mahuta: In light of that answer, would he consider charter schools a success if 37 percent of their students do worse than those in public schools and 50 percent do no better; and if so, is he aware that those were the outcomes of the US charter schools, according to Stanford University* in its report referenced in 2009 by the *Ministry of Education? [Interruption]

Mr SPEAKER: Order! I want to hear the answer.

Hon JOHN BANKS: This is what we do know. We do know that the new Minister— [Interruption]—we do know that the new—

Mr SPEAKER: Order! Look, I took it that the honourable member’s question was a serious question, and so I would ask her colleagues to make sure they do not make so much noise that they interrupt the Minister and distract him. But the Minister should answer the question. The question was very specific as to whether the Minister would consider it a success were 37 percent of the students considered to have done less well and 50 percent to have done approximately the same— whether the Minister would consider that was a successful outcome.

Hon JOHN BANKS: What we do know is that there is a long tail of people failing in the education system in this country—

Hon Trevor Mallard: I raise a point of order, Mr Speaker. I think you asked the Minister to address the question. He is a little way into an answer that has to do with the New Zealand situation and is not a response at all to the question.

Mr SPEAKER: Order! No, no. I think we have to allow the Minister the opportunity to answer the question. He started by addressing the current situation, and I hope he will move on to the research figures that were included in the member’s question.

Hon JOHN BANKS: We hear the research figures. If we were to rely on those research figures, then we would give up on the long tail of underachievement in the education system. What we do know is that the new *Secretary for Education understands charter schools as they exist in the United Kingdom very, very well, and is supportive. What we do know is that we spend $7 billion per year on education for students up and down the country, and it is the students’ right to get a world-class education—

Grant Robertson: Does the Minister have the faintest idea what he’s talking about?

Hon JOHN BANKS: I say to the *interjector that of the students who were entering the system when the member for Hutt South was the Minister of Education, one in five will leave school with no education. This Government is saying we cannot have one in five leaving school with no education. We are not going to take up the worst aspects of any overseas charter schools. We are going to adapt them to a New Zealand model that works for New Zealand kids, who the *frontbench member of the Opposition wants to see succeeding and achieving in education so that when they leave school they have the dignity of work. That is what we are going to do. It is going to work. Give it a go. Do not give up on it before we have tried it.

Mr SPEAKER: The Hon Nanaia Mahuta. [Interruption] Order! I want to hear the question. The Hon Nanaia Mahuta.

Hon Nanaia Mahuta: Is he aware that an independent study by the University of Michigan** into the **Knowledge is Power Program charter school model found that the Knowledge is Power Program’s improved performance was a result of *cherry-picking the students most likely to succeed?

Hon JOHN BANKS: What we do know is that—

Hon Members: Oh!

Mr SPEAKER: Order! The Minister will resume his seat. I ask members not to interject before the Minister has even started his answer. But I say to the Minister that when a Minister starts with “What we do know”, it usually indicates that he or she has no intention of answering the question whatsoever, and it is not good enough. The question asked about a specific piece of research. The Minister may wish to acknowledge that he is not familiar with that piece of research. That is fine, but he should not go on to talk about something totally different. Usually, saying “What we do know” is an indication that it is going to be something totally different. Because time is passing, I invite the Hon Nanaia Mahuta to repeat her question.

Hon Nanaia Mahuta: Is he aware that an independent study by the University of Michigan into the Knowledge is Power Program charter school model found that the Knowledge is Power Program’s improved performance was a result of cherry-picking the students most likely to succeed?

Hon JOHN BANKS: I have not seen that piece of advice that talks about cherry-picking students. But what we want to do is we want to provide access to different ways of educating the 20 percent of young people who fall through the cracks, do not make it, and end up as statistics. What we do know also is that we have appointed a very able working group to recommend the precise policy settings and learning from research that the member talks about, so that we do not make the same mistakes as have been made overseas. We will take the best of the research, and we will build on the information that we can gather together here, because we want this to succeed for the 20 percent of young people who fall through the cracks and end up as statistics. We are not going to give up on those young people.

Hon Nanaia Mahuta: Will charter schools be able to raise revenue, in addition to public funds, from individuals and corporates, and be accountable to their sponsors; if so, it is possible that *Skycity could sponsor one of his charter schools, and how will this transform the long tail of underachievement?

Hon JOHN BANKS: As at *Onehunga High School in Auckland, we want to make sure that, for our charter schools, the local community is involved, iwi are involved, church groups are

involved, everyone interested is involved, families are involved, industry is involved, and commerce is involved. We have all got to take ownership of the fact of the matter, which is that 20 percent of our young people fail in the education system that that former Minister was associated with when she was in Government, and the member for Hutt South was the Minister and did nothing about it. We care about people who fall through the cracks. We are not worried about the 80 percent of people who achieve—

Mr SPEAKER: Order!

Hon Nanaia Mahuta: In light of the Minister’s answers, I seek leave to table two documents. The first document is the research report from Stanford University, which clearly shows that 37 percent of students do worse and 50 percent no better than students in public schools.

Mr SPEAKER: Leave is sought to table that document. Is there any objection? There is no objection. Document, by leave, laid on the Table of the House.

Hon Nanaia Mahuta: I seek leave to table the University of Michigan report into the Knowledge is Power Program charter school model, which shows that improved performance was linked to cherry-picking of students most likely to succeed.

Mr SPEAKER: Leave is sought to table that document. Is there any objection? There is no objection. Document, by leave, laid on the Table of the House.

New Zealand Air Force—2010 Anzac Day Helicopter Accident

8. DENIS O’ROURKE (NZ First) to the Minister of Defence: Is he satisfied that all issues arising from the 2010 Anzac Day helicopter accident have been properly dealt with by the Government and the RNZAF?

Hon MURRAY McCULLY (Minister of Foreign Affairs) on behalf of the Minister of

Defence: The Government is satisfied that the *Air Force has learnt the appropriate operational lessons from this crash, as identified in the *court of inquiry, and is implementing those lessons. The *New Zealand Defence Force is waiting to receive a report from a barrister, Mr **Matthew McClelland, examining the Air Force’s treatment of the families of the victims. The Defence Force is still awaiting further legal advice on potential disciplinary options.

Denis O’Rourke: As it is over 2 years since the crash, why have *RNZAF officers not been charged as a result of any current disciplinary inquiry, considering *Air Commodore **Moore’s comments to the assembling authority of the court of inquiry that “There is now an obligation to investigate whether any offences have, in fact, been committed against the *Armed Forces Discipline Act.”, and what actions have been taken by the Government and the RNZAF to deal with the culture issue, given the Air Commodore’s further comments: “The culture of No. 3 Squadron at *Ōhākea is one of the most concerning of all causes, and negative aspects of this culture are present in all six causes.”?

Mr SPEAKER: The Minister, the Hon Murray McCully, may answer one of those questions.

Hon MURRAY McCULLY: The court of inquiry identified a number of factors related to Air Force orders, instructions, flying management, supervision, and work practices that were not satisfactory. I am advised that the Air Force has accepted these findings and made significant progress in implementing the changes. Additionally, the New Zealand Defence Force is working on a programme to improve pilot training systems.

Denis O’Rourke: Will the Government and the RNZAF apologise to the parents of *Corporal Ben Carson for their incongruent treatment by the RNZAF, especially in being excluded from meetings and briefings to which the *next of kin of other personnel killed or injured in accidents

were invited, given the Carsons’ denial of the Minister’s claim that such an apology has already been given?

Hon MURRAY McCULLY: The RNZAF has already acknowledged that it made mistakes in the way in which families were treated. The Air Force has learnt lessons in this respect, and has apologised. The previous Minister of Defence initiated an independent review—that is the review I referred to earlier by the barrister Mr McClelland—which was subsequently—

Denis O’Rourke: I raise a point of order, Mr Speaker. The answer has stated that an apology was given, whereas the question itself makes—

Mr SPEAKER: Order! The member cannot use a point of order to dispute an answer being given. The member may not like the answer that is being given, but he cannot use a point of order to dispute it.

Hon MURRAY McCULLY: I would like to make a final point that the previous Minister of Defence, Dr Mapp, initiated an independent review by the barrister McClelland, which was subsequently widened to include the interests of all four families. Once Mr McClelland has completed his review, the Air Force can address any outstanding issues. I am advised that that review should be available in approximately 6 weeks’ time.

Denis O’Rourke: I seek leave to table these documents: firstly, a copy of a letter from the Minister of Defence to Mr and Mrs Carson, dated 24 April 2012, stating that the RNZAF had apologised to them, and—

Mr SPEAKER: Order! We will deal with each document separately. Leave is sought to table that letter. Is there any objection? There is no objection. Document, by leave, laid on the Table of the House.

Denis O’Rourke: I seek leave to table a copy of an email dated 1 May 2012 from Mr and Mrs Carson to me, confirming that they have had no apology from the RNZAF.

Mr SPEAKER: Leave is sought to table that document. Is there any objection? There is no objection. Document, by leave, laid on the Table of the House.

Welfare Fraud—Information Sharing Between Government Agencies

9. MIKE SABIN (National—Northland) to the Associate Minister for Social Development: What steps has the Government recently taken to combat welfare fraud?

Hon CHESTER BORROWS (Associate Minister for Social Development): On Monday an *Order in Council was signed expanding the range of information the *Inland Revenue Department can send to the *Ministry of Social Development, and this will give the ministry a powerful new tool to make sure it has accurate information and that people on benefits are receiving their correct entitlement. It is another step forward in cracking down on welfare fraud. I want to acknowledge the Minister of Revenue, the Hon Peter Dunne, for his work in making this level of information sharing a reality.

Mike Sabin: What would he say to a beneficiary who was concerned about the new *information-sharing?

Hon CHESTER BORROWS: That we are drawing a distinction between the vast majority of beneficiaries, who are honest and upfront* with the Ministry of Social Development, and the small minority who think it is OK to rip off hard-working* Kiwis. Honest beneficiaries have nothing to fear from these changes, as it will only confirm information that the ministry already has. But fraud is fraud, whether from an individual or from a taxpayer, and those who rip the system off should come to us before we come and find them.

Hon John Banks—Donations for Member’s Political Campaigns

10. Hon TREVOR MALLARD (Labour—Hutt South) to the Prime Minister: Did the assurances that Hon John Banks gave his office regarding his compliance with the Local Electoral Act, which he has accepted, include an assurance that any donations for radio advertising during the 2010 mayoral election were correctly recorded?

Hon BILL ENGLISH (Deputy Prime Minister) on behalf of the Prime Minister: As the Prime Minister stated in the House on Tuesday, the chief of staff sought and received an assurance from Mr Banks that he had fully complied with the requirements of the Local Electoral Act in respect of donations. There were no assurances sought or received about the details of any particular donations.

Hon Trevor Mallard: How can advertising be donated anonymously, when there is a requirement for authorisation; and if the Prime Minister does not know, why did his office not ask Mr Banks?

Hon BILL ENGLISH: I understand the member has already made a complaint about an anonymous donation for radio advertising, and that this has been referred to the police for investigation. He could perhaps await the outcome of that investigation to get answers to those questions.

Hon Trevor Mallard: Can the Prime Minister assure the House there is no link between the soft Crown loan Steven Joyce arranged for a radio chain he used to own and this radio advertising giving shortly afterwards to the National Party’s preferred candidate for the Auckland mayoralty?

Hon BILL ENGLISH: No. I think last week it was charter schools that were part of this conspiracy, and now something else is. The fact is the member has a complaint, he has referred that to the police, and his attempts to get more media attention by constructing conspiracy theories might or might not work. We will see.

Rt Hon Winston Peters: With the National Party, as we speak, conducting polling in the Epsom electorate with the question—[Interruption]

Mr SPEAKER: Would the member please proceed with his question, and I do want it to be something that is the Minister’s responsibility. National Party polling certainly has nothing to do with the Minister’s responsibility.

Rt Hon Winston Peters: With the National Party, as we speak, conducting polling in the Epsom electorate with the question: “Who would you vote for?”, is that an ominous sign in respect of Mr John Banks that the assurances are not being accepted by the Prime Minister?

Mr SPEAKER: The Hon Bill English, in so far as there is ministerial responsibility.

Hon BILL ENGLISH: The Prime Minister accepts the assurances of the member for Epsom.

Hon Trevor Mallard: Why did he say that he had absolutely no reason to doubt John Banks was unaware of the Dotcom donation, given that ACT’s own party president has said that splitting the donation from Dotcom was one of the suggestions John Banks made to Dotcom?

Hon BILL ENGLISH: The Prime Minister made that statement because he believes it to be the case and has not seen statements or evidence otherwise. The matter is in the hands of the police, who are rightfully investigating.

Hon Trevor Mallard: Has he or his office questioned Mr Banks about the suggestion by the *ACT Party president that one of the $25,000 donations was in fact from John Banks himself, and did Mr Banks explain how he could give himself a donation and not know it?

Hon BILL ENGLISH: As I said in the first answer, an assurance was sought from Mr Banks that he had fully complied with the requirements of the *Local Electoral Act in respect of donations. That assurance was given. No assurances have been sought about particular donations.

Tourism and Conservation—Department of Conservation and Air New Zealand Partnership

11. CHRIS AUCHINVOLE (National) to the Minister of Conservation: What are the likely benefits of the new tourism-conservation partnership with Air New Zealand?

Hon KATE WILKINSON (Minister of Conservation): The Government recently signed a tourism-conservation partnership between the *Department of Conservation and *Air New Zealand. This partnership is worth $1 million a year for the next 3 years and represents a win-win for our *flagship airline, our tourism industry, and conservation. It includes formalising the agreement to transport some of our most endangered species on Air New Zealand planes to breeding sites across the country. It will also help fund a range of new *biodiversity and conservation programmes in *national parks to preserve and protect native plants and wildlife along the *Great Walks network.

Chris Auchinvole: What other benefits will this partnership offer?

Hon KATE WILKINSON: Heaps! It is not always acknowledged that the Department of Conservation is one of the largest tourism activity providers in New Zealand. Under this partnership Air New Zealand will use its global marketing network to help the Department of Conservation to promote the Great Walks in both the domestic and international tourism markets. More than 50,000 people enjoy our Great Walks every year. These walks bring in around $3 million annually—money that is put back into conservation. Air New Zealand will also contribute through its 3,000-strong **Green Team, who will volunteer their time for conservation initiatives. This partnership demonstrates that conservation can be good for business, business can be good for conservation, and we can work together to achieve shared goals and protect our native species.

Rt Hon Winston Peters: I move that Mr Auchinvole be allowed to ask another question, so that he can truly justify the rubber stamp National gives backbenchers to ask—

Mr SPEAKER: Order! I could not hear what the member was seeking leave for.

Rt Hon Winston Peters: I move that Mr Auchinvole be given a chance to ask another question so that he can truly justify the rubber stamp—

Mr SPEAKER: Order! The member was lucky I did not hear it the first time around. We do not waste the time of the House that way, I say to the right honourable member.

KiwiRail, Railway Workshops—Minister’s Statements

12. CLARE CURRAN (Labour—Dunedin South) to the Minister of Finance: Does he stand by his statement to the Otago Daily Times on 21 April 2012 that he was not aware of KiwiRail’s decision to sell off the Dunedin Hillside workshop prior to the announcement?

Hon BILL ENGLISH (Minister of Finance): Yes, I do. I understand that my office was notified later in the day, before the announcement. However, if the member is suggesting that the notification is important in the sense that either I or other Ministers would have intervened in the decision, then that expectation is incorrect. We would not have.

Clare Curran: Is he aware of the *no-surprises policy outlined in the **Owner’s Expectations Manual for State-Owned Enterprises, which states: “Under the ‘no surprises’ policy, shareholding Ministers expect to be informed well in advance of any material or significant events”; if so, given that the sale of Hillside is a significant event, how can he not have known that KiwiRail* was planning to sell up?

Hon BILL ENGLISH: Well, I think I just gave the answer. Of course Ministers were aware that that was one of a number of things discussed, but I would have to say it was a small part of discussions with KiwiRail. The Government is investing $4.5 billion in a 10-year turn-round* programme with KiwiRail. We expect the board of KiwiRail to make sensible operational decisions to back up the investment of $4.5 billion in turning round KiwiRail. We do not expect to be part of every single decision involved.

Clare Curran: If KiwiRail neglected to inform him and other shareholding Ministers well in advance of its intention to put the Hillside workshops up for sale, has he asked it to explain why it did not, given that it is a significant community event; and if he has not asked it, is he not then negligent in his duties as a shareholding Minister?

Hon BILL ENGLISH: No. We were aware that the discussions had been going on about the Hillside workshops. In fact, anyone in New Zealand who can read a newspaper would know that

that has been going on for a number of years. However, it is a matter for the board to make the decisions. As I have said, the Government has committed $4.5 billion to a 10-year turn-round plan, including an injection of $750 million. We do focus on whether the overall plan is on track, and we have done.

Clare Curran: Does he support the KiwiRail decision to sell the Hillside workshops, and is it Government policy?

Hon BILL ENGLISH: The Government policy is to try to turn KiwiRail into a viable commercial business, and the taxpayer is going to invest, one way or another, $4.5 billion in achieving that. That is the Government policy. In respect of the Hillside workshops—

Andrew Little: Why won’t you keep Kiwi jobs?

Hon BILL ENGLISH: We cannot have it all ways. If we put in billions of dollars to upgrade the wagons and the locomotives so they are new, then they do not need nearly as much maintenance as when they were 50 years old. So by putting in a taxpayers’ investment to upgrade the gear, now we do not need the same maintenance capacity. The board has the responsibility of making those balanced decisions.

Michael Woodhouse: What reports has he seen on the involvement of Ministers in respect of State-owned enterprise decisions?

Hon BILL ENGLISH: The House might not be surprised to hear that an Acting Minister of Finance stated: “as a matter of policy the Minister of Finance, as shareholding Minister, does not intervene in the operational affairs of the airline.” That particular quote was from Trevor Mallard in respect of Air New Zealand, and I think it is a *longstanding practice that State-owned enterprise Ministers do not try to run these businesses.

Clare Curran: Does his refusal to intervene in *KiwiRail’s decision to sell the Hillside workshop and its reluctance to repair the Gisborne to Napier rail line not prove that this Government does not give a damn about regional economic development?

Hon BILL ENGLISH: I think that is an extravagant statement. In fact, the Government is investing—

Grant Robertson: You’re not saying it’s not true, though.

Hon BILL ENGLISH: Well, it is an untrue statement. The Government is investing $4.5 billion in KiwiRail, and that is going to enhance the infrastructure right through New Zealand, including in Dunedin. We want to make this into a viable, reliable rail company. The plan is well under way, and we are reasonably optimistic that it can be achieved.

ENDS

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