Today on Newshub Nation ` the prime minister tells us why it was important to increase New Zealand's refugee quota ahead of her visit to the UN. As Housing New Zealand apologises for its flawed meth testing policy, we ask its CEO if the agency can change enough to meet its new social objectives. And we talk to the chair of the government's Tax Working Group, Sir Michael Cullen, about income equality and the environment. Captions were made with the support of NZ On Air. Copyright Able 2018 Kia ora, good morning. I'm Lisa Owen. Welcome to Newshub Nation. Jacinda Ardern is heading to New York today for the 73rd United Nations General Assembly, where she'll speak as part of the General Debate. The trip comes after several weeks of domestic problems that saw one minister resign and another one sacked, speculation of a power struggle with Deputy Prime Minister Winston Peters and questions over tensions within the coalition government. She chalked up a win this week, announcing New Zealand's refugee quota will increase to 1500 in 2020. I asked the prime minister if that was a well-timed piece of good news for her to take to the United Nations. Look, it is fair to say that it's something I wanted resolution around. There had been speculation around the government policy, and I wanted there to be clarity on that. Look, it certainly helps as well, in the sense that we're able to make sure that when we're standing up on any issue at a global level ` climate change, nuclear non-proliferation, disarmament, humanitarian issues ` that we're also seen to be walking the talk. And so in that regard, I'm constantly vigilant about making sure that New Zealand's policies demonstrate our values, both here and on the world stage. So, the theme of the debate at the General Assembly this year is around making the United Nations relevant to all people. I'm just wondering how can that happen when you've got five countries with conflicting goals who hold all of the power and, some would arguably say, block any real change? Yeah, and it is fair to say that UN reform, rightly, needs to be high on the agenda. We've seen a number of examples, actually for our international institutions as a whole, where there has been disruption, where there has been a sense that the rules have been undermined. Now, for countries like New Zealand, these institutions are critical, particularly when you look at our trade environment, for instance. So I will be using my opportunity on that platform to highlight the importance of these multilateral institutions ` why they remain absolutely relevant, and why we have to make sure that we keep reforming them to meet the public's expectation and citizens' expectations. But you can campaign and you can say those things, which we have done in the past, and zero has changed with those veto powers. Yeah, and on the veto powers, we've been utterly consistent. We think that they should no longer be used. They should be gone. In our view, it makes a mockery of what the UN stands for and the way that it tries to build that general consensus around issues of international importance. There is, however, a secondary tool that the UN has debated, whether or not there should be some kind of code of conduct around the use of veto powers. And as a secondary option to getting rid of the veto altogether, we support that, and we will continue to advocate for that. I want to move on to local politics now. The three parties that make up your government ` are they equal in influence and standing in that relationship? We represent different sizes, different numbers of votes. I, of course, am the leader of the coalition government. So we, of course, take prominence in this arrangement, but we work by consensus. So I pride myself on the fact that we have managed to achieve a huge amount, whilst having three different parties at the table. So are you the senior partner? Is Labour the senior partner in the coalition? Well, just by default, the fact that I'm the prime minister, yes, does give us seniority in that regard. So why have you stopped calling it a Labour-led coalition? These are issues of semantics. To be honest, I actually don't think the general public cares what we call ourselves. Yeah, but Mr Peters cares, doesn't he? Because he's said many times, 'words matter'. So have you changed the way you describe the government` Oh, look, we need to be honest` ...because of his concerns? No. No. We need to be honest about the descriptors, you know? And we are a coalition government. I have, many, many times, called us the purest form of MMP government that we've ever had. Everybody knows we cannot pass legislation without the support of all three parties. And of course, that means that we work by consensus. For me, what we call it on a website is neither here nor there. It's the way we work that matters. OK. So the way you work and the influence those other parties have, do you think it's what the voters thought they were getting when they voted you in? Do you think it's what they want, in terms of the influence that, in particular, New Zealand First has? Oh, well, again, I would reject the sense that` or the sentiment that we have that dominancy. We are working through issues by consensus and, I think, getting outcomes that New Zealanders, yes, did vote for. We were able to form a majority government because voters voted for the parties who are now in office. They then told us, 'make it work'. And that's what we're doing. The fact that this week, for instance, we announced an increase in the number of refugees that will be coming to New Zealand in 2020, the fact that we have implemented a significant agenda around the Families Package, around what we do in skills and trade training. You name an area, and we will have done something as a government. So you think you're getting a proportionate share of the gains as compared to your other partners in this government? Absolutely. Keeping in mind, of course, that, actually, there are areas where we just all agree on. There are issues that we all campaigned on ` issues like housing, education, health investment. We all made a point of investing in those services. We've all made a point around the infrastructure deficit. We actually all made a point around environmental standards. And so, actually, that's just getting on with the things that, as a matter of principle, we all supported work on. Yeah, there is some variance in your views, though. And Mr Peters has said this week that he didn't agree to the Employment Relations Bill in cabinet. The following day, you said, 'Anything that goes before parliament 'goes through a cabinet process first.' So for clarity's sake, did Mr Peters sign off on that employment law reform in cabinet? This is where it gets into just process points here, so excuse me if I sound a little dull as we go. Of course, everything that goes before parliament goes through the legislative cabinet committee and is signed off. That doesn't mean that there aren't reforms that happen. Even for a government that was just one party, they may change, post a cabinet decision, elements of a piece of legislation when it's before the house. That's just the prerogative of the government of the day. We are working through some issues around employment legislation and continue to do so. But as Mr Peters himself has said, that law will pass, but we are continuing to work together on the details. But Mr Peters also refers to whether something has been approved in cabinet very frequently. He did it in relation to 'three strikes'. He said that hasn't been before cabinet` And he was correct on that. And he said that about the refugees as well. And he was correct on that. So that's why it's important. Did he rubber stamp that law` Again` ...going forward in cabinet` ...the point that I'm making is that even if we were one party, we could pass a draft piece of legislation to go into the house and still have changes made to it as we go. That is the process that we use to make sure` Absolutely. ...that the legislation is meeting select committees' expectations and the public. And I understand that process` What I will point out` Coming back though, I think the point that you've made is actually that on those three issues, they have been quite overblown. We've simply pointed out that on some of the questions we've been raised, we hadn't made a final decision yet. That was the case with refugees. We've now made a final decision, and everyone in the public can see that we've landed on something that all three parties are happy with. So simply put, did he or did he not agree to it at cabinet? Again, the first stage` Was that a yes? But that doesn't mean that we've finalised the final iteration` Absolutely. ...of the legislation. I understand that. And that's obviously what some union leaders that have expressed some concern about when it comes to this particular bill. They're worried that you're going to get a watered-down version, and it will be watered down because of New Zealand First. So is Labour reform, as it's laid out in your party manifesto, a bottom line for you? Again, as even the Deputy Prime Minister himself has said, this bill will pass. We're working on some details collectively. I will keep my confidence around those negotiations, as I do with all of our negotiations, but we are the Labour Party. Issues of employment legislation, of course, are critical to us. But I'd say, actually, they are to New Zealand First as well, and that's certainly the sentiment that I'm feeling as we go through these discussions. So it's so critical that you're prepared to stand your ground on it, in order to get what you laid out in your manifesto? Is it a bottom line? We have some fundamental aspirations with this legislation. It's why we proposed them. But as you'll see from the very beginning, when we stood up and said, 'Actually, we've reached agreement with New Zealand First around the way that 90 days will apply', we work collaboratively to try and make sure we get the best outcome for us as a government, but also for the people we represent, including workers. So, basically, you're saying, you'd like to get it as it stands in your manifesto, but you have to negotiate` No. No. ...that so you can't be sure` No. ...if you're going to. No. What I'm saying is you will have to wait. Well, is it a bottom line, then? You will have to wait. What is a bottom line is that we absolutely have an expectation that we will bring balance back to the workplace ` that's what that legislation does. But as you said, you're a Labour party` Yes. ...so if you can't express that it is a bottom line on labour law, people are going to think` And the public will see the emphasis on the labour law when that law passes, as the deputy prime minister has said it will. And there are incredibly important provisions there that, yes, will pass. We're working on some detail. And when it's finalised, we'll be making it public. And the public will see that we continue to put emphasis on rebalancing relationships in the workplace. So you mentioned that you think some of the chatter around the coalition has been, well, overblown. Yes. But, clearly, you were blindsided by New Zealand First's approach to the three strikes, the refugee quota, the Crown-Maori liaison` No. ...and employment relations. So did you know he was going to say all those things before he said them? No, I actually refute that I was blindsided by that. So did you have prior knowledge? For instance` Let's use an example. On refugees ` the question was asked of the deputy prime minister around government policy. And the point he made was it hadn't gone through cabinet. He was absolutely right ` it hadn't gone through cabinet. It now has, and we have an agreement to bring 1500 refugees into New Zealand. So none of those things that New Zealand First has stood its ground on came as a surprise to you? Three strikes didn't come as a surprise to you? No. Everything` As we've said, we use a process` Right. ...and daily on issues, actually, that are legislative issues` So why did you` ...issues that are relating to spending. As I've said, we cannot pass things without forming consensus. From time to time, questions have been asked before decisions have been finalised. And so the public has seen a little bit of the iterative process we go through. But that's` So you're talking about the Crown-Maori liaison, where you had people` No, I'm not talking specifically. That's MMP government. But I'm proud of how we're making it work. OK. So there have been a few questions lately about who's actually in charge of this government. So do you think there is an element of sexism involved in that? Uh, look, I haven't given too much thought or time of day to that debate, actually, generally, from any assumption` So, now, I'm wondering what you think about that. Whether there is an element of sexism in the suggestion that Mr Peters is calling the shots? Regardless of what's driving this sentiment, I dismiss it. OK, well, you have said, very clearly, that government policy is set out in the speech from the throne, confidence and supply and coalition agreements, right? Everything else is a negotiation. Yes. We have also added to that, of course, the priorities that we set out in the` Recently? In your speech? On Sunday. Around the future direction we'll be taking. OK. Well, let's look at a specific example. The speech from the throne mentions Whanau Ora and a review around that. Yes. But your election promise was $20 million of extra funding over four years. So the money's not specifically mentioned. Will that funding go ahead? And that's a good example. You know, you could pluck anything from all three parties' manifestos. The moment that you form a coalition government, you establish where you have agreement. And we've done that, I think, to an extent far greater than any former coalition government. The fact that on Sunday, we laid out an agenda that went beyond all of our coalition agreement, our confidence and supply and said, 'Actually, here's where we're going'. So, election manifesto items for any of the parties, if we want to pursue them, they have to be agreed upon. So, Whanau Ora, you can't guarantee that you're going to get the extra money, then? Whanau Ora ` we've said that we want to demonstrate the benefits that we instinctively believe are being generated for families. The Minister for Whanau Ora, Peeni Henare, is doing a great job of leading that review, but I'm not going to predetermine any budget discussions that we're having, Lisa. But you would fully appreciate the fact that Winston Peters has said ` and this is a quote from him ` 'Whanau Ora is just a giant koha fund set up in a separatist system to appease the Maori Party.' So how do you fancy your chances of getting the $20 million across the line? Each of these issues, we work through, through the strong relationships that we have and the processes we have. We, as a starting point` But you can't guarantee that money? As a starting point, any party's individual election manifestos aren't what is at the centre of what we're working through as a coalition. But, of course, we're undertaking this review so we can demonstrate the value of Whanau Ora. We're almost out of time. I just want to cover two things with you. Questions have been raised about how you personally handled the chief technology officer's job and your statements around Clare Curran's resignation. So, in your year as prime minister, have you, at any point, misled the public? I certainly` I certainly set out to never mislead the public. Will I make mistakes? Yes. But never is that my intention. And you haven't misled the public in your year in the top job? It is never my intention. I'm not going to say that I'm not fallible and make the odd mistake, but I never set out to mislead. So during the course of this conversation, you have described a coalition which you obviously feel is working really well. If you're happy with the way it's going, would you commit to a second term as the arrangement is now? Yeah. We work with whatever the public gives us. And as I've said, the public` But you'd be happy to do it over again with the parties as they are? I work with what the New Zealand public delivers. And the fact that we've made this coalition work so well, I think demonstrates my ability to lead a coalition government. But it's ultimately always going to be up to voters what we are delivered after an election. Do you want to commit now to running with New Zealand First at the next election? As Labour leader, my job's always to elevate the Labour vote. For now, I'm making this coalition work. After election day, we'll see what the voters give us. So no commitment to run with` alongside either party? We are all distinct parties. And we will all run on our agendas, but we will equally be able to demonstrate at the end of this term of government that we can also work well together. I appreciate your time today, Prime Minister. Thank you. Thank you. And if you've got something to say about what you see on our show, do let us know. We're on Twitter, Facebook and Instagram ` NewshubNationNZ. Now, our Twitter panel this week is Richard Hills and Marianne Elliott. They're using the hashtag #nationnz. Or you can just email us at nation@mediaworks.co.nz The address is on your screen now. And up next ` we speak with Tax Working Group chairman Sir Michael Cullen, but first Housing New Zealand CEO Andrew McKenzie on mistakes made and whether the agency can change. Welcome back. Housing New Zealand has apologised for what it now calls 'wrong or ill-judged policies' around meth testing in state homes. In a report released this week, it says around 800 tenancies were ended as a result of the flawed policy, affecting an estimated 2500 people. Housing New Zealand didn't track what happened to the people it evicted, but it says it's dismayed at the human impact of its policy. I couldn't bring anything with me. And all my furniture, everything I had for all those years. I was sleeping on couches ` you know, mate's couches, friend's couches, family couches. And then up and leave the next morning. We lost a lot more than furniture. We lost self-respect, respect from others. I've broken down,... at my lowest of my lowest, to a point where, yeah, I thought suicide. I would love an apology, you know? That will show me, you know, that person does think about those people. If it wasn't for my family, I think I would've... probably given up, you know? The government has now announced Housing New Zealand's social objectives will be enshrined in law. The eight objectives include being a fair and reasonable landlord and supporting tenants to live with dignity. I asked Housing New Zealand Chief Executive Andrew McKenzie how he is going to change the culture at the agency. As I say, we've been changing for the last two years. And we haven't evicted any tenants now for over a year. So we have moved already to implement that change. It became very clear when I arrived as chief executive that decisions to move people out were simply passing costs on to other parts of the social support system. If they're not living in one of our homes, somebody else will have to put them up somewhere. And it could be with special needs grants. So we made the decision over a year ago that we would not evict people, and where homes were unsafe, we would look to rehouse them. So we have already begun that process. We've begun the change. We're working to line ourselves up with a whole lot of other social agencies who are expert at helping people with some of the issues you face. It's not just methamphetamine use that will cause issues for a tenant, in terms of the stability of their lives. It could be alcohol addictions. It can be mental health issues. So DHBs, Ministry for Social Development, Corrections, police ` they're all agencies who we're working closely with so that those people are able to stay in their homes. All right, so it's going to be about degrees of change. You say you've started to make some change. But here's the thing. If we look at what has happened with the meth-testing regime ` it was a policy based on bad science, but let's put that aside for a moment ` the testing and eviction process was deeply flawed as well. There were no baseline tests, in most cases, done before tenants were moved out. They were robbed, in many cases, of their rights to natural justice. That kind of looks and sounds like bullying behaviour. Was it? We've certainly apologised for the way in which tenants were treated. My personal view, as I say, when I came in, is that we weren't doing it right. Was it bullying behaviour? I don't know that it was bullying behaviour. The lack of a baseline test is really about attributing whether or not that tenant caused the harm. Where the organisation was unable to determine that the tenant had caused the harm, they would rehouse them. Where it was determined that they did cause the harm, then they made the decision, for that period of time, not to rehouse. We've changed that behaviour, and we now focus on keeping them in the homes. They are rehoused where the house is not safe to live in. You need to understand that at the essence of this was when is a house safe for somebody to live in. And that was the reason that the organisation went out and looked for these standards and guidelines. But you were getting conflicting information over a period of time, and challenges to those guidelines. Yet you enthusiastically applied them. So can you see how some people will find it difficult to believe that, because you have changed a few things, and a few things have changed on paper, that you are actually going to change your whole culture and attitude? Yeah, I can understand that people would be concerned, absolutely. The organisation has ` and it has very openly said ` we did not do the job the job that we should do` You had a culture problem. I wouldn't say we had a culture problem. As an organisation, we were placing emphasis on different things. If you're a landlord, you think of those things that you've got to get a balance between` Yeah, but you're more than a landlord` If I could just finish, you're looking after a home, you're making sure the tenants are safe and healthy, you're looking after their well-being, you're complying with the legislation. All other landlords are affected by this too. And they too were subject to the Tenancy Tribunal decisions which said that if you put somebody into a home that had contamination above the guidelines for manufacturing, but even if it was due to use, then the landlord was liable for damages against those tenants. So that's the environment that the organisation was working within. And in terms of the change, we have begun that already. As I have said, it is over a year now since we evicted anyone. We have moved on. We have changed. We've stopped seeking damages from tenants. So the organisation is different, and it will continue to change and improve. And there are some very concrete steps outlined in our report which we will be taking to make sure we embed that change in Housing New Zealand. But you keep saying you're a landlord, just like other private landlords were held to these standards. You're more than a landlord, and you were more than a landlord then too. Your kaupapa was to build lives by housing people ` 'build lives', that's from your own website and your own statements. Yeah, 'Building lives and communities by housing New Zealanders', which is` But you didn't do that, though, did you? That is the vision for the organisation. We developed that at the end of last year to reflect our move from being a landlord to being a public housing landlord. As I say, I arrived here two years ago. The first thing I did when I got here was look at the direction of the organisation and understand whether we were operating in a way that was aligned with exactly that vision. So we developed it, so that's been there in the last two years. And because of that vision, and because of the direction we're taking around keeping people in homes, we came to the decision that we would move from evicting and not rehousing to keeping people in homes, rehousing them, finding agencies that could support people to deal with the issues that were causing them problems. And that's your approach in the last year. For the last two years, we've had that approach. Are you telling people that the entire culture of your organisation has been sorted in 12 to 18 months, and everything is all good? So, we're a big organisation. And all big organisations will occasionally have pieces of the organisation, whether processes or people, who will let them down. But I can tell you very, very clearly that the organisation's modus operandi, the policies we work to, the processes we work to, are all being changed to align with keeping people in homes. That's why we decided last year not to evict people. That's why we are now working and we have very close relationships with other agencies who are supporting these people in our homes. One of the things that you need to realise is that when you come and live in one of our homes, you come normally supported by a multiplicity of other government agencies. And we're making sure we are working with them so that we're able to support them, cope with the different slings and arrows that life has thrown at these people who live in our homes. So you don't evict people now, but you did. So how many children were kicked out of their homes under that meth-testing regime? So, we know that post-2013 around 800 households were moved out and` Yeah, how many were children? Well, we don't know the exact numbers, because our records are kept based on the lead tenant, who will be an adult. On average, there would be three people in each of our homes. So we're talking probably 1200 to 1500 of the tenants affected would have been children. Right. And you don't know what happened to most of those people, do you? Most of those people that you evicted, you have no idea what became of them. That's correct. So there are some households that we're unable to contact. So with all those children in those households that were kicked out, you sent them off, you don't know what's happened to them. Is that because you simply just didn't care enough about them? I think` Again, I go back. The organisation was a landlord, and while you were living in one of our homes, we obviously kept the records and we understood what was going on. Once you had moved out and you weren't living in one of our houses, then the organisation didn't` These are our most vulnerable people, and you were responsible for them. We were responsible for housing them. And when we stopped being responsible for housing them, we obviously didn't keep those records. What we're now doing is reaching out, using those other agencies that are supporting those families, to find out where they are, so that we can go and ensure that they have the assistance and support they need in their lives. So, obviously this happened over an extended period of time, as you pointed out. But you started in early 2017, didn't you, in this role? Well, late 2016, yeah. OK, so you` it continued on your watch. The enforcement of the policy continued on your watch, until you changed. So, yeah. So, what happened` There's a lot of issues that you need to get right here. One of them is staff health and safety, and that was one of the key concerns that drove the previous approach taken. So once we had established that we could safely ` and we had staff lined up, so that they were comfortable with the new approach we were taking, were able to implement it. So do you think you're the right person to stay on and do this job, given that you were part of a process that is now recognised as being grossly flawed? I think if you listen to` The decision as to whether I'm not appropriate is something that the board, obviously in discussion with the Minister, will make. You heard him yesterday say he has confidence in the board. He's got confidence in the direction the organisation is taking, with my leadership. What about you? Do you think you're the right person? Certainly I think that, since I've been here, I've made some very positive changes, and led them, to the organisation ` positive for our tenants, positive for our employees. Are you 100% comfortable and confident in the board? Because they were complicit in a lot of the decisions made. The report has said they basically abdicated, in some cases, their decision-making responsibilities to people in management. It kind of sounds like they were asleep at the wheel. So do you have confidence`? It's not my role to have confidence in my board. You've got to work with them. That's the Minister's role, so he'll determine who he is comfortable with leading the board. And as he said yesterday, he is comfortable with the board and has every confidence in them. He has appointed some new members to the board. So he's taken some action there. But he certainly expressed confidence in the board yesterday. That is not my role to make that judgement. But change comes from the top. Change, especially in culture, has to come from the top. And if most of the people at the top are the people who were at the top when things went horribly wrong, people will question whether you are able to make those changes. I think, first of all, the people who are at the top are the people who have led the change already, and changed approach, and that's certainly something that's been acknowledged by the Minister and is clearly set out in the report ` that the change process had begun, people were doing thing differently, the organisation was doing things differently. So that changed had happened. So this report, now, says that you'll be paying out discretionary grants, basically ` up to $3000 to affected tenants. That's not correct. Just to be really clear, what we'll be doing is we'll be providing assistance to tenants and it will be treated on a case-by-case basis as to how much money they should be provided. It's capped, though, isn't it? No, it's not capped. OK. In the report, the indicative numbers, based on the assistance we provided to other people ` because obviously people want to know, what's it going to cost us? So you could pay more than that figure? Absolutely, we will. There will be some larger households where we'd certainly expect it. So that was the average on the assistance that we provided to people in the past when they were moved out of their homes` It is based on material loss, though, isn't it? Yeah. So, if I could just finish, the compensation was paid to people who were deemed not to have caused contamination, and it was based on putting right the cost that they had incurred through loss of goods and for any moving costs. And so we will be following the same approach. We think it's fair and reasonable to do exactly the same to those tenants who were moved out and weren't rehoused. Right. So, on average, it was around $3000. You are prepared to pay more than that, depending on what the losses are. We did pay more than that in the past, and we expect to do that. But it's material losses, isn't it? Like costs of moving, if your belongings were destroyed as a result of contamination. I'm just wondering, what about the emotional stress, the loss of mana, the trauma, the having to house your kids again, and maybe them having disrupted education ` what about all that stuff? What's that worth? So, the assistance we're providing is, exactly as you've said, to compensate them for the material loss. Those other elements, we've been in, we've reviewed how government pays... assists people in these circumstances, and the approach we have taken fits with what government has done in the past. Of course, if there are other redress people are seeking, then they are still able to do that. You mean through legal action? This is about putting right what we've done, in terms of those costs we've caused to those households through moving them out of their homes. As part of the assistance, we'll also be looking to rehouse them. And we are also looking at how we work with the other agencies who are supporting them, to make sure that is done in a way that deals with any issues that they have, as a family or as a person. You're no longer going to have to return a profit to the government. So that is so that, Mr Twyford says, you can build more houses and also meet your welfare obligations to your tenants. What kind of money will that mean is directed into those areas ` The welfare. ...the looking after the welfare of your tenants? So, if you look at the welfare of our tenant, the first thing that we have is we have to give them a safe, healthy home. So, our stock is old. We're in the middle of a huge renewal period of time for our homes. Over the next 20 years, 45,000 of our 60,000 homes that we currently own will be renewed. They'll be insulated properly. They will be refurbished completely, throughout. So that is a massive programme of work that we're underway. And that money that the Minister's talking about will help us pay for that. In terms of the tenancy support, we've already increased significantly the level of tenancy managers we have in the organisation. We have specialists who are now dedicated to dealing with particular tenants who require additional assistance. We've got a really exciting development in the middle of Auckland, in Greys Avenue, where we'll be building a 279-home complex that will include homes dedicated to those people who have been chronically homeless. And there will be space for the Common Ground, Housing First... Right. ...type of services to be provided out of that. So those are all things that we're introducing in an effort to make sure that, as a public housing landlord, we can keep people in our homes and support them to have the dignified, stable lives that the Minister has talked about. All right. Just before we go, you have acknowledged that, for some families ` and this includes families with kids ` that the damage that has been done may be irreparable in some cases. So I want to give you the opportunity to speak directly to those people. The camera is just over there. What would you like to say to them? Certainly, to them, we have apologised for the disruption we've caused to their lives. And we want to make sure that we assist them to get back into a position of stability. And we will work with those other agencies who are supporting them to help deal with the issues that they have in their lives. So to those people, what, you're sorry? We absolutely apologise. You are sorry? I apologise. I mean, as an organisation, we did not do what we should have done. Thank you for joining us this morning, Andrew McKenzie, head of Housing New Zealand. Thank you. Appreciate your time. And still to come ` we dissect the week's political news with our panel. Plus, we ask Sir Michael Cullen if the tax review is a Robin Hood plan to redistribute wealth. Welcome back. A working group set up to review New Zealand's tax system has released its initial recommendations, including two options for a capital gains tax. The government wants any changes to be tax neutral, meaning that they won't increase overall revenue. Instead the plan is to improve income equality. Simon Shepherd asked Group Chair Sir Michael Cullen who would end up paying more under those recommendations. Well, basically, people who have substantial income via capital assets in one form or another. You've got investment signals, which tend to favour going into non-owner occupied housing ` so you've got this pressure into the housing market of excessive investment. You've got, effectively, under taxation of those at the top end of the income and wealth scale, because there's under taxation there. We have a tax system which is, by international developed country standards, a low level of redistribution via the tax system. So this is about being Robin Hood ` taking from the rich, giving it to the poorer people in society. Well, not quite like Robin Hood but somewhere close. Not so brutal as Robin Hood? But it's also like making sure that if Robin Hood and the Sherriff of Nottingham got the same income, they pay the same tax. Right. So, probably in the original version Robin Hood would have been paying more tax than the Sherriff. How are you going to do that? If you're going to create more tax models ` like capital gains tax, more taxes ` are you going to compensate? Are you going to cut taxes elsewhere? Well, that's certainly one obvious option, and we've got to look at a number of parts of what we are dealing with at the present time. I mean, primarily, you've got on the table not just capital income taxation ` there's also potential for environmental taxes. There's the impact for capital income taxation on savings schemes like KiwiSaver ` a whole range of things of that order. You want to make sure, say, with respect to KiwiSaver, that at least for the vast bulk of KiwiSavers are not just very low incomes but up in the middle incomes ` they are not disadvantaged by these changes. Well, that's right. So, a capital income tax, or a capital gains tax, would target those shares. Why would that disincentivise us when we are so bad at saving? Well, that's why you want to make sure that you offset that. How would you do that? Well, you might look at the way in which some of the current taxation on KiwiSaver occurs. The previous National party government introduced the application of what's called employer contribution, superannuation contribution tax, on KiwiSaver contributions by the employer. That dramatically reduced the net return, or net investment, into KiwiSaver funds. It reduced, basically, a third` And you're proposing getting rid of that, aren't you? Well, what we're saying is ` you might want to look at some partial reduction in that tax which would not have flow-on effects elsewhere but that would offset any impact of the imposition of capital income taxation. Because you could say, 'Well, let's just exempt KiwiSaver', but then what about other schemes which are similar in character and other forms of savings and so on and so on. And that then becomes` We've kind of tilted the playing field again in a very strange way, and we're trying to even up the playing field. This whole debate about capital gains tax ` I mean, Labour's been down this path twice before, you're proposing a different model, but why now? What's different now? It's been political suicide in the past. Well, I'd like to claim that that was the only thing that lost Labour the 2011 and 2014 elections, but I would have to say, I think historians would find it a very strange judgement to arrive at. But it hasn't been politically acceptable. There was no real sign, actually, that that had any great impact in shifting votes around in 2014. So, do you think coming up it would shift votes around? I think it could shift some votes around. You can't be sure what the net movement of those votes would be. I think it depends on the details. At the moment, because we haven't got all the details out there, because we've yet to make a number of decisions about even whether we're going to recommend a capital income tax. We haven't done that yet. It's easy for people to fill the holes with misinformation. Once we've done further work, I think it will be much harder for people to do that. I've said to the officials, 'What we will need in the final report is worked examples of how` You know, 'You are a person on the average wage on KiwiSaver. How does this affect you?' That's how people actually understand what the implications are. Can I talk about a couple of other things that you've outlined` recommendations. One is charity. So, your report says that charities could be getting some tax breaks but not really using their income for charitable purposes. Is there a concern there? Yes, I mean, they get favourable treatment by the fact that charities aren't taxed on their income. So, should they be? And that's a concession which is made because of the charitable purposes. This is a way the government, in effect, is subsidising the activity of those charities. But some of those charities are not being charitable. Some of those charities are, at least on first examination, appear not to be passing on much of their income out to the supposed intended beneficiaries. So, if you look at what was done in the United Kingdom they don't have the initial tax concession. What they do is ` they tax, but then the tax is rebated in full on the pay-out to the purposes that the charity was set up for. So, there's some room there to look at. There's room to think about that, but it complicates it a bit more. Well, let's look at a couple of other issues around the environment. The report says New Zealand doesn't have much environment taxation. Other environment taxes you're talking are about, perhaps, to change behaviour. And these are like, paying more to dump waste and drive our roads. It's all about changing behaviour. Indeed, it is. I mean, in the UK this has been extremely successful in reducing the amount of waste going to landfill. You know, we have a huge amount of waste go to landfills. It's becoming more and more of a difficulty. People increasingly don't find this acceptable behaviour. If you're looking at it from a perspective of Maori, where you've got leaching coming out of these landfills in streams and so on. All of those sorts of things, that's sort of unacceptable. This is something we could do something about. The idea, just the end of the day ` why you'd put a tax on ` it's not necessarily to raise huge amounts of money, because hopefully behaviour changes, so that the amount of money that you collect at the end of the day may not be much more than we collect with a much lower rate at the moment. There's just a lot less waste going to landfill. One last question ` these taxes, this tax reform, is about being fair and equal, but if you're going to put those user-pays taxes on in the environment area, in the congestion charges, they target people ` or have more impact ` on the lower socio-economic people, so it's not fair. It's a question of, 'What else do you do?' That's when you come back to` And so what else will you do to offset that? When you come back to revenue neutrality, what are the best offsets? Now, the first look is, well, since many of these things are being put on the cost of living in some way. I mean, obviously waste levies may feed back into the cost of living in some way, certainly some of the other tax will, think, 'Well, maybe you should reduce GST?' We've actually done quite a bit of work, with the assistance of the officials, and it looks reasonably conclusive, although GST is regressive ` because it bears more heavily on those at the bottom ends in terms of income, that actually reducing the bottom tax rate, or having even a tax-free area at the bottom, is more effective in compensation. If you put that in place with some more taxation on capital income, it's possible to come out with a package which is actually better for lower-to-middle income earners. So we could be looking for tax cuts there? We could be looking at tax cuts, particularly targeted towards the lower-middle income area. You could do that in a way which only a small amount flows-on, in effect, to those like me on higher incomes. Sir Michael Cullen, thank you very much for your time. Thank you. And still to come, we catch up with our panel ` writer and political commentator David Slack, Newsroom political reporter Thomas Coughlan and Trish Sherson from Sherson Willis PR. Welcome back, I'm joined now by our panel, political commentator David Slack, PR consultant Trish Sherson from Sherson Willis and Newsroom political reporter Thomas Coughlan. Good morning to you all. Hey, Trish, if I can start with you first. The prime minister is putting on a very relaxed vibe about the state of the coalition and saying that it's been over-egged, this idea that there's some conflict. Do you believe that? Well, I think the problem that the prime minister has got is that she's constantly being asked now, 'Who is in charge?' And, you know, that old rule ` if you're complaining or explaining, you're losing. Winston seems to have become almost like the Grey Wizard standing at the, you know, 'You shall not pass.' And I think we've only just started to see him really hammering his staff up and down. There are some bigger issues to come, so I think Jacinda has spent the week trying to stamp her mark but in doing so, and having to say, 'I am in charge', it suggests that she's worried that this narrative is really bedding in. Thomas, it's a coalition government now, Apparently (!) Apparently. It's not a Labour-led coalition. The opposition were quick to point out that there are over 55 references in the record in the House where it was previously called a Labour-led coalition. Do those words matter? Well, as you mentioned in your interview Winston Peters is very fond of the phrase 'words matter'. He's said it to me a number of times, and has made it very clear to journalists that words matter. I wouldn't be surprised if at some point in the last year he's had a quiet word to the prime minister about the use of the term Labour-led government, because it has disappeared from government press releases, the Labour website, other websites and government documents. It is gone. I mean, she has a point about it being a first. It's a very European-style coalition government, where you do have a major party that is smaller than we're used to having in New Zealand. I think the big question, and this is going to really play out over the next three years, is whether New Zealand still has a first past the post culture. Does she have a mandate with governing from` Sure, she's the largest party in the coalition, but she's certainly not the largest party in Parliament. No, but, David, she reckons she's getting her proportionate share of the spoils. Is she? Yeah, I think that Thomas is right. We still have this fixation with first past the post and who's got what, when in fact, perversely, we seem to love watching Borgen and seeing what actual Scandinavian MMP politics looks like, but we're not prepared to try it out here. We keep reverting back to, 'Oh, who's got the control here?' The way I prefer to judge it, and I wonder if maybe voters who aren't so fixated with politics might see it too is ` what do you get out of this in the end? It's much less a consideration of ` who's got what prestige, and who's got what label. But what's being delivered on housing, in particular affordable housing, cost of living, all of those things that actually matter to people. And I suspect that, although it is important to give Winston Peters his prestige at all times, and it's important for him to keep reminding his slim wedge of voters that he's there. I don't think it matters that much to the prime minister as you might think. As long as she's getting the policies that she needs to get through, which brings us to the employment relations legislation ` the amendments there. She wasn't prepared to say that that was a bottom line for her party, and it is the Labour Party, Trish. Do you see that causing some problems for her? Well, she can't, can you? That's the reality of the politics of the situation. She can't say it's a bottom line, because she's serving at Winston's pleasure, effectively. I think that is one of the big tests for this government ` is around that Employment Relations Bill, and in particular the clauses around those multi-employment collective agreements. I know some people say that isn't a big change, actually for most employers going back to that kind of mecca-style agreement, that is a really big deal. I think what was really symbolic this week is when Jacinda announced the increase in the refugees, Winston Peters standing alongside her. The first words out of her mouth were ` 'The Coalition Government today is announcing.' That's, actually, a big win for Winston to have that wording now embedded in every time you have an announcement. And not to have the Greens standing beside you at the podium. That was interesting as well. Whanau Ora, Thomas, she was saying ` because, obviously it pains to keep repeating that unless it's in the speech from the throne, coalition, confidence and supply, it's all up for negotiation. They promised $20m for Whanau Ora on the campaign. They've got a review, but can you see them getting that? Because it's not one of Winston's pet projects. Whanau Ora is going to be one of the really ugly decisions that this government has to make. Winston Peters is not in favour of dedicated funding to Maori and Maori issues. So far, that's been the Government's position. You notice in the budget there wasn't a huge swell of extra money for Maori as there was in Helen Clark's first term, under the 'closing the gaps' policy. But obviously with the issues around Meka Whaitiri, the Maori caucus is really closing ranks. There is an understanding that with the Maori seats, if they're going to stay within the Labour ranks, in the Labour camps ` and they might not. There's a huge wasted vote in those Maori seats with the Maori Party gone, the Labour Party, this government, will need to do something for Maori. That might mean dedicated funding, and Winston's not going to like that. I think there is something overarching to consider here, though. That is that all three of these parties do agree with the idea that transformation is necessary. That's what last weekend was all about. You can get bogged down in the minutiae of these things and lose track of that larger question. You know, how are we going to make us the kind of economy that copes with a robotic world of displaced jobs and vast change. How do we make sure that people have a decent standard of living? How do you ensure that everybody has a decent standard of living? That's what was being laid out in that very large plan. So, to use the analogy that the prime minister was using, we're too obsessed with the car just worry about the destination. Yeah... Actually, yeah. My word would be 'outcome'. Yeah. But, yeah. Yeah, sure. OK, so, you've raised Meka Whaitiri there. The prime minister, kind of, ripped that plaster off and then headed to the UN. Did she have no choice? I don't think she, absolutely, had any choice. There was so much around the Whaitiri case that really is against what this Government has said in terms of values and things like that. Really interesting, though, when you saw Jacinda trying to take charge around Meka Whaitiri, it was as if she'd been going back and watching tapes of Helen Clark. It was a very Clark-esque announcement to try and stamp authority and, as you say, rip the plaster off cleanly. All right, we've got to leave it there. We're heading to a break, but do stay with us. We'll be back soon. Welcome back, you're with Newshub Nation and our panel. Spoke to Andrew McKenzie this morning, the boss of Housing New Zealand. Do you think, David, that they've apologised enough, they've made good? I think the proof will be demonstrated in the years ahead. I'm reminded of what happened with IRD in the 90s. You might remember there was all of that culture, with people on meat-hooks and things. The Home Show, in particular, I remember exposing that. It time for that to shift, because people go at their work with a particular mentality, and I think the mentality of Housing in recent years has been people from the property sector who see it in very transactional terms, and here's a CEO who was previously a CFO` A money man. Yeah. I thought that he was saying some admirable sentiments. I'm just not sure if that culture is necessarily transformed yet, and certainly the invitation is there for them to do it. In my experience in business, it tends to only change once various people go. Well, that's interesting because the board is pretty much the same, and, obviously, Andrew McKenzie wasn't there at the start, Trish, but he was there for about 18 months of implementing this policy. So, do you think legislating social objectives, you know, saying it so and writing it down makes it so? Well, it absolutely doesn't. It's interesting David raised that point about the IRD culture change, because I was working for Rodney Hide at the time when he ran that very sensitive, and at the time quite amazing campaign, to change the culture, because, yes, people were committing suicide. It was a dreadful time. But that did take several years. I guess what the government is trying to do is get a top-down, really hard-core, sort of blow torch on the bum of Housing New Zealand to say, 'New sheriff in town, and these are our expectations.' It's a really tough one for Housing New Zealand. I think the change will actually take quite a long time, because they've had, how many years of operating under that quite commercial model, I guess you'd say. Yeah, because he keeps talking about being a landlord, and now they are more than a landlord. They're a landlord for the most vulnerable. This was a policy of the National Government, Thomas. Has any of this stuck on them? I mean, Judith Collins put out a press release. She's their new Housing Spokesperson, saying that this is a government that are going to be paying money out to crooks. I don't think much of it has stuck on them. I think they're spinning it in the way that they are spinning their overall kind of 'tough on crime' approach. You see with the three strikes they've done this as well. Labour, traditionally, is perceived as being soft on crime and Andrew Little's ideas around justice reform are going to take them further in that direction, if that's the way that you perceive that strategy. So, this particular event is going to play right into National's hands. It gives them another opportunity to paint Labour as the soft party, when really it's National's policy and they should've picked it up earlier. We heard in the interview that it shifts the cost from Housing New Zealand to the health system to the justice system. That's social investment. That was a National policy. They should have picked up on that. These people were safer in their houses. They should have been kept in their houses. It would have been cheaper, if this is the actuarial approach to government you're thinking about, to keep them in their houses. It's a National scandal at every level of the policy spectrum. There has been very little accountability. Not from that government, not from this government, not from the civil service. I would refrain something I've been saying this week, which is ` the National Party appears to be defining 'meth crook' as somebody who is treated unfairly, treated harshly, even though they'd done nothing wrong. I was just reminding people, other people, who are therefore 'meth crooks', would be Trayvon Martin, people who were exonerated through DNA, and Jesus. (ALL LAUGH) Let's move on to tax. Sir Michael Cullen and the Tax Working Group, they've put out their weighty, well, they call them 'indications', not recommendations, Trish. Is that semantics or does the language matter there too? I think the language very much does matter. I mean, the interesting thing about this tax working group, particularly, is an example of the new government coming in and, obviously Labour has had three tries now with capital gains, and it's gone very badly for them in those election cycles. So they pushed it out to this working group to say, 'Hey, you guys go and do the work and we'll figure out what our policy is off the back.' My concern around this, and I heard Grant Robertson on Morning Report yesterday morning being questioned about it, first of all ` this tax is about bringing down house values. Is that really going to achieve it? 'Oh, no, we don't` Not really.' Then it's about fairness and equality. Is it going to achieve that? 'Oh, no, not really.' Then it's because every other country has this, and I think the overarching concern I'm hearing from people around this working group is that we have a simple tax system, which is a good thing. This would make it a very complex tax system. In Australia 30% of accountancy resources are around capital gains, because it is really difficult. And if you're trying to achieve equality, use the transfer system to do that. Don't try and make the tax system more complex. Thomas, they might need Winston Peters to get on board with this, and previously he has said that capital gains taxes don't work. Could that be a make or break issue too? Well, they're going to take the final report which comes out in February. That final report is almost certainly going to recommend some form of tax on income earned from capital, not a capital gains tax. And then Labour will take that to the 2020 election and then implement it after that, if they win. So, yes, if Winston is in that government they will need his support. It will make it difficult. The Greens, on the other hand are in favour of the broad-based capital gains tax, also not on the family home. I think you could make it a lot simpler and just have a general capital gains tax ` including the family home. We don't` ...and I back that! We're going to have to leave it there. We'll leave it with you backing it. We're out of time for the moment, and former Hastings mayor and current National MP Lawrence Yule joined us on Facebook Live this week, to talk about moving from local to central government and the hardest lesson he ever learnt in politics. Oh, the hardest time for me in politics was, undoubtedly, the Havelock North water contamination. It wasn't really a lesson. It was just a series of events that I had to manage. That was extremely stressful. There was` You know, a lot of people got sick. Some people died as a result of complications of it. It was a horrendous time. But it did teach me that I need to front up, be honest and own the thing. That's what I did. I was on the media every day. I was telling people what was going on. I think if you ask people today, they respected the fact that I did front up on that. Do you think you handled that situation properly? Yes, I do ` as well as I could've. There's always learnings and things we could have done better, but once we knew what we were dealing with I'm not sure how we could've handled it better. I couldn't take the fact that a number of` you know, thousands of people had been poisoned. I couldn't take that away. It was there. I just had to deal with it at the time. And that is all from us for now. We will see you again next weekend. Thanks for watching. www.able.co.nz Captions were made with the support of NZ On Air. Able 2018