Hon RODNEY HIDE (Minister of Local Government) Link to this
I move, That the Spending Cap (People's Veto) Bill be now read a first time. At the appropriate time I intend to move that the bill be referred to the Finance and Expenditure Committee. [ Interruption] I am looking forward to Mr Shearer’s wholesome support. I say to Mr Shearer that the bill is a timely response to New Zealand’s challenging economic circumstances. It will provide some more certainty around the growth in Government spending and greater spending restraint, and will improve the transparency of spending decisions. The bill will lead to Government objectives being delivered through a State sector that takes up a smaller share of the economy, rather than a larger one. That is something I know that Mr Shearer is concerned about. A smaller, more efficient State sector will allow a lower tax burden over time, supporting higher economic growth and higher living standards.
The bill also responds to weaknesses in our present legislative framework. The fiscal responsibility provisions of the Public Finance Act 1989 focus on achieving and maintaining a prudent level of Government debt and on the operating balance required to achieve that. The Public Finance Act has served us well in that regard and has helped New Zealand bring down its net core Crown debt from 56 percent of GDP in 1992 to 5.6 percent in 2008. But the Public Finance Act has not prevented core Crown expenses from rising as a share of GDP. We have seen Government expenses soar from 28.8 percent of GDP in 2004 to a forecast 36 percent in 2011. I will repeat that: Government expenses have increased from 28.8 percent in 2004, when Helen Clark was in charge, to 36 percent now. It has been easier for Governments to increase spending than to reprioritise and to drive greater efficiency within the existing base of spending.
The bill is designed to place greater disciplines on governance, deliver greater value for taxpayers’ money, and protect New Zealand’s growth prospects. The bill has two main elements, I say to Mr Shearer. The first is a spending cap that limits the annual increase in core Crown expenses to the rate of population growth multiplied by the rate of inflation. The second is a requirement that any proposed spending increase above that cap be subject to a binding referendum on whether the cap is to be raised to allow for that increase. The spending cap for a financial year beginning 1 July is based on the product of the annual percentage change in the resident population and the Consumers Price Index. This rate of increase is based on data for the 12 months ending 30 September in the year prior to the financial year for which the cap has been set. That rate is then applied to the core Crown expenses from the previous financial year.
The spending cap provides for a small number of sensible exclusions. For example, the cap is designed to allow fiscal policy to continue to play a stabilising role in response to the economic cycle and shocks. Unemployment benefit expenses are therefore excluded from the cap so that they can continue to expand and to contract through the economic cycle in a counter-cyclical way. Borrowing expenses are excluded from the cap as they are effectively limited by the Government debt objective required under the Public Finance Act. Similarly, capital expenditure is excluded from the cap because it is constrained by the debt objective and the fact that the operating expenses associated with capital expenditure would need to be met from within the cap. The bill provides for national emergencies such as natural disasters, where it is appropriate to exclude expenses incurred in responding to an emergency. Impairment losses on assets such as student loans, which are recorded as an expense, are also excluded from the cap. These tend to be volatile from year to year and hard to forecast, and therefore difficult to manage within the cap.
The bill fits with the annual Budget cycle by requiring the spending cap for a coming fiscal year to be publicly announced in the Budget Policy Statement ahead of the Budget. Indicative caps for the following 2 financial years must also be disclosed. The Minister of Finance would be subsequently required to state, when presenting the annual financial statements of the Government to Parliament, whether expenses were within the cap for that year. If not, the Minister must explain why expenses were incurred in excess of the cap and what measures will be taken to ensure compliance in the future.
The Government may at any time initiate a binding referendum on a proposal to increase the spending cap for a specified financial year. The bill requires any referenda to be held under the provisions of the Referenda (Postal Voting) Act 2000. The question put to electors requires a simple yes or no response and is specified in the bill. If a majority of votes cast in a referendum favour the proposal to increase the spending cap, then the cap is raised by the specified amount. A referendum may be held on a proposal to increase the spending cap for the financial year ahead or to increase the indicative spending cap for a subsequent year. It is envisaged that a referendum on the later proposal would fit better with the Budget cycle. In such a case, a referendum could be held 12 months before the start of that subsequent financial year, allowing time for the result to be reflected in the Budget strategy and process relating to that financial year.
The Spending Cap (People's Veto) Bill has its origins in the New Zealand Taxpayer Rights Bill, which I drafted as a member’s bill during the previous term of Parliament. The National-ACT confidence and supply agreement provides for the New Zealand Taxpayers Rights Bill to be referred to the Finance and Expenditure Committee as a Government bill. That bill has been refined so that it focuses solely on limiting the growth in expenses, thereby allowing for future taxation to be lower. It has also been renamed the Spending Cap (People's Veto) Bill to better reflect its intent: capping the annual growth in spending and allowing people a direct say over any higher increase.
New Zealand is grappling with the hangover of too much spending and too much debt. Putting New Zealand back on the right path will require restraint and a determination to never again allow excessive public spending to drive up interest and exchange rates and to drive out growth. The Spending Cap (People's Veto) Bill will help to provide that restraint and will support that determination.
There are two questions in the bill, really. One is whether there should be an announced cap on Government spending each year; certainly I believe there should be. The second is whether, if Government is to exceed that cap and increase spending in real terms, the people of New Zealand should be able to have a say on that through referenda outside the normal electoral cycle. I say they should. I think it is tough for members to stand up at this time and say that they do not support the idea of Government getting its spending in order, and that they do not support people having a say. After all, it is the people’s money that we are spending here. I commend the Spending Cap (People's Veto) Bill to the House. Thank you.
PHIL TWYFORD (Labour) Link to this
Normal transmission has been resumed in this House. I found it deeply unsettling in the last debate to hear one Labour speaker after another get up and give praise to Rodney Hide. It was very, very unsettling and concerning to a Labour member of Parliament to hear one speaker after another on this side of the House praising Rodney Hide for his good stewardship of the Local Government Borrowing Bill. We are now back on much more familiar territory. We are here to oppose and criticise the nutty, extreme ideas that have been Rodney Hide’s hallmark since he came to this House. The bill before us now, the Spending Cap (People’s Veto) Bill, is another batty idea borrowed from the extreme right internationally. It seeks to institutionalise and to structure into our political system a cap on Government spending.
Amy Adams is sitting in the back row there, chipping away, but she knows that National does not support this bill. National members think it is a nutty, extreme bill, because it is really—
OK, so Amy supports it. Now we know where Amy stands on the political spectrum within the National Party.
Mr DEPUTY SPEAKERThank you, Mr Deputy Speaker. I want to say, before we leave the subject of Rodney Hide, that I was disappointed that in that speech there was not more personal content, more anecdotes, and more recollections of his time in this House. Rodney Hide is one of the more interesting people that have passed through this House in recent years, and it is a matter of some disappointment to us that we are being denied our democratic right to hear his valedictory. That is a great loss to this House. I think he would have some very interesting stories to tell and some very amusing anecdotes.
He might be back; it is true. It is hard to know what is happening with the ACT Party list these days. He could well be back. There could well be a counter-coup any day now. In fact, the Spending Cap (People’s Veto) Bill could be a Trojan Horse for Rodney Hide’s counter-putsch. However, I will address my comments to the Spending Cap (People’s Veto) Bill.
It will not surprise anybody in this House, least of all Rodney Hide, that Labour is opposing this bill. We do not think spending cap legislation is needed, and there is plenty of evidence from overseas, where it has been tried, that it simply does not work. In the course of this debate we will be discussing some notable examples of countries that have a spending cap that simply has not worked.
This kind of approach—a spending cap—is no substitute for the normal democratic process where elected leaders and citizens work out between them the appropriate parameters for Government spending and taxation. Nothing like a spending cap can really achieve the kinds of aims that it has. It is an attempt by stealth to systematically and drastically cut Government spending, and we think that would be damaging to the economy and damaging to New Zealand.
Under this bill core Crown expenditure would be capped in dollar terms at the level of the previous year’s spending prior to the law coming into effect, and increases would be allowed only at the rate of inflation plus population growth. The limit can be bypassed by a referendum or by the use of emergency provisions. We will see that there are other examples—Japan, most notably, I think—where such a spending cap is bypassed on an annual basis. If the cap was effective—and we think that is a big if—it would result in Government spending as a share of the economy declining over time, and would lead to severe spending restraints.
If National and ACT really want to slash Government spending, then we think they should be much more honest and upfront about it. They should go to the people and say: “This is what we want to cut, and these are the things we are going to cut—superannuation, health, education.” Why not just be upfront and honest with the New Zealand people and campaign on that basis? But this bill is a sneaky attempt to slash spending and to roll back the State. I do not believe for a moment that that is what New Zealanders want.
The impact this bill would have on superannuation is one of the illustrations of how misconceived it is. The allowance to increase Government spending at the rate of inflation plus population growth deliberately ignores the fact that, in the case of superannuation, because of the ageing population and increasing health costs, those things are increasing much faster than the rate of inflation and faster than population growth. Under Rodney Hide’s bill they would be drastically cut back.
We believe that a much better solution is to have those trade-offs, those dilemmas, discussed and debated and decisions made in the course of the democratic process. For example, the spending cap would rise 8 percent by 2015, but the cost of superannuation will rise by 22 percent. What would National do if it had the opportunity to pass this bill? What would it cut to make up for that crunch?
In very recent history we have an example of a Government that cut back the national debt—Government debt. Over the period that the fifth Labour Government was in office, Government spending in the first year was 30.9 percent of GDP. When the fifth Labour Government left office in 2008 it was 31.1 percent. So there was basically no change in the level of Government spending as a share of the economy. That is an illustration that this issue is about political will. It is about the democratic process. It is about good policy and good economic stewardship.
Under National, spending has skyrocketed to 36.4 percent of GDP. At the same time, the Government has cut revenue, particularly by means of tax cuts that have disproportionately benefited the top end of New Zealand income earners. It has opened up a massive hole in the Government accounts and it has led to National borrowing $36 billion in less than 3 years.
I mentioned Japan before. That country is a really good illustration of what we are talking about with the Spending Cap (People’s Veto) Bill. Japan has had a spending cap since World War II, but that has not stopped the country from amassing a debt equal to 200 percent of GDP. Every year the Japanese Government gets an exemption from its spending cap legislation from the Parliament.
This bill is ideological and ill-thought-through legislation that even Treasury opposes. National, deep down, knows that it is not a goer. It is basically a going-away present to Rodney Hide. National is paying lip-service to the confidence and supply agreement, otherwise it would have done it within the 6 months that it promised in the confidence and supply agreement. But National knows that this bill will not be passed in the term of this Parliament, and, really, it is the equivalent of a bunch of flowers that it is giving to Rodney Hide, in lieu of his valedictory speech.
I will comment on what Treasury had to say about this bill. It insisted on a number of modifications, which were made to this bill before it came to the House. Even Treasury thought it was an extremist and ideological draft law. Treasury said that it “does not support imposing constraints on the ability of the government to set fiscal strategy via hard parameters in legislation. A legislated spending rule, which a government did not wish to be bound by, could lead to efforts to circumvent the rule—potentially favouring certain types of decisions … and raising the risk of unintended or perverse outcomes.”
One of the commonly found perverse outcomes of these kinds of spending caps is that they encourage Governments to meet their policy objectives through tax rebates. “To be effective”—Treasury says—“the fiscal framework needs to be reasonably stable over time. This criterion would not be met if a legislated spending rule was likely to be overturned, shortly after its introduction, because it lacked widespread and enduring political support.” That is exactly what would happen if this bill was passed. A future Labour Government would see it out the door straight away.
AMY ADAMS (National—Selwyn) Link to this
When reading through the general policy statement at the beginning of the Spending Cap (People’s Vote) Bill, we see that the bill is designed, as we heard in the first two speeches in this debate, to put in place a cap whereby annual increases on core Crown expenditure are linked to the rate of inflation and the rate of population change, and then to put in place a mechanism by which the public of New Zealand, through a binding referendum, can express a view on that spending cap and seek to increase it. As the Minister said in his opening words, they could do that either for that year or for out-years.
This is an interesting issue. I think we would all agree that, certainly in the current economic climate across the country, managing the Government’s books and keeping control of Government spending is critical. A key plank of this Government’s economic agenda is that we manage our expenses well—that we are careful how we spend our money, and, most important, that we do our best to keep debt at prudent levels. On that point, I note that under the Public Finance Act the very first principle of responsible fiscal management is that debt is reduced to, and maintained at, prudent levels, so I think we are all very aware of the need to keep public debt as low as possible.
I note that, given the extraordinary events this Government has faced, not the least of which occurred in the Christchurch and Canterbury earthquakes, it is still an impressive achievement that having inherited Michael Cullen’s decade of deficits, we are still able to project a return to surplus in less than 3 years. But that has not been without this Government having to make some very strong decisions and express the very clear view that if we are expecting New Zealand to constrain its spending, and get beyond the ethos of living well above its means by spending more than $1.11 for every $1 earned, the Government also has to model that behaviour. We have spent these 3 years being very clear with the Public Service that we expect all of Government to be very, very careful with what it spends.
We are very aware that Government money does not belong to us. The Government has nothing except for what it takes out of the pockets of hard-working New Zealanders. Frankly, we owe it to those people to make sure that every dollar we spend is spent in the best way possible, having a very careful analysis of the opportunity cost of where we spend that money, and understanding that we can spend it only once. We do have to ensure that when the Government spends, it does so in a very careful way. The Government should support economic growth but it should not be leading it; it certainly should not be dominating it, as we saw with the last Labour Government.
The issues around controlling and tightly constraining Government spending are very live ones, and ones that we have to pay careful attention to. What we have in this bill introduced today by Minister Hide is certainly an interesting approach to addressing that, and to looking at the measure of a spending cap to ensure that future profligate Governments are not able to borrow and spend, and borrow and spend. In that vein, it is no surprise to me that Labour members are dismissing the bill out of hand, without even wanting to have a public debate about it. Labour is a borrow-and-spend party. The only way Labour knows how to govern is to borrow and spend, borrow and spend. It is of no surprise to me that Labour members are not even willing to have a debate on the issue, because, frankly, without a borrow-and-spend platform they know they would never be able to win another election. So it is no surprise that Labour wants to shut this down before there can be a debate.
I think this is an interesting issue. I think it is worthy of debate. I think we should send the bill to the Finance and Expenditure Committee and consider the issue in depth, and I look forward to that consideration at the select committee.
Hon RUTH DYSON (Labour—Port Hills) Link to this
The member who has just resumed her seat, Amy Adams, is generally not a member whom we would accuse of letting us die wondering what her opinion was on an issue. She is a woman who has different politics than me but who has very strongly held principles and beliefs. I have never in the past heard her so reluctant to share them. I have never heard a speech by that member that totally ignored the topic of the debate, which is the bill from Rodney Hide, the Spending Cap (People’s Veto) Bill. The member barely gave it a passing glance throughout her entire speech, and certainly she did not give any impression—certainly not on the public record—that would leave us in any doubt that she supported it. She was not prepared to commit those words to this bill.
If I was Rodney Hide, I would be spitting tacks at the way he has been treated by this Government. What a humiliation to have the confidence and supply agreement that Rodney Hide signed with John Key ignored. Rodney Hide signed with John Key that they would have this agreement and that Rodney Hide would vote for John Key’s legislation. That is what Rodney Hide said he would do all the way this term if National agreed to the conditions of the confidence and supply agreement. What did John Key do with the part of the confidence and supply agreement that said that the Spending Cap (People’s Veto) Bill would be introduced—when did it say it would be introduced in the confidence and supply agreement, I say to Mr Hide—within the first 6 months of forming the National-led Government? When was the election? It was on 8 November 2008.
Grant RobertsonIt was 8 November 2008. Grant Robertson was elected as the member of Parliament for Wellington Central that day. That was excellent. That was an excellent move by the fine people of Wellington Central. That member might help me calculate the 6-month period from that day, when he was elected. Iain Lees-Galloway was also elected, as the member of Parliament for Palmerston North, on that day. So 6 months from 8 November 2008 is May 2009. Let us give National a bit of leeway. It did not form the Government on the day of the election, so let us give, say, 3 months leeway. Let us be really generous. That would take us to—
That is right—August 2009 is when John Key pledged to introduce the Spending Cap (People’s Veto) Bill into this House. That is the outside limit, being very generous. What did he do with that confidence and supply agreement with Mr Hide? This is what he did with it—worth nothing. Who cares?
So with only 8 sitting days of this Parliament left, the bill is introduced. No wonder Amy Adams gave such a careful speech. How many times did she say in that very short but careful speech that this is an interesting proposal to deal with an interesting issue? That means: “This is completely out of the ballpark for anything we would do, and we have delayed introducing it for as long as possible. We don’t care how embarrassed we have made Rodney Hide.” That is not nearly as embarrassed as his own party made him, frankly, by having a successful coup for the leadership led by a man who was not even a member of the party. It is extraordinary. So this bill is being introduced and referred to the select committee only in the dying days of this Government, rather than in the 6 months of the forming of the Government, which is what was promised in the confidence and supply agreement.
As my colleague Phil Twyford said, there are spending caps on Government spending in other countries. We should look to, for example, Japan. Japan has had a spending cap on Government expenditure since the end of World War II. It has not stopped Japan amassing debt equal to 200 percent of GDP. That is what the level of debt is in Japan—200 percent of GDP. What the Japanese Government does every year is just ask for an exemption from Parliament. I do not propose that as a good idea, either. What I suggest is that our democracy and our Parliament should be robust enough to have those debates for ourselves, not to be restricted by some mandatory dream of Rodney Hide that we would have a spending cap imposed on us, let alone a spending cap when we could just ask ourselves for an exemption, which obviously would be granted given that the largest party would be leading the Government and would have that exemption to the spending cap as part of its confidence and supply agreement. Let us hope that future confidence and supply agreements have more integrity than the one that National signed with ACT.
The member of Parliament for Selwyn, Amy Adams, also spoke about the crippling debt and actually implied that it was left by the last Labour-led Government. Well, she should be very careful about what rubbish she puts on the public record, because those facts are available to every single member of the country. When we were elected in 1999, Government spending was 30.9 percent of GDP—30.9 percent of GDP. When we left office at the end of 2008, it was 31.1 percent. What is the difference between 30.9 percent of GDP and 31.1 percent of GDP? Not a lot.
I think even that member would be able to add it up. Even that member would be able to add up the difference between 30.9 percent of GDP and 31.1 percent of GDP. And 2¾ years on under National, what is the percentage now? It is 36.4 percent of GDP. So who are the reckless spenders?
The Government borrows money, spends up large, and cuts tax rates for the highest income earners. At the same time, it is slashing front-line services for New Zealanders from Government departments and agencies, particularly in the provincial areas. So this bill is not what is needed; what is needed is a responsible attitude for Government and an ability to tell the truth. The truth about the level of debt is that it has blown out of control since National was elected. I will just repeat those figures for the member who still does not understand them. When Labour was elected at the end of 1999, Government spending was 30.9 percent of GDP. When we left office, it was 31.1 percent of GDP. Now, after 2¾ years of the National Government, it is 36.4 percent of GDP. It might be hard for those members to get their heads around those figures, but that is a factual presentation based on information that is available to the public and on the public record.
It is hard to understand when we see so many people losing their jobs around the country and so many people like those, for example, in the provincial offices of the Department of Conservation and the Inland Revenue Department. They are people who have been available in their local communities to help people with particularly important issues—whether they are enhancing our local community and environment through the Department of Conservation, they are scientists who have been charged with protecting our endangered species, or they are workers in the local Inland Revenue Department office, whom one can approach face to face to receive help to deal with difficult tax issues. Those are the people who are losing their jobs, despite Government spending blowing out of control. This is a borrow-and-spend Government. The Spending Cap (People’s Veto) Bill is a nonsense bill and it deserves to be thrown out.
Dr RUSSEL NORMAN (Co-Leader—Green) Link to this
I rise on behalf of the Green Party to speak on the ACT Party’s Spending Cap (People’s Veto) Bill. The Green Party will not be supporting this bill from the ACT Party. The effects of this bill will be that, over time, Government spending as a proportion of GDP will decline. It will effectively cause a real reduction in Government services over time. That would be the practical import of the bill.
This bill comes in and is driven by the ACT Party’s belief, which I am sure is very genuinely held, that the Government should have a very small role in society and that it should maintain the rules, and that is about it. All the other things the Government does are seen, from the ACT Party’s point of view, to be a constraint on our freedom and a constraint on our ability to do things for ourselves. So the ACT Party takes the view that we should reduce Government spending, reduce taxation, reduce regulation, and so forth.
Good on the ACT Party for having a set of beliefs that it brings to this place, but we do not agree with the beliefs that the ACT Party puts forward. Rather than subscribing to a philosophy of “freedom from”, which underpins the ACT Party view—that is, a freedom from Government intervention—the Green Party subscribes much more to an idea of “freedom to”. We see the role of Government to be in collective action, and when we all work together it actually increases our freedoms rather than reduces them. Take, for example, public education. Public education is a very expensive impost on the Government and the taxpayer. We all contribute to pay for public education, yet public education adds to our freedom. It means that all children, regardless of where they come from in our country, are given a fair chance to get an education, which adds tremendously to their ability to experience life and to make the most of their abilities and their talents. Public education adds to their freedom. The fact that we all pay taxes and that we all contribute sufficiently so that we have a proper public education system so that all children in New Zealand have access to it, perhaps from an ACT Party point of view, is a constraint on all of us because we all have to pay taxes to have that. But I would argue that collectively it adds to our collective freedom, because it means that all of us and all of our children have the opportunity to get a decent education so that they can be fully fulfilled and reach their potential. So we have a different perspective on paying taxes to pay for public health and public education.
Public health is, of course, another example. We could view the taxes we pay for public health as an impost and as a constraint on our freedom. You know, we all hand over taxes so that there is this public health system. When any one of us here in New Zealand gets sick or is in an accident we know that we have access to a public health system so that we can be looked after and, hopefully, brought back to good health. I would not view the fact that we pay taxes to support public health as a problem; I see that as a great addition to our freedom. The fact that we can walk around knowing that if something terrible happens to us or we get a terrible disease the public health system will be there for us actually adds to our freedom. It is not a constraint on our freedom that we have to pay taxes for a public health system. Collectively, all of us chipping in means that individually we are all effectively insured by the whole. All of us contributing together gives us that freedom. That freedom would not be available otherwise. We could argue that we could have private health care, but, basically, private health care in New Zealand is entirely dependent on the public health system. At the end of the day, if something really terrible happens to someone, they always end up in the public health system, because the private health system cannot do the kinds of treatments that the public health system can.
Also, the private health system is a problem for the poor. If people do not have the money to pay for private health insurance, then if there is not a public health system to support them, their freedom and their life opportunities are reduced dramatically if they are unfortunate enough to have an accident or to get a disease that means they need expensive treatment. I am sure many people in this House and, of course, right across New Zealand have experienced that either personally or know of people close to us or in our extended family of people who have had illnesses or accidents and who have had tremendous support from the public health system. That adds to our freedom. The fact that we have access to the public health system gives us all the assurance that we can go about our daily lives without having to live in fear that should anything happen to us we will not get access to the public health system we need.
I say to ACT Party members that they may see taxes and collective action in Government as a constraint on our freedom, but from the Green Party’s point of view those kinds of collective contributions actually give us all the security we need and add to our freedom. If we do not have that basic security that no matter where we come from we can access decent health and decent education, then, fundamentally, our freedom is constrained. That is why we do not think of this as Government intervention that we need “freedom from”, which I know is how the ACT Party sees it, and as a terrible burden that means the Government is on top of all of us. We see it as the Government enabling us to increase our freedom so that we can do the kinds of things we really want to do.
This, of course—and this is slightly at a tangent—also applies to regulation. There is a similar philosophy within ACT and the ACT view about regulation. It is always trying to restrict regulation. There are times when regulation is very important, as it is with leaky houses. We saw that when we removed the regulation protecting consumers it cost us all $20 billion to fix up leaky houses. I would argue that that is another example of where the philosophy that sits behind this bill, which is, I am sure, genuinely held and honestly expressed, none the less is a mistaken philosophy.
Nobody is saying that we want absolute Government spending to be 100 percent of GDP. Nobody is saying that the Government cannot over-regulate and cause harm. Of course it can. But we do think that putting this kind of constraint on the ability of the Government to spend money when it needs to will result, over time, in a decline in the provision of real Government services as Government spending as a proportion of GDP declines. We will find a cut over time in the quality and quantity of the Government services that we all rely upon and that actually increase our freedom. So for those reasons, the Green Party will not be supporting this bill tonight. Thank you.
DAVID BENNETT (National—Hamilton East) Link to this
I want to take a call on the Spending Cap (People’s Veto) Bill. It is a bill that Rodney Hide and the ACT Party have brought to this House. The objective of the bill is to limit the annual increase in core Crown expenses by linking them to the rate of inflation and the rate of population change. I note that the last Labour speaker on this bill, Ruth Dyson, made a big point about Government spending. Her issue was that Government spending had increased. Well, it has increased and that is because we have had a recession and we have had an earthquake in Christchurch. So if Labour does not want to deal with the recession nor the earthquake, then fine; we will tell the public of New Zealand that. But at this stage the New Zealand Government has dealt with those issues and dealt with them in an appropriate way. That is important for our economy and our country going forward.
We look forward to this bill progressing through this stage of the House to the Finance and Expenditure Committee, so that there can be further deliberations and so that the public has the ability to have their say with regard to this proposal. The objective, once again, of this bill is to limit the annual increase in core Crown expenses by linking them to the rate of inflation and the rate of population change. We look forward to the bill progressing through the House.
Hon NANAIA MAHUTA (Labour—Hauraki-Waikato) Link to this
If David Bennett’s speech was an indication of the level of commitment and passion that the National Government shows the Spending Cap (People’s Veto) Bill, I can tell members now that it will be going nowhere very quickly. In fact, that is why the bill is being introduced just before the end of this parliamentary term. The National Government has no intention whatsoever to continue with this bill beyond the next election. If it did, it would have introduced it 6 months after it was elected as Government, as the supply and confidence agreement somewhat indicated. That member had all the passion of a wooden block when he spoke to the particular details of the bill—
Hon NANAIA MAHUTA Link to this
I hear that it is an improvement, but I have heard him in other forums and he is actually not too bad. It is a clear indication that the National Government does not intend to progress this bill. When I was reading through the intent of the bill and its purpose I struggled to see why we were debating this bill at this late stage in the parliamentary term. I think it is an absolute affront to members in the House that we are even spending time on it.
Labour will not support the bill. We do not see the need to progress a bill like this. If we look at the intent of the bill, which is to put a spending cap on Government spending, we see that it is an affront to how good Ministers actually manage their vote and try to ensure, in the context of the time, that they are managing their budgets accordingly and are able to ensure that they are keeping within budget for the most part. But this bill is not addressing one iota the level of debt that this Government is going into to fund tax cuts. I would far rather debate that as an issue and a very real concern. That is the type of concern New Zealanders have: why is National providing tax cuts to the top 3 percent of income earners, and borrowing for those tax cuts? That is the type of question that Kiwis, when they want to make a decision about who they will support in Government, want to hear this Parliament debating.
They also want to hear what the Government is doing to ensure that more young Māori and Pacific people will be trained and employed. That question would lead them to the Government’s investment policies in skills and training, and what is happening within that vote. There is, in fact, a cap on the spend in that particular area. The Government is currently pulling funding away from skills training, under tertiary education, which makes it harder for those providers to get young people employment-ready, in order to get a job—if there is a job out there. I would far rather spend time in this House debating those types of issues, rather than the Spending Cap (People’s Veto) Bill, which we in this House know will not see the light of day beyond the next election.
So why are we bothering? Why are we bothering, when the very real and pressing issues facing Kiwis are about what the Government is not spending, and the priorities that are not being addressed, which are affecting everyday families? We could be discussing things like the greater inequality that Māori and Pacific children are facing, where one in five is in a benefit-dependent household. The great majority of them are Māori and Pacific children. What is happening there? The spending cap there is an affront to the greatest level of inequality of the most vulnerable young people that we have in this country. We are not debating that issue at all, but we should be. Instead, we are debating a bill that will not see the light of day beyond the next election, and it is terrible.
I look forward to hearing the next member who will take a call on this bill justify why we are not debating in this House the pressing issues that are facing Kiwis and New Zealanders—vulnerable, low-income, and modest-income families—and the issues that they really want addressed. Instead, the Government has put Parliament in a position of debating a bill that is a sop to an outgoing member of Parliament who is soon to leave this House. The Government has no intention whatsoever of pursuing this bill through the select committee. If the next member taking the call can assure this House before it rises that not only will the bill go to select committee but also the Government will call for submissions in the same session in which it is tabled at the select committee, I will be very happy to sit and reflect on my comments. If they could further give a guarantee that this bill may be picked up beyond the next election, let them stand in the House and put their name on the record to give that undertaking.
I can say right now that in this very late stage leading up to the election, we are looking at a first reading and at sending the bill to select committee before the election. It is a bill that the Government members certainly have no passion whatsoever to endorse, not Amy—
Hon NANAIA MAHUTA Link to this
—Adams, not David Bennett, and, I am sure, not the member who will follow me. None of them will have sufficient passion to convince any person listening to this debate that the National Government will continue with this particular bill.
We know that it is a waste of time, and we are not supporting it. We understand that, in fact, good Governments and good Ministers manage their votes and are quite upfront and clear about their priorities when they are looking at their portfolio and at where they will shift their priority spend. That is a far better, more transparent way for all Kiwis to understand what the Government’s priorities are, where funding will be attributed, and where the priority spend will be. That is far more transparent, and it gives far more accountability and far more opportunity for Kiwis to see what the Government stands for and its priorities.
Instead, this Government wants to continue down a path of some vague priorities that will, I think, be slipped away. People are not debating the real issues, as we should be. We should be debating why the number of Māori and Pacific youth in unemployment has gone up, why there is not enough spending in upskilling and training those young people, and why there is greater inequality in households in New Zealand. Low-income and vulnerable families, and especially Māori and Pacific children, are becoming more vulnerable under this Government.
In this House we should be debating with respect the very serious issues of the lack of jobs in our communities so that we can provide people with a real plan for growth and opportunity, so that they can get a job, put kai on the table, and feed their whānau. It is that simple. This bill has no future in this House, and I challenge the next National Government member to tell us that it does.
PESETA SAM LOTU-IIGA (National—Maungakiekie) Link to this
I rise to support the Spending Cap (People’s Veto) Bill. Unlike my colleague who has just sat down, the Hon Nanaia Mahuta, I believe the intention of this bill is an admirable one. It is a meritorious one. It is about looking at Government spending and how it should be limited. It is about limiting the annual increase in core Crown expenses by linking it to the rate of inflation.
I do not know where members opposite have been for the last 3 years. I do not know whether they have witnessed what has gone on in Greece and Ireland, and what is continuing to happen in the United States of America. Government debt is crippling those economies. Recession has taken hold and export growth has contracted. In the light of those crises, the points that the Hon Rodney Hide has raised in terms of this bill on Government spending are admirable.
We all know that debt has debilitating effects on our economy. We also know that Labour, when it was in Government, expanded only the Government sector and did not expand jobs in the export sector. Through its economic plan over the last 3 years, this Government has demonstrated that we are about controlling debt—we will reach a surplus within the next 3 to 4 years—about promoting expansion of export growth and jobs, and about supporting local industries.
PESETA SAM LOTU-IIGA Link to this
That member asks me how. When I go through my own electorate of Maungakiekie and look at companies like Compac Sorting Equipment, I see the types of contracts that it is now expanding through to the United States in terms of its sorting equipment. When I look at companies like Rakon, I see the technological and innovative ways that it expands its business. It earns valuable export dollars, which is not something that the previous Labour Government endorsed or promoted. This Government is about promoting export growth. It is about infrastructure. The broadband initiatives that we have put in place will bring this country into the new century. We believe that infrastructure—through roads, broadband, our hospitals, and our schools—will drive that growth.
Let us talk about education and skills and what we are doing. The last member who stood up asked what we are doing for Pacific and Māori populations. I can tell members that it starts at early childhood, as the amount of money we have poured into Māori and Pacific early childhood centres shows—and I see my colleague nodding here. Getting those kids up to scratch with numeracy and literacy is such an important part of our education system. That is what this Government stands for.
It is about reducing regulations, and the Resource Management Act reforms that this Government has put in place have reduced the red tape and bureaucracy that was built up by the Labour Government. After 3 years, we are already promoting the type of regulation-busting statutes that National stands for. On innovation and trade, it is also about free-trade agreements.
RAHUI KATENE (Māori Party—Te Tai Tonga) Link to this
The Spending Cap (People’s Veto) Bill seeks to impose a constitutional limit on spending as a sure way to create fiscal health. The Māori Party believes this legislation must be opposed at all costs.
As other speakers have noted, in the United States similar laws have been used to bring several states to financial ruin, leading to massive cuts in social services. Thirty states already limit how much their legislatures can spend or raise revenues, devastating funding for education and essential public services in their wake. Although we appreciate that the bill’s intention is to prevent the State from ever again accumulating a deficit like the one it faces now, simply placing limits is a Draconian measure designed to appeal just to popular conservatism. Tea Party Republicans brought the United States to the brink of collapse a couple of weeks ago, when they exercised a veto over raising the federal spending cap.
The real reason for the bill coming up now is that National is seeking to tidy up the loose ends of the confidence agreement it has with ACT. In essence, the bill is the desperate breaths of a party seeking to have some influence in the last 7 days of the Government’s work programme, but we say in the strongest possible terms that this must not be ACT’s legacy to New Zealand. The motivation for Mr Hide bringing in the bill today is to protect the wealthy from having to pay their share of tax. As a Parliament, we must be wary of any populist attempts to conjure up voting power that lacks sound rationale or academic justification.
Spending discipline is an important ingredient in any recipe to fix the State’s Budget, but putting in place a pre-imposed fiscal cap is a recipe for disaster. If our constituents need any proof of that, we simply remind them of the spectacle of the fiscal envelope. I will remind National members of that bleak period in our history. The late Hepi te Heuheu attracted 100 percent support from iwi for his stand against this approach. The genesis of the fiscal envelope was that one fixed amount was offered to settle all claims for ever—approximately 3 percent of all appropriations for one year. The $1 billion fiscal envelope compared miserably with other transactions of the Crown, leading Māori to believe that they were locked into an unhappy relationship with the Crown. At the time the fiscal envelope was seen as the final straw. A fiscal envelope of $1 billion for the settlement of all historical claims was, in effect, a definitive limit on what the Crown would pay out in settlements. Māori vehemently rejected such a limitation in advance of the extent of claims being fully known and, as a consequence, the fiscal envelope was subsequently dropped after the 1996 general election. One might have thought that Governments could learn from their mistakes.
Internationally, too, the concept of a preordained limit has been met with as much comparable heat and fury as the fiscal envelope fiasco. What we have seen happen in Colorado is that the state’s roads declined to being in the worst shape since it stared monitoring them. The contribution to higher education funding fell from 60 percent to 40 percent, and revenues returned to pre-recession levels. When the economy was restored to a more positive state of health, it was almost impossible to make up what had been cut—a decision that was essentially devastating to public services. I found some devastating information about the spending cap concept from Rich Jones, director of policy and research for the Bell Policy Center, a progressive research group based in Denver. According to Rich Jones: “It’s been particularly negative on the state, on state government and its ability to retain and raise the amount of revenues that it needs to function effectively.”
Of course we are all in favour of any proposals to rein in spending and lower taxes. It is about value for money, and we are as keen as the next party to look at that. But there are other things we could do that could tell us about effectiveness, efficiency, and the best value for our dollar. For example, we could get the Office of the Controller and Auditor-General to report annually on the effectiveness of interventions targeted at Māori, Pacific, refugee, and migrant communities, as well as young people. How effectively spent is the taxpayer dollar in this regard? We could ask for an annual report on the capability of the State sector to achieve outcomes for Māori. We need, as Nanaia Mahuta said earlier, to discuss the real issues about value for money for government. We want to see more community services and less government bureaucracy for the outcome of whānau restoration. That is the best way of controlling debt and of creating prosperity and growth, not a rigidly imposed fiscal envelope of ACT’s making.
What we really need to see, and what the Māori Party is determined we will see, is that the Government is made more accountable and transparent through the unbundling of public money spent on tangata whenua. Kia ora.
DARIEN FENTON (Labour) Link to this
I am delighted to take a call on the Spending Cap (People’s Veto) Bill. I never thought that I would say this, but I feel a bit sorry for the Hon Rodney Hide. It is not that I agree with his bill; far from it. The bill is a bit of an ideological burp of the proportions that we have come to expect from the ACT Party. I know that the Hon Rodney Hide does not want my sympathy, but I offer it in a genuine—
He does not want it. OK, I will stop feeling sorry for him. But I do want to say that not only is Rodney Hide leaving this Parliament after being chucked out by his own party but also the confidence and supply agreement that he negotiated and signed up to with National has been treated with contempt, as well.
This bill was one of the showpieces of that confidence and supply agreement, even though National has no intention of supporting this bill beyond its referral to a select committee or beyond this Parliament. Like some of the other great initiatives we saw in the wonderful confidence and supply agreement between ACT and National negotiated by the Hon Rodney Hide—who does not want my sympathy, so I will not give it any more—there was the agreement on the concrete goal of closing the income gap with Australia by 2025 and the establishment of a so-called high-quality advisory group, led by none other than Dr Don Brash. That part of the confidence and supply agreement is a bit like this bill. The advisory group that was set up has been dumped, after costing the country half a million dollars for advice that we could have dug out of the Hansard of the Governments of the 1980s and 1990s. The gap now between ourselves—
Hon Maurice Williamson—that is right—and Australia has grown under this Government. It is now 38 percent, so not only has the Government failed to get anywhere near achieving that goal but also it has gone backwards.
This bill, in the confidence and supply agreement, was called the New Zealand Taxpayer Rights Bill. I believe it copied some of the bills that other members have talked about, and I will eventually talk about other legislation from other parts of the world. The bill was supposed to have its first reading within the first 6 months of the new Government. I think my colleague the Hon Ruth Dyson did a very, very good job of reciting the calendar of this Government, which was elected on 8 November 2008. Six months from then—being very, very generous—was 8 May 2009. This bill was not on the Order Paper then—nowhere near it. In fact, even if we are generous and give a bit of space for the National Government to find its feet and figure out what kind of Government it thinks it might be, we realise it has still taken all this time. We are heading for 2012, so I think that delay is a real failure on the part of not only the ACT Party and its confidence and supply agreement but also the National Government. The Government has failed to live up to the agreement it made with its confidence and supply party. We are at the eleventh hour of this Government’s first term, and certainly nearing the end of Rodney Hide’s political career, but we are debating the first reading of this bill.
As I said, this bill has no show of surviving the general election. This bill is a cynical move by the National Government. If National wins the election, which is very unlikely, this bill is a good lesson for other parties about the folly of signing up to confidence and supply agreements with National. I think the Māori Party might be learning that lesson as we speak. I hope the other parties will take notice of how shabbily Rodney Hide and the ACT Party have been treated by the National Government.
He has loved every minute of it. Well, shame on him.
Having said all of that, I want to register Labour’s strong opposition to this foolish and ridiculous bill. It has no purpose; it is meaningless. Spending cap legislation is not needed, and it has not worked overseas. I was very interested in the National Government’s weak attempts to try to show some sort of feeble support for this bill by describing it as “interesting”. “Interesting” usually means “We think it’s a crock, but here’s one way we can say that without insulting the Hon Rodney Hide.” We do not need a law like this. We need a responsible Government that will lead by example and be fiscally responsible, like the last Labour Government was—and thank goodness for Michael Cullen.
Sandra GoudieThat member can laugh, but New Zealand is in the best situation of any country in the world because of Michael Cullen and the previous Labour Government.
We cannot have this debate without considering the present context, in which the Government is slashing spending and there are job losses in the core State sector. National and ACT have made a really good job of demonising our public sector workers. They have done an appalling job on that. These workers provide essential services, and so far National and ACT have got away with cutting 2,500 jobs. They are quite happy to take the credit for our front-line workers who have been there during the tough times, like the Christchurch earthquake, but they are ruthlessly slicing through public services. As an example of what can happen with a cap on spending, I am told that the Government is now struggling to get decent, independent policy advice from some Government departments. We realise that from some of the junk that we hear back from Government Ministers when they try to justify the terrible decisions that they make.
This bill is just another attempt to try to slash more vital Government services, and to create more tax cuts so the rich can benefit and be handed over more money, while fundamental services are cut for those who need them the most. Let us talk about that, because I know that members opposite like to have a bit of a laugh when we talk about Government spending. Let us talk about the facts under Labour and under National. When Labour was in power for 9 years, our Public Service spending was 30.1 percent of GDP. What is it today? It has gone up to 36 percent. That is despite the slash-and-burn approach of this Government. That spending has skyrocketed to 36.4 percent of GDP, so I would like to hear the next speaker from National explain—that is, if National is going to speak for more than a minute on this bill and show some enthusiasm in its support of it, which would be quite a nice change—why, after attacking the last Labour Government for its Public Service spending, that spending has skyrocketed under National. Of course, attacking public services is the intention of this bill. This is happening at the same time that the Government is slashing public services.
I am interested in why the Minister and the Government have not had a good look at how this proposal has worked overseas, because it seems as though they have not done so. Certainly, Treasury has looked at that, and some other members have talked about what has happened in Colorado and in Japan. Japan has had a spending cap since World War II, but that has not stopped it from amassing debt equal to 200 percent of its GDP. Every year the Japanese Government gets an exemption from the Act in Parliament. This proposal is an old hardy annual of the Republican Party in the United States, and we all know what has been happening there. A member of the Māori Party talked earlier about the Tea Party in the US and the irresponsible actions that we have seen there that took the whole world to the brink of an economic collapse, when politicians could not agree on the Budget because they were playing politics around spending caps. This proposal has never achieved widespread support. We can look at other places, and California is a really good example of one of them. It has not quite had a spending cap, but it has emulated the proposal in this bill, which is about holding Government-initiated referenda on spending. But proposition after proposition has brought the state of California to its knees.
Spending caps are a populist approach: if we go out and ask people whether the Government should spend any more, of course they will say no. I think the proposal by the member that there be a Government-initiated referendum is, quite frankly, stupid. It is a stupid proposal, and it would leave Governments absolutely vulnerable. I was interested to hear Sam Lotu-Iiga, who spoke before the dinner break. He spoke about increases in spending on early childhood education, health, and other things, but he did not seem to realise that this bill would put caps on that spending. Thank you.
Hon JOHN BOSCAWEN (Leader—ACT) Link to this
It is a pleasure to stand and take a call on the Spending Cap (People’s Veto) Bill. It has been interesting to listen to how the bill’s provisions, but, more important, the bill’s benefits, have been misrepresented in this House this afternoon and this evening. Let me just take a minute to reflect on some of the key provisions in this bill.
In essence what this bill is seeking to do is to put an upper limit on public expenditure as a percentage of GDP, and that is that percentage as it is today. Then it would provide that Government expenditure can increase only in real terms. So we have a certain level of Government expenditure today, and as the population increases one would expect the tax revenues to go up, and, as a consequence, expenditure on public services necessarily to increase. Likewise with inflation; that will also affect the spending power of taxes. As a consequence, one of the provisions of this bill is that a total amount of spending is adjusted upwards for increases in population and for the effects of inflation. There are also adjustments to take out, and look specifically at, the impact of unemployment benefits, because we know that through the economic cycles unemployment goes up and it goes down. It would be wrong to include the cost of unemployment benefits within that cap. Equally, borrowing expenses, a function of interest rates and the level of debt, are separately calculated. The cost of national emergencies such as the Christchurch earthquake is also separately calculated. We are actually adjusting for known one-off occurrences, if you like, of that nature, and for population and inflation effects.
Why is this bill important? Darien Fenton had a very interesting contribution. She made some comments, which I am sure were tongue-in-cheek, about Rodney Hide, but she then went on to praise Michael Cullen. Let us just look at Michael Cullen’s record, because Mr Cullen can take some credit for the fact that Government expenditure, coming into the 2005 election, was some 29 percent of GDP. What happened then? Well, Labour, fearing a defeat in the 2005 election, went on a spending spree. It was a massive spending spree in a desperate effort to buy the 2005 election. We are living with the consequences of those decisions today. I suspect we will be living with the consequences of those decisions for many years to come. As a consequence of substantially increasing social welfare entitlements through Working for Families and through a massive extension to the interest-free student loan scheme, we find a situation today where Government expenditure is some 36 percent of GDP—an increase from 29 percent to 36 percent. Just think, if we had actually had this bill in place prior to the 2005 election, and if we had been able to contain Government expenditure to 29 percent of GDP—the figure that Michael Cullen achieved prior to the 2005 election—rather than the massive blowout in expenditure, the massive blowout in debt that Labour members have spoken about today, we would be spending some $12 billion or $13 billion less today than we are.
Why is that important? It is important because money that is spent has to be taken off people. It is taken off people in the form of taxes and through increased debt on future generations. That has an impact on jobs. It has an impact on the number of jobs and it has an impact on the standard of living in New Zealand. Prior to the dinner break, Nanaia Mahuta was waxing lyrical about poverty in New Zealand, the need to reform our social welfare system, and the lack of jobs. It is unfortunate that her knowledge of the economy and how it works is not better than what it is. I suspect the same comments could be made about most members of the Labour Opposition. How do we create jobs? We create jobs by encouraging entrepreneurs to invest, to build factories, to create opportunities, and to look for new markets overseas—that is how we create jobs. What creates that investment? It is the potential return an entrepreneur, a businessman, will get from investing. We live in a global market place. The investors of the world are free to invest in New Zealand, in Australia, in Asia, and in the United States. We are competing for capital. If we want to attract capital to New Zealand, if we want to create capital, if we want to create the investment and the sorts of jobs that Labour members say are so precious to them, we need to have a system that incentivises people to invest in New Zealand. The way to do that is to ensure that those entrepreneurs, those businessmen, those people saving, and those people working have the greatest possible return. The way to do that is to reduce wasteful Government expenditure, to bring Government expenditure under control, and to allow New Zealanders to keep more of the income they earn.
I mentioned earlier the massive spending spree that went on after the 2005 general election. We know that one of the things that was implemented was a substantial extension to interest-free student loans. When the student loan scheme started there was a write-off of 11c in the dollar. So for every dollar that was borrowed, the Government ended up writing off 11c, and 89c was repaid during the early to mid-1990s. By the time we got to 1999 the Government was writing off 23c in the dollar, and students were repaying only 77c. If we fast-forward the clock to 2009, the write-off was approaching 50c in the dollar, and students were repaying only half of what they borrowed. Why was that? It was because there was no control on Government expenditure—there was no control. The Labour Government put in a plan to buy the election and we had this massive blowout in expenditure. If we had had this very bill, the Spending Cap (People’s Veto) Bill, that may well not have happened, we may well have had Government expenditure today at 29 percent of GDP, as it was under Michael Cullen in 2005, the Government may well have been spending $12 billion or $13 billion less, and we may well have had the investment and the jobs that Labour members are very happy to wax lyrical about.
I was also interested in the comments of Russel Norman before the dinner break. He talked eloquently about the benefits of public education. What is important about public education? Surely, the key issue is education—that is the key issue. Does it matter that teachers are paid by the State? Is that important? Is it important that taxpayers pay taxes to the State for the State to go out and employ the teachers? What is wrong with letting New Zealanders keep more of their own money so that they in turn can directly purchase education for their own children? What is wrong with giving New Zealanders more freedom? Russel Norman said that if we really wanted freedom in New Zealand, we should have better public education. The ACT Party says that it is not important who employs the teachers; what is important is how successful those teachers are, how good those teachers are. We say we need to let New Zealanders keep more of their own money, let them have the freedom, and let them go out there and choose whether they want to send their children to a State school, where the teachers are paid for by the taxpayer through taxes, or to an independent school—actually let them have the freedom. Let New Zealanders have choice. Let us ensure that those opportunities are funded equally. It is the role of the State to collect taxes and to fund education, but there is no reason that a person should have to pay twice—to pay their taxes and also to pay for an independent education, if that is their choice.
Yes, I say to Mr Russel Norman, we do stand for freedom. What we stand for is freedom and for equal opportunity. This is a bill whose time has come. Many people have waxed lyrical about the fact that this bill will not see the light of day after the election. Well, I say to New Zealanders that if they want to see decent controls on Government expenditure, if they want to see expenditure back at 29 percent or less of GDP, there is a very good way to do that: vote for the ACT Party with their party vote to put us into a position where we actually have some leverage on the incoming National Government. Unlike Darien Fenton, I am not in cloud-cuckoo-land.
MICHAEL WOODHOUSE (National) Link to this
I am very pleased to take a call on the Spending Cap (People’s Veto) Bill, a bill that has come to this House because of the confidence and supply agreement between National and the ACT Party. National is a Government that delivers on its confidence and supply promises. Darien Fenton can wax lyrical all she likes about the fact that this bill took some time to get to the House—and I am sure there are many reasons for that—but it is here. I contrast that with the confidence and supply agreements that the previous Labour Government had with its minority partners and, in particular, with United Future. I know of at least one example where not only was a confidence and supply agreement not followed through in one Parliament but it was not followed through in at least two and maybe three.
I draw the attention of the House to the particular agreement that Labour had with United Future on the issue of support for private health insurance, which was in the confidence and supply agreement between Labour and United Future. It was so dismissed by the Labour Government that by the time Pete Hodgson became the Minister of Health he did not know it even existed—he had absolutely no knowledge of it whatsoever. So I refute any of those accusations that this Government has not met, completely, its undertakings under the confidence and supply agreement.
There are many things said by Rodney Hide that I will agree with. One of them is that although I agree that this bill is one part of the “response to the need for greater fiscal prudence”, I suggest that the best response to that need will be the future election of a National-led Government and the appointment of Bill English as the Minister of Finance. It was only when Bill English became the Minister of Finance that any attention was drawn to any notion of fiscal constraint. We can play the game of “my statistic is bigger than your statistic”. I think Ruth Dyson tried to indicate that there was no problem with Government spending under the Labour Government, but there is no doubt that Government spending increased dramatically during the period of the Labour Government. Crown spending went up by 63 percent from 2001 to the last Michael Cullen Budget of 2008-09. Even adjusted for population growth, that increase was 51.5 percent, more than double the CPI growth during the same period. At the same time, the tradable sector was being strangled.
I also want to draw attention to the comments made by the Māori Party MP Rahui Katene, who said that this was simply a means to stop the wealthy from paying their fair share in tax. Well, I draw the attention of that member and the House to the data presented by the Minister of Finance, which has received quite a bit of air time, I have to say, on who is really paying income tax in this country. Thanks to the fiscal policies put in place by this Government, 44 percent of households are paying no effective income tax after wealth transfers such as Working for Families and housing supplements, and 10 percent of households are actually paying 71 percent of net taxation. If we take it out to 17 percent of households, they comprise 97 percent of all net income tax paid in this country. I think that is fair. I refute any claim by any member of this House that this bill is a means to stop the wealthy from paying their fair share in tax. They already are.
I will come back to Government spending over the period of the Labour Government. Dr Russel Norman implored the House that somehow this was necessary to maintain health and education services. On the issue of health services he made a very interesting comment. He said that the private sector existed only because the public sector existed. Well, I think there might be some merit in that argument, but I would argue the counterfactual, and that is that the public sector exists because of the private sector, especially in the areas of surgery, anaesthesia, radiology, and endoscopy. I relate the case of a surgeon who was considering working at Dunedin Hospital 3 or 4 years ago who, when told what the salary was at Dunedin Hospital, said: “Well, that’s pretty good for a monthly salary.” He was then told that that was the annual salary, at which point he ran back to New York, from whence he came. It is increasingly the case that the surgical and anaesthetist fraternity see their core business as their private business, and view their service to the public sector in the same way lawyers view legal aid. There was a need to increase that, but the fact that productivity went up not one jot during that period is a blight on that Government.
In summary, I think this is a sound bill that is worthy of the Finance and Expenditure Committee’s consideration, and if by the electorate’s good grace I am back here after 26 November, and still a member of the Finance and Expenditure Committee, I would be very happy to listen to the submissions on the bill. I strongly support it.
A party vote was called for on the question,
That the Spending Cap (People’s Veto) Bill be now read a first time.
Ayes 62
Noes 58
- New Zealand Labour 42
- Green Party 9
- Māori Party 3
- Mana 1
- United Future 1
- Progressive 1
- Independent 1 (Carter C)
Bill read a first time.