Hon PETER DUNNE (Minister of Revenue) Link to this
I move, That the Taxation (Annual Rates and Budget Measures) Bill be now read a third time. I need to report to the House that this bill, which gives effect to the Budget’s provisions relating to some of the changes to KiwiSaver and Working for Families, has been thoroughly considered by the Committee, and has emerged without amendment. During the Committee stage of the bill there was a very rigorous set of debates, but in many senses not a great deal of light was shed, particularly from the Opposition, on an alternative package.
It is worth noting, in respect of KiwiSaver, that even after the changes that members opposite have so decried, it is still anticipated that KiwiSaver membership will strike 2 million during the 2012-13 year. One of the points that is relevant to the reason the changes are being made—and I will respond to a point made by Mr Shearer late in the Committee stage—relates to the cost of KiwiSaver’s success. When KiwiSaver was introduced in 2007 the projection was that it would hit 700,000 members by 2015. It now has 1.7 million members, and that number is projected to be 2 million during the 2012-13 year. That is well over twice, or nearly three times, the original projection. Because of both the member kick-start—which is not being touched—and the member tax credit, there is a significant fiscal cost to the Government associated with KiwiSaver, and in order to sustain the scheme into the future these changes have been necessary, given the extraordinary and unprecedented success of the scheme to date. The changes amount to about $2.6 billion in savings.
The changes being made to Working for Families, which will kick in from 1 April next year, in some cases will take 4 years to be fully implemented, and in other cases will take nearer to 8 years to be implemented. The changes represent a cost saving of approximately $447 million to the Crown over that time.
The legislation gives effect to the Budget measures. The Budget was really about setting a path for returning New Zealand to surplus after some unprecedented experiences in recent years—the global financial crisis, and now the Christchurch earthquakes—yet we are still predicting a return to surplus in 2014-15. The changes contained in this bill are part of achieving those policy objectives.
I thank the officials who have served the House during the hours of the Committee stage. I thank those members who have participated in the debate. I commend the bill to the House.
Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this
I rise to take a call, but I was engrossed in this incredibly exciting Dominion Post article, which aptly sums up the Budget as “A big fat zero”. Moving on, this speech is about the Taxation (Annual Rates and Budget Measures) Bill. This bill vests part of the Budget in legislation. As we have discussed earlier, and throughout this debate, the first question that must be asked again in the House is why we are being forced to do this under urgency today. Fundamentally, there is a deep paradox at play. The Government has said it will seek a mandate from the public on the changes proposed in this bill. It said it will go to the 2011 election, in which case these changes should have gone into Budget 2012, once a mandate had been obtained. As the Government has not done so, it is either the case that the Government has unmandated legislation, and therefore fiscal consequences, or it has broken an election promise. It can logically be only one of those alternatives. Treasury has signed off on this bill, so I assume that means Treasury’s view is that this is not unconstitutional and not unmandated. It must therefore logically be the case that Treasury believes that the Government has broken a major election promise; if not one, then several.
The Government said it would not cut KiwiSaver, and this bill cuts it. It said it would not cut Working for Families, and this bill cuts it. Most people I talk to are struggling. They are struggling as prices rise faster than wages. They are working hard, they are doing everything right, but they just cannot seem to get ahead. Every week I hear stories in my electorate of people who, week after week, are cutting back just to put food on the table or to pay the power bill. National’s third Budget should have addressed this, but unfortunately it makes the struggle that much tougher. It does not help, but it does hurt. It is a tinkering Budget that does not have a plan to get the economy going again. It does not address the problems that are at the core of this moribund economy and that have undermined our chances of putting people back to work.
The best way to get a deficit down is to get the economy growing again. We in Labour will be continuing to outline our plan to get the economy going over the next few months. We will present a credible strategy for rebuilding the New Zealand economy, with a fully costed package of measures. There is no doubt that we need to be saving more as a country. There is no doubt that the intention of building up national savings is worthy, but there is also no doubt that reducing the incentives available to New Zealanders to get them into the programme while simultaneously taxing the employer contribution before it benefits the employee is not the best way to do that. One can expect that the Labour Opposition will be bringing to the public a better plan for increasing national savings for the benefit not only of those saving but also of all New Zealanders.
Selling assets is just as short-sighted. This bill contains the tax rates, which are predicated on a fiscal balance. That fiscal balance is supported by the illusion of capital flows that should not yet exist. There is no mandate for asset sales. All the polling tells us that New Zealanders hate the idea of the so-called mixed-ownership model, which makes people pay twice for things they already own. Every New Zealander owns Mighty River Power, Meridian Energy, Genesis Energy, and 80 percent of Air New Zealand. New Zealanders own them already. They do not need to buy them twice, and of course what will happen is that most of those shareholdings will pass to the control of foreign multinational corporations, thereby undermining the economic sovereignty of this country.
That might be less awful if it solved the problem, but it does not. It is like taking a teacup full of water and throwing it on a raging bushfire, except in this case there is nothing raging about the New Zealand economy; it is raging nowhere. Just as importantly, this does not, therefore, solve our debt problem. What will the Government do when debt increases further and there are no assets left to sell? This is not a plan that will grow our economy. There is nothing in this bill, nothing in the regulatory impact statement, and nothing in the Budget that shows a plan to create jobs and growth.
A rosy glow is forecast of 4 percent growth in 2012-13, which nobody believes. Nobody believes it. The rating agencies patently do not believe it, because this Government has just got a C- or a D from Standard and Poor’s, which means: “We will believe it when we see it.” Increasingly, that is now the view of the mainstream media, which are questioning the flimsy thread of credibility upon which this Budget hangs. They do not believe that it is right that there should be $1 billion of unspecified cuts. They do not believe that it is right that there should be $4 billion of difference in cash flow between the Inland Revenue Department and Treasury. They do not believe that it is right to raid the piggy bank of public servants by taking $650 million from their retirement fund. They do not believe that it is right to take more out of the KiwiSaver of teachers than we are putting back into early childhood education. None of that is right, none of it shows any vision, none of it shows any boldness, and none of it shows any plan.
New Zealanders are hungering and thirsting for a way out of the economic wilderness, and they have been waiting for three Budgets now for a credible plan to get them there. It was not the Job Summit. It was not the cycleway. It was not the rolling maul of tinkerers. It was not suspending payments to the Superannuation Fund. It was not huge tax breaks for upper-income earners, and it is not cutting KiwiSaver and Working for Families and flogging off assets, because that is all this Budget does.
The crime of this Budget is not only what it does do. It is not only the measures that attack KiwiSaver and Working for Families that are in this bill, but it is what it does not do. This Budget does not provide hope, it does not provide vision, it does not provide a plan, and it does not provide a way out of the fiscal nightmare that this conservative Government has wrought upon New Zealand. Government members will say that it is Labour’s fault, when it is not. Labour left the country in surplus, to the tune of 7.6 percent of GDP. They will tell us that it is the earthquake’s fault, but it is not. The earthquake is responsible for only 10 percent of the accumulated debt, and their economic mismanagement is 90 percent, along with the global financial crisis.
They will tell us that they are being fiscally responsible, and they are not. There is nothing fiscally responsible about making up numbers. There is nothing responsible about a billion dollars of cuts, when we do not know where they are coming from. There is nothing responsible about imagining 170,000 jobs that do not exist and will not exist, or Standard and Poor’s would have taken them at their word.
I have given up waiting for Bill English to have a new idea. I have given up waiting for Bill English to get a vision for this economy. New Zealanders are giving up on this tired, listless, useless National Government. National will be a one-term Government. How do I know that? Because the polling is telling us—wait for it—that 48 percent of New Zealanders believe the country’s economic management is on the wrong track, and 32 percent believe it is on the right track. I have been here for four terms and I can tell members opposite that when the economic right track / wrong track numbers cross over, the Government’s popularity is sure to follow—and they are sure to follow. As quickly and as surely as night follows day, they will be making the pilgrimage to this side of the Chamber after 26 November, when the public is called to vote upon this rubbish Budget and throw it out.
CRAIG FOSS (National—Tukituki) Link to this
Hopefully there are still a few people listening to the radio. The third reading of the Taxation (Annual Rates and Budget Measures) Bill is associated with the Budget and the reconfirmation of the income tax rates, PAYE rates, changes to KiwiSaver, and some changes to Working for Families. They have been well canvassed by some members of the House, and extrapolated upon and fantasised upon by others.
The Budget announced yesterday by the Minister of Finance is about savings. It is about building savings. It is about the integrity of savings. It is not about borrowing to save.
Regardless of what we have heard from the previous speaker, David Cunliffe, and other speakers, we have yet to hear where Labour’s $45 billion - odd of various promises over the forecast period will come from. We have no idea. But one thing I can say to the previous speaker is that if things were so rosy, if the books were so good in the last year of the last Labour Government, then why did New Zealand vote Labour out of office so convincingly? Perhaps it is because New Zealand also looked at the pre-election update, which showed the decade of deficits and showed all those numbers that affected the fiscals, as opposed to the 2008 Budget that members on the other side of the House keep referring to. The key document is the pre-election Budget and the travesty of the decade of deficits that it revealed to the public after 9 years of the previous Government. But the good news is that the decade of deficits is no longer upon us. This Budget showed us we will come very close, hopefully, to surplus in 2015. That is not too bad.
I note a very interesting and good point that the Hon Peter Dunne made in his third reading speech. If the bill that is before us is so bad, if Opposition members dislike the income tax rates in it so badly and think they should be altered, if they do not like the Working for Families changes, if they truly do not like the KiwiSaver changes, and if they have a plan—maybe a decent spreadsheet, as the member opposite apparently has; fully costed, allegedly—then why did they not table an amendment to any part of the bill? During the Committee stage not one amendment, not their tax tables or suggestions, or an amendment to the KiwiSaver changes was tabled. This is the bill that would enable that. It points to the fact that perhaps Labour members do not have a plan, costed or otherwise. Mr Cunliffe has his spreadsheet, I am quite sure, but I do not think Labour members actually have a plan. We might see it at the Labour congress over the weekend. That may come before or after the singing. Will members opposite be singing at this year’s election-year congress? We are looking forward to it, because we so enjoyed it 3-odd years ago. What did they sing?
Michael WoodhouseThat is right. Funnily enough, that one might get rolled out.
This Budget passes the four tests outlined by Mr Cunliffe in his article in the paper the other day. It creates and helps the export economy; it pulls back the State economy to allow room for the private sector to at least grow and at least start to create and hold jobs, the tradable sector having essentially been in recession since 2005; and it shows a true and direct path back to surplus. It passes another one of Mr Cunliffe’s tests. I am interested that he keeps showing the test, but we passed it with flying colours. I enjoyed his piece in the paper. I saw it and thought: “This is great. We will pass those ones.” Mr English’s Budget, the National Government Budget, passes all of those tests with flying colours. I am surprised that the member still keeps repeating it.
Mr Cunliffe talked about the export market. In 9 years the Labour Government had the chance. Yes, Labour is in Opposition now, but as far as increasing exports goes, the only thing that Labour did to try to compensate for double-digit interest rates for hyperinflation, if you will, for a 50 percent expansion in the State and a 50 percent expansion in the tax take was to declare 2007 as Export Year. That was it. Exports plummeted and New Zealand went straight into recession a year before the rest of the world. So it is interesting that there have been no amendments to this bill from other members during the Committee stage. I was quite surprised about that.
I am also interested to see that 2 million people are still forecast to go into KiwiSaver, up from 1.7 million currently. I think all members in this House hope that is the case. That will be an interesting judgment upon the changes within this Budget.
The mixed-ownership model has been addressed. Even though it has been discussed a lot in the debate on this bill, it is not in the bill, but perhaps the KiwiSaver changes will help facilitate investments in the mixed-ownership model. Members opposite have positioned themselves so diametrically opposed to that. That is fair enough; that is their policy position. It has moved somewhat since Mr Cunliffe’s speech at Victoria University on 8 November last year. The Labour Party policy was to unleash the balance sheets of the State-owned enterprises and their associates, to leverage up their balance sheets, etc. I notice that in one of Mr Cunliffe’s speeches—I admit that I do read his speeches, although I do not know whether anyone else does—he gave the other day that phrase was interestingly taken out. I do not know whether Labour members want to unleash the power of State-owned enterprises any more. But if they do not like it, then why did they do it with Air New Zealand?
We inherited from the previous Labour Government a mixed-ownership model for Air New Zealand. Air New Zealand diluted it down when it had to go and get some more capital. Did the Crown stump up? No. It was happy for it to be diluted down. It is very interesting. Actually, that same Government at the time allowed Air New Zealand to issue a credit note, which essentially meant that if it defaulted, then the ownership of that entity would have gone offshore. It is very interesting.
I must pull up the previous speaker on his comments about Standard and Poor’s. It was the member’s judgment of a C or D rating. Fair enough. He can pass those judgments. The key point to New Zealand mortgage holders is that after the Budget was released, Standard and Poor’s confirmed, reaffirmed, New Zealand’s credit rating. That is worth one huge amount of money to the households of New Zealand, to indebted New Zealand. We all acknowledge we are too indebted as a nation, so each and every one of us, be it via the Crown accounts or via our personal accounts, have benefited instantly from this Budget as our mortgage rates and interest rates have stayed lower for longer, as they have under this great Government.
I make one final point. Why has the Opposition lost all faith in democracy? Why do those members not like democracy any more? At the election this year the public of New Zealand, who are so wise that they threw out the previous administration, will pass their judgment not only on this bill and this Budget but also on the three Budgets of this Government. They will pass their judgment and we will accept that judgment. They may keep us in; they may give us further seats, or they may throw us out. Let us wait and see. But I have faith that opening the books and putting everything possible before the public of New Zealand shows that we trust them, that we believe in democracy, and that we have faith in their ability to make the right decision. That is why this bill is before us now, taking effect in 18 months’ time. If—horror, horror, horror of all horrors—there was to be a change of Government and if members opposite were take these benches, they would be totally free to change this policy in this Budget, and it would be interesting to see their firm position on these exact points.
I invite other members, if they are talking, much as they seem to be opposed to this bill and much as they seem to be opposed to this Budget, to tell us which parts of it they will put before New Zealand to vote upon on 26 November. All we can see right now, the only bits of firm information we have from Labour, is that it will increase the top income tax rate. It may increase middle-income tax rates; we are not quite sure. Some Labour members were nodding and some were shaking their heads last night. They will not be changing GST except on cabbages. Mr Nash started to fly something about a turnover tax. I think Labour confirmed that it will not change the business tax. Of those members’ $7 billion or so of committed promises so far, I ask how they will be funded. Will it be done through a capital gains tax? It is a credit to Russel Norman that at least he has a solid policy position, absolutely clouding out the direction of the alternative supposed Opposition over there. I say good on him, because Labour talks about painting Premier House as its solution—or not painting it—and about not having BMWs for Ministers and former Ministers, and those members want to take these benches. I commend this fine bill, based upon this fine Budget, to the House.
Hon CLAYTON COSGROVE (Labour—Waimakariri) Link to this
I noted that speech from Craig Foss with interest, and I took a number of things out of it. The member concluded by giving us a lecture on parliamentary democracy. He gave us a lecture, and said members on this side of the House are somehow against democracy. Then he paraded an argument that basically said those members trust the people, and the judgment will be on 26 November.
I make this point to the member: if he has so much faith, respect, and trust in the people of New Zealand, then why today do we sit in urgency without the bill going to a select committee? The people who are smart, whom he takes for granted, could come before a select committee and give us a view on how they see this bill. They could tell us whether they are in favour of “integrity in savings”, which was the other phrase that that member used. “Integrity in savings” is an interesting phrase. That must have whipped out of the National public relations unit, because it is an interesting phrase. At the same time as that member talked about integrity in savings, his Government’s legislation before us cuts KiwiSaver—a family with two KiwiSavers loses $20 a week in cuts. Is that integrity in savings? Hang on, the empty tin has not rattled; there is no sound.
I ask the member again whether that is integrity in savings. No; I suggest he crawls under the desk. I ask that member whether he believes we should have a select committee hearing so that—to use his words—we can trust the people, treat the people with respect, and ask them their view. Oh, he is mute, or deaf; his tongue has gone—somebody has cut it out. I say to that member that there is a word for the speech he gave. On the one hand the member preened and preached to us about democracy, but he does not show the intestinal fortitude in this place to say we should have a select committee hearing. I ask him again whether he believes people should have the right to come to this Parliament, before an election, and test this legislation with a select committee hearing. Silence!
The silence is deafening. What a plonker, I say. The people will see that member for what he is, standing up, a lion in this Chamber—an absolute lion. But he does not have the intestinal fortitude to call a Finance and Expenditure Committee meeting and ask the people in the gallery and throughout our towns and cities to come forward and make submissions, and listen to their opinions, because he does not want the answer. He knows what the answer would be. He knows that many of the 200,000 people affected by the cut in Working for Families would rock up to the select committee and say they did not vote in a National Government for this. He knows that many, many thousands of people whom he respects—so he says—would rock up to the select committee and say: “Didn’t John Key say he would not touch KiwiSaver?”. Did John Key say that? Yes, he did. Has John Key broken his word? Yes, he has. Those are the responses Mr Foss and his ilk, and Mr Henare, do not want people to have the opportunity to come in and express.
People would come to a select committee, if there was one, and they would say: “By the way, we do not want our assets sold. By the way, we, the people of New Zealand, already own those assets.” So why is the Government pretending it is so benevolent in offering those assets back to the people of New Zealand, offering them the opportunity to buy them, given that they already own them?
People might also come to a select committee and say that we as a community are not awash with cash to be first in the queue, which the Government cannot guarantee, to purchase back assets that we already own. They would say to Mr Foss, chair of the Finance and Expenditure Committee, that we as a community do not have the money, because of the cost of living, because of the great tax switch that gave those on the bottom of the heap—72 percent of my electorate earn under 40 grand a year—very, very little. But it gave his leader a thousand bucks a week. That is what those people might say if they were given the respect and the opportunity to come before a select committee and express their view. But that has been denied to them, and that member had the audacity to get up and preach to this House, and say he respects the views of his community.
If the member has that much guts—and I am sure he has—he will stand up and say, or the next speaker will take a call and say: “Hang on. Taihoa. Let’s seek leave to have a Finance and Expenditure Committee and give the people their say.” There is no reason we would not. The member himself said these measures will come in after an election. Therefore, we have months to deal with this legislation. But, oh no, he sits there looking into his fictitious papers, pretending, not willing to look up at anybody, with a guilty look on his face because he knows he has just put his foot in his mouth in respect of that last speech. It is easy to get up here in the Chamber, be very lofty and high and mighty, say one respects democracy, and lecture every other MP. But he has the power, as the chairman of the Finance and Expenditure Committee, to call people in and show some real respect. But no, he keeps staring at the crossword or whatever it is down there, because he cannot look people on this side of the Chamber in the eye, he cannot look the Speaker in the eye, and he will not be able to look his constituents in the eye and explain to them, on Saturday or Sunday when he has his clinic, why he denied them their democratic right to have a go and have their view heard in the select committee.
When we look at the historic record of the last Government, members opposite talk about the decade of deficits. That member wanted some facts. I suggest maybe he rolls up these facts and chews on a few of them in the next couple of days. I will give members a quote from Bill English that I have used in every speech. Of course, those members do not like it when we quote their own finance Minister. They are all very quiet now. That member keeps doing his crossword, or whatever it is he is doing down there. He will not look us in the eye; we know it is difficult. Here is what Bill English said on 19 December 2008 about the legacy of the last Government. This is a cracker, and I take Bill English at his word. He said this: “I want to stress”—
Hon CLAYTON COSGROVE Link to this
That member is under a bit of stress, by the sound of it. He said: “I want to stress that New Zealand starts from a reasonable position in dealing with the uncertainty of our economic outlook.” That is what he said within days of taking office. That was his economic assessment of the legacy of the Labour Government that had preceded him. However much shellac they put on their line over there, no matter how much whitewash they try to spin through this place, they cannot alter history.
Let us have a look at history. I will read out a couple of other facts for that member who shows a tonne of intestinal fortitude when he is on his feet. I will say this. We had 9 years of surpluses—9 long years of surpluses—beginning in 2000 with $594 million. In 2001 there was a surplus of $1.4 billion, in 2002 there was $2.4 billion, in 2003 there was $5.5 billion, in 2005 there was $7 billion, in 2006 there was $7 billion, in 2007 there was $5.8 billion, in 2008 there was $5.6 billion worth of surpluses—
Hon CLAYTON COSGROVE Link to this
They were the best times, absolutely, as that member said. That member’s finance spokesperson at the time, Bill English, day after day, month after month, challenged, criticised, and berated the then Labour Government, saying it should flog the lot—spend the lot. National, for the historical record, was criticising a Labour Government for not spending the surplus and for squirreling it away for the rainy day. The rainy day came when this Government took over and even Bill English was generous enough on 19 December to admit that the legacy the previous Government had left was in good shape.
What we have in this legislation, what is served up to the public, is a cut in KiwiSaver and a cut in Working for Families. The only plan—if we can call it that—is to flog off the family silver, which does not actually solve the debt problem, because if we look at the debt track, we see that it goes up. Then the Government uses the earthquake as an alibi, even though it knows in terms of accumulated deficit that the earthquake in Canterbury contributes only 10 percent.
Hon CLAYTON COSGROVE Link to this
I think the member is going to blow, Mr Assistant Speaker Roy. You might want to call the men in white coats or those with the stretchers. I think he is going to blow something. It could get messy in here, I say to colleagues.
I say to Mr Foss that the people of New Zealand are not silly. His constituents deserve respect. They are intelligent and they will unpick the hem of this Budget inch by inch and they will render a verdict on him. I look forward to the next Government speaker being totally respectful to the people and telling us that they are going to have a select committee. I suggest that if there is any medication available or cold water we direct it over to that side of the House real quick.
GARETH HUGHES (Green) Link to this
Kia ora, Mr Assistant Speaker Roy. Na mihi nui ki a koutou. Kia ora. I feel somewhat that I should not be taking this call, because I would like to hear National’s reply to the Hon Clayton Cosgrove, who was building up quite a slanging match. But I want to take a call on this important bill, the Taxation (Annual Rates and Budget Measures) Bill, at an important time, because we are at a turning point in our nation’s history. We are at a turning point where we are facing huge economic challenges as a nation. At the moment it is only those high international commodity prices that are keeping our heads above water as we continue our slide down the OECD rankings, as we have for the last several decades. This has real impacts on Kiwi families, and real impacts on Kiwi jobs. [ Interruption]
The ASSISTANT SPEAKER (Eric Roy) Link to this
There are too many conversations going across the House.
Essentially, we are a nation addicted to growing grass. Most of our income is from tourists coming over here to look at our natural landscape and the other part of that is selling grass in the form of dehydrated milk powder. We are addicted to high commodity prices; we are not masters of our own fortunes in this nation.
We are facing huge environmental challenges. Just this week at the time of the Budget we had esteemed National Aeronautics and Space Administration (NASA) astrophysicist Dr James Hansen in New Zealand, saying that climate change and coal were the single greatest threat to our civilisation on this planet. It is also a week of immense personal challenges and worker challenges. Just before the Budget, I was privileged to stand with a number of other MPs from the Labour and Green Parties at the Council of Trade Unions rally about how people were really feeling the pinch of these Government changes in the Budget and those it had made before. We are facing huge economic challenges, huge environmental challenges, and huge challenges to our workers and our whānau in New Zealand. But what did we see in the Budget? Quite frankly, it was a damp squib—an absolute failure. We saw a bit of tinkering. We have seen some hilarious names issued for the Budget. Probably my favourite name was the one given by the member Stuart Nash in the Committee stage: the “Steal-the-Dream Budget”. We have heard the “Shaky Quaky Budget” and the “Zero Budget”. There has been a whole bunch of names. The journalists have been busy trying to come up with names, because there is not a great deal of substance, and definitely no positive substance, in the Budget for the country.
We are debating this now on a Friday afternoon under urgency. There is absolutely no reason for this to be the case. We have plenty of time for this to go through the proper process, which involves the public having a say in select committee, and it is a disappointment that we have to see this bill under urgency today. The Green Party will be voting against this bill, which basically does only two things. Firstly, it halves the Government rate of matching contributions to KiwiSaver and removes the tax exemption on the contribution by employers. It also makes some significant changes to Working for Families. Let us look at the balance of contributions to KiwiSaver. The Government says this is intended to move public funding towards private saving. It says this will generate fiscal savings by reducing the public cost of the Government’s contribution. Cutting both the Government’s and employers’ contributions to KiwiSaver and saying that that will increase the incentive for personal saving really borders on the disingenuous. Why would anyone be more encouraged to save when the matching contributions are cut?
Let us look at the Working for Families changes. The bill amends Working for Families by reducing the fiscal costs of the scheme while protecting the tax credits for lower-income earners. The threshold is to reduce from $36,827 down to $35,000 and the abatement rate is also rising from 20c to 25c in the dollar. Tax credits for children aged 13 to 16 will be aligned and a two-child family on $61,000 will now receive the same amount. Generally speaking, those earning anything above this will receive less than that. Below it, they will receive more, though the extra amount is tiny. Our analysis suggests that this is less than altruistic, despite what is claimed by the Government benches. Essentially, 110,000 Kiwi homes will be affected by these cuts to Working for Families. With more than 23,000 families earning less than $60,000 a year in combined annual income, reducing the abatement threshold to $35,000 means that the abatement now applies to two-parent families with one partner working at a minimum wage and the other partner working 12 hours at a minimum wage too. So raising that abatement rate to 25c in the dollar—and this is the rub of the changes—results in an effective marginal tax rate of 58 percent. This is put on the people of New Zealand who can least afford to be paying a marginal tax rate of 58 percent.
The KiwiSaver changes come at a terrible time in New Zealand’s history. We have very low rates of household savings compared with other OECD countries. I have to admit that I have been wrong on one thing. We have heard over the years that this Government has a vision of taking us back to the 1990s. That is definitely the case when it comes to industrial relations legislation. For some environmental legislation, the vision is to go back to the 1990s. When it comes to household saving, the vision is for us to go back to the 1970s—back to the days of Muldoon and scrapping national superannuation. Apparently the Government has dusted off the old play books on how to reduce our nation’s savings.
Two things this bill deals with are the KiwiSaver changes and the Working for Families changes. The third big element of this bill is the student loan changes, and I am surprised we do not see the changes in legislation in this Chamber today for the entitlement to student loan access for students aged over 55. Clearly, that is discriminatory. At 54 one can get a student loan; at 55 one is not allowed to under this Government’s change. It is clear, blatant ageism. It is distinctly unfair and, I believe, unlawful. The Human Rights Act says it is illegal to discriminate based on age when providing services. Obviously the Government can get around this by legislating it, but the Government has not legislated this. The student loan scheme was established in 1992 under a Cabinet minute. One cannot break the law in a Cabinet minute. Cleary this change is discriminatory, and I believe it is unlawful if the Government intends to continue this crazy policy. It is crazy when we consider that Kiwis are working longer—many past 65. It is crazy when many of us have a number of careers in our lifetime. It is crazy because in a recessionary environment people who have lost their jobs want to get trained up and they want to get skilled. That is a good thing for the economy, but this Government is saying no. I am surprised we do not have legislation in front of us to deal with that.
Lastly, I want to touch on the context of this bill, which is the Budget. The Budget lays out National’s grand plan, which is essentially that it will sell State assets. It is like an analogy of ordinary Kiwi cafe owners selling their espresso machines to get a little bit of upfront cash. It is like shearers selling their clippers to pay off the monthly bills. It is like hairdressers selling their scissors to pay off some bills. Ultimately, we will see bad long-term effects. I have just discovered in the Budget that it allows the Government to set up a new account of $750 million to help borrow for its roads of significance to National. This is in the context of the nation borrowing more than $300 million a week and of the biggest Budget deficit in our country’s history. Yet somehow Steven Joyce has managed to ring-fence his $11 billion for just seven roads of significance to National. And now, because we are seeing declining road usage across our country as a result of those high oil prices that the Government refuses to prepare us for and plan for, it has to set up a whole separate budget line of $750 million to fund the roads of significance to National.
We are seeing in this Budget subsidises to polluters of between $800 million and $1 billion. At a time when our country can least afford it, we are subsidising polluters. For me that sums up the Budget, but it also sums up the failure of imagination from both the two big parties in our Parliament. There is still no vision. From the National benches we hear that we will have severe cuts, possibly leading to another recession, and from the Labour benches we hear that it would borrow more, potentially risking a credit downgrade. No other party in this Parliament has the courage to look at the revenue side of the ledger. For any household budget, if the household is facing a pinch then it has to look at revenue. The Green Party has put serious, credible, well-costed proposals on the table that would not impact the economic growth currently projected but would make a serious difference to the Government’s books.
Lastly, I say that there is no vision from either party of how we transform in order to deal with these significant economic, environmental, and social challenges facing the nation. We have such advantages and such strategic assets in this country. We have this “clean, green” brand that will be called into doubt, as seen in the BBC HARDtalkinterview. We will have 80,000 people coming to New Zealand to watch the Rugby World Cup, and maybe a billion people watching it on television, and when they are not watching the rugby they will be asking the question: what is the deal with New Zealand? What is the country’s story? They will find we are on the world stage, selling ourselves as being clean and green, yet it is simply a marketing slogan and a marketing line. Instead, we need to be cutting those subsidies to polluters, rebalancing some of that transport budget to sustainable options, and leveraging that “clean, green” brand into a prosperous future for all of our kids. Kia ora.
TE URUROA FLAVELL (Māori Party—Waiariki) Link to this
Tēnā koe, Mr Assistant Speaker Roy. E te Whare kia ora tātou katoa. I reckon the Taxation (Annual Rates and Budget Measures) Bill is the difference between mince on toast and a gourmet feast. It fills the spot and it sustains us but it is hardly going to excite the masses. I reckon it is the difference between sensible and sensational. It is a slow and steady approach to lifting the national savings, rather than a slash-and-burn approach or, at the other end of the scale, a shop-‘til-you-drop approach. These days, when virtual social networks thrive, and instant gratification is the only game in town, it sometimes appears as if there is no end to the levels of sensationalism we have come to expect with any event, including the annual Budget. An economic analyst on AMP Business this morning described it aptly. He said that New Zealand is used to Budgets that are one of three gears: fifth gear, neutral, or in reverse. Simply moving forward at a moderate pace never quite seems to hit the spot.
The latest phenomenon, I tell members who do not know, is a game or activity called planking. Planking is a particularly good example of the trend to be just a bit more shocking and dramatic than the next person in line. Planking is a new obsession. It requires that the subject lies flat and face down—which is what some of these people in the House should do—in an innovative location. The pose is photographed and the photo is uploaded on to the social networking site. Members might have seen it on TV recently. Earlier this week the game took on a bit of a sinister edge. A 20-year-old Brisbane man fell to his death, while planking, from the seventh floor of his dwelling. It is a classic case of a world where people hunger for excitement and a sense of adventure, regardless of the risk.
In such a context, the prospects of people welcoming a Budget that emphasises balancing the books and being responsible, affordable, and measured was always going to be pretty low. Let us face it: steady as she goes will hardly raise an eyebrow, let alone get a standing ovation. But, then again, building a solid platform for growth will not see us catapulting down into the death trap either.
The taxation legislation epitomises a “business as usual” approach to the economy. That is what we say. It is about enacting various strategies that support and sustain core programmes while at the same time making changes that deliver better value for taxpayers. Of course, no one has ever wanted to reduce any funding to families. Ideally, they should be the first place to look at, in terms of investment. How do we respond to exceptional extenuating circumstances of two massive earthquakes and an ongoing series of shocks to the economy, without some changes that have the potential to create savings?
If one looks at this bill one sees some answers. Slowly but surely the Government intends to reduce the amount of money it has to borrow from overseas in order to subsidise KiwiSaver, and instead increase the amount of genuine savings from the public sector. The Māori Party supports this approach on two grounds. Firstly, we are pleased we are lessening reliance on foreign funds to prop up our own local economy. Part of our policy approach has been that we look at our opportunities internally for suitable investors. Opposition members are quiet now; it must have been a good idea. I am mindful of the excitement that was evident at the Māori economic summit conference held earlier this month.
TE URUROA FLAVELL Link to this
The member has already been on the plank. That is why he looks so bad. One of the breaking news reports from the day was from a study from Business and Economic Research that revealed that the value of assets held by Māori has more than doubled since 2006. Māori now have a significant asset base, worth $36.9 billion, compared with $16.5 billion 5 years ago. That is what we learnt at the Māori economic summit conference. At the summit the thriving momentum and buying power of Māori organisations, businesses, and individuals was clear for all to see. The point that the Ngāi Tahu leader Mark Solomon made in the context of that summit is just as relevant to this taxation debate as it was then. Mark Solomon spoke about the recent meeting he had attended where he challenged an influential Auckland business audience to retarget their approach to iwi. The forum was a meeting hosted—
TE URUROA FLAVELL Link to this
I tell Mr Cosgrove that it was probably at his meeting. The forum was a meeting hosted by Sir Ron Carter at which 40 major banks and companies were present. On the wall of that hui was a banner that asked “Are iwi ready to invest?”. Mr Solomon said the question should be “Are you ready to invest with iwi, as we have stood in front of you for 150 years and been absolutely invisible?”. It is certainly a good question to consider. Is the Government prepared to consider trusting in the asset base, including Māori trusts and incorporations, Māori employers, and self-employed Māori? That is the question.
I will focus on this last group for just a minute. The Government’s contribution to KiwiSaver has been the only incentive for the self-employed to participate in this scheme. As over 90 percent of New Zealand businesses employ fewer than 10 people, having small employers involved in KiwiSaver is very important. They would not divert funds from their business for retirement savings if it was not worth more than $1,000 to do so. We are pleased the $1,000 incentive for new entrants to the scheme has been retained. My colleague Tariana Turia spoke yesterday about the fact that there was not a huge uptake of KiwiSaver by Māori. For those Māori who are in the scheme we understand that it can provide higher relative payouts for lower-paid workers, whereas they do not get any value from taxes paid in respect of New Zealand superannuation.
The other reason we support the changes to KiwiSaver is that the increased contributions from both individuals and businesses will happen only over time, helping to give the country time to adjust. The biggest risk, of course, is that any dilution of the current benefits of the scheme may undermine the public’s confidence in the complex financial product. Currently, KiwiSaver has 1.7 million New Zealanders saving for their retirement. This provides a stabilised savings vehicle, which is helping to rebuild individual and household balance sheets, and the challenge is on all of us to ensure we maintain future long-term benefits to the country while the adjustment is in place.
The other big set of changes in this bill is around Working for Families. In terms of the broad parameters of the policy change, we support the concept of better targeting Working for Families for lower-income families who need more help. That fits in with the advocacy role we have played in Government, fighting to protect the rights of, and opportunities for, the most vulnerable. We acknowledge that it will hurt higher-income families in terms of the greater good for the nation, but we believe that that is a change we can support in the interests of the longer haul. The Māori Party will support the third reading of the Taxation (Annual Rates and Budget Measures) Bill.
SHANE ARDERN (National—Taranaki - King Country) Link to this
It is a pleasure to rise in support of the Government’s Taxation (Annual Rates and Budget Measures) Bill. I stand here today representing the Taranaki - King Country electorate, an electorate that starts near Hamilton and finishes in South Taranaki. It is a rural electorate, a farming electorate, with a large number of dairy farmers. It is not a rich electorate. It is made up of 17 small towns up and down the electorate. They support the rural electorate and we support them as part of the farming sector.
I stand here as a dairy farmer and I say to Labour members over there that I know what my tax is, I know what we pay, and I despise the way that issue has been misrepresented over the last few days. If there is one thing that the rural electorates know how to do, it is to hunker down when there are tough times, look at what works, pay the bills on the areas that are essential, not pay the bills for things that are not essential, and look to where cuts can be made. That is why I am proud to be part of the National Government. I am proud of a Government led by John Key, which has looked at the circumstances New Zealand faces at the moment and what we can do to bring about an increase in economic activity and growth. I will tell members on the other side of the House what does not increase economic activity and growth: taxing the productive sector—that is, taking taxes from the productive sector and spending them on non-productive activity. That is Labour’s answer, that is its solution to the way forward, and that is what the Labour Opposition puts up.
I have one question to put to the Labour Opposition, and it relates to the fact that I have heard in many speeches in this House that the agriculture sector, and particularly the dairy industry, is supposedly the backbone of this country. What does that mean? What does the word “supposedly” mean? Does it mean that it may be, or it could be, or it might be? If it is not, what is? I ask members on the other side of the House whether it is the black market that the trade unions support—openly and regularly. Maybe it is the underground, non-taxable income that is so often supported—and turned a blind eye to—by those members on the other side of the House. Maybe it is not; maybe it is something else. Maybe it is the activity of the trade unions, or maybe it is the activity of the Labour Party. If the agriculture sector is not the backbone of this economy, what is? There is no “supposedly”; it is, in black and white, the backbone of the economy, and there is no doubt about it. Why then would those members use such distorted figures? The only reason I can suggest is that Labour intends to attack the very productive base that this economy depends on. I am a dairy farmer, and I will never back away from that, and I am a shareholder of Fonterra, a small cooperative—a small farmers’ cooperative. It is small by international standards but big in New Zealand.
When the Christchurch earthquake struck, who was the first one there? Who was the first one there with a tanker load of water? Who was the first one there? And I ask this question: who put the money in? How much money did Mr Little write out for the earthquake? What was the cheque from the trade union movement? Righty-o, they cannot afford it. They will say that they cannot afford it. Where were they when they needed the soldiers on the street cleaning up? Who turned up for that? It was the Farmy Army and the students—not the trade union movement, no. They were the ones sitting in their houses and looking out at the workers. This is a childish, shallow, and vindictive attack on the farming sector, the very sector—
Hon Clayton Cosgrove Link to this
I raise a point of order, Mr Chairperson. I respect the member and I do not wish to interrupt him, but I simply ask for your advice. I know this is a very wide-ranging debate, and we have roved reasonably wide, but the member speaks of the Farmy Army, the student army, and the earthquake. This is a tax bill, and the member might want to come back to it. I do not think it is healthy to throw accusations about black markets and people being involved in that.
The ASSISTANT SPEAKER (Eric Roy) Link to this
I take the member’s point, but I think that if I was going to be overly critical on this point, then I would have raised this matter at other times during the succession of debates on this matter. It is probably stretching things a bit, but has he gone further than other members? I am not sure. My preference, certainly, would be for members to debate specifically.
Thank you for that, Mr Assistant Speaker, because the member has given me such a wonderful opportunity that I do not know where to start. In the Budget there is $5.5 billion going to the Christchurch earthquake repair. The member would have missed that, I am sure—he would not have seen that. It is on the second or third page, and he would not have read past the front page that the Labour research unit gave him. The National Government is investing $5.5 billion into a town that was devastated, and so it should. But here is the irony: most of the Christchurch seats are held by Labour. It is a Labour town, and the National Government is putting $5.5 billion into it—so we should—and we do not resent a single cent of it.
Labour members have this notion that we can get this economy back on track by, once again, identifying entrepreneurs and successful people—not the losers on the other side of the House, not the vindictive haters and wreckers on the other side of the House, but people who are successful, work hard, and strive to achieve—and attacking them. Labour’s alternative budget is to tax farmers more, and that will solve the problem. That is the next Tui billboard: “Tax farmers more and that will fix the economy!” That is what Labour members have said in the last few days. It is the next Tui billboard. What will they say to that? “Yeah, right!” Shame on the Labour colleagues who have decided to shift the limelight from the fact that they have no alternatives, that they have nothing to offer, that they are shallow and completely without any substance, at all, on to a group of hard-working, dedicated individuals who are paying their taxes, are good citizens, and are good community people. Those members should be ashamed of themselves, and that is all I can say.
The Green Party has also put up no credible alternative. Dr Russel Norman sails up and down rivers all over the country talking about the state of pollution, and blaming a particular industry. I invite him, actually, to row his canoe down the Avon River—row it down the Avon.
OK, OK, of course it’s different. There are no cows anywhere around the Avon; it cannot be polluted, because there are no cows there. It is the most toxic waterway in the country, next to the Viaduct Basin in Auckland, of course, where, again, one would have to go a long way to find some cows. Never let the facts get in the way of a good story. The Hon David Carter and the Hon Nick Smith have done more to correct the situation in terms of cleaning up waterways with the recent announcements that this Government has made than any Labour Government has ever done. Labour and the Greens talk about the environment but they do not do anything about it.
In closing, I say that this is a good Budget, and it is the right position to go to. I am a farmer and I live in an electorate that is made up of farmers. I share the highs and lows. I know when they are hurting, and when they are not paying tax, because they have not made any money and have made a loss. I know that when they make a good profit, they pay their share of tax. I say to members opposite that I know what their vision for the future is. One need go no further than the small community I live in, where there used to be a small school that produced four duxes in four different high schools in the electorate, but now it looks like a Third World derelict. That is the Opposition’s future for the rural community. It closed that school despite the fact that 75 percent of the operational grant went into the curriculum. When one looks at it now, we see that it is a disgrace. That is the legacy and the vision that Labour has for New Zealand. The vision is bankrupt, Labour members are bankrupt. They are losers, haters, wreckers, and muppets.
Hon Clayton Cosgrove Link to this
I raise a point of order, Mr Speaker. Last night you made a series of rulings, and I was, quite rightly, a victim of one of them. Given the last set of comments by that member, I invite you to be consistent. You were right last night, you should be right today, and I invite you to be consistent in your rulings in respect of that last salvo from the member.
The ASSISTANT SPEAKER (Eric Roy) Link to this
I think the member Shane Ardern used some invective that certainly was not necessary. Probably the appropriate thing for me to do would be to ask the member to withdraw and apologise for that.
BRENDON BURNS (Labour—Christchurch Central) Link to this
I am a little bemused by the preceding speech by the member from the struggling, poor electorate of Taranaki - King Country, and by his description of the union movement, which, obviously, has not done anything to help the poor people of my electorate, Christchurch Central! I just remind him that, firstly, generous donations were made by various unions to the Christchurch earthquake appeal, and, secondly, as he asked who was there first, I can tell him that people like police, firefighters, nurses, and emergency service workers were there first, most of whom are proud members of unions, and some of whom were outside Parliament yesterday to say they did not want to see a Budget that took the axe to the benefits they have enjoyed from good, sound policies that the Labour Government introduced, like KiwiSaver and others.
I will start by putting on the record how pleased I am to see that this Budget provides for Canterbury. I am probably the member whose electorate will benefit the most from that provision, the $5.5 billion put into the Canterbury Earthquake Recovery Fund. I am also particularly pleased to see that the Government has picked up the idea of an earthquake bond. I have been working on that myself with a group that I chair, Interests in Conserving the Identity of Christchurch, which brings together building owners and heritage advocates. Jim Anderton has done some work on that, and we have done some work on it. I would hope that as the earthquake bond comes through after the announcement yesterday, we will see that there is some potential for it to at least in part support things like heritage retention in Christchurch. It is important to the rebuild of our city, along with other elements. I would also hope that some of the money might be directed to further support for skills training, which is, of course, essential for our rebuild as well. There it is on the record—we are in support of that measure.
There are now no excuses from here on in terms of how the rebuild proceeds. The Government has the power through the Canterbury Earthquake Recovery Act, it has the money as provided by the Budget, and it has the department in place. We are looking for an acceleration of the recovery from here on. There should be no more of the delays with things like heating, where there has been acknowledgment of the installation of 4,000 new heaters when there are 25,000 people who have asked for them. Let us hit the fast-forward button now in terms of this Budget funding the recovery of Christchurch.
However, there is for me a deep and fundamental concern about how the quake is portrayed in the Budget. I say to members that, yes, the quake should be the centrepiece of the Budget because it is the nation’s biggest ever natural disaster, and this Government, or any Government, would have had to respond to that situation. But that is no reason whatsoever, in my view, to provide for the sale of assets, be they State assets or Christchurch City assets. I remind members opposite that the basis of the Budget is that the quake accounts for only 10 percent of the accumulated deficit, nearly $17 billion. Let us not see the quake used as some sort of carte blanche for asset sales.
I will talk first about the assets of my city, Christchurch, where $2.2 billion in assets is held by ratepayers. These assets are essential to the financial integrity of the city. They keep rates down by about 15 percent. They have contributed to many other important projects, such as the building of the Christchurch Art Gallery, which became the base for civil defence, and, more latterly, the Canterbury Earthquake Recovery Authority operation. That was the building that stood up, and it was funded, in large part, by assets such as Orion. Orion has returned nearly $1 billion to the Christchurch City Council and its ratepayers over 20 years. That is nearly $1 billion from one of the assets alone. I challenge the next Government speaker, who might be Amy Adams, to stand up and add to my voice in saying that we will not tolerate any sale of Christchurch City Council, Selwyn, or Waimakariri assets as part of the funding of the recovery.
I ask members why we should be concerned about that. We are concerned because, firstly, the Canterbury Earthquake Recovery Act provides the capacity for that to happen, and, secondly, the Budget provides for the sell-down of half of some of the major assets currently held by the Crown. We look at Mighty River Power, Meridian Energy, Genesis, Solid Energy, and Air New Zealand as being the principal assets that we hold, and we say it is absolutely essential that those stay in public ownership because of the dividend stream they provide.
I ask the next member to speak to comment on the issues created by the Supplement to the 2010 Investment Statement of the Government of New Zealand. On page 3, in the Executive Summary, it states that proceeds from asset sales—
The ASSISTANT SPEAKER (Eric Roy) Link to this
Just a short while ago I was asked to rule on relevance. This debate is on the Taxation (Annual Rates and Budget Measures) Bill—
Hon Phil HeatleyThe ASSISTANT SPEAKER (Eric Roy) Link to this
Who said that? I ask the member to leave. I am on my feet. You are out.
The ASSISTANT SPEAKER (Eric Roy) Link to this
I ask the member Brendon Burns to contain his comments to matters that are in the bill.
Hon Clayton Cosgrove Link to this
I was the person who at one point during Mr Ardern’s speech raised an issue with you. You were generous and correct in your ruling. You stated that the debate had stretched pretty wide of the mark, and that others had stretched it possibly even further or to the same level as Mr Ardern. I argue that in terms of being consistent, what is good for the goose is good for the gander, as it were. I invite you to perhaps have a wee think about the instruction you have given my colleague.
The ASSISTANT SPEAKER (Eric Roy) Link to this
The member has made a fair point, but I was responding because I had been asked to make a ruling earlier. Maybe I did not make the point as firmly as I should have. I will restate what I said then. We have strayed wide, and I alert the member Brendon Burns to the fact that it is my desire that he approach the debate in the direction of the bill.
Thank you, Mr Assistant Speaker. I pledge I will not refer to Farmy Armies, unions, or any other matters from here on. I will talk about the Budget and the fact that in Part 1 of the Taxation (Annual Rates and Budget Measures) Bill it provides for the taxes to be paid this year, and in Part 2 it provides for cuts to Working for Families and KiwiSaver. I am making the point that part of the whole integrity of the Budget is actually including partial asset sales, so how can we have that included as part of the Budget, its papers, and its assessment of forecasts when in fact the Government has said it will not take those issues to the electorate until 26 November and they will not come into play until next year? But here in the Budget papers we have a provision for a stream of income from asset sales of the order of $5 billion to $7 billion.
I come to a point on KiwiSaver and the changes made to it in Part 2 of the bill. To me, this just continues what has been an appalling record by National in office that dates back to the time of our colleague Sir Roger Douglas, who in 1974 brought in a contributory superannuation scheme—a predecessor, if you like, of KiwiSaver. If it had been left in place, it would have seen us a very wealthy nation today—would have. Unfortunately, the then National leader, Rob Muldoon, campaigned on disembowelling that scheme, and we have paid a price for that ever since. That is not the only legacy of National in respect of superannuation, which has been most recently manifested by yesterday’s announcements on KiwiSaver. In the 1990s there was a cut to the base rate for married couples from 65 percent of the average wage to 60 percent. It was a swingeing cut for those people. Around 70 percent of people are reliant on national superannuation as their base income. We had that change perpetrated on New Zealanders in the 1990s under the Shipley administration.
Now we have KiwiSaver, in about its third permutation—because National came into office saying it would cut back the employer contribution to 2 percent—and now we are seeing under this measure a return to a 3 percent payment from employers. The signals from employers are that that will simply come out of the wage increases of employees. That is certainly not contributing, in my view, to the focus on savings that this Budget is supposed to have at its heart. If we are going to encourage people to save, then we need, as Treasury’s and the Inland Revenue Department’s own regulatory impact statements say explicitly, stability and predictability. People will not put money into schemes if they think Governments will play around with them.
Here we have a National Government that should hang its head in shame at its past history on superannuation and on encouraging New Zealanders to save. Yet again, National is playing tricks with a superannuation scheme that was picked up by thousands and thousands of New Zealanders every week—1.7 million New Zealanders have come on board. Instead of enhancing the scheme, adding to it, or building it into a scheme that all New Zealanders can rely on into their future retirement, we are seeing the axe taken to it. We are seeing cuts being made to it. We are seeing its value being undermined. New Zealanders will take those signals and ask why they should stay on board and contribute to KiwiSaver if the Government is not staying on board. We are already seeing comments like that in the public domain.
My final comment is that although this Budget is supposedly about growth, we saw two references to exports and 19 references to debt in the text of the Minister of Finance’s speech to the House yesterday—19:2. That is the focus of this Budget. It is about debt and it is about cutting; it is not about growing. It is a very poor, shabby, and shameful Budget.
AMY ADAMS (National—Selwyn) Link to this
I will take a call in the third reading of the Taxation (Annual Rates and Budget Measures) Bill. Before I talk about some of the specific measures in the bill, I want to make a few introductory comments to set the context within which those changes are being made. As this has been a wide-ranging debate, I am sure I will be indulged for a few moments. I think where we have to start with this stuff is to say that anybody can stand here and talk about perfect-world scenarios. It is very easy to stand here and say that this should be happening, we could do this, and would it not be great if we could do that. But the reality is that the last few years have presented an unprecedented set of challenges. There have been economic challenges, personal challenges, and social challenges that this Government has had to deal with. That has meant we have to make changes to the way things have been if we are going to get this country back on a path to sustainable growth. If we are starting from a position of saying that everything is good, let us just carry on and keep spending money, we are not accepting the fact that we have to do things differently to deal with what has gone before so that we can get this country on a path back to growth.
This Budget charts a remarkable turn-round from a record deficit of over $16 billion to almost balance in 3 years, and, in the year following that, a surplus of $1.3 billion. That is a turn-round in those 4 years of nearly $18 billion. That is a stunning achievement, and it is an absolute prerequisite to getting this country into the sustainable, strong, prosperous position it deserves to be in. Mr Burns was right about one thing in his contribution: a big part of getting that situation right is about controlling debt. We are not making any excuses about that. We have to get on top of this debt. If we are going to keep borrowing and borrowing, we will never get back to the position of surplus. Surplus means choices and the ability to withstand the sort of shocks we have had in the last few years. We have to control debt. At the moment we are borrowing $380 million every single week. With the changes in this Budget, we can get that down to $100 million a week next year. That is absolutely critical to getting this right. Yes, we are making changes, and, yes, those changes take money out of the Government spend. That is a good thing, because it is what is needed right now in this climate with the issues we are facing.
I want to have a look at some of the specific changes this bill delivers to KiwiSaver and Working for Families. Let us have a look at those. I have sat here all day today and the debate has been wide ranging, but few people have actually talked about the specifics of the changes and how small and gradual they are. Let us have a look at them. KiwiSaver costs this Government $1.2 billion every year. It is costing this Government $1.2 billion in subsidies and tax breaks. That money comes from hard-working New Zealanders. What is worse, it is money that is adding to what has to be borrowed from overseas. It all has to be funded and paid for. Yes, we are reducing the tax credits to 50c in the dollar, but we are keeping the kick-start subsidy. That means we will still be committing $650 million as a Government to KiwiSaver in the next year. That is a significant contribution. We will be committing $2.5 billion to KiwiSaver over the next 4 years. That is absolutely important to emphasise. We are committed to it. We will see it remain viable and successful, and all the projections tell us it will continue to grow. But, yes, we are reducing those tax credits to help pay the bills from the years we have had it.
Let us look at Working for Families. We are talking about gradual changes over 8 years. Let us get this on the record very clearly. Three-quarters of families on Working for Families will not see a reduction; in fact, they may see more. Twenty-five percent of families will see a reduction, and that reduction is an average of $4 a week—$4 a week. For all the histrionics about gutting, slashing, burning, and everything else, and all the vitriol and hyperbole we have seen, a quarter of families on Working for Families will notice a reduction, gradually introduced over 8 years, of an average of $4 a week. It is not a lot, but it is an important step in getting this country back to surplus. We have to put that on the record.
Let us have a look at student loans, as well. Although the student loans scheme is not part of this bill, it is an important part of this. Here are a couple of interesting things. The cost of student loans has gone up 50 percent in 5 years—50 percent. There is $12 billion outstanding in student loans. Of that money, the Government collects an average of 55c in the dollar. It is staggering to find out that 50 borrowers are responsible for $11 million in debt between them. We have to start asking the hard questions about these schemes; we cannot put them in the sacred cow category. That is what this Budget has done, and it has done it in a balanced and responsible way. That is what this bill delivers in respect of KiwiSaver and Working for Families, and I am very pleased to commend it to the House.
JOHN BOSCAWEN (Leader—ACT) Link to this
I have been listening to this debate with a great deal of interest over the last hour or so. I particularly want to comment on the contributions of Gareth Hughes, Shane Ardern, David Cunliffe, and, more recently, Brendon Burns.
Let me start with Gareth Hughes. I always find it very interesting when members of this House refer to the pronouncements of the Human Rights Commission, and particularly when those members come from both Labour and the Green Party. I have a real respect for the Human Rights Commission and, in particular, its Chief Human Rights Commissioner Rosslyn Noonan. I listen to what the Human Rights Commission has to say, and particularly so in view of the courage shown by Rosslyn Noonan, Judy McGregor, and Sylvia Bell in the commission’s submission on the Electoral Finance Bill, which came before the Justice and Electoral Committee in the last Parliament. I remind Mr Gareth Hughes of what the Human Rights Commission said in respect of that bill. The commission said: “The bill in its current form represents a dramatic assault on two fundamental human rights that New Zealanders cherish,”—
Mr DEPUTY SPEAKER Link to this
This has nothing to do with the taxation bill, and I ask the member to come back to what this bill is about. We are speaking on the third reading, and on the report back from the Committee stage. Those are the points that need to be canvassed in this speech.
Thank you, Mr Deputy Speaker, and I understand that. The reason I thought it was important to put Mr Gareth Hughes’ criticism in context is that the Human Rights Commission has come out and spoken out against the proposal to restrict the ability of those over the age of 55 to borrow for living costs when they are studying. Those students will not be restricted to borrow money for their fees, but restrictions will be placed on their ability to borrow for living costs.
I say that although the Human Rights Commission has come out against that proposal, I would say to the members of the commission that there is a cost for everything. There is no free lunch. As contained in this Budget, some $15 million a year is borrowed for living costs for those over the age of 55, which has to be paid for by someone. As I will point out, it will be paid for by the people who will get the least from this Budget—the most disadvantaged. The people at the bottom of society, the people who actually do not have the money to contribute to KiwiSaver are required to pay taxes—if not income tax, then certainly GST on the food and the clothes they purchase—to subsidise those who can go to university. In the same way, those same people on low incomes, those same disadvantaged people, have to subsidise those who will enjoy unlimited superannuation into their 80s, whereas those who are not as well off usually have a lower life expectancy.
Gareth Hughes also continually refers to the paying of subsidies to polluters. We hear the Green members’ constant refrain about paying subsidies to polluters. They seem to think that the more times they say it, the more it will be true. But the tragedy is that it is not true, and I suspect that most members of this House do not understand that. I would like to explain, because the emissions trading scheme, which is an item in this Budget—
Mr DEPUTY SPEAKER Link to this
No, we are talking about taxation matters, which are in the bill. The bill is not about an emissions trading scheme. I ask the member to confine his comments to the contents of the bill.
I suggest to the House that the Government has had to make reductions in the subsidies on KiwiSaver because of what the Government is spending in other areas. Maybe we would not need to be legislating for these cuts in subsidies if the Government was not wasting money in so many other areas. I note that on page 179 of the Budget documents, buried under “Heritage, culture and recreation expenses”—and a previous speaker Brendon Burns would have us believe that heritage, culture, and recreation are about the rebuilding of Christchurch—we find mention of the Kyoto Protocol and the emissions trading scheme. What a great place for the Government to bury the fact that we are spending over $1.2 billion on that scheme, and that we have to cut other Government services.
I refer now to the comments of Shane Ardern when he was speaking on this Budget. Mr Ardern said that he was very proud to represent a farming electorate that had a very large number of dairy farmers. He said he himself was a dairy farmer. Given that he is a dairy farmer, he will know that dairy farmers pay about $3,000 a year on the emissions trading scheme. I thought it was particularly interesting when Mr Ardern said that the solution was to tax the productive sector, and that to tax farmers more would fix the economy. National seems to think that is true, because that is exactly what the emissions trading scheme does. That is why we are discussing the cuts to KiwiSaver contained in this Budget.
Let us look at the contribution made by David Cunliffe. That member, like so many in this House, thinks that this is a debate between National and Labour. There is no alternative, they think, so the member waxed lyrical about the fact that some pollster is showing that 48 percent of people believe that this Government is going down the wrong track, and only 32 percent believe that it is going down the right track.
That is what he said. He said that as sure as night followed day, when a greater number of people believed that this Government was going down the wrong track—and he said that more people believed that it was going down the wrong track than the right track—there would be a change of Government. Well, the ACT Party believes that this Government is going down the wrong track. The ACT Party, although it will be supporting the changes in this bill—the changes in the KiwiSaver subsidies, and the other taxation changes in this bill—is supporting it because we have a confidence and supply agreement with the Government. But we do not believe that these changes go far enough. We absolutely do not. We think this is a lost opportunity. Mr Cunliffe said he had been waiting 3 years for a Budget from National that would give some vision and some courage. But the members of the ACT Party have not been waiting 3 years; they have been waiting 18 years. We have been waiting 18 years for a Budget that can lay down some foundations for making some significant increases in the productivity of New Zealand.
There are a number of things to commend in this Budget. Yes, we are returning to surplus by 2014, or should I say we are projected to return to surplus. Those projections, of course, are based on—
Hon Rick BarkerHope is exactly what it is. Those projections are based on rising incomes and growth of some 3 or 4 percent in that 2014 year. Media commentators have said this morning that Treasury has been forecasting growth of much higher levels than we currently have. It is forecasting growth at a time when there is massive world uncertainty; the US dollar has massively devalued. So this is very much a “hope” Budget, in the same way that it is another lost opportunity, just like the previous 17 Budgets that have been brought down by both Labour and National Governments since the ACT Party was formed in 1994.
We have been talking about the cuts in the subsidies to KiwiSaver. One of the fundamental points of this bill—and Amy Adams made the point—is that the cuts are gradual. Certainly, the changes in Working for Families are gradual changes. But who can actually save the money? Who are the people who can put together and save, currently, the 2 percent contribution, which is now to be 3 percent? Are many people on low incomes or working for the minimum wage in a position to save 2 or 3 percent? I suspect not, but they are the people who will be paying the taxes to subsidise those who can. One of the reasons that ACT opposes the bill is that we do not think we need to have those incentives. We do not think that those earning low incomes and paying GST should be subsidising those in a position to save.
I find it very interesting that Brendon Burns referred to the fact that Sir Roger Douglas, as Minister of Finance back in the then Labour Government of 1975, introduced the Labour superannuation scheme in that year, and Brendon Burns waxed lyrical about how big that pot of money could have been. Mr Burns is absolutely right: that would have been a big pot of money 35 years ago. But Mr Burns did not say that there was actually no subsidy for it. It was based on a 4 percent employer contribution and a 4 percent employee contribution. There was no $1,040 one-off payment. There were no ongoing subsidies that the poor had to pay for.
We are supporting this bill. But it is a lost opportunity, and we look forward to playing a much bigger role in Government following the election.
STUART NASH (Labour) Link to this
Is it not interesting—John Boscawen said the ACT Party was formed 18 years ago. Well, it held its breath for 18 years and it turned blue. That is what happened; it turned blue. The party has given up on everything it once stood for, and John Boscawen even admitted that he does not agree with anything in the Taxation (Annual Rates and Budget Measures) Bill, but he will vote for it. What does that say? Well, maybe I should say that blue is the wrong colour. Maybe yellow is the right colour. After 15 years of not even getting close to power, ACT had to pull back Sir Roger Douglas. He had to come out of retirement to save the ACT Party. I feel a little bit sorry for Sir Roger. He was enjoying his retirement. He had put the old version of KiwiSaver in place. It would have been a fantastic scheme.
But I must admit there are a couple of points—and members will not hear me say this very often in this House—on which I agree with John Boscawen. The first point is that this Budget is a hope Budget. The figures behind this Budget do not stack up. Why do I say that? Because I am the Labour spokesperson on revenue. I have dealt with the Inland Revenue Department on a number of issues, and I have found it to be absolutely brilliant in its statistics and its advice. The advice the Inland Revenue Department gave to the Government on tax in this Budget differed, by $4 billion less, from the advice the Government received from Treasury. The Inland Revenue Department advice differed from the advice from Treasury by $4 billion over 5 years. That is a lot of money, in anyone’s language.
I do not know what the Treasury figures were based on, but, goodness me, we should be very concerned. Amy Adams stood up and I agreed with her on one thing: things need to be done differently. Labour agrees with that. Labour knows that the country cannot afford to keep borrowing $380 million a week. That is not sustainable. A $16 billion deficit is simply not sustainable, and something has to be done about that. Amy Adams said that it is about giving choices. This Government had choices, but it spent $25 billion on tax cuts. That was the wrong choice. This Government also cut KiwiSaver.
I will give the House a quote from John Key. He refused to rule out further cuts to KiwiSaver. When he was asked whether it was the end of the cuts to KiwiSaver, he would not rule out further cuts. In Auckland today after addressing a business audience, he said “You learn in life, I guess, to rule nothing out.” When he was asked whether he could rule out further cuts to KiwiSaver, he said that he would not rule them out. He said “You learn in life, I guess, to rule nothing out.” Well, I think Mr Key needs to come straight. He needs to tell the people of New Zealand exactly what he wants to do with KiwiSaver. At the moment, he has cut $10. How much more? He says he will not rule anything out. Well, how much more? What is not ruled out? Will it be $20? Will he take away the $1,000 head start? What will he do?
There are a couple of points I would like to make in rebuttal to a couple of Government members. Craig Foss stood up in this House and had the nerve to tell New Zealanders that they were better off because of low interest rates. Well I can inform him and this House that New Zealand has the highest business lending rates of any country in the OECD. How is that helping business? Those figures are from the IMF; those are not Labour figures. New Zealand has the highest figures for business lending in the OECD. What has that Government done about it? Absolutely nothing. There is absolutely no plan whatsoever.
I will tell the House where the Treasury forecasts came from—that is, the forecasts that differed from the advice of the Inland Revenue Department by $4 billion. They were based on the creation of 170,000 new jobs. That is what that forecast was based on. When Mr English was asked today where the jobs were going to come from, he could not tell the people of New Zealand—
What did that create? Was it 60 or 100 jobs? It was certainly not 170,000. The tax revenues based in this Budget, based on these rates, are not achievable. They are simply not achievable. Mr English said that commodity prices are booming—they are going to come in the sectors that sell commodities. Well, I can tell this House that the opposite happens, and I will give members an example. In the forest industry, there are record commodity prices. What is happening? We are selling unprocessed logs offshore. Domestic processors simply could not afford to buy those logs. They are closing down. Jobs are lost. Let us talk about the farming sector. It is crippled, under $42 billion worth of debt. Thank goodness for record payouts! We may see a little bit of tax coming from that.
No one wants to see a more profitable farming sector than I do. Mr Ardern stood up in this House and he told us the boundaries of his electorate. He said that he came from a poor electorate, a rural electorate. That is true. That was our point. The fact is that the industry that describes itself as the backbone of this country is in serious financial trouble to the point where the dairy industry pays only $26 million in tax, and where 75 percent of dry stock farms earned $20,000 or less. Over half of those farms made a loss. That is a debate that we need to have as a country. It is also a very, very powerful argument for investing in the productive economy. Do we see any of that in this Budget? No. Was there any investment or tax incentives for research and development? No, none whatsoever. The plan is in this bill, and what is that plan? Cutting KiwiSaver. That is the plan to drive this country out of economic woes. Well, it does not work.
The other plan is to cut the Working for Families entitlements for about 110,000 Kiwis—no, not Kiwis, 110,000 New Zealand families. Those families are struggling, and that is why Working for Families gave them a little bit of a lift-up. In the Hawke’s Bay economy, $120 million worth of Working for Families entitlements goes towards helping those who need a lift-up. Mr Dunne was the Minister of Revenue when the Working for Families scheme was put in place. Mr Dunne knows how important it is to New Zealand families that they can have a little bit of a lift-up, a little bit of a hand. Those are the families that will spend money in our communities, in our shops, but now that money will not be spent, because it is being cut. Amy Adams has the nerve to stand up in this House and say that the average reduction in Working for Families entitlements is only $4 a week, and that it is not much. It may not be much to Amy Adams, but $4 a week—I know this is dreadful—is actually a bit of money to a lot of New Zealand families. It buys bread. It can buy some milk. It buys the necessities. For someone like Amy Adams, who is out of touch, $4 does not matter. But it does matter to a lot of Kiwi families. To say that it does not matter shows just how out of touch she is. I find that quite insulting.
I will give a quote from Bill English about Michael Cullen. Bill English said: “I want to stress that New Zealand starts from a reasonable position in dealing with the uncertainty of our economic outlook.” Dr Cullen left this country in fantastic shape—nine Budgets, all in surplus. This bill is not good for New Zealanders.
Hon TAU HENARE (National) Link to this
The Taxation (Annual Rates and Budget Measures) Bill gives effect to some of the changes set out in the Budget yesterday. We heard a lot of noise from Labour. What we did not hear was an alternative plan. There was not a word, not a whisper, of an alternative plan. There was nothing—naught, zilch—in any of those speeches, right from when the Hon Clayton Cosgrove came in here with his bully-boy tactics. He stood up and tried to stand over everybody, but, no, it did not work. [ Interruption] It did not work.
The Prime Minister the other day laid out for everybody what the plan is. Come 26 November we will see who supports the plan, and we will see who supports Labour’s plan—apparently Labour’s support is only 27.3 percent. The taxation measures set out in this bill are about one thing and one thing only: back in black by 2014.
I know the member for one of the areas in Canterbury thinks that “back in black” is an AC/DC song—and it is a good song—but this is about being back in the black by 2014. As Amy Adams said, that will be an absolutely remarkable turn-round.
I will tell members across the way a funny thing. Back in 1993 I was a young lad with four children. I had a mortgage. I was paid, before tax, $28,900. I did not get Working for Families, and I did not get the accommodation supplement. I am damn proud of the fact that I was able to work my way to having a home and a family without the help of the Government.
Here is the other thing: I am also glad that a person on $100,000 today should not get any assistance whatsoever. That is my personal belief. When we put into perspective what this Budget has done, we see that Amy Adams was absolutely right. Amy Adams was absolutely right that there are families that do not need Working for Families or the accommodation supplement. But, yes, on the other hand, some families do need assistance through the accommodation supplement, Working for Families, and tax credits.
I absolutely commend this bill to the House. It is a step in the right direction. It is the only thing that we can do. Opposition members hold up the front page of the Dominion Post with a big zero on it. I am proud that in an election year the Minister of Finance and the Government have brought to this House a Budget that will see us back in the black by 2014.
The other thing that I must say I really love about this Budget is that we are not putting this measure in place for the next 3 years. We are saying to the electorate that on 26 November people have a choice: go with a Government that is a good manager of the economy, or pick the other guys who squandered away billions and billions of dollars—
Oh no, they did not. It was all gone. It was all gone by the time we got here. That is the real story of this Budget and the real story of the economy.
How did we end up where we are? I can tell members that we ended up where we are because of the likes of Parekura Horomia, David Cunliffe, Phil Goff, and Annette King. They have been around for too long, in the days where we had the best of times, and they squandered the surplus every year. That is where they left us.
In the debate on this bill, Opposition members have also had a go at Sir Roger Douglas. I bring the honourable member into the debate because I want to say that if it had not been for Sir Roger Douglas and the Labour Government of the mid and late 1980s, we would have been in the you-know-where. That Government’s programme was kept by the National Government of the 1990s. I have something to say to the Labour members who get up and rail against selling State assets. I had a look at the old register the other day, and out of the 27 State assets that this country owned, half of them were sold by those who say that they do not like the sale of State assets.
Oh, that is all right! Now they say that they are opposed to any State asset sales. I am proud of the fact that our Prime Minister and our Minister of Finance have both said that we will put up for sale 49 percent of certain State assets. We will see a return on that.
How about my house? Why would the member want my nice little weatherboard house up in Te Atatū? Why would he want to do that? I tell him that what we should do is sell the assets of Stuart Nash. That would get us quite a few dollars. But I digress. This bill is about putting in place some measures so that we can get back in the black by 2014. That will be the catchcry of the election this year: “Back in black by 2014.”
A party vote was called for on the question,
That the Taxation (Annual Rates and Budget Measures) Bill be now read a third time.
Ayes 67
Noes 51
- New Zealand Labour 42
- Green Party 6
- Progressive 1
- Independent 2 (Carter C, Harawira)
Bill read a third time.