Taxation (Budget Measures) Bill

Hon PETER DUNNE Link to this

There are a number of reasons for that, but the fact is that if we want to attract those citizens back, we have to have a competitive tax environment in this country, and that is what this bill is seeking to establish. The lower company tax rate that it ushers in will encourage productive investment throughout New Zealand, thereby increasing productivity and contributing to raising wage levels. Lifting the amount of GST will help shift the current economic balance away from consumption and spending, and will channel efforts towards saving and investment. As part of the rebalancing of the tax system, certain rules will be tightened and strengthened to make the system more equitable, so that everyone pays his or her fair share of tax. In making these substantial changes to our tax system, the Government has been mindful of those New Zealanders who will need support as a result of the rise in the GST rate. As has been indicated, compensation will be an immediate and permanent part of these changes.

In summary, these are the main features of the tax reforms proposed in the bill. They were well aired in the earlier debate and in the Budget presentation this afternoon. Taken together, they offer a fairer, more balanced system, which will better support the efforts of New Zealanders to get ahead, and for that reason I am very happy to commend this bill to the House.

Hon TREVOR MALLARD Link to this

It would, under the definition in the Māori Party bill that is on the Table of the House. Kentucky Fried Chicken and chips would be healthy food under its definition. I say to Peter Dunne that the problem is that as he puts up the rate he opens it up to that sort of approach, which I think undermines the tax. I accept what the member says—that as he puts up the tax level he opens it up to a number of other suggestions that would not have arisen if he had not taken the leadership in the way in which he has done in promoting this bill. I think it would be better to stay with the 12.5 percent GST rate and to stay comprehensive, but the member knows my views on that.

I think we have three things happening here—and I would be interested in the Minister’s views when he makes his reply. We have some loopholes being closed. I say to the Minister that no one can argue against closing the depreciation loophole; we all know that it is a rort. The changes made to thin capitalisation are, again, a good thing. I am not there yet on the company tax changes; my view is that the major beneficiaries of those are the Australian banks, because for New Zealand companies, of course, company taxation is effectively a withholding tax, and with the imputation credits it is a matter of timing rather than absolute amounts—and I am glad Mr Woodhouse is agreeing with me. So there is not a lot of benefit to New Zealand companies from these changes. The end benefit of the taxation changes is to overseas owners of New Zealand companies.

In my view, the closing of those rorts has effectively given some money to lower-income and middle-income earners in order to offset the increase in GST for them. But the revenue from the GST is what is effectively paying for the massive tax reductions for high-income earners. People on incomes similar to the Prime Minister’s full income will get about $1,000 a week. People like the Prime Minister will get about $1,000 a week in the hand as a result of these changes. I ask whether we, as Kiwis, think that is fair. I say to Paul Hutchison that most of his voters would have been happy if the Government had raised the threshold for the 38c rate to, say, $150,000, or $120,000. I think his voters would have said that, yes, they liked that, and thought it was fair. When people such as the Prime Minister and a number of his mates are earning—or receiving; I do not want to say that the Prime Minister is earning it—$1 million of taxable income a year, do most Kiwis really think that those people should have an extra $1,000 a week? No, we do not; we think it is fair for them to make a contribution to our system. This is a tax switch bill; it is a switch from the poor to the rich.

Dr PAUL HUTCHISON Link to this

That is even better. But it is important to put this Budget in context, because if one thinks back to 2001—if Labour members can think back that far—one can ask what the Labour Government did after organising a highly respected report, the McLeod Tax Review. That Government totally ignored it. If it had actually implemented some of the report’s recommendations, we would not have been in the pickle we now are. In contrast, after this National Government had organised in 2009-10 a highly respected report known as A Tax System for New Zealand’s Future, tonight the National Government is implementing its measures, or the thrust of most of those measures. It is salutary to record in the House what the Tax Working Group report said. It said: “The current system”—this was after 9 years of Labour—“is incoherent, unfair, lacks integrity, unduly discourages work participation and biases investment decisions.” Those are the things that have been corrected, and are being corrected, in this Taxation (Budget Measures) Bill tonight. The working group explained that due to New Zealand’s current financial circumstances, it accepted the constraint to consider tax reform on a neutrally fiscal basis. That is absolutely correct.

So what does this bill do? Firstly, it rewards effort and helps families to get ahead. Just in case Labour members do not know, let me tell them that people respond to incentives. People think that it is fair and equitable that if they work hard, they are rewarded. The great thing about this Taxation (Budget Measures) Bill is that it decreases taxes right across the board. These measures certainly make the system fairer. At all taxable income levels, tax cuts more than affect the GST rise; furthermore, two-thirds of the cost of the income tax cuts goes to reducing the bottom two rates. Two-thirds of these reductions go to addressing the bottom two rates. They are Labour’s people that this Government is looking after.

The third thing this Taxation (Budget Measures) Bill does is help attract and retain skilled people. I was over in Australia a few weeks ago with the Health Committee, and we were deeply concerned by the number of research institutes that had skilled New Zealanders in them. But those New Zealanders wanted to be here, and the measures in the Budget are the very sorts of things that will attract and retain skilled New Zealanders here.

The other important thing is that this Budget encourages savings and productive investment, instead of the Labour Government’s 9 years of vacuuming up hard-working Kiwis’ important earnings, and redistributing them in a nanny State manner. Kiwis had got so used to that that they had forgotten about it. But, as Peter Dunne said earlier this afternoon, when Labour put up the tax rate in 1999 it was a disaster. There are now 130,000 loss attributing qualifying companies in New Zealand, which is four times as many as there were in 1999. Gross distortion has occurred over the last 9 years.

This bill is an extraordinarily great suite of measures to correct the disasters of the past. It will cement in a bright future for New Zealand, and economic growth to ensure that New Zealanders get sustainable, world-class health, education, and welfare.

Hon RUTH DYSON Link to this

Dr Paul Hutchison, who is a National member of Parliament. Dr Paul Hutchison is from somewhere just out of Auckland and is also the chair of the Health Committee. I find it extraordinary that in a 10-minute contribution on a tax bill he did not mention the Taxation Budget Measures Bill. I am not all that surprised; I would be ashamed too, if I were the member. Also, despite being a doctor and the chair of the Health Committee, he did not mention the $300 million hole that today’s Budget has left in our health budget. Any basic calculation will show that with inflation at the level it is and with the 2.5 percent increase in GST, which came in with the Budget, there is now a $300 million hole in the health budget. I could say that this makes the job of an Opposition health spokesperson a dream come true in many ways, because all we have seen over the last few months is health cuts. That may make an Opposition health spokesperson’s job easier but they do not make the lives of good, hard-working, ordinary New Zealanders any easier. It has not made the lives of people in Otago and Southland who have had their home support cut very easy. It has not made life any easier for the people in Palmerston North who are terminally ill and who will have 8 hours a day cut from the district nursing services they were receiving. It does not make their lives any easier, either.

So I am not surprised that Dr Paul Hutchison is so embarrassed that during a 10-minute speech he not once mentioned the tax cuts or the $300 million gaping hole in the health budget that was announced today. Nor did he did not mention that the Budget was a Budget of broken promises. The first broken promise was a promise made by John Key before the last election that GST would not be increased; today we saw it increased to 15 percent. Before the election John Key categorically denied that there would be an increase in GST, but today in the House we saw him as Prime Minister break that personal promise.

The second broken promise from the Prime Minister, Bill English, and National was an earlier promise that they would not increase borrowing for tax cuts. What did we see in the Budget today? We saw exactly that; there is increased borrowing for tax cuts, and not even fair tax cuts. [Interruption] The woman from Christchurch who has taught Aaron Gilmore everything he knows about economics says that that cannot be right. But one just has to read the Budget to see that we now have increased borrowing in order to deliver tax cuts. That is another broken promise from John Key, Bill English, and National.

The third broken promise was that there would be no cuts to public services, and I am sure my friend and colleague the member of Parliament for Wellington Central will have further contributions on this later. What are the services that are delivered through our education system and our health system? Are they front-line services, are they public services, and are they being cut now? They certainly are. That was the third broken promise.

New Zealanders are pretty tolerant; they understand when we are going through hard times. They understand when we all need to work together—central government, local government, and members of our community. They understand the need for people to tighten their belts and do a little bit more in hard times so that our country can get ahead. However, what they will not and do not understand, and what is making them very angry, is that this Budget and this legislation that we are debating had an opportunity to lift New Zealand out of the recession, to give people an opportunity for jobs, and to create a fairer tax system in any changes that were being introduced. But that is not what happened, at all. We see that the people who are doing OK still, despite everything—the people who are in the very, very top income bracket in New Zealand—are doing the best out of tax cuts while people who are on the average wage or below doing very, very badly.

Yesterday in the House I heard the Prime Minister announce—it certainly was an announcement and news to everyone, including Treasury—that Treasury had told him that GST was a progressive tax. Well, it is not. It is a regressive tax. It means that people who have less income spend a higher proportion of that income on items that have GST attached to them. Those people do not have a lot of spare money, so a higher percentage of their income goes on items that attract GST, so when GST goes up it is harsher on people who are low and middle income earners. On the Government’s own figures now, we know that most people will not be compensated for the GST increase. Many people will be worse off. People on $70,000 a year, and that is well above the average, will be $45 a week worse off with the tax cuts and GST increases. That does not factor in some other situations—for example, people in an income-related rental house whose income goes up, as it will for many people who are beneficiaries or on superannuation. Their rent will go up as well. So as their income goes up, their rent goes up. That means they will not be better off, but when they go into the supermarket they will not get a discount; they will pay an increased level of GST.

We see that 41 percent of the tax cuts go to the top 10 percent of income earners, and 15 percent of Bill English’s tax cuts go to the top 1 percent of income earners. How can that be fair on people who are just getting through a recession, many of whom have lost their jobs, and have had to get another job at a lower income. They work as hard as people on the top income bracket. I was appalled when John Key said to them to wait for the Budget and the Government would give the biggest tax cuts to the highest income earners but not to get jealous, because those very, very wealthy people are the backbone of the country; they are the people who are important to New Zealand!

I think those people are important to New Zealand, but I think the cleaners who work in this building are important to New Zealand, and as much of importance to our country as the people who are on the highest income. The average-income earner, and people earning right up to $70,000 a year, will be worse off under this legislation. Today the National-led Government squandered an opportunity to put a fairer tax system in place, and create a more modern economy where people would have open opportunities. When we look into the other budgets—like the education budget and the health budget—we see more cuts to adult and community education, introducing costs on people with children in early childhood education, reducing the number of qualified teachers in early childhood centres, and leaving a $300 million gaping hole in the health budget.

The Government has not introduced a fair tax system, as National promised. It is not the $50 a week tax cut that National promised before the election. This Government has introduced a tax swindle. It has broken three promises. It has increased GST when John Key promised personally to this nation that National would not increase the level of GST. It has cut public services, and certainly it has not introduced a fair tax system. This legislation will be a huge disappointment. It will cause more unfairness in our community and a lot of anger. Labour will oppose this legislation.

METIRIA TUREI Link to this

I thank the member. All children are entitled to live in a safe, sustainable society that protects their right to warm housing, safe, affordable food, and quality public education and health care—all within a loving and supportive whānau. We know that inequality hurts every child and every family, not just those people who are at the bottom. We know that New Zealand is one of the most unequal countries in the developed world: we are 23rd out of 30 in the recent OECD report. We were the sixth most unequal country among highly developed countries in last year’s United Nations Human Development Report.

METIRIA TUREI Link to this

Shame on the Government. Shame on the Government for failing to do anything about it. Shame on John Key’s Government for making it worse, which is exactly what its tax cuts and its GST increase do—they make inequality worse.

New Zealanders like to think of ourselves as an egalitarian society where everyone gets a fair go, but the truth is that we are not—the facts tell a very different story. The Green Party has the vision that we can be a more equal and more sustainable Aotearoa. It is within the choices that we make. But this Budget and this bill produced by the John Key Government choose not to pursue that vision. John Key’s Government has already initiated some very big spending: about $10 billion on new motorways, an estimated $500 million from cutting the top tax rate, and potentially hundreds of millions of dollars in taxpayer subsidies to polluters through the emissions trading scheme. Again, it is always a question of priorities, and the Green Party would prioritise our people and our environment.

I will talk about the area of housing. There are some provisions in this bill for changes in property taxes and speculation. The Mind the Gap package produced by the Green Party recommended the introduction of a comprehensive capital gains tax, excluding the family home. My fellow co-leader, Russel Norman, has talked about that tax in some detail today. We know that, in the longer term, a capital gains tax will provide a serious and significant part of the solution to New Zealand’s property crisis by broadening the tax base and protecting housing from what currently seems to be irrational property speculation intensity. A capital gains tax is necessary to strengthen our economy in the short and the long term. This bill makes some minor changes around property speculation and property taxes. They are a small step towards the changes we need to make, but we also know that any changes in property taxes could lead to increases in rental prices, particularly in the short term, and particularly for those at the very bottom.

In order to make sure that the spread is fair around the tax obligation and the tax benefit, we need to make sure that for any changes in property tax there is also a comprehensive building programme of new State housing to help provide affordable housing for those who need it the most. That is absolutely an urgent priority in this country. We have severe homelessness in this country, in different ways: primary, secondary, and tertiary levels of homelessness. It is incredibly important that families who live in overcrowded, cold, expensive housing have affordable alternatives, but this Government will not be doing that, because it has cut the budget for the building of new State homes. This Government has cut the budget for the building of new State houses by more than $100 million. So no State houses will be built under this Government. That is clear from the Budget cuts. In fact, the Government’s only proposal is to sell off more State housing. It congratulates itself on having sold off 17 houses last year. There is no plan by this Government to increase the supply of affordable housing for those families who need it the most.

The fact is that we must make that change, because safe, secure, and sustainable housing is fundamental to the health and well-being of everyone, and everyone should have access to housing that is suitable for their needs. It is a basic necessity, and we know that being homeless or in overcrowded housing affects income, employment, attendance and truancy at schools, and health. The Human Rights Commission has identified that crowding, dampness, and coldness are key issues for the New Zealand community. There is a State housing crisis, with 10,000 families on the waiting list. Many people are living in rental accommodation where they have to move regularly, which has a huge impact on their education and employment. We know that about 30 percent of at-risk and vulnerable young people are in unsafe and insecure housing. It is a serious crisis.

The cost of cold housing on families in the community cannot be allowed to continue. We know that we are losing about $1 billion per year in costs from cold housing, whether it is in relation to hospitalisation, the cost of respiratory illnesses, or the cost of lost working hours. We have a package that would deal with that cost. The building of 6,000 new State houses over 3 years at the cost of $2 billion would provide 28,000 jobs. Housing is part of the bill. That is a way of providing access to affordable housing and creating 28,000 new jobs, so that people have employment as well. There is no employment strategy in this Budget.

We would also introduce progressive pricing into the electricity market. That is a way of making sure that we can bring 70,000 households that are currently living in energy poverty out of energy poverty by providing a fixed rate of electricity provision at a low cost; anything that is used above that fixed level of provision comes at a higher cost. It is an effective way of providing support to those who are in the worst energy poverty. For example, pensioners who live on their own in old homes have a 97 percent chance of living in energy poverty. We can provide for them and support them out of that energy poverty if we simply choose to do so. The Green Party chooses to do so.

JOHN BOSCAWEN Link to this

I am interested in the barracking from the Government members, because they should be ashamed. The reason they should be ashamed is that New Zealand’s Treasury estimates that the impact of the emissions trading scheme will be to add 5 percent to the price of electricity and 4c per litre to the price of petrol from 1 July. Those costs will flow throughout the whole economy. They will flow into food prices and into everything that New Zealanders purchase. The Reserve Bank has calculated that the annual effect in the first year of the emissions trading scheme will be to add 0.4 percent to the CPI.

Where does that leave this Budget? Where does that leave the Budget that Mr English and Mr Key are so very proud of—the Budget that says that, on average, most New Zealanders will receive roughly “a half to one per cent”? Well, the people on incomes from $40,000 to $85,000, which the Budget document “B2 and B3” shows on page 9 will get a benefit of 0.4 percent, will be left with absolutely nothing—zero. National members—

JOHN BOSCAWEN Link to this

Do I hear a comment asking whose side I am on?

JOHN BOSCAWEN Link to this

That is interesting. I am very pleased that the member has asked that question, because I find myself, more and more, having to stand up and represent her constituents. Overwhelmingly, National Party members are opposed to the emissions trading scheme. They tell me that at the meetings I have conducted up and down the country. I read with a great deal of interest that at the National Party’s central North Island regional conference in the weekend, a subset of National Party members moved a resolution, unanimously, that the National Government should be delaying the introduction of the emissions trading scheme.

How interesting it is, also, to hear Labour members talk about the impact of this Budget on working people’s incomes and their expenditure. I have heard Mr Goff and Mr Cunliffe talk about the increase in GST, and of how inflation is going up. Well, National members can be proud of one thing. They can be proud of the fact that they are putting electricity up by only 5 percent, because the previous Labour Government would have put it up by 10 percent. That is right; that is the one thing, and the only thing, that the emissions trading scheme has to commend it. If there had not been a change of Government, then, from 1 January, we would have had an emissions trading scheme that Treasury has said would have increased electricity prices by 10 percent.

The National Government is confident and relaxed about the fact that it is increasing electricity and petrol prices, and increasing the flow-on effect of those things, by 5 percent from 1 July. The impact of that is there for all New Zealanders to see, on page 9 of the Budget document. Households earning between $40,000 and $85,000 will get a net impact of 0.4 percent, and the Reserve Bank tells us that the impact of the emissions trading scheme will be 0.4 percent. So everything that this Budget purports to give to those people will be taken away from 1 July, which is 3 months before the tax changes we are debating in this bill will come into effect.

It is actually worse than that. We can look at the position of superannuitants. The Minister of Finance goes on to state, very generously, on page 22: “the package will provide, from 1 October 2010, an immediate lift in the levels of New Zealand Superannuation, all main benefits, student allowances and Working for Families payments. This will be sufficient to offset the estimated impact on prices due to the rise in GST.” Well, is that not generous of the Minister of Finance and the National Government to be making adjustments to superannuation that will be sufficient to compensate for the increase in GST?

I ask about the increase in the price of electricity. What about the 5 percent increase in electricity? I ask about the flow-on effects throughout the whole New Zealand economy. I ask about the 0.4 percent increase in costs that the Reserve Bank of New Zealand said the emissions trading scheme will cause. What about that? There is no reference to compensation in the Budget speech. One thing I will say is that beneficiaries, and those who have their benefits adjusted in line with the CPI, will receive an adjustment, which will be carried forward because those benefits are adjusted in line with the CPI. But superannuitants, those people over 65 who rely substantially on New Zealand Superannuation—and who may be listening to this debate tonight—will receive no permanent compensation for those increases in electricity and petrol prices.

Let us turn to page 15 of the Minister’s executive summary. We see that in 2011, the cost of the emissions trading scheme will be about $907 million. In the following year, it will cost $275 million. I have heard the Minister for Climate Change Issues tell this Parliament that we have to proceed with those electricity increases because we have the massive cost of the emissions trading scheme. We heard Metiria Turei, the co-leader of the Green Party, talking tonight about subsidies for polluters. But this is not a subsidy for polluters. That $1.3 billion over 2011-12 is not a payment to polluters. I am sure that she is referring to the emitters of carbon dioxide, and carbon dioxide is not a pollutant. But that is a totally separate argument.

What is this sum? It is $1.3 billion that will be paid to the people who planted trees in the 1980s and 1990s. That is right. There were 70,000, 60,000, 70,000, and 80,000 hectares planted in trees every year through the 1990s. The people who planted those trees had no expectation of receiving a subsidy, but that is what they are getting. They are getting it courtesy of the taxpayer, so every single New Zealander will have to pay for that. It is a disgrace. If National’s politicians will not represent their members, then the ACT Party certainly will. Thank you.

Hon CLAYTON COSGROVE Link to this

Mr Mallard did not know. She is a member who is famous for two things. First, she is the member who thought that one should ban water. Secondly, she is the member who, during a public meeting with my colleague David Parker, showed that her in-depth knowledge of economics rivals that of Aaron Gilmore. She said: “No, we’re not going to borrow money. We’re going to get it from overseas.”

Hon CLAYTON COSGROVE Link to this

It was an economic theorist rivalling Aaron Gilmore.

Let me say that it has been an interesting day today. This is a very prophetic day, because on this day Mark Bryers, the biggest crook in the Blue Chip scam, got 75 hours’ community service. On the same day that Mark Bryers, the biggest crook in the Blue Chip scam, got 75 hours’ community service—he is a very wealthy man, a multimillionaire—the National Government gave him a $1,000 a week tax cut. In fact, it would be more than that, because he earns well over $1 million per year, and we know that, under this Budget, if one earns $1 million per year one gets a $1,000 tax cut.

Hon CLAYTON COSGROVE Link to this

I am sorry: it is a $1,000 tax cut per week. Mr Bryers, thanks to Mr Key, will get that. I am sure Mr Bryers will send Mr Key a nice Christmas card saying: “Thanks very much. I have done my 75 hours’ community service.” There were tears in court today, according to the media, but Mr Key was good enough to give him 1,000 bucks a week.

Hon CLAYTON COSGROVE Link to this

My colleague Mr Mallard said that a pensioner who was ripped off will deliver the card to Mr Key. It is a very, very prophetic day today. Mr Bryers will have a lot to celebrate tonight as he contemplates his whole 75 hours of community service.

Let us look at the Budget. What do we have? We have inflation. We have the highest inflation, I believe, since 1990—5.9 percent. I really enjoyed the Māori Party contribution, especially the contribution of Tariana Turia. I said that she had sold out her electorate and a number of other members have said the same thing. Well, those members are very proud of this Budget. I ask them how proud they can be when 72 percent of the constituents in Rahui Katene’s electorate earn under $40,000 per year, and when we factor in the increases in GST and inflation, 72 percent of her electorate are going to be worse off. I say to Tariana Turia—and I am sure that she will take another call to try to justify this—that 73 percent of her electorate earns under $40,000, and will be worse off when we factor in the increase in GST and a 5.9 percent inflation rate.

Ms Dean and others have said that it is fantastic that people who earn $70,000-plus will get a tax rate of 33 percent. Well, here is the problem with that for the Māori Party, which signed up to it today. In Ms Katene’s electorate, the number of people who earn over $70,000 equates to 5 percent—5 percent. In Mrs Turia’s electorate, it is even worse; there they equate to 3 percent. So I say: “Well done!” to the Māori Party. Those members have done a wonderful job of getting gains in this Budget for their electorate, because what they have got is some hocus-pocus, and a couple of prisons, which Pita Sharples has put on the deck tonight and which Judith Collins could not explain to the media, and they have sold out 72 to 73 percent of their constituents. I invite them—the weekend warriors that they are—to get up in this House and justify that to their constituents. If they are so proud of this Budget, then it will be very interesting during the hui on the campaign trail, when their constituents get up and say to Ms Katene that they are part of the 73 percent who missed out, and that she and her colleagues inside and outside Cabinet voted for this move, never opposed it, and ripped them off. That is what those constituents will say to the Māori Party. I do not know whether it is mana-enhancing when 73 percent of one’s electorate is worse off thanks to one’s vote and thanks to the fact that one is so proud of this legislation and this Budget.

Then we come to the other aspect of this Budget: the broken promise about the New Zealand Superannuation Fund. Mr English had a history of breaking promises to our superannuitants when he was last in Government, in the 1990s, when, under him, their pension was cut three times. Last year he said: “Oh well, we will suspend payments to the Cullen fund, but when we get into surplus”—and the Budget documents show that, allegedly, that will be in 2016—“we will activate funding again.” Oh no, that date is now 2019.

National members and their leader went around the country with the second broken promise, which was that they would not raise GST. I invite them to front up on a Saturday, if they ever hold electorate clinics, if they ever get off their backsides and go and talk to the 73 percent of the people in some electorates, like the Māori electorates, who are affected, if they ever meet those folks, who are worse off as we speak tonight. I invite them to go to Grey Power and explain why their leader broke that promise. Every last member opposite got his or her backside over the line in the vote and was elected on two false promises.

Mr Gilmore should get off his chuff, go to Grey Power members, and explain to them why he broke his promise. They will not know who he is, of course, but he might get in the door. I am sure they would invite him in, and he could justify the pay he gets by explaining to them why his leader said that he would not put up GST, why Mr English said that he would not mess with superannuation, and why Mr English said that he would pre-fund superannuation when the Government accounts moved into surplus. It is the same with Nicky Wagner. But we will never see them fronting when it is bad news. They stand up in here, but none of them will front up out there. Well, I challenge them. Let us have a meeting. Let us get every person in their electorate, let us get 10 of them, five of them, three of them. Let us get Mr Gilmore, who does not have a patch, of course, to talk to everyone in the area where he lives who is on the average wage. After we factor in National’s broken promise on GST and factor in record inflation of 5.9 percent, let us hear Mr Gilmore explain to them why National has ripped them off and why they are worse off. They are the battlers, the strugglers, and the people who are trying to provide for their families.

I remember polls about Budgets, too—rolling out the 80 percent. Well, I have always held the view as a member of Parliament that people are not stupid. I know this about Budgets: the Government might win on the night, when the flashbulbs are flashing and certain people are tripping over camera cords, but as the days go on, and the pay packets are opened, and the GST receipts are added up at the end of the week, the people are not silly, and it is very dumb and stupid politicians in this House who think they can hoodwink the ordinary folk in the street. I say to them that it is a simple equation: get up and explain why the Government will borrow $240 million per week for the next 3 years, and get up and explain why the debt track and the interest costs do not start even declining until 2021. If we look in the Budget, we see that those are important numbers.

But National members will not do that; they will not explain and they will not justify. They hide in their various patches and constituencies, and they will not explain to anyone why they broke their promises. Kate Wilkinson, a Cabinet Minister who occasionally resides in my patch, was told by the Prime Minister to go out and sell the increase in GST, but there was not a meeting, not a whimper, not a press statement, nothing. The invisible woman never ever fronts the bad news. Well, in my patch of Waimakariri 72 percent of my electors earn under $40,000 a year. Kate Wilkinson, who sits in Cabinet, who voted for every last measure in this legislation, who never opposed it, and who wants my job and everybody else’s, has sold out that quadrant of the electorate. Seventy two percent of people in my patch are worse off as we sit tonight. They did not expect 5.9 percent inflation. I invite Ms Wilkinson, Ms Wagner, Mr Gilmore, and the other tumbleweeds over there to get off their backsides, get up in the House, and tell us tonight why they broke their promises to the people of New Zealand and to their constituents.

I ask why the member for Tauranga—the Perry Mason in his own lifetime; I forget his name—does not get up. He loves going on the Breakfast TV show and waxing eloquent about his golf handicap and how he got gold membership of his local golf club. Well, he will be able to afford a membership with his tax cuts, but a pensioner in Tauranga will not, and a person earning under $30,000 will not. I invite the next speaker to show some intestinal fortitude and tell us why National members broke their promises.

MICHAEL WOODHOUSE Link to this

That is right. I think that has been proven. Yes, inflation is higher this year, for reasons that are well understood by everybody but the Opposition. But the Opposition will not tell people that this is a one-off adjustment. Next year it will be 2.4 percent, the year after it will be 2.4 percent, and the year after that it will be 2.4 percent. What happens to the tax cuts? They stay and endure for a very, very long time.

MICHAEL WOODHOUSE Link to this

That is not the mistake. We know that there is absolutely no doubt that the inflation figure would have been much, much higher had this been a Labour Budget. It would have been materially higher. Labour’s spokesperson on finance, Mr Cunliffe, said as much in the New Zealand Herald this morning: “If Labour were writing today’s Budget, it would spend more than National to ensure the recovery from recession remained on track.” So there it is: Labour would spend its way out of recession, and continue to tax the heck out of hard-working New Zealanders. Well, that worked for Greece! It worked for Portugal! It worked for Italy and Spain! The UK is in a similar mire. Mr Cunliffe would take New Zealand down exactly the same tax-and-spend track that got those countries into trouble into the first place, and it would not stop there.

I will mention the emissions trading scheme. Labour’s emissions trading scheme would have imposed double the cost, and it would have been introduced sooner than this Government’s scheme. That would have added to inflation. More consumption leads to higher borrowing, and higher borrowing drives up interest rates. That is an unacceptable burden on hard-working New Zealanders. Electricity prices went up 72 percent under the 9 years of the previous Labour Government and I have no doubt that that would continue were Labour back in Government.

Where is Labour’s alternative budget? It does not have one. Labour does not know what it would do. Labour members crusaded around the country in a bus that said “Axe the Tax”. They did not need a bus; they could have saved on gas and travelled in a two-door Morris Minor. That is about as much interest as they got. They would have had enough room for a suitcase and a six-pack. But the slogan did not ring true. Would they axe the tax? We do not know, the public do not know, and the commentators do not know. The reason is that even Labour members do not know. Labour members cannot even make up their minds on whether to axe the tax they said that they would axe. That confusion was still evident in Mr Cunliffe’s first call about loss attributing qualifying companies. He saw them as terrible things. I think he said that, yes, Labour put the system in place, but it saw it used for purposes that were never intended. God forbid that loss attributing qualifying companies were used to attribute losses! That is consistent with the sort of confusion around the tax arbitrage that Labour created over 9 years. These arbitrage measures are being put down.

I really want to focus on the last thing that, unfortunately, Labour members still do not get. Three-quarters of income earners will now have a top tax rate of 17.5 percent, which is nearly half what they had when the previous Government came into office. For that reason alone, this Budget will be applauded right around the country by all but the 20 percent of people who still support Labour.

Hon LIANNE DALZIEL Link to this

That is Trevor Mallard and Lianne Dalziel. We are among these major contributors to New Zealand’s economic capacity. How extraordinary! It is absolutely extraordinary.

Hon LIANNE DALZIEL Link to this

Are you jealous of me? I think members should be jealous. They should be envious of me because I am a lawyer, so I am one of the people who the Prime Minister thinks are so valuable that he wants to encourage us to stay in New Zealand. Well, I am determined to stay in New Zealand, and I am determined to make sure that we reclaim the Treasury benches in this country at the next general election.

Scientists were also included in the list. Now I buy that. I agree with John Key that scientists are a valuable contributing factor with regard to our productive economy. The real economy needs more scientists to work in it.

Hon LIANNE DALZIEL Link to this

No, they do not earn over $70,000, but I will come to wage rates in a minute. We actually get to the nub of the problem—and scientists are included in this—when we get to nurses. Nurses do not earn enough to put them into the extremely wealthy category. What is absolutely extraordinary is that—[ Interruption] I am listening to all of the National MPs, because I want it to be recorded in Hansard that the deputy chair of the Commerce Committee, Aaron Gilmore, the Dunedin list MP Nicky Wagner, and Simon Bridges are saying, when we are talking about nurses, that yes, they are in the extremely wealthy category. I said nurses had not been put into the extremely wealthy category, and “Yes, they are.” is what we heard back in a barrage of interjections from the National Party members.

I make the point and put it on the record that nurses earn as much as they do because of the pay jolt that the previous Labour Government gave them because of the problems created by National. National opposed the pay jolt. In fact, National criticised the previous Labour Government for spending what we did in the public health system and for giving the pay jolt to nurses. Anyway, let us look at what National said. That pay jolt only works in the public health sector. How many nurses do members think are paid over $70,000 a year to work in rest homes? How many do members think? I think it would not be many. So let us look at what the Nurses Organisation said on the front page of the Dominion Post this morning, which was that nurses with 5 years’ experience earn on average $60,000 per annum. So they do not even reach that category.

Why have those professionals be singled out by National? It is to stop them leaving the country. But Statistics New Zealand tells us that workers across all sectors leave the country. Housekeepers, restaurant workers, drivers, and labourers are also among the top 10 percent of occupations of people who leave New Zealand, alongside nurses, teachers, and finance and sales professionals. I tell this House that these changes are not about reducing the tax paid by housekeepers. I am sure that Bill English has worked out exactly how much more he will receive in this pay packet each week, but I bet he has not worked out how much his housekeeper will receive, because that person will not receive very much, at all.

The issue is actually not just about low-paid wage earners, as well. I know that we have talked about them tonight. But I have been talking to taxi drivers, other self-employed people, and small-business owners, and they say they are gutted by the increase in GST. It will put their precarious businesses under a real threat of failure. I know that National does not give a toss about small to medium sized enterprises, and certainly not about the self-employed. But when those businesses have to put 15 percent on their GST accounts, they will know that their precarious businesses are really under threat of failure. I have had conversations leading up to this Budget day with many taxi drivers. We use taxis a lot these days, and taxi drivers said they were very worried leading up to this Budget.

I had my first post-Budget conversation with a taxi driver in the dinner break, before I came back to the House. He said to me that when he had heard John Key say people should not be envious of the wealthy for receiving much bigger tax cuts then he was, he was reminded of the expression “Let them eat cake.” He was a very, very intelligent and capable taxi driver. Tonight he said that if there was a Bastille he would storm it; that is what he said to me tonight. That was absolutely extraordinary, and I said to him that I would quote him in the House tonight. He said that was great, and he would down tools and storm the Bastille—he would switch the key off in his taxi, and he would storm the Bastille—if we had a Bastille to storm. That taxi driver gets something that John Key simply does not get: it is not tax that is holding back incomes in this country; it is wages, and it is the income-earning potential of our small to medium sized enterprises sector. That is what holds New Zealand back, yet this Budget does nothing to increase wages, and it has nothing to do with improving the productive capacity and the earning ability of our small to medium sized enterprises sector.

My taxi driver tonight knew the figures; he knew that Paul Reynolds was to receive over $6,000 more in his pay packet every week. He knew that the Prime Minister and Cabinet Ministers were to receive hundreds of dollars extra a week in their pay packet. He did not know what the minimum wage earner would receive. He did not know that, because the minimum wage earner—

Hon LIANNE DALZIEL Link to this

What my taxi driver did not know was how much someone on the minimum wage would receive, which is that such a person will receive an extra $4 a week. Someone who earns five times the minimum wage will receive over $50 a week. Five times $4 is $20, so why is someone in that position to receive over $50? My taxi driver has worked it out—this is a terribly unfair Budget, and the bill that is before the House today is very unfair.

The last thing that I ask is why this is being done under urgency. This legislation is to take effect from 1 October, and today is only 20 May. We should have time for the bill to have a short period at the Finance and Expenditure Committee, and for public feedback to be given on it. Why are we not to have any public feedback? The Government does not want it. It does not want to hear from the public on this issue; it does not want to hear a single word. This is a tax swindle, not a tax switch.