Hon PETER DUNNE (Minister of Revenue) Link to this
I move, That the Taxation (Budget Tax Measures) Bill be now read a first time. As announced in today’s Budget, the second and third stages of the personal tax cuts that were to have taken effect on 1 April 2010 and 1 April 2011 respectively are being deferred to prevent further increases in Government debt. Large Budget deficits are already being forecast for 2010 and 2011 and these will clearly have an effect on gross debt that Treasury projects could have increased to above 70 percent of GDP by 2023 in the absence of any policy changes.
The current and projected fiscal position therefore constrains policy choices and places greater emphasis on maintaining revenue flows. As Minister of Revenue I am acutely aware of the need to ensure that our tax revenue remains sufficient to finance Government spending on the essential services that New Zealanders expect—a point I was making in an earlier address a moment or two ago. By delaying the second and third tranches of personal tax cuts, the Government estimates it will save around $900 million a year from 2011-12 and that has to be seen as prudent fiscal management for difficult times.
Let me turn for a moment to the language of the bill. As drafted, the bill speaks of “repealing” the further tax cuts rather than “delaying” them. That is merely because the date when these tax cuts can be reinstated is not yet known. If an undated delay were legislated for, it would combine the repeal with a provision to allow the dates of the cuts to be restored by Order in Council, which is not the most appropriate way to set tax rates. Tax rates are the province of Parliament, and Parliaments historically in this country and elsewhere have fought quite properly to retain the right to set tax rates and have always resisted deferring those to an Order in Council or other mechanism outside the parliamentary process.
This delay should not be interpreted as the end of further tax cuts. The Budget states clearly that the Government is committed to further reducing income tax rates as the economic and fiscal conditions allow and it clearly identifies further tax cuts as a fiscal risk, meaning that the Government’s future reinstatement of the tax cuts has been explicitly taken into account. We have already made clear our medium-term commitment to aligning the top personal, company, and trust rates at 30c in a manner consistent with the broad-based low-rate approach.
This bill also cancels the associated increase of $5 a week in the independent earner tax credit, which was to take effect from 1 April 2010. At present that credit puts an extra $10 a week in the pockets of those earning between $24,000 and $44,000 a year who do not receive a benefit, Working for Families tax credits, or New Zealand superannuation.
The second part of this bill relates to the KiwiSaver mortgage diversion facility, which allows KiwiSaver members to divert up to half of their contributions to their mortgage repayments. That facility is to be closed to new applicants from 1 June 2009, although it will remain available to existing participants so long as their providers and their banks continue to offer it. Not all banks currently offer mortgage diversion and it appears that only about 600 people out of a KiwiSaver membership of more than 1 million have actually taken advantage of it. Now, I acknowledge that this was the initiative of a former member of United Future—one whose name I dare not speak because it has become a byword for treachery—but in practice it has been demonstrated that this policy has not worked, that any benefits of the facility are completely outweighed by its many disadvantages, and I frankly see little reason to continue with it.
Mortgage diversion imposes additional and unnecessary compliance costs on KiwiSaver providers and on the banks, and these costs have been generally passed on to members who use it through increased fees. A further problem that has arisen with mortgage diversion from a policy perspective is that it goes against a basic principle of KiwiSaver, which is to lock in savers’ funds until they are 65, thus helping them to save for their retirement. With mortgage diversion, on the other hand, it becomes possible to sell the house in question before the member is 65 and thus for the member to gain access to his or her funds. There is no easy way of preventing members from gaining early access to those funds through mortgage diversion so it is much simpler to close the facility altogether to help reduce the costs of running the KiwiSaver scheme and to leave things pretty much as they are for those who might currently be in the scheme.
Let me conclude by saying this bill is a response to the difficult challenges that face the country today. It gives effect to measures that were announced in the Budget a couple of hours ago, and I therefore commend it to the House.
Hon CLAYTON COSGROVE (Labour—Waimakariri) Link to this
I say from the outset that Labour will be supporting the passage of the Taxation (Budget Tax Measures) Bill to cancel the tax cuts, and we do so for a number of reasons. Firstly, we have been consistent in our view that these tax cuts were unaffordable, inequitable, and wrong. That is why we will be voting to cancel them. But the great crime in this House today is not actually the fact that these tax cuts are going to be cancelled; it is the great deception created by a Government that before the election bribed the people of this country by saying over and over and over again that they would get their full tranche of tax cuts.
I point to an article by Brian Rudman. The great alibi that Mr Dunne and the National Party have put forward is that times have changed, and the economic environment has changed. They say that when they walked through the door of the Cabinet room for the first time, the veil fell from their eyes, and they realised that the world was in a global economic meltdown. They said they knew about that, effectively, only when they got into Government. Mr Rudman made some very interesting points in his article in the New Zealand Herald on 27 May. He said: “It seems we’re drifting back to those bad old days. Earlier this month, Prime Minister John Key signalled to an audience of his friends at a Business New Zealand meeting the promised tax cuts would be delayed to some unspecific time in the future. He said New Zealand could not afford ‘a runaway balance sheet’.” Yet, Mr Rudman goes on to say that on 30 September last year, Bill English criticised Michael Cullen, saying: “Dr Cullen cannot be trusted to deliver on any future tax promises.”, and that he criticised Dr Cullen for being cautious.
The alibi that National put up was a bribe. It won an election largely based on a bribe that said that everybody would get tax cuts.
Hon CLAYTON COSGROVE Link to this
Except the poor. It put the first tranche of the tax cuts through. We know now that National’s version of economic stimulus was to give the top 3 percent of income earners in this country one-third of the tax cut package. Families earning $40,000 or less a year—I know this will not affect Mr Boscawen, of course—got absolutely nothing. That was National’s version of stimulating the economy. Who did President Obama pitch his tax cuts to? He pitched them at low-income earners. Who did Prime Minister Rudd pitch his tax cuts and his stimulus package to? He pitched them to low and middle income earners. Why? Because low and middle income earners will spend the money. Those at the top, who have discretionary income, will either retire debt or save, and that is not stimulatory.
Hon CLAYTON COSGROVE Link to this
My colleague is probably referring to somebody on the opposite side of the House.
Then National tried to do what it has always done throughout its history. It came into Government and said it had not known about the economic conditions. It said that the rules had changed and the environment had changed, and it said to the New Zealand people that it must pass this legislation to be responsible. I tell members that if the National members did not know back in October and September that the world was in an international and economic meltdown, then they must have been the only people on the globe who did not know that. The Nats knew all right—I ask members to listen to more of Brian Rudman’s article: “The International Monetary Fund’s October 8, 2008 World Economic Outlook … said the world economy is ‘entering a major downturn’ in the face of ‘the most dangerous shock’ to rich-country financial markets since the 1930s.” That is what the IMF said in October last year. Mr Rudman goes on to say: “That was about the time Mr Key was unveiling his ‘responsible’ and ‘appropriate for the current conditions’ catalogue of tax-cut bribes.”
It is not good enough for Mr English and Mr Dunne, who walks with National now, to say that the world has changed, and that that is why National must go back on its word. It is ironic that Mr Dunne got up to quote from Part 2, because, as he said himself, part of this bill expunges a part of United Future policy. How embarrassing is that? It is not good enough for National members to come down to this House and say, in the traditional Tory slap-happy way, that they are sorry, but they have to go back on their word. Those members could not read what the rest of the world read in The Economist, in Time, and in material from the International Monetary Fund. The OECD said in October and September last year—well before the election—that we as a globe were heading into an economic hole. Yet what did National members do? They announced, to use the same words, a “responsible”, “appropriate for the current conditions” tax package. They knew all along that these tax cuts were unaffordable. They knew all along that these tax cuts were inequitable, but they announced them anyway.
I like this part of the article. Mr Rudman referred to the Budget and Mr English. He said: “Tomorrow, the albatross comes home to roost on Mr English’s shoulder. We can’t sue our politicians for breaking their word. But we can at least enjoy seeing them squirm.” I tell members that the people who are squirming out there are the poor battling New Zealanders for whom this Budget did nothing, and whom my leader, Phil Goff, talked about. Mr English squirms in this House because he broke his word. Mr Joyce broke his word. In fact, all those members over there broke their word.
Hon Trevor MallardHon CLAYTON COSGROVE Link to this
Well, that may be so. But the truth is—and history will show it—that those members told the country that it would get tax cuts. They accused Labour of being mean. They criticised us for being cautious. They told us not to worry, as it was a cast-iron guarantee. It was one of the guarantees that John Key signed. It was another case of “no ifs, no buts, no maybes”. I can hear the ghost of Christmas Past; I can hear Jim Bolger’s words emanating into the Chamber. National members did the old Tory trick. The lied to the people of New Zealand. They lied to them before an election. They said they would give people tax cuts come hell or high water. They read the IMF report and they still went on promising tax cuts, even though the IMF said this is the worst shock we have had in a generation, and possibly in our history economically.
Hone HarawiraHon CLAYTON COSGROVE Link to this
Do you want to make a speech, or do you want to sit down? The Māori Party might like to consider that, because, of course, it voted for the first tranche of tax cuts—
David Garrett
The ASSISTANT SPEAKER (Hon Rick Barker) Link to this
No, we do not need to debate this. The member makes a point. Technically, the member was using the word “you”. The word “you” is not ruled out on every occasion. I think that, on occasion, members just hear the word “you” and automatically think there has been an infraction of the rules. There has not. For the rules to be broken, the member must be directing the comments at the Speaker; I did not take the member’s comments to be directed at me.
Hon CLAYTON COSGROVE Link to this
Is that is the best he can do over there, as he shrivels up behind his desk? I say to that member of the ACT Party and that member of the Māori Party that every one of their constituents who earn under $40,000 a year got nothing out of the first tranche of tax cuts. Yet those members line up in the stalls—like a bunch of sheep led by the nose—to vote for the National Party every time. I invite Mr Harawira—there is no point in talking to Mr Garrett, because we know what his constituency is like—to stand up and finally explain to us why his party voted for a tax package in which 70, 80, or 90 percent of their constituency get nothing.
Hon CLAYTON COSGROVE Link to this
No, it was a false start, so the member should sit down. He will get his chance, because in the words of the famous Paul Keating, “I want to do you slowly.”—I do not mean you, Mr Assistant Speaker Barker; I mean that member. I say to the Māori Party that maybe the Māori Party members can get up, instead of being lambs led by the nose lining up in the stalls to vote for that lot, and tell us why they sold out—and they did sell out—every member of their constituency.
We will vote to get rid of these tax cuts. Our position has been vindicated; our position has been consistent. We knew they were unaffordable, the IMF knew they were unaffordable, and the OECD knew they were unaffordable, yet Mr Key tried to treat people like idiots, and said that the first he knew that there was an economic crisis and that his package of tax cuts would be unaffordable was when he whipped up to the tea-making machine in the Cabinet room and realised that there was an economic crisis and a meltdown.
I say to Mr Joyce, who will get up next—with all the spin of his radio network background, and with his hair parted in the middle—that he will have to put his best spin on this situation for New Zealanders. I say to Mr Joyce that New Zealanders are not silly: they know a bribe when they see it, they know dishonesty when they hear it, and they knew there was a recession. But they got sucked in. They got bribed, sadly, because on and on Mr Joyce and his ilk promised the unpromisable, promised the inequitable, and promised the biggest tranche of tax cuts we have seen for many years, knowing, of course, that they would have to pull the pin, and knowing they would try to win an election and then go back on their word a couple of months after.
Hon STEVEN JOYCE (Minister of Transport) Link to this
One certainly knows it is a tough day in Opposition when one is down to quoting Brian Rudman in the first speech. Brian Rudman is that noted economist and right-wing Roger Douglas supporter. This Budget—I just need to comb my hair before I start—is a responsible Budget for difficult times. It has been titled a “Road to Recovery”, which I think is an excellent name for it. I would probably prefer a “Multifunctional, Multi-modal, Low Benefit-cost Ratio Transport Corridor to Recovery”, but I will settle for a “Road to Recovery”.
This Budget makes some tough decisions, and one of those decisions is on tax reductions. The National Party is the party that understands that paying too much tax stifles initiative and removes incentives to work hard and get ahead. We understand that one of the big reasons we have had record migration out of New Zealand over the last 9 years has been high marginal tax rates. That is why we campaigned on reducing taxes, and we have done that. First we shamed Michael Cullen into doing it, and then we did it ourselves at an average of $30 a week per full-time worker in an 8-month period.
However, we are a party of realists. That is not something we could accuse the Labour Party of being. So as the world economy continues to accelerate in the wrong direction, we have made the tough call of postponing future tax cuts. Mr Cosgrove stood up before and said we knew the situation before the election. I need to acquaint him with some facts. The Budget 2008 forecast a surplus of GDP for 2009-10 as 0.5 percent of GDP. Prior to the election it was a deficit of 0.9 percent. The December forecast was a deficit of 2.2 percent. The Budget 2009 forecasts a deficit of 4.4 percent. The world economy fell off a cliff, and Clayton Cosgrove—surprisingly enough—did not predict that.
Postponing future tax cuts was not an easy decision to make. We work hard to keep our promises; we have kept nearly all of them. Tax reduction is important to grow the economy, but we also cannot have New Zealanders burdened by higher than necessary interest rates because the Government cannot balance its books. I am pleased to report that, this afternoon, Moody’s upgraded New Zealand’s credit watch from negative to stable after the Budget was released today. The Labour Party thinks that is not important, but I tell members that everybody who pays interest in this country thinks it is important. We made the right call. We fronted up and said we could not have tax cuts. But members should rest assured; reducing taxes will remain top of mind.
There is only one party in this House that can keep tax rates under control and control spending, and it is certainly not the party of the member for Waimakariri. It is certainly not that lot over there: the “Never-Never Land Party”, which believes in the financial fairies at the bottom of the garden. It is a party that is now doing a very passable impression of the old Social Credit Political League. All that those Labour members need is the old Skodas and the crimplene suits. They say we should not cancel any spending. They do not want to control any costs. They do not want to run the ruler over expenditure. They do not want to suspend payments to the Superannuation Fund, despite their own architect of the Superannuation Fund saying it is exactly what he would do if there were no surpluses.
Back in 2000 Michael Cullen said any contributions had to be paid for out of a cash surplus into the fund. He also said back in 2000 that “The government will make contributions to the Fund from available surpluses. Where these are insufficient for making the required contribution a reduced contribution would be made.” That is what Labour’s architect of the Superannuation Fund said back in 2000. Not only do Labour members not want to stop spending but also they want spending increases. If they were allowed to be in Government today, they would be proceeding with something called the deep tunnels for the Waterview Connection. They would have no changes to the Government policy statement on roading. They would have either $2.8 billion or $3.2 billion being spent, depending on whether there would be two or three-lane tunnels. That would take the deficit this year from $7.7 billion up to $10.5 billion or $10.9 billion, which is getting up towards 7 percent of GDP—just like that. They are not responsible. They are basically saying they do not believe in taking any responsibility for governance in this country.
We need a responsible Government; a Government that preserves people’s entitlements, gives people confidence, and encourages jobs. What we do not need is a Government that guts the economy. I am sorry but I cannot agree with Sir Roger. The best accolade that could, and has, come out for the Budget today is that it is pretty boring and predictable. In New Zealand right now we do not need wild-eyed spending ideas from the current Labour Party. We also do not need the radical cuts to social expenditure that others propose. We need a steady, conservative hand on the tiller, and we have that with John Key and Bill English. New Zealand will be thankful for that tonight.
Hon LIANNE DALZIEL (Labour—Christchurch East) Link to this
I am pleased to take a call on the first reading of the Taxation (Budget Tax Measures) Bill, which is being passed through all stages under urgency. I think the bill is wrongly named and has been brought to the House rather quickly today. National was able to table it only after the urgency motion was moved. I think what National meant to call the bill was the “Pre-election Promises (Post-election Breach of Faith) Bill”. That is what the bill should have been called, because that is precisely what it is. We had pre-election promises that we were told would not be put on the chopping-block, no matter what happened.
I ask a question of the Prime Minister of New Zealand. I ask John Key what he means by the words “personal guarantee”. Is it not interesting that the words “personal guarantee”, when one thinks about what they are intended to mean, mean that a person will stand behind his or her assurance and personally guarantee the result of the outcome?
Let us have a look at what John Key actually said in the letter he sent to every single household before the previous election. I am told that the covering note sent with the pledge card stated: “Well, unlike Labour I’m going to be straight-up about my priorities. That’s why I’m sending a card to all of you. It’s called ‘My key commitments to you’ and it will be delivered to every household in New Zealand over the next 10 days.” I will read out the introductory clause and first key commitment on the card that John Key sent: “If National is elected to lead the next Government, I personally guarantee that we will—strengthen the economy, increase after-tax incomes and ensure Kiwis can get ahead under their own steam by reducing personal taxes on 1 April 2009, 1 April 2010 and 1 April 2011.”
Not only did John Key say that but he signed his personal guarantee as “National Party Leader”. That first commitment has a red cross through it. It is not the Red Cross Society, as in who might save us in an emergency situation; it is a red cross for a failure to deliver on the personal guarantee. I think that is where Brian Rudman’s comments come into play. I do not really care what Steven Joyce, the previous speaker, thinks about Brian Rudman’s comments. Brian Rudman was simply making the point—and quite reasonably so—that people were very clear in September last year. I will quote from the article: “Yet back on September 30 last year, Mr English was mocking then Finance Minister Michael Cullen for being over-cautious on the issue. He said: ‘Dr Cullen cannot be trusted to deliver on any future tax promises.’ ” He compared that with National, which will—and I quote from Mr English—“have an ongoing programme of personal tax cuts. It will be a responsible programme and a transparent programme.” Mr English said he would treat Labour’s tax cuts, which came into force the next day, as the “first tranche in our tax-cut programme. That will be followed by another tranche of tax reductions on April 1, 2009, and further tranches in 2010 and 2011.”
I want to know whether Mr English advised John Key to sign a personal guarantee, knowing full well that we were heading into a major economic recession. I suspect, given the huge smile and the laughter on the lips of the Minister of Finance when he was reading out the announcement on the cycleway budget, that there was not a personal commitment to that particular policy from the Minister of Finance. I wonder whether the Minister of Finance has set up the Prime Minister of New Zealand with this personal guarantee, because it will come back to haunt him over and over again.
National members have proved that they were really prepared to say anything to get elected, and then act surprised as if they had not noticed that there was an impending financial crisis. That is the issue I am deeply concerned about. I will comment further about what Mr Key went on to say about the tax cuts. He was contrasting what he believed to be the position the Labour Government would take if we had been re-elected at the previous election. He went on to say: “unlike Labour we won’t cancel our tax cuts”. Is there any leeway on that? Let me just read that statement, and let us just see whether anyone can read any words of doubt into it. He said: “unlike Labour we won’t cancel our tax cuts”. I think that is pretty clear-cut.
He went on further in his Budget speech last year and said that New Zealanders really could rely on, and trust, the National Party’s tax cuts. He said: “Most of all, New Zealanders will be able to believe our tax cuts, they will be able to trust our tax cuts … You see, we believe in tax cuts, we believe in the power of tax cuts, and we will deliver them. What is more, we can afford to do it.” Well, I am afraid that every single statement that John Key has made and his personal guarantee have proved to be completely and utterly out of sync with the legislation we are now debating in this House.
The Taxation (Budget Tax Measures) Bill undoes the second and third series of tax cuts scheduled for 1 April 2010 and 1 April 2011. We knew that the tax cuts National was promising were unaffordable, and we said so. We took a responsible approach with our policies. We pulled back on policies that we wished to announce as part of Labour’s election campaign, as we decided that we did not want to misrepresent the situation to the people of New Zealand.
As my colleague Clayton Cosgrove said, we will be supporting this bill because we never believed that National’s tax cuts were going to proceed. We knew they were unaffordable. More important, we always knew that National’s tax cuts were inequitable. I remind the people of New Zealand—most of whom are probably tuned in as we speak, listening to this important debate—that 30 percent of the last round of tax cuts on 1 April this year went to 3 percent of the top income earners.
Hon LIANNE DALZIEL Link to this
That is disgraceful. I totally agree with my colleague behind me who intervened; they are utterly and completely unaffordable.
Hon Tau HenareHon LIANNE DALZIEL Link to this
Well, if that member would like me to give Mr Nash a complete free hit here, then that is fine. Clayton Cosgrove was making the point that it is shameful the National Party’s focus was always on delivering tax cuts to high earners, but that would have the least impact on stimulating the economy, something that National promised. We all know that it would be much better to focus those tax cuts at the bottom end, where people are spending every cent they have.
The other thing that is mentioned in this legislation is the reminder we have of the major changes that the previous Government made to our investment and savings environment with the Cullen superannuation fund and KiwiSaver. There is an absolute reneging on those, and it is a reminder that the crucial research and development tax credits we had in place for investing in export industries have been completely gutted by this Government.
It is really hard to give this Budget a name. One of the bloggers today came up with “Dark Grey Budget”. It is not really a “Black Budget”, but it has not got very far.
Hon LIANNE DALZIEL Link to this
The “Looming Clouds Budget”—but there ain’t no silver lining in this Budget, and that is one of the problems. I personally think that this is a Budget that represents a complete waste of opportunity, and this particular measure we are debating proves that.
JOHN BOSCAWEN (ACT) Link to this
The ACT Party will be supporting the Taxation (Budget Tax Measures) Bill, but we are supporting it with a great deal of reluctance. In essence, this is a bill to delay tax cuts. We heard from the Labour Opposition this afternoon that the National Party went out and campaigned on a programme of tax cuts, and it has reneged. Yes, we find the country in difficult circumstances and there are a number of reasons for that. One reason is the last 9 years of financial mismanagement that saw Government spending, in real terms, increase by $5,500 per person in this country. That is $22,000 for a family of four. Allowing for the effects of inflation, the previous Labour Government went out on a spending spree over the last 9 years and took $22,000 on average, in real terms, out of the income of an average family of four.
Rather than face up to the issues or the need to go through and review Government expenditure, National has taken the easy option. It is proposing to postpone tax cuts. It is interesting that the Minister of Revenue said earlier this afternoon that the date of the tax cuts is unknown. We cannot say when the tax cuts are going to take place. We are looking at tax cuts that next year would have cost the taxpayer $1 billion. Let us put that in context. That $1 billion is out of total Government expenditure of $65 billion, which is $18 billion more in real terms than what it was 9 years ago. If Government expenditure had kept pace with inflation over the last 9 years, we might have expected Government expenditure to be $47 billion. But, no, it is $65 billion. It is $18 billion higher as the result of 9 years of financial mismanagement.
It was interesting to hear the Minister of Finance talk about what makes this country a richer country, and how we raise our living standards. How do we raise the income of New Zealand vis-à-vis our nearest neighbour, Australia? The reality is that incomes in New Zealand are some 20 to 25 percent lower than those in Australia. Our citizens are leaving for Australia and they are not coming back Our young people are going overseas and in years gone by they would come back to New Zealand, but in increasing numbers they are not.
One of the issues this country has to address is our productivity and our need to raise it. I will come back to productivity very shortly, but there is a second thing: we also need to get right the incentives to work. We just heard the Hon Lianne Dalziel talking about people on lower incomes. Well, it was the Labour Government that put in the Working for Families package. That was a badly designed scheme because it effectively puts the recipients of Working for Families support on a marginal tax rate of 54c to 59c. Where is the incentive to go out, work hard, get promotion, work longer hours, and work overtime to try to raise the living standards and income of one’s family, when one knows that some 59c in the dollar is being taken away?
Another key issue is productivity. We have to raise our productivity. Both the Minister of Finance and the Prime Minister spoke on that this afternoon, and I commend them for it. We absolutely have to raise our productivity. The Minister of Finance referred to infrastructure. It is a theme that Mr Key came back to. I struggled to hear what Mr Key was saying; I literally could not hear him. The banter backwards and forwards between Labour and National members meant I could not hear what Mr Key was saying.
I commend National for the decision to proceed with the Waterview Connection. Labour could have built that connection when it was in Government for 9 years. It was able to build a 4.5-kilometre motorway from Hillsborough to Mount Roskill. There was nothing to stop it from building from Mount Roskill to Waterview, but it chose not to because its option of building a $3 billion tunnel was totally unrealistic. It was an expense and a folly. Rather than front up and complete the job, as this National Government is proposing to do, it did not; it postponed it. National is now required to deal with that issue. That project will cost $1.4 billion, and I heard the Prime Minister say that 60 percent, or just under two-thirds, of that tunnel will be underground. People would not realise that on listening to the speech by Mr Norman this afternoon. Mr Norman, the chief doom master, talked about the bulldozers cutting a swath through Mount Albert. Of that motorway, 1.5 kilometres is on the surface. It follows the railway designation, and that is the same designation that Mr Norman would like to put a train set on. It is not a motorway that cuts through Mount Albert in the way that Mr Norman, the chief doom merchant, said.
We need to raise our living standards and we need to raise our productivity, but, first and foremost, we need to reduce waste. We need to provide an incentive for New Zealanders to go out and work and to contribute to this economy. We need to provide rewards. We need to provide incentives. Over the last 9 years we have had financial mismanagement on a scale that has never been seen before in this country. It has taken 100 years to get Government expenditure to $13,500 per family—over 100 years. In 9 years the Labour Government was able to increase it from $13,500 per family to just under $19,000 per family. For a family of four—two parents and two children—that is $22,000 taken out of the family budget.
The ACT Party will be voting for this legislation. It will be doing this with disappointment, and it will be doing this as part of ACT’s agreement to support the National Government on confidence and supply. Yes, ACT members will be voting for the deferral of these tax cuts, but we do so reluctantly. We only wish National had the courage to fulfil the promise it made to the electorate last year to provide those incentives and to create the environment where people want to go out to work and contribute to the economy.
Hon Dr PITA SHARPLES (Co-Leader—Māori Party) Link to this
Tēnā koe, Mr Deputy Speaker. Tēnā tātou katoa e hui nei i tēnei ahiahi. The first seven words of the explanatory note of the bill tell us all we need to know about Budget 2009. This day will for ever be recognised as a response to a “difficult fiscal climate”. The Minister of Finance has described this Budget as sitting within the context of a global economy that is experiencing the deepest, most synchronised recession since the 1930s. What does this mean for us at home? We know that just in the last few weeks employers throughout the nation have had to lay off workers in the timber, manufacturing, telecommunications, and textiles sectors. Just how dire this situation is can be seen in the numbers of unemployed benefit recipients. There are now 44,000 New Zealanders actively seeking work, with 14,000 of these being Māori, and with close to one-third of Māori job seekers in the 18-24 year age group. It is that group of some 5,000 young people that has been on our minds as we have embarked on the road to recovery articulated in Budget 2009. These were not the lucky New Zealanders who benefited from the $1 billion allocated from the Government’s first round of tax cuts. These are New Zealanders, all the same, who deserve every opportunity—
Hon Shane JonesHon Dr PITA SHARPLES Link to this
I did not bring the member a Happy Meal! But these are New Zealanders—
Hon Dr PITA SHARPLES Link to this
Hoki ki a McDonald’s! But these are New Zealanders, all the same, who deserve every opportunity for the light to shine in their eyes. They are New Zealanders who may well take up leadership positions in the future. They will be our scientists, our entrepreneurs, our teachers, our sportspeople, our tribal leaders, and our parents. This Budget recognises that every New Zealander is entitled to enjoy the basic rights of citizenship, to benefit from quality public services, and to maintain a standard of living that we can defend despite the rigours of a global financial crisis.
The Māori Party will support the Taxation (Budget Tax Measures) Bill on behalf of the young people and those to follow. We celebrate the fact that despite worsening economic and fiscal conditions, the Māori affairs portfolio has been maintained intact. We believe that the decision to defer the second and third tranches of the personal tax cuts is a sign of responsible management, thinking of the collective well-being of all New Zealanders, and balancing the Budget in a way that will protect people from the sharpest edges of the recession. The Māori affairs budget has been rigorously scrutinised to ensure a careful yet secure footing from which whānau Māori can emerge from the recession. In many ways it mirrors the type of budgeting that we may see in Māori homes around the motu. [Interruption] E, kāre koe i te whakarongo. It reflects a conservative approach to ensure bread and butter on the table, while also enabling whānau to be opportunity-driven. We have given priority to whānau as the social structure that best provides protection and resilience during times of stress. Investing in whānau is not about what we will do to them; investing in whānau is about what they will do for each other. As Minister of Māori Affairs I have heard the call from whānau: “Let us create our own solutions.” So in early July I will be looking to announce a network of whānau advocates who can work closely with our—
Hon Clayton Cosgrove Link to this
Eighty percent of your constituents got nothing out of the tax cuts.
Hon Dr PITA SHARPLES Link to this
If you listen, you might get educated. I will be looking to announce a network—
Hon Dr PITA SHARPLES Link to this
I think another member did that the other day, but never mind. This reflects the conservative approach to ensure that there is bread and butter on the table. We have given priority to whānau, because it is the social structure that is best provided to protect resilience during stressed times. Investing in whānau is not about what we will do for them; it is about what they will do for each other. As Minister of Māori Affairs, I have heard their call, and on 1 July I will announce a network of whānau advocates who can work closely with our whānau to ensure they have all the assistance they need to be strong. Resilient whānau are those who can ride out the storm, because they are supported to be the best they can be. Resilient whānau need jobs. They need a spirit of optimism. They need education. They need healthy homes. They need a strong economic base to build their future on. This Budget will help to make that happen.
The fact that our whānau who are earning under $40,000 a year will now not have to cope with extra taxation—up to something like an extra $8 a week—is something that we welcome. The previous approaches to taxation were based on a trickle-down economic theory, which says that boosting the incomes of middle to high income earners through tax cuts will create economic benefits that will trickle down to the lower-income earners from the spending that creates jobs, demand for services, and the like.
Hon Dr PITA SHARPLES Link to this
That is exactly right. If the member listens, he might learn something. But we always had concerns that those who are already vulnerable might never gain from the trickle-down effect.
Hon Dr PITA SHARPLES Link to this
If members only listened until I finish, they might get educated. The already vulnerable might never actually gain from the trickle-down effect, because instead they will be watching the trickle-up effect, which contributes to the growing income inequality, with the well-off becoming wealthier, and the lower-income families in their wake. Deferring tax cuts will instead save around $900 million a year, which can be used to sustain—
Hon Dr PITA SHARPLES Link to this
—the member should check his figures—and support New Zealanders in the times ahead. We must look forward in order to ensure that when the recovery begins, our people are ready to respond quickly. So one of my first priorities as Minister of Māori Affairs was to establish the Māori economic development task force, to develop a Māori-led response to the recession. The task of that rōpū is to advise me on how to protect existing jobs and businesses, but also to think about the long-term vision, a vision in which our young will benefit from increased education and training, and investment will be made to maintain and build a skilled workforce, ready to go, when the economy is recovered. It would be great if the task force were able to directly create jobs, but my challenge to it is to take a longer-term view of Māori economic development opportunities and look at systemic change across its own areas of expertise, to ensure that Māori and Māori assets can take a role in leading Aotearoa out of the recession.
Also encompassed by the journey towards economic self-determination is the commitment I have taken up to strengthen the Māori economy by establishing the Māori Trustee as a strong, independent, accountable, and sustainable trustee for Māori landowners and beneficiaries. I remind the House that that was the first bill put through this Parliament by the independent Māori voice of Parliament, the Māori Party. That is another important legacy of this time, and members should not forget that.
Hon Dr PITA SHARPLES Link to this
Oh, get a life! I want to point out just one more highlight in respect of the Māori affairs budget, and that is the investment in whānau language development.
This Budget initiates $4.5 million over 3 years for the retention and revitalisation of te reo Māori, using te ātaarangi kei roto i ngā whare [the Cuisenaire rods method in homes], andthere is $1.2 million allocated to iwi Māori radio operating funding.
All of these initiatives are ideas that are about creating opportunities for our people, and for establishing a stable platform for growth to occur. But there are other opportunities right throughout the appropriations, which I would like to point out in my closing remarks.
In making the decision to defer further tax cuts, the Government has acted responsibly. Such an approach is also reflected in the $22 million allocated to speeding up Treaty settlements. Settling past injustices is an important part of any future constitution reform for New Zealand, as is restoring an economic base for iwi. I acknowledge my colleague Chris Finlayson for the constructive working relationship we enjoy. Similarly, I am proud to have signed, alongside my colleague Phil Heatley, the fishing aquaculture settlement, to which the Budget allocates $15.9 million for aquaculture. Kia ora rā, Mr Deputy Speaker.
JEANETTE FITZSIMONS (Co-Leader—Green) Link to this
The one time that urgency is often seen to be justified is when on Budget day urgent financial legislation needs to be passed overnight, so that people cannot take advantage of knowing the change is coming before it is law. This is not such an occasion. In this urgent legislation, we are cancelling tax cuts that take effect in April next year.
JEANETTE FITZSIMONS Link to this
And the year after. It is very hard to see why anybody could claim that this legislation was urgent enough to bring Parliament together into the night on Thursday and again on Friday morning. The Green Party did not vote for the urgency motion. We believe urgency ought to be used quite cautiously, if there is to be support across the House for urgency when it is actually justified. There are times when it is justified, but this is not one of them.
We will, however, vote for the Taxation (Budget Tax Measures) Bill. We are not voting for the Government’s Budget—we are not voting for this Government on confidence and supply—but we will vote for this bill because the obviously sensible thing to do in a recession is to cancel two rounds of tax cuts for which we would have to borrow billions of dollars. We are glad that the Government has chosen to do the sensible thing in that case. The Greens never supported the tax cuts in the first place.
I have to say that when the Government took urgency to rush through tax cut legislation in December last year—some of which is already in force from 1 April this year and which is not being cancelled—it was already obvious that New Zealand was in a recession. It was already obvious in December that the tax cuts would put the Government into serious debt. But because National campaigned around the country on tax cuts, I suppose National members felt obliged to put them into practice. Now National is coping with the consequences of a Budget that is very, very hard to balance because so much was given in tax cuts. Tax cuts are something that we do when the economy is in surplus, when we are having the good times, and when we know that it is a structural surplus, and that we will be able to keep on doing it. In December last year we were not in that situation economically, and we are even less in that situation now.
However, it is better late than never, and we are glad to support the common-sense approach of cancelling the next two slices of tax cuts. If the first slice had not gone ahead in April this year, and if that December bill had not been passed, the savings to the Government Budget would have funded our entire Green New Deal stimulus package, which would create 43,000 new jobs. Yes, people like having $30 a week more in their pocket from their pay packet, but I bet that if we asked most New Zealanders whether they would rather have a tax cut of $30 a week or 43,000 more jobs in the economy, they would choose the latter. They would know that their neighbours, their kids, and their friends would have employment and that there would be spin-off effects in the economy. They would know they would see all the other benefits of the Green New Deal package, such as clean rivers, better export returns from New Zealand being clean and green, warm, insulated homes, better public transport, more community development, and 6,000 new State houses to tackle homelessness. I bet that most Kiwis, if they had been asked whether they wanted $30 a week or a better society for themselves and their children, would opt for the Green New Deal package and all the benefits that it would bring.
I will quote Jane Clifton, whose comments in the Listener I always enjoy. Back in April, she had this to say: “But so much has changed since we first hankered after tax cuts, that it’s all the most depressing let-down.” This was April, when the tax cuts first came in. She continued: “Once again, we can see the extra money will not compensate us for dairy product, petrol, power, school-fee, and mortgage-interest hikes. It will not supply a nest-egg for any redundancies set to hit our households.” She knew those would happen. “It will simply be sucked into the maw of our existing financial struggles, and grateful as we are for it,”—this is the interesting bit—“our central existential problems will continue unabated.” She is saying that tax cuts are not a recipe for happiness and greater well-being, and that there are better ways that that money could have been spent.
The part of this bill that we struggle to understand is the closure of the mortgage diversion facility in KiwiSaver. Apparently only 600 people so far have used the opportunity to divert savings from KiwiSaver to their mortgage payments. Those 600 people may well have faced mortgage foreclosures if they did not have that facility, and it is very important that they were able to do that. It does not sound as if, with 600 people participating, this was a huge compliance cost for KiwiSaver. It is very hard to see where the problem is that this is trying to fix. So I look forward to hearing the Government explain that measure a little bit further. The Greens may well, therefore, not vote for Part 2 of the bill. However, we will vote for Part 1 and we will vote for the bill overall. We are glad the Government has finally seen sense and realised that making tax cuts when the country is in a recession does not make sense.
CRAIG FOSS (National—Tukituki) Link to this
First of all, I take this opportunity to congratulate our Minister of Finance, the Hon Bill English, on an absolutely fantastic Budget for these strained times. It is a Budget for the future. It is a Budget that builds the platform for a much more aspirational, realistic, transparent New Zealand. It is not a Budget for the next headline. It is not a political Budget. It is realistic, it is transparent, it is robust, and it is fair. Some may even call it a boring Budget, but I say to members opposite that this Budget should probably have been in place about 4 years ago.
This is the Taxation (Budget Tax Measures) Bill. It is part of the “road to recovery Budget”. I just note this point after hearing the Hon Phil Goff’s Budget speech. Is Labour not missing the Rt Hon Helen Clark and the Hon Dr Michael Cullen? We know that Labour members are missing them, because Phil Goff’s speech was a total shocker. It was as if he had turned up and could not deliver the speech he had written earlier. I think he had talked himself into thinking that entitlements would be cut, that superannuation would be cut—
—and that Working for Families would be cut. To that I say no, no, and no. I could pose the question to anybody as to how much his or her superannuation was changed by this Budget. How much? Actually, the answer is it was changed by zero. Superannuation is unchanged, and it is committed to. All entitlements are unchanged and the commitments that were made were held, because so many New Zealanders need to have some certainty to get through these unfortunate times, this one-in-60-year event.
I would like just to take issue with the foresight that Mr Cosgrove has suddenly developed. He told us that apparently, 2 years or so ago, when the IMF issued a report—I think I remember the one the member was talking about—that the current global economic conditions were all known. He alleges that Mr Key and Mr English should have foreseen these conditions. I will turn that question round. Did Mr Cullen, the finance Minister at that time, foresee it? I recall a quote from Mr Cullen, talking about how the subprime crisis in the US would not hit the shores of New Zealand. I think that was said in about April last year, 2 or 3 months before his 2008 Budget.
I point out that so far this National Government has delivered over $1 billion in tax cuts, which will assist over 1.5 million New Zealanders. That is in addition to the $500 million or more of tax compliance improvements that we have made for small businesses. I come back to the foresight that Mr Cosgrove developed. I will point out some figures. In the operating balance before gains and losses in Budget 2008—we remember that New Zealand went into the recession under the previous Government about a year before the rest of the world—a 0.5 percent surplus was forecast. In the Pre-election Economic and Fiscal Update, on 6 October 2008—members will remember that, prior to the election—a 0.9 percent, almost 1 percent, deficit was forecast. Remember that that is when we started to get into the decade of deficits, which was basically if the policies of the previous administration had continued in their current shape and form, we would be in awful shape, worse than today, because this Budget is starting to put us on the road back to recovery. In the December Economic and Fiscal Update, on 18 December 2008, the surplus was minus 2.2 percent. We can see that the numbers have shown a marked deterioration until this point today. In Budget 2009 we are at negative 4.4 percent. That is unfortunate, and none of us like to be in that position, but I am so pleased that a National Government is in place to start to bring some accountability, some transparency, some robustness, and some prioritisation into the Government’s accounts.
I will go back to Mr Goff’s speech. He seemed to totally ignore the fact that $50 billion less will be coming in revenue to the Crown over the next 3 years. That is $50 billion less to allocate to entitlements, or whatever. He has totally ignored that point. Mr Goff, Mr Cunliffe, and Mr Cosgrove have all been talking about what a great time it is to buy assets. That implies the question: why did they buy so many in the last 5 years? They are saying assets are now cheap. I say to these financial gurus of forecasting, which they have suddenly turned into, that actually hindsight is a great thing. But I say to them not to go down that track, because they will be caught out—somewhat tragically for their personal standing. Thank you, Mr Speaker.
STUART NASH (Labour) Link to this
I find myself in the unique situation of standing to support the Taxation (Budget Tax Measures) Bill under urgency, after standing to oppose the original bill, the Taxation (Urgent Measures and Annual Rates) Bill, under urgency less than 6 months ago. It is a strange situation, which anyone with half an eye on the global economic situation could have predicted 8 months ago. But, first of all, I say to Dr Pita Sharples that 80 percent of his constituents got nothing out of the tax cuts. Pita Sharples sold his people out. Is that fair? No, not at all.
I would like to talk about one thing in my 10 minutes’ speaking time: the fact that Mr Key and Mr English knew of the impending economic crisis and its potential impact upon the New Zealand economy, yet they never pulled back from their tax cut package during the last days of the election campaign. This is not right, and it is simply not fair. I think it is quite interesting to note that today ANZ and the National Bank upped their interest rates, on the day that we were given a jobs Budget. Will those two major banks upping their interest rates help the ordinary Kiwi bloke? Of course it will not.
I know that Mr Key and Mr English are smart men. Let us give credit where credit is due.
I will tell the member. Someone like Mr Key, who made significant money in international finance, knows about risk management and the fundamentals behind assessing financial risk. Mr Key knows how to read economic forecasts and future financial trends probably better than anyone in this House, except for David Cunliffe, Mr Mallard, and Mr Horomia. That is how our Prime Minister made his fortune—by trading. It is all about assessing risk, then putting in place strategies to mitigate and beat the odds. A lot of it is about bluff and big balls, because if they get it wrong it can go spectacularly wrong, and many in this game do not succeed. We have ample evidence of this in the collapse of Mr Key’s old firm, Merrill Lynch.
The fact that Mr Key made so much money analysing and then beating the odds means he was probably pretty good at it—in fact, pretty damn good at it. Good on him! He was a good money market trader. He knew how to play the odds. But did he play us? Were the voters of New Zealand simply lines of data on a spreadsheet, to be manipulated in the same way that was used in an attempt to manipulate data on the international currency movements? Were the voters of New Zealand who ticked National on election day taken for a ride on the promise of tax cuts? That is an interesting question, and now it appears we have our answer.
Let us look at Mr English. Sure, he is as machiavellian as they come. He would have to be to become leader of the National Party, after previously being the Minister of Finance in charge when fiscal management mistakes were made over the handling of the last recession suffered by this country, in the late 1990s. Luckily that recession was cyclical and not structural, which basically means that our export markets held up and we could trade our way out of it. This recession is structural, which basically means that the fundamental way we do business, both in New Zealand and globally, has changed. It has to change. But Mr English was not quite machiavellian enough. He got rolled for the leadership by the right-wing ideologue Ruth Richardson masquerading as Don Brash, after being trounced in the 2002 election by a Prime Minister who knew the country wanted substance and vision. Mr English could provide neither, nor can he today.
When Don Brash’s time was up, Mr English got rolled again, by another very smart odds and numbers man in John Key. That must have hurt. [Interruption] I ask Dr Coleman what we, the people of New Zealand, have ended up with today. We have a money market trader who understands risk management, and therefore is an expert manipulator, as Prime Minister, and a machiavellian man who has not quite the grasp of political or economic philosophy, or numbers, as Minister of Finance. Let us face it. If he knew the numbers he would be Prime Minister now, and he would not have been rolled by Brash and then passed over by his colleagues for Key. Ouch!
Hon Dr Jonathan Coleman Link to this
He’s just read the Budget today. I think it’s a lot more fun than the Opposition.
In October of last year, when Dr Coleman was out there telling his constituents that under National they would get tax cuts, these two puppet masters—let us call them “M and M”: the manipulator and the machiavellian, the then Leader of the Opposition and the then deputy leader of the National Party—were reading The Economist magazine. It was commenting at the time on the state of the global and the New Zealand economy. “M and M” would have, no doubt, read the following from The Economist. On 29 October last year, a little over a week before New Zealand’s general election, it stated: “After the most eventful and creative six weeks in the history of central banking, a half-point interest rate cut by the Federal Reserve on Wednesday October 29th was almost anti-climactic. Nonetheless, it was an important strike at the deepening recessionary forces surrounding the American economy … Within America the financial crisis is showing signs of easing, but the economic crisis is only just starting, as the Fed broadly acknowledged. ‘The pace of economic activity appears to have slowed markedly … Moreover, the intensification of financial market turmoil is likely to exert additional restraint.’ ”
Let us go over that again: “the economic crisis is only just starting,” “The pace of economic activity appears to have slowed markedly”, and “the intensification of financial market turmoil is likely to exert additional restraint.” This is all in the world’s largest economy—the global engine room. I can picture how this went. “M and M” would have sat down over a coffee in the manipulator’s office. Key says to English: “This is bad, Bill. The world is going to hell in a handbasket and we are promising tax cuts that will be totally unaffordable. I have done the numbers, and it won’t work.” English says to Key: “For God’s sake, John. It’s about winning this election at all costs. Let’s promise them the world, and when we get in we can tell them whatever we want. Key then says to English: “So, if we fool them all, can I become Prime Minister, Bill?”. English says to Key: “In name, yes, John. Now go out there and tell the people what they want to hear. And that stuff about the ides of March is just a story; we all love you, John.”
I tell members that “The M and M Show” knew exactly what it was doing, and rushing the original tax bill through Parliament was all part of the plan. In my humble but educated opinion the voters of New Zealand were hoodwinked in a way that only the National leadership can do. I say to Dr Coleman that National would do anything to get elected. It is cynical politics. The people of New Zealand need to know this, and today they have found it out.
I am rapt about this bill because it means that Napier will return to Labour. I am sorry for Mr Tremain, but there is nothing wrong with being a list MP. This bill is not what the people of New Zealand voted for.
If I win Napier, I will give Mr Foss my tax cut next year and the year after. Oh, hold on a second, they have just been cancelled!
I remember sitting opposite Mr English at the Finance and Expenditure Committee and asking him whether, in light of the fast-deteriorating global economic crisis, National was still going to push through its tax cut legislation. Mr English’s response was that it would, because it is what the voters voted for. Well, Mr English has now taken away what the voters voted for, and hence has taken away the reason he thinks National won. What will he tell the people of New Zealand who put him there on the promise of a tax cut?
“M and M”—the manipulator and the machiavellian—are now in a spot of bother. They are in a catch-22 as they are shown to be either the master manipulator and the machiavellian who misled the majority of the masses, or slightly slow. What would they rather be—sneaky or simple, standard or poor? It is not for me to decide, but I can tell members that my mates have called me and texted me about this situation and they are not particularly happy. When I said to them that they knew this was going to happen and that tax cuts were not affordable, most said that they knew that, but they did not really think—they trusted Key. But no more. They say that the honeymoon is over and the love is gone. To “The M and M Show” I say that 2011 cannot come quick enough to get rid of the show of broken promises. The people of New Zealand know that this is simply not fair. Thank you.
CHRIS TREMAIN (National—Napier) Link to this
On one of the most important days for New Zealand this year we hear a fictional play written by Mr Stuart Nash. If he thinks he will win back Napier he can dream on.
We should be focusing on the facts, and I want to tell members about a fact that will appear in the headlines tonight in the Television One and TV3 news. It is the Standard and Poor’s announcement: “International credit rating agency Standard and Poor’s has cast a favourable verdict”—not a negative verdict, but a favourable verdict—“on the Budget, upgrading New Zealand’s outlook from negative to [positive].” That is a fact. Standard and Poor’s, one of the most important credit rating agencies in the world, has said that it is putting a positive outlook on our Budget as a result of what was delivered today. There is nothing fictional about that. No fictional playwriting is going on in that regard.
Exactly. When Labour was in office we had a negative outlook. Now that National is in office we have a positive outlook, and that has to be good for New Zealand. What does it mean? Let me make just a couple of quick points. It means $600 million in savings on interest rates alone. As a result of that improvement in our rating, we have delivered $600 million into the back pockets of Kiwis through not having increased interest rates. That is a fantastic outcome. What is even better, though, if we put that aside for a moment, is that it will allow the arteries of finance to stay open. The veins of finance will continue—
I raise a point of order, Mr Speaker. On Mr Tremain’s facts, he knows that 75 percent of people in Napier earn under—
Mr DEPUTY SPEAKER Link to this
The member will sit down. That is not a point of order; it is a debating point. The member cannot bring in that sort of material on a point of order.
It will keep the arteries of finance open and it will allow businesses to stay operational. They will be able to continue to borrow and we will be able to get on the path to recovery. That is what has happened.
Another fact from Standard and Poor’s will end up on the news tonight. It said today that the Budget delivered a sound outlook. That is high praise. Just a few minutes after Bill English had delivered his Budget, we received the following high praise from Standard and Poor’s: “The change in the outlook on the … rating reflects our view that the measures announced in today’s budget will support stabilisation in the government’s fiscal position over the medium term.” If that is not positive, I do not know what is. Here we are in one of the biggest recessions of the last 60 years, and the Government has delivered a Budget that has put us on a pathway to a strong recovery. It is absolutely fantastic.
What did we see from the Opposition today, apart from the fictional play that we had before? We saw “Visa-nomics”. We saw Mr Phil Goff—“Whack-it-on-the-bill-Phil”—recklessly say in the House today that we should keep on spending. He said that we should keep on increasing our debt and putting ourselves in a position whereby our kids will have to pick up that debt down the track. It was absolutely crazy. Delivering that sort of Budget would burden Kiwis with an immediate downgrade. But it is not that we heard anything of any note from Phil Goff, apart from increasing expenditure. Did we hear anything about what he would change in order to deliver that? No, we did not. He just talked about more debt—“Whack-it-on-the-bill-Phil”. It was all about putting more on the Visa card and burdening Kiwis with more debt.
What we heard from National was a reflection of where the real economy is. The really important thing is that out there in New Zealand businesses are doing it tough. They are going through their profit and loss statements line by line, looking to see how they can take expenses out of their budget so that they can remain in business. It is not so that they can make a profit; many businesses out there are trying to keep afloat, and they are going through their budgets line by line to do that. There are people out there who have recently lost their jobs, or who are facing the prospect of losing their jobs. They are not faced with a situation where they can be fiscally prudent; they have to be tough and go through their budgets line by line. That is what this Government has done. It has gone through the Budget line by line and taken out as many expenses as it can. It has provided a Budget that will take us forward, which is fantastic.
On the other hand, “Whack-it-on-the-bill-Phil” thinks we can just keep on spending and racking up debt—spend, spend, spend, and the debt grows. National members understand the position the economy is in and we have had to make some tough calls. Whether or not members opposite like it, when New Zealand is in a situation like this the Government has to make tough calls, and we have done that. At the time of the election, when we made our initial call about tax cuts, we made some tough calls in order to afford tax cuts, based on the Pre-election Economic and Fiscal Update delivered to us at that point in time. At that time we made some calls about research and development tax credits and KiwiSaver. Once again, in this Budget we have made some tough calls about what we have to do, and one of those tough calls has been to stop the second and third tranches of the tax cuts. That is something we have to do in this economic environment.
Mr Ross Robertson asked us before about what the future was under this Budget. It has given us a debt track that is rising but will then go down. It has given our kids a strong outlook for the future. Today we are in the position of having to hit the tax cuts on the nose with this tax bill so that we can go forward, and Standard and Poor’s has delivered us a fantastic result because of it.
IAIN LEES-GALLOWAY (Labour—Palmerston North) Link to this
Before Christmas we were in this House late at night, day after day, ramming through tax-cut legislation under urgency. National could not get it done fast enough. Why? It was because the Government wanted to stick to Mr Joyce’s mantra: “Find out what they want; give them what they want; then tell them that you’ve given it to them.” The Government wanted to be able to say before Christmas “We’ve given it to you.” It wanted to put on the façade of a hard-working Government that was getting on with it, but it was all smoke and mirrors. National knew before the election that those tax cuts were completely unaffordable. Now, a mere 6 months later—not even that—we find ourselves under urgency with the Government running as fast as it can away from the broken promises that it knew it could not keep. The Government knew full well that there was not a chance that these tax cuts would go ahead—not this year, not next year, not the year after. Bill English was not talking about the tax cuts when he used those words, but he may as well have been. There is no doubt that this Government cannot be trusted on anything.
IAIN LEES-GALLOWAY Link to this
Before we headed off for the dinner break I was reflecting on the bizarre symmetry that has been created by this situation. Before Christmas there was a need for urgency to rush through some incredibly important policies that the Government needed passed by Christmas so that it would look like it was doing something. We forced through tax cuts under urgency, yet tonight we find the Government, under urgency, running as far away as it can get from those tax cuts. The Government has done a handbrake turn so sudden and so violent that its members should have their cars crushed. It is just incredible how quickly the Government has turned around on this policy.
When Bill English talked about not this year, not next year, not the year after, he was talking about the cycleway, but John Key crushed him on that, did he not? Mr English was actually talking about the tax cuts—they will not happen next year or the year after.
Before the election, when all these promises were being made, John Key liked to compare himself to Barack Obama. He knew that Barack Obama was on to a winner so he thought he would try to ride that wave and compare himself to Barack Obama. One could write a thesis on the differences between John Key and Barack Obama, but I would like to focus on one difference in particular. Obama’s campaign phrase was: “Change You Can Believe In”. He was upfront, he was honest, and he delivered the tax cuts that he said he would deliver. He costed them out, made his pledge, and delivered on every single one of his promises. He promised to cut taxes for low and middle-income earners. Why? Because it was fair and it was the best way to stimulate the American economy. That is unlike what we have seen in this country, where tax cuts have been delivered to the rich, who will save them or spend them on overseas trips, and where poor, low-income families have been shafted by the Government and have received absolutely nothing. Obama delivered, but this Government we cannot believe in.
The one thing that this Government has not done a U-turn on is research and development tax credits. They were gone before Christmas, and they are still gone. In my hometown, Palmerston North, research and development tax credits—Mr Power knows this—were welcomed with open arms. Palmerston North is an innovative city, and so much of its economy is based on research, innovation, and scientific development. Those credits were something that this country could have seen as a way out of this recession. Recently, Moana Mackey came up to Palmerston North, and we spoke to the science sector there. Those people said that they wanted to be taken seriously as a sector that can lead New Zealand out of the recession. But what has this Government done? It has slashed those research and development tax credits and taken the Fast Forward Fund with them. What have we seen today? We have seen an attempt at an about-turn, but it is not even half of what the Fast Forward Fund had and not even half of what Labour pledged. It has nothing like the security that that innovation fund offered to the science and research community. Those in the science sector want to know that their funding is secure, and this Government cannot deliver them that level of security.
How can we move towards being a high-wage, high-earner economy? How can we catch up with Australia, as this Government keeps insisting we can? Government members said over and over again when they were in Opposition that we were far behind Australia, and they pledged that our wages would catch up to Australia’s. But how will we do that if we insist on focusing on being a low-wage, no-innovation, dumb economy with moves like scrapping research and development tax credits and the Fast Forward Fund? The talk is all about productivity. Well, research and development is all about productivity. John Boscowen from the ACT Party said earlier on in this debate that it is all about developing productivity. But then he got into what he really wanted to talk about—
Hon Darren HughesIAIN LEES-GALLOWAY Link to this
No, no, there was not a lamington in sight. What he really wanted to talk about was how awful Working for Families was. He absolutely slated it. In fact, he was in good company, because John Key called it “communism by stealth”. But not today! John Key was crowing today about the fact that the Government was able to maintain Working for Families and interest-free student loans. He even crowed about the tax credits that were delivered on 1 October. I know that John Key wanted to lead a Labour Government—he said so himself—but he is taking the flattery just a little bit too far. He should watch out for Bill English. The knives will be out, and he will be in trouble soon if he keeps flattering the Labour Party with that sort of rhetoric.
But the dark, grey clouds are looming. There are ominous references throughout these Budget documents, and they say that New Zealanders have to prepare for changes. There will be shifts in funding from low-priority, unproductive areas to more productive areas. We know what they on the other side of the House do not like. We know what dead rats they had to swallow: Working for Families, interest-free student loans, universal superannuation—which is in a whole world of trouble now, and will not be around by the time I retire, that is for sure—and KiwiSaver. The Government has already put a dent in KiwiSaver, and, I tell you what, it is lining it up. KiwiSaver is even referred to in this bill, in the provision allowing mortgage diversion. I understand—although I was not in the House at the time—that that policy came from United Future. But that is OK, it does not matter, it does not mean anything to Peter Dunne. He has jumped ship before and he will do so again. He has jumped ship on the provision to allow mortgage diversion.
The Government members are having a drag race to see who can get the furthest from tax cuts. They want to try to position themselves far away from the promise they made before the election. They want to get as far away from it as possible. The promise that John Key made at the National Party campaign launch was: “We all know what will be the first to go under Labour, whether they want to admit it or not, and that is the rest of their tax-cut package. Well, unlike Labour I’m going to be straight-up about my priorities. That’s why I’m sending a card to all of you. It’s called My Key Commitments to You and it will be delivered to every household in New Zealand over the next 10 days.” His very first commitment read: “strengthen the economy, increase after-tax incomes, and ensure Kiwis can get ahead under their own steam by reducing personal taxes on 1 April 2009, 1 April 2010 and 1 April 2011.” In other words, next year, the year after, and the year after that. Mr Key went on to say: “And unlike Labour, we won’t cancel our tax cuts.” He also said: “Most of all, New Zealanders will be able to believe our tax cuts, they will be able to trust our tax cuts, … What is more, we can afford to do it.”
This bill is dastardly, deceptive, and dishonest. That is how this Budget has been, and that is how this one-term National Government will be remembered.
NATHAN GUY (National—Ōtaki) Link to this
The previous speaker was Iain Lees-Galloway from Palmerston North. He failed to tell the people of Palmerston North that he will be voting for the Taxation (Budget Tax Measures) Bill. He has been whipped into line and will support this bill.
I need to make a few introductory remarks. The Labour caucus is all over the place on this bill. Tonight on Close Up I heard the Labour leader, the Hon Phil Goff, say that we should have more tax cuts, yet in the House tonight Labour is supporting this bill. I also heard the Hon Phil Goff say this afternoon that the National Government was lucky enough to inherit an economy that was in good shape. Well, what a misnomer that is! How could Phil Goff possibly stand up in the House today and say that with any credibility, when the books were open at the Pre-election Economic and Fiscal Update, and there was a decade of red ink and deficit? That member is an absolute embarrassment.
He also said that this Budget was a Budget of missed opportunities. I need to bring to the House’s attention that this is a very tough economy. It is the toughest since 1930, and, indeed, we are in our sixth quarter of negative growth. A member who has recently departed the House—Michael Cullen, the former Minister of Finance—said on 20 March 2008 that a recession was unlikely. The following day he said that he expected a technical recession. He squandered the good years—the magnificent years—that we had, which were nothing to do with what the former Labour Government did. All those years were squandered. We came into Government, opened up the cupboard, and found that—whoopsie—the cupboard was bare.
If we want to set the record straight, I say that the now dumped president of the Labour Party, Mike Williams, said there was a deep dark secret in the 2005 Budget. Wait for it! Then in 2005 the Minister of Finance said that Labour was moving the income thresholds, and that the average worker would benefit by 68c—just half the cost of a packet of chewing gum. Then, lo and behold, the Labour Government had to cancel the tax cut.
This Government is going about its job in particularly difficult times. We have already rolled out our tax package—$13 a week to the average hard worker—and we are actually moving on and supporting entitlements. All the constituents in the Ōtaki electorate, particularly those over 65, will be pleased to know that we are supporting them in superannuation. Those who are reliant on Working for Families in particularly hard times will be very pleased to hear that we are supporting their entitlements. This bill has the support, I believe, of those members across the other side of the House, as well, which is surprising because when we hear their speeches, we wonder whether they are supporting it.
I think Labour members owe it to the public of New Zealand to give them a bit of an indication on this two-part bill, which is only a couple of pages long, as to whether they will filibuster this bill like they did with the Local Government (Auckland Reorganisation) Bill to the tune of 8,000 amendments in this House. The next speaker from the Opposition should stand up in the second reading and say where Labour stands in terms of the Committee stage, and whether it will support this bill in its current form.