Hon PETER DUNNE (Minister of Revenue) Link to this
I move, That the Taxation (Budget Tax Measures) Bill be now read a second time. As I said in the previous debate, this bill is necessary to ensure the Government can deliver its explicit medium tax policy goal of a broad based - low rate system that raises revenue in the most efficient manner to support the objective of aligning the top personal, the trust, and the corporate rates at 30c in the dollar. It is something that I have long advocated. I think it is a necessary solution to the problems we currently have within the system of people using companies and trusts to shelter personal income, because the current misalignment of the rates provides scope for people to use those entities to structure their affairs in a way that benefits and reduces their liabilities.
I should say to the member that we have in place the tax policy work group under the aegis of Victoria University, and it will be putting forward a wide range of options for public debate in an open environment over the next few months. The Government will then make some calls early next year on where it wants to go in terms of those options and the pursuit of that objective. One of the things that we have lacked in this country for a long time—
I would have thought that the member opposite would be keen to have an open, wide-ranging debate about tax policy and about the future structure of tax policy.
The member says that they will be there. I welcome that. I look forward to his input, and I look forward to the outcome being one that will see us better placed to achieve the objective that I have just stated. Let me come back to the bill.
Hon David Cunliffe Link to this
But you are heading in that direction day by day. You should be very afraid!
Let me say to the member that he might like to speculate upon many things, but I think both Sir Roger and I would be horrified if we ever ended up in common company.
That is dead right. In fact, I do not think there are many people in New Zealand who were not in the Labour Party at some stage; the trouble is that most of them grow up. Let me move on. When the Government’s tax cuts in April this year—[ Interruption] Well, there is one over there. The problem with the Labour Party is that it is a great launching ground for political careers; most people, however, grow up and move on to other things.
Let me come back to the bill. Delivery of the first round of personal tax cuts in April this year was a critical part of this Government’s policy. It followed on from the legislation introduced before Christmas, and it put an extra billion dollars into the pockets of about 1.5 million New Zealand workers. That round of tax cuts and the tax cuts introduced by the previous Government in October last year were affordable. The April tax cuts this year were funded by concurrent changes to the KiwiSaver programme, the abolition of the research and development tax credit, and the replacement of the out-stages of the previous Government’s tax cuts. So those changes currently in place are not affected by the bill before the House today, but the future tax cuts for 2010 and 2011 have become unaffordable in the meantime, for the reasons outlined in the Budget. If we look at the Budget tables, we see a revenue decline that shows that the 2008 revenue levels are unlikely to be reached for another 3 or 4 years. There is a question of how one pays for those costs.
To go ahead with tax cuts in this environment would simply add to Government debt at a time when we are already in deficit, and when we need to reduce the debt burden not just on the Government and the economy but on households, which bear the burden.
At the time of the election a lot of things were going on in the international economy, and they were changing day by day. To suggest that there was a crystal ball out there that made all of what has happened this year, and all of the changes that the Americans, the Australians, and the British have had to cope with, predictable in October or earlier last year, is simply fanciful. No one actually knows what the depth of the international recession is, except, perhaps, for Mr Cunliffe, who is now sharing his knowledge with us. I think it is wonderful to have his omniscient presence in our midst, and I am sure that when he does speak he will share some more wisdom with us about the state of the international economy, when New Zealand will recover, and all of the things that we need to be doing by way of economic policy.
In the meantime, let me come back to a bill that has to be passed now to put on hold those tax cuts for the future, to make clear to New Zealanders where they stand, and also to give some certainty and direction, which has already been positively welcomed by the rating agencies since this Budget was brought down.
Part 2 has effect more urgently. It closes off the KiwiSaver mortgage diversion option. The member who spoke at the end of the first reading debate, Nathan Guy, said it was a United Future initiative, and he was absolutely right. It was put forward by a former colleague of mine; it has not worked. I was the Minister who recommended it—
Yes, of his particular initiatives. I dare not mention his name, because it causes me grief—the member will know why. But the fact of the matter is that it was my proposal to get rid of it, because it is simply not working. We have more than 1 million people in KiwiSaver, but fewer than 600 have taken up the mortgage diversion arrangement, which is spread over a number of funds, and in a number of cases there probably are fewer than 100 people per fund. It is simply unworkable. We therefore are saying that those people who are currently in the system can stay in it as long as their fund providers wish to retain the option, but for new entrants we are closing it off with effect from 1 June this year. It was potentially a good idea, but it has not worked. I am sure the member opposite who is nodding his head would agree with me that if there are good ideas that do not work, we should get rid of them. This is one of those, and I do not think anyone will greatly mourn its passing.
With those few comments I am very happy to commend the second reading of this bill to the House this evening.
Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this
Before the election, the only thing National was going to cut was taxes. After the election, that is about the only thing it is not going to cut. Today is Budget day. The kimono has been opened, and we find that there is not a lot there. This bill makes a liar of the Prime Minister. The man who signed the personal guarantee to say that there would be tax cuts—
Chris Tremain
The ASSISTANT SPEAKER (Eric Roy) Link to this
I do not think you need to explain what your point of order is. All members are honourable members. I think the way in which the member phrased that was beyond—I will ask him to withdraw the comment.
The ASSISTANT SPEAKER (Eric Roy) Link to this
No, I have ruled that the member will withdraw the comment. That is all I require.
Hon DAVID CUNLIFFE Link to this
I withdraw the comment.
I raise a point of order, Mr Speaker. Respecting your wisdom in this matter, it none the less leaves me on the horns of a rather uncomfortable dilemma. As you will see from the speech that follows, I can find no other explanation for the course of events than that the leader of the National Party knew before the 2008 general election—or should have known—that these tax cuts could never be affordable.
The ASSISTANT SPEAKER (Eric Roy) Link to this
I have the gist of what the member is saying, and that argument has been tried many times in the House. There is no way that the member can imply that about a member or use the word that he did. All members are honourable members. The member has to exercise his brain to express himself in another way. The member will continue.
Hon DAVID CUNLIFFE Link to this
The key point here is that the Hon John Key knew before the election that these tax cuts could never be afforded. There are only two logical possibilities: either he knew, or he should have known.
As a matter of evidence, let us look at the historical record. The International Monetary Fund issued a warning in October 2008 in its World Economic Outlook. It said: “The financial turmoil that began in the summer of 2007 has mutated into a full-blown crisis,”.
Hon DAVID CUNLIFFE Link to this
I am coming to that, if the member will just wait patiently. On 14 September 2008 Mr Key’s old firm, Merrill Lynch, was gobbled up by the Bank of America. On the next day, Lehman Brothers went bankrupt—nearly 8 weeks before the election. Mr Key likes to remind us that he was a member of the foreign exchange committee of the Federal Reserve Board of New York—a very august body. He would have been patently unqualified for that role if he had been unable to take the hint that two major investment banks on Wall Street had bitten the dust and there was a tad of trouble. One cannot have it both ways. One cannot be qualified to serve on the Federal Reserve Board of New York, yet miss the hint—Lehman Brothers hitting the wall is a bit of a giveaway, right? If he knew, yet promised to continue with tax cuts, the Assistant Speaker has better wisdom than me of how one might describe that. The word I wanted to use, I cannot use, but I cannot think of another. There was a deception, an untruth, a very long stretch of the imagination. But either way, the public of New Zealand were conned. They were conned that they could have everything that they had liked under Labour—they could have Working for Families, smaller class sizes, and cheaper doctors’ visits—and they could have 3 years of tax cuts as well.
You know, the tax cuts were always economic lunacy. The first one took three-quarters of a billion dollars from people below the average wage who really needed the help and would have spent it straight away, and, by the Minister’s own admission, transferred it to upper income earners. But worse than that, it gave 30 percent of it—
Hon DAVID CUNLIFFE Link to this
Mr Power may laugh, but Mr Power unfortunately will not be in the top group that got one-third of the money. Three percent of income earners got 30 percent of those tax cuts—3 percent of income earners. I do not know who would call that fair, but certainly not the taxi drivers I have been using. They are gobsmacked by that; they talk to everybody. So let us assume that ordinary New Zealanders think that was a rort. It was a political payback to the people who bankrolled the National Party to deliver for them—and it did. That was the 1 April tax cut. We are all good-humoured in this House, but sometimes one just has to call it like one sees it. It seemed to me to be political payback.
The key point—and it is a Key point—is that the Prime Minister, then the Leader of the Opposition, must have known before the election that this tax cut could not be afforded. Before Christmas, this House was thrown into urgency to pass the tax bills in the dead of the weekend to get them through. And here we are, in the dead of the night, un-passing them, because the penny has finally dropped in the National Party that they were ridiculous. I ask colleagues to contrast that with the responsible actions of the New Zealand Labour Party, which canned a whole lot of election campaign promises—I did in health, and there were whole portfolio manifestos we did not even release—because we did not want to promise more than we could afford. We did not want to promise more than we could afford, because the public of New Zealand have had a gutsful of being conned.
Today is Budget day. Today is the day National cannot hide any more. It has to open the books, and the public has to see. It is no surprise, therefore, that on Budget day the charade was finally dropped. The argument in this House is not whether the tax cuts were a good idea—finally National has come round to our way of thinking, which is that they were always bollocks. Now that National is voting them down, we are happy to support that. There is no confusion in the Labour position, because it has not changed. The senior whip on the Government side should be reminded that it is his party that has done the U-turn. It passed the tax cuts, and it is repealing them, and good on them for having finally mustered the courage and the wisdom to do so.
Nathan GuyHon DAVID CUNLIFFE Link to this
We are for it—that is what I am saying. You did not used to be; you have changed your mind—not you, Mr Assistant Speaker Roy. He changed his mind. You, Mr Assistant Speaker, are known for your consistency and wisdom.
Hon DAVID CUNLIFFE Link to this
Look, a man has to take his chances when he can get them. He is such a good Assistant Speaker, is he not? Labour today stands alongside the hundreds, probably thousands, of decent, hard-working New Zealanders who will be joining the unemployment lines. We are disappointed and we are angry that certain decisions have been taken that mean that some of them actually need not be there.
On Budget day, we are faced with a Budget that is remarkable for what it does not do. As, I think, Vernon Small from the Dominion Post said, it does nothing for the short term. There is no new stimulus. There is some reprioritisation of old money and dressing up of old programmes. There is no new stimulus, and these tax cuts remove part of the stimulus that was there—it was not a very good stimulus. Those unemployment lines will grow. And it does nothing for the long term. There is no plan. There is no growth strategy. Heck, there is not even an Economic Development vote of much meaning left. There is no research and development to give tax cuts for. There is no Foundation for Research, Science and Technology to speak of; there is no Fast Forward. There is no Skills Strategy. There is a doughnut with a gaping great hole in the middle that is New Zealanders’ future.
The punchline of this Budget has been the decade of deficits in superannuation. It is one thing to suspend contributions for a year; it is another thing to suspend them for 10 years. Our children will have to pay $30 billion out of their taxes because this Government did not have the fortitude to buy assets when assets where cheap, and maintain the consistency of that purchasing fund. Not only that but if that Government really had to take a holiday, what would have been wrong with doing that for a year or two, and then telling the people of New Zealand how it was going to catch up again? But, no, those members could not do that; they had to have a 10-year holiday. It is like people not going to the gym for a decade and then thinking they will still be fit.
Maybe Mr Key does not mind his second great con—the con that he would personally guarantee to maintain superannuation—because he knows that he will not be the Prime Minister when those chickens come home to roost. So his personal guarantee is as useful on superannuation as it was on tax cuts: “I personally guarantee 3 years of tax cuts—this year, next year, the year after—oh, sorry, is that what Lehman Brothers going bankrupt really means? You mean there is no growth? There is a deficit? We can’t afford them, after all? Sorry we put you into urgency before Christmas. Sorry I told you in the House that these could be afforded. I guess I was wrong. Gee, whizz, how silly of me; I’ve been saying that for 6 months. I know I was a merchant banker, I know I should have known, I guess I just got it wrong.” Nobody believes that. The taxi driver does not believe it, ordinary New Zealanders do not believe it, and they will have their returns in 2011 when we win the next general election and restore integrity in New Zealand politics.
Hon SIMON POWER (Minister of Justice) Link to this
That was David Cunliffe, the man who cannot decide whether he is an attack dog, a statesman, a policy wonk, a poet, an orator, or a leader-in-waiting. You see, the strange thing about his contribution is that while sitting through the Budget and watching closely the reactions of members on the front bench of Labour I picked up three interesting facts: the majority of those members had their heads down and did not look up during the entire speech given by the Hon Phil Goff; Trevor Mallard, at the conclusion of the speech, clapped between six and nine times and sat down before anybody else—a long period before anybody else—and the only other person who strayed from either of those models was the Hon David Cunliffe. There was a grin on his face as broad as a picket fence. He was pleased with how badly the Hon Phil Goff did, because his numbers person, Moana Mackey, was back there with the clipboard, doing the numbers, working out that she alone had the key to his popularity, and tipping him on the numbers required to shift him across one seat.
We could see in David Cunliffe’s contribution to this second reading debate how he was edging towards Phil Goff’s seat as he was speaking. He was positioning himself just at the point where he could comfortably drop into the seat, knowing that Ms Mackey was quietly ticking away there in the background. She has been beavering away with Ruth Dyson and Darren Hughes to get the numbers together for David Cunliffe in order to make sure he has sufficient numbers to get him over the line.
I came down to the Chamber for the end of the first reading, thinking to myself that this second reading debate could be interesting. I came down to listen carefully to some of the contributions being made, and my colleague from the Manawatū Iain Lees-Galloway gave a spirited contribution. I sat and waited, the vote was taken, but the only sound I heard was that of a tumbleweed. There was no vote. After all the protestations from the other side, and all the clicking of pens from Moana Mackey as she did the numbers for the Hon David Cunliffe, what did we get? There was not one vote opposed.
The interesting thing about all of this is that when I came to Parliament in 1999—and this is my tenth Budget—I learnt that—
This is the point: the first lesson of Opposition is to oppose. We have come down to the Chamber for the new Government’s first Budget and for the first bill under urgency after the first Budget to find that Opposition members are for it.
What an unusual arrangement we have here. I would not have picked Moana Mackey as David Cunliffe’s numbers person, and I would not have picked that for the first bill under urgency after the Budget, when we are down here ready for a spirited fight, we would have a big pause, the sound of tumbleweed, and a vote that Labour members are for the bill. That is unbelievable.
We heard today that fiscal conditions have changed dramatically in recent months. The Hon Bill English gave a speech this country can be proud of. He delivered a Budget this country can be proud of. What is more, the first bill to come to this House after the Budget has the unanimous support of every party here. That has not happened before in my 10 years here.
I also say that we learnt very soon after the delivery of the Budget that Standard and Poor’s has removed the negative outlook from New Zealand’s AA+ foreign currency rating. Moody’s Investors Service says that New Zealand’s triple A rating, which is on a stable outlook, is not immediately affected. Not only did we maintain entitlements, and not only have we set the course for a difficult but achievable task ahead, but the ratings agencies have backed the Budget today. For the first bill in urgency after the Budget has been delivered, they are not the only ones backing this Budget; that party across the Chamber is voting for the first bill following the Budget.
Let us just cut to the chase here: nobody in this House believes that this bill is anything but sensible, necessary legislation to keep this country on course on what we know is a crucial path to ensuring productivity and improvement to this economy and our way of life. That member opposite, David Cunliffe, talked about the children of future generations. If it were not for this legislation and this Budget, their plight would be far more difficult.
Today we are seeing a Government prepared to make the hard decisions. They are not easy decisions to make, but they have to be made to ensure that this economy has the capacity to drive growth in the way that is necessary—that is, a credible and balanced approach to dealing with a major recession. Those Labour members opposite left few choices—aside from those that were unfunded—for the new Government to come in and deal with. So I say to Labour members that if they are serious about contributing to this debate on this bill and on this Budget, then they should come up with some alternatives and get on with it.
MOANA MACKEY (Labour) Link to this
It is always nice to see Mr Power in the House, dealing out his own special brand of fantasy in the way that only he can do. He said that it was amazing that Labour was supporting this first piece of Budget legislation, but that is because the legislation is repealing National policy. The first piece of Budget legislation we have in this House is repealing National’s election promises. That is why Labour is supporting this bill, so for National members to claim that they find it surprising that we would do that, just shows that they have no idea what it means to be consistent. Labour has been consistent on this issue. We said during the election campaign that National’s tax promises were unaffordable. National members told us that we were scaremongering. When we went through urgency just before Christmas—and the legislation was rushed through with no select committee process—we said that the tax cuts could not be afforded, and National said that that was scaremongering. Well, less than half a year later, members should look at where we are. We have a bill repealing the very tax cuts that we said were unaffordable—the very tax cuts that those members said could be afforded—yet they are calling us inconsistent for supporting this legislation.
I have one prediction: even though Labour is supporting this legislation, so that it has widespread support across the House, Gerry Brownlee will still stuff up the management of the House. Even though Labour is supporting the bill, Gerry Brownlee will still struggle to get it through under urgency.
Mr Simon Power went on to talk about Standard and Poor’s and the fantastic announcement that we had today. Well, of course Standard and Poor’s would say that, because that agency effectively wrote this Budget. Standard and Poor’s got to see the Budget before the National caucus saw it. It got to see it before the people of New Zealand did. National stands up and acts surprised that Standard and Poor’s liked it, but when they were the only people who were allowed to see it before it was delivered, that should hardly be surprising. Mr Key said it was great that the Budget got such a high rating from Standard and Poor’s, and that is not a bad thing, of course. But so did Enron, as Mr Goff pointed out in his speech. So what we have from Standard and Poor’s is a triple A rating for Enron, for subprime mortgages, and for Budget 2009. I can see why Mr Power would be very, very excited about that.
Here we are; it is déjà vu in this House. I remember the 1990 election. I was at high school. I went out delivering pamphlets locally. I remember the election promises made by the National Party at that time, and all the things it was going to do. Basically, it adopted Labour Party policy, and then added a whole lot of stuff on, just like it did in 2008. Then National got into power and it claimed that it never saw the recession that everyone else saw coming. National members said they never knew it was going to be as bad as this, and they used that as an excuse to back down on their election promises.
When it comes to Tory Governments, the more things change, the more they stay the same. Here we are again. Mr Key was either the only person in the entire world who did not see the global recession, the financial crisis, that was coming, which would be unusual given his background, or—and this is the more likely scenario—he did see it coming, and knew how bad it was going to be, but he made those election promises anyway because he wanted to buy the election, just like National did in 1990. It has done so again in 2008. When we in Labour stood up on the campaign trail to point this out and said we would have to shelve a whole lot of election promises that we were going to make, because we knew that we were not likely to be able to afford them—
I say to Mr Foss that we did. We also said that we would do a mini-Budget before Christmas. Because things were changing so quickly, we needed to introduce a stimulus package. National told us that we were wrong. National chose to coast and wait until May this year, as was its prerogative. It did not have to do a Budget before Christmas. Now National expects the people of New Zealand to seriously believe that it did not know that its tax cuts were unaffordable when it promised them. Labour knew that this legislation was coming. We knew that it was coming when we were forced under urgency before Christmas to pass those tax cuts—a full third of which, by the way, went to the top 3 percent of income earners.
Hon Ruth DysonA full third went to the top 3 percent of income earners. How is that a stimulus for our economy? How is that a stimulus? Not only does it not help the low and middle income New Zealanders who need that extra money right now, but those earners were the people who were going to go out and spend it. They were the people who were going to spend that money and stimulate our economy. But no, National members had some favours to repay from the election campaign, so they rejigged the tax cuts that Labour gave to low and middle income New Zealanders and gave them to the top 3 percent of income earners. Then for the rest of New Zealanders, we are here now debating this legislation, just like Labour said during the election campaign we would be doing, and just as Labour said when National was passing its tax cuts under urgency before Christmas. National called it scaremongering, but the truth has been shown here today. This legislation repeals National’s tax cuts.
What did John Key say about this when he was desperate to get elected? He said that his very first commitment—his personal guarantee—was to strengthen the economy, increase after-tax incomes, and ensure that Kiwis could get ahead under their own steam by reducing personal taxes on 1 April 2009, 1 April 2010, and 1 April 2011. He then went on to say that, unlike Labour, National would not cancel its tax cuts. So what is this from the party that stood up on the election campaign trail and said that it would not cancel tax cuts, unlike Labour? Let us remember that Labour gave significant tax cuts during our term in Government. We are the only party that ever gives business tax cuts, ironically. We have given tax cuts for research and development, and we have given tax rebates for families through the Working for Families package. What has National done, when the rubber hits the road, what is it doing in its first Budget? It is cutting the tax cuts. Labour is supporting this legislation, because we are consistent. We said that it should not be done, when the legislation was passed before Christmas. We opposed the legislation for the tax cuts that we are now repealing. So not even 6 months later, after rushing through tax cuts under urgency, here we are in urgency again, cancelling those tax cuts. How efficient!
Given John Key’s position on the election trail, perhaps instead of being called the Prime Minister he could now be called the “Prime Misleader”. He knew very well that we would be here today. He is a nice guy, he smiles a lot, and yesterday he quoted “On the Good Ship Lollipop”. As Bill English said, he bounces from cloud to cloud. I think he thought his personality would pull him through this. The fact is that this is a rort; this is an absolute rort. The people of New Zealand were absolutely conned at the last election, again—just like they were in 1990. It is really tragic because we should be here tonight discussing legislation that creates jobs. We should be here—
Cancelling tax cuts that were lied about during the election campaign does not create jobs. I am sorry; it does not. We should be here passing a package that creates jobs and supports jobs. We should be here passing legislation that will increase wages, not decrease wages. We should be here reinstating the research and development tax credits that National foolishly cancelled last year. These are tax credits that help our most innovative companies, tax credits that will help our exporters, and tax credits that everyone in New Zealand agreed with, apart from the National Party.
Those are the policies that will grow this economy, I say to Mr Bennett. Mr Bennett went out on the campaign trail and said that his party’s policy on the Fast Forward Fund Ltd was stupid, and that the Fast Forward Fund Ltd should stay, and he was right in that respect. The Fast Forward Fund Ltd has been replaced by a sickly and insipid replacement. This is from the party that said that the replacement would be as good as, or better than, Labour’s. That was another con; another broken promise. This is a shameful, shameful night for the National Party, and a very sad night for New Zealand.
KEVIN HAGUE (Green) Link to this
My colleague Jeanette Fitzsimons spoke in the first reading debate of the Taxation (Budget Tax Measures) Bill. She indicated that the Green Party intended to support it, but that we had not yet made up our minds about Part 2 of the bill. That is still the case: I rise to support the bill, but to express reservations on Part 2.
It is a pleasure to be able to support this bill in an environment where apparently everyone in the House, including our colleagues from the ACT Party, are now opposed to these future tax cuts and will be voting in favour of the bill. I intend to speak not to beat up the Government for changing its mind, but to praise the Government for changing its mind. It takes a certain amount of maturity and bravery to indicate that one was wrong in the first place, so I think the Government deserves the House’s praise for saying that it was wrong to introduce the legislation to provide for the tax cuts, the Taxation (Urgent Measures and Annual Rates) Bill, and that is why it is repealing them today.
This legislation is not the only area in which the Government has shown bravery in its performance today. In the House, prior to Christmas, one of the lines of questioning that the Green Party had for the Minister of Finance was in relation to the number of green-collar jobs that the rolling maul of measures to deal with the recession would create. I think it is fair to say that the response we had indicated a fair amount of ridicule towards the idea of green-collar jobs. There was a sense that they did not really matter, because a job was a job, and a green-collar job was no better than any other kind of job. It was with a sense of pleasure that I heard the Minister of Finance in his Budget speech today refer to green jobs being created by one of the Budget measures.
The third area the Government has today fessed up to having been wrong on prior to Christmas is the Green Homes Fund. The Green Homes Fund was a $1 billion fund over 15 years that had been created through the Green Party liaising with the then Labour Government. One of the first actions of this National Government was to scrap the Green Homes Fund. We said at the time that that was the wrong thing to do, and it is with an enormous sense of pride that I am able to stand here today and acknowledge the particular contribution of the outgoing co-leader of the Green Party, Jeanette Fitzsimons, who has championed the issue of home insulation and energy efficiency over more than a decade in this House. She has the single greatest responsibility for having wrought the multilateral consensus that home insulation and energy efficiency are sensible and prudent measures for any New Zealand Government to take. I salute Jeanette Fitzsimons and I also thank the Government. I thank the Government for admitting that it was wrong to scrap the measure before Christmas, and I thank the Government for having the courage to come back to the measure and to reinstate home insulation.
That particular new policy has been brought about through the Green Party’s memorandum of understanding with National. I note that our two parties will be working together on further areas of energy efficiency in the future. I look forward to further gains we can make, because all of this learning the Government has done over the past several months, moving on from decisions made before Christmas that turned out to be wrong, has the potential to be transferred to other areas.
I have just returned from the Green New Deal listening tour, on which I spoke at five public meetings over the last week about the Green Party’s Green Stimulus Package. Home insulation is certainly one of the measures we advocated. We were saying it is possible to address simultaneously the economic crisis facing this country and the environmental crisis that also besets us. If it is possible to address both crises simultaneously, then why on earth would we not do so? We advocated measures not only in home insulation and energy efficiency but also in transport efficiency. It is possible to create 40 percent more jobs by investing in public transport, walking and cycling initiatives, and traffic demand management than by investing in motorways, which is this Government’s choice. We advocated measures to protect waterways in rural areas and thereby protect New Zealand’s “clean, green”, “100% Pure New Zealand” brand, which is at severe risk, but has huge economic benefit to this country. We advocated building 6,000 State houses to a high energy-efficiency standard. We also advocated a variety of community-based employment opportunities, including more housing and waste minimisation schemes.
All those schemes would have created assets and jobs for New Zealand. It is $3.3 billion worth of spending, and at least 43,000 green-collar jobs. The Green Party’s fervent hope is that it will be possible for us to take the learning the Government has done over these three measures—repealing the tax measures, understanding the importance of green-collar jobs, and the Government’s new commitment to home insulation and energy efficiency—and transfer it to some of those other areas. This is the kind of green new deal that New Zealand so desperately needs. It is a green new deal that solves our economic problems and addresses our environmental problems at the same time. The Green New Deal should include taking some effective action on climate change. I look forward to the day when it is possible for all members of this House to support effective measures on climate change, just as we are all supporting the repeal of these taxation measures today.
I also note that one of the other causes we have been championing on the Green New Deal listening tour is innovation. The answer to New Zealand’s need to increase productivity is not everyone working harder; it is actually using innovation and thinking about how to do things in different ways—changing the goalposts and changing the ways we reach them. This Government can also do some learning around innovation. Research and development tax credits have been scrapped. The Fast Forward fund has been scrapped and replaced by an anaemic copy. I spent a day this week with the Sustainable Business Network. It is a fantastic organisation that actually has the answers to improving New Zealand’s productivity, and has just had its funding slashed by this Government. So there is an awful lot of potential for transfer of learning.
I will conclude with a couple of comments about urgency. When the Government took urgency for its 2 weeks of shock and awe before Christmas, the Green Party objected to urgency at that time. We said it was not necessary and would lead to bad decision-making. We were right on both counts. As Jeanette Fitzsimons said in her first reading speech today, we are also right in saying that urgency is not required at this time. Urgency has been taken today because the Government is embarrassed about changing its mind. We say that the Government does not need to be embarrassed, because it is doing the right thing and it should be proud of the fact that it is prepared to learn from its mistakes. In respect of Part 2 of the bill we see the exact reason why urgency is a bad idea. We have yet to hear an argument in favour of Part 2 of the bill. If the bill had been referred to a select committee, then maybe we would have heard an argument in favour of Part 2 and we would be able to vote for it. We will support the bill but oppose Part 2.
Hon Sir ROGER DOUGLAS (ACT) Link to this
I was interested in Kevin Hague’s comments about green initiatives. The Taxation (Budget Tax Measures) Bill includes a major green initiative, which the member referred to—home insulation. But the thing that distinguishes my approach from the approach of the member, who believes that only the Government can do these things, is that I believe that we need to think about the issue in other ways. Can we get a market mechanism to do this so that the Government does not have to spend this sort of money? The decision to spend the $323 billion is based on research that is quite suspect. I will not go into that, but I will make one suggestion of what we might have done to achieve the same thing. For example, we could have made it compulsory to state on a land information memorandum whether a home was insulated. Currently, a land information memorandum report does not have to state whether a house bears insulation. If it is stated on the report, then people who are about to buy a house would haggle on the price and there would be a done deal. Similarly, if a rental property is advertised as being uninsulated and the rent drops, landlords then receive an incentive to insulate it. Sometimes one can do these things in ways that do not involve a huge Government expenditure. But that is not really what I stood up to talk about.
Let us understand what this bill does, why the Government believes that it is necessary, and what are the consequences of the bill, along with other measures that are being taken by both Labour and National. This bill defers—if we believe that—or gets rid of the tax cuts for 2010 and 2011. Those tax cuts would have reduced Government revenue by somewhere between $900 million and $1,000 million in a full year. National had a choice. Let us understand that. National had a choice of whether to cut expenditure by $1,000 million, to not introduce new initiatives of $1,000 million and have the tax cuts, or to refuse to cut expenditure and refuse to defer new expenditure initiatives. National decided to get rid of the tax reductions, breaking—as Labour members have pointed out—its election promise. I think that choice has the support of virtually everyone in this House. If the expenditure reduction is not made, then the tax reduction cannot happen.
My personal preference would have been to reduce expenditure and, as a result of that, have the tax cuts. I say this because we are in a recession and this country will have to make an adjustment. This House is deciding who will feel the pain. People will feel the pain of adjustment, and this House is deciding that the people in the private sector will feel the pain. The farmers and their workers that National represents will feel the pain. The unionists on the Labour side and their members in the private sector will lose their jobs and feel the pain. There is a choice, and there is no free lunch. Let us understand that. For example, an across-the-board 2 percent cut in Government expenditure—and it is a blunt instrument—would have enabled us to have these tax cuts.
Let us look at what has happened. If we go to the core Crown expense tables on page 176 of the Budget Economic and Fiscal Update, we see that from 2008 to 2010 core Crown expenses as a percentage of GDP have increased by 5.5 percent. We need to understand what that means. That 5.5 percent increase in core Crown expenditure is equivalent to $10 billion. So in this bill and in other ways we are taking $10 billion out of the private sector and giving it to the public sector. That period includes 1 year of Labour and 1 year of National Government. We are making a deliberate decision in this House that all the costs of adjustment, all the pain, and all the unemployment will be out there in the private sector. When there are jobs lost in members’ constituencies, members should remember that they decided that that is what they wanted and what they voted for.
We really are saying that the public sector is immune to a downturn; we will just lift the percentage of expenditure to GDP to make it immune. Worse than that, we are saying that the Government will expand it during a downturn. That means that ordinary people in the private sector will have to make the adjustment. They will have to absorb the shock. The collective decrease in GDP over 2 years will be around 5 percent, but if the public sector does not shrink, then it means the private sector—60 percent of our economy—is forced to bear the full effects of that reduction in GDP. In other words, the private sector has to contract or reduce by $10 billion. That is what we are deciding. There is no free lunch. There is opportunity cost. We can kid ourselves, but that is the reality. We have decided that we will put a lot of people in the private sector out of work. Unless that $10 billion is spent as effectively in the public sector as it would be in the private sector, we will lose by a lot more as well. When the local restaurant closes down, when the local petrol station closes down, or when 100 people are laid off from a plant, remember that it was a result of these sorts of decisions we made in this House. Per week, $200 million will be taken out of spending in the private sector and unemployment is likely to increase as well.
The only way that we can get through this and for this country to prosper is to start to increase productivity. If we as a nation continue to throw money at health as we did under Labour, and see the productivity of doctors continue to decline by 15 percent and that of nurses by 11 percent, we are going nowhere. When we look at the health sector, we see that the only part of that sector where productivity increased was where the work was contracted out—for cleaning staff and orderlies. We had better learn.
CRAIG FOSS (National—Tukituki) Link to this
It is a shame that the previous Minister of Finance, the Hon Dr Michael Cullen, was not here during the Budget speech to listen and read—second-hand, of course—the Budget that had to be put in place to repair the damage from the last 9 years, and in particular from the last 3 years of the previous Government. I will point to some of the numbers in a moment, but I am sure he has picked it up on the radio wherever he might be. The last 3 years were something of a travesty for the New Zealand economy, and we are paying the price right now. I commend the new Minister of Finance for making the hard call.
I again note that so far under this National Government over $1 billion has been put back into the pockets of over 1.5 million New Zealanders. They are enjoying over $1 billion due to tax cuts that were marked in October last year and came into effect on 1 April this year. That is in addition to the $500 million in the pockets of small businesses around the country—the engine room of the economy—given by the Taxation (Business Tax Measures) Bill, which was passed in February this year.
Part 1 of the Taxation (Budget Tax Measures) Bill is about delaying changes in tax cuts that were previously flagged. There are no secrets about that; we have been quite upfront. The key is why it is necessary that this happen. Part of the consideration, which I alluded to, is the last 3 years of the last Labour Government. One reason why the accounts of the New Zealand Government that we inherited are in such an appalling state—contrary to the opinion of the Hon Phil Goff, who thought we inherited a great set of accounts; perhaps he was looking at them upside down through the wrong end of a telescope or something—is that in the last 3 years there was an ongoing, compounding, 50 percent structural increase in spending. OK, some might like that—the Keynesians over there might like that—but the problem with it was there was only a 25-odd percent average structural increase in revenue. Hopefully someone sees the problem there. When expenses go up 50 percent and revenue goes up only 25 percent—half of the increase in expenses—there is a major problem. It is a compounding problem.
The impact of the shambles of economic management we had in the last 3 years is nowhere better demonstrated than on page 1 of the Minister’s Executive Summary at the front of the Budget. The graph shows “Gross debt with and without Budget 2009 policy changes”. Quite simply, that could also read “Gross debt track with a National Government or without a National Government”. This graph shows us that without any changes, gross debt was going to peak at something like 70 percent of GDP. However, with the changes the Minister of Finance has made, the courage and leadership he has shown, and the Budget that we have before us tonight, the gross debt will peak at just over 40 percent, then track down to an average of about 37 or 36.5 percent. The reason that graph is so important is that it represents New Zealand’s future. If the gap were not addressed, and the blue line—the line showing gross debt without the Budget 2009 policy changes—kept going up, that would mean our youngest leaving for brighter shores and a further slide down the OECD rankings.
I heard previous speakers from the Opposition talking about what a wonderful thing it was that they had delivered on their commitments, or something like that. I seem to recall that one of Labour’s commitments was to have New Zealand in the top half of the OECD within 10 years. I recall that that promise was made in 2001 at the Knowledge Wave conference; I have not heard about that promise in a while. We are almost in 2011, and I ask members whether we heard anything from Mr Goff or Mr Cunliffe about getting New Zealand up to the top half of the OECD. In fact, I think we were No. 22 and sliding when Labour left office.
Why is this legislation necessary? International conditions that have been unheard of and unseen since the Depression years of the 1930s are forcing some very hard decisions on this Government, but it is prepared to make them. This Government is prepared to do what is right for New Zealand, for New Zealand’s future, for our children, and for our great country.
I note that Opposition speakers—and I will come back to this point in a minute—seemed to imply that they knew everything was coming, and they knew that global economic conditions were going to be where they are today. Labour knew that the subprime mortgage situation was going to go all the way and wash on to these shores. They knew all these things! Actually, as I noted in a first reading speech, Dr Cullen, the previous finance Minister, is on record as denying that. It is very interesting. I do not quite know the angle that the Opposition is trying to go for. It keeps on alluding to an IMF report from midway through last year. As I said, I recall that report, and it begs the question: given that Labour knew in July last year, when it was in Government, the conditions that were going to be thrust upon us now, what did it do about it? In July last year, according to Mr Cosgrove and Dr Cullen, the Labour Government knew. They are accusing Mr Key of not doing enough about it in Opposition, but Labour was in Government in July last year—with all the knowledge of being in Government, with all the forecasts, and with the information—and it did nothing. The accusation that members opposite have been making is somewhat misleading, and very, very generous with the truth. It is perhaps revisionist of their final months in office.
Mr Cunliffe keeps talking about the Superannuation Fund, and what a great time it is to buy assets. If he knows that, and if he knew the market was going down, why did Mr Cunliffe not sell assets when he was in Government, when the assets were priced higher? Why did the previous Government buy so many assets when they were so expensive? Why did it not sell them? Mr Cunliffe knew that we were going have these incredible conditions that have not been seen since the 1930s—according to his speech, it was obvious! Well, the central bankers did not know. Heads wiser than many in this room did not know. Treasuries around the world did not know. President Obama did not know. The Bank of England did not know. The General Motors Corporation did not know. Prime Minister Brown in the UK did not know. But the members opposite—Mr Cosgrove, Mr Cunliffe, and the Hon Phil Goff—did. They somehow knew!
Since then, about a trillion dollars worth of assets across the globe have been wiped out. The Labour members say they knew, but they cannot have it both ways. If they knew about the recession back then, what did they do about it? They did nothing. They alluded to a mini-Budget, but they were not going to tell us about it. I recall that when Dr Cullen was asked about it, he was a bit smug. It was more of a one-off comment of his, I think. Labour did nothing. I ask Labour to show us the information and to show us what it was going to do, because if those members say that they were not going to tell us, then they went to the electorate under some kind of untruth. The Labour Government was going to have a mini-Budget because it knew, with its lovely IMF report, what the economic conditions were and the fact that things were going to deteriorate somewhat badly. Yet back then Labour did not do anything, even though it had a mini-Budget that was going to solve it all, but which it is not going to tell us anything about.
I think we need to hear a bit more from the members opposite. I note the sagacity of these people; I keep asking them what the Lotto numbers will be next week, given that they know everything else. I will give members a quote, because we will be hearing about the Superannuation Fund: superannuation entitlements are exactly the same now—today and tomorrow—as they were yesterday. They are exactly the same. The entitlements are “66 at 65”. The entitlements were “65 at 65”, but with the agreement of the Rt Hon Winston Peters they went up to 66 percent. National has taken those rates up. I recall an offhand comment that, I believe, Dr Cullen made about the Superannuation Fund. His words were along the lines of: “Well, we’re going to have these surpluses. I’ve got to stash away $2 billion a year, because I can’t let those nutters get hold of them.” I bet he was talking about his colleagues. To be fair, that was a somewhat off-the-cuff comment from Dr Cullen.
I will round up by talking about Part 2 of the bill, which makes changes to the mortgage diversion facility. I acknowledge the Hon Mr Dunne for his confession, if you like, that it was a policy brought in by United Future. I recall one of his party’s members speaking at the time about the nuttiness of the Government trying to have the KiwiSaver savings scheme at the same time as it was trying to encourage debt. Lo and behold, the policy has not worked. Only about 600 people out of over a million have taken it up. I look forward to working with this bill as it goes through the House. Thank you, Mr Deputy Speaker.
BRENDON BURNS (Labour—Christchurch Central) Link to this
I am very pleased to follow the thrusting and hands-on chair of the Finance and Expenditure Committee, Craig Foss, who is marked for better things in this Government. Yet—
Chris Hipkins—supposedly—he has the temerity to say to the House that the previous Labour Government in its Budget of last year should have known what was coming. He is part of a Government that introduced the tax measures that this Taxation (Budget Tax Measures) Bill is repealing tonight, and he stood up to defend that.
There were to be three rounds of tax cuts and none of them were affordable or fair. Here we are on a Budget night under urgency. It is not unusual to have urgency on Budget night, but normally it has something to do with a compelling initiative or change that introduces important and relevant measures. That is not the case tonight from this Government and this Minister of Finance. After the “doughnut” Budget—all hole and missed opportunities with just a bit of recycled dough—the Government introduces this bill. It is not a bill that truly requires urgency. Its main provision does not take effect for another 10 months, and the rest 1 year after that. I say to members that, yes, this Labour Opposition supports the bill. We acknowledge that we are in a recession. We knew that last September-October when we as a party revised our pledges to the electorate in the face of what we knew was a gathering storm. But the National Party, the then Leader of the Opposition, and the then Opposition spokesperson on finance did not. They maintained the facade, as the Crosby/Textor manual requires, and told people that they could have their cake and eat it too.
That facade told people that they could have most of what the Labour Government had given to them, including Working for Families, secure superannuation—although we know that that is now under some question—interest-free student loans, and the whole package, and that they could also have three rounds of tax cuts as well. That facade was maintained throughout September, throughout October, throughout the election campaign, and throughout the introduction in this House of those tax cuts in legislation, which was debated under urgency last December. We knew it was dubious, we knew the fundamentals were simply not there to support it, and now that is being acknowledged with this bill tonight.
Those promises were made, so the Government had to construct an escape route. It had to soften up the voters and tell them that the economic conditions, known to most people by the end of last year, were such that the second and third round of tax cuts could not now be afforded. Yet the Government still proceeded with round one of the tax cuts, and it introduced those tax cuts in a way that gave a third of the money to just 3 percent of taxpayers. Those tax cuts ignored people who were on below the minimum wage. The Government refused to acknowledge that the first fundamental imperative of a recession is the need to put the money where it is most needed, and to put it in the direction of people on the average wage or below who will spend every dollar they get—people who will not save it, or use it to go on overseas holidays, or to pay debt. That is why Labour accepts the need for this bill and why we support it.
We knew that those tax cuts were a false premise and a false promise. We knew that last September, last October, and last December. The Minister of Finance knew that in December with Treasury’s financial update. He knew it in February when he spoke to the departmental chief executives and said there would be no new money. This bill now before the House is no surprise to anyone. It is part of a “cut and hope” Budget, a Budget that took a line from Dickens’ A Tale of Two Cities. It was described as a “worst of times” Budget. It could have also been, to quote Dickens, a “best of times” Budget that projected to the future and provided some investment for training. It could have done that, but there is barely a word about training and investment in this Budget.
It is also a Budget that had only one reference to the environment. That was in the context of water management and the need to allow for quick and efficient decisions for productive investment. I acknowledge the funding for insulation in the Budget, an issue I have long championed; it has not been an exclusive issue for the Greens. We want to ensure, as we look through the detail of the announcement on insulation, that the legislation will extend to rented properties, where many of the poor housing stock exists. One suspects that the Government’s motivation in respect of this issue is that this initiative will deliver quick results, and that is great for people who live in cold, uninsulated homes. There are 900,000 homes across New Zealand that either do not have proper insulation or lack any insulation at all. But in terms of where the Government is coming from, one suspects that it is part of that equation that asks whether there will be a quick return in the electoral cycle. We have seen that in the area of health. We have seen that with money spent on hospitals rather than on primary or public health initiatives, which do not deliver the quick returns. We have seen it in transport, where roading infrastructure gets funded but not rail or cycling. So much of the Budget is built around getting those sorts of early results.
I will comment briefly on the Budget’s supposed focus on productivity and export-led growth, which is an issue that some members opposite have touched on. I note comments tonight from the Manufacturers and Exporters Association saying that this Budget contains little in terms of changes to support any real economic development. It says that although some attempt at—
Paul QuinnI say to Mr Quinn that the Manufacturers and Exporters Association represents the productive sector of this economy. The association said that incentives to invest in research and development of productive assets, such as equipment and machinery, are lacking.
The research and development tax credit was cancelled to fund tax cuts elsewhere. Here we are with a bill in front of us that wipes the second and third tranche of tax cuts, in part funded by the abolition of the 15 percent tax credit for research and development. What a travesty! This bill takes away the incentive for productive New Zealand, for manufacturers, and exporters to do well and grow the economy. To give it away in tax cuts, of which one-third was taken by the top 3 percent of income earners, is trickle-down economics if ever we saw it. It is an absolute travesty. Here we are, axing rounds two and three. It is no real surprise. Most hard-working New Zealanders will be very disappointed by this Budget. They know they have been diddled. They know that this Budget should have focused on jobs, but it did not. It is not a Budget that delivers for them. There is no mention of investment in training or of creating jobs.
This is a Budget that had its focus on having an eye on the 2011 election. Those members opposite should be shamefaced. Two weeks ago we were in this House debating other legislation, and members opposite were crying down at every opportunity the use of urgency to defend the rights of Aucklanders to have a say in the future of their city. Members opposite cried down that use of urgency, but at least it was appropriate. It had a strong connection to a relevant issue. Here we are tonight under urgency debating a bill that takes effect in 10 months’ time and then 1 year on from that. It is not a matter that truly deserves urgency. We should be debating real initiatives to help New Zealanders to create jobs and to take the nation forward, and not simply be debating a tax measure that was a failure in its inception—which should have been known, and was known certainly by members opposite. It was pledged to this nation and now the National Government is backtracking, using urgency to do so. Shame on it!
DAVID BENNETT (National—Hamilton East) Link to this
Today is a fine day for the leader of the National Government, John Key; it is a fine day for the Minister of Finance, Bill English; and it is a fine day for the National Party. It is a fine day for our colleagues in the Māori Party, United Future, the ACT Party, and the Green Party, and it is a fine day for New Zealanders. They have got a Government that has listened to what is needed and has delivered what is required. This Budget will go down in history as one of the most successful Budgets, because if I ask members to show me anyone out there who is against this Budget, there is no one—there is no one. All the emails we have been getting all afternoon have said that this is a great Budget, a perfect Budget, and the best Budget that can be made in these situations. That is what political commentators have been saying, that is what interested parties have been saying, that is what even political parties have been saying, and that is what the people of New Zealand have been saying.
New Zealanders are out there struggling, and they know how difficult the times are. They know what it is to have the possibility of losing their job on Monday. They know what it means to have a high mortgage on which they do not want to see interest rates go up on Monday. They know what it is to struggle out there, so they have wanted a Government that has commitment, that has decency, and that has made the right decisions. And they have got it—they have got it today. They have a Government that is showing leadership, direction, and smart ability to deal with the situation. That is what the National Government has delivered, and that is what we will deliver for many years to come, in this Parliament. The voters out there understand the dilemma of this world, this economy, and this country. They have wanted one thing: they have wanted a steady ship. In these uncertain times they have wanted certainty, and that is what they have got. They have got leadership that has delivered a certain future for New Zealanders.
And what did people have within an hour of that leadership being shown? They had international commentators, people who determine the cost of credit for this country, saying that it was a great Budget and one that would turn us round and put us on the right path. That is the support we had from the international community within an hour of this Budget’s announcement. It took only an hour and we delivered what the international community had not seen.
The other parties that are supporting us today have had big paybacks in the areas where they were looking for them. The Māori Party has done exceptionally well in this Budget, and the Green Party has done well in this Budget. Let us look at the Opposition. Labour members have sat in Government for 9 years, but what did they give the Green Party or the Māori Party? What did they give those small parties in 9 years—9 long, hard years? They gave them what?
They gave them nothing. The National Government has given them something. It has given them pride, it has given them respect, and it has given them a role in this Parliament. That is what we have given to New Zealanders today. We have given them a role, pride, respect, direction, and leadership. That leadership has been given the big tick, and that tick will go down in history as the first one for many successful Budgets for this country and this Government.
SU’A WILLIAM SIO (Labour—Māngere) Link to this
Thank you for the opportunity to take a call on the Taxation (Budget Tax Measures) Bill. Mr Bennett said that this is a fine day for National and for the Government. I say it should have been a fine day, but it was not. It was a disappointing day. Many of the people who have been listening to this debate are now looking towards a long, dark, and cold winter. This Budget was about broken promises, about no jobs whatsoever, and about continuing unemployment for many hard-working communities throughout New Zealand. This Budget means that a lot of ordinary families will be reduced to receiving lower incomes for the next 5 years. That is what has been forecast in the Budget by this Government.
Earlier I listened to the Hon Roger Douglas conveying his philosophy to this House. I felt that it was a cruel philosophy. It is a philosophy based on the law of the jungle, whereby the strong survive. That is not the kind of New Zealand that I am prepared to create. At least one thing is that I can appreciate that the Hon Roger Douglas was making things clear for the rest of the nation about that kind of philosophy. It is not the kind of philosophy that I support, but at least he has been up front about it. But I cannot say that about the National Government and Mr Key.
The bill that we are debating repeals the National Government’s tax cut promises. This Government made promises at the beginning of its becoming Government and rammed through legislation to give tax cuts to 3 percent of the population. National members campaigned hard that a National Government would give tax cuts, and now we are having to debate this matter again, under urgency, to repeal it. Yes, the Labour Party is supporting the bill, because tax cuts was the wrong thing to promise in the first place, and it continues to be wrong.
Earlier today we heard from the Prime Minister. He cracked a few jokes at the expense of the Labour Party, and all the National MPs laughed and took great joy and relish in making fun of us. As usual, the public would have been watching that and would have noted that Mr Key uses jokes and laughter to hide the truth. What is the truth? I will quote it. John Key, in his speech at the National Party election campaign launch on 12 October 2008, stated: “In laying out our economic plan, National has been very clear about our priorities. 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. In it are 11 commitments that I make to you.”
The very first commitment on “My key commitments to you” reads: “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.” Mr Key then stated “unlike Labour, we won’t cancel our tax cuts.” What does this bill do? It proposes that the final two tranches of personal tax cuts in the 2010-11 and 2011-12 income years be repealed. That is what this bill is about. The tax cuts are being repealed.
This is a Budget of broken promises. Mr Key promised the nation that he would give tax cuts, he was laughing about it, making fun of it, and now we are having to repeal them in urgency. Mr Key and the National Party should never have promised to have tax cuts. They knew it was wrong. They were warned. The Labour Party protested about them. The Government should never have implemented the tax cuts, particularly when they favoured higher-income earners. What about the ordinary New Zealanders who not only are working day and night to make their families better off and trying to support their families but also are moving the engine of New Zealand ahead?
When the tax cuts were introduced, they created greed and individualism amongst many people who probably would not have ever considered tax cuts. It was probably the wrong thing to do, because in these times, and in the circumstances that we find ourselves in, we should be working together. We should be helping the weak, those who need help the most. But the Government did not give tax cuts to that group of people.
John Key, in my view, owes New Zealanders across this nation an apology for the Government’s turn-round. We know, because before the election he made those promises, and to now renege on them is wrong. It should never have happened. I call on Mr Key to be up front and go out to the public and apologise. He should not smile about it. He should be serious. These are serious times, and people want real solutions that will help them to overcome the recession that we are currently in.
It is a shame that the bill makes a liar of the Prime Minister, and voids his personal signed guarantee to the people of New Zealand.
Mr DEPUTY SPEAKER Link to this
The member cannot use that term. He should withdraw that comment and carry on.
I withdraw that comment. The bill shows up the Prime Minister as somebody who did not tell the truth. He gave a personal guarantee to the people of New Zealand that they would receive personal tax cuts for each of the next 3 years. People would have made plans based on that statement, and now what happens? What will happen to those plans?
The only way that tax cuts were ever going to provide an economic stimulus was if the people receiving the tax cuts spent them, and the only way the tax cuts were ever going to provide any meaningful relief to New Zealanders in an economic downturn was if they were directed at those who need them the most. National’s tax cut promise was completely misguided on both of those counts. Either John Key was oblivious to the catastrophic recession when he promised tax cuts, or he did know and chose to continue anyway.
That is why I say that the Prime Minister, Mr Key, was not telling the truth. There are harsher words that ought to be used, but I know that you, Mr Deputy Speaker, would pull me up again and ask that I withdraw them. The Prime Minister did not tell the truth. He knew that what he was doing would not eventuate. He went ahead anyway, rushed things through this Parliament in the beginning, and now we are having to rush through a bill to repeal the tax cuts. He is using, I believe, the recession to be able to repeal them.
Listen to what Colin Espiner said about the Budget in his blog today. He stated “there’s no real vision or big new ideas.” The Government has already raided KiwiSaver, and now it has stopped contributions to the New Zealand Superannuation Fund. How will the more than $20 million lost to the Superannuation Fund be paid back sometime in the future? Mr Colin Espiner asked what we got for this recklessness. We got nothing; not even new training, not even new investment to ensure that this economy will grow.
A lot of fancy words are being used when I listen to this debate, but they are all hollow words. There has been no substance. I know that families out there who are listening to this debate will see the hollowness of this Government’s words.
AMY ADAMS (National—Selwyn) Link to this
Today I am so proud to be a member of this National Government. I am so proud to be a member of this Government, because today we have seen the Minister of Finance deliver a Budget that is solid, that is sensible, that is prudent, that is responsible, and that is what this country needs right now. This Budget is putting us on the road to recovery. It is the first Budget that will take New Zealand through these hard times, and it will bring us out of them the stronger for it.
This is the worst recession in more than 70 years. Business as usual is not an option. We cannot carry on as though the recession does not exist. Today the Hon Bill English had some very difficult choices to make. He could have followed along in the mode of the previous Labour Government; he could have followed Michael Cullen’s lead and carried on the massive explosion in Crown expenditure and not worried about burdening every single New Zealander with $45,000 worth of debt. The Labour Party would have every man, woman, and child carry $45,000 in debt, not to mention another 1.5 percent being added on to the interest rate on every mortgage of every family in this country. We could have carried on in that way, as Labour would have done, but we were not prepared to see debt blow out to 70 percent of GDP. That is not acceptable to us. National was not going to sit back and cripple future generations so that it could buy its way back on to the Treasury benches.
Bill English has not only stopped that path to destruction; he has done it while protecting the entitlements of all New Zealanders. He has protected superannuation, he has protected Working for Families, he has protected interest-free student loans, and he has not cut any entitlements. He has protected New Zealanders. But in order to do that, hard decisions had to be made. We cannot achieve the wonderful outcomes that our Minister of Finance has achieved, without making some choices.
Today the Labour Party has demonstrated why it is incapable of managing an economy in times like this. It does not understand the seriousness of the debt situation. Labour members clearly have no grasp of the impact of credit downgrades. They do not understand that without our protecting that position, this country would be spending more on debt servicing than it does on health. A Labour Government would have spent more on debt servicing than it did on health. Labour members want us to know that they saw the recession coming. I find that hard to believe when they could not even see the billion-dollar hole in the accident compensation scheme books. Labour members are financially illiterate. They want us to borrow another $2 billion. They want us to rack up an extra $2 billion in debt every year, to pay 5 percent interest on that money, and to put it into the Superannuation Fund, which has lost 4 percent a month over the last 10 months. In the time that the Superannuation Fund has been going it has achieved half of what one could have got from putting the money in Government bonds. But Labour says that we should not let that stop us, that we should rack up another $2 million of debt on the credit card and chuck it into a poor-performing investment. That is great business!
It is no wonder the people said that they do not want that crowd leading them through the recession, and that they want John Key and Bill English.” Today they have delivered a Budget that I am proud of and that New Zealand needs. I congratulate them on it.