Hon PETER DUNNE (Minister of Revenue) Link to this
I move, That the Taxation (Budget Tax Measures) Bill be now read a third time. This bill has two prime components. Part 1 changes the Government’s tax reduction plans in light of the Budget announcement yesterday, and introduces the deferral of those plans until economic conditions improve. The debate during the Committee stage focused on the state of the New Zealand economy, whether those cuts were affordable in the current context, and what the alternatives might be. The reality is that the Committee of the whole House overwhelmingly—in fact, I think, unanimously—endorsed the proposition that these tax cuts should be deferred at this time, even though a number of members made it clear that this was not their preferred course of action, but that it was an inevitable response to the current global economic crisis. Most members noted that in the current framework, where the Government is facing significant additional fiscal pressures, it would have been fiscally irresponsible to proceed with the tax cuts at this time.
Part 2 deals with a very specific issue, which is the closing off of the current mortgage diversion scheme within KiwiSaver. The reasons that were advanced for that change were quite simple. First, the uptake of the scheme has been particularly slow. In fact, somewhat less than 600 people out of over a million KiwiSavers have availed themselves of the mortgage diversion facility. One of the largest fund managers in New Zealand, BT Funds Management, which acts as the agent for Westpac, says it has fewer than 30 members enrolled in its particular scheme to give effect to this facility. The consequence of the facility is that the complexities it gives rise to are causing pressures amongst fund providers on continuing to offer the option.
The second point is that changes to KiwiSaver, particularly the introduction of the “2 plus 2” percent contribution regime, meant that the maximum income where benefit starts to accrue from mortgage diversion is $104,000. That is because of the additional 2 percent being retained in earners’ own pockets, and also because of the way in which the mortgage diversion scheme has worked—it has, essentially, become a top-up over and above the basic mortgage repayments. So for those reasons, it was the Government’s view that the scheme had not worked and ought to be repealed. There was a good discussion in the Committee of the whole House about whether the scheme ought to be repealed, but the conclusion of virtually all parties, bar one, at the end of the day was that repealing it was probably the correct course of action to take.
At this stage I simply thank members who have contributed to the various debates as this bill has proceeded. I acknowledge the work of the officials who have attended throughout and, as usual, have proffered their advice, as appropriate, from time to time, but who have sat here in wonderment watching the ensuing debate. On that basis, I am happy to commend this bill to the consideration of the House.
Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this
The third reading debate is traditionally an opportunity to take stock of where the debate has come to, and we should use it to see the measures contained in the Taxation (Budget Tax Measures) Bill in the context of the Budget in which they were brought down. I am reminded of the taxi driver test, which is to ask what ordinary New Zealanders talk about when sitting in a cab. There are two clear messages around these tax cuts. The first reflects the previous speaker, Peter Dunne: there is pretty much unanimous agreement in the community and in this House that these tax cuts should be repealed, and that they were never good economic sense or good equity sense. Everybody agrees that to proceed with them now would be fiscally irresponsible. The House is divided on what the taxi drivers know and what their fares are telling them: that these tax cuts were always unaffordable, and that therefore their repeal makes transparent what was always the case, which is that this was one of the great electoral cons of New Zealand’s political history. The Government got elected on an untruth, which was that New Zealanders could have everything they valued from the previous era—KiwiSaver, smaller class sizes, good primary health care, whānau development, and a future with high-tech, new skills—and 3 years of tax cuts in 2009, 2010, and 2011.
John Key knew the tax cuts could not happen. That is the point from this side of the House. The evidence on that point has been traversed in the second reading debate, and it is pretty incontrovertible. The Prime Minister used to sit on the Federal Reserve Board of New York, which is a pretty august body. He would not have got there if he could not read the markets—and good on him. Someone cannot be on the Federal Reserve Board of New York and not notice that Lehman Brothers—probably Wall Street’s leading merchant bank—has hit the wall and gone bankrupt, nor that John Key’s old firm, Merrill Lynch, had been broken up and sold for scrap to the Bank of America. That happened 2 months before our general election. That is the proof, if anybody needed proof, that John Key knew that those tax cuts would not and could not ever happen.
The world economy was freezing. We had to issue overnight wholesale and retail bank guarantees. There was real uncertainty as to whether global credit would move at all. Interbank lending margins ballooned from 30 points to 230 points almost overnight. People around the world were worried about financing existing loans. That is the backdrop to this bill. We are not arguing about whether tax cuts should be cancelled, because everybody knows they should be. The Labour Party and the Green Party have been absolutely consistent right throughout, saying these tax cuts should never and could never have happened. What is more is that National knew that.
The context matters here. This is our opportunity to reflect on the part these tax cuts have played in the overall Budget strategy. What strategy? As Peter Conway of the New Zealand Council of Trade Unions said this morning, this is the “Road to Nowhere Budget”. I would say it is the “Swap One Great Con for Another Con Budget”. The other con is that payments to the New Zealand Superannuation Fund can be suspended for 10 years, yet one can still put a prime ministerial guarantee on the payout levels and the age of entitlement. What is that guarantee worth now, when the Prime Minister’s signature was on the piece of paper that has been ripped up in this debate? It is worth exactly what it seems to be worth: nothing. It is worth nothing to the baby boomers.
I woke up this morning feeling like I had a hangover, not because I had anything to drink last night, but because I was starting to worry about my family. What am I going to do when I turn 65? My parliamentary superannuation is worth half what it was a year ago, and that was not much anyway. But ordinary New Zealanders are far worse off than I am; I am on a good wicket. What about the people on $50,000, $40,000, $35,000, or even $90,000, who if they are 40 or 50 cannot count any more on 65 percent of the average wage when they are 65? Do members know why they cannot? Because as of yesterday there is a $30 billion hole. At the moment, one retired person—a superannuitant—is supported by five taxpayers. By the time these guys start paying back into the scheme that will be down to three taxpayers. Has anybody calculated the cost to those three taxpayers supporting the retired person if they have to make up the difference of 10 years of no contributions? No. The Budget is a great swindle. It is a huge con. Superannuation is dead. It is dead, and our old people will be shivering in cold, dark flats, wondering how to pay for the roast beef they will now never see.
Members opposite may laugh. They have taken a politically expedient step because they do not want to cut into today’s spending, and they do not want to put down markers for a pathway to growth. The chairman of the Finance and Expenditure Committee might be having a wee laugh, but where were his bright ideas? When I read the Budget documents in the lock-up and got to the end of the Executive Summary I thought I must have missed something. Here is this bright, shiny, new Government. It has Graham Scott and the purchase advisers working from home on $2,000 a day to come up with earth-shattering bright ideas. Where are they? Where are the bright ideas in this Budget? Let us think about it like this: let us imagine—[Interruption]
I raise a point of order, Mr Speaker. I usually enjoy interjections, but there is hubbub that is not even related to members interjecting on the speaker. I think this matter is too important to New Zealanders to have that at this time. I ask that members be quiet.
The ASSISTANT SPEAKER (Eric Roy) Link to this
Members, that is a fair point. The noise level was getting up and there was a lot of side talk. If people want to have discussions, there is a door on either side of the Chamber and at the back for members to go out of in order for them to conduct those conversations.
Hon DAVID CUNLIFFE Link to this
Let us imagine the analogy of a doctor’s surgery. Let us imagine Bill English is a doctor and he has said that the patient is critical and on life support. The New Zealand economy is in a critical condition. Let us see what the diagnosis was and the solution—the medicine—that has been proposed. One rating agency said we had a short-term debt management issue, but that the fundamental issue was that we did not have enough innovation. If that was the disease, what was the cure? It was cutting Fast Forward, cutting the research and development tax credits, and cutting tertiary education spending. Let us take the classic example of Fisher and Paykel Appliances Ltd—that iconic company that Bill English overruled John Key on when John Key wanted to bail it out. The company is very intensive on research and development. It might not have had to go cap in hand to China if the Government had not canned those research and development tax credits. That is the truth of the matter.
This Budget is selling us short: it is not just a road to nowhere; it is a road to serfdom. Too much of our economy is owned by other people. That is why we have the second problem, which is the current account deficit. The biggest part of that deficit is the outflow of invisibles—that is, the rent we pay to the foreign investors, who own too much of our economy. If that is the disease, what is the cure? I will take 2 minutes to sum up the situation, and it is a biggie. If the disease is the invisibles deficit and the savings gap, the cure was KiwiSaver. KiwiSaver filled in that gap, yet the Government gutted it by half as part of this Budget. Absolute shame on the Government. This Budget is a road to nowhere. It is a road to serfdom. It is a “Road to Nowhere Budget”.
The third thing was that the Minister of Finance said—
Paul QuinnHon DAVID CUNLIFFE Link to this
That member would do better at a time like this to contribute some positive ideas to the future of this country, rather than heckle.
If the disease was a lack of growth, the solution should have been to build growth with an economic development strategy, not to gut the ability of our small farm to develop new industries and new markets by taking the stuffing out of the Ministry of Economic Development and New Zealand Trade and Enterprise. That was the wrong cure for the wrong disease. That means that ordinary, decent, hard-working New Zealanders will be on the dole queue when they do not need to be. Hundreds of thousands of baby boomers out there will be worrying about their superannuation and their retirement—quite rightly, as they know they have been conned. They know that the National Party has swapped one great lie for another great lie. The lie was that we could afford tax cuts, when it knew we could not. Today’s legislation nails that coffin shut, and the new lie is that the few remaining taxpayers will be able to make up the difference in the Superannuation Fund.
Hon JUDITH COLLINS (Minister of Police) Link to this
I will take just a few moments to reply to some of the most outrageous comments from the member opposite David Cunliffe. It is amazing to hear him talk about lies and cons, because he is a member of a party that offered us the infamous “chewing gum tax cuts” in 2005, but, straight after that election, what happened to those tax cuts? The Labour Government of the day said they were unaffordable. And at that time that Government had the biggest surpluses this country had ever seen!
This country is going through the toughest economic times that the world has seen in 70 years. Bill English has pulled together a magnificent Budget. The previous speaker, who is now leaving the Chamber, has never once told us what he would cut. Would he have cut the entitlements of the most vulnerable New Zealanders? Would he have done that? The answer is yes. That is exactly what he wanted us to do, but we will not do that. We do not think it is fair to punish the most vulnerable New Zealanders for being the most vulnerable New Zealanders.
The previous Labour Government took 9 years to deliver one personal tax cut, after all the surpluses and all the opportunities. And it left the books in an utter mess. They have been rescued by this Budget. The Labour Party would rather we had borrowed on the credit card, and invested the money in the bank at 5 percent interest. That is the sort of “Visa-nomics” being displayed by the Labour Party. That is why members opposite are so angry. They have no answers. That is why they were voted out, and I hope they will continue to be voted out, because that is what they deserve. It is an utter disgrace.
Hon CLAYTON COSGROVE (Labour—Waimakariri) Link to this
That speech was from the member Judith Collins, who thinks she has a monopoly on sympathy and empathy with vulnerable people. She appears to be a very generous member who oozes sincerity and sympathy for the downtrodden—yeah, right! That will be the next Tui billboard.
I say to that member that during her speech my colleague Maryan Street interjected a number of times that the difference between us and them is that we did not promise the unaffordable. We did not promise the inequitable. That member says that in 9 years we did not deliver any money back to the folks in the street; well, she conveniently forgets about the tax credit for Working for Families. As she slopes off now, back to the crypt where she belongs, she conveniently forgets about that.
The great crime in this debate today is not the cancelling of the tax cuts; the great crime is the grand deception that every member on the other side of the House perpetrated against the New Zealand people. It comes down to a simple word: “lies”. Those people opposite went into the election saying that there would be tax cuts. John Key signed a pledge card saying that.
It was even said by the ghost-like figure sitting in the Government front row at the moment, Kate Wilkinson, who stood against me at the election. On the stump, she attacked me and called me a liar when I said that National would not deliver the tax cuts. And I was called a liar by that member, on the stump in Waimakariri, when I said that National would hack into superannuation. Today it has done that. I ask who the liar is. Whom will the people of Waimakariri see as a liar? That member and her ilk pledged, almost in blood, that the tax cuts would go ahead.
National members’ only alibi now is to perpetrate the typical Tory trick that those folk have perpetrated yea unto the generations, and that is to say every time they come into office: “Oh, we didn’t know.” They say that they did not know what the economic conditions were, and that they inherited a global meltdown. Well, I say to the ghost-like figure in the front row, who pops up in Waimakariri and who purports to be a lawyer and someone of intelligence, that she should have known of the conditions. Could she not read Time magazine? Could she not read The Economist? Could she not read the IMF report of September last year that Brian Rudman referred to? Did she not know that the previous Labour Government and our Australian counterpart had instituted bank guarantees before our respective elections because the global economic climate was very rough, and we wanted to ensure that there was not a run on the banks and that depositors’ funds in Australasia were not put in jeopardy? Did John Key, that self-made man who worships his creator—a great saying; it is not my saying—not know that, even though he was a foreign exchange dealer? Did Bill English not know that? Could he not read those international reports? Maurice Williamson, that loyal member of the National Party, is trying to interject; could he not read the newspapers, either domestic or international?
It is not credible for that crew in Government to say that after they had been sworn in they suddenly realised, at that point, that their tax cuts were unaffordable.
Hon CLAYTON COSGROVE Link to this
Even that alibi is not credible, because a month after they had been elected, after they had opened the books—
Aaron GilmoreHon CLAYTON COSGROVE Link to this
That genius in the back row interjects on me, as does that other member, the chair of the Finance and Expenditure Committee. He knows about tax; he knows about personal tax returns, of course, but we will not go there. If he would like us to work him over on the barbecue spit, we will have a go.
Even a month after National members had been elected, even a month after they had opened the books and had cruised through them line by line, they still said that the tax cuts were cast in stone. The great lie, the great crime, is not the cancelling of the tax cuts; it is the deception. Labour supports cancelling them. We consistently said they were unaffordable and were inequitable. The proof of that is in the first tranche of tax cuts that those great empathisers with the community delivered, whereby the top 3 percent of income earners in this country got a tax cut of a third, and families on $40,000 a year or less in Waimakariri, in every Māori seat, in every seat in this country, got nothing!
Hon CLAYTON COSGROVE Link to this
I do not think it was fair. My colleague knows that it was not fair. We knew that it was not fair. That is why we did not support that tax cut. And we have been consistent.
Then we come, of course, to superannuation. Well, I say that National has pulled it off again. The ironic thing is that when that crew were in Government last time, Mr English cut the pension three times. When I kept reminding the ghost-like figure in the front row of that in the election campaign, she called me a liar. When I said to her that she would do what her Government had done last time—tinker with superannuation—she said I was a liar. Well, we are racking them up; the notches are being racked up.
Members opposite come into the House almost in a self-congratulatory mood, demanding that the people congratulate them on holding the pension at the same level of entitlement. They believe they deserve congratulations from Grey Power and Age Concern. Well, yes, they have held the pension at the same level of entitlement, but the great debate that we thought had been put to bed, and that Grey Power thought there was consensus on, has now re-erupted. It goes like this: if this Government suspends payments to the Cullen fund for 10 years, I predict that if National is still in office at the next election, its members will say: “Look, after 3 years of deferred payments, in order to put that huge amount of money—billions of dollars—back into the New Zealand Superannuation Fund, we have to raise your taxes.” National will try to sell it to people in that way.
People in their 50s now will remember the spectre of Don Brash. It was said that this would never happen. More specifically, people who have 15 years to go before retirement will now be in the situation they were in before Labour became the Government in 1999. They will be uncertain, they will be worried about their superannuation, they will not know what they should do about their retirement, and, worse still, they will have only 15 years in which to recalibrate their arrangements. We know that that is not enough time for a mum or a dad who, at 50 years of age, has paid the mortgage off, done all the right things, and looked after the family. The Government told those people what the rules would be, told them what the entitlement would be, and, by the way, it said it would guarantee it because it had put money aside.
That is what all Kiwis do when they do their household budget. When they know they have a big expense coming up, they put money aside, because they are smart people. We know when everybody is going to retire, we know when that will happen, and there is absolute certainty about that—we know the age of everybody. We know what the bill is going to be henceforth. So what did Dr Cullen do? He was as smart as New Zealanders are every day in respect of their household budgets. He put money aside. The great betrayal will not occur today; the great betrayal will happen tomorrow as we go forward, because every New Zealander now is worried and does not know whether he or she will have a superannuation entitlement.
I will be 40 this year. Maybe I have time on my side—I am sure I have. Someone in his or her 40s has a few more years to go and is able to recalibrate his or her arrangements. But people in their 50s will not have time to do that. They have set their course, they have set their savings, and they have set their plan for their retirement, and now the spectre of uncertainty comes forth. As my colleague has said, when it gets really tough in a few years’ time, in 10 years’ time when the money will have been carved out of the Superannuation Fund, if ever the Tories are in Government again they will say: “Oh well, maybe we have to move on the age of entitlement”—as they did before—“or maybe we have to cut the rate of superannuation.”
What National has done is the typical Tory trick that the ghost in the front row was adamant would never happen under a National Government. But National has not only tinkered with superannuation; it has taken an axe to it. Six months ago, when Labour was in office, people were certain of the retirement age, certain of the entitlement, and certain that when they retired they would get superannuation that they could live on, because Labour had said we would put money aside for it. As one of my colleagues said, an economic downturn, when shares and investments go down, is the time when we can use our money to buy good-quality investments on the cheap—we can do it on the cheap—so that we can gain from them when they appreciate. We know that the Superannuation Fund actually made money last month, as one of my colleagues alluded to. I look forward to the genius in the back row opposite going to the constituents, going to the Grey Power meetings, and telling them why National has pulled the rug out from under them.
This measure is a traditional National trick; it did it 20 years ago, it is doing it today, and it will pay a price for it.
CATHERINE DELAHUNTY (Green) Link to this
Tēnā koe, Mr Assistant Speaker Barker The Green Party is voting for the Taxation (Budget Tax Measures) Bill because Part 1 is obviously necessary. Part 2 is highly dubious, and both parts should have been debated in a select committee. It is very peculiar that the Green Party was the only party to vote against Part 2. I do not actually understand that.
As our co-leader Jeanette Fitzsimons stated clearly in the Committee stage, less haste and more speed would have been a good idea in respect of both parts of this bill. But, at the risk of being almost repetitive—as some of the speeches in the Committee stage were—I say that we do not accept the need for urgency, as used by this Government. As a new member of this House I am amazed and bewildered by the use of urgency as a tool. The definitions of “urgency” include one that says it means “pressing necessity”. Every single bill forced through this House under urgency since I have been here has not met that test, and now some of them are being repealed. Each one may have been seen as a pressing necessity by the Government, but I am not sure whether anyone else feels that way, either in this House or on the planet.
The Green Party is very surprised that United Future, which has campaigned on transparency and common sense, agreed to Part 2 without the bill going to a select committee, and without the issues about the mortgage diversion scheme being properly debated, particularly as the recession bites. We urge the Government to take serious stock of Part 2 and to abandon it. After all, just because only 600 people were supposedly involved so far is not a good reason to close the mortgage diversion facility. If 600 people are on a heart surgery list, we do not abandon the heart surgery team. It is short-sighted thinking.
Urgency is also a bad idea in that it seems to make people even more petty, fractious, righteous, and abusive—at the same time—than Parliament normally is, and that is quite an achievement. It does absolutely nothing for our reputation with the public of Aotearoa New Zealand.
The absolute worst thing about this bill is not the bill as it looks; it is the context of it. The cynical populism that characterised an election campaign based on tax cuts has led us to this highly predictable moment. Numerous extremely conservative economic commentators have been predicting a serious downturn in the global economy for the last year, if not for 5 years. No one can tell the Green Party that it was news to the Minister of Finance. On that cynical basis the election was won, and now the promise is being broken. The voters have a great opportunity to reflect on questions of honesty in politics and questions of what is fiscally responsible economic policy in terms of tax. The repeal of the tax cuts is necessary, but tax cuts were always the peddling of an unhealthy and irresistible fast-food solution to this failing economy.
What amazes me about this House is that we hear all about who ate McDonald’s on Monday, but we do not have any acknowledgment that the Government has just banned the healthy food scheme in schools. So it has no leg to stand on, on either issue.
To go back to the issue of tax cuts, I say they are irresistible to people, but they are a failed solution. The really sad thing—and I want to finish on this point, because the Green Party is realistic about what is happening and the inevitability of getting rid of the tax cuts—about the Budget yesterday and the bill today is that they ignore the substantive economic and ecological crisis that is facing this country and the world. Lester Brown said that economy is what we borrow from each other, and ecology is what we steal from future generations. But anyone sitting in this House would not think that the Government had ever heard of such concepts as ecology or future generations.
Although Green members will vote for the bill, we do so with a sad realisation that we are in a situation that will probably continue throughout this term, and it does this House no good at all. Let us be really, really clear: we cannot have tax cuts, National never should have offered them, it was always a dumb idea, and now we have to tidy up the mess. Kia ora koutou katoa.
DAVID GARRETT (ACT) Link to this
I rise to support the Taxation (Budget Tax Measures) Bill in accordance with ACT’s confidence and supply agreement with the National Party. The tax cuts should not have been cancelled, but it is certainly correct that to borrow to pay for them would be an even worse idea. Our major criticism of this Budget is not the cancellation of the tax cuts, but the failure to fund tax cuts by a reduction in Government spending.
The Government has missed the opportunity to cut Government waste by scrapping some Government departments altogether and by scrapping some Government functions. I do not think this speech will be very popular in some quarters, but I ask why we need a Ministry of Women’s Affairs. We have a female Chief Justice and we have thus far had not one but two female Prime Ministers. We recently saw the back of the first female Speaker. The “Girls Can Do Anything” campaign—by its very language, it shows just how long ago it was—was a resounding success. At the end of the Second World War the Special Operations Executive—those chaps we saw dropping into France in movies—was disbanded because the war had been won. So why do we need a Ministry of Women’s Affairs in 2009?
Hon Trevor Mallard Link to this
I raise a point of order, Mr Speaker. I think there might be a little bit of confusion in the House. Yesterday afternoon we adjourned the Budget debate and we are now on the third reading of the Taxation (Budget Tax Measures) Bill, which is quite a narrow tax bill. I think the member might have his notes for the two debates mixed up.
Mr DEPUTY SPEAKER Link to this
I ask the member to—[ Interruption]—I am on my feet. We are debating a bill that is quite small in its content. The member must bring the factors he is mentioning into the bill that we are talking about. I ask the member to continue.
Thank you, Mr Speaker. As I said, the tax cuts should have gone ahead. They could have been funded in a different way. Having said all that, the ACT Party will support this bill.
RAHUI KATENE (Māori Party—Te Tai Tonga) Link to this
In the hustle of post-Budget commentary, the comments of a humble crane operator from Porirua probably summed up for many the reaction to this Taxation (Budget Tax Measures) Bill. Koro Moon told local papers: “I was hoping for more money but I’m not surprised there were no tax cuts. I am not affected by the recession. It doesn’t bother me, because we’ve just got to live the way it is. I mean, what more can we do?” What can we do? Exactly. We face the worst economic downturn in 30 years. It was always expected that we would all need to tighten the belt and nail down the hatches if we are to get through this time unhindered. I suspect that the nonchalance and, possibly, fatalism expressed by Koro Moon would not be too different from the response of many New Zealanders as the Budget hit the bookshelves and the analysts plotted their storyline. Quite frankly, the repeal of the personal tax cuts and independent earner tax credit will not register with many of our constituents, who are far more focused on ensuring that the whānau survives the tough times.
I bring another angle to this debate. Yesterday, as our Budget hit the news-stands, the United Nations released a statement warning that “Economic development activities, whether government infrastructure projects or mineral extractions by corporations, must not infringe on the rights of indigenous peoples,”. The United Nations Permanent Forum on Indigenous Issues stated that these issues are extremely complex, because, so often, we understand the need to make economies survive—
Mr DEPUTY SPEAKER Link to this
I know what the point of order is. We are debating a tax bill that relates to doing away with tax cuts and to KiwiSaver. The member must confine her comments to that. We are dealing with pretty narrow content in the third reading, not with other peripheral issues that may be of interest, but certainly do not relate to this bill. I ask the member to continue.
Certainly. If the member had waited, I would have pulled the matters together for him.
As we looked through this bill we have been weighing up in our minds whether the decision to kill the tax cuts comes at the expense of the lives of indigenous peoples. I have to say that the balance is favourable. As Koro Moon pointed out, tax cuts never meant a great deal in comparison with some of the other issues affecting indigenous peoples. There has been a lot of rhetoric in this debate around broken promises. All I can say is that for tangata whenua a fairly significant promise weighs heavy in our collective soul—that is, around Te Tiriti o Waitangi. So we should get a bit of perspective here.
The evidence provided to us has told us that tax cuts to middle to high income earners contribute to growing income inequality. They do not create the economic benefits that will trickle down to lower-income earners. Indeed, the latest OECD report on income distribution, Growing unequal? Income Distribution and Poverty in OECD Countries, shows this as a particular and perverse effect of globalisation. It is well known that the Māori Party was a reluctant signatory to the first tranche of tax cuts. We were always nervous that the new tax regime had created new and unnecessary layers of complexity. It was our thinking in the Māori Party that low-income earners would be better served by blanket tax cuts, as had been provided to higher-income earners, and by raising the minimum wage. Administrative simplicity is one of the benefits of a broad based - low rate tax framework. Yet the cuts introduced last December failed to provide this benefit.
We are pleased to support this new bill to cancel further tax cuts in the context of ongoing spending restraint. This is the time for a fresh look. No additional tax relief has been provided for the nation’s most vulnerable families in this time of global economic recession. This tax relief must be an urgent priority for us. In this bill, with its effective freeze on tax cuts, we hope that the Māori Party will have another opportunity to influence further tax policy. We are pleased that people earning under $40,000 a year and who received no tax cuts on 1 April 2009 will no longer be subjected to the higher taxes that were due to come in on 1 April 2010 and 1 April 2011—up to $8.65 per week for some low-income earners.
The positive in all of this is that the increase in the inequality in disposable income is somewhat halted because of this bill today. But now we must turn to the task at hand. We must think about creating ways to provide tax relief to low-income earners and families, such as through tax cuts, through taking GST off food, and through an increase in the minimum wage. In line with that vision we will support this bill as an opportunity to move forward.
CRAIG FOSS (National—Tukituki) Link to this
I rise quickly in the third reading of the Taxation (Budget Tax Measures) Bill. This is a bill that comes from necessity, from the Budget yesterday that came from necessity itself. That necessity is driven by the ongoing increase in spending of the previous administration, which was increasing by 50 percent per annum, yet its revenue was increasing by only 25 percent per annum. There is a fairly obvious hole that even those members opposite, with their various master’s degrees in business, should comprehend. That is a disaster waiting to happen, that is why this bill comes out of necessity, and that is why it is so urgent that this legislation comes into place as soon as possible.
Members around the Chamber talked about the mortgage diversion provision. It is very interesting to hear members opposite questioning that, because I was on the Finance and Expenditure Committee when the mortgage diversion was pulled into the KiwiSaver Bill at the last minute as a bit of a trade-off. The Labour members on the committee, the Hon Paul Swain and company, were not in favour of it at all, and the discussion and debate revolved around the points that the Hon Peter Dunne has made in this House. So for members opposite to say that it should go back to a select committee for some reason does not make sense, particularly in light of the fact that only 600-odd people have picked it up.
I will make a couple of other points. One thing is that everyone talks about tax. This Budget and this Taxation (Budget Tax Measures) Bill is actually avoiding a tax—that is, the tax of a lower credit rating for New Zealand. That tax would be about 1.5 percent on everyone’s mortgage and credit card, and that is if we still maintained the ability to raise funds. We are an indebted nation, unfortunately. We owe $130 billion - odd. Our debt increased massively, to the tune of about $40 billion to $50 billion, under the previous administration. The measures we are taking in the Budget and in this bill, which is part of that Budget, will save New Zealand an incredibly large amount. For the life of me I cannot understand the scoffing we heard from the Hon Phil Goff about the importance of a credit rating to New Zealand.
It may seem distant to the taxi driver; that is fair enough. But there is an implication on New Zealand. For those who have to borrow to survive, who have been struggling through the last 9 years—and particularly through the last 3 years, when spending was out of control—this is their reward. It will save them an extra margin on their borrowing costs.
I will make just one further point. I cannot go without mentioning the incredible foresight that Mr Cosgrove has discovered in hindsight. Mr Cunliffe has the same disease. I notice that other members and colleagues, who have perhaps more business nous than they do, tell us that now is the time to buy anything. It raises the question as to why things were bought back when they were more expensive. Again, I ask why, then, those members did not sell things back in June 2008, when the IMF report they keep alluding to came out. Why did they not sell some superannuation assets? Because their value has lost 30 percent. They moan on about the Superannuation Fund, but under their governance that fund lost 40 percent of its value. I cannot for the life of me understand the revisionist theory that those members suddenly have, and I really do not think that they believe it themselves. They are just trying to look for some headlines, because they are trying to find their way through this Budget and there is very, very little for them to criticise. Interestingly, on top of all those members’ speeches, they are voting for the bill. On that note, I commend the bill to the House. Thank you.
RAYMOND HUO (Labour) Link to this
On the fifth day of the fifth month of the Chinese lunar calendar, which fell yesterday, Budget day, Chinese people worldwide celebrated the Duanwu Festival, or dragon boat festival. The dragon boat festival was also celebrated in Japan, Viet Nam, Korea, and other east Asian nations.
Mr DEPUTY SPEAKER Link to this
We have brought up other colleagues for straying well off the track. I ask the member to bring his comments back to the content of this very narrow bill.
The reason why I cited the dragon boat festival is that it is very relevant to the Taxation (Budget Tax Measures) Bill. According to legend, in 278 BC the Chinese statesman and great poet Qu Yuan drowned himself in the Miluo River to protest against the corrupt regime of the Chu Dynasty, whose king had constantly broken his promises. To save the legendary statesman, who had thrown himself in the river—
Mr DEPUTY SPEAKER Link to this
I have asked the member to come back to the bill. We are on a current bill. History is quite fine, and I learn a lot from it, but I ask the member to come back to the bill.
Hon Trevor Mallard Link to this
I raise a point of order, Mr Speaker. I think the point that the member had just come to was that this was an ancient and very important case of breach of promise, as this bill is.
Mr DEPUTY SPEAKER Link to this
I thank the member for the history lesson. We have had a minute and a half so far of his speech, and, as I said, we are on a very narrow debate on the content of the bill. I would ask the member to continue in that vein.
I will come back to the bill. I had two interviews yesterday afternoon, with the Auckland-based World TV network and Chinese Voice Broadcasting, before heading to the Finance and Expenditure Committee meeting—[ Interruption]
I raise a point of order, Mr Speaker. As a new member I am starting to enjoy the interjections, but if Mr Paul Quinn—
Mr DEPUTY SPEAKER Link to this
That is not a point of order. Interjections are allowed. I ask the member to continue. That is not a point of order. Could he please carry on.
Mr DEPUTY SPEAKER Link to this
That is not a point of order. I ask the member to continue his speech. That is not a point of order.
Hon Darren Hughes Link to this
I raise a point of order, Mr Speaker. This is a new point of order. You might have missed what my colleague was saying. He was saying that if the member opposite is going to interject on him in the way that he has been doing, he should resume his own seat. That was the point Mr Huo just made.
Mr DEPUTY SPEAKER Link to this
I do not need any help. The slate is clean. We will start again. The member has 8 minutes left.
Before heading to the Finance and Expenditure Committee meeting to discuss the allocation of the 2009-10 estimates, I had interviews with the Auckland-based World TV network and with Chinese Voice Broadcasting. Inevitably, we talked about the dragon boat festival, its origins, and yesterday’s Budget. According to legend, local fishermen raced out in their boats to save the legendary statesman, but it was too late. To prevent his body from being eaten by fish, they beat their paddles furiously on the water and threw zong-zi, which are large rice wrappers, as a sacrifice to his spirit. One viewer called me during the dinner break last night and said he felt he was eating humble rice wraps. He meant to say he was eating humble pie, because he had voted for National because of its tax cuts promises, and he now felt let down and regretted doing that.
In terms of the tax cuts, for which National’s leader, Mr John Key, signed his personal guarantee, we, the members, remember that in December this honourable House was rushed into urgency in order to have the tax cuts put into law. [Interruption] I thank members for that. Now, nearly 6 months later, this honourable House has been rushed into urgency again for the introduction and passing of this bill, which has the effect of cancelling those tax cuts. It was a key election promise—$4 billion of personal tax cuts over a 3-year programme. The Dominion Post correctly predicted before Budget day “Budget to break election promise”, and today’s Dominion Post has correctly described the Budget as giving “Cuts everywhere but not on taxes”. Gone are the tax cuts that National promised to deliver in 2010 and 2011.
Gone, too, are the automatic Government contributions to the New Zealand Superannuation Fund established by the Hon Dr Michael Cullen. I feel sorry for the baby boomers. I feel sorry for ordinary New Zealanders. Ongoing Government contributions to the Superannuation Fund are essential to guarantee future superannuation payments to New Zealanders. New Zealand’s baby boomer generation should be very afraid of what retirement holds for them. The future of superannuation has been thrown into doubt by Mr English’s 10-year freeze on New Zealand Superannuation Fund contributions. Brian Rudman said in the New Zealand Herald: “In the commercial world, such an obvious breach of promise would be actionable in the courts. Unsurprisingly, the legislators that draw up the laws to protect us from the business wide-boys carefully exempt themselves from similar sanctions.” Actionable in the courts? Probably not. Sanctions? Yes. We will see in 2½ years’ time.
The biggest challenge facing New Zealand’s economy is worsening unemployment. Last week more than 1,250 Kiwis joined the dole queues. National’s Budget will not stem the dramatic increases in job losses happening right now in New Zealand cities and towns. This Budget does not set out a coherent plan to keep Kiwis in work. It fails to take action for vulnerable New Zealanders who are on the brink of losing their jobs. It fails to adequately invest in skills training and investment to create new jobs, and it fails to set out a clear path that will lift New Zealand out of the current economic downturn.
Labour’s finance spokesperson, the Hon David Cunliffe, wrote in yesterday morning’s Dominion Post that “unemployment is a scourge that destroys people’s livelihoods, homes and families. The real human cost of another 60,000 Kiwis on the dole is appalling. … The fiscal cost is also huge. The unemployment benefit for 7 per cent of the workforce costs $800 million per year; for 9 per cent it is over $1 billion per year …”. A total of 24,000 jobs have been lost in the last quarter, but this Budget will not stem the dramatic increase in job losses that is happening right now in New Zealand. This is not a Budget for Kiwi battlers. It simply makes their struggle harder.
On this occasion, when the dragon boat festival is being celebrated, another broken promise of the National-led Government is remembered. Thank you.
Hon TREVOR MALLARD (Labour—Hutt South) Link to this
I seek the leave of the House to move the members’ motion in the name of Lindsay Tisch forthwith.
Mr DEPUTY SPEAKER Link to this
Leave has been sought for that purpose. Is there any objection? There is objection.
Mr DEPUTY SPEAKER Link to this
If members look at the Order Paper, they will see that I congratulated the Chiefs on their win.
CHRIS TREMAIN (National—Napier) Link to this
I am looking forward to Hawke’s Bay climbing the ladder once again and getting to the top of the Air New Zealand Cup competition. I know that is something that Mr Nash on the other side of the House will take on, and we will be in that top four. I am looking forward to that.
The pervious speech from Raymond Huo was a leadership bid in the making. We learnt that Mr Huo had two interviews about the Budget, and that is probably two more than the Leader of the Opposition had on the Budget. No, it was an excellent speech and we are all a lot further forward than we otherwise would be.
I want to get to the essence of this debate and keep it very simple. First, I want to take out the hyperbole, the hysterics, and the crocodile tears that the Opposition has laid out before us over the last few hours. The fact of the matter is quite simple: we are in the worst recession in 60 years. The impact of that recession has become hugely more relevant as we have got further down the track; nothing is simpler. My second point concerns the period before last election when we lined up on the stump—and the Labour Party members have created a lot of hyperbole about this. If we look at the Budget promises at that point in time, we see that they are almost identical. In fact, the National Party’s total tax cut package, after we had made the tough decisions on KiwiSaver and the research and development tax credits, was $200 million less than the Labour Party’s.
So here we stand with those facts before us. There have been crocodile tears and hyperbole, but in respect of the tough decisions in this bill I ask members which decisions a Labour Government would have made. I would love to stand here and say, yes, let us roll out the research and development tax credits and expand KiwiSaver to be as wonderful as it can be. I would love to say we were rolling out the tax cut package we talked about before the election. The reality is that we cannot do it. We are in a recessionary environment that does not allow it to happen. We have had to make some tough calls. We have had to cut our cloth to the state of the economy right now. Taxpayers, our children, and our mokopuna will thank us in years to come, as our debt track starts to come down.
By making these tough calls, we have been able to deliver a whole lot of other things. There would be many, many more problems if we had not delivered them. The entitlements to our superannuitants, ensuring that 66 percent of the average wage would be delivered to them, are being delivered. Ensuring that Working for Families stays in place is something we have delivered on. There is a raft of other things we have been able to deliver on, including an insulation package. There is a raft of things we are doing as a Government and they are absolutely excellent. I stand today to acknowledge the Taxation (Budget Tax Measures) Bill and to commend it to the House.
STUART NASH (Labour) Link to this
I stand in support of this Taxation (Budget Tax Measures) Bill. I support it because it removes an insidious promise, which was hawked to the people of New Zealand, that the Nats always knew they could never implement. I contend that there was so much information in the market before the election that Mr Key, Mr English, Mr Tremain, Mr Foss, Mr Williamson, and anyone who read the newspaper knew exactly what they were doing when those members promised tax cuts to their electorates and the people of New Zealand. The unsuspecting people of New Zealand did not know that this was one big lie, but they know now. Mr Foss asked who knew that this was the state of the economy. Well, I knew. I read the newspaper, I watched the television, and I read The Economist. We all knew that the economy was going to hell in a handbasket, but those members stood up and promised tax cuts. All the members on that side of the House promised tax cuts. All the newspapers were full of news of the recession—
Hon Maurice WilliamsonThat member was fully aware that the recession was not over at all. If National members did not know that before the election, then certainly they would have known when they convened after the election and rammed legislation through the House under urgency. The National Government would have known when the tax cuts were rammed through the House under urgency before Christmas that they were totally unaffordable. I ask Mr Foss what that was about. It was about a facade of hard work in the first 100 days. What happened? It was a fraud. It took National 100 days to put them there, and 150 days to get rid of them. That is real action, but it is not what was promised.
What did National promise? Let me tell members what Mr Key said to the people of New Zealand. He said: “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 … In it are 11 commitments that I make to you.” Those commitments were to “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.” The unfortunate thing was that it was music to the ears of New Zealanders, but now National is singing out of tune. The tune has changed, the song is tired, and it is off key.
Mr Quinn might like his opera, but goodness me, this message is tired, old, and sad, and it was a lie. Mr Key went on to say: “unlike Labour we won’t cancel our tax cuts.” Is that clear—“unlike Labour we won’t cancel our tax cuts.”? What are we debating at the moment? We are debating the repeal of the tax cuts that were put in place by last Christmas. National members gave New Zealanders a Christmas present, and they took it away by Queen’s Birthday.
Let us look at our Labour leader, Phil Goff. He has been delivering for the working people of New Zealand for over 20 years. Mr Goff knows what New Zealanders want, because he has been out there talking to ordinary New Zealanders out in the markets. He knows what they want, because he has been out there on the streets. What has Mr Key been doing? While Mr Goff was talking to ordinary New Zealanders, Mr Key was manipulating the money markets of the global world. He was making honey from the New Zealand currency. Mr Goff negotiated the New Zealand free-trade agreement with China, which, as businesses big and small understand, was the most important measure of growth strategy ever negotiated in New Zealand’s history. Mr Goff is a man of his word. When Mr Goff says there will be tax cuts, he will deliver on them. He never promises New Zealanders something that Labour cannot deliver. Mr Goff is a man of integrity and honesty, and he has never engaged in the politics of cynicism and deceit.
That is the difference between Mr Key—“Mr I-will-not-cancel-tax-cuts”—and Mr Goff. We have just heard what Mr Key promised and then reneged on within 150 days. Let me tell members what Mr Goff said: “One of the things about the fifth Labour Government of which I am the most proud is that we honoured the promises on which we were elected. We not only honoured those promises but we in fact, after each election, over-delivered on the promises that were made. We under-promised and over-delivered. The challenge to this new National Government is to do likewise.”
Mr Goff threw out that challenge to the Government. It has taken only 250 days for it to fail miserably. In fact, the people of New Zealand issued that challenge. “I say to Mr Key”—and these are Phil Goff’s words—“that he will be judged on his ability to do that.” Mr Key and Mr English, with this bill, have been judged and found guilty of deceiving the people of New Zealand. As a member of the jury, which also consists of every single New Zealand voter, I say that the sentence is to have a one-term Government only. That will be the verdict of ordinary New Zealanders, up and down this country, once they understand that the promises of tax cuts were nothing but empty rhetoric designed to deceive.
The politics of cynicism and negativity—I hate that, and according to my e-mails and texts, so do the people of Napier, the businessmen and businesswomen of New Zealand, and the Kiwis all around the country who are struggling to survive and to make ends meet. This bill removes one of the biggest deceits imposed upon New Zealand since Muldoon cut the New Zealand superannuation scheme set up by the Kirk Government. Can members imagine the Budget and the state of the economy now if Mr Muldoon had not axed that superannuation scheme? But, wait a minute—Bill English has also cut payments to the Superannuation Fund, and the Government has said that it will not be starting them up again. Well, it will start them up, but not until Mr Tremain turns 65—great! This bill is about cancelling the tax cuts. It is about cancelling a promise to New Zealanders. As it has been debated, I have looked across at the Government benches and seen some pretty angry people. I saw John Hayes—it is pretty hard to miss him, actually—and he looked as if he was about to explode.
Ha, ha! He was an angry man; he was a very angry man. But it was only because he knows that by cancelling those tax cuts, the seat of Wairarapa will be coming back to Labour—as will the seat of Napier. Mr Hayes knows it. He went out to the people of Masterton, and promised them tax cuts for 3 years in a row. So the people voted for him, but they voted for a lie. Not only did he do that, but when Mr Hayes realised that the tax cuts were not going to be delivered, he turned as white as a cream puff. Why? He knew that 75 percent of the people of Wairarapa earn under $40,000 a year. Therefore, they would get nothing. That is right: they got nothing out of the promised tax cuts. Then, he probably thought that he could get away with that—that the Government had cancelled the tax cuts, but that he could get away with that because the Government would deliver them in 2010-11. But this bill has taken away even that. It has taken away any promise on which he could go back to the people of Wairarapa and say “We delivered for you.”; this bill just takes away that ability to deliver.
Carol BeaumontTax cuts for the rich! But that is the story throughout the country. Mr Tremain wrote in the paper in Napier that tax cuts would help the hard-working people of Napier. But I ask him how that will work. How will that work, when over 75 percent of the people in Napier earn under $40,000 a year? Therefore they will receive nothing. How much will they receive?
Zero—75 percent of the people in Napier will receive nothing, and that member has just cancelled any hope they might have had that at least they might receive something in the next couple of years. Paul Quinn was almost in tears when the member realised that this bill was forever removing tax cuts and forever consigning him to Opposition in the future. He was angry—
I tell the member that he was an angry man, and I was worried. I was pleased to see Mr Coleman in the Chamber, because I thought that he was going to have to administer CPR. This bill is not about the Budget; this bill is about broken promises to the people of New Zealand—the people of Wairarapa, the people of Napier, and the people of Tukituki. But that is not what politics is about. It is no wonder that people are cynical when the Prime Minister stands up and starts promising things. Mr Goff understands that the promised tax cuts—now gone—were not and never would be stimulatory, because 30 percent of the original tax cuts went to only 3 percent of the people of New Zealand. What is that about? Is that stimulatory? Absolutely not! If members knew anything about first-grade economics, they would know that that was economic vandalism—absolutely.
KATRINA SHANKS (National) Link to this
It is my pleasure to speak on the third reading of the Taxation (Budget Tax Measures) Bill this morning. It has been very interesting listening to the debate on this taxation bill over the last couple of days. It is not very often that we see most of the House voting the same way on a bill, and that is what we are seeing today in the support of this bill.
National is very, very committed to reducing personal income taxes; over time we want to see them come down to 30 percent. But the time has to be right. The time is not right when we are in the middle of a recession, when debt is increasing, and when there are no surpluses. That is not the time to borrow money to give tax cuts. This Government has recognised that. We have had 9 long years of a Labour Government, when we were in surplus and it was the ideal time to give many tax cuts to many New Zealanders to help keep them in New Zealand, and to stimulate our economy. But the Labour Government did not take advantage of that. Now we are faced with a recession, which we have known about for, most probably, a year. A recession is not a time to give personal tax cuts and it is not a time to borrow to do so; it is a time to be a responsible Government and make responsible decisions.
The major pressures around some of these decisions on our debt were about New Zealand’s credit rating. As everybody knows, it is important to keep a good, solid credit rating if we want to keep our interest rates low. That is what this Government has been committed to doing. In fact, we have saved New Zealanders nearly $600 million by keeping our credit rating at its current rate. It has been a hard decision for this Government to make, but it has made it based on prioritising, safeguarding entitlements, improving public services, and reducing our debt. That is how we have come to this decision.
The Government believes in making the right decisions, even though it may be hard to do it. We do not believe in “Visa-nomics”. We do not believe in putting it on the bill, like “Whack-it-on-the-bill-Phil” does. We are a responsible Government that is making responsible decisions for all New Zealanders, and we are trying to make the best out of the situation that we are in now. It is my pleasure to stand here and support this bill today. Thank you, Mr Deputy Speaker.