Taxation (KiwiSaver and Company Tax RateAmendments) Bill

Hon TONY RYALL (National—Bay of Plenty) Link to this

I am pleased to be able to take a call to oppose the progress of this bill, which, frankly, will not be good for New Zealanders. This is a bill that will send a very bad message to low-income New Zealanders. These are the people who cannot afford to save for their retirements. These are the people whom Labour came to Parliament to represent.

Let us think about those people who voted for Labour at the last election—the few low-income people who voted for Labour at the last election. They find it difficult to make ends meet. They are working in jobs that in Australia would be paid one-third more.

Hon DAVID CARTER (National) Link to this

This morning the body language of the Labour members in this Chamber says it all. They came into the House yesterday for the reading of the Budget, and Dr Cullen had obviously conned them and told them that it was all good news and that it would correct the 10 percent poll differentiation between National and Labour. Darren Hughes nods his head and agrees. Then, when those members actually heard the Budget, and a few people who are a lot sharper than Darren Hughes analysed the Budget, particularly the KiwiSaver bit, it became clear that Dr Cullen has been too clever by half. We now know that he has presented a very complicated savings system that simply will not be accepted by most wage earners in this country.

The interesting thing was that Helen Clark knew it by the time Dr Cullen had delivered the Budget. In her opening address, she stood up and said: “Is that it? Is that it?”. Helen Clark knows that Michael Cullen has now delivered his final Budget in this House. He has had eight chances to deliver a Budget that ensured growth for this country and he has had eight failures, one after another. He is gone, Darren Hughes is about to go, and the guy sitting next to him, Mark Burton, is definitely about to go, because KiwiSaver will not work.

What I find sad is that a week earlier the Australian Budget was read. There, for the fifth Budget in a row, the Government has delivered tax cuts, real meaningful tax cuts, to the wage earners of Australia, to the extent now that anybody living in Australia—and 1 million New Zealanders are living in Australia—can earn 50 percent more in take-home pay. The two reasons, I tell Darren Hughes, are that wage rates are higher and now tax rates are significantly lower in Australia.

What we see now is the KiwiSaver scheme presented to this country, and even Treasury says that 50 percent of New Zealanders will not take it up. I want Labour members to acknowledge today in this Committee which 50 percent that is. Low-income New Zealanders cannot afford to take it up and they will reject this scheme. So the ones who will take it up are the higher-income New Zealanders—and by the way, they are pretty sensible people who are saving anyway.

I feel for the people Tony Ryall just spoke about. Those are the people in Ōtara who are battling away with no support from this Labour Government. The people who went to the polls at the last election were dragged out of their State house, probably, by the union delegate and made to go and vote. They voted in good faith, thinking that Labour would look after them.

R DOUG WOOLERTON (NZ First) Link to this

New Zealand First supports Part 1 of the Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters) Bill, and I am delighted to hear about the National Party’s interest in the people of Ōtara. I am a bit saddened about the way that National members speak about them, as though they are an uneducated bunch of people who cannot work things out for themselves. The National Party I used to belong to many years ago actually did know about the people of Ōtara, and it would have supported tax cuts for companies, because it would have wanted to help companies to stay in New Zealand. It would have wanted New Zealand to be competitive with Australia. It would have wanted our companies to be competitive even in Europe, but competitiveness with Australia was just a given. So I cannot believe that the National Party has come to a point where it cannot support the reduction of taxation for companies, and cannot support the reduction of taxation, as contained in Part 1 of this bill, for what I call savings institutions—I presume that people understand what they are—which is where the money from KiwiSaver will be kept, looked after, and, hopefully, will grow.

I cannot believe that the National Party is opposing those things, because it is through investment in our businesses that we all do better. The people who are leaving our country are, to me, absolutely a sign that some policies of past years have failed. I think that is a market signal that we can all work out. I think it is quite obvious. Furthermore, that market signal has been there for many, many years now. We have all talked about it and recognised it. It has been talked about in the Chamber, but this is the first Budget that recognises it and attempts to go some way towards catching up with the taxation regime for businesses in Australia and the trading regime in Australia.

The Opposition promotes itself as the so-called business-friendly party, so it is rather amusing to hear National members say on the one hand that Australia is a great place—where the employer’s contribution to the compulsory scheme equates to around 9 percent of labour costs, whereas the KiwiSaver scheme will be in the region of 1 percent—and on the other hand that they oppose the bill. That cost of about 1 percent is laudable and it should be applauded in the Chamber. I also make the point that I have not heard one National Party member say that National would get rid of either the KiwiSaver scheme or the taxation reductions proposed in this bill. I suggest, most strongly, that is because National does not intend to get rid of either.

New Zealand First is prepared to be quite upfront and to welcome the KiwiSaver scheme. We welcome the company tax deductions. We would like to see, as I am sure Mr Peter Dunne would want to see, further cuts in company taxation. This bill is a first step, and if we learn anything in this place we know that change is incremental. When change is not incremental, people cannot cope with things.

JUDITH COLLINS (National—Clevedon) Link to this

It was very interesting to hear the representative from New Zealand First tell us that he supports this Budget, as I recall that in 2002 that party opposed the Budget because it had a fuel tax of 5c a litre. We hear today that New Zealand First supports this Budget, which has a fuel tax of 10c a litre. So that is inflation, is it not? Talk about a turn-round and flip-flop—New Zealand First has just done a major one.

When I look at the cost of this Budget, I realise the people who are not going to benefit are the poor. In today’s New Zealand Herald Isaw comment from the unionist Laila Harré. Do members remember her? The headline stated: “Workers party fails to help the poor”. She is right on that one. There is nothing for people who are struggling, other than a 10c a litre increase in their fuel costs. That is what the Budget does for the people of Botany, for the people of Dannemore, and for the other people of east Auckland. There is nothing for them, except that they will get a 10 percent hike in their fuel bills. That cost will carry right the way through to food bills and to every other sector of the community—to transport costs generally. That is exactly what the Budget means. Those people do not get access to a rail line; they get to pay for a rail line twice. They get to pay extra rates in order to pay for other people to use a rail line, and they get to pay higher fuel bills so that other people can get access to a rail line. That is simply not fair.

When I read on, I saw what Richard Prebble had to say. He pointed out that this Government is now taking $20 billion a year more out of New Zealand taxpayers than National did in 1999. Our taxpayers are now paying $20 billion that they should not have to pay. Richard Prebble is right. In that time, what has happened? We see 700 people leave this country every week to go and live in Australia, and they do so because there they are paid more, their taxes are less, and they have more incentive to save.

KiwiSaver will appeal to some people, that is for sure: people who are already saving money. When I heard Dr Cullen say yesterday that after 45 years of saving, people will have $400,000, I thought that may seem a lot of money. But I will tell the Committee something. In the early 1980s we bought our first house for $33,000. When we bought that house for $33,000, it was a really big stretch. Today that house, even without our improvements, would not sell for less than about $600,000. So if somebody is to be told that after 45 years of renting, he or she will be able to buy a house, I do not believe that is a legitimate promise to make.

It is also unbelievably unfair for people to be told the Government will just take the money out and the person’s employer will pay, and that will be great. It is not great, and the reason is that most businesses in New Zealand are those of small-business owners. Most people do not own their business through a company; most people pay a personal tax rate. Those people will receive nothing at all out of the deduction in company tax. What they will get, though, is to pay for the Government’s election bribe. That is exactly what it will be. I think about people with small businesses in my electorate—panel beaters and motor mechanics—who will face another cost. What will happen? It will go straight to their accountant, and it will put up their compliance costs. Then, when employees go along and say they need some extra money because fuel costs have gone up, the boss will say: “I’d love to give you some extra money, but I’m already giving it to you in KiwiSaver. Just remember that for every dollar that I have to give you now, I also have to top up your KiwiSaver. So how about we do a little deal?”.

That is what will happen. Little cash deals will happen, and little things like that will encourage tax avoidance. That will not help the system, at all. More people will be doing anything they can to get as much cash as possible out of the system, rather than going through the official system. This whole system is about making our taxation system more complicated. Taxation systems must be very, very simple.

CHRIS TREMAIN (National—Napier) Link to this

I rise to speak to Part 1, which deals with amendments to the Income Tax Act 2004, and particularly to speak about a couple of clauses that deal with tax credits for contributions made by people to the KiwiSaver scheme or a complying superannuation fund. That deals with the way the Government will help employees get a $20 contribution at the end of the financial year. The tax credit will apply to all contributions made, up to a maximum of $20 a week or $1,042.86 a year.

On the face of it that appears to be a good scheme, but the problem is that the average yearly wage is $45,000 in this country. That is the average wage, so I imagine the median wage would be significantly below $45,000. People on $45,000 cannot afford to save money, going forward. That is very typical of people living in Napier, where the median wage is well below the average of $45,000. Many people in my electorate are unable to save and will find they cannot afford to take 4 percent out of their wage to contribute to the scheme.

Let us look at what that 4 percent means. It is 4 percent of the gross wage, not the net wage. It is 4 percent of the gross wage but is deducted from the net wage, so it would be quite a significant chunk of their take-home pay. It is more like 5 to 6 percent. For people on $25,000 or $30,000 per annum who are bringing up a family and trying to get ahead, that is hard yards. No one in the Chamber sits on a low level of income, so we have to take into consideration the people on those incomes. The reality is that for the money we are talking about here—$26,000 a year—that is a $20 a week contribution.

Out of a take-home pay of, say, $360 or $380, $20 is a significant amount. Rent might be $180 or $200, then there are power and electricity bills. Out of, say, $100 left over for food, $20 is significant. In fact, I would challenge anybody in this House to be able to save in that environment.

If it becomes impossible for those people to save, then the question is what we do as a country to lift the game for them. That is where the National Party comes in with a totally different tack from where the Labour Government is taking our country. It is a totally different tack. We take the tack that we need to put the handbrake on Government spending.

We saw the Minister of Finance, Michael Cullen, stand up and tell us how he was going to spend $54 billion on this nation’s income. He stood up and told us how he was going to spend some 32 or 33 percent of the GDP of this country. There has been a $20 billion increase since the year 2000. He has the cheek to stand up here and tell low-income New Zealanders who are on $26,000 to $30,000 a year that they will now have to save money by putting aside $20 a week while this Government continues to crank up its spending. It has cranked up its spending by an additional $3.8 billion in this last Budget. The Government is saying that it is OK for the Government to spend big time, but it wants average Kiwis to save.

National members say that that spending increase has to stop. It can continue to rise by the consumer price index level—so we are not talking about massive cuts—but we cannot keep adding to the fire of Government spending with continued increases. On top of that, National members say that we should take the Australian approach, with consistent and ongoing cuts to personal taxes. There should be consistent, gradual increases to cuts in personal taxes, so that Kiwis have the opportunity to invest their own money in the choices they want to make as people living in this country—whether it is repaying their mortgage, investing in business, or investing in their family’s education and trying to get them up the income ladder. Because, as I said earlier, if people are at the bottom of the ladder, then it is impossible for them to save $20 a week.

Hon BILL ENGLISH (Deputy Leader—National) Link to this

I want to pick up from where the member for Napier, Chris Tremain, left off, when he made the point that for many New Zealanders the KiwiSaver scheme will be out of reach. He was reinforcing the point made earlier on by the co-leader of the Māori Party Tariana Turia. She made the pretty straightforward statement that if 50 percent of Kiwis take part in this scheme, it means that 50 percent do not. The 50 percent who do not take part are missing out every way around. Not only do they miss out on the now multibillion-dollar contribution by the Government to a personal savings account, but also—probably worse than that—they miss out on the changes to their tax thresholds, which at least would give them the cost of a packet of chewing gum a week. That is really what is hard to understand about this particular package of measures.

Hon MAURICE WILLIAMSON (National—Pakuranga) Link to this

It is usual for members of Parliament to have quite a bit of feedback sent to our electorate offices the morning after a Budget. When there are things in the Budget that are good, members will often hear people saying it was great that they happened. I can report immediately to the Chamber that the feedback I have received from the people of Howick and Pakuranga is that of sheer outrage. They have never had access to a rail network and never will have. Even those who are quite green in their feelings, and would love to use a rail network if they could, simply do not have one. They simply do not have one.

It is really interesting. Outside my electorate office is the Pakuranga Highway—a three-lane highway—and in the mornings I look out to see cars just locked, blocked, and stopped as far as the eye can see. Guess what? Yesterday Dr Cullen said to those people that he would charge them another 10c a litre on their petrol tax in order to pay for the electrification of a rail network somewhere on the other side of the city.

That went down like a cup of cold sick with the people of Howick and Pakuranga, and I bet it was the same with the voters of the North Shore, Northcote, Murray McCully’s East Coast Bays, and Judith Collins’ area of Clevedon, Beachlands, and Maraetai. People in those Auckland regions will be saying to the Government: “Excuse me? You are going to tax me to pay for the electrification of a rail network that I don’t have any access to at all, even if I want access to it?”. That is what the feedback from those people has been.

I have to speak on behalf of what may end up being a new constituency block for me. I may, with boundary changes, end up with some people from the Glen Innes and Point England areas. I have not had contact with those people yet, because the boundaries may not be changed, but they may end up in my constituency. I understand that those people are mainly Labour voters, but I can tell the Labour Government that they will be pretty angry about what happened yesterday, as well.

I know for a fact from the levels of household debt being accumulated by people in areas like that that they do not have one cent of spare discretionary income each week to put into anything. What with hire purchase payments, their budget does not exist. Their budget is blown to pieces each week, and they struggle from day to day to make ends meet. If not, they are accumulating debt on their credit cards. Often we hear people in Glen Innes say they have maxed out on their credit cards. These are the people whom Dr Cullen should be representing. They are not the people whom the Tory party would normally be out there speaking on behalf of. That is why this Budget will not go down well with Labour voters.

Dr Cullen says to those people who do not have a cent of discretionary expenditure that if they save some money each week, then they will get into this KiwiSaver scheme, and the Government and the employers will put some money in, and that will be good for them. I can tell members now that if Trevor Mallard wants to come with me and wander the streets of Glen Innes or Point England, the very first response he will get from those people will be: “How the bloody hell do I save anything when I can’t save already?”. They will ask how they can save a cent, how they can have money taken off their pay and put into a KiwiSaver account.

A lot of people in my current patch of Howick and Pakuranga will say they have enough discretionary spending to put 4 percent of their pay into the scheme. They are in the wealthier, higher-income end, and they will say they are OK with this. They will say that they can do with this scheme, and that it is fine—they will provide 4 percent of their pay, and their employers and the Government will tip in some money. They will say that it is not a bad idea. But what about the people at the bottom end of the spectrum whom the Labour Government is supposed to be an advocate for?

SHANE JONES (Labour) Link to this

Let us return to what we are actually gathered here for, which is to talk about the Budget, and let us recite some recent history. In 1967 dollars and cents came to New Zealand as our currency. The point at which we moved from the pound and the ha’penny to our current currency, I say to all listeners out there in Aotearoa, marks how far we have to go back to identify a time when National members actually introduced a tax reduction for company tax. In all the years since 1966-67, National members have not brought to this House a bill or a proposal to reduce the tax burdens on company tax. That is a statement of fact.

JOHN CARTER (National—Northland) Link to this

It gives me great pleasure to follow the Tory in the Labour Party, Shane Jones. You know, Shane Jones and I are Northland MPs, and along with the other MPs from that area, we all work well in the Northland scene. But the unfortunate thing with Shane Jones is that when he decided to get into politics, he tripped over and fell into the wrong party, because underneath it all, he is a Tory at heart, and he hates having to defend this Budget. If one can get Shane Jones in the quiet, in the back room somewhere, he will say: “Man, I just do not know where we are going.” Here he is, and we could see the lacklustre effort that he put in when he was trying to defend this Budget.

I am really looking forward to the next election campaign and being on the campaign trail with Shane Jones, because I would ask him three questions about this Budget that affect the people of Northland. The first thing is that he is out there saying that Labour has done it for business. Well, when we look at it, it may be that Labour did do just a little bit for business—until we actually start doing the maths. Then the only way we can say that businesses got an increase is if we stand on our heads, and the figures will then go up the right way. The fact is that businesses will pay. Labour gives it to them on the one hand and it takes it away on the other. That is the first point.

My second point, though—and this is the point I really want to ask Shane about—is that he talks about the fact that KiwiSaver will be great. He talks about the fact that it will work for people in Northland, and he talks about businesses. Well, you know, in Northland most of the businesses are sole traders; they are not companies, they are small, individual people who have gone out and taken a chance. They have gone out and had a go. They are standing up as we would expect New Zealanders—good Kiwi people—to do. They are men and women, out there having a go. But what will this legislation do for them? It will penalise them, will it not? It will cause them cost; they will have to pay. They will not get any benefit from the reduced company taxes—they do not pay them. But if they are employers—and most of them are employers of one or two people—and they are paying wages of, let us say, $60,000, they will have to pay something like $3,000. Whatever the figure is, it will cost them money.

How will that benefit or encourage the small-business people in Northland? It will not help them at all. In fact, it is a negative for them. Just maybe it will tip them over the edge. In Northland a good number of businesses are right on the edge—they go from hand to mouth, and they just keep going. They make it, they work hard, they do all the things they can, and now the Government comes along and says: “Well, here’s another bill, and here’s another tax. You are going to have to pay. You are going to have to front up.”

What about the people who work in the Moerewa freezing works? What about the people who work in kiwifruit businesses in Kerikeri? What about the small people who work driving a school bus to Mangamuka? What will they get out of this? They will get absolutely nothing. The fact is that they will get nothing out of it because they cannot afford to take anything from it.

How much surplus cash does the person who is earning $18,000 a year have hanging around to put into KiwiSaver? Negative—they have no surplus cash at all. I say to Mr Mallard and Mr Shane Jones that these people do not have a spare cent to put into KiwiSaver. So what is their only option? They will opt out—they have to opt out. This legislation does not help the people of Northland. I know a young fella up there who has just started working at Pak ‘N Save. He has a partner and a child, and a second child on the way. He earns $15 an hour. He is doing well and getting himself established, but man, he sure ain’t got any surplus cash to pick up his share of what Michael Cullen says he should have. That is the shame of it. This young lad wants to buy his own home. This young lad is having a go. This young lad is actually trying to make a go of a life for himself here in New Zealand, and this Government has done absolutely nothing for him in this Budget.

TIM BARNETT (Senior Whip—Labour) Link to this

I move, That the question be now put.

Hon DAVID CARTER (National) Link to this

I certainly want to speak to Part 2 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Bill because, looking through this really complex legislation that the Hon Peter Dunne and the Hon Michael Cullen have cooked up, it springs to mind that one important question has not been asked in the debate so far. I would ask how many more Inland Revenue Department officials will be employed to manage this extremely complex KiwiSaver scheme. How many more high-rise buildings in Wellington will be filled with Inland Revenue Department officials who have to work through the complexity of a scheme that even Treasury, which is known for its optimism in floating the scheme, says that only 50 percent of wage earners will take up?

With this legislation, we will have a scheme whereby come 1 July employers must, by law, sign up everybody who works for them. All the wage calculations will have to be redone. Many people in New Zealand farming situations are paid on a regular basis with an automatic payment. Those payments will all have to be changed. There will be huge complexity for the employer, huge confusion for the employee, and lots and lots of bureaucrats trying to sort it out.

An employee is signed on to a scheme, presumably a little tagged account is opened in KiwiSaver for this person, and 2 weeks later this lower-income New Zealander will say: “I like the idea of it, but I simply cannot afford to stay in.” So this person will go back to the employer and ask to be taken out of the scheme. Treasury is saying that 50 percent of employees will take this option; I say to Peter Dunne today that it will be more than 50 percent, judging by the calls coming into my electorate office this morning.

So once this employee asks to be taken out, the poor old employer will have to go back and recalculate the wages and PAYE deductions, and will have to go back to the bank, where the employer will probably incur a charge to change it back to what it was prior to 1 July 2007. Then the Inland Revenue Department—with its hundreds more bureaucrats—will have to post out a cheque to the employee for the $20 or $40 that has gone into the account in the couple of weeks before the employee made the decision that he or she could not stay in the scheme. That sounds incredibly complex and incredibly stupid.

We can see the shock on the faces of the New Zealand First members, who have only just realised that this will happen. Yet they are signed up to support this nonsense. Labour members have not even thought this through. Michael Cullen has—this scheme employs lots of bureaucrats; that does not seem to worry him—but the Labour members themselves obviously have not realised how complicated it is.

That is why we saw Dr Cullen getting a really hard time on Close Up last night. Then he came down to the House at about 8 o’clock last night and lost his rag because he knew he had lost the argument with John Key on the benefits of the KiwiSaver. He knew then that New Zealanders had not swallowed it hook, line, and sinker. He has been too clever by half, and has stuck something in here that his own Labour caucus simply does not understand.

Today, when we analyse this scheme in detail, we realise just how massively complicated it is and how much more Inland Revenue Department bureaucracy we will have to build to manage something that in a couple of weeks will revert to the status quo for low-income New Zealanders. Peter Dunne, instead of sitting there, should actually stand up and defend this legislation. He is part of the design of the thing. He will go down as being attached to the folly of Dr Cullen for the KiwiSaver scheme, which will not work. It will not work, because lower-paid New Zealanders simply cannot afford to stay in the scheme.

I look at the complexity of the Dr Cullen scheme and at the simplicity of the scheme of Peter Costello, Treasurer for the Australian Government. He has come in with five Budgets, one after another in a row, and he has been able to simplify the tax system by delivering tax cuts and giving the chance for wage earners in Australia to keep more of their own money. But no, Dr Cullen says: “That would be wrong, we cannot leave that money in the hands of New Zealanders.”, and says that he can do better.

CHARLES CHAUVEL (Labour) Link to this

I want to speak just briefly in support of the bill and to take some real-world examples, in response to some of the issues that have been raised by previous speakers. I am looking at the second page of this morning’s Dominion Post, where a couple of calculations really give the lie to some of the sillier claims we have just heard.

There is the example of a single person on the minimum wage, earning $11.25 an hour or $450 a week. If that person decides to join KiwiSaver on 1 July, he or she will have to put away $18 a week. We have heard, from polls and surveys of people’s savings habits and intentions, that people really want to be able to save, and they really want incentives to join this scheme. I think that many New Zealanders, even if they are on modest incomes, will look at that requirement of $18 a week, look at the incentives that now exist—or that will exist when this legislation passes—and will think they will make a real effort to put that sort of money aside. Now if that person puts $18 a week aside, which is the minimum contribution—4 percent of gross salary—then the Government would add, under this legislation, another $18. From 1 April next year the employer will pay $4.50 a week. Then, stepping up the scheme, by 2011 the employer would have to match the contributions up to 4 percent. Assuming that the person retired in 35 years, there would be $150,000 in the bank, which is enough to earn about $8,000 a year in interest in today’s dollars. That assumes a very conservative rate of return on the funds of about 2.5 percent.

It seems to me that there will probably be quite a high uptake of the scheme if those figures are correct. People have been crying out for some assistance and some incentivisation to help them to save. That will now exist, and it is the answer to the question of what the kiwifruit worker in Kerikeri or the school bus driver would do—questions that John Carter raised earlier. That is a living example of the figures those people will have to think about in order to join the scheme and of the benefits that they will get.

There is another example: that of a single person on the average wage. If a 50-year-old who earns a gross salary of $45,000 contributes 8 percent, which is about $70 a week, by the time that person retires at 65 there will be accumulated funds of $110,000, which is enough to generate $8,000 a year during retirement over and above the superannuation contribution. Now that is real money. It is the sort of fund that people have been wanting to build up—the sort of nest egg that ordinary Kiwis would like to have but that they have not had the assistance or wherewithal to put together. I am very proud that this legislation and the accompanying package will allow that to happen.

This scheme will be good not only for the average Kiwi worker but for the country. If members look at the projection of the funds that will be built up over time, they will see that KiwiSaver funds under management by about 2030, again assuming a very conservative rate of return—2.5 percent—will be $100 billion. Now when members look at that and at the Cullen fund, they will start to see a strategic reserve for the first time being built up in this country, and will understand the importance of saving. Of course, we know about the wider economic benefits of having a decent savings scheme and a decent capital fund such as this. We will have stronger and deeper capital markets, leading to a lower cost of capital over time and easier access to capital for New Zealand businesses.

The scheme will also reduce the pressure of inflation. We know we have a current account problem. Well, finally, we have the opportunity not only to help ordinary Kiwis but also to build up the sorts of strategic reserves that our neighbours across the Tasman, whom we have heard about in speeches today, did some time ago. It was interesting to hear the model from across the Tasman being idolised by David Carter, the previous speaker. I wonder whether that means he wants the Australian model of a 9 percent payroll tax on employers, rather than the sort of scheme that has been designed for New Zealand and will be presented through this legislation.

Like the rest of this Budget, this is good legislation for ordinary Kiwis, for the country, and for all of us.

Hon BILL ENGLISH (Deputy Leader—National) Link to this

The member Charles Chauvel, who thinks he will be the member for Wellington Central, but he will not be, demonstrated the kind of cargo cult that Labour is trying to build up around the KiwiSaver system. It is only Labour people with that kind of champagne socialism attitude who think people on $11.25 an hour are saying: “Oh yeah, I’d love to put away $18 a week.” People on $11.25 an hour are the last people who will go into the KiwiSaver scheme, and they are also the first people who missed out in this Budget. If the Government had kept its promise to move the tax thresholds to allow for inflation, people on $11.25 an hour would at least have received something—it may have been chewing gum, but at least they would have received $2 or $3 a week. This would have been some recognition that they are paying a bigger percentage of their income as tax than they were 5 years ago, simply because of inflation and a lazy, big-spending Government.

The reality, I say to that member, is actually much different from the cargo-cult mentality that he is trying to cultivate. People on $11.25 an hour, even people on $15.25 an hour, will be the least likely to opt in to KiwiSaver. The Government’s message to those on $11.25 an hour is “Cut your spending, profligate!”. The Government says that these people are the ones who are causing inflation, the ones driving up the housing market. The Government is telling people on $11.25 an hour to cut their spending because they are part of the savings problem.

I guess that would have some credibility if the Government was cutting its spending. But, of course, it is not. There is a record new spend in this Budget; it has never been $3.8 billion before. It will be $3 billion or $4 billion next year. Is that not typical? This is champagne socialism. People on low incomes have to cut their spending to be patriotic, while MPs and bureaucrats on high incomes go on spending up large, taking money out of their cash deposits in the bank and shifting it into KiwiSaver, with no increase in their rate of saving. What a hardship! They are thinking: “This is a terrible scheme; we will have to shift some money around.”

The Labour MPs believe Dr Cullen, who has told them this scheme will create a whole lot of new savings. Well, it will not. There are only two ways to get more savings into KiwiSaver: to shift it from somewhere else, or to spend less. Labour are telling us today that the people they expect to spend less are the ones on $11.25 an hour. Well, I invite Mr Chauvel to get out to the supermarkets and tell the people stacking the shelves and serving on the counters that Labour’s vision for them is to give up $18 a week—and give up all prospect of pay increases for the next 4 years, because the employer has been compelled to put the pay increase into their KiwiSaver account—and get it all back in 40 years’ time. I invite Mr Chauvel to come with me to the supermarkets around Wellington. We will get all the staff in the morning tearoom and tell them the truth: that Labour says: “Put $18 a week into an account. We can promise you jam in 40 years’ time if you give up your bread now.”

That is why, yesterday, Labour members were looking really worried about this scheme, because they know what a big gamble it is. The people who will take the tax advantages of this scheme vote National. They will bank it—they will. Their accountants are all on the job today. But the low-income person and the small employer have been ambushed. Small employers have been ambushed by the compulsory contributions, which they never expected, and which come just after they have had to find the money for the 4-week holiday and the time-in-lieu provisions of the Holidays Act. Low-income people have been ambushed by a Labour Government they thought supported them.

RUSSELL FAIRBROTHER (Labour) Link to this

The difference between the National Party in the last speech, given by its deputy leader, and this Labour Government is that this is a Government that does not believe that a section of the economy should be permanently parked on $11.25 an hour. The changes to KiwiSaver are the first and important step to lifting the incomes of our lower-paid people to a higher range of brackets. It has been done in many ways, such as increasing the funds for research and development to increase the skill base of our Kiwi businesses. I notice that John Shewan, writing this morning, welcomes the 45 percent subsidy by the Government on research and development, and notes that it is urgently needed and will be great for investment. The editorial in the Dominion Post this morning also writes of welcoming research and development, and also welcomes investment into the superannuation scheme, noting that if there had been a tax cut instead, it would have merely fuelled inflation. We know whom the fuelling of inflation would assist—the very people National wants to support by voting against this bill today.

It is not true to say that this bill supports National Party voters. If that were true, National would vote for the bill. But it is voting against the bill, because its members know that the overall picture enhances the welfare of so many New Zealanders, including those currently on $11.25 an hour. In fact, those on $11.25 an hour will get two tax cuts from this part of this bill. They will get a $20 contribution as soon as they make their $20 payments, and then as the money is invested in a portfolio investment entity, that entity’s investment rate will come down from a 33c tax rate to a 30c rate. So there are two levels of tax cuts for the lower-income people who put money into KiwiSaver.

I want briefly to address the point raised by David Carter, who claimed that this legislation would increase the level of complication, and who saw us increasing the level of expenditure on civil servants. I draw the member’s attention to clause 54, in Part 2. That clause provides for the electronic furnishing of returns, which of course is now a well-established practice for the Inland Revenue Department, and which will extend to the KiwiSaver provision. So as the computers in employers’ offices and the Inland Revenue Department become clearly able to interface, it will ease the workload on both the offices of employers and the Inland Revenue Department. When David Carter made that trite and ill-considered criticism, he failed to address Part 2 of this bill, which includes clause 54.

I will talk briefly about how KiwiSaver will help those on lower incomes. But first of all I will remove this myth that has been bandied around today that 50 percent of New Zealand workers will not be able to take part in the KiwiSaver scheme.

SIMON POWER (National—Rangitikei) Link to this

I came to the debate about KiwiSaver, and the concept behind it, with a reasonably open mind. I thought about what it would mean for my constituents. These are people who over the last 7 or 8 years have come into my electorate office and said to me: “I am a truckdriver.”, “I work in a supermarket.”, and “I am an apprentice mechanic.”, or words to that effect. They are trying hard to etch out a living, to look after their young children, and to get that extra little bit of discretionary spend that would make the difference for them as they go through the supermarket, buy the stationery for the school year, or purchase the new pair of shoes for the school year’s commencement.

I sat down and read through the documentation relating to KiwiSaver, and thought about how it would affect those people today. The answer is that it will actually make them worse off, because their discretionary spend, at the introduction of the new scheme, will get no bigger immediately, and then will actually decrease over time as the employers’ contributions increase and as the inflation-adjusted wage rise they would otherwise have got disappears into the KiwiSaver scheme. Government members argue that when these individuals, in the communities that we all in this House represent, hit 65, they will have something for their retirement. That may well be the case, but the problem is that the individuals I see in my electorate office, who are in jobs like working in local supermarkets, driving trucks, or working as apprentice mechanics, will have less discretionary spend from Budget day plus 1 year, plus 2 years, plus 3 years, plus 4 years.

The Government is saying to those individuals in the towns of Feilding, Marton, or Taihape: “We want you to take a portion of the wage that you already get”—with which they struggle to make their way in purchasing basic necessities for their families—“and we want you to put that aside for a rainy day.” The problem is that for those people it is raining now. It is bucketing down, actually, for those people, as we speak. You see, those people need the relief and the discretionary spend to increase today, in order that they can go about their business. Those people are the people whom Labour for so long has purported to represent.

This is my eighth year in this House and I have heard time and time again Labour members on the other side of the House interjecting comments like “What about the worker?” The answer is to throw the question back to Labour members. I say to those members on the Treasury benches: “What about the worker? What about the person who needs the extra discretionary spend today?”. If the argument were that we are all in this together, we all have to pull together in order to save for tomorrow—which means pulling back our discretionary spend—and we will all do that as a country, it might be easier to sell the argument. The problem is that the Government spend is increasing. The very people who need the discretionary spend are having it denied, while the Government does nothing to cut its own spend over the next 4 years.

I see that the Minister of Corrections is in the Chamber. We will get on to the fiscal risks in that area in another debate, but they are substantial and we are talking big, big bucks in that area. The one thing I am worried about is the 35-year-old dad in Feilding, who drives a truck, whose wife works part-time, and who has two kids. He is not worrying today about his situation in 40 years’ time; he is worried about getting through this week. The Government is not doing its bit but is asking people in those situations to do their bit.

Hon PETER DUNNE (Minister of Revenue) Link to this

I want to reply to Simon Power, who has just spoken, because he and Mr Carter, who spoke earlier, are probably the only two contributors from his side of the Chamber who, during the course of the debate, have got remotely near what the Taxation (KiwiSaver and Company Tax Rate Amendments) Bill is about. I say to Mr Power that I relate very much to the last part of his speech. I recall that as an 18-year-old I took out a life insurance policy for the princely sum of $1,000. It was to mature when I reached the grand old age of 55, which I am not yet—

KATHERINE RICH (National) Link to this

I am always keen to hear from that Minister. He is a Minister who, on this side of the Chamber, we have a lot of respect for. But I think he overestimates the interest of 18 or 19-year-olds in this particular legislation. The Minister would have been a rare 18-year-old in taking out superannuation when he was at university, although it is quite nice to think that while most 18-year-old men were thinking about beer, girls, and rock ‘n’ roll, Peter Dunne was taking out his first superannuation policy, planning for his future. I think he is a rare person who demonstrates common sense.

One of the things that concern me about this legislation is that there is very little in it for people who vote Labour. We heard Russell Fairbrother talk about the person on $11.25 an hour and how he or she would benefit. I say to him that people on $11.25 will not opt into KiwiSaver, because they cannot afford it. They cannot afford it, because if they earn that amount of money they are struggling to put bread and butter on their tables and cover their costs. Those are the people who were shouting the loudest for tax cuts so they can increase their discretionary income and cover a few more of their bills.

So low-income Kiwis on $11.25 an hour will now be in a position of subsidising the superannuation of higher-income people, who have the ability to put some money away and save. And that is the thing. The $11.25 an hour wage earner will be hit in two ways. First, those wage earners will not have the true option to opt into KiwiSaver. They will not put their money away. They will not be able to get credits through KiwiSaver, and they will also be asked to subsidise high-income Kiwis who do have the option to save. But the last thing is that they will not get any pay increases.

We have heard from the Minister of Finance and the unions that in order to appease some of the concerns of employers, they are sending the message out right now that no pay increases should be expected. Basically, this is the pay increase for those wage earners. So those people will get very little whatsoever, and I think that will dawn on a lot of people as they suddenly work out the details of this package. I think of all those 18 and 19-year-olds in my home town right now. They are not going to get all excited about this. They will not see that they will be better off by getting a payment in 45 years’ time, so I do not think they will be particularly excited about it.

I think what we are seeing here is a debate forming about the difference between independence and dependence. Members heard my learned colleague Simon Power make the point that those Kiwis who are earning the average wage want to be able to survive and to be independent. They do not want to have a relationship with a Work and Income manager if they can help it. They do not want to spend their lives filling out forms, because they believe that they are only getting back money they have earned in the first place. Therein lies the difference between National and Labour. We believe that people should be independent, that they should not have to form a relationship with someone from Work and Income unless they really have to, and that we should do more to allow people to stand on their own two feet and not continually have more money taken from their pocket, only to have it handed back by the Government, which believes that they should be grateful for getting their own money back.

Even if we look at the Budget, where has the chewing gum gone? In 2005, when Michael Cullen handed out this tax cut and thought that this would appease those calling for tax cuts, he said: “You can have one, but it will be in a couple of years.” Well, that has gone, as well, and albeit that it was small, I think it is something that many Kiwis will be disappointed about. We have heard lots of other announcements today that will bring benefits supposedly in a few years’ time, but they are not forthcoming.

One of the things that I think it is important to consider when we are looking at our savings problem is that it is not because people are lazy or short-sighted. The fundamental problem is that most New Zealanders are not earning enough to be able to put money aside. What we have here does not solve that; it just postpones the problem. The fundamental problem is that Kiwis do not earn enough. I am surprised that more Kiwis are not getting on a plane and going to Australia, because in the last four or five Budgets we have seen Peter Costello deliver more money into the pockets of Australians.

MARYAN STREET (Labour) Link to this

I want to pick up a couple of points in speeches made over the last few minutes. A couple of things seem to be missing from the Opposition’s analysis of KiwiSaver, its application, and its potential uptake. First of all, has the Opposition not noticed that the social debate around savings has altered—that people are very aware of the need to put aside money for their retirement? In fact, after listening to some of the vox pop coverage expressed yesterday in the wake of the announcements about KiwiSaver, it is patently obvious to me that of the four young people I heard, all four would rather have the $20 put aside for them to complement their own savings than to have that $20 in the hand. That was said by four out of four people who were asked about that. They were young people who were watching their parents approach 65 years. One woman in particular said that her mother was approaching 65 and it was getting a bit scary. To a person, they would rather have the money put aside and contributed to KiwiSaver than to have the $20 now—which they thought would go nowhere.

This is, absolutely, a savings regime for the poor and the low paid. This is exactly who it is for. This is the best opportunity for the poor and the low paid to provide for their retirement—the best opportunity. The sooner the Opposition understands the structural shift in the economy that this KiwiSaver initiative represents, the better. How will they go out and say to people: “We will give you a $10 a week tax cut across the board. You can have $10 now.”? People will say: “Oh yeah, great; thank you. That’s not going to do much for me. I would rather make sure that I have $20 a week that’s going forward to my future.” This is the best opportunity that low-paid workers have of providing for their future.

Given that the National Party seems to think it is on a crusade to woo the women’s vote, it may like to consider what this means for women’s superannuation. It is an absolute given—it is well known—that women do not accrue the same level of savings as men, and they do not receive the same amount back in superannuation as men do, for all the reasons that we know about. First, women are located predominantly in the lower-paid parts of the labour market. Secondly, women have interruptions to their work history that interrupt their payment into savings. Thirdly, we still have a persistent gender gap in earnings. Therefore, there are three structural reasons why women do not achieve as much in the way of superannuation returns as men do.

This is the best opportunity for women to be preparing in their own right, as well as with their family and their partner, to receive very substantial returns for their superannuation in years to come. KiwiSaver allows for holidays on payments. It allows for those holidays so that if and when women take time out of the workforce to raise children, they can be seen to be continuous contributors, including those holidays from their actual payments. It means they will have safeguarded accounts they can rely on when they turn 65.

The first Labour Government was known for the welfare State and for provision for the poor and the needy. In Norman Kirk’s day the Labour Government was known for independent foreign policy. This Labour Government will be known for its contribution to older people and for security in the future.

JUDITH COLLINS (National—Clevedon) Link to this

We have just learnt a new term—social debate. What the hell does that mean? What is a social debate? It is just another politically correct term from that Government and from one of the most politically correct members of a politically correct Government. The people who pay for this will wonder what a social debate is, as opposed to an unsocial debate, I suppose. What does it mean? I say to Ms Street that most people here do not sit around talking in the language of social debate. Most people have to look after their kids. Most people have to pay the bills. Most people have not been living off the Government for years and years and years, and working the taxpayer system. Most people have to work for a living.

When I listen to that member and other Government members speak about this, I ask who KiwiSaver is really going to help. Will it help the poor? Laila Harré says that it will not do a thing for the poor, and I think she is right. Let us have a look at the people it will help. The Inland Revenue Department had to hire 400 more people just to bring in the most basic version of KiwiSaver last time. So we can forget the 1,000 new police; we will have 1,000 new tax bureaucrats in the Inland Revenue Department. That is just what this country needs—not! It is just what this country needs—sure! What this means is more bureaucracy and more taxes paid to pay for this Government to be able to give people back some of their own money.

What we do not know is who will be eligible for this. I would like to ask the Minister in the chair whether all public servants will be eligible for this. Will all public servants on the Government superannuation scheme at the moment be eligible for this? If that is true, then will that not do something to the blowout in the Budget? Will that not actually have an effect? If it is not true, then why are public servants being treated differently from everyone else. Is that true?

I would like to know about the stay-at-home mums. What is in it for them? What is in this Budget for the women whom Ms Street has just said she thinks so much about? What is in it for them? There is absolutely nothing in this Budget for them—absolutely nothing. What they are being told is: “Get ye out to the workforce.” That is what they are being told. We hope these mums are having three or four children, because someone has to have three or four children. We have to have a decent population in this country. Those people need to be praised and they need to be helped. They do not need to pay for this Government trying to give a tax credit to people who are saying they do not even have enough money to buy into the scheme.

Most people, unfortunately, do not earn enough at the moment. What we have to understand is that most workers in New Zealand get about a third of what they would get in Australia for doing the same job. That is what they end up with. All this Government wants to do—instead of looking to the future and saying: “Let’s try to grow this economy.”—is to grow the Government. We now get $20 billion of taxpayers’ money going into the Government—$20 billion more each year than we had under the last National Government in 1999. That is a huge increase, and most people in this country are finding it very difficult to cope.

We do know that the rich have got richer and the poor have got poorer. The people who are now becoming poor are the people with a couple of kids—two, three, or four kids, or people who have one income, or even two incomes for one person. Those people are our new poor. They have become the new poor under a Labour Government that likes to stand up on its hind legs and talk about the rights of women. Well, what about the rights of women who do the work, who look after the children, and who help us have a better society because they work with their kids and are good mothers? What about them? There is absolutely nothing for them under this Government.

The only thing they should know, of course, is that Michael Cullen has hinted that this will lead to some sort of means testing of national superannuation. He hinted at that yesterday when he spoke about how that would help to ensure that there would be enough money for national superannuation. Why would it help? These are supposed to be individual savings plans. Of course, it will help only if this Government has in its mind that it will means test national superannuation. That will utterly destroy superannuation for those stay-at-home mums, and destroy superannuation for people who have been on disability benefits for years because they are invalided and really cannot work. Means testing will destroy superannuation for the poor people.

SHANE JONES (Labour) Link to this

Tēnā koe, Mr Chairperson. [ Interruption] The nation is rejoicing, from the tail of the fish to the head of the fish. Even in Horowhenua people are happy. For their infrastructure, their bridges, and their roads, improvement is on the way. We will not see much of that member in the House; he will have to employ someone else on, hopefully, good wages to milk the cows—unlike Mr Bennett, who has been feeding off the udder. That is an example of massive infrastructure development.

I have been in and out of the Chamber to take toll calls from people up and down the country who are totally overwhelmed by the potential to improve savings, improve the efficiency of firms, and improve the prospects of children and grandchildren. These people are waiting with bated breath to hear how refined this product will actually be after it has been sifted by, and shepherded through, our Finance and Expenditure Committee. Like all proposals, obviously, the policy will be passed here, but there is a need for further detail. The proposal is based on vision, and the vision will be strengthened through attention to detail. I could not think of a better committee to undertake that role.

I hope the members on the other side of the Chamber rise to the occasion and toss away this hyperbole, this irrelevant rhetoric, and bring real skills to the debate. I accept I may have been a tad irreverent in describing Mr Bennett as constantly lacquering his head with pottles of oil. He has just come back; he now has powdered his nose. We know that, and that is why every contribution he makes in an attempt to undermine our mātua Winston Peters is an irrelevancy. He has been mothered on milk he did not buy.

I will say that at least those members towards the back of the Chamber make an attempt to contribute constructively, but they overlook the fact that this debate is about a grand narrative that is moving Aotearoa forward. They seem to believe that the way to improve the roads is to constantly study the shape of the spark plug. No, if one wants to lay down a better trajectory, one has to step out of the minutiae.

LINDSAY TISCH (National—Piako) Link to this

The Taxation (KiwiSaver and Company Tax Rate Amendments) Bill will make businesses $1 billion worse off than they are today. You see, what is happening here is that although the corporate tax rate will be cut from 33 percent to 30 percent, the cost of implementation for an employer will be higher than that 3c in the dollar cut. Where is the fairness and where is the equity in that? This measure is a tax increase. It is a compliance cost increase for small business. We all know that 95 percent of the businesses in New Zealand are small to medium sized enterprises. There are 300,000 businesses that fall into that category. Sixty percent of those businesses will not benefit from the corporate tax rate reduction. Sixty percent of 300,000 is 180,000. One hundred and eighty thousand small to medium sized businesses—that is, businesses employing fewer than 20 people—will get no actual benefit whatsoever. Why? Because they are either sole traders or partnerships, they will miss out.

However, those businesses will still have to contribute to an employee’s KiwiSaver account. If an employee decides he or she wants to opt into the KiwiSaver scheme, then deductions will have to be made. As we have seen, the real hoax in yesterday’s Budget is that there will be a compulsory employer contribution. Who thought of that? The real hoax in this Budget is that businesses will carry the can. In fact, it is—

Hon TONY RYALL (National—Bay of Plenty) Link to this

I cannot help but agree with Lindsay Tisch’s contribution. I thought it was right on the money—and I will tell members about the money. New Zealanders are not going to get any of it.

I am strongly opposed to these proposals in Part 2 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Bill because Government members have not answered the three important questions I asked them earlier this morning. I have listened to this debate, and I have not heard one member opposite answer any of the three key questions that I asked earlier.

The first question I asked was how a low-income person in Ōtara benefits from this bill. If he or she cannot afford to save anything, what is benefiting that person in this bill?

TIM BARNETT (Senior Whip—Labour) Link to this

I move, That the question be now put.

NATHAN GUY (Junior Whip—National) Link to this

I raise a point of order, Mr Chairperson. Standing Order 137(3) states: “The Speaker may accept a closure motion if, in the Speaker’s opinion, it is reasonable to do so.” The reason I raise this point of order is that we are in urgency and Part 2 is mainly around KiwiSaver, about which the Opposition has some big concerns. According to my records, we have had 10 or 11 speakers, and we have many more to come. So I would ask that you rule accordingly, Mr Chairperson.

DAVID BENNETT (National—Hamilton East) Link to this

Yesterday out of this Budget we got one phrase that has not been in the papers yet, and that is: “Is that it?”. Is that the last Budget from Michael Cullen? It is. Is that the last Budget from Helen Clark? It is. Is that the last Budget of the New Zealand First – Labour coalition? It is. Is that the last Budget where New Zealanders will be kicked around by this Government? It is, because New Zealanders will stand up now and want a Government that will not tell them what to do. They will want Budget legislation with a Part 2 in it that actually reflects what they want to see happen. They will want a Part 2 that will deliver for all New Zealanders.

Those people in New Zealand who work hard and try to make a living will be, under this Budget, put to the sword by this Labour – New Zealand First Government, which has no recognition of hard-working New Zealanders. This is a Government that thinks it knows best. It thinks that by taking money from people, then spending it and giving it back to them, it knows better than those individuals who should have had the money in their hands in the first place. This is a Government that thinks it knows what people should do. It thinks it knows how people should live their lives. It thinks it knows how people should spend their money. Part 2 should not be like that.

Part 2 should reflect ordinary New Zealanders’ ability to live their own lives, determine their own destinies, and have some tax cuts they have been promised over many years—tax cuts we were told about, and tax cuts to the value of chewing gum that have now been put away. It is no good giving people “chewing-gum” tax cuts now, because they are too small. We will have to wait till next year to get any tax cuts, will we not? People will have to wait until the “Budget of all Budgets” in election year—the Budget where there will be a pay-out to buy the votes of people who have saved up for 9 years. That is what New Zealanders will have to wait for to get tax cuts, and that is simply not good enough.

Hon LIANNE DALZIEL (Minister of Commerce) Link to this

I move, That the question be now put.

The CHAIRPERSON (Hon Clem Simich) Link to this

There will be one debate on the title and commencement, in which contributors may, if they wish, summarise all other aspects they have covered. So there will be one debate and two questions.

Hon DAVID CARTER (National) Link to this

I want to cover one or two points that were raised by Labour members during this debate on the Taxation (KiwiSaver and Company Tax Rate Amendments) Bill. The first point I would make to the Committee today is a comment on the rather amazing contribution from Shane Jones. Shane Jones said that when this legislation goes to the Finance and Expenditure Committee, his select committee, the committee will refine it. The reason that comment needs to be exposed today is that he is indeed chair of the Finance and Expenditure Committee, but we are here in urgency pushing this legislation straight through the House because the Government does not want it to go to the select committee. So Shane Jones should get up to speed and realise that in fact he will not have the opportunity to refine this legislation before the select committee.

The next time this legislation comes before a select committee Shane Jones will not be chairing the Finance and Expenditure Committee; the next National Minister of Finance, the Hon Bill English, will be the one who has to send this back to the select committee to get it tidied up, because that is the first opportunity it will have. Shane Jones certainly will not be the chair of the select committee, and I suspect he probably will not be a member of Parliament. Given the way that Labour is rating at the moment, it will not get many of its list members in here, at all.

The second point I would make is to take this opportunity to thank Mr Dunne for answering my questions. A number have been raised throughout the debate and finally I had an answer from Mr Dunne to my questions about whether this would increase the size of the bureaucracy of the Inland Revenue Department. I accept the answer that Mr Dunne gave me that although the scheme is complicated, the department will not need any more staff. The question then arises, if this is complicated and will put a lot of work on to the department’s employees, what are those employees doing now that the department has all this spare capacity? I look forward to an answer from Mr Dunne.

The third contribution I will remark on was the most amazing one of all, from Ms Maryan Street. One or two of the questions raised by the National Party throughout this debate asked what is in this for low-income New Zealanders. Do members know that in the Chamber this morning Maryan Street said that low-income wage earners do not need $10 to $20 a week.

Hon MARIAN HOBBS (Labour—Wellington Central) Link to this

I rise to support this legislation because I find this a very interesting Budget and a particularly interesting scheme. Budgets can make some changes to how we live as people, and I want to take members through, in a sense, the experience of my parents and their behaviour, and my behaviour in terms of debt.

My parents lived, through the Depression, and consequently they never ever borrowed to buy something. They saved before they bought a fridge; so we did not have a fridge until about midway through the 1950s. We did not have car until about the 1970s; and that was a Skoda, and that was doubtful! They would never ever do things like borrowing to buy something, because they were brought up very strongly with this idea that one saved money before one went out and spent it.

I have a look at myself and I find that if something goes wrong with the dryer, I will very easily take my credit card to the company and buy a dryer, on the credit card, and then pay it off. That is so much the reverse of what actually happened in our parents’ lives. That is what this Budget and this bill are about. It is about returning us to a different way of acting, to a way of responsible acting that accumulates money in this country, instead of making us always subservient to money that we have to borrow overseas.

This is a Budget about building capital for this country, and I would have thought the capitalists who are so good at borrowing capital from overseas and who sit on the Opposition benches might be interested in this debate. [Interruption] I cannot hear them; they are yelling so much. This bill is about bringing discipline, self-pride, and security to both individuals and this country’s economy. It is something that we desperately need to do.

I have been out and about today, and doing a radio programme with some economists. Have I found there has been a real buying of this legislation? You bet I have! The response from young people on the streets of Wellington has been: “A $20 a week tax cut disappears very fast—four lattes, four bottles of beer. But $20 from the Government, going into my savings account instead of a tax cut, is money that will grow. It is money that will grow for the country’s capital development, and money that will grow for me as a person. I would much rather have money saved than have money squandered.” That is the difference in what is being offered here.

People on the other side condescendingly talk of the poor not being able to save. At the moment the “poor”—the people they refer to so blissfully at the Otara market, which I do not think they have ever been to—are the people they refer to as not wanting to save. People do want to save, and people want to find a way in which they are supported in their saving. This bill builds on that scheme and gives an incentive to save. The Opposition would rather give that incentive to be spent right now, rather than saved. It is not a question of starving or saving, because with this legislation the same Government is returning money to those very people whom the Opposition refers to as starving. They are the people who will receive better money, because they will pay less when they go to the doctor and pay less for prescription charges, and those aged 25 to 44 are the last group in this respect. That is money that is being saved and it is being awarded from this Budget. Therefore, it is not a question of starving or saving; it is a question of supporting people into saving, and supporting people into security for the future.

I find it absolutely hypocritical to hear members opposite talk about a sound economy. I must say it is always really interesting that whenever one is on the hustings with the National Party people they always say, very quickly: “It’s all right; for those roads we’ll just go out and borrow.” Where would they be borrowing from? It would be from overseas. Who has to pay back the money for that? The taxpayer has to pay back the money, borrowed from overseas. This KiwiSaver is about growing capital in our country and growing security.

JOHN HAYES (National—Wairarapa) Link to this

I have heard some hypocrisy in my time and that last speaker definitely wants to take us back—

CHRIS TREMAIN (National—Napier) Link to this

Before getting into the guts of the bill, I will just respond to Marian Hobbs across the other side of the Chamber. She is a member for whom I have a lot of respect and time. She told us a very nice story about her family, and about how they had learnt to save after the Depression and put away every dollar. But that is kind of rich coming from a member of a Government that for the last 7 years has spent an additional $20 billion—$20 billion. This year in this Budget—I am not talking about saving—another $3.8 billion is being spent. I just think the member needs to take that into account before lecturing members on this side of the Chamber about saving.

I also apologise to the Chair, Clem Simich, for the disparaging remarks from Mr Jones earlier on about my colleague David Bennett and various hair creams needed. I trust, Mr Chair, that you did not take that personally. I am just apologising on behalf of Mr Jones.

I want to take a short call and address the Minister in the chair today, Mr Dunne. I have three questions for him; I would like him to take a call and come back to me on them. The first issue concerns the tax cut for companies and, more important, the businesses in this community that will not achieve that tax cut. They will be lumped with a cost on their businesses. There are three areas I want the Minister to address if he takes a call. There are 118,000 small to medium sized enterprises that are not corporatised but that are sole traders or partnerships. They will not get a reduction in the tax rate but they will have to meet the employer contribution. I understand that there is a $20 credit for each employer, and that that covers only up to $500 per week. But the average wage in this country is not $26,000; it is $45,000. How are we going to sell this policy to those 118,000 small to medium sized enterprises?—I am sure there are a number of them in the Ohariu-Belmont electorate and certainly many in the Napier electorate—because they will get an increase in costs.

The next area I would like the Minister to take a call on concerns exporters. I spoke to the Minister previously about a number of the exporters in the Napier electorate who at this point in time are not making a dot. They are faced with an economic climate in which it is very difficult for them to make a dollar. They will not have a tax cut but will be faced with the additional costs, above $500 per week, of an employer contribution. That cost will rise by 1, 2, 3, and 4 percent over 4 years, so it will be an additional 4 percent cost on their businesses. The Minister, Mr Cullen, told us that it is not a problem and that those costs will be negotiated as part of ongoing wage rounds. The problem is that the policy has become compulsory now, not optional. It is negotiable when it is an optional policy, but as soon as it becomes non-optional policy it will be off the negotiating table.

We need to answer to the 118,000 businesses I talked about, to exporters, and to all those other businesses that have large labour costs that are much higher than their profit margins. For the majority of businesses in this country—as Mr Woolerton knows—the cost of labour is way higher than the profit at the bottom. On the one hand, the Government is saying that there will be a 3 percent cut at the bottom—if the business is making a profit, then that is good—but why a 4 percent increase over 4 years in the top line of expenses? I cannot see how that is a benefit to those businesses. I ask Minister Peter Dunne to take a call and let this side of the Chamber know how that sting in the tail will benefit those businesses I have talked about today.

NATHAN GUY (National) Link to this

Here we are today in urgency, and on this side of the Chamber we have about a dozen National MPs, while on the other side of the Chamber we can see two. That is how seriously Labour is taking this legislation—

DARREN HUGHES (Labour—Otaki) Link to this

To assist my constituent Mr Guy, I seek leave to table a document indicating that the National Party supports the KiwiSaver scheme.

R DOUG WOOLERTON (NZ First) Link to this

That contribution from Mr Nathan Guy was another of what I call the National Party financial adviser speeches. The people who will be better off under the KiwiSaver scheme, the people who will be advantaged by it, are the people who just know they need to save. They have been unable to save hitherto, because there were no incentives, no help from the Government, and no help from employers or anybody else. But those people know they should save. It saddens me that the National Party does not give people, apart from the wealthy, the credit for wanting to do what they believe to be the right thing for themselves, for their families, and, in fact, for the country. People do want to save. They do want to put money away for the future. They do want to have the security that comes from doing that. But hitherto they have been absolutely unable to do so.

The KiwiSaver scheme—especially the enhanced KiwiSaver, which we are talking about now—enables people, for just about the first time ever, to save. We cannot stand here as New Zealand First and not applaud that. We have made an issue of the need for savings from the time we first came to Parliament, and we will continue to do so. We are proud to support this bill, and we do not take any heed of the manipulations that the National Party thinks people will have to go through in order to decide whether they will be part of this scheme.

I want to attend to the issue of 50 percent participation in KiwiSaver, which is being made a lot of. It has been said people cannot afford to participate in KiwiSaver and will not participate, and, in fact, only 50 percent of people will participate. The community is just not divided up like that. There will be a time when people who do not participate in the initial stages will participate. They may not get all the benefits that early participation will give to anybody—we all know the rules of compounding interest—but they will be able to participate at some stage. It is not right to talk about only 50 percent of people participating in KiwiSaver, then, in the next sentence—or in the same sentence, many times—to talk about communism, compulsion, and our socialist regime. If there was compulsion, people would all be in KiwiSaver. I do understand that some members of the National Party have taken the time to at least say that the compulsion component they are talking about is on the employer when the employee decides to participate, and that is certainly true. But one cannot talk about a 50 percent take-up on this issue and then talk about compulsion in the same breath, because that is just not credible.

We in New Zealand First have talked for years and years about the issue of encouraging saving. I have congratulated Mr Dunne before; I will do so again. I will also congratulate the leader of New Zealand First, its deputy leader, who is here, and—