Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Bill

Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this

It is with great pleasure that I move, That the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Bill be now read a third time. What a fun time we have had in the House since about 5 o’clock yesterday! The National Party started off looking like a bunch of rabbits that had just been rolled over. Mr English told National members not to promise anything, because Dr Cullen had actually spent up to the limit. That line was held to very strictly by National Party members for at least 10 to 15 minutes of the debate; they could talk about anything else, but they could not make promises. But then Lockwood Smith PhD took over the running of the campaign, and, suddenly, National Party members were fiscally camping it up all over the place as the debate proceeded from then on. He is the man who staunchly opposed the Working for Families package, saying it was a terrible insult to New Zealand families. Now, it is pretty good, and the National Party is supporting the enhancements in this particular bill. Before we had this bill, he said that Working for Families was an insult to the average working New Zealander—an insult, a terrible thing.

We have learnt that National Party members have an obsession with cheese. I get the impression—I thought it was only Gerry Brownlee, but apparently it is all of them—that their every spare penny is spent on cheese. And they eat it! That party over there is the “Bigger Block Party”. When something goes up in price, people should buy more of it. That is the attitude of those members towards family budgets. People should not buy chicken, fruit, veges, or something else that has not gone up in price; they should buy more cheese. That is those members’ approach to life.

Throughout this debate, we have learnt some wonderful things. While National Party members have been arguing away in here, and, indeed, have been fighting to the death a bill they support, right down to the final moment—and they will be gone by lunchtime today; they will go off to explain to people that, in fact, they support this bill to the death, and will continue to do so—Mr Key has been out there giving interviews. Mr Key giving an interview is always an exercise in watching the changing picture as it moves along. In the immortal words of John Campbell, he is “as slippery as a snake in wet grass.”, unable to give a clear answer on anything. Mr Key has given quite different answers from the answers that Dr Lockwood Smith is giving. Dr Lockwood Smith tells us that this tax package is nothing like big enough. It has to be much bigger to satisfy Dr Lockwood Smith; at least three blocks of cheese have to be in this tax package, for Dr Lockwood Smith to be satisfied. But the economists are saying that the fiscal package is a bit too stimulatory.

Dr the Hon LOCKWOOD SMITH (National—Rodney) Link to this

We would have thought that in that 10-minute third reading speech on the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Bill, Dr Cullen may have just said something in defence of his tax cut package. Did he say anything, at all, to defend his package? Not a thing! He just gave personal abuse. You know, it shows that he does not actually believe in it, at all. In fact, if Labour were not so far behind in the polls, we would not be seeing this tax cut package, because Dr Cullen does not believe in it. If he believed in it for one minute, he would have defended it and explained why the structure of the tax cut package made sense—why it was the best way to restructure income tax in New Zealand. We would have thought, if he believed it, that we might have heard something like that.

There was not one word defending that tax package, because we all know that personal income tax cuts cause Dr Cullen to choke. He can hardly say the words, and we know why: Dr Cullen genuinely—and I do not say this unfairly—believes that he knows far better how to spend our money, New Zealanders’ money, than we do. Ordinary New Zealand people are far too stupid, according to Dr Cullen, to be trusted with their own money. Dr Cullen knows far better how to spend it! Of course, the Rt Hon Helen Clark takes the “Labour Government knows best” approach. I think Labour members genuinely believe this; they think they know how to spend our money so much better. All I can say is that New Zealanders are sick of it. They are heartily sick of this Government telling them how to run their lives, how to raise their children, and what to have in the school tuck shop—all those things. New Zealanders are sick of this Government telling them how to lead their lives. Taxes have a lot to do with it, because people do not have the freedom to lead their lives the way they want to when they are overtaxed. Right at the heart of freedom is the issue of excessive taxation—not enough money being left in people’s own hands for them to actually enjoy freedom in their lives.

People find it an insult, after 9 years of a Labour Government, to have a tax cut package, just a few months before an election, that gives them the equivalent of a block of cheese. That is just so insulting, because New Zealanders are seeing—if they look at these Budget documents—a Government that has taken money from ordinary New Zealanders, to the point where ordinary New Zealanders struggle to fill the car with petrol, struggle to pay for the groceries at the supermarket, struggle to get on with finding the money to buy the clothes, the uniforms for the kids for sports teams, and that sort of thing, to enable the children to take part in weekend sport. They struggle with all those things, while Labour has been lining its own pockets—the Government’s pockets. If we look at the Budget documents we see the Government has been taking money from New Zealanders and putting it in the Government’s coffers over these last few years, in a way that will make New Zealanders angry. The Government has been lining its own pockets, at the expense of ordinary New Zealanders and they are totally sick of it. It is little wonder that so many New Zealanders will be angry when we get a block of cheese in October this year and have to wait 18 months to get any more tax relief from this Government, and that will be just half a block of cheese.

It is interesting that the current Minister of Finance, Dr Michael Cullen, was an Associate Minister of Finance when Labour was last in trouble in 1990 and going out of office. He was also Minister of Social Welfare in 1990. Those of us who were around at that time remember the Budget in 1990, when Dr Cullen and his colleague David Caygill, the Minister of Finance, came into this House and presented a Budget that claimed there was an $89 million surplus. From memory, they had in their supplementary estimates something like $160 million. Before that election in 1990, Dr Cullen, who is the current Minister of Finance, had, without appropriation from this Parliament, far exceeded the provisions in that Budget for supplementary estimates. He and Phil Goff, who at the time was Minister of Education, simply spent money, illegally, to try to win that 1990 election. I say that, without any sort of hesitation. I can say that without hesitation because I took over as Minister of Education from Phil Goff, and I had to make legal his illegal spending as Labour desperately tried to win the 1990 election. The very first contact I had with the Ministry of Education was with its financial controller. Within 2 or 3 days of becoming Minister of Education he came to my office and told me there was stuff I just had to know. He laid out in front of me the spending by Phil Goff, for which he had no authority whatsoever, to try to win votes heading into the election. Dr Michael Cullen did the same thing.

That is why I was so interested, in this tax bill, to examine whether it covered the Government’s full promises around Working for Families, and what we discovered was it does not. Working for Families has four basic tax credits; this bill indexes only two of them, and it does not address the in-work tax credit and theparental tax credit. We discovered during the Committee stage on the bill that the Government currently has a review, and that review reports before the end of June. This matter will be in front of Cabinet before the end of June. Does this Budget provide for any increase in in-work payments or parental tax credits under the Government’s flagship Working for Families policy? It says, in fact, on page 144 in respect of Working for Families that the review of rates is an “unquantified risk”. In other words, there are no provisions in here for it. It is an unquantified risk. This Government, I will bet, if it is behind in the polls after this Budget and heading towards the end of June as the review of the Working for Families tax credits—the in-work payments and the parental tax credits—comes up, will take no notice of the fiscal provisions in this Budget. The Government will just spend the money, if it is behind in the polls. We have seen it before. Dr Cullen and Phil Goff, in 1990, when Labour was last on its way out, just spent the money without legal authority. I bet the Government will do it again, if it is desperate.

That is why New Zealanders cannot trust this Government. They are sick to death of this “Big Government knows best” approach from Labour. They are sick to death of being told how to run their lives. They want some financial freedom to get on with their own lives, and that will not happen under this Labour Government because this Labour Government will always tax them far more than is necessary, to enable these politicians opposite us to do what they want to do. It is time New Zealanders had the chance to be treated with respect—to be treated by a political party that values freedom and understands the value that New Zealanders put on their freedom. Come this next election, if National can win that election, New Zealanders will once again have the chance to enjoy the privileges of freedom from excessive taxation. It will be the last of the “block of cheese” insults.

Hon PAREKURA HOROMIA (Minister of Māori Affairs) Link to this

Well, well, well! It was very interesting to listen to the previous speaker, Dr the Hon Lockwood Smith, talking about going back on pledges, because in that same year—1990—he made a promise to students that if he did not get rid of interest rates on student loans and halve them, he would resign. Did he? No, he did not. He had to climb out of a window to escape the students. He is still here now. That is what the National Party is known for in the sense of the claptrap summary we heard yesterday by its leader. It was insincere, and that member in his speedos does not want to remember that. That is the truth.

This Budget will go down as one of the finest time-breaking, platform-setting Budgets in this country’s history. Why? It is at the top of what this Government has done well in the last 8 years. One just has to understand basic financial ideology to understand that it is full of wisdom and carefully crafted. We have made sure the country does well, going forward.

Mr Chris Tremain talked yesterday of his fear when people keep talking about the past. I want to make this a “Do you remember?” speech. I want Mr Tremain to understand. Does anyone remember by how much the previous National Government, in its 9-year reign, increased the minimum wage?

JUDITH COLLINS (National—Clevedon) Link to this

There leaves Parekura Horomia, one of Labour’s best members. Next time I will ask for his speech to be delivered in Māori so that we can understand it; I could hardly understand a word he said.

One of the most disappointing things about this Budget is that it will not address any of the issues that New Zealanders think are really important. National members will, of course, vote for the tax cuts today, because we do not believe that Labour will go ahead with them unless we do. That is one of the really important things that New Zealanders want to talk about. This Budget has been called the “block of cheese Budget”, but in the good old days when Norm Kirk led the Labour Party and when Labour said it represented workers—and it did in those days—this would have been called the “cheddar cheese Budget”. Nowadays, under the current Labour Government of Helen Clark and Michael Cullen, we have the “Budget of gruyère cheese”. That is really all it is—full of holes and pretty stinky. That is about it.

Nowadays, Labour members only ever want to talk about the arts and things like that. They want to tell people how to live their lives and how to bring up their children. Labour members want to tell people what they can eat, what they can do, and what they can watch. They say that they will fight obesity by telling people not to eat, and that they will fight child abuse by telling people not to abuse their children, as if somehow that is going to matter.

Unfortunately, there is nothing in this Budget and nothing in the tax package that will do anything about child poverty. Once upon a time in the 1990s the Labour Party in Opposition talked constantly about child poverty. It talked about it up hill and down dale. Labour members said they would do something about the benefit cuts that happened in 1991. And did they? They did not. We can hear the absolute sound of silence from the Labour benches. Those members did nothing. They just talked and talked.

What did Ruth Dyson say 2 weeks ago, when she was told that this year we had had the biggest drop in employment in one quarter in the last 19 years? She said: “Oh well, I don’t think that this is bad news at all, actually.” That is what she said. That is what the Labour Minister of Social Development and Employment, which is what the Labour Government now calls it—or social welfare; I will put it into plain language—said about our having the highest drop in employment in one quarter in 19 years, this year. That is what she said. When I asked her whether she stood by that statement, hoping that she might say she should not have said it, that it was a silly thing to say, or that she was misrepresented, she said yes. She said that she stood by that statement. A couple of days later I asked her again and she still said that she stood by it.

Did Ruth Dyson care about the people who have lost their jobs at the meatworks recently? No, she did not care about that, either. She told them that they could go on a benefit. That is what she said. Did she go down to see the 300 Sealord workers who have been told that they are losing their jobs? No, she did not.

R DOUG WOOLERTON (NZ First) Link to this

I was looking forward to the delivery of the Budget and, more than that, I was looking forward to the debate afterwards. I thought we would see something that has become a bit of a tradition in this House, and it is something that we subscribe to. We said what we would like to see in the Budget. We put out our wish list, and I thought it would be interesting to see the alternative Budget from the National Party. I honestly and truly believed that would happen, because that is what has traditionally happened in this House in an election year. The Opposition has come forward and, to its best endeavours, put out an alternative Budget. If we had had that, then we would have had a truly interesting and meaningful debate that would have filled the whole of this Friday. But we have not had that from the National Party, and I think it is sad.

However, I am pleased, and New Zealand First is pleased, to see that National has at last backed a tax bill that has been put forward by the Labour Government. That is a first in 9 years and I think it is great. I hope those members keep on doing that, because New Zealand First has said on the record many times that we will support tax cuts from whomever proposes them—and we have done so.

Obviously, we have said we would have liked to see some incentive for our exporters. Everybody knows that following the problems in America and around the world, things are in a bit of a slow-down mode. We believe that the people who can get us out of that situation are exporters, who in this country are mainly farmers. We believe we should have seen incentives provided through the taxation system to assist them to get up and help us. We would have liked to see that, and we said so. We would have liked to see the first $5,200 of taxpayers’ salaries be tax-free, and we will be pursuing that in future years. We put those things forward, hoping that we would be able to compare proposals from the various parties, but we have not been able to do that. We also said we would have liked to see, and we will be pursuing this also, a reduction in the rate of GST to 10 percent—2.5 percent being taken off. We think that would be fair, would not be costly, and would not be administratively difficult. We would have liked to see that.

However, we have seen some things that we are very happy with. We have seen the relativity of superannuation for our seniors retained. We have had promises that it will be increased, and that is fantastic. We have also seen, and we applaud this because it is our initiative, an undertaking be given that if the price of electricity goes up because of the emissions trading scheme—and we will see whether that gets through, in the fullness of time—there will be some support for those people who find themselves in difficulty. We think that is the way we should go throughout this economy. Nobody should be disadvantaged, and the producers, the people who go out and get our markets and earn our money, should be looked after.

We have not heard about any of that from the National Party, either. That is tragic, because what we needed to know today, and last night, from the National Party is how much it would give in tax cuts to the earner on the average weekly wage. If this Budget is as bad as the National Party says it is—and almost every one of its speakers on this issue has said the tax cuts are too little, too late—then I ask how much it would give. Is it not fair that the public should be able to assess a group of people who put themselves up as Her Majesty’s main Opposition—that is what those members say they are—and who say they are looking forward to an election? I ask why they are afraid to tell us the extent of their tax cuts.

TE URUROA FLAVELL (Māori Party—Waiariki) Link to this

Tēnā koe Mr Deputy Speaker; kia ora tātou katoa. The tax cuts programme is apparently all about fairness and social justice, according to the Minister in his speech earlier. So the question is: what does nearly $11 billion worth of personal tax cuts mean for the wallets of most New Zealanders?

We know in dollar terms that high-income earners will get back 2½ times more tax dollars than those working full-time on the minimum wage, and around 3½ times more tax dollars back than families supported by benefits. So although someone living in poverty will get an extra $12 or $15 or so per week, someone earning $80,000 will receive around $55. I suggest that many New Zealanders would say “Big deal!” to that. With price rises and so on, these days $12 will disappear pretty fast. You see, every day of the week newspapers have headlines describing the scourge of poverty affecting an increasing number of New Zealanders. Insufficient disposable income, substandard housing, inadequately nutritious food, and unequal access to health care all contribute to an increasingly desperate state of health.

This Budget has been a long time coming, and the drive for personal tax cuts has pretty much dominated public discussion for years. So the question is: who gains the most from the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Bill 2008? Where will the bulk of the $10.6 billion go?

The Minister has been upfront about the fact that personal tax cuts have been specifically designed not to exacerbate inflationary pressures in the economy. Those are flash words, but what do they actually mean? I think they mean that the money has been directed more to those who will be able to save money rather than to those who will spend it, given that consumer spending causes inflation to increase. We know that this Budget is a sweetener for Generation Y. The bulk of the $10.6 billion will also go to those middle-income earners—those classic swinging voters—on the flawed assumption that they will be more likely to save than to spend, and that giving money to the poor is pointless as they will just waste it. In fact, the poor are far more likely to repay debt than to go on a consumption blowout.

The question that everyone has been asking is: where is the relief for the poor, for Māori, and for Pasifika in this great tax cut package? Where is the tax cut package that will mean that Māori and Pacific Island women whose lives are currently tied up in gambling will have another pathway forward? Where is the real and meaningful tax relief to confront all the other social hazards that are symptoms of poverty, such as the fact that Māori and Pasifika people are especially vulnerable to unethical lending practices? Where is the genuine tax relief that will make a difference to Māori and Pasifika families who are disproportionately affected by reduced housing affordability and, as a consequence, are most likely to live in inadequate, overcrowded housing? Does this tax bill do anything to make a difference to the demands on the Auckland City Mission, where 50 percent of the users of the food banks are Māori, with Pasifika making up another 25 percent?

The tax changes announced today will not eliminate this poverty. We in the Māori Party really do want to see this tax cut programme come in and start to make the difference we urgently need in our personal tax system. But we are genuinely torn by our knowledge that it will not make a tangible difference to those who suffer—those we may refer to as te pani me te rawakore, those who are the most vulnerable members of our community. It is because of what appears to be crumbs from the tables of those of us in this House who are privileged, that we abstain on the basis of principle. We are referring to those whose lives were changed for the worse by the “mother of all Budgets” in 1991. This House will remember that Budget as one that reduced the income of beneficiaries by 24 percent. It was a Budget in which the economy suffered, and the social impact on New Zealanders was immediately felt in health, education, and social services. For the last 17 years, this group of New Zealanders have been struggling to get back on their feet.

We know that this group of New Zealanders were looking for a break, yet just weeks ago the Minister of Social Development and Employment announced in the now infamous Pockets of significant hardship and poverty that beneficiaries are now comparatively worse off than in 1991. We now have a situation where the Budget legislation that was passed by this House in 1991, which slashed benefit levels and forced New Zealanders into recession, has still not been rectified in 2008. What is the big relief in store for those who are most in need? When we really drill down into the detail of the 2008 Budget and look at the breakdown, we find benefit reductions: the unemployment and emergency benefits by $39 million, the sickness benefit by $13 million, the widows benefit by $3.5 million, and special circumstances assistance by about $635,000.

It has been disappointing that much of this Budget debate has been reduced to some comments of ridicule about a bigger block of cheese. As boring as they may be for the purposes of debate, bread, butter, milk, and cheese are vital elements of the daily budget for far too many people. It is in the absence of such basic provisions, for instance, that people are forced to ask for help when they are in severe and significant hardship. It is in the absence of such provisions that people may be catered for through special circumstances assistance—assistance that has now been cut. That appropriation is to assist people in financial difficulty: with clothing allowances, domestic violence and witness protection relocation, home help, civil defence payments, civilian amputees assistance, and other forms of welfare assistance. But all have been cut, reduced, diminished.

It is probably no wonder that cerebral palsy sufferer Helen Capel thinks that beneficiaries are the forgotten people. It is no wonder the Salvation Army has come out and said that there is nothing to support the hard-end group of people who are really suffering. It is no wonder that economist Susan St John has described people who cannot do paid work because of a disability or family responsibilities as being “totally invisible”. The 2008 Budget could have introduced a tax change to restore benefit levels to what they were before the “mother of all Budgets”.

Some of the speakers in this debate have asked what some of the solutions are. Here are a few, and there are more on the way. The Māori Party believes that lower-income people should carry less of the burden proportionately than those on higher incomes. We know that 1.8 million taxpayers are on incomes of $25,000 or less. It is this group that should have benefited from tax cuts, not the other way around. We need to pledge to end child poverty in terms of all poverty measures by 2020, and one part of this is to introduce an official poverty line so we actually know where we are. We could follow the lead of the New Zealand Council of Trade Unions and introduce a new minimum wage of $15 an hour. Food could be exempt from GST on the grounds that it hits low-income people struggling to buy food with the same burden, per dollar, as rich people. It makes the difference at the checkout and the petrol pump.

We need to address Māori unemployment. The fact that unemployment rates for Māori have shot up to 8.6 percent, and for Pasifika peoples to 8.2 percent, compared with 3 percent for Europeans, is really a national shame. One way we could achieve our objective is by encouraging Māori enterprise and encouraging Māori iwi economic development, not just by setting up another Crown agency to call the shots. Why not give us a break? Māori innovation could be a major contributor. Let us determine the solutions; this House might well be surprised.

This is just the start; there is much more to come. The Government could have done this—it could have been bold, and it could have made a difference. Instead, as others have said already, its tax cut package has won some favours and perhaps gained some ground, but for some New Zealanders it has been merely more of the same. This is a Budget where they are forgotten, where they are invisible, and where they continue to suffer.

Mr DEPUTY SPEAKER Link to this

The Labour call is split; there will be 5 minutes for each member, with a bell at 4 minutes.

Hon DARREN HUGHES (Deputy Leader of the House) Link to this

I am pleased to rise in support of the third reading of this bill, which clearly sets out the plan for the future that the Helen Clark Labour-led Government has, starting with a 3-year tax programme going forward, starting on 1 October this year. It is a significant package that the Minister of Finance has outlined to the House. There is one thing I have been thinking about, though, as we have been debating this issue of tax cuts over the past day. It is that after the last general election Labour came to office with some very clear priorities to try to change New Zealand for the better. We said we wanted to make KiwiSaver a priority in this term. We said we wanted to make a priority of lowering the cost of going to the doctor and of picking up prescriptions for ordinary people in our country. We said we wanted to take the interest off student loans for our young people starting out, so that they had the best start in life. We also said we wanted our babies—our young 3 and 4-year-olds—to get 20 free hours of early childhood education, and that has been the biggest single expansion in the public education system in many, many decades. They were the priorities that Labour brought to the Treasury benches. They were the priorities we campaigned on, wrote in our manifesto, and have delivered through this term of Parliament.

If we look through the Labour Party manifesto, we will not find this bill anywhere in it. The Labour Party did not campaign on a programme of personal tax cuts. But today we have brought to Parliament a bill that delivers in that area, on top of all the other things we have said to the people of this country that we would achieve for them and with them—together. I am proud of that. I am proud we have kept our word on those key social issues and on top of that we bring a tax cut programme to Parliament.

National members, throughout the debate, have not got that simple point. They are obsessed with one policy, and one policy only. None of it fits together, there is no theme, and there is no philosophy. There is nothing to tell us what it is they want to do. All they want to do is cut taxes, for no obvious reason, and no plan has been put forward for it. We heard Dr Smith say that New Zealanders need the freedom to spend their own money, as though somehow the National Party does not plan to charge any taxes at all.

If tax is so terrible, if it is much better for people to spend their own money and not have Governments in the way, let us have no taxes. But, of course, that is not National’s policy. If we take National’s argument and expand it through, it is just a different shade of Labour’s policy. We will have different income thresholds cutting in, and National might have a different rate here and there, but it will still take money off hard-working New Zealanders and spend it on their behalf. As a Government it would still take out about a third of the economy and spend it. These debates that National members are having are absolutely academic, puerile, and silly in trying to argue in that regard.

Labour is putting in a tax cut plan that will cost $10.6 billion over 3 years. That is about the size of the education budget. This Labour-led Government is taking about the same amount that we spend on education for our kids and our young people starting out and returning it to New Zealanders by way of tax cuts. This is a significant tax cut package on top of those key social and economic justice issues that Labour campaigned on and has worked on with other parties in this Parliament in order to achieve.

National members were asked many times what their plan would be. Mr Woolerton from New Zealand First made an excellent point. The Government has put up its programme and it has been voted on by Parliament. Why does the Opposition not put up the mirror of that so that we can have a proper debate on it?

MOANA MACKEY (Labour) Link to this

Like my colleague Darren Hughes, I too am proud to stand to support this bill in the House. This bill is one of a package of tax cuts that the Labour-led Government has delivered over the 9 years it has been in Government. National members have tried to forget that. They are trying to say that this is it and it is not enough. If we put these tax cuts on top of the Working for Families package, on top of business tax cuts, and on top of the research and development tax credits that this Labour-led Government has delivered, we see that it is significant. We have already delivered $4.6 billion worth of tax cuts. This bill adds $10.6 billion over the next 3 years. That is significant. Have National members ever voted for a business tax cut when they were in Government?

CRAIG FOSS (National—Tukituki) Link to this

It is a pleasure to follow the previous speaker, Moana Mackey, who is well known for singing “The Gambler” at the Labour Party conference. Perhaps she will rewrite the song, because the headline on the front page of today’s Dominion Post is “I bet the bank”, and the gambler is Dr Cullen. I thought I should note that.

One thing seems to be lost on members opposite. In the last half-hour or so Government members have started to speak, on the third reading of this bill and on the Budget in general. I do not think any Government member spoke in the Committee stage of this bill, and Government speakers were few and far between during its other stages—except for the Ministers, of course. The key speakers, Dr Cullen and Mr Mallard, have implied that it is all locked in, that it is about absolute power, and that the numbers are so tight that there is no room for any movement—no room for John Key, no room for Bill English, and no room for the Nats to improve upon it. I will let members into a secret: there is a lot of room. But they seem to have missed the obvious. If we are to believe those speeches from Dr Cullen and Mr Mallard, they have poll-axed Mr Goff. If it is true that this Budget leaves the next Minister of Finance with no room to do anything, then if, by some absolute tragedy, Labour wins the next election—a tragic, tragic event—the next Labour Minister of Finance, whoever that might be, will have absolutely no room to move. Dr Cullen has poll-axed Mr Goff, or Mr Cunliffe, who we know has ambitions, or Mr Jones, who is lining up quietly amongst the undergrowth. He has poll-axed his own caucus.

Obviously, his caucus colleagues are sick and tired of being bullied by him year after year about tax cuts, etc. Now he has finally caved into them. Talk about swallowing rats! These tax cuts have to be the biggest, spikiest, dirtiest, ugliest rat that a Minister of Finance has ever swallowed. The rat that Dr Cullen has swallowed to produce this particular bill is of elephantine proportions.

I note that the name of this bill—Labour does not miss an opportunity; I have to give its communications unit credit for that—is the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Bill. Was the 1999 bill that hiked taxes called the “Taxation (Personal Tax Hikes) Bill”? Have any of the measures introduced by Labour all the way through its terms been called the “Interest Rate Increase Bill” because of the effect of the prolific and unproductive spending of Labour and its taxation grab? Labour does not miss a trick. One has to give it the nod there—although I wonder whether this bill has been referred to the Electoral Commission because of its blatant advertising.

As I have said in every single speech on this bill, it is an absolute pleasure to be voting, finally, for a personal tax cut bill. It is a bit of a road to Damascus Budget from Dr Cullen, in view of the big, big rat he is swallowing. But it is all about trust. Quite simply, if I do a quick search of Hansard and have a quick look at the old pamphlets and brochures from the 2005 election and at previous Labour Budgets, then contrast them with the Minister’s Budget speech, I realise that he did not write it. He read it out, and he read it well, but I do not think he wrote it. Someone else wrote it. Perhaps it was Mike Williams, or perhaps it was Helen Clark. At least she is reading the political tea leaves in public.

The previous speaker talked about the railways. A member from New Zealand First—the party of contradictions—also spoke about assets and railways. I will give members yet another reason why National will be voting against the Budget—the Budget, not this bill. I refer them to page 153 of the main Budget document, under the heading “Purchase of Rail and Ferry Network from Toll Holding Limited”. I will read out the last paragraph, and members should remember that the Government has put $690 million of taxpayers’ funds into the railways: “There is a risk that if any differential in the purchase price and the value of Toll New Zealand’s rail and ferry assets and liabilities cannot be recovered through rail operations, a write-down in the Government Financial Statements will be required.” We should remember that this Budget is supposed to be produced under New Zealand International Financial Reporting Standards, so everything is supposed to be market to market. Translated, that paragraph means we paid about $290 million too much, and we have seen that reflected in the share price of Toll Holdings.

This part is blatant. I cannot recall it being mentioned in the Minister’s speech yesterday. The paragraph quoted refers to a “write-down”. It does not state “write-up”. That is an admission right there that we paid too much and the taxpayers have been gouged. At what value will the railways etc. that have been bought from Toll Holdings go on the books? What contingent liabilities are about to hit the books? We know all about the subsidisation of the trucking firm, the leases, etc., and the $50 million that taxpayers have granted, essentially, so that Toll Holdings can buy another trucking company. The document states right there—and this is not a Treasury ideological burp; it has stopped burping now; its Minister has taken on board tax cuts, apparently—that Dr Cullen paid too much.

I will tell members another reason for not supporting the Budget. Between the Budget and today, the 3-year interest rate has gone up 50 basis points. In the Budget speech, time after time the Government tried to show its heartfelt feelings for people suffering because of high mortgage rates. It blamed it on the subprime issue. The previous speaker tried to do that, as well. It is more than the subprime issue, because the starting point for New Zealand interest rates is higher than that of interest rates anywhere else. What a change! From before the Budget to after the Budget, 3-year interest rates went up 50 points, the Kiwi dollar went up 1c, and short-term interest rates went up again.

What else is going on? How is this Budget going to be funded? Well, page 102 of the main Budget document talks about $6.4 billion of additional borrowing—additional borrowing. Dr Cullen is failing miserably his third test in respect of tax cuts. Also, the assets that the Debt Management Office has been looking after—basically, the cash stash; where the Minister has been keeping it all—will be sold, or matured. What will the effect of that be? Billions of dollars of assets coming on to the short-term market will hold, at the very least, interest rates, or send them up—that is, 90-day rates, 60-day rates, 12-month mortgages, rolling mortgages, etc., will stay up and stay up for longer.

If colleagues still do not believe me, they should look at the forecast in the Budget itself and at the numbers that are relied upon to produce those forecasts. The Budget Economic and Fiscal Update refers on page 70 to the 90-day bank bill rate. It was guesstimated at the last update to be 8.6 percent, on average, this year; it is now 8.8 percent. It is expected that it will plummet post this Budget to 8.6 percent. That is miles above that of any other OECD country. And those members shed crocodile tears on TV. It is absolutely absurd. The 10-year rate is staying up. It is not even moving around.

Members should look at the current account and the CPI—the cancer on the future of our economy. It is the result of unproductive spending by this crowd for the last 8 years. The CPI is nudging the top of 3 percent. What does that mean? It means that short-term interest rates will be higher for longer. It means that the New Zealand dollar will be higher for longer—higher than necessary. The Labour Government premium—the Cullen premium on New Zealand interest rates—and the discount on our future growth have been embedded in this Budget. Thank you, Mr Assistant Speaker.

Hon DARREN HUGHES (Deputy Leader of the House) Link to this

The debate has almost concluded. We have heard from almost all the speakers who want to participate in it, but we are due to break at 1 p.m. for lunch. I seek the leave of the House to continue the sitting of the House beyond 1 p.m., until we can conclude the third reading of the debate.

Hon LUAMANUVAO WINNIE LABAN (Minister of Pacific Island Affairs) Link to this

Kia ora, talofa lava, and warm Pacific greetings. I stand with pride to support the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Bill. I am very proud to be part of this Labour Government, which is delivering for all Kiwis. I am proud of all the achievements that our Government has made and very excited about our vision and our plan for the future.

I am particularly excited about what this legislation means for Pacific Island peoples. Our people have made great advances under the Labour Government, with unemployment reducing from 12.2 percent in December 1999 to 4.7 percent in December 2007, and our education and income levels are improving. Pacific people in full-time employment are increasing their hourly earnings at a faster rate than those of any other group, and Pacific children are also increasingly taking part in early childhood education, which is critical for future success. Their increase in enrolments is more than twice that for other ethnicities. The number of our students who leave school with National Certificate of Educational Achievement (NCEA) level 2 or above is increasing. Nearly a third of our young Kiwi Pacific people aged between 18 and 24 are taking part in tertiary education, and their degrees and PhDs have improved hugely. That is all good news, and there is also a lot more.

What is fantastic about our Government is that we are continuing to deliver for Pacific peoples and for all New Zealanders with this bill. We know that households have come under considerable pressure. That is happening in New Zealand and across the world, as nations cope with rising food and petrol prices and with higher mortgage repayments driven up by the credit crunch. Those problems are not of New Zealand’s making, but Labour is committed to managing the economy through these challenges. Because of this Government’s responsible economic management, putting aside money in the good years, we are able to deliver relief when it is needed. Labour is helping Kiwis to cope with rising living costs, without driving the public accounts deep into debt or slashing public services in order to do so.

These tax cuts are responsible. They are providing relief, while there is also continued investment in public services like better hospitals, modern classrooms, cheaper doctors’ visits and prescriptions, and more nurses, doctors, teachers, and police officers. The Prime Minister has also recently announced expenditure of $18.5 million to rebuild Porirua College, which is a decile 1 college and is one of the leading schools in terms of its NCEA results in our electorate. Tax cuts will benefit people across the board, and especially those on lower incomes, our families, and our superannuitants. The lowering of the bottom tax rate will benefit those on the lowest incomes and people in part-time work. The people on middle and higher incomes will also be able to earn more before going into higher tax brackets. Families will also receive even more support through a boost to the Working for Families family tax credit. That investment in our families and in our children is critical, because it is an investment in the nation’s future success. It is critical for people to understand those links in order to understand how important this legislation is. This legislation will make a difference, and we will see evidence of that.

For our Pacific people, this legislation will also mean they will have more money in their pockets. Census 2006 showed that 77 percent of Pacific people earn an income of less than $50,000 a year, so our people have a lot to gain from this legislation. A full-time Pacific worker on the average wage will now receive an additional $16.54 a week, and that is great. It is an improvement, and it is really appreciated. Our tax cuts and our Working for Families increases mean that a Pacific family with a husband who earns $35,000 per annum, with a wife who works part-time and earns $10,000 per annum, and with four children aged 4, 6, 12, and 14 will be better off by an additional $1,975 per year. That will increase to $2,273 per year in 2010 and $3,719 in 2011.

The tax cuts will also mean significant increases in the amount paid every fortnight to older New Zealanders. For our superannuitants, our Pacific elderly whom we love very much, the tax cuts will mean an increase from 1 October this year of $45.88 a fortnight for a married couple and of $23.84 a fortnight for a single person who lives alone. There will be even more in 2010 and 2011. This is extremely good news for New Zealand. All members of our families will benefit. I am extremely pleased and happy that during these times, when our elderly will have found the recent increases in the cost of living difficult to manage, we are in a position to support them.

Let us not forget that the last time economic turbulence hit our shores, the National Government cut superannuation and public services. The misery and the violation of Kiwi values and the Kiwi heart caused much misery and anxiety for many of our families.

Our Labour Government has looked at the costs at the petrol pump and at the supermarket checkout, and it has looked at rents and mortgages. It has decided that this support for New Zealanders, which would have been given on 1 April 2009, will now be given on 1 October 2008. We are supporting our people when they need it the most. I would particularly like to acknowledge and thank Dr Michael Cullen for bringing this bill to the House. Under his leadership the public purse has been managed responsibly, which means we are now able to support Kiwis who are dealing with the pressures of today. I am very proud to be part of a Labour Government that is ensuring the people in my Mana electorate, our Pacific peoples, and all New Zealanders and Kiwis have a strong and sustainable future. Thank you, fa’afetai, tele lava, maloaupito, meitakimaata, maloni.

TIM GROSER (National) Link to this

I shall take just a brief call. Obviously I want to leave the next leader of the Labour Party the final word. I recall about an hour ago a Minister of the Crown literally saying that this was the finest Budget in New Zealand’s recent history and describing the author of the Budget, Dr Michael Cullen, as the finest financial administrator New Zealand has seen in recent times. I think we have to agree that in politics a little bit of exaggeration is fair. A little bit of hyperbole is part of the game, and we all understand that. But it reminds me of a very cynical political statement that comes out of the Russian school of politics, which is about as cynical as one can get. Obviously I know only the English version, so I will change it slightly, to keep the language within parliamentary language rules. It states: “You can mislead the people and you can mislead them often, but know when to stop. Know the point where you have completely lost your credibility. You should stop at that point.” A Minister of the Crown is using such language, to describe what is not just one Budget—let us be plain about this. What we are debating today, and what New Zealanders will be debating in their living rooms, is not one Budget; it is a Budget in a sequence of nine. We are debating the legacy of this three-term Labour Government, in terms of economic management.

To use another cliché: “One swallow does not make a summer’s day.” One Budget out of nine is not what we are debating today. We are debating a legacy of 9 years of a definite set of political choices. One thing I absolutely agree with Mr Darren Hughes on is that there is a choice. He is absolutely right. There is a choice to be made. New Zealanders are to be given that choice, as they should be. That choice is between two completely different sets of priorities.

Let us look at this outrageous claim in the context of some facts, rather than just pure rhetoric. Labour inherited an economy that grew, in the last year before it took office, by 4 percent in real terms, and that averaged 3.5 percent real growth in the preceding 8 years. Labour has now delivered us an economy in which everything is going south. Labour inherited an economy in which inflation—by the way, several times this morning we heard some absolutely ludicrously wrong figures from the Government—peaked at about 14 percent, and it was tracking down to about 2 percent when Labour took office. For the last 4 years it has been about 3.5 percent and trending up to 4 percent.

Of course, although I do not have the time to develop the analysis of the difference between tradable and non-tradable contributions to it, people who have looked at the facts know that the fundamental problem here, in terms of inflation peaking upwards on Labour’s watch, has been in the non-tradable sector. What is the gorilla in the room, in the non-tradable sector? It is Government spending, which has increased from $32 billion to $60 billion in this 9-year period. This is the legacy of the finest economic manager New Zealand has ever seen? Labour had unemployment that had peaked at around 11.1 percent in 1991, and from memory the Māori rate of unemployment had peaked at an atrocious 21 or 22 percent in 1991. It had tracked down progressively throughout the 1990s, down to 6 percent unemployment generally, with the Māori rate still unacceptably above that.

Since the roots of good economic performance are of course laid in years, in terms of the past, there was almost nothing short of a Mugabe-style approach to government—which is not the expression I would use personally, because of the same issue about credibility—but there was nothing this Labour Government could do, or did do, that was going to dramatically alter the first 5 years of its term in office. Labour came in with all this favourable wind behind it. What do we have now? We have a very significant, large loss in employment in the last quarter. Unemployment is tracking up. We had interest rates at a little more than half the level 9 years ago of what they are today. That is the legacy we are debating today.

Hon PHIL GOFF (Minister of Defence) Link to this

Let me start where Tim Groser, the member who has just resumed his seat, left off. He talked about a legacy. I remember the legacy of 1999. I remember that 161,000 people were registered as unemployed. What is that figure today? It is 19,000. As the Minister of Defence, I remember the legacy of that Government in terms of defence. We had a defence force that had been run down year after year, and sent to places like Bosnia with equipment dating back to Viet Nam that was not safe to put our troops in to do the job that we expected of them.

I remember the legacy—the legacy of broken promises. Lockwood Smith said that he would abolish student fees and he doubled them. Lockwood Smith promised that he would resign as Minister of Education if he did not eliminate student fees, and he stayed on for 6 years. I remember the legacy of lies about superannuation right from the beginning. “No ifs no buts, no maybes”—National said that it would get rid of the surtax. It increased the surtax. And Bill English, one of the new-generation National people, was the Minister who, in 1998, pushed down the rates of New Zealand superannuation. The same guy, by the way, today says that superannuitants are handled too generously. That is the same man who said that decile 1 schools were paid too much. That is equity from the National Party. That is what those members believe in.

I say to Mr Groser that we both remember how well National managed governing under MMP. The previous National Government failed to govern this country with stability, because it failed to work with other parties. That Government relied on the vote of Alamein Kopu. We remember that. If New Zealanders can remember that, then why would they want this “new” team that includes Dr Smith—both of them; Nick and Lockwood—Mr English, and Mr Williamson? It is the same failed group. It has no ideas and no vision.

I sat and listened when the Leader of the Opposition was speaking. I took out a blank piece of paper, picked up my pen, and thought that I would take down the substantive points he made. Twenty-five minutes later I had nothing written on that piece of paper. That is exactly what the National Party has offered the House in this debate—nothing.

National members are like stunned mullets. They read about the $10 billion in tax cuts. They have read that the average New Zealand family would be $42 a week better off by 1 October, and they thought: “Where does this leave us? Where have we to go?”. That accounts for the utter failure of the National Party in this debate to be critical of what this Budget does. It is an exceptionally good Budget and this bill is very good legislation.

National members have learnt one thing: they have voted against every tax cut this Government has brought in. They voted against Working for Families, they voted against KiwiSaver, and, I say to Mr Groser, they even voted against bringing down corporate tax rates. You know, National is meant to be the party that supports the business sector. National had 9 years in Government, and did it cut taxes for the business sector? Did National try to lift research and development funding in order for the business sector to go out and do its job? No, it did not. National failed where the Labour Government has succeeded.

This Budget gives tax relief to all New Zealanders. Not only does it give tax relief to all New Zealanders but also it acknowledges the fundamental point that where families have young, dependent children, the Government has to give more support to those families. We have to give help to those families, and that is why we brought in Working for Families. A family on $35,000—a low income—with two kids would not have got more than $10 or $20 in simple tax cuts, but out of Working for Families they will get $190 a week.

I will tell members what I am proud of about this Government. I am proud that we have lifted tens of thousands of kids out of poverty, because we have recognised the cost of raising a family and have done something about it. That is something to be proud of. When I think of people who are working in the social sector, I think of Major Campbell Roberts of the Salvation Army, who has worked for people on low incomes for all of his life. What was his verdict on this Budget? He said that this is a fair Budget because somebody on the lowest income gets more than a 5 percent tax cut.