Taxation (Urgent Measures and Annual Rates) Bill

The House is resumed.

Mr Speaker—

Is the member seeking the call?

Yes.

You have not given your maiden speech. If you were to speak now, it would be deemed to be your maiden speech.

Yes, it is.

Yes, it is? I take it that the member is seeking the call. If the member speaks now, his speech will be regarded as his maiden speech. He will not get another chance to make a maiden speech if he speaks now.

Mackey Moana Mackey Link to this

I pass the call, then.

Tremain CHRIS TREMAIN (National—Napier) Link to this

Kiwis are breathing a sign of relief at the speed with which this new Government is addressing the work order that we took to the electorate over the election period. We have put our new bill on the Table, and we are making progress already. You know, this is what New Zealanders have been wanting for the last 9 years—a Government that is focused on its agenda, focused on the issues that matter, and making progress. Even just in the last few weeks I have been out in my electorate of Napier, talking to my constituents. Do members know what they are saying? They are saying “Thank God we have a Government in there now that is focused on the issues and on taking this country forward.” That is what they have seen, have they not?

Our constituents have seen a Government put together within 7 or 8 days—quick-smart action. They then saw a Cabinet put together within a couple of weeks—action again. Then our Prime Minister—an aspirational Prime Minister—quickly went to APEC, then to London, to get a feel for the world financial crisis and an understanding of what global leaders were doing with that crisis. Then he came back here and made sure that the promises we took to the electorate were being delivered today. So here we are in the second reading of the Taxation (Urgent Measures and Annual Rates) Bill, which delivers on that agenda. That is why constituents out there are saying “Thank goodness we are seeing a Government that is focused on the issues and taking the game forward for us.”

The second reading of this bill includes changes to personal tax rates and thresholds, and I will talk to that in some detail as we go through it. It also includes the introduction of a new independent earner credit for middle-income New Zealanders. Those are the Kiwis out there, the battlers, who have continued to be pushed into higher tax brackets—the teachers, the policemen, and the wharfies. They have been the traditional constituency of the Labour Party, but they have been forgotten about by that party over there and they have been pushed into continually higher and higher brackets. That is why those members are sitting on that side of the House today and we are sitting on this side. We are focused on the issues and on addressing those tax thresholds. We are bringing those hard-working Kiwis back to a level of taxation that is affordable for them, and where they can ensure they can put bread on the table for their families. Those families do not have access to the support that has been delivered over the last 3 years. They have continued to be pushed into higher and higher tax brackets, and that has hurt them, so we are unashamedly focused on those taxpayers in this bill.

The third area I will focus on is the changes being made to KiwiSaver, making it more affordable and sustainable. I will also touch on the repeal of the research and development tax credit.

It is important that this bill be passed into law and passed into law quickly. We made that commitment to the New Zealand electorate. Today we have heard speeches from the other side of the House saying that there is no regulatory statement, or that the bill is not going to a select committee. But we made it clear to the electorate that we had a 100-day agenda. There is no confusion out there among the public about that. We told them on countless occasions, in every newspaper in the country—except for the Melbourne Age newspaper, which was where, as my leader pointed out the other day, many members of the Labour Party were flicking around in the underground and trying to dig up dirt on our leader. No, it was not in the headlines of that paper, so they probably missed it. But our 100-day agenda was in the Dominion Post and the New Zealand Herald, andinjust about every major daily, so Kiwis knew we had a big agenda, and they are proud to see a Government standing up there now and delivering on that agenda. I think it is absolutely fantastic; I am proud of that, and it is great to see us taking this forward.

I will also talk about the repeal of the research and development tax credit, which is a tough decision we had to make when we laid out our tax cut agenda. We knew that that would cost some money, and we had to make some hard calls going into the election. Again, we stood on the platform and said that these were the things we would address. When Labour rolled out their one or two policies that had any innovation at the election, there was no costing around those. There was no “Oh, we’ll actually change this and pull that back.”. There was absolutely no costing whatsoever above the pre-election fiscal update; it was an absolute joke.

Anyway, I will focus on the tax changes we are talking about and look at the provisions of the bill. As members have heard, there are reductions to personal tax rates, and particularly to thresholds. As I said earlier, the hard workers of our community—the social workers, the teachers, the wharfies—who have got into higher and higher tax brackets will actually have those thresholds brought backwards. That will not increase tax. I do not know what papers the Government is looking at, but if we look at tables for 1 April 2009 we see that that middle-income tax threshold is coming back to $48,000, so people will pay only 21c in the dollar on an income of under $48,000. By 1 April 2010 that threshold will increase to $50,000, so again we are focusing on those in that middle-income bracket, and they will still pay only 21c in the dollar. Then from 1 April 2011 the rate for that threshold will actually move down to 20 percent.

Why are you putting taxes up for poor people?

Tremain CHRIS TREMAIN Link to this

So I say to Moana Mackey that everybody benefits from that: if they are earning anything between $14,000 and $50,000 they will benefit from a reduction from 21 percent to 20 percent. I ask Moana Mackey to tell me how they would not benefit from that. How would they not benefit from that? That is a reduction from 21 percent to 20 percent. Those lower-income earners—we are not talking only about middle-income earners here; we are talking about lower-income earners—will benefit not only from the increase in the threshold level but also from the reduction of the rate from 21 percent to 20 percent. Hold on, I will say that again: we are taking the tax level from 21 percent to 20 percent.

Heatley Hon Phil Heatley Link to this

Is that up or down?

Tremain CHRIS TREMAIN Link to this

Hold on—that is down! That is for a threshold of between $14,000 and $50,000. I would have thought that that covered a fair chunk of middle-income New Zealand, and probably an even bigger chunk of lower-income New Zealand. I ask those members to tell me how people will not benefit from that. Oh, it has all gone quiet over there now! This tax bill will actually deliver the changes we need, and I think it is fantastic. The cuts will be delivered through the PAYE system, which will be good for employees, and if someone is an independent contractor, that person will be able to have that delivered through his or her tax return at the end of the year. There will be no immediate changes to the tax rate structure that applies to portfolio investments, but that will be addressed by 1 April 2010.

I just want to talk about the independent earner tax credit. This tax credit really hits those battlers out there who have had no benefit from the Working for Families tax credits. There are 600,000 people who qualify for this—600,000 of the hardest-working New Zealanders who go out there, day in, day out, paying tax and allowing our Government to make tough decisions about how we allocate that money. Let us understand that it is not our money; it is theirs, and 600,000 Kiwis have totally missed out on that. They have been part of threshold rises the whole way, and they have just been taxed and taxed, more and more. It is time we were dealing with that through the independent earner tax credit, which will ensure that we start to deliver—and I say “start” to deliver—some rebate back to those middle-income earners. So from next year the credit will be worth $10 a week, rising to $15 per week from 2010. It will be abated at 13c for every dollar of income earned over $44,000 and, as I have said, 630,000 people will qualify. Again, I ask how that is not addressing a big chunk of the electorate. That 630,000 is a huge proportion of our workforce being addressed. They have not had even one iota of tax reduction in 9 long years.

I think this bill is a massive step in the right direction. We have gone out to the electorate and told them that we will deliver tax cuts, and here we are, within 32 days, out there actually doing that—delivering on our promises, building trust, and delivering on what John Key said he would do. This is a good bill, and in the second reading I recommend it to the House. Thank you.

Hide Hon RODNEY HIDE (Leader—ACT) Link to this

I raise a point of order, Mr Speaker. I have looked through the Standing Orders and the Speakers’ rulings, and I can find no rule that precludes a new MP from speaking under urgency because if he or she did so, then he or she would have to forgo his or her maiden speech. The ACT Party agreed to the Address in Reply debate being broken into to do this urgency on the basis that we would be able to contribute to the debate. Mr Deputy Speaker, what you have done, I think, is make a new ruling—which is your right as Deputy Speaker—which essentially precludes the ACT Party from contributing to this important debate. I have two MPs here who are willing and ready to contribute, and I would like you either to point out to me the Standing Order or Speaker’s ruling that says that if John Boscawen or David Garrett speaks under urgency, he therefore cannot give a maiden speech in the Address in Reply debate when Parliament resumes it, or to tell the House that you are making a new ruling.

Mallard Hon TREVOR MALLARD (Labour—Hutt South) Link to this

It might seem somewhat unusual for me to come to the aid of Mr Hide, but I think the position that he has outlined is correct. There is an expectation that maiden speeches are made as part of the Address in Reply debate. That does not necessarily have to be the case, but as far as the Standing Orders are concerned, and given the times available and the approach we are taking, there is certainly that expectation. I am going a long way back in my memory, but I have vague memories of members back in the 1980s speaking on Committee stages of bills, or in fact on estimates, before they made their maiden speeches. They certainly asked questions before they made their maiden speeches. So the idea that people cannot get on their feet before their maiden speech, or that by getting on their feet they lose their right to a maiden speech, I think is incorrect. Mr Deputy Speaker, if it would help you, I indicate that the Labour Opposition would not object to a leave-type arrangement in order to protect you, but I think your ruling was wrong.

Thank you, Mr Mallard. The Standing Orders allow maiden speeches to be made during the Address in Reply debate—that is Standing Order 350—and provide for additional time to be made available for members to make maiden statements. The Address in Reply debate takes precedence over other business, and therefore in normal circumstances new members would make their maiden speeches before speaking in any other debate. One of the consequences of our adjourning the Address in Reply debate is that the opportunity for maiden speeches has been delayed. I take on board the point that Mr Mallard just made, and I am prepared to allow the member John Boscawen to seek leave to speak, if that is the wish of the House.

Mallard Hon TREVOR MALLARD (Labour—Hutt South) Link to this

I raise a point of order, Mr Speaker. I think I would prefer you to go further than that, to start with, and to rule that the speech he shall give is not a maiden speech, because it is not part of the Address in Reply debate. I think we should not have to seek leave to deviate from a ruling that appears to be wrong.

Thank you. I will seek some advice from the Clerk. I am prepared to allow John Boscawen to take the call. I make it clear that his speech is not his maiden speech. He will speak for 10 minutes, with a warning bell at 8 minutes.

Tremain CHRIS TREMAIN (Junior Whip—National) Link to this

I raise a point of order, Mr Speaker. I have a question: if this speech is allowed to occur, what precedent does that set for the rest of the debate on the items in the urgency motion in terms of allowing new members to take calls in the Committee stage and other stages of debate? I need to have that question answered first.

Hide Hon RODNEY HIDE (Leader—ACT) Link to this

The point is that it is not a precedent. The point that Mr Mallard and I are making is that it is perfectly within an MP’s right to stand up and take a call to speak in Parliament, and then, when we go back into the Address in Reply debate, to give his or her maiden speech. The Deputy Speaker is not making a precedent with this ruling; the precedent would be to say that new MPs cannot speak under urgency unless they forgo making their maiden speeches. This is not a precedent ruling; it is simply the Standing Orders.

Mallard Hon TREVOR MALLARD (Labour—Hutt South) Link to this

I would go one step further than Rodney Hide has gone. It is not a precedent, because it is not new, in my understanding. But to answer the question the junior Government whip asked, I say that it is clear that other new members will also be able to speak in the first readings of bills, the Committee stages, and the second and third readings and not lose their maiden status.

Tremain CHRIS TREMAIN (Junior Whip—National) Link to this

I want to indicate to ACT that if that is the case, then there is not a clear ruling, and that we would deny leave for that request.

We do not need to ask for leave. There is no precedent being set. I shall seek further advice, if members will wait for just one moment. Yes, I can confirm that allowing a new member to speak now does not curtail his or her opportunity to make a maiden speech of 15 minutes during the Address in Reply debate.

JOHN BOSCAWEN (ACT) Link to this

I thank the Deputy Speaker, and I thank Mr Mallard—

The Labour Opposition is here to help.

I thank the Labour Opposition, and I say long may it remain the Labour Opposition. I am proud to be part of the new National-ACT-Māori Government, and to speak in support—

Hon Members

Say it again!

I will say it again. I am proud to be part of the new National-Māori-ACT Government, and to speak in support of the Taxation (Urgent Measures and Annual Rates) Bill.

I will start by referring back to yesterday’s Speech from the Throne. I quote: “The driving goal of the new Government will be to grow the New Zealand economy in order to deliver greater prosperity, security and opportunities to all New Zealanders.” The driving goal will be to grow the New Zealand economy in order to deliver greater prosperity, security, and opportunities for all New Zealanders, and nothing is more fundamental to driving prosperity than a taxation system that encourages thrift, enterprise, and hard work. How appropriate it is that one of the first moves by the new National-ACT-Māori Government is the introduction of this tax bill, which makes a number of significant changes to our taxation system.

First of all, the bill introduces a regime where, by 1 April 2011, 80 percent of taxpayers will be paying 20c or less in every dollar in tax. Secondly, it introduces a reduction in the top marginal tax rate—initially from 39 percent to 38 percent, and then to 37 percent. I say that that is the first step, because I believe that the top marginal tax rate should be a lot lower than 37 percent. I thought it was very appropriate that the Hon Michael Cullen asked a question of the House a few minutes ago, when he asked what the main attraction was of going to Australia. What is the main attraction of going to Australia? Let me tell Dr Cullen that the main attraction of going to Australia is the standard of living in Australia, where net wages after tax are a full 25 percent higher than in New Zealand.

What a contrast there has been between the first move of the National Government and the first move of the previous Labour Government. When the Labour Government first came to power in 1999, it moved to increase the top marginal tax rate from 33c in the dollar to 39c in the dollar. Since that time we have had the Labour Government’s 2001 McLeod Tax Review, which recommended that the top marginal tax rate should drop back from 39c in the dollar to 33c in the dollar. Did the previous Labour Government listen to the advice of its own advisers on the McLeod Tax Review? No, it did not. I say that this is the first move of the National Government in this area, because we in the ACT Party believe that the top marginal tax rate should be a lot lower than 37c in the dollar.

When Dr Cullen introduced the bill in 1999 to increase the top marginal tax rate, he said that 95 percent of people would not be asked to pay more tax; instead, only the top 5 percent of income earners would pay more. That has never been the case, and over the last 9 years more and more New Zealanders have moved into the top income threshold of $60,000. More and more New Zealanders have been penalised for working hard and making sacrifices in order to get on and improve their lives. They have been penalised for doing that with the “envy tax” of 39c in the dollar. That overtaxation has cost New Zealand families hundreds of millions of dollars. It has cost New Zealanders jobs, growth, and lost opportunities. Why is that the case? It is because the taxation system has sent a message to all New Zealanders that we do not recognise hard work. It tells them we do not recognise hard work, thrift, and enterprise. It says we want to have a regime in New Zealand that penalises people who want to study, go into higher paying jobs, work hard, and try to provide a higher standard of living for their families.

My colleague the Hon Sir Roger Douglas commented on Government expenditure in his speech to the House yesterday. He talked about how the rate of Government expenditure had increased over and above the rate of inflation by $18 billion over the term of the last Labour Government—by $1,000 a month, or $12,000 a year, per capita. In order to have lower taxes, one has to first get Government expenditure under control. By allowing Government expenditure to grow by more than the rate of inflation on a per capita basis, Labour has cost the average income earner in New Zealand over $12,000 a year.

I say to Mr Cullen—who asked what the main attraction was for people to go to Australia—that the main attraction is for people to enjoy a higher standard of living, with a top marginal tax rate that does not cut well into incomes in excess of $100,000. What has the regime been under Mr Cullen’s Government? It has been a top marginal tax rate of 39c in the dollar on income over $60,000 a year.

The ACT Party, as the party that encourages individual responsibility, enterprise, and thrift, has always opposed Labour’s tax hikes. ACT has been the only party in this House that has been consistent in its approach to tax. We have advocated tax cuts since the party’s inception in the mid-1990s.

Why is the member voting for increases?

I am voting for a reduction in the top marginal tax rate from 39c in the dollar to 37c in the dollar, and I am saying that it is far too high at 37c in the dollar. I say to the member that if his Government had managed to control Government expenditure and keep increases to the rate of inflation, the average New Zealander on the average income in this country would be $1,000 a month, or $12,000 a year, better off. I campaigned at the last election on a policy that would hold increases in Government expenditure, going forward from 2009, at no more than the rate of inflation. We are five MPs, and by 2011 we expect to be a lot more than five MPS. Our forecasts show that if we can maintain increases in Government expenditure at a rate of no more than the rate of inflation, by 2018 we can have a flat marginal tax rate of 20c in the dollar.

In 2005, the Labour Party had the opportunity to reduce the tax burden on hard-working New Zealanders. If the Labour Government had implemented the tax rates that the ACT Party suggested at that time, the previous Government could have added 1 to 1.5 percent growth in the economy, which would have put New Zealand in a much better position to cope with the recession that we are now in. We have now led the OECD countries into the recession.

This bill talks about tax rates, changes to KiwiSaver, and a number of other tax-related issues. Let us talk about KiwiSaver.

Yeah, let’s—

Let’s talk about KiwiSaver, and let us talk about the people that you purport to represent.

The member cannot use the word “you”. That word brings the Speaker into the debate.

Tremain Chris Tremain Link to this

I am sorry, Mr Deputy Speaker. We have 800,000 people enrolled with KiwiSaver, and, without doubt, KiwiSaver has been a tremendous success—far in excess of what the Labour Government expected. But we have to look at who those 800,000 people are. Are they ordinary working men and women on the average ordinary wage? Can those people afford 4 percent, or are they people who have been attracted by the massive incentives, and particularly parents who have encouraged their children—and infant children in some instances—to take advantage of the very generous incentives? As the Hon Bill English said when introducing this bill, the recession is now upon us, and we have reached the stage where we can no longer afford those incentives.

If we are to improve the livelihoods and living standards of ordinary New Zealanders, we have to increase productivity in this country. There is more to it than reducing taxes. There is more to it than the changes to the KiwiSaver scheme. There is a need to reform the Resource Management Act. There is a need to build infrastructure. There is a need to improve the roading system, and to complete the roading system in Auckland.

Thank you for the opportunity to speak. I say the ACT Party will be supporting this bill.

Mallard Hon TREVOR MALLARD (Labour—Hutt South) Link to this

I congratulate the previous speaker, John Boscawen, on taking the opportunity to make a speech on this occasion, and I say that that is about all I agree with him on.

I repeat one of the comments I made to Sir Roger Douglas last night—that is, that I am very, very surprised that the ACT Party is supporting a bill that increases tax for quite a large group of people. More than that, it introduces a big area of inefficiency and bureaucracy, in the sense that the credits involved will require an army of bureaucrats to implement. It complicates the tax system much more than is necessary, and it increases the top marginal tax rate for a very large group of people.

The very thing that Sir Roger Douglas told us was most important as far as tax rates are concerned was the top marginal tax rate, and here we have ACT making the top marginal rate higher for a large group of New Zealanders. ACT members are removing or reducing the very incentives that they tell us are so important.

I will also make a comment or two to the Māori Party. I thank those members for not taking their call, and for giving the Labour Party an extra call again. I say to Mr Flavell that we remember. We remember seeing Māori Party MPs going around the country and saying that they wanted a tax-free area up to $25,000. That was their policy: nil tax to $25,000. You know, one would think that if that was their policy, then their minimum position would be that every tax change heads in that direction. But what do they do? They vote for a bill that puts tax up for low-income people. And who are those people? They are much, much more likely to be Māori, proportionately, than Pākehā.

The Māori Party members are putting tax up especially for people who have families, people who have a couple of low incomes and have kids, and people who are struggling on incomes in the $20,000s and the low $30,000s. They are the group of people whom the Māori Party was kind enough to support in terms of Working for Families, and now they are the ones who are being punished by the Māori Party because it is following blindly behind National.

What is Mr Flavell going to say to that family whose dad earns $33,000 and whose mum earns $22,000 in a bit more than a part-time job, who have a couple of kids, and who are in KiwiSaver? Does the member know how much their net income will go down? Between $60 and $70 a week. Those people will have $60 or $70 a week less under the National-Act-Māori Government, as it was described.

I say to Mr Flavell that I want to come on to the marae with him, as well. Not only does Mr Ririnui want to do that but I want to be there, as well. I want to hear him explain how it is mana-enhancing to take $60 or $70 a week off some of the poorest Māori families in New Zealand—$60 or $70 a week from some of the poorer families, compared with what the law says they would get now, in 2011. [Interruption] What is now clear is that the junior Government whip also does not understand the difference between what is in the law now and what is being worked through.

You detail it for me, then.

Mallard Hon TREVOR MALLARD Link to this

We will. We will work throughout today, we will work throughout tomorrow, and for the next 3 years we will work our way around the poorer communities of New Zealand. We will show them what will happen because of the rise in the thresholds between the package that has already been legislated for by the previous Labour Government and this Government’s legislation. Although some of the marginal rates are coming down, the lift in the threshold hits the poorest people in New Zealand. It hits the poorest workers in New Zealand, and it hits not only those who are working.

I give members the example of the older family—a couple on superannuation. They have done the right thing, they have saved up, and they have a small income that is coming in as a result of their savings. What happens to them? Their tax goes up. Their tax goes up under the National Government.

I know that National appealed heavily to superannuitants, but what will happen under this legislation is that the tax on people who have an income of $20,000 as a result of the amounts they have saved, over and above their superannuation, will go up. They might have that income coming from another superannuation plan, but as a result of this legislation their tax will go up. Notwithstanding the small increase those people will get in their national superannuation, their total income will go down. And the National members sound like they are proud of it.

I will tell members something—Paul Quinn did not go and tell people at the Grey Power meetings that if they had some savings, then their net income would go down. He did not tell them that. I am not sure whether he knew. He did know; he is putting up his hand to indicate that he did know. Well, in that case, it is very, very sad that he misled the Grey Power people at the meetings he went to in Lower Hutt and Wainuiōmata.

I will get back to the Māori Party, in particular, and to something that those members and John Key had in common during the election campaign. That was around the relative attractiveness of New Zealand and Australia. One of the very good things that the previous Government negotiated was an arrangement for portability of superannuation back and forth. One of the reasons for that, I say to Mr Flavell, was so that whānau could bring their superannuation from Australia back to New Zealand, and so that some of the higher-income earners who were living in Australia and wanted to come back to New Zealand would not lose their superannuation as a result of coming back. It was something to bring families together, to bring whānau back, to bring leadership back into communities in New Zealand, and to allow some of the older people to get a piece of the pie by keeping the superannuation that they had earned in Australia. What has Mr Flavell has done? He is voting for the gutting of the KiwiSaver arrangements, which will result in that portability being lost.

Were Government members polite enough to ring the Australian Government, to get on the phone to Mr Rudd—John to Kevin—and tell the Australian Government that they were walking away from the superannuation portability? Did they do that? No. They did not even think of it. So what do we have here? We have legislation that removes the incentives to do research and wrecks the portability of superannuation. We have legislation that increases the marginal tax rate for some poor and middle-income people and increases the taxes paid by a significant group of people who have kids and have joined KiwiSaver. It is just not fair, and we are going to fight it right through.

Bennett DAVID BENNETT (National—Hamilton East) Link to this

I congratulate you, Mr Deputy Speaker, on your election to your new role. It is great to see somebody from the Waikato in such an esteemed role, and I say well done. I am sure you will follow in the footsteps of other great people in that role, such as Margaret Wilson before you, who also had Waikato links. I say well done and congratulations.

When we look at what we are passing today, we see that the Taxation (Urgent Measures and Annual Rates) Bill is very important legislation. It is legislation that goes to the heart of many New Zealand individuals and families who are struggling, who know there is a world economy out there that is very tight, who know they need some help from their Government in their time of need, and who want to see a Government that listens and is aware of the issues that are involved in the way they have to live their lives at the moment. They want a country and a Government that will deliver something to help them through this tough time.

The National Party has listened to the people. The National Party went out to the people during the election campaign and said we understand the dilemma they are in, we understand they want a better future, and we understand they need a Government that will understand and work in their best interests.

This is what we are seeing here today. This bill is the first step in building a better future for New Zealanders, and building a stronger economy that will actually deliver that future for our people. Our people know it is going to be tough out there. They know there are going to be some major economic issues that we have to deal with as a country. They also know they want a Government that will make decisions; a Government that will go out there and not just look around the world and try to say we are leading on social and environmental issues but not actually do anything. They want a Government that will do things, and that is what they will get from the National Party.

The National Party will deliver constructive solutions, and we will deliver them now to the people of New Zealand. We have a 100-day plan, we have a plan of action, and we know what is needed for the New Zealand economy to turn it around. The New Zealand economy is in recession. I invite anyone who does not believe that to look at what is happening around the world. The US and the Australian economies are teetering on the edge of recession, and those countries are looking at ways of avoiding going into that situation. New Zealand has been in recession under the Labour Government that was in power before the election, and now it is time to turn that around. Now it is time for the Government to make some constructive changes that will deliver a stronger economy.

This bill is the first step. It is the first legislation the National Party has put through in Government, and it will deliver some relief for hard-working New Zealanders. Hard-working New Zealanders want to see a reduction in the taxes they pay to the Government. They need to see a reduction in taxes because they are struggling out there. They are struggling to pay their bills and meet their mortgage payments at the high interest rates that have been inflicted on them for many years under the previous Labour Government. They are struggling to pay the high expenses that have been inflicted upon them by the previous Government through the high inflation it controlled in this economy.

It is time now for a change of approach. It is time now for relief for hard-working New Zealanders. It is time now for these tax cut packages to come forward, and for New Zealanders to see a Government that cares, acts, and delivers something constructive to hard-working Kiwis. That is what they are going to get under the National Party. They will get a Government that delivers, that looks forward, and that promotes solutions. That is what this bill is about today.

Let us look at the personal tax cuts. They are significant tax cuts. They are the first step, but they are significant. When we look at those percentage and rate decreases, we see it is in the best interests of New Zealanders to give them that money so they can deliver to their families the future they want. Those cuts will deliver the right signals and incentives for New Zealanders to go out there and get a good education, take risks, and progress their lives and the lives of their families. That is the whole point of a tax regime. It is to provide those signals and incentives, at the same time as providing the Government with the revenue to deliver its social services.

This is a robust tax regime that takes into account the need for New Zealand families and individuals to have some tax relief at this point in time, and the National Party will deliver that tax relief over the next week or so. The independent earner tax credit is an initiative for many New Zealanders who have missed out, who want to get into the home ownership market, who are struggling through getting an education and into the workforce, and who want to build up a future for themselves so they can have a family and deliver what we need in New Zealand—strong and sustained growth for our economy. It is good to see the National Party coming out and delivering for those people and giving them the independent earner tax credit, an initiative that will deliver much-needed finances to individuals who are working hard, doing the right things, making the right decisions, and need to get that support from the Government as they make those investments in their future and the future of this country.

Let us look at other parts of this bill, which are very important for New Zealanders. The KiwiSaver changes enable a lot more New Zealanders to get into the KiwiSaver regime. At the moment it is a regime that is dominated by people who are putting their families into it and taking advantage of a system. We need to let more New Zealanders have the ability to get into KiwiSaver and into the savings regime. The Labour Party’s attitude is that it knows what is best for New Zealanders. That is not the case. New Zealanders can make their own decisions. They need to have the opportunity to make those decisions, and by lowering that percentage this bill gives more New Zealanders the chance to get into a regime where they can save for their future and deliver what they need to deliver for themselves and their families.

The research and development tax credit is another important part of this legislation. We have to look at what is important for the research and development industry, and that tax credit was not delivering what was needed. That was never going to be what was needed. Let us look at what was happening. The Labour Government members just sat there while AgResearch laid off staff. They were not interested in research and development. It was all about the mantra of what they thought sounded good, and the reality is we need to do constructive work in the research and development industry and deliver real solutions. The biggest solution we can deliver for research and development in New Zealand is to have a stronger economy. Without a stronger economy companies will not engage in research and development, and, if we are in a recession, like the Labour Party has delivered us, then it does not matter how many tax credits are given, people will not go into research and development. If they do, they will be using it only to project something that is different from what they are doing in their business.

The National Party understands what is good for the New Zealand economy. We understand what would benefit research and development. It is to give a strong, vibrant economy. That is what this tax cut package is part of. It is part of delivering that strong economy. We need the economy to function and grow, and in order to deliver that we must take some important steps. This is the first step in that process, and a very good step it is. We are looking at an approach that is constructive, well meaning, and in the best interests of New Zealand. We will not take the approach the Labour Party is taking this morning of coming to the House and trying to use fear and scare tactics and saying that this is not in the best interests of hard-working New Zealanders. No, we will actually go out there and deliver constructive solutions for New Zealand.

People in the street have come up to us and said that they are confident and very supportive of the National Government because they see a Government that is making decisions, a Government that is actually willing to go out there and build a better future for New Zealanders, a Government that is not trying to project fear, to put people down, and to say that it knows best, which is what the Labour Party does in this House time after time. It is time for a different direction in New Zealand. It is time for a direction that actually delivers solutions. It is time for a direction that looks at what economic fundamentals are required in the country to deliver the growth we need. That is what we will get under the National Government. We see the previous Minister over there laughing away. He does not care about growth; he never has. He never delivered it. He just waited for somebody, or for some other world economies, to deliver him economic growth. He was not taking the steps, but National, through this bill, has taken the first steps towards delivering that stronger growth economy.

Hon CLAYTON COSGROVE (Labour—Waimakariri) Link to this

I seek leave to table a report in the Waikato Times of 28 October, in which one Mr David Bennett stated: “I don’t think that our”—that is, the National Party’s—“(R & D) policy is as good as it could be, but we need to invest in our infrastructure to boost the economy.”

Leave has been sought to table that document. Is there any objection?

Mackey MOANA MACKEY (Labour) Link to this

The one thing clear from that speech from David Bennett is that he has not read the legislation before him, because it does none of the things he says it does. It does not deliver for all hard-working New Zealanders. In fact, it penalises some of the poorest families in this country, and it comes off the back of a campaign during which National members went around the electorates smiling at everyone, saying: “It’s OK. We’ve changed. We’re different. We know that people don’t want cuts. We know that people want support for their families. We know that people don’t want the same old tired policies and failed arguments of the 1990s all over again.” And what do we see? On this first day of business in this new Parliament, with this new National-ACT - Māori Party Government, what do we see? We see the putting up of taxes on the poorest New Zealand families, compared with the tax cuts they would have got—and were already legislated for—under the previous Labour-led Government’s tax policy. I say to the National Government “Shame!”.

If the Government thinks for a second that this Labour Opposition will roll over and let it destroy the economy and destroy the finances of some of our poorest families, then it has another think coming. Its members think that we do not know we have lost the election. We know it when we stand here and see legislation that once again attacks some of our most vulnerable families. The difference is that—unlike that party—it will not take us 6 years in Opposition to get stuck in. We are getting stuck in from day one. We will be here today, tomorrow, and—as Mr Mallard said—for the next 3 years holding this Government to account on every promise to the electorate that it breaks.

This is actually delivering the promise.

Mr Mapp need not worry; I will get to him soon.

Let us remember the context in which this bill comes to the House. The outgoing Labour Government left the economy in a very good position for the incoming Government. We had halved debt from 35 percent to 17 percent of GDP. We left this National Government with a very good position in which to move. The previous National Party leader, Don Brash, agrees. He said New Zealand is in a very good position to weather this storm. We have seen international credit agencies agree. New Zealand is in a very good position to weather this storm, because of the fiscal prudence shown by the previous Minister of Finance, the Hon Dr Michael Cullen. And what is the first thing we see on day one of this Government? We see legislation—if those members opposite will ever show it to us—that puts us on a track back to the 35 percent debt we inherited when we became Government in 1999.

I refer to the Speech from the Throne in relation to this bill. There were lots of nice words in that speech. We heard that the Government is going to look after people, we heard about turbocharging, about protecting, about enforcing, about innovation, about aspiration, and about individual responsibility, but nothing in this bill will assist vulnerable New Zealand families through the recession, nothing in this bill will help our most innovative businesses bring us through the recession, and nothing in this bill will help bring liquidity into our capital markets through our savings in this country. In fact, not only does this bill not do those things; it destroys them. It undermines the gains we have made as a country over the last 9 years.

I want to talk a little about the research and development tax credit. I am very glad that the Minister of Research, Science and Technology, the Hon Dr Wayne Mapp, is in the House now, because he has made a big deal about how great he will be for research and development. I wonder whether Mr Mapp is aware that with this bill New Zealand will go straight to the bottom of the OECD when it comes to research and development. In one go this legislation puts New Zealand straight to the bottom of the OECD when it comes to research and development, and this is at a time when one would think it would be sensible, prudent, and common sense to provide incentives for our most innovative companies—those that are most likely to bring New Zealand through the recession faster, those that are most likely to be exporters, and those that are most likely to employ people on higher salaries and therefore provide higher take-home incomes for families. One would think that a Government would want to provide incentives for those companies to invest in more research and development. [Interruption]

Dr Mapp says it is a tax rort. The Australian Government thought that. A year later it had to bring the research and development tax credit back because it realised that getting rid of it did much more damage than these kinds of tax rorts that people talk about and never prove. Of course, Australia is meant to be the nirvana that we are following, so why, with one stroke of a pen in this legislation, are we putting ourselves at a competitive disadvantage to Australia?

I want a guarantee from Dr Wayne Mapp. He promised that a third of the money that would have gone towards this research and development tax credit would go to our Crown research institutes. He promised. Will that continue?

It’s broader than that.

Oh, it is broader than that. No, Dr Mapp promised in the election campaign, as did Dr Hutchison, that a third of the money saved by scrapping the research and development tax credit would go straight to funding science directly. I think that is what he called it; he said it would be a third. Will they get that money? Will the Crown research institutes get that money?

You haven’t read the policy.

Well, I say to Dr Mapp that we will be getting out the policy; he need not worry. The policy was very clearly that the Crown research institutes would be directly funded with a third of this money.

I didn’t say that at all.

Oh no, what a great day for science! Not only are we scrapping the research and development tax credit, but we have just heard here on the floor of the House that the $330 million promised to the Crown research institutes by Dr Paul Hutchison and by the new Minister, Wayne Mapp, will not be given to them—they will not get it. What is it going towards? It is going towards paying for tax cuts that disadvantage some of our most vulnerable families and do nothing for our economy.

Research and development tax credits are a common tool around the world for lifting rates of private sector research and development investment. Just about every country has them. All the countries the National Party compares us with have them, yet we are getting rid of them at the one time in history when we need them more than anything else. Well, I am sure the scientists and the manufacturers around New Zealand are saying: “Thank you for a very merry Christmas, the National-ACT - Māori Party Government. Thank you for a very merry Christmas, Dr Wayne Mapp, our new Minister.”

We know that the research and development tax credit was supported by all of National’s mates. Business New Zealand’s Phil O’Reilly pointed out that many companies had made long-term investment plans based on that research and development tax credit, and they will be out of pocket now that the National-ACT - Māori Party Government is getting rid of it. They are going to be out of pocket. We know that when National announced its tax policy, different groups, such as manufacturers’ organisations, flew all over the country to meet with Bill English to try to convince him to back down on the research and development tax credit abolition, because they knew how important that single policy was for our economy, especially going into a recession.

So I say to Mr David Bennett, who said before that the National Party does not want to lead on anything in the world—he does not think it is important to be a world leader on anything—that his mission is accomplished. We are now, with one stroke of the pen on this legislation, last in the OECD on research and development. The member might not think that that is particularly important. He thought it was important during the election campaign, when he was in his own home area, because, of course, there are lots of manufacturers in the Waikato. There are Crown research institutes and lots of scientists. It is a fabulous area for science innovation—it is a hub. He got up during the election campaign and said that he did not agree with abolishing the research and development tax credit. He has obviously realised that that has got him seated somewhere further back in the Chamber than he was during the last term, so he has come down here with a mea culpa, road to Damascus speech. He has suddenly realised the error of his ways, and that getting rid of the tax credits is a really fabulous idea.

We have just heard from Wayne Mapp that the money he was promising the Crown research institutes was, kind of, so that they would not feel so bad about his getting rid of the research and development tax credit—which they may have got money from through contracts they have in the private sector—because he will give them $330 million to tide them over. Of course, they were very happy with that. Well, that has gone. That has gone out the window as well, and what for? To pay for cuts to KiwiSaver that will limit the level of liquidity we have in our venture capital markets, which is important for our research and development. National will cut KiwiSaver. It will cut taxes for the people who need it the least. It will raise taxes on some of our most vulnerable families.

I genuinely want the Māori Party to think very seriously about its support for that legislation, which raises taxes on some of our most vulnerable families. Thirty-five percent of families in the East Coast electorate earn under $40,000 and they will get nothing—they will get absolutely nothing. In fact, for some of them their taxes will go up. Well, I say merry, merry Christmas from a National Government, which from day one is showing its true colours—a National Government that campaigned on being softer, campaigned on being friendlier, and campaigned on being smiley—their smiley selves. Well, once again we are seeing the cold face of reality behind the friendly mask of John Key and this National - ACT - Māori Party Government.

Mapp Hon Dr WAYNE MAPP (Minister of Defence) Link to this

Congratulations, Mr Deputy Speaker, on your elevation. One of the disappointing things when listening to Opposition members is that apparently they cannot read. If they had read our policies they would know that the statements they are making are simply not correct. I could actually say something else but I will not, because it would be unparliamentary. But I remind members that if they are going to make assertions about another party’s policy, they at least should take the trouble to read it before doing so.

Extraordinary things we have been finding in Government are all the problems the previous Government left for us. For instance, one of the very first briefings I received related to the issues around AgResearch—all its redundancies. Did the previous Government tell the public that—did it tell the scientists that? No, it did not. It was actually a great relief—and I know that my colleague Mr Bennett knows this particularly well because he comes from the area—that that, in fact, has been ameliorated quite substantially. I know that that has been a substantial relief to the people in AgResearch. One would not hear that from Labour members, would one? One would not hear that Labour’s legacy was going to be redundancies rolling out for ever. That was Labour’s policy when it was in Government. That is what it was going to do about protecting New Zealand’s science, research, and technology bases. So it was a good result to see that the effects of that were being ameliorated substantially. I know that that was appreciated within AgResearch itself and within that community. So let us not hear from the other side about all the work it did for science, research, and technology. When one measures the facts against Labour’s rhetoric—actually, that was a feature of the previous Government: rhetoric on the one hand was always noble, grand, and highfalutin; reality on the other hand, well, that was a bit different, was it not?

Mapp Hon Dr WAYNE MAPP Link to this

How about the whales, Wayne? How are the whales getting on?

Let me just remind the senior whip on the other side to look at the Defence Force.

Mapp Hon Dr WAYNE MAPP Link to this

How’s the frigate?

That member should ask the former Minister of Defence about all the problems in defence that he has left with the current Minister of Defence. I tell that person that he had better be quiet on that particular issue.

I just want to bring the Opposition to a reality check. We explicitly campaigned on this bill. The public knew exactly the nature of the tax programme that National is offering not just in terms of personal income taxes but also in terms of KiwiSaver itself. The public made a judgment on Labour’s programme and made a judgment on National’s programme. That is why we are on this side of the House today and that is why we are moving this bill. We told the public that this was part of our 100-day programme, and that is why we are implementing it in this way.

Hon Clayton Cosgrove Link to this

You don’t want it to go to select committee?

Mapp Hon Dr WAYNE MAPP Link to this

The former Minister knows full well that tax rate issues never go to select committees. They are always dealt with by this House. I remind that member that that is what happened in December 1999. There is a good reason for that, in fact. It is because the public have actually made a judgment. They voted for specific tax rates. We have a specific promise and there is no point putting that specific promise to a select committee, because the issue has already been judged, and that is why we are implementing it in the way we are doing.

I just want to go through some aspects of the detail. Labour always goes on about its tax package being better than ours. Well, the first point of which I need to remind Labour is that the public has made that judgment already, and Labour was not on the winning side of that. But the second point I make to the Opposition is this: the major difference is that we put our priority into middle New Zealand families and their aspirations. So our focus was shifting the 21 percent rate up from $40,000 through, ultimately, to $50,000. That is where the vast majority of hard-working, aspirational New Zealand families actually fit. We are not talking, obviously, about people who have just entered the workforce, we are talking about people who have built experience and are going into careers and looking at opportunities for the future, and looking at opportunities in other countries.

This is the key point in the New Zealand tax system. One only has to look at the whole group of people that Labour often talks about—teachers, nurses, and so forth. This tax rate affects them more than any other tax rate. So we have aimed this package right at aspirational New Zealanders who are building skills and building careers. We are saying to them that our tax package will make it easier for them and their families. Our tax package will make it easier for them to decide that “Yes, perhaps I should stay in New Zealand.” I also remind the Opposition of this: at this point in time, with the economy in the situation that it is, right now stimulus is exactly what is needed on 1 April 2009. What would the public have got from the other side? Zero! Actually, zero was Labour’s tax package for 1 April 2009. That is one of the reasons Labour lost the election. The public understood that in this difficult financial situation, which not just New Zealand but much of the rest of the world is involved in as well, stimulus is what is required. Every country, in fact, is undergoing that process, and this bill is part of the National Government package to deliver stimulus to the economy.

Labour members might talk about savings and all of that. That is not the core issue right now in the New Zealand economy. The core issue is getting money into the economy by 1 April next year to keep demand up, keep aspirations up, keep jobs going, and keep hope going. That is the difference between us and them. Their package for 1 April next year was zero. Our package will stimulate the New Zealand economy at a time when it will count.

Dovetailed to that is that it is pitched at those New Zealanders who have been crying out for some relief in the tax system. In 9 years under Labour they got zero. National is delivering. That really sums it up. National in Government is delivering, we are honouring our promises, and we will deliver this in the next day or so when the bill comes into effect. That fundamentally pitches the difference between this side, a Government of action, and that side, an Opposition of failure.

Hon CLAYTON COSGROVE (Labour—Waimakariri) Link to this

As I reflect on the debate of the last 24 hours, a question comes to mind and it is simply this: in that speech, Mr Tremain’s speech, Mr Bennett’s speech, and all the speeches we have heard from the Government in defence of this bill, which increases taxes for the bottom end, why have we not heard any rebuttal of the allegations the Opposition has put on front of them?

When Phil Goff used the example of a family on $50,000, with one child, and investing in KiwiSaver, losing $70 a week—that is seven-zero, for Mr Bennett’s benefit—as a result of this package, did we hear one denial from Bill English, or Mr Tremain, or Mr Bennett, or that tax expert Mr Foss? Did they deny it? I remember that last night Mr English grinned as if he had been caught like a kid with his hand in the cookie jar. Did any of them get up, deny it, and say: “No, that is not true. The facts are other than what is being put forward by the Opposition.”? No, they did not deny it, because they cannot deny it.

Last night we saw the Māori Party members look as if they could have leapt into the desks in front of their seats as they stuck their hands up and gave their party vote in support of this bill. Every one of their constituents earning under $40,000 will be getting either zip from this or an increase in tax. A couple on $55,000 a year with three kids will have to pay $14 extra a week because, in effect, they get a tax increase. If Hone Harawira could have shrunk himself and dived into his desk or under it to get away from this debate, he would have. Mr Flavell is piling the computer and the boxes higher and higher on his desk because he knows he has to answer his constituents, probably in a couple of months when they rock into his office and say: “Mr Flavell, we voted for you. Why are we paying more? You never told us about this.”

Here comes the man himself, Bill English. He is the architect of this bill. Not once in any of his contributions in the last 24 hours did he say: “No, the Opposition is wrong. As the National Party promised in the campaign, everybody will do better out of our tax policy.” That is what National said. They talk about aspiration. I ask Mr Bennett, that learned gentleman on the other side of the House, how it is aspirational if a family that is on $50,000, is in KiwiSaver, and has one child, loses $70 a week.

The only National Party response last night was from that genius Nick Smith, who, when he decided to stop holding his breath, said that that is the politics of envy. That is what he said. I have the Hansard, and I am going to blow it up. I, along with Maryan Street and the troops on this side, will come to Nelson and find all the families on $50,000 a year who are in KiwiSaver, who have one child, and who lose $70 a week. We will line them up in front of that genius’ electorate office and let him say, on behalf of National: “Oh, you $50,000 parents with one child losing $70 a week—that is the politics of envy.”

As I said last night to Mr Bennett and Mr Tremain, that is the politics of betrayal, not envy. Where is the aspiration when dad is on $35,000 and mum is on $22,000, they have three kids, and they have to pay $14 a week extra in tax? Where is the aspiration in that? Or does aspiration and the so-called choosing a brighter future apply only if one is at the top end? We know that Mr Bennett and Mr Foss, wherever he is, and Mr Mapp—and I now know the anatomical impact of peroxide on the cranium—will get a big tax rebate of around $100 a week. Apparently, aspiration applies only to those who are pretty far north of $40,000.

I looked at the Dominion Post this morning. It said that those on $42,000 a year will get $4.62. Those members criticised us for the so-called block of cheese tax cuts. Well, that is one slice of Chesdale without the plastic wrapping. Apparently, aspiration and choosing a brighter future applies only to their mates at the top end. I do not think it is the politics of envy to stand up, as we are in this House, do our duty, and point out that this bill was not signalled in its entirety before the election campaign.

Dr Mapp got up and said: “You don’t need to send this bill to a select committee. You don’t send tax bills to a select committee.” I say to Dr Mapp: “Wake up!” I used to chair the Finance and Expenditure Committee, and we did tax bills—we did a lot of them. We can send this bill to a select committee, and why? Because it comes into effect in April. That is plenty of time to send it to a select committee for a week or a couple of weeks. But, oh no, Dr Mapp does not want to do that, because, then, the tax experts and the venerable social services agencies such as the Salvation Army and others would come in and point out the things that we are pointing out today.

Mackey Moana Mackey Link to this

And the manufacturers.

Hon CLAYTON COSGROVE Link to this

And the manufacturers, of course.

My colleague Moana Mackey talked about the research and development tax credit. She made reference to a meeting that happened with Mr English. I know for a fact that manufacturers flew from all around the country to have a meeting with that member in Auckland, and they worked him over. They got the blowtorch out and did the rotisserie on him. Do members know what he said to them? He said: “Ah look, do not worry, we will fix it some other way.” They did not believe him, and they do not believe him now.

The justification for doing away with the research and development tax credit was this, which appeared in the New Zealand Herald: “National leader John Key, in announcing the move to drop the scheme yesterday as part of the party’s tax policy, said…‘It’s clear that the tax credit has created a lot of business for tax accountants and tax advisers, but evidence of real increases in R and D is harder to find.’ ” Hang on; there is a problem with that. That sound business person and good guy, the chief executive officer of the Canterbury Manufacturers Association in my area, John Walley, said that Mr Key’s comment was “daft”. Another member of the House was called daft—the electorate chairman of the National Party for Gisborne called Anne Tolley daft, I think.