Motions

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

I move, That this House endorses the Family Support Tax Credit increase of $10.00 per week per child that comes into force on 1 April 2007. This year, 1 April will mark an important milestone in the Labour-led Government’s work for New Zealand families. The changes that are happening on that date are not just about talking about issues; they are about addressing them with positive changes to help hundreds of thousands of families, and indeed millions of New Zealanders.

The most important of those changes is very simple. The family tax credit increases by $10 per week per child on 1 April. That will assist some 360,000 families, by itself. Three-quarters of all New Zealand families with children will be getting assistance on 1 April this year. This is stage three of a process that began in Budget 2004, with an increase on 1 April 2005 of $25 per week for the first child and $15 per week for second and subsequent children. At that point the threshold for family support changed to $27,500, and on 1 April 2006 it was lifted to $35,000, with a cut in the abatement rate to 20 percent, which means that people moving off the domestic purposes benefit, for example, do not face as high an abatement rate as they once did, because indeed there is no abatement on their family support credits until they reach a total income of $35,000 a year.

What that also means for a person supporting a spouse and two young children is that his or her weekly income now has to reach, from 1 April, around $800 a week before that person pays any net income tax. In New Zealand, the tax-free income of a person supporting a spouse and two children after 1 April is, in effect, in excess of $40,000 a year. That is why New Zealand will have about the lowest tax wedge for the average wage of a person in that position, of any country in the world. That is real tax reduction, delivered to the people who are most in need of it.

From 1 April next year there will be regular adjustments to the rates and thresholds for the family tax credit. No longer will it continue to slip behind as inflation eats away at those rates and thresholds. Once the consumer price index reaches a 5 percent increase, those threshold increases will be triggered. So, in effect, both rates and thresholds are indexed from 1 April this year onwards. There is a massive increase also, at the same time, in childcare assistance and in out-of-school care and recreation rates.

The total effect of this package is to reduce by something like 70 percent the proportion of children living below the poverty line in New Zealand. That is a massive reduction and moves us back into the league of the northern European States, whereas we were in the league of countries like the United States, in terms of the incidence of poverty in New Zealand, when this Government took office in 1999. This is not just about a quick visit to a poor neighbourhood, jacket slung over one’s shoulder to look casual, and scattering around a few muesli bars to impress the poor and the television cameras, then running away and, after running away, deciding that one was not going to scatter around the muesli bars any more in any case because one had found out that it was not a very good idea, after all—it was tasty at first but turned out to be tasteless after that.

The fact is that this $10 a week per child tax credit was in the National Party’s election policy to be cancelled—to be taken away—in order to fund tax cuts for those on higher incomes. That is the reality of what National’s great tax cut promise was at the last election. It is a bit like Mr Key, on the TV, promising to an early childhood centre that it should have 20 hours’ free early childhood education then pointing out that, indeed, there would be equality under National—nobody would get 20 hours’ free early childhood education. It was not just about some centres deciding they wanted to be much better off and therefore not offering the free hours; nobody would get it, at all—zero, nothing, zilch, nada, to quote myself in another statement about Mr Key last week. If he has done a U-turn on that, I imagine that the next thing we know, Mr Key will be getting the television cameras to turn up at about the end of this year to watch him sitting a National Certificate of Educational Achievement examination. The question, of course, is whether he will get an “Achieved” in that examination. He certainly will not get an “Excellence”; that is for sure.

The family tax credit and the rest of the Working for Families package is about an active Government that is consciously leaning against the natural trend of our kind of society. In our kind of society, inequality tends to increase naturally. We see that here, we see it in Britain, we see it in Australia, we see it in the United States, we see it in Canada. It is a feature of many countries that we have great similarities with. It is only if the Government consciously leans against those trends, by interventions such as the Working for Families package, that we do not see relative poverty rise and we do not see the Government reinforcing the natural trends of a modern market-based economy.

That is why people on this side of the House are in politics. If there was one thing that drove most of us on this side of the House into politics, it was the issue of social justice. Social justice issues led people into this House. [Interruption] Naturally enough, we hear from a National backbencher that to do something about poverty is to express some kind of greed and envy. The greed that I see is the greed of those who, while already on high incomes, want policies that will give them more. That is what Mr David Bennett of Hamilton is arguing for in this House at the present time. I bet he did not tell all those academics from Hamilton East that he would be voting in favour of those kinds of measures when he got elected last time around for his one-term visit to this place as an electorate MP.

That is not all that happens on 1 April. On 1 April we begin 4 weeks’ annual leave for all workers. National Party members expect to have 3 weeks’ leave every time there is an adjournment in this House, but they voted against 4 weeks’ annual leave for ordinary workers who could not negotiate that for themselves because they lacked sufficient muscle or sufficient economic power. Well, from 1 April all workers qualify for 4 weeks’ annual leave. A Labour-led Government delivered that to New Zealanders. Furthermore, the minimum wage goes up on 1 April this year. It has increased by 61 percent since 1999. It has been increased every year by this Labour-led Government at a rate higher than the rate of increase in wages in general. National managed, I think, one increase to the minimum wage from 1990 to 1999, and, if memory serves me right, that was only when New Zealand First was in coalition with the National Government. Left to itself it did nothing about the minimum wage, and, indeed, cut benefits to ensure that the minimum wage could continue to fall back, in real terms, over the long term.

Again, I say that Labour does something about poverty and low wages. Labour members do not just turn up in a street and say: “Oh, I’m very sympathetic because for a couple of years I was a bit hard up myself, about 40 years ago.”, which is what Mr Key does in this particular respect.

Finally, on 1 April this year a married couple on New Zealand superannuation gets an increase of over $20 a week. Superannuation has gone up every year under Labour. Under the previous National Government, for 3 years there was no increase in New Zealand superannuation, and in the last year of that Government Mr English cut the rate of New Zealand superannuation to pay for the tax cuts he had introduced that year. He cut the rate to 60 percent of the average wage. He shakes his head. He has forgotten. He has a kind of repressed memory syndrome about the National Government from 1990 to 1999. But I can assure him that over the next 18 months we are going to give him a lot of counselling so he can unlock those repressed memories and remember what it was like.

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

I want to remind anyone who is listening just what an unprecedented event it is that we are dealing with here today. I have been in this House for—[ Interruption] There is no record of the Government finding itself with so little legislative business that the Minister of Finance has put down his own notice of motion—[]

I raise a point of order, Madam Speaker. The last speaker was heard in relative silence, and I would ask for the same courtesy.

BARBARA STEWART (NZ First) Link to this

The Hon Brian Donnelly and I will be splitting this particular call. New Zealand First welcomes the increase in payment of $10 per week per child that comes into force on 1 April. We welcome it for a whole number of reasons. The first is the poverty factor. Recently a number of reports have raised the issue of increased poverty affecting New Zealand families. This increase in payment will do something about it. In this House we all say that the Government should address the role of poverty, and this is part of one of the measures.

I looked at a 2006 Ministry of Social Development report on the issue and it states: “Having a low living standard limits a person’s ability to participate in wider society, curtails their quality of life, and can have negative long-term consequences across a wide range of social and economic outcomes.” The same study noted that between 2000 and 2004 there was an increase from 16 to 17 percent of families with a market income defined as having low living standards. Under this increase 360,000 families will benefit. That is a significant number. So the increase in payments from 1 April will help improve the living standards of lower-income working families and will have flow-on effects for their health and their well-being, which is something that we in this House all want. For example, $10 a week is the equivalent of additional loaves of bread or litres of milk, which for a lower-income family will definitely make all the difference.

When we look at improvements in the living standards of lower-income working families it follows on logically that we need to improve our appalling child poverty statistics. It is absolutely essential that every child in New Zealand has the fundamentals he or she is entitled to: adequate food, being able to participate fully in education—and all the factors that surround this, such as school trips, school books, and school fees—going to the doctor when their parents believe it is necessary, and being able to afford the necessary medication. The list goes on and on. For children, a good start is so essential.

The second reason we support this increase in payment is that we want people to be encouraged to move off a benefit and into paid work. It is claimed that the family tax credit is there to support families moving off a benefit and into work, and to ensure that those doing paid work are better off as a result of being in the workforce. That is a laudable aim and it is something we want to see. We can only hope that the increase in the payment, as of 1 April, does result in more people moving off a benefit and into paid work. We know that families with parents working are far better off than families where parents are at home and receiving a benefit. It is also necessary to ensure that people are better off by being in the paid workforce, and we have already heard that the increase in the minimum wage from 1 April will also help.

New Zealand First recognises the importance of the early years, and we will always support policies aimed at the optimum development of children. We say that a good start is essential and that actions speak louder than words. What we are seeing today is action, and we definitely support that.

Hon BRIAN DONNELLY (NZ First) Link to this

I would just like to remind the members of the Opposition who were giving me a bit of a hard time before that I had plenty of pressure put on me in 1998 by the likes of Wyatt Creech, Don McKinnon, Jenny Shipley, Doug Graham, etc., asking me to remain as a Minister and stay with National. I did what I thought was right and I will continue to do what I believe is right in this House.

New Zealand First has always been an advocate for children, and there is no doubt that the Working for Families package has positively impacted on families and family life. I want to give the experience of my own family. My youngest daughter has a beautiful young child, and her partner works in a factory and works long hours. He is not on a high salary. This couple does not waste money. They do not go to the pub or out to the pictures. They live in a modest rental property, etc. The money that comes to them through Working for Families is absolutely critical. I want to make the point that every cent of that money that comes into their household goes on my grandchild. Believe it or not—and I did not realise this until I had grandchildren—it costs so much more money to bring up a young child these days, even just to get the basic equipment that is now required. So on behalf of my family I want to thank Labour for what it has done. It certainly has made a difference to my youngest grandchild. It is good that they will have another $10 a week after 1 April.

I do not necessarily believe that this is the answer to the problem. I think the answer to New Zealand’s problem is the fact that our wages are not high enough. We need to drive our wages up. That is why New Zealand First put into its confidence and supply agreement with the Government that we would drive the minimum wage up to $12 per hour. As Barbara Stewart mentioned, on 1 April something else will also take place—that is, the minimum wage will go up by $1, which will once again drive up wages.

I say that because, looking back, my father was an M5—married with 5 children. He would not have actually paid very much in tax, but he never, ever would have brought home more than he earned, and that is unfortunate. With the system of tax credits, etc., that we have, that problem is reduced.

New Zealand First believes that the Working for Families package is absolutely critical at this point in time for us to be able to get our families out of poverty. It is not the long-term answer; the long-term answer is getting the wages up, but we readily admit that that is not a possible solution within the next year or so. Therefore, we need the quinella of approaches to be able to achieve that purpose on behalf of New Zealand. One of the things that New Zealand First believes—and I certainly believe—is that the quality of the future we leave to our children will be determined by the quality of the children we leave to the future. We will not be able to leave quality children to the future if we are trying to drag them up in poverty. Thank you, Madam Assistant Speaker.

METIRIA TUREI (Green) Link to this

The Green Party will be abstaining on this Government motion No. 1 because, although the Working for Families extension does provide much-needed additional assistance to at least some families on low and middle incomes, it still fails to assist those families in New Zealand who are most in need.

Firstly, I want to draw the House’s attention to the very confusing changes in terminology that have just been implemented by the Inland Revenue Department. The overall regime formerly called family assistance is renamed Working for Families tax credits. The former family support tax credit is now called the family tax credit. Just to add to the confusion, the former family tax credit—which is a different entitlement from the new family tax credit—is to be renamed the minimum family tax credit. Perhaps the Minister of Finance or the Minister of Revenue could explain to the House the reasons for these changes in terminology.

My take on them is that they are bound to cause confusion, and that the confusion will result in those people who have entitlements under the regime not receiving those entitlements. The wording of the motion itself would indicate that even Dr Cullen is uncertain of the current terminology, because the term “Family Support Tax Credit” is no longer used on the Inland Revenue Department’s website. Furthermore, the various components of the regime abate at different rates, resulting in very complex effective marginal tax rates, yet the department’s assessments just give an overall figure of entitlement, rather than a breakdown of the entitlement into its components and then details of the abatement regime for each component.

So a family with a Working for Families tax credit entitlement faces a major exercise in working out exactly how a potential change in its income will affect its entitlements. In terms of the substance of the Working for Families tax credit regime, I acknowledge that it has alleviated hardship for some families and that the increase that is the subject of this motion will likewise alleviate hardship for some families. However, the regime itself has fundamental flaws. Some of those flaws may have been able to be corrected had the Government allowed a public submission process in consideration of the legislation by a select committee, but the package was rammed through this House under Budget urgency, with no opportunity for public input on some of its more controversial aspects, such as the discriminatory in-work tax credit and the replacement of the discretionary special benefit with the new, rules-based temporary additional support.

The Green Party’s primary concern about the Working for Families tax credit regime is that the people who most need assistance from it are provided with the least assistance by it. Middle-income New Zealand families will do well from the scheme, while those on benefits—especially those receiving the temporary benefit, special benefit, or temporary additional support—will receive the least from it.

The living standards report in the Ministry of Social Development’s Social Report 2006 revealed that between 2000 and 2004, while the proportion of the population in hardship remained about the same, the number of those in severe hardship actually increased by 3 percentage points during that period. Working for Families tax credits will do little to alleviate the severe hardship of that sector of the population. Primarily, they are beneficiaries, and the in-work tax credit will not be available to them, simply because they are beneficiaries. This not only is discriminatory on the basis of employment status but also unfairly denies assistance to the sector of the population that has the greatest need.

This discrimination is indicative of the flawed ideology of this Government—and, frankly, of the previous National Government, which, I might add, introduced the in-work tax credit’s equally discriminatory predecessor: the child tax credit. It is indicative of an ideology that places little value on the unpaid work of those who choose to care full time for their children, to care for their elderly or disabled relatives, or to work voluntarily for the benefit of their communities.

When the previous National Government introduced the child tax credit, Annette King, who was then in Opposition, was reported as saying: “It is no wonder that we do not value the work that is done in our homes, because we dismiss it and give it no economic value at all. That is disgusting. To divide children into those whose parents are good parents because they work and children who are bad because their parents do not is absolutely disgusting.” I agree with the Minister, but how the worm has turned.

The in-work tax credit aside, the parts of the Working for Families tax credit regime that are available to those in the most severe hardship are offset by reductions in the special benefit or the temporary additional support, and consequently this group gains nothing from the increases in the newly named family tax credit.

Then we have the minimum family tax credit—the renamed former family tax credit. This continues the worst aspects of Roger Douglas’ original guaranteed minimum family income scheme, which was described by economist Brian Easton, when it was introduced in 1988, as “technically incompetent, fiscally explosive, and socially reactionary”. The minimum family tax credit has an effective marginal tax rate of 100 percent, effectively locking those who, for reasons of disability or lack of educational attainment, cannot work in any but the lowest-paid jobs. They are, therefore, forced into a permanent poverty trap. However much more they earn, they will have no more dollars in their hand while their earnings remain below the minimum family tax credit threshold.

There is an alternative to the work-first approach and the complex, confusing, and discriminatory mix of income support payments and tax credits that are supported by both Labour and National. Unfortunately, the Green Party is one of the only parties in this Parliament that supports this alternative. It is an income-based support system based on simplicity, sufficiency, and universality. We can start by increasing the minimum wage. There will be some increase now, but we advocate for an increase to at least $13 an hour, in contrast with Labour’s promise of $12 an hour. Who knows what National’s policy on the minimum wage is? At one stage its leader Don Brash did not want to have any kind of minimum wage, at all, and its track record on increasing the minimum wage when it was in Government was equally ridiculous. So this is just common sense, frankly. If people earn more, then they will be less reliant on State assistance, which is, in reality, a massive subsidy to employers.

The Greens would set main benefits at a level that people can actually live on—and I would be interested to know just how many members of the current Parliament have ever been beneficiaries and understand how difficult it is to live on the benefit. We would make benefits sufficient to meet all beneficiaries’ basic needs and index them to a fixed percentage of the average wage. Increases in benefit levels have progressively failed to keep up with increases in the average wage. This has been another reason for the increased reliance of beneficiaries on very complex targeted assistance, such as special benefit or temporary additional support—those ones with the 100 percent marginal tax rates.

We would also abolish the discriminatory in-work tax credit and incorporate it into a universal child benefit. Many of the families of MPs here would have been recipients of a family benefit years ago. Yet when my colleague Sue Bradford attempted to introduce a member’s bill to this House that would have brought in a very modest universal child benefit, the Labour-led Government vetoed it without its even being allowed to go to a select committee for the public to make submissions on it and for a discussion on the issue to be heard.

Despite the concerns that I have outlined, the Green members of this House acknowledge that the assistance in the Working for Families tax credit system does provide some assistance to some low and middle income families. But until we have a system that is simple, universal, and sufficient; that does not require enormous complex machinations by families to understand what they are entitled to; and that is not discriminatory on the basis of a family’s income source, we simply cannot support this motion. Thank you.

HONE HARAWIRA (Māori Party—Te Tai Tokerau) Link to this

Kia ora, Madam Assistant Speaker. Kia ora tātōu te Whare. My mum reckons that any legislation that comes into force on April Fool’s Day has to be a joke—and both Shane Jones and the Hon Parekura Horomia agree that my mum is always right. Mark Twain also made the comment that April Fool’s Day is the day upon which we are reminded of what we are on the other 364 days. So naturally, when we saw this Government motion No. 1 suddenly pop up on the Order Paper, we wondered whether Dr Cullen had been working overtime to make sure that his joke got online by this Sunday—except that it is not a very funny joke.

The Māori Party supports anything that will help families in need, and to put more money into the pockets of families with children to support is a worthwhile notion. The problem is that this initiative comes to the House hidden beneath a whole stash of complicated tax and social welfare legislation that most Kiwis simply cannot even understand, let alone get benefit from. This motion follows hot on the heels of the KiwiSaver Bill, the taxation of portfolio investment entities, the introduction of foreign tax regimes, the establishment of social security reforms, and a 2,700-page Income Tax Bill that rewrites income tax legislation. The hilarious explanatory note of that bill states that the objective is to reduce compliance costs by producing tax legislation that is clear, uses plain language, and is structurally consistent. Yeah, right!

The truth is that out in the real world families are already finding the criteria and requirements for family tax credits to be too confusing. Yet now they are being asked to wade through a quagmire of new legislation and compliance terminology, and get up to speed with a whole new vocabulary, including family support, tax credit, child tax credit, family assistance credit, family plus family credit abatement, in-work payment, family support, family tax credit, parental tax credit, social assistance payment, and family scheme income. It is not as if any low-income worker or beneficiary in my electorate—or any other electorate, for that matter—will be able to understand any of that.

The hardest thing is that this gets even worse. If we log on to the Inland Revenue Department website, we see that from now on payments will be called Working for Families tax credits, and that the department is also changing the names of the payments that make up those Working for Families tax credits. So people who thought they had sussed out Working for Families will now have to go back to school and start all over again, because what was once called family support is now called family tax credit, what was once called in-work payment is now called in-work tax credit, and what was once called family tax credit is now called minimum family tax credit. How ridiculous is all of that? It kind of makes one want to know what poverty will be called from now on—possibly “a negative financial tax credit”, or some other foolish phrase.

But wait for it; it gets even worse. There are now different truths about how much the family support tax credit—I think that is what it is called, rather than a family tax credit—actually is, and for whom. There are now different names and different amounts if one’s eldest dependent child is aged 16 to 18; if one’s dependent children, other than one’s eldest, are aged from 16 to 18; and if one’s dependent children, other than the eldest, are aged from 13 to 15. It goes on and on. I would like to try to summarise what this motion will mean for all the real people out there—I am talking about the people for whom this is supposed to be of help.

The Government has changed the name from family support to family tax credit. I know a name is supposed to be just a name, but it would have helped if the Government had talked to those who will be most affected—real families—to see whether it makes any sense to them, or even whether they understand what the changes will mean. It is not just a matter of a name change; the Government’s proposal actually adds another complicating layer of confusion to an area that is already confusing. People had become used to family support, which has been in place for some time, and they had finally worked out how it applied to every child, regardless of whether the parents were in paid work. However, the family tax credit used to refer to payments for children whose parents were in work. But this will now be the term for family support, because family tax credit has now become the minimum family tax credit. If that is confusing for you, Madam Assistant Speaker, or anybody else in this House, we really have to guess what that will mean for the people out there on the street.

Another obvious outcome of the confusion is that families will find it more confusing to apply for, and even more difficult to get. The whole tax credit system is marketed towards working families, but the newly termed family tax credit, which used to be family support, actually applies to all families. People who were entitled to one benefit or another will now miss out because they will not understand what benefit they should be getting. This means that people who know that Working for Families means “Beneficiaries not Welcome” will be cut out from this new model because they will not know that they are entitled to a tax credit. We already know that whenever complicated new beneficiary laws are introduced Māori are the group most likely to miss out, because they simply do not know whether they should be getting it.

Another important outcome of the confusion is that by using a name like family tax credit, which meant one thing but now means another, it becomes very difficult to get any coherent analysis of the changes for beneficiaries during that whole transition period. The Government has bracketed together three separate parts—minimum family tax credit, which used to be family tax credit; in-work tax credit, which used to be in-work payment; and family tax credit, which used to be family support—and lumped them all together into one Working for Families tax credit. That means that families do not know the values of the separate parts, and that they will not be able to work out what they should get. So those families will miss out on benefits that they had previously received because they will no longer know how to apply for them.

The point about this whole April Fool’s Day motion is that instead of simplifying an already complex area, the Government’s proposals will simply make it even harder to understand. The real joke is that those in greatest need—the beneficiaries who will be bypassed by this legislation—will be even worse off after 1 April than they were before. If that is the joke, then the comedian deserves to be shot. Kia ora tātou.

GORDON COPELAND (United Future) Link to this

I rise on behalf of United Future to say that we will be endorsing, as a party, the increase to the family support tax credit of $10 per child per week, which will come into force on 1 April 2007. To remove the confusion in the mind of the previous speaker, Hone Harawira, I make it clear that whether people come from a benefit family or a working family, they will, if they qualify, receive on 1 April 2007 another $10 in the hand if they have one child, $20 in the hand if they have two children, $50 in the hand if they have five children, and so forth.

Michael Cullen, in his speech, mentioned that this was an expression of social justice, and that is exactly right. This is a way of ensuring that no one in New Zealand with dependent children falls below the poverty level. As I will mention later in my speech, this Working for Families package and the $10-a-week increase goes a long way towards achieving that goal.

The description “social justice” brought to mind the fact that we could also use Michael Joseph Savage’s expression and say that this is simply applied Christianity, because the whole idea of caring for one’s neighbour and of ensuring that a community supports its most vulnerable members—its poorest members—is indeed a core gospel value.

In my first year in Parliament I remember speaking with the Minister of Finance about the need for the Government to provide tax relief for families with dependent children. I mentioned to Michael Cullen that people earning even, say, $50,000 a year with five dependent children were certainly not well off. In fact, people on that rate with five dependent children would be struggling and finding it extremely difficult to make ends meet. I know that, because a number of families I am in contact with are in that situation.

Subsequently, therefore, in its Budget bids for both 2003 and 2004 United Future suggested to the Government that it should bring in a tax credit system for families that had three particular design features. The first of those was that there should be specific recognition of the number of children in the family. That suggestion has been picked up on. The second was that there should be a clear gap between working families and benefit families, both to incentivise work and to recognise the extra costs that arise when people enter the workforce. That has been picked up, as well. The third was to ensure that the family support system in New Zealand moved closer to—and was therefore more competitive with—that which exists in Australia. That has also been picked up in the Working for Families package. Therefore, we as a party were delighted when the Government announced in the 2004 Budget that it would be introducing this Working for Families package, and we were equally supportive when, just prior to the 2005 elections, it decided that it would introduce this extra $10 per week per child, which is to come into force from 1 April 2007.

This will be of fantastic assistance to 360,000 families in New Zealand who have dependent children. I hear so many favourable comments and reports from those young families—whether they have preschool or school-age children—who are just delighted with the extra financial assistance they are receiving under this package. They tell me that it has made a huge difference to their household incomes, and sufficient household income, for United Future, is a core policy goal. It is of central interest to us, because we believe that a family’s net income after tax needs to be sufficient for that family to meet its basic household needs—be they food, clothing, accommodation, housing, education, health, or transport. Those are the minimum things we want every single family in New Zealand to be able to afford to a reasonable level.

Our vision for New Zealand does not include child poverty. When I came into Parliament, 28 percent of all New Zealand families were, according to most measurements, living in poverty. Almost one out of every three of our children were in that situation. By 1 April 2008 that number of children will be down into single-digit territory—the best estimate I have heard is about 7 percent or less. In simple terms, it means that basically through this excellent package we have shifted about 21 percent of our children from poverty to above the poverty line.

I would have thought that that was something every party in this Parliament would recognise as a core Kiwi value and would support. I must say I was very disappointed that when Bill English was making his speech, he said that National would not roll back this $10 a week but—when he finally got to it—he said that his party was not going to endorse this motion. National will vote against this motion—that is, National is against this extra $10 a week per child. I am very, very disappointed, frankly, to hear that, because I would have thought that under the more pragmatic leadership that John Key has introduced to that party, National members might just say: “Hey—are we, in 2008, going to take this money back off people, or not?”. Obviously, they have decided they will. From my point of view that will be a backward step, because I would not mind working with National after 2008 if that is what the electorate decides. But, I tell you what, if I am, we as a party will not be going along with taking this money back from people who by then will have built it into their family budgets, the repayment of their mortgages, and all those other costs. It would be just crazy to take it away.

What we do need to do is overlay this package with income splitting. I think Metiria Turei talked about home-care people, and so did Bill English. Income splitting is the way we can recognise the tremendous role that a stay-at-home parent not on an income plays in the life of this nation. As I think Maurice Williamson said during the smacking debate, bringing up kids is the most difficult and the most important job in the world, and it is time we gave some tangible recognition to people who take time out of the workforce to do that fundamentally important work. Income splitting does that; it also addresses the effect of high marginal tax rates for people. The examples that National members have given are of those very high effective marginal tax rates normally involving single-income families. If we overlay income splitting on those, we would find that the problem more or less disappears.

So that really is the way that United Future believes we need to move post-2008. Quite early in 2008, well before the election, the Minister of Revenue will be bringing out a discussion document on income splitting, so that New Zealanders will have an opportunity to have some input into that. We will be asking for public submissions. I think, also, that that will really inform New Zealanders of the way that could transform household income. As I mentioned earlier, it is a core value of United Future. We want to see every family in the country having a core income that could enable them to provide fittingly for themselves and for their dependants.

I want to mention just one other issue, in the last couple of minutes I have. National labels this package as welfare and the Government labels this package as tax credits. United Future is in the centre. We say that in fact there are—I will get the numbers right—around 196,000 families who will not receive welfare through this package, but who will receive a reduction in their income tax. They will pay the same amount, I know, but they will get a credit back. So, effectively, there is a bit of churn, which is undesirable in some ways. But those 196,000 families will actually be getting tax relief through this package. Then a further 164,000 families will receive an increase in their benefits. It is quite correct for those 164,000 families to say that they are welfare recipients. That is their status now, and it will be after this extra $10 goes through. But for 196,000 families it is actually a tax credit, and should be described as such.

Accordingly, it is United Future’s position that we should actually call this package a tax reduction and family income package. That describes exactly what it does. It reduces taxes for 196,000 families, and gives additional income to a total of 360,000 families. In United Future’s book, that has to be a good thing for our society. It increases social cohesion. It is social justice in action; it is applied Christianity. Thank you.

Hon DAVID BENSON-POPE (Minister for Social Development and Employment) Link to this

I will begin by reading a letter that I will ask for leave to table at the end of my comments. It is a letter from someone called Jenny to the Prime Minister, received just last month. I will read only excerpts from it. “Dear Prime Minister, I just want to say I am forever grateful to your Government for that package. Working for Families has meant the difference to me and my son in being able to eat decent food, and not having to stress any more about when I can juggle the budget in order to buy food. This might not seem much to someone who has never had to struggle”—[ Interruption]; yes, I am not surprised that National members do not like hearing this—“but I can tell you from me it is huge. Thank you so much for looking after the families in this country. I really appreciate it. Kia kaha, and please carry on for a fourth term. I think you and your party are fantastic.”—signed, “Jenny”.

TIM GROSER (National) Link to this

Two quite separate issues face this House in relation to the motion. One is a substantive question about tax policy design and the use of tax credits—I will come to that presently—and the other is an overtly political question that is raised by this extraordinary move to put on notice the motion that is before us today. On the substantive question, I want to address not the misrepresentation of National’s views we have just heard from the Labour Party but Mr Copeland’s obvious concern as he feels the squeeze that no doubt all third parties are feeling when this Government’s popularity slowly wanes and he looks towards a political future, perhaps with National. I say to Mr Copeland that he should not be concerned. He should listen explicitly to what my deputy leader, the Hon Bill English, has said. We have used tax credits as part of a system of tax policy. We recognise that families have special needs. We will unquestionably use tax credits for families in some way in the future. That is not the question at issue.

But what this debate and those simplistic answers from grateful Labour Party supporters illustrate is that the Government has not got its head around the truly important issues of the detail of policy design. It may well be that Government members do not really comprehend how effective marginal tax rates will work in practice. It may well be that the large majority of New Zealand taxpayers would not understand the term “effective marginal tax rate”, but, I tell you what, in due course they will understand how it cuts in at middle-income levels, without any question whatsoever. When two partners have a conversation about whether one of them should take a job, under certain scenarios it may absolutely follow, from the way in which this tax policy structure has been put forward, that they may collect only 30c in the dollar. That is when middle-income New Zealanders will understand—without necessarily knowing the term for it—what effective marginal tax rate policy actually means, and what bad and sloppy design of tax policy actually means for them in terms of their future. That is coming around the pike. But on the underlying issue raised by Mr Copeland, I say that, yes, National understands that families have special needs. We will cater for those special needs. We will use tax credits, as we have in the past, but in a more coherent way than this current package represents.

The second issue is a political issue and it is this extraordinary motion. We can look at it in two ways. One way is to look at it in the way that Mr English did when he opened up debate from the National Opposition, which was to put it in the context of this Government. We can look at the Order Paper as a signal of third term - itis, and as a signal of a Government that really no longer has anything useful to say to the New Zealand people. Looking down the list of issues—all of them worthy—on the Order Paper we see the Oaths Modernisation Bill, Conservation (Protection of Trout as a Non-commercial Species) Amendment Bill, and we must not forget the Palmerston North Reserves Empowering Amendment Bill. All of the bills are worthy in their own right but, frankly, 10 or 15 years from now when we look back, these bills will be seen as irrelevant scribbling in the margins of New Zealand political history. They will perhaps be remembered only by some unfortunate MA thesis writer doing her or his thesis in political studies or history, and trying to explain why the Labour Party did not succeed in attaining a fourth term because it ran out of steam. I suspect that they are about the only people who will be interested in this essentially trivial agenda the Government is trying to convince the New Zealand people addresses the real issues facing New Zealand. It is for that strategic reason that the National Party, although reaffirming the proper role of tax credits for families in the system, will oppose the political purpose behind this motion, which is to conceal the reality that the Government has lost the plot. It has run out of steam. It no longer knows what to do with the privilege of running the country. For that reason, we will oppose the motion.

Let us look beyond that, to the context of what we really would expect the Government to be doing, and what we really would expect if the Government were trying to put forward a coherent view that would tackle the real long-term structural issues facing this country, including the issue of comprehensive tax reform. We know that this Government has ridden on the coat-tails of hard decisions taken earlier, which created a tripling of New Zealand’s average growth rate. [Interruption] Members opposite do not want to hear that, because they have somehow amazingly convinced themselves that New Zealand’s improved economic fortunes began on the day Labour was elected to Government for the first time. The doubling of New Zealand’s per capita income, and the tripling of New Zealand’s real GDP long-term growth rate, are consequences of people taking real decisions to stabilise the macroeconomic policy framework, to reduce unemployment from a high of 11 percent—23 percent for the Māori population—in the early 1990s, and actually to come to grips with the fundamental issues facing this country. The Government has ridden on the coat-tails of some successful but hard-won policy change.

Its first response has been, then, to introduce a welter of blather about knowledge wave economies and the—now to be late lamented—growth and innovation framework. Now it is about economic transformation. Essentially, that is the same thing; it is to talk, talk, talk the language of economic change, but just to fix political problems as they arise. This is so ably demonstrated by the particular motion before us today. We are seeing the wrapping of New Zealand in a blanket of mediocrity, which is not addressing the long-term fundamental issues facing this country.

It is not addressing the reality that we have, for example, a revolving-door policy on migration by which roughly 72,000 people—on the basis of the last annual statistics I have in my head—came through. They have moved to New Zealand to become New Zealand citizens—and we welcome them—but we have had about exactly the same number moving out of the country. These people are not moving out because they are looking for higher unemployment benefits or better tax credit schemes; they are moving out because they no longer fundamentally believe that the New Zealand economy can offer them and their families the best route to personal advancement.

Somewhat under half of the one million New Zealanders who live overseas, live in Australia. They are automatically disqualified from the unemployment benefit for a stand-down period, but that does not stop them from getting off their back seat and moving across the Tasman to take advantage of the higher level of real wages that is available there for them. We have a situation even at the middle level of the workforce. I remember a figure being given for fork-lift drivers’ earnings in 2005, converted to Australian dollars, and applying then. The average fork-lift driver in New Zealand was earning A$10 less than his or her counterpart in Australia. New Zealanders are moving to Australia fundamentally because our productivity growth rate has slowed down.

We have heard from various speakers today the continued plea for higher minimum wages. Minimum wages address—and this is arguable—an equity issue. They will actually do nothing in the long term to address the real issue facing this country, which is the need for higher real wages. The only route to higher real wages is through higher sustained productivity. The big news in the last month—admittedly it might be to a minority taste but, again, people will work out for themselves what it means when they see their wage packets 10 years from now—is the slow-down in productivity growth.

During question time, I thought Dr Cullen was very ill-advised to correct our questioner who made the point that labour productivity of growth rates were the slowest since statistics were first recorded in 1988. Dr Cullen said: “The figure the member cites is labour productivity, not total factor productivity”. Some people use the term “total factor productivity growth”. The answer there is even worse. The position in respect of labour productivity slow-down—to 0.4 percent in the latest statistics that are available—was accompanied by an increase in capital per worker. The consequence, I say to Dr Cullen, is that the really important measure of multifactor productivity—and I agree that this finally is the really important measure—actually declined, from memory, by somewhat over 1 percent compared with a long-term positive increase in multifactor productivity of around 1.5 percent. This is not some fine academic point. In the long run, our ability to sustain higher productivity growth will be the difference between New Zealand moving forward and its becoming a backwater.

HEATHER ROY (Deputy Leader—ACT) Link to this

I rise on behalf of the ACT party to speak on this motion. Mr Tim Groser, who has just taken his seat, is absolutely right when he says this is an extraordinary motion. The timing of this motion is absolutely no coincidence. There is very little, if anything, of any consequence on the Order Paper. The Government is presented with a runaway public debate that Labour finds itself completely on the wrong side of. Today’s debate on family tax credits is just another attempt to distract Kiwis from the unpopular and undemocratic anti-smacking debate, which has Labour in real trouble with families and with some of its own caucus. This is an attempt by the Labour Government to say it cares about families. Many people could be forgiven for saying: “Yeah, right!”. This minority Labour Government says that it cares about families, that we should not let anyone smack their children, and that it knows best how to raise children. Labour says it knows what is best for families, so people should just listen to it.

Why has this motion come before the House today? It is because the minority Labour Government is in real trouble with Kiwi families. Helen Clark has lost her gamble of pushing through the unpopular anti-smacking bill under urgency. Her response and that of the rest of the Labour Government—those members who are chipping away across the other side of the Chamber, with nothing valuable to do except to hit, hit, hit other members of this House—is to try to buy off voters with their own money. Today’s debate in Parliament on this motion is just a cynical reaction to a poll-driven crisis.

A fair Government would let all workers keep more of what they earn. But this Government plays at being Robin Hood, while taking so much of what Kiwis earn that it would make the Sheriff of Nottingham blush. All Kiwis should pay less tax; that is what they want. A low, flat-tax rate would let people keep what they earn and let them take control over their own decisions.

I have a number of points to make about this motion, and I will go through them one by one. Firstly, ACT believes that lower, flat taxes are the only fair form of taxation. Mr Benson-Pope spoke in this House earlier and said the National Party is the only party that supports a flat-tax rate. Actually, he was wrong; he forgot to do his homework before he came here. The National Party—quite rightly—did want to lower tax rates at the last election, and I believe it still does want to do so, but it was the ACT party that wanted a flat-tax rate. So Mr Benson-Pope should do his homework next time before he comes down to debate in this House. People should be able to keep what they earn and to take control of their own decisions.

Secondly, I say incentives matter to people. Incentives make a difference to the way people behave, so we need to get marginal tax rates down. High marginal tax rates discourage entrepreneurship, they discourage savings, and they discourage investment in work.

RUSSELL FAIRBROTHER (Labour) Link to this

This morning at 7 o’clock I was in Napier at a breakfast attended by about 120 builders—

Hon MAURICE WILLIAMSON (National—Pakuranga) Link to this

All I can say, after listening to that speech, is how perverse the voters of Napier must be. We have just heard from Russell Fairbrother about how much the voters of Napier think this is a great Government. He said that everywhere he goes—to the Eastern Institute of Technology, or to the breakfast for 150 builders—that is what everyone thinks. Well, what happened at the last election? Napier was the safest Labour seat in the country—a seat that Labour had never lost, for any reason—and a seat that good old Geoff Braybrooke used to hang on to by a majority of 15,000 to 20,000, and that member lost it. That member lost Labour’s safest seat. I have to say that if I ever lose my seat, which is a similar Tory safe seat, I will be so ashamed that I will walk on that day. That member comes into the House and says that everybody he talks to is in support of the Government, so the loss of the seat can only have been a personal vote against him. It could only have been the result of a sheer abhorrence of the individual member, if everybody in Napier thought things were going so swimmingly.

I want to say today that my “gast” is completely “flabbered”. I am flabbergasted. I have been in this House for as long as you, Mr Assistant Speaker—for 20 years—and I have never seen an Order Paper have as its No. 1 item a self-congratulatory notice of motion about how well the Government is doing. I want the people who are listening to this debate today to know that this debate is not about passing any family tax credit provision, Working for Families provision, or any other taxation legislation. We are not doing that today. Any members of my adoring drive time audience in Auckland who listen in to the radio regularly need to know that this debate is not about a bill. It will not matter whether people vote for or against the motion, because the regimes have all been put in place after previous debate in this House and through legislative change. No, for the first time, in my knowledge of this Parliament, we have a Government that is so bereft of any ideas that it has come up with a motion to congratulate itself.

I could not believe that, so I got out the Standing Orders. There is a very good section at the back that states the time each debate can take. I thought that that would be interesting to read, because I did not know how long a Government motion debating timeslot was—how long each member could take, and what the maximum time for the debate was. I know what the timeslots are for the general debate and for the first reading of a bill, but I did not know about those for a motion. As I went through pages 119, 120, and 121 of the Standing Orders, I read about every sort of debate we can think of that this House normally has. I read about how many minutes each speaker gets—the first speaker gets this many, then subsequent speakers get that many—and about the limit for the debate. But I could not find the speaking time for a Government motion.

So I asked the Clerk. David McGee knows these things; he knows everything. He said that if I looked at the section entitled “General procedures”, I would find a heading “Debates not otherwise provided for”. That is what this is today: a debate not otherwise provided for. That is how important this debate is. That indicates how many debates like this that there have been in the past. We have to look under the heading, which I should have spotted, “Debates not otherwise provided for”.

What is going on here? I was a Minister in a National Government for 9 years, and I tell members that the hardest thing I did during those 9 years was to go to the legislative committee every week—the Hon Lockwood Smith will remember doing this—and fight like stink to try to get some of our legislation into the House. There was so much legislation, and there were so many bills in the backlog, that Don McKinnon, who used to be in charge of that committee, used to say he knew I wanted to bring my maritime transport bill into the House. He would say he was sorry, but I could not do so, because there was no slot available. Dr the Hon Lockwood Smith would have rued the day too when he was trying desperately to get legislation into the House. What does a legislative committee meeting look like now? Do the members have a cup of tea and some biscuits? I bet there is not even a legislative committee now, or, if there is, that the committee sits around and has a chardonnay and something to eat.

A self-congratulatory Government notice of motion has got to the top of the A4 page that is all that is left of the Order Paper. Clayton Cosgrove will know how important some of the stuff is that is left on the Order Paper. I should hang on, though, because one of the items left on the Order Paper is Government notice of motion No. 2. So not only do we have this precedent but it will be repeated in the form of another self-congratulatory motion at some stage in the future. There are other things on the Order Paper, like the Conservation (Protection of Trout as a Non-commercial Species) Amendment Bill. I understand that that is a very important bill. I know that most of the people in Pakuranga run down the street, trying to touch the hem of my garment and asking me to please make sure that the Government gets the Conservation (Protection of Trout as a Non-commercial Species) Amendment Bill passed through. But not one person has ever in my life asked me to please get the Government to move a motion in the House that is self-congratulatory about something it has already done.

Let us think of an analogy to this motion. Let us think about a sporting analogy. How would we feel if the Warriors, after they won a match, had a separate day when all they did was to give speeches about how well they had played the day before?

SUE MORONEY (Labour) Link to this

I think we have just heard excuse No. 500 as to why National made no investment in infrastructure in the whole decade it was in power. Maurice Williamson just told us that he did nothing while he was the Minister of Transport because he could not get his legislation on the Order Paper. That must be the best excuse I have heard yet as to why National did absolutely nothing about the state of our roads and our public transport in the whole decade it was in power. But now I know.

Why does National not like this debate? Every single member of the National Party who has participated in this debate has said that he or she does not want to be debating this issue. The clear reason why those members do not want to debate this issue is that this debate gives a clear demonstration of which parties support families and which parties do not. Come election time, everyone says they support families. When people want families to vote for them, suddenly everyone is in support of families. But this is the debate that will really flush it out. Which parties actually vote for those types of policies that are of good, practical use to families, and which parties do not? I know that the National Party is not supporting this motion. I do not know what the National Party has against families, but just as it will not support the 20 hours’ free childhood education policy, it will not support this motion. What has the National Party got against families?

But to understand why we are debating this motion we need to go back a little bit, because there is a context all around this. We could not be debating this motion at all if we did not have the successful economy that has been built around the term of this Labour Government. We do have that very successful economy, and what we are debating now is the motion that says that some of that economic benefit will go to working families.

I remind people in this House who may have forgotten, because it may be some time since they have been involved in that period of time when they raised young children, that all New Zealanders who have been involved in this process do know that raising a family is the time of most financial pressure in our lives. As we move through that whole age demographic, raising a family has to place the most financial pressure on a person over the course of his or her lifetime. This measure will ensure that we can take that financial pressure off families, because with the complexity of raising children these days, families need as much pressure taken off them as possible. This measure actually reflects not just slogans and not just feel-good messages about families; it is good, practical support that this Labour-led Government is bringing in for working families.

The best thing about it is that the extension of the Working for Families package gives families options. Those members opposite who want to argue that somehow this Government is forcing issues upon families really have difficulty debating this particular motion, because this measure gives families lots of options. It gives them the option to increase their income as working families. But if they wish to do so, they could use this package to maintain their income and reduce their working hours and therefore spend more time with their children, and that is good news for families.

But it is not the only good news for families that is coming up on 1 April. Another initiative by this Government that will ensure that families can spend more time with their children is the 4 weeks’ paid annual leave as a protection for all workers. This is a great initiative for families. It means not only that workers will have more time for rest and recreation but that those families who do have young children, or even older children, can spend much more time during school holidays with their children—again, another very family-friendly initiative from the Labour-led Government.

Another time of financial pressure that springs to mind for me, if we look over our lifespans—and again on 1 April this area will be further alleviated—is the period of time when people are in retirement and reliant on New Zealand superannuation for their income. On 1 April the rate of superannuation is increasing, and that is good news for older families.

The effect of these impacts—all these different initiatives—coming from, yes, a very busy Government, despite what Maurice Williamson just tried to say in squaring off for his lack of performance when he was last in Government, is bringing in an absolute wrap-around effect. It gives a combined effect that is a significant improvement to people’s lives. I want to tell members about a couple of real people—real-life instances I have come across recently that demonstrate this wrap-around effect that a number of different policies will have, come 1 April.

I want to tell members about a woman I talked to at a meeting in Cambridge last night. She talked to me about the effects of the policies that are coming in on 1 April from this Labour-led Government, for her family. She said that her son and his family benefited greatly from the Working for Families package. The new initiative will make a real difference to the income of their family and therefore take significant financial pressure off. She then went on to tell me how she was a recipient of the rates rebate scheme brought in by the Labour-led Government. She then went on further to say how both her and her sister were going to also enjoy the increase in superannuation—again coming in on 1 April.

So that is just one example of the combined wrap-around effect that Labour-led Government policies have in making a very real difference; it is not a bumper sticker slogan, not shallow promises, but good, practical effects for people in their everyday lives.

I give yet another example: just last week I was on a worksite in Matamata at a place called Metso Minerals, which employs around 140 staff. For a town the size of Matamata, that is a very large workplace, indeed. When I met with the staff and talked to them about some of the initiatives coming up, they thought it was almost too good to be true. They checked with me: “Is this really going to happen? Is this really what we’re going to get?”. I could give them in writing, and verbally, the information that confirmed it for them. The Working for Families package for those people was going to make a significant difference.

I listened with interest to Dr Cullen speaking earlier today in this debate about a person with a spouse and two children. As at 1 April that person can now earn up to $40,000 before paying any tax. Is that not a great thing? I was able to talk to the people at Metso Minerals about the fact that come 1 April they would, through a Labour-led Government initiative, get a 4th week of annual leave. They said: “But surely that can’t be paid leave?”. I said: “In fact, it is. This is from the Government. Your employer will pay you for a 4th week of annual leave, and that is even better for the time you can spend with your families.” They are, of course, looking forward to July because they were also very interested to hear about the KiwiSaver scheme that is coming up, and that will have a real impact in that workplace. These are examples of the types of people who would suffer if National ever got a chance to run this country.

I just want to refer back to Bill English’s speech earlier, where he had the audacity, the absolute audacity, to take this Government to task about what caregivers in the health sector are paid. For goodness’ sake! By the time Bill English had finished as the Minister of Health, the wages had gone backwards in the 1990s. Caregivers in the health sector had lost income. I know this because I was a union organiser in the aged-care sector at the time. I had to deal with the consequences of the Employment Contracts Act being enacted by the National Government, and penal rates being stripped off those aged-care workers, primarily middle-aged women working in the weekends, having their incomes slashed. The audacity of Bill English to say that it is wrong for this Labour Government to keep increasing the minimum wage so that those wages can be increased! I am very pleased to stand up in support of this motion. Thank you.

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

The media are starting to refer to this Labour Government, the Clark-Cullen Government, as a lame duck. It is a dead duck. In 23 years in this Parliament, I do not remember a Government that has absolutely so little business to conduct in this Parliament that it debates a motion at the top of its Order Paper. I never ever remember a Government announce that it would seek urgency to pass legislation in the way that the Clark-Cullen Government said it would do in order to pass its anti-smacking legislation—and then it could not even raise the votes needed to get urgency. This Government is a dead duck. A Government that can no longer govern should get out and let the people elect a Government that can govern.

We are debating this motion whereby Labour is celebrating its family support tax credit increase. I want to test this lame-duck Government, to see whether it actually understands the policy it is debating. I will run a test now, to see whether there is even a single Labour member in the House who can answer some questions about this policy. The first thing I want to ask those members is this. If a woman, or a man, is trying to get off the domestic purposes benefit and we take that person over an income range of from $5,000 of earned income a year up to $100,000—by that time, that person has gone right off the domestic purposes benefit—[Interruption] I ask Darren Hughes, a Labour Party whip, whether the tax that that person on the domestic purposes benefit would pay on the next dollar he or she earns, in the entire income range of from $5,000 a year to $100,000 a year of income, will ever fall below 50 percent.

Can any Labour member answer that question? Would the tax that that person—a person with three dependent children, going off the domestic purposes benefit—has to pay on the next dollar he or she earns, in the income range between $5,000 a year and $100,000 a year, be less than 50 percent? Is there any income where that person would pay less than 50 percent in tax on the next dollar he or she earns? Does any Labour member know the answer to that? Not one of those members can tell us the answer. In fact, the answer is that, yes, there is an income range where such people would actually pay less than 50 percent on the next dollar they earn.

Let me ask the Labour members the next question. Over what income range would the tax paid on the next dollar earned by a person with three dependent children—a person who is trying to work his or her way off the domestic purposes benefit—be below 50 percent? Can any Labour member tell me that? We are debating Labour’s policy; it is those members’ policy. Surely, one Labour member understands the policy. Over what income range would a person who is working his or her way off the domestic purposes benefit pay less than 50 percent in tax on the next dollar earned? Can one Labour member tell me that? Can even a Minister tell me? Can Pete Hodgson, a Minister in the Labour Government, tell us the answer to that? Not one Labour member can tell us. They do not have the faintest idea of how their policy actually works, and they have the audacity to waste the time of this House by debating and celebrating something, without knowing how it works.

Let me tell Labour members how their policy works. I have here a graph. The data on it is provided by the Inland Revenue Department—the Government’s Inland Revenue Department. The question I asked members opposite was to tell me how much tax a person who is working his or her way off the domestic purposes benefit would pay on the next dollar he or she earned, over $5,000 intervals, on incomes of from $5,000 a year to $100,000 a year. The graph shows that indeed there is an income range within which such people would pay under 50 percent in tax on the next dollar they earn. Do members know what that income range is? It is from $30,000 a year to $40,000 a year of income—and that income range only. In every other income range from $5,000 a year to $100,000 a year of earned income, a person with three dependent children, who is trying to work his or her way off the domestic purposes benefit, pays more than 50 percent in tax on the next dollar he or she earns. And Labour says that is great!

If we listen to those Government members, we hear only dead silence now. Not one of them understands how the policy works. Do those members understand that the tax the lowest-income people—people whom they claim to care about; people with three dependent children—pay as they try to work their way off the domestic purposes benefit is over 90c in the dollar? We have heard examples given by David Benson-Pope this afternoon, so let me give him an example. People who are trying to work their way off the domestic purposes benefit today may earn $10,000 a year through their own work while still being on that benefit. They are trying to earn more for their family. If they work another 20 hours a week at $15 an hour—and, of course, their increased earnings are $15,000; they go from $10,000 to $25,000 of earned income over the year—does any Labour member know how much those low-income families with three dependent children, working their way off the domestic purposes benefit, get to keep? Of that extra $15,000 of income, they get to keep $1,694.

Labour celebrates that; it says that is great for low-income families. It says it cares about them. Those people work for an extra 20 hours a week at $15 an hour, and they get to keep $1,694 a year. In other words, of every extra dollar they earn, the Government takes 92c and those families get to keep 8c. And Labour celebrates that; Labour thinks that is wonderful. This data is all from the Inland Revenue Department, using the figures after the changes that take effect on 1 April are put in place. And Labour celebrates that.

Labour’s Working for Families policy was a bribe to middle-income New Zealand at the last election—a disgraceful bribe in order to win votes. It does not do a damn thing for low-income families; they continue to suffer under this Labour Government. The marginal tax rates that most people with families face on the next dollar they earn are in fact over 60 percent, on incomes of from $5,000 a year through to $100,000 a year. If those families have three children, the marginal tax rate they face on the next dollar they earn is 60-plus percent, except for when they are on incomes within that $10,000 income gap between $30,000 a year and $40,000 a year.

It is little wonder that 22,000 New Zealanders have taken off to Australia in the last 12 months. That is 30 percent more than those who left just 2 years ago. The exodus to Australia is growing, because under this Labour Government’s policies, people feel trapped. They have no hope when they earn an extra dollar and the Government takes 92c in tax out of that extra dollar earned. Where is the hope for low-income New Zealand families? They leave the country and go to Australia. They get out, and this Labour Government, bereft of policy and bereft of legislation, should get out too. It is time the public elected a decent Government.

Hon CLAYTON COSGROVE (Associate Minister of Finance) Link to this

After that vein-popping dissertation from Dr Lockwood Smith, we were not sure whether the member had burst, or was about to burst, some organ in his system. He got so worked up. I am not getting off the subject, but for a moment I ask whether members recall that wonderful television series called Dad’s Army? Members might be able to assist me, because I cannot quite recall the name of the old fellow who had gone out to the African wars, or whatever, who had this wonderful saying. He used to say to Captain Mainwaring: “They don’t like it up ’em—the old cold steel, do they? They don’t like the old cold steel up ’em.” Well, today, in political terms, what this motion has done to that party on the other side is to put the cold steel into them.

I predict that that great genius Lockwood Smith will probably take a point of order, just as he does every time I bring this up, because he hates it—just as Darren Hughes predicted that the first three lines of his speech would be to quote his 23 years’ lineage in this House. He said he had never before in his 23 years seen this, that, and the other. That is the man who asks what low-income households should celebrate. I will tell members what they should celebrate. They should celebrate their 9,000 sons, daughters, brothers, and sisters who are in apprenticeships today, for instance—apprenticeships that that member gutted in 1992 when the National Government abolished the Apprenticeship Act. He is the member who stands before the House and denies—as he does every time I make this speech, and I wonder whether he will again, because he has never won the point of order when he has made it—that the Apprenticeship Act got abolished and dealt to by him. Not only that; he is proud of it.

What those 9,000 young people should celebrate today is what we have done to give them a chance and a career in trade training. I was with Russell Fairbrother at the builders’ breakfast this morning. There were 150 builders there, many of whom have young people working for them and have taken advantage of a modern apprenticeship system that that other crowd sold them out on. Well, that silly member over there, who should be on heart pills or something else, would know if he read the statistics that on the East Coast of the North Island today there are carpenters—young people who are straight out of their time—who are earning $57,000 a year. What did they get under that member’s Government? Zip! They got nothing, except an abolished Apprenticeship Act, which he is proud of. I say to that member that the old, cold steel is waiting for him. He may enjoy it, of course, but it is waiting for him.

This Government motion No. 1 makes a stark challenge to the National Party because if we look at the figures, we see that 350,000-plus families out there who were earning, on average, $88 per week in tax credits before this now earn $98 per week. I am told that Dr Bollard said to the Finance and Expenditure Committee—which I think Dr Smith is still a member of, nominally—that before this $10-a-week increase with the Working for Families package, there had been an increase in average real wages of 6 percent. Members should mark that.

Unemployment is down to 3-plus percent—to 3.4 percent or 3.6 percent. Three hundred thousand jobs have been created in the 7½ years that this Government has been in office, compared with Dr Smith’s great 23 years in the House. What a history that is! In June 1999, before that member was routed by the people, his response to unemployment was the “mother of all Budgets”. To quote Mrs Shipley at the time, National’s response to getting unemployment down was: “The Government believes our goal of reducing unemployment must now be matched by clear programmes that attempt to reverse the growing trend of domestic purposes, sickness, invalids, and accident compensation claimants.” In English, that means that the “mother of all Budgets”, which she cut. So those members’ answer to unemployment was to slash benefits.

What did it do? In June 1999—when that genius was still a Minister after his 23-year record in the House—unemployment was 7 percent. What is it today? It is 3.4 percent—the second-lowest in the OECD. How many jobs did that genius create over 9 years in office?

CRAIG FOSS (National—Tukituki) Link to this

I rise to speak calmly and intelligently about Government motion No. 1, unlike the previous speaker, who is obviously very, very angry. I can understand why he is very, very angry, because today, I believe, he visited Napier, which was the home of a Labour seat for 54-odd years. It was taken from Labour—earned from Labour—by my good colleague Mr Chris Tremain. I can further see why the member is angry. It is because, I guess, when he flew up from Wellington he flew over the Wairarapa. He flew over what was another Labour seat that was won by Mr John Hayes, a good candidate for National. Mr Cosgrove would have been remembering that these seats were all won in the 2005 election, when these extra tranches for Working for Families were on the pledge card. So as the plane flew over the Wairarapa, the angry member—who I presume spoke sense somewhere along the way in his speech, but I honestly missed it—flew over Tukituki. Well, that is the seat that I won, which I took from a Labour Minister. It had been a Labour seat for quite some time and, again, I can just see Mr Clayton Cosgrove’s anger rising as he travelled up the country. Then he landed at Hawke’s Bay airport at Napier. As he got off the plane and Mr Fairbrother greeted him, people probably looked away because no one was really quite sure who that gentleman was, given he was the MP who turned about an 11,000 majority into a vote of 15,000 against himself and against the Labour Party. So no wonder the previous speaker was so angry and frustrated.

I was also interested in the analogy that he was making about It Ain’t Half Hot Mum, because it reminded me of where the current Government is. It is a bit like , because I can just hear the cry of “Don’t panic, don’t panic!” from Dr Cullen at the moment as he looks at the polls. Those members look around and try not to panic in the face of the obvious catastrophe coming towards them.

I have asked a few seasoned colleagues who have been in the House a bit longer than I have why we are debating this motion. I asked those colleagues whether the Hon Michael Cullen put up the first tranche of Working for Families in the House as a debatable motion. The answer was no. Did Labour put up the student loans package as a debatable motion in the House? No. So we went through the other bits and pieces on the infamous pledge card, and not one of them has been debated in the House as a motion. So I cannot quite understand why the most important thing facing this Government that needs to be debated in the House is a bit of self-gratification from a policy on a pledge card that was dubious anyway. Obviously, Labour is stalling for time, which is quite unusual, because a few days ago it was running for time to try to get urgency as it whipped into action on the anti-smacking bill in order to vote for it.

When the Hon Dr Michael Cullen, who was first up, spoke to this motion, it was very interesting to watch all the list MPs on the Labour side furiously clapping away—working on their list-ranking speeches, I guess. Those members seem to forget that around 60 percent of New Zealanders actually voted against this package. The party vote for Labour was nudging 40.5 percent. So around 60 percent actually voted against it. They were right to vote against its implementation and the way it has been executed. The way it works flies in the face of the good, solid Kiwi way, which is about rewards for hard work. It is about merit pay—work harder and earn harder to be rewarded.

We need to be clear. This policy drives net family income. It virtually ignores gross family incomes because of the high marginal tax and the way the rebate system works. So another way to read that is that this policy controls net family income. There is nothing that good old-fashioned socialists—like the ones we have running the show at the moment on the other side of the House—like more than control. They want to control the net incomes of New Zealanders. They therefore want to control which way they swing and which way they vote, and, as we have recently seen, they also want to control how we bring up our children.

I work endlessly in my electorate and in this House to raise incomes for families and for all New Zealanders, and to help them to achieve their aspirations, to live their dreams, and to set their sights wherever they want to be—it is patently obvious that I am fully in favour of this. I am all about empowering families; actually, I am all about empowering all New Zealanders. I want all New Zealanders to hold on to more of what they earn. I want all New Zealanders to do their best as they see fit for themselves and their families. Again, the way this current mechanism has been put in place is all about control. I want New Zealanders to be able to choose to save, if at that time of their lives that is what they choose to do. I also want them to be able to enjoy their income, if that is what they choose to do, and I also want them to have the freedom to add value to our economy. In short, I trust New Zealanders, and National trusts New Zealanders, to make the best decisions about themselves, at whatever time of life they are in.

Nothing demonstrates more clearly the differences between Labour and National than the way Labour has implemented this policy. This policy is about control; everything this Government is about is control, be it in respect of smacking, what one watches on TV, or what one’s net income is. This was a flagship pledge on the infamous pledge card at the last election. It was one of those slogans on the pledge card, which, sadly, the taxpayer had to fund and pay for. It was also—disgustingly, quite frankly—made legal by retrospective legislation that was pushed under urgency late last year. Incidentally, as I was writing a few notes, I was wondering whether that $800,000 had been paid back—there are about 95 days to go—and I am looking forward to the receipts being tabled in Parliament.

Many studies in the last couple of years and in recent months have shown that there is a growing underclass in New Zealand and a growing poverty gap. Those at the bottom of the socio-economic ladder have suffered more than ever over the last 6 or 7 years. In fact, the National leader, John Key, raised this issue in a recent speech, and Prime Minister Helen Clark denied it. She said he was talking nonsense. In fact, New Zealanders acknowledged it, and they thanked Mr John Key for raising the issue, confronting it, and starting to offer solutions.

I guess the celebration of this motion by Labour begs the question as to why on earth $10 a week is necessary in the first place. Why is it needed? Besides the other points I have talked about—control and buying votes—I ask why on earth this is necessary. Well, it is very simple, actually. Billions and billions of extra funds and extra individual wages and salaries have been taken from the private sector in the form of extra taxation by this Government over the last 8 years—amounting to something like $60 billion that will be wandering through the Inland Revenue Department accounts this year. That is why Labour decided that it needed to give families another $10 per week. Can members not see the obvious—that the money should not be taken in the first place? The Cullen experiment of the past 8 years has failed.

DARREN HUGHES (Labour—Otaki) Link to this

I move, That the question be now put.