1. TIM BARNETT (Labour—Christchurch Central) Link to this
to the Minister of Finance
What reports has he received on the role of taxation in the economy?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
Not surprisingly, I have received many, many reports on that matter, but one in particular was from a person who said that right now is not the time for extensive tax cuts but that a better approach is to use taxation as a “tool to promote savings, investment, and growth”. This quote was from Bill English, who, of course, now has to explain why he voted against the savings and investment tax cuts introduced last year.
What reports has the Minister seen on an alternative approach to the role of taxation in the economy?
Hon Dr MICHAEL CULLEN Link to this
Again, very many, but in particular I have seen a report from the Timaru Herald last week that outlines a radical overhaul of the tax system at a cost of up to $4 billion a year. This came from the other National Party leader, Mr John Key. But I have also seen a report from the showing Mr Key posing next to a giant pair of flip-flops, which themselves have flipped and flopped to the top of his electorate office in Helensville. I suppose a pair of flip-flops is an appropriate symbol for the new leader of the National Party. []
Madam SPEAKER
Hon Bill EnglishWhy is the Minister so reluctant to discuss his own economic policies, such as the worst productivity figures we have ever had, which were produced last Friday, and the growing concern about the spending surge that he is planning over the next 18 months, which some people speculate could rise as high as $10 billion?
Hon Dr MICHAEL CULLEN Link to this
In terms of the so-called spending surge, the main concern came from a Mr Phil Rennie, who previously worked for Mr Bill English and now poses as an independent commentator on the economy. As for the issue of productivity, I remind the member that when there is an economic slow-down but labour is not shed, then labour productivity growth falls. It could have been much higher if the unemployment rolls had risen very dramatically, as no doubt the member would favour.
Gordon CopelandHas the Minister seen reports about yesterday’s Budget in Canada, which supports families with a parent at home through tax exemptions; and if Canada—with its similar culture to New Zealand—supports families with a stay-at-home parent, is it not time that New Zealand followed suit through income splitting?
Hon Dr MICHAEL CULLEN Link to this
Income splitting is only one answer and for many families would not be terribly effective. Much more effective for many families has been the Working for Families tax credit programme, for which I am grateful to the member for supporting. That gives a real choice to many women, in particular, as to whether they should stay at home to care for their children or go out to paid employment. They have that choice in a way that was not possible before Working for Families came into operation.
Rodney HideHas the Minister seen the report by the Centre for Independent Studies that states that core Government expenditure in 7 years has increased in real terms by $20 billion, and the report by Treasury in 2005 stating: “There is little information to indicate that New Zealanders are getting more services and better results from the public sector for the large increase in resources provided.”; and does he not find it concerning that such a large increase of expenditure can occur for no apparent gain?
Hon Dr MICHAEL CULLEN Link to this
Firstly, we have again the so-called Centre for Independent Studies’ Mr Phil Rennie, who previously worked for Mr Bill English. So it is certainly a centre for studies, but not for independent ones, in that respect. Secondly, the member is wrong in saying “real”; it is nominal growth of $20 billion. If one imagines no increase in spending since 1999, then that means no increases in the numbers of teachers, police, and many other people, and no wage increases for anyone in the public sector. I suspect we would have few doctors, nurses, teachers, Child, Youth and Family Services workers, Department of Corrections officials, or many others left working.