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Taxation—Affordability of Tax Cuts

Wednesday 24 October 2007 Hansard source (external site)

Key1. JOHN KEY (Leader of the Opposition) Link to this
to the Prime Minister

Does she stand by her statement that “Across the board tax cuts are not affordable, and will inevitably lead to cuts in public services.”; if not, why not?

ClarkRt Hon HELEN CLARK (Prime Minister) Link to this

That July 2005 statement was absolutely true. I am happy to say that the continuing strong economy under this Labour-led Government now gives us many more choices.

KeyJohn Key Link to this

Does the Prime Minister recall that yesterday in the House, using Statistics New Zealand’s figures, I pointed out that somebody who does not have children but who earns the average wage, which has gone from $34,000 to $44,000, is in fact only $500 better off after the impact of fiscal drag and inflation, and that by doing the same calculation using Treasury’s figures, moving from $36,000 to $46,000, that New Zealander is in fact $500 worse off; and does she think that is fair to someone earning the average wage?

ClarkRt Hon HELEN CLARK Link to this

I am advised that the figures the member is quoting are those from Bill English. He got it wrong, and we will have a bit of fun with him in due course.

KeyJohn Key Link to this

Is the Prime Minister aware that if tax thresholds had kept pace with inflation in the time that she has been the Prime Minister of New Zealand, people on the average wage would now be better off by $1,200 a year, or $23 a week; and does she not think that would be the decent thing she could have done to at least just help them avoid bracket creep?

ClarkRt Hon HELEN CLARK Link to this

I would not take any of Bill English’s figures at face value, because I know he sets the member up. Of course, the Working for Families tax cuts make families immensely better off.

DonnellyHon Brian Donnelly Link to this

Does the Prime Minister believe it makes economic sense to promote a policy of large-scale tax cuts in conjunction with asset sales, and if such a policy was pursued, what would have to be sacrificed in order to accommodate the reduction in these two income streams?

ClarkRt Hon HELEN CLARK Link to this

The National Party went to the last election with a tax cut policy funded by borrowing, asset sales, and cuts in spending. That was a bargain the public chose to see right through.

FitzsimonsJeanette Fitzsimons Link to this

If it is true that cutting taxes, as the National Party proposes to do, would reduce Government income to fund services like health and education—which is a statement we agree with—is it not also true that if agriculture was brought into the emissions trading scheme now and taxpayers did not have to cover the cost of our agricultural emissions for the next 5 years, then those hundreds of millions of dollars could also be used for hip replacements, improved student-teacher ratios, or many other public services?

ClarkRt Hon HELEN CLARK Link to this

The answer to the first part of the question is certainly yes. In respect of the second part of the question, the Government gave a commitment in 2002 that agriculture would not be included in the first commitment period, and we have honoured that undertaking.

KeyJohn Key Link to this

Does the Prime Minister agree with the Minister of Finance that four conditions must be met before a Labour Government would give a tax cut, and can she give a commitment that if those four conditions are not met, then no tax cuts will take place under Labour?

ClarkRt Hon HELEN CLARK Link to this

I am glad the member is taking the four tests seriously. They look like pretty good tests to me.

KeyJohn Key Link to this

Can the Prime Minister explain to the public of New Zealand why she and her Minister of Finance are saying that tax cuts will be on Labour’s agenda next year, when she does not know whether the four tests can be met?

ClarkRt Hon HELEN CLARK Link to this

Is that not an extraordinary statement from the leader of a party that has voted against the billions of tax cuts delivered by the Labour Government?

CullenHon Dr Michael Cullen Link to this

Has the Prime Minister just received a verbal report suggesting that taxes should be cut even if it means borrowing for them, even it means that services have to be cut, and even if it means that totally unfair tax cuts are brought into place that do not do anything for low to middle income New Zealanders?

ClarkRt Hon HELEN CLARK Link to this

On the record, the public refused to vote at the last election for a party that promised inflationary tax cuts that would have put up every mortgage, would have cut services, would have involved borrowing, and would have meant asset sales. That has always been the National Party approach.

KeyJohn Key Link to this

Will the Prime Minister have a go at answering the question this time, seeing that she avoided answering it last time: the Minister of Finance has laid down four tests that he says tax cuts have to meet before they can occur under a Labour Government, so will she give a commitment to New Zealanders today that if those four conditions are not met there will be no tax cuts under Labour?

ClarkRt Hon HELEN CLARK Link to this

I am very confident that if there are tax cuts those conditions would be met.

CullenHon Dr Michael Cullen Link to this

Is the Prime Minister aware that Mr Bill English argued today that tax cuts could be paid for by not properly providing for bad debts on the Government books, and that if we did not write off those, we could afford to pay for tax cuts?

ClarkRt Hon HELEN CLARK Link to this

I have heard word to that effect. I also heard on 9 March Bill English say: “Right now is not a time to be giving out extensive tax cuts.”, and the very next day I heard John Key say: “We’re firmly committed to tax cuts.” Which is National’s policy?

KeyJohn Key Link to this

Now that the Prime Minister has confirmed that under Labour the four conditions have to be met before there is a tax cut, will the Prime Minister explain why she and Michael Cullen can confirm that there will be tax cuts under Labour next year when she does not know whether those conditions can be met now?

ClarkRt Hon HELEN CLARK Link to this

The member really should pay more attention to the answers given. The answer given was that the Government had many more choices in front of it. The answers consistently given are that these issues will be addressed in next year’s Budget. I do not know what it is about that that the member does not understand, except that he is not in charge of his policy and Bill English is.

FitzsimonsJeanette Fitzsimons Link to this

Does the Prime Minister agree that the proposal of the New Zealand Institute today to welsh on our commitments under the Kyoto Protocol would amount to an environmental tax cut for polluters and a reduction in the services provided by the climate, and will she assure the House that the Government will not follow the institute’s advice?

ClarkRt Hon HELEN CLARK Link to this

I am very much inclined to agree with the assertion in the member’s question. What has truly amazed me is to see Mr Key go from climate change denier, to jumping on the bandwagon, to leaping off it again today and going back to the denial state.

KeyJohn Key Link to this

Has the Prime Minister asked the Minister of Finance when he actually dreamt up these four tests that must be met under a Labour Government before tax cuts could occur, because it may well have dawned on her that those conditions have been met before when the Minister of Finance was in charge, and New Zealanders are wondering why they did not get a tax cut in that year?

ClarkRt Hon HELEN CLARK Link to this

This Government has delivered billions of dollars of tax cuts to families, to businesses, and to savers, and every single one of those cuts was voted against by National. There is a word for that, and it starts with “h”.

KeyJohn Key Link to this

I seek leave to table a document showing Treasury’s figures that if someone was earning, 7 years ago, the average wage of $36,000 and now earns $46,000—

Document, by leave, laid on the Table of the House.

WilsonMadam SPEAKER Link to this

I just remind members that there is to be silence during points of order, otherwise some people will be leaving the Chamber.

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