Budget Debate
Hon BILL ENGLISH (Minister of Finance)
:I move,
That the Appropriation (2009/10 Estimates) Bill be now read a second time.
Six months ago, this Government was elected on a platform of enterprise and growth. The National led Government is ambitious for New Zealand. We want New Zealanders to realise their aspirations through better opportunities in a prosperous, competitive and open economy.
A domestic recession, followed by the worst global recession since the 1930s, makes these ambitions challenging.
The Government is determined to address these issues honestly and responsibly. Our partners in government, ACT, the Māori Party and United Future, share our commitment to the challenge of managing through the recession. Stable government is critical in a turbulent time.
By taking firm, early and decisive action, the Government is managing the downturn to cushion the immediate impact on New Zealanders and to enhance future growth. The Government is determined that the economy will make the adjustments it needs and emerge in better shape once the recession ends.
We are particularly concerned that the economy creates new jobs. The burden of a recession falls most harshly on those who lose their jobs and on their communities. We owe them every effort to create the opportunity for a new job.
This Budget fulfils many of our pre-election commitments. These, together with the agreements made with support parties, have been given first priority on available resources.
Protecting the most vulnerable is a priority.
The Government will safeguard entitlements to income support. Low income and older New Zealanders need security when times are uncertain. That’s why this Budget maintains New Zealand Superannuation, benefits, student support, and Working for Families.
The Government will increase funding for public services. Core Crown expenditure, excluding finance costs, in the year to June 2010, is projected to rise by $3.0 billion compared with the previous year.
Within this increased funding, less effective spending is redirected to higher priority areas. This Budget sets out the first steps in the Government’s drive to deliver better, smarter public services. It will be an ongoing task as long as public needs grow and budget deficits persist.
This Budget restricts the increase in public debt to manageable levels. Treasury’s December forecasts showed a dramatic and indefinite rise in debt levels. This is unacceptable to this Government because we do not want to saddle future generations with the cost of short term policies.
And the Budget outlines the first steps on the long road to raising productivity, lifting economic performance and closing the income gap with Australia.
This Budget addresses the major economic issues facing New Zealand.
World growth is at its weakest in three generations.
Countries buying our products are in recession. The euro area countries, the United States and the United Kingdom economies are all forecast to shrink by around 3 per cent or more during 2009.
The situation in Asia is even more severe. The major Asian economies, China excepted, are expected to contract by more than 5 per cent this year.
Australia’s economy is faring relatively better. Even so, our largest market will also contract this year.
Overall, the OECD forecasts that GDP in its member countries will drop by 4.3 per cent in 2009. This is the largest, most synchronised decline since the Second World War.
These events have highlighted longer-term weaknesses in our own economy.
By the time of the election, New Zealand had been in recession for almost a year. It is likely that the economy is now experiencing its sixth successive quarter of contraction.
Imbalances in our economy have been laid bare by the global recession.
The first imbalance is in the government’s books. What appeared to be permanent surpluses have rapidly swung to large deficits. The first signs of deficit emerged in the 2008 Pre-election Economic and Fiscal Update. Now, 15 years of surpluses may be followed by a decade of deficits.
In addition, New Zealand continues to spend more than it earns and finance the difference by excessive borrowing. Household debt has increased 51 per cent since 2004. The cost to households of servicing this debt had almost doubled prior to the recent drop in interest rates.
These trends are apparent in the nation’s current account deficit. This has persisted at or near record levels of around 8 to 9 per cent of GDP over the past three years.
New Zealand’s accumulated net debt to foreigners rose from $93 billion in 2000 to $168 billion today.
Further, New Zealand’s productivity performance has been poor over the past decade. Ultimately, better productivity growth is the only way to create jobs and sustain high living standards.
The common elements to each of these imbalances are excessive growth of the domestic and consumption sectors of the economy. Meanwhile there has been insufficient growth and investment in those parts of the economy that either export or compete with foreign producers.
Between 2004 and 2008, import volumes grew at around three times the rate of export volumes. Indeed export volumes have on average grown by less than 2 per cent annually over the past five years. It has been hard being an exporter in recent times.
The economic slowdown that started in early 2008 was the product of a decade when we spent more and borrowed more while we saved less.
An adjustment in the right direction is already underway. The New Zealand dollar has fallen by around 25 per cent. Household borrowing has slowed and the saving rate has increased. House prices have eased and consumption has slowed.
The depth of the global recession means we will have to adjust faster to less borrowing and more productive investment. The adjustment will be harsher if it is forced on us by lenders reluctant to pay our bills.
So the global recession has lent more urgency to a programme to lift productivity, build business confidence and investment and create jobs.
The Government’s stimulus measures will in the short term cushion the community against greater job losses and sharper declines in consumption. But in the long term New Zealand must balance its economy in favour of more investment and jobs in internationally competitive industries.
That is the only way we will create new, sustainable and worthwhile jobs.
In this Budget we will continue to support public services and help New Zealanders through the downturn.
We will initiate a programme to lift productivity, improve competitiveness and sharpen New Zealand’s future economic performance.
We will consolidate the Government’s fiscal position, keep debt under control and ensure that Crown finances are properly managed.
The Government has been active in softening the sharp edges of this recession. The package of initiatives has been likened to a “rolling maul”.
The Government now guarantees deposits in New Zealand banks, and many building societies, credit unions and finance companies.
We have introduced temporary additional support through our ReStart Package for those worst hit by redundancy. ReStart is already helping around 1,400 families.
We have launched our Small Business Relief Package, which makes it simpler and less expensive for small businesses to manage cash flows and pay taxes.
We are fast-tracking close to $500 million of infrastructure investment in school improvements, state housing upgrades, and roading projects.
We are developing the best ideas from the Prime Minister’s Job Summit. These include the “nine-day working fortnight”, increasing education options for young people, and the national cycleway. The Job Support scheme is already helping workers keep their jobs.
Above all, we have maintained financial stability through turbulent times. This is the single most important thing that government can do to maintain existing jobs and to create new ones.
This Government came into office with a plan to lift New Zealand’s economic performance.
Our productivity initiatives fall into three broad areas: improving the business environment and removing roadblocks to growth; investment in productive infrastructure; and improving the way government works.
The business environment will be improved by a thorough review of government regulation.
We have started by streamlining and simplifying the Resource Management Act. We will also reform the Building Act. We will change the Overseas Investment Act and review telecommunications regulation.
A review of the electricity industry will begin reporting back next month.
We are reviewing a range of environmental legislation, including all aspects of water management. In each case, we will redesign the legislation to allow quick and efficient decisions for productive investment.
The process of creating regulation will be considered by the Regulatory Responsibility Taskforce overseen by Hon Rodney Hide, as Minister for Regulatory Reform.
The Government will pick up the pace of infrastructure investment in order to clear the bottlenecks that hold back a growing economy. The next three years will see extensive investment in transport, housing and electricity transmission and generation.
We have created the National Infrastructure Unit to provide a coherent framework for investment. This will be supported by an advisory board with strong private and public sector experience.
By the end of this year, we will have delivered the first national infrastructure plan. This will provide industry with some certainty about the future and assist government to prioritise its investment.
We have also set out to lift public sector productivity.
The government conducts around a quarter of all economic activity. Public services must play their part in lifting national productivity by using taxpayers’ money more effectively. Increased funding in this Budget allows public services time to plan for better performance over the next five years.
I move on to our plan to balance the Government’s books.
Shortly after taking office, this Government received an updated set of fiscal projections showing ongoing operating deficits and sharply rising debt levels.
As we indicated last December, it is appropriate that the Government bears its share of the downturn through its own finances.
However, it is clear that future deficits are far from temporary. The reason for this, alongside the recent downturn, is the fact that in recent years spending increases have got a long way out of line with growth in the economy and with growth in tax revenue. The fall in revenue caused by the global recession has made this trend obvious.
In the five years to June 2009, core Crown expenditure will have increased by 49 per cent. By contrast, the nominal economy has grown only 25 per cent and tax revenue by 25 per cent over the same period. No government, business or household can survive for long with expenditure growing at twice the rate of income.
The result is that public debt is rising rapidly. The current projections show debt would have reached 48 per cent of GDP by 2013 and 70 per cent by 2023, without any commensurate increase in Crown assets.
That level of debt would be more than all the debt raised by government since the Second World War. It equates to just over $45,000 for every New Zealander. Put another way, it would represent $180,000 of government debt for every family of four – equivalent to a second mortgage on their home.
Projected finance costs would, in time, have reached levels similar to spending on District Health Boards or on all sectors of education combined.
Allowing debt to accumulate rapidly is the surest way to put those services in jeopardy.
New Zealanders know from recent experience the costs of paying for high debt and how difficult it is to bring it down to acceptable levels.
Public debt peaked in 1987 at 76 per cent of GDP. At that point, finance costs consumed some 20 per cent of all government spending.
It required a monumental effort to reduce debt to today’s level. This required many measures government might have preferred to avoid, including often harsh spending restraint. Government finances also benefited from two decades of mostly favourable world growth. Even then, the debt reduction took 20 years.
Quite possibly, if New Zealand’s debt was to rise again to 1980s proportions it would never be restored back to today’s levels.
Clearly, we cannot allow debt to accumulate on this scale.
This Budget will begin to restore the Crown balance sheet to its previous health. A relatively strong balance sheet has helped the economy ride out this shock. It has also allowed the Government to extend loan guarantees and to make considered and quality spending decisions.
As the recession ends, the Government’s priority will be to rebuild its finances so another generation can cope with future recessions.
This Budget starts the process of changing Government spending priorities.
The first step was to carefully scrutinise existing spending. This involved considerable input from both my Cabinet colleagues and public sector chief executives. I commend both groups for their enthusiasm and integrity they have brought to this process.
Budget 2009 includes net new operating spending of $1.45 billion a year, which has been allocated first and foremost to meet the new Government’s priorities. We have also allocated funding to meet emergency pressures.
The new $1.45 billion annual spending allowance is considerably less than in recent years. New spending in the past five years has averaged around $2.8 billion a year. It would have been imprudent to continue new spending at that rate.
In addition, initial reviews of departmental spending have freed up considerable extra funding by reducing low priority spending.
These reviews have saved about $500 million annually over the next four years, which have been used for higher priority activities. Many of the initiatives included in Budget 2009 would not have been possible without this reallocation.
In December, the Government announced it would increase its allowance for new capital spending to $1.45 billion a year for the next four years.
This higher capital allowance will be targeted mainly at infrastructure spending. This is consistent with this Government’s intention to build a more productive, higher-income economy.
The Government remains strongly committed to the public health system.
The Budget provides for $750 million a year in new capital and operating spending within the health sector, or $3 billion from 2008/09 to 2012/13.
Just over $2.1 billion extra over the next four years will go directly to District Health Boards for services to their local communities. This includes $139 million for subsidised medicines, $46 million to devolve some hospital services to primary care and $90 million to improve age care facilities and respite care for those being cared for at home.
The Budget also provides $70 million for up to 800 additional health professionals to increase services for New Zealanders needing elective surgery.
We will create 60 new medical training places and 50 extra places for general practitioner training, at a combined cost of $43 million.
The Budget provides an extra $103 million to meet increased maternity service needs.
Elsewhere in health, we have allocated $245 million for capital infrastructure. This will be allocated across hospital developments, including the Government’s plan to increase elective operating theatre capacity.
Education is also a priority.
Over the current year and the following four years, the Budget includes more than $1.34 billion in new operating spending and $340 million in new capital spending to deliver on the Government’s election commitments.
Schools funding will continue to increase to pay for increased teacher numbers and salaries, as well as providing for a larger operating grant.
The $523 million boost for the 21st century school building programme in this Budget will build new schools, modernise existing schools and expand capacity.
A further $36 million has been provided to support improvements in numeracy and literacy standards and $51 million has been allocated so more students can access support from the Ongoing and Reviewable Resourcing Schemes.
Early childhood education will receive nearly $70 million more over the next four years.
From July 2010, five year olds and children attending playcentres and kōhanga reo will be eligible for 20 hours per week of early childhood education.
In the year ahead the Government will begin to implement the Youth Guarantee with a particular focus on the fast growing numbers of young unemployed. Our education and welfare systems need to be adapted to ensure the next generation of workers lift their skill levels and stay connected to the world of work.
The Budget includes funding for a significant initiative to upgrade home insulation.
More than 180,000 homes built before 2000 will have access to grants for insulation and clean heating over the next four years. Most households will be eligible for grants of up to $1,800 and those with Community Cards will be eligible for additional funding.
$323 million is set aside for this, including $244 million of new spending.
In addition, the stimulus to the building industry will provide green jobs to help cushion the effects of the recession.
I particularly thank the Green Party for its role in developing this project as part of its Memorandum of Understanding with the National Government.
Budget 2009 boosts Māori Affairs funding to support families vulnerable during the recession. Whānau Social Assistance Services will receive $32 million and The Māori Economic Taskforce $10 million.
The Government is grateful to Hon Dr Pita Sharples and Hon Tariana Turia – and indeed to the broader Māori Party, for their contributions to these initiatives.
Science and technology play important roles in the Government’s vision of a better New Zealand.
The Budget includes new initiatives of $321 million for research, science and technology. This includes increased funding to the CRI Capability Fund, the Marsden Fund, Health Research and the introduction of $1 million for Prime Minister’s Prizes for Science.
This includes $190 million over the next four years for a new Primary Growth Partnership. When fully operating in 2012/13, the partnership will see the Government investing $70 million a year in primary sector innovation. It will be matched dollar for dollar by industry.
Law and order is also a priority for this Government. In a number of areas, the need for extra resourcing was becoming urgent.
The Budget provides more than $900 million in operating and capital funding over the next four years for initiatives across the justice sector.
Police will receive $183 million to provide 600 more Police by 2011. Half of them will be in Counties-Manukau, with the others spread across the rest of New Zealand.
The Budget also funds tougher anti-money laundering measures, so that New Zealand will meet its international commitments. Some funding will address more local problems, notably profits from cannabis and methamphetamine sales.
We need to address many downstream pressures within the Justice and Corrections systems. Community Probation and Psychological services will receive an additional $256 million to manage the increased number of offenders serving community sentences and improve the quality of parole and home detention management.
We also know that our prisons are under pressure. The Budget provides $3 million in 2008/09 and $385 million over the next four years for increased prison capacity and planning for further potential expansion.
This Budget significantly increases operating funding and capital investment for public services, fulfilling National’s election commitments and meeting the costs of growing demand.
However, the public sector must consider how it will adapt to tighter budgets and smaller or no increases in the future.
Public sector chief executives are already identifying how to deliver services more efficiently. Considered decisions now will avoid harsher decisions later.
I have already referred to the task of providing New Zealand with the infrastructure needed for world class performance. This Budget contains funding to back our infrastructure plans.
The Government is increasing investment in the state highway network by about $1 billion over the next three years, through changes in the National Land Transport Fund.
This is on top of the Crown investment in transport infrastructure of $142 million announced as part of the February fiscal stimulus package.
We have continued to invest in rail. Budget 2009 includes $115 million to fund Kiwirail’s purchase of 20 new locomotives and to provide it with access to working capital. In Budget 2009 we are announcing an additional $90 million of operating support for KiwiRail.
The Government’s plan to provide ultra-fast broadband to most New Zealanders is underway.
This Budget provides an initial $290 million of funding for this project – including a $200 million capital allowance, $48 million for investment in rural broadband infrastructure and $34 million to make schools broadband-ready.
The measures I have outlined will form key elements of our strategy to ensure that New Zealand emerges from the downturn stronger than it entered it.
The Government is determined that future taxpayers will not be burdened with higher debt which is unmatched by increases in productive assets.
To achieve this, the Government has made some difficult decisions.
There will be ongoing restraint on future spending increases.
The new spending allowance in future Budgets will be reduced to $1.1 billion in Budget 2010. The new spending allowances will then be adjusted to grow at 2 per cent per year in future Budgets.
This represents an appropriate balance between maintaining public services on the one hand and limiting debt on the other. We will continue scrutinising and reprioritising resources.
The Government believes that equal or better public services can be delivered from existing budgets with better management.
Future spending restraint will help keep debt manageable and contribute to renewed profitability of New Zealand’s exporters. However, it is not enough.
The Government’s commitment to maintaining New Zealand Superannuation entitlements is absolute. Entitlements will remain 66 per cent of the average wage after tax, paid from age 65. As with all public services and entitlements, sound public finances are the best, indeed the only way of ensuring future delivery.
The Government has reviewed all its substantial cash commitments and decided to suspend automatic contributions to the New Zealand Superannuation Fund.
When it was set up, the idea of the Super Fund was to invest Budget surpluses. The Government was then in surplus and expected to remain so for the foreseeable future. Those Budget surpluses have disappeared.
Had contributions continued at the previous rate, the Government would have had to borrow an additional $1.5 billion a year, rising to over $2 billion a year during the next decade. It makes little economic sense to burden future generations with debt incurred financing investments that were intended to reduce their need to borrow.
We will resume contributions when the operating balance is sufficient in terms of cash flow to meet contributions and other capital spending. On current projections this will be from 2020/21, and will continue for a decade until withdrawals from the Fund begin in around 2031.
The Government will make a contribution to the New Zealand Superannuation Fund of $250 million in 2009/10. This will assist the fund to find suitable investment opportunities in New Zealand, and will continue to support local capital markets during the downturn.
The Guardians will actively consider New Zealand-based investments as part of their role of managing the Fund prudently and commercially.
Future contributions to the Fund will be considered annually.
The Government has also examined its revenue strategy. This Government believes in reducing tax rates. High marginal tax rates are a cost to the economy. They reduce incentives to work, to save, to invest and to take risk.
However, the Government’s revenue strategy must be re-evaluated in light of the contracting economy and growing debt we have inherited.
As a result, the Government has decided to defer the second and third tranches of the planned tax cuts in 2010 and 2011 until economic conditions improve. Taxes were reduced on 1 October 2008 and this Government has enacted tax cuts from 1 April this year. Those tax cuts will be maintained.
The Government will thus have delivered tax cuts worth over $1 billion to more than 1.5 million New Zealanders since being elected.
A person on the average wage has in the past eight months benefited from tax cuts worth more than $30 a week.
The measures outlined this afternoon, the expenditure restraint shown by this Government, deferment of the tax cuts and deferment of Super Fund contributions, will keep the increase in public debt within acceptable levels.
The economic projections show that the economy will trough this year. In the current year to March 2010 output is expected to shrink by 1.7 per cent. As growth resumes the economy is expected to expand by 1.8 per cent, 2.9 per cent and 4 per cent respectively in the three years to March 2013.
While the economy picks up in the next few years, Budget deficits persist for the next nine years. The projected deficit in the year to June 2010 is $7.739 billion, or 4.4 per cent of GDP.
Government net debt will peak at around 36 per cent of GDP by 2016/17. The debt to GDP ratio will steadily decline over subsequent years. Finance costs are not projected to exceed 3 per cent of GDP at any point.
As I discussed earlier, this compares with the pre-Budget outlook that would have seen debt continuously rising, accompanied by a rising financing cost.
No increase in public debt is entirely satisfactory. In this case the world has moved very quickly from the best of times to the worst of times. It is appropriate that public finances be smoothed through these long-term cycles.
To put the deterioration in perspective, at their peak projected debt levels will be comparable to those of the mid to late 1990s.
This Budget will ensure New Zealand retains one of the lowest debt levels, and one of the strongest balance sheets, in the OECD.
This is the first Budget on the road to recovery.
The Prime Minister has made clear this Government’s aspirations for an economy that values enterprise, rewards people for effort and encourages them to get ahead. Sustained growth and new jobs are about more than just Budgets.
Sustained growth is about providing opportunities for New Zealanders to achieve their aspirations.
In the months to come, New Zealanders will be asked to make changes because the world has changed.
While these changes will be challenging the Government is confident about New Zealand’s prospects.
Our confidence in recovery is confidence in the resilience of New Zealanders – in our collective ability to make practical changes that solve the problems we face, to channel our resources and our brainpower to where they are productive and create new jobs.
Budget 2009 marks a turning point for New Zealand. Ten years of economic growth and expansive appetites for debt and Government spending have ended. Today we have outlined the challenge to rebalance the economy from debt and consumption to investment and exports.
The Budget will improve New Zealand’s international competitiveness.
It will get our debt under control and turning down.
It starts to create a government sector that provides better services and delivers better value for taxpayers.
It will help create new and sustainable jobs.
It will begin to build a platform for a much more ambitious New Zealand.
Mr Speaker, I commend this Budget to the House.
Hon PHIL GOFF (Leader of the Opposition)
: I move,
That the words after “that” be omitted and the following substituted: “this House have no confidence in the National Government led by John Key, because the 2009 Budget fails to provide an effective plan to address the growing number of jobs lost and the increasing numbers of New Zealanders worried about losing their livelihoods and their homes, fails to build a foundation on which New Zealand can emerge from the recession in a stronger position to take advantage of an economic upturn, and fails to deliver on the promises and personal guarantees made by John Key in the election campaign just 6 months ago.”
This is a dishonest Budget. It says one thing and it does just the opposite. In a nutshell, this is a Budget that is full of rhetoric but empty of substance and empty of any vision. The tax cuts personally guaranteed by John Key dishonestly to win an election are gone, but this Budget cannot even be honest in the words that it uses. It says “defers”. Bill English told the lock-up that the tax cuts were gone; they were gone for ever.
But the biggest dishonesty is to talk about entitlements for superannuation being guaranteed at the very time that the Budget guts the funding of superannuation, not for the 2 years that people might have been expecting but for more than a decade. That means that the Government will not face up to its responsibility for the future. It means that the baby-boomers over there are bound to be bludging off generations X and Y, because by the time that generations X and Y come to retire, there will be no funding to guarantee entitlements. The biggest lie of this Budget is that guarantees are made around entitlements. Without funding of superannuation, when one in five New Zealanders retires in the next two decades there will be no superannuation. This Government has unilaterally broken the political consensus on superannuation, and it has taken away the certainty that New Zealanders rely on for their entitlement. That, more than anything, will be the legacy of Bill English when this Budget is remembered in years to come.
Talk about dishonesty! The Budget talks about closing the income gap with Australia. At the same time, the Budget is entirely premised on New Zealanders having no increase in their real wages for 5 years—no increase in real wages for 5 years. Yet the Minister of Finance comes into this House and says the Government is going to close the income gap with Australia.
Then the Budget dishonestly talks about productivity. What do we know about the keys to productivity? One of the keys to productivity is research and development. What does this Budget do? It reduces Labour’s funding for research and development, through Fast Forward, by 75 percent. It reduces the funding for productivity, through research and development, by 75 percent.
It is a Budget that is designed to help those unfortunate enough to lose their jobs—that is the biggest lie. What do we find that this Budget actually does in practice? It takes $5 million out of the employment assistance designed to assist people who have lost their jobs to move on to another job. That is what it does, in practical terms. Does it do anything for skill training? Not a thing! Does it do anything to keep young men and women in their apprenticeships? Not at all! At a time when 2,800 young apprentices in the building industry have lost their jobs and their ability to complete their skill training, this Budget does nothing to help those people, or the hundreds of other young people who will lose their jobs, lose their opportunity to acquire skills, and lose their hope. This Budget has the rhetoric; it has none of the substance.
Let us come back to what this Budget should have been about. It should have been a Budget for jobs; it is not. It is not a Budget for jobs. John Key said yesterday that his Government’s primary focus in the Budget was to avoid a ratings downgrade, and within 5 minutes his loyal deputy and finance Minister had contradicted him—for the fourth time in the last 6 months—but in this case John Key was telling the truth. This Budget is designed to placate and grovel to Standard and Poor’s. This Budget was given, in an unprecedented way, to a group of overseas people—foreigners—who work for Standard and Poor’s, 3 or 4 days before any New Zealander got to know what was in it. I say to Mr English and Mr Key that the ratings agencies are not part of the solution to the problems the world is facing; they are part of the problem. Standard and Poor’s and other rating agencies gave Enron a triple A rating right up to the weeks before it collapsed—a triple A rating. Standard and Poor’s and other agencies gave a triple A
rating to the subprime mortgage agencies right up to the point that they collapsed, taking with them the American financial system. And John Key came into the House smugly yesterday and said that Standard and Poor’s think we are doing a fine job. Well, I am glad that Mr Key takes satisfaction from that.
Ordinary New Zealanders have had a real gutsful of the fact that while the fat cats, the financial institutions, and others whose poor judgment and greed are responsible for the economic crisis we are facing emerge from this crisis with their personal assets intact and their bonuses increased, ordinary New Zealanders are paying the price through the loss of their jobs and the loss of their savings. Mr Key knows that; he knows that it is New Zealanders who are paying the price for this recession, and this Budget does nothing to help those who are its primary victims.
Of course debt has to be taken seriously. Of course we have to make sure that in the longer term New Zealand lives within its means. But that does not mean that the best way of achieving that outcome is the slash-and-burn policies of this Government, which will literally throw tens of thousands of New Zealanders on the scrap heap of unemployment. Am I exaggerating about tens of thousands? Am I exaggerating?
Hon David Carter: Yes, yes.
Hon PHIL GOFF: Mr Carter is so out of touch that he does not believe that figure, so let me tell him that for the first 3 months of this year the household labour force survey reported the loss of 24,000 jobs—24,000 jobs, which was 8,000 a month, 2,000 a week, and 300 a day. What is it about those statistics that Mr Carter and his colleagues do not understand?
Yesterday in the House I raised the point that in the last week the number of New Zealanders forced on to the dole had increased by more than 1,250. Just last week 1,250 extra New Zealanders were thrown on to reliance on the unemployment benefit. The National Government and Ms Bennett have suppressed that figure. Ms Bennett can tell the House whether that figure is true. In fact, the figure is higher than 1,250. That is the biggest increase in the number of people going on to the dole in any week since the 1990s, when a National Government last oversaw a recession in this country. It is the biggest increase.
Ms Bennett can tell the House the other statistic that she will be aware of: that most of those New Zealanders going on to the dole have never been unemployed before—never been unemployed before. The document is sitting on the desk of every Government member; those members should have a look at it, because it shows that by the end of next month the number of people on the unemployment benefit in New Zealand will have doubled since National took office—doubled since National took office. How does it help to maintain our credit ratings and to make sure our debt levels come down, when tens of thousands more New Zealanders are being thrown out of productive work and on to reliance on the unemployment benefit? They are unable to pay tax; breadwinners are unable to support their families; young people have no hope; and people in the Māori and Pasifika communities, as always, are bearing the brunt of that unemployment.
The focus of this Budget should have been on jobs: on ensuring growth and ensuring we can get our exports up, and on ensuring that people are kept in productive work. That has not happened. This Budget is bereft of imagination, of vision, and of any practical way to help people into jobs. I heard the rhetoric at the Job Summit. I heard the rhetoric about the 9-day working fortnight. Yes, 143 jobs have been saved over the last 4 months—143! That is just over 10 percent of the number of people who went on the dole last week, and last week alone. So Mr English should not come into this House pretending that this is a Budget that worries about the battlers in New Zealand, that worries about the people thrown out of their jobs, and that worries about the people who
have lost their lifetime savings because of the corruption of people in the financial sector—which this Budget also does nothing to address.
There were measures to get New Zealand’s economy back on track. There was KiwiSaver, because we knew we needed to save more. What did this Government do? It gutted KiwiSaver; it took $3.5 billion out of KiwiSaver. That money would have done more than anything else to ensure that New Zealand got on top of its current account deficit. National scrapped the New Zealand Skills Strategy, it gutted the New Zealand Fast Forward Fund, and it removed the tax credits for research and development. Then Mr English comes into the House pretending that he is going to do something about the New Zealand economy. This Budget is a “Standard” but “Poor” National Government Budget. That is what it is. The Government took its instructions from people who saw one dimension of the New Zealand economy. It has done nothing in this Budget to get our country back on its feet and to get our people back into employment.
I would like Mr Key, when he gets to his feet, to tell this country what the projections are for unemployment by the end of the year. Will it be up by 70,000 more? Is that the figure that has been given to him by Treasury? I think it is. Will he get up and admit that, or will he sit in his seat smirking? This Budget will not stem the dramatic increase in joblessness that is occurring. This is a Budget of missed opportunities. This is a Budget of broken promises—broken promises about tax cuts. You know, the average New Zealander will not be too upset about the scrapping of those tax cuts, because most of the money would have gone to those on higher incomes. They will not be too upset about that, but they will be angry about the absolute dishonesty and recklessness of Mr Key in making that promise in order to buy votes during the election campaign when he knew that it could not be delivered upon. That is what New Zealanders will be angry about.
They will be angry about the fact that the certainty around their superannuation has gone. They will be angry about that, because the people who are now going into retirement know that the younger people are not going to pay tax now for something that they will not get when they retire. The other big part of the dishonesty around superannuation is the claim that to invest in it would be to lose money. The New Zealand Superannuation Fund last month made $1.75 billion!
Hon Members: Oh no!
Hon PHIL GOFF: It made $1.75 billion. There is nobody in this House who does not understand that the best time to invest funds is when the market is at, or close to, the bottom. By the National Government’s theory, New Zealand homeowners should be selling their house now and buying it back when the prices have risen! That is National’s philosophy. Kiwis know that it makes no financial sense, so why cannot the Prime Minister and the Minister of Finance see that?
The other great broken promise was that jobs in the public sector would only be capped, not cut. Mr Key should explain that to the 1,470 hard-working, decent, ordinary New Zealanders who worked in the public sector that his Government has sacked. It does not stack up.
This Government inherited an economy that was in good shape. It inherited an economy where the level of net debt was zero. Mr Speaker, you might think it appropriate that those members are barracking to the point where you probably cannot hear the matter I am about to raise with you. The truth is that in the good times a Labour Government paid off the debt so that New Zealand’s net debt was zero. That gave the incoming National Government the flexibility with which it could have protected jobs. Instead of giving tax cuts to the top 3 percent, it could have given the money to the decent, ordinary working families earning less than $40,000 who got nothing. Had they got something, there would have been jobs for them in that.
The truth of the matter is that the priorities of this Government are absolutely skewed and are wrong. The truth of the matter is that this is not a Budget for Kiwi battlers; it simply makes their struggle harder. This is not a Budget for employment; the National Government has clearly given up on employment. This is a Budget of missed opportunities. This is a Budget of broken promises, and no more so than in the area of superannuation. This Government will be remembered for having gutted a superannuation scheme that gave certainty to New Zealanders, equity to New Zealanders in retirement, and equity between generations. This Government, because it knows that it will not be there to be held accountable for its actions at a later date, has absolutely gutted the prospect of superannuation being maintained into the future.
I want to finish by talking about my personal experiences last week when visiting a number of places in South Auckland to talk about how the recession was affecting people. I talked to the Salvation Army, to citizens advice bureaux, and to budget advisory services. The social cost that they reported to me from people suffering job losses was tragic. The demand for Salvation Army food parcels had risen by 44 percent in the last few months; for the Auckland City Mission, it had risen by 60 percent. The Auckland City Missioner said to Annette King and me that she had advertised a job for a cleaner; within 24 hours she had had 200 applications. This Budget does nothing to address the key issue worrying New Zealanders today.
Mr SPEAKER: Before I call the honourable Prime Minister, I remind members that this is a very robust debate, and that is healthy, but I urge members not to accuse members across the House of having done something, because that leads to disorder. I remind members of that.
Hon JOHN KEY (Prime Minister)
: All I can say is that if Phil Goff thinks that this Government inherited an economy that was in good shape, he must have been asleep when the Labour members were reading the Pre-election Economic and Fiscal Update. You see, the truth is we inherited an economy that was in about as good a shape as the previous Labour Government was.
It is hard to say I learnt anything from Phil Goff’s speech, but if I learnt one thing, it was this: the Labour Party knows how to do only one thing, and that is to spend money. That is all it knows how to do. You see—
John Boscawen: I raise a point of order, Mr Speaker. I am sorry to interrupt the Prime Minister, but I would like to hear the Prime Minister. At this end of the House we cannot hear the Prime Minister, and I think we are entitled to be able to hear what he is saying.
Hon Trevor Mallard: Speaking to the point of order.
Mr SPEAKER: No, I do not need any assistance. There will be silence while I am on my feet. The honourable member may be concerned about the robustness of the interaction, but he will remember that while the Leader of the Opposition was speaking there was very robust interjection from the Government benches. I think members have to appreciate that this debate is robust, because it is about the very heart of Government. Where provocative statements are made, there will be reaction to them. If members want there to be silence, they should not make provocative statements. I ask members to please keep the noise at a reasonable level, but, in fairness, there was plenty of robust interjection during the speech made by the Leader of the Opposition.
Hon JOHN KEY: What we learnt from the Labour Party is that it wants to spend more money. It is a credit card Opposition; that is what Labour is. Phil Goff has got a plan; it is called “Visa-nomics”—that is what Phil’s plan is. He does not want to defer tax cuts, and he does not want to chop any expense; he just wants to spend more money. Out there in New Zealand, after listening to Phil Goff, people are saying he is “Whack-it-on-the-bill-Phil”. That is what the theory is. The tragedy is that that is not going to cut
it. You see, whether or not Mr Goff wants to accept the fact, the National Government has inherited the worst economic conditions since 1930. That is the truth of it. Our trading partners’ income is collapsing, unemployment is soaring around the world, our economy will earn $50 billion less in the next 3 years, the tax we are able to get will be a whole lot less, and the Government needs to do something about it. Labour may be a credit card Opposition, it may want to try to spend our way out of it, and it may believe that “Visa-nomics” is the way to do it, but unfortunately it will not cut it.
The best point in Phil Goff’s speech was when he said we should not worry about the rating agencies. That is why Labour got voted out. When the rating agency said in the newspapers on Tuesday that a National Government knows how to manage the economy, it was saying by default that it knows that a Labour Government does not know how to manage the economy. And that is what Phil Goff proved. He said to hell with the rating agencies. Well, this is what that means. The Irish who go off to the pub to have a nice Guinness are paying 1.5 percent to 2 percent more in their interest rates. That is the economic prescription of a Labour Government—1.5 percent to 2 percent more in interest rates. Treasury has done some work on that. A ratings downgrade would mean New Zealanders paying $600 million more a year in interest rates. Well, I say thank goodness we have Bill English, who knows how to get us through this. “Whack-it-on-the-bill-Phil” would have seen New Zealand running up a quarter of a trillion dollars’ worth of debt by 2023. The servicing cost of that debt would have been $13.8 billion more than the entire health spend today. That would have been the strategy under Labour. New Zealanders tonight will look at this National Government and say that it is a Government that has the right priorities.
I want to make one final point in relation to Phil Goff’s speech. It was not one of his best speeches, but I will let him off. One thing that I will say is that Michael Cullen understood the economics of superannuation. We saw from Phil Goff the worst sort of opposition. It was scaremongering opposition. Labour members know, like we know, that there will be no change to the age of eligibility for superannuation, and no change to the superannuation floor of 66 percent of the average wage—not under a National Government, anyway. You see, pre-funding of the superannuation scheme already had a formula built into it that allowed the Government to defer those payments if it wanted. Does it make sense to borrow billions of dollars on the credit card to save for tomorrow? I do not think so. “Whack-it-on-the-bill-Phil” might think that that is the way to go, but on this side of the House we do not think so.
There is no getting away from the fact that these are difficult conditions for the Government, but we had three objectives for the Budget, and I believe we have met all three of them. The first of those objectives was to get through the recession and to take the rough edges off the recession. Let us talk about the entitlements that we are borrowing to preserve. No student in New Zealand tonight has to worry: the interest on his or her loan is zero percent. No family in New Zealand that is getting Working for Families has to worry: its entitlements are fully preserved. No one in New Zealand who relies on superannuation, relies on the unemployment benefit, or relies on the widows pension has to worry: those entitlements are preserved. Let us understand that for a second. We are in the worst economic conditions since 1930 and Bill English has preserved every entitlement for every New Zealander. I say that we are lucky to have Bill English; that is what I say.
Let us turn to the issue of jobs. Phil Goff said that no jobs were created. What about the 600 police we are adding? What about the 800 professionals in the health system? What about the hundreds and hundreds of people we are hiring around the economy on the back of this Budget?
This Government knew absolutely the areas that were critical, so let us turn to a couple of those. Let us start with the health system. We are in the worst economic conditions since 1930, yet this Government is putting $3 billion into health over the next 4 years. When the previous Government had all the money in the world, all it did—
Hon David Cunliffe: Big clap for no change!
Hon JOHN KEY: Well, David, you happened to be the Minister of Health, and under your watch all you did—
Mr SPEAKER: Order!
Hon JOHN KEY: All Mr Cunliffe did when he was the Minister of Health was to wander out to the airport and wave bye-bye to the nurses, the doctors, and the midwives. I will tell members what Tony Ryall has done. Tony Ryall has introduced voluntary bonding for nurses, doctors, and midwives, and they are signing on in their hundreds. Tony Ryall has had to deal with swine flu. Well, he has not made a pig’s ear of it, which the previous Labour Government would have done. He has done something about it in the health system. While he is at it, he has put $103 million into maternity services—$103 million. A National Government, in the worst economic conditions since 1930, rocks up with money so that there is more time for young mums to stay in hospital with their babies. Labour rocked up with a food voucher. For New Zealanders who want to have elective surgery, this Government has delivered 20 new elective surgery clinics under this Budget.
Let us talk for a moment about health and social outcomes. When I became Prime Minister 7 months ago, the first thing that the Department of the Prime Minister and Cabinet said when it wrote to my office was that if I wanted to make a difference to the social and health outcomes of New Zealanders, I should heat and insulate homes. That is what the department said—that I should heat and insulate homes. The previous Labour Government waited 9 years, and did zero. It has happened in the first Budget under this National Government, thanks to the Greens.
I thank Russel Norman and Jeanette Fitzsimons from the Green Party. They have worked very hard to get a very good plan: $323 million over 4 years, and 180,000 homes heated. They have delivered $1,800 to insulate and heat the home of any New Zealander who wants it whose house was built pre-2000, and nearly double that amount for low-income New Zealanders. That will make a difference to social and health outcomes. It is a great result for New Zealand.
The Leader of the Opposition had the audacity to say that there was nothing in this Budget for Māori. Well, I want to thank the Māori Party for what it has done: standing up strongly and fighting for the rights of Māori New Zealanders—for fighting hard.
Hon David Cunliffe: Where are the Māori seats in Auckland? What are you going to do in Auckland, Mr Key? Where’s the koha for the brothers?
Hon JOHN KEY: Well, that debate is not over. I tell Mr Cunliffe that we will sort out Auckland; that is another thing that Labour sat around for 9 years and did not resolve. Tens of millions of dollars are going into whānau ora services for Māori, education for Māori New Zealanders, the extension of kōhanga reo, and early childhood education. The Māori Party has come into this House, joined in a partnership with National, and delivered for Māori New Zealanders. I thank and congratulate the Māori Party members on what they have done.
One of the big aims of this Budget was to grow productivity. What did we hear from the Minister of Finance? This Budget provides for $7.5 billion worth of additional capital in the next 4 years. That is $7.5 billion for building the productivity capacity of this economy. That is something that has been going backwards over the last 9 years.
We saw $1 billion a year allocated to State highways. The debate over the Waterview extension has brought it all to a head, has it not? [Interruption] Mr Twyford does not care much, because he was drop kicked by his leader from having a chance in the Mt Albert electorate. The people of Mt Albert understand what I am talking about, because—
Hon David Cunliffe: Melissa’s back.
Hon JOHN KEY: Well, I actually back my caucus, but that is a different story. [Interruption] Opposition members want to make a lot of noise, because they do not want anyone to hear this. If they were to quieten down for a second, we could run through it. If they want to debate the facts, I am more than happy to have that debate. Here are the facts—no imagination. Labour allocated $650 million to State highways; we have allocated $1 billion. Labour had $650 million; we have $1 billion. We will build the Waterview extension—60 percent of it underground—for $1.4 billion. Labour promised a mythical tunnel, which would have cost $3.2 billion—5 years’ worth of everything it had available for State highways.
Hon David Cunliffe: 10 years, no super!
Hon JOHN KEY: Mr Cunliffe does not understand economics, which is quite worrying for Labour, given that he is its finance spokesperson. The interesting thing is that if Labour is to be believed, it would have spent every State highway dollar for the next 5 years on the Waterview extension, and zero on every other State highway across New Zealand. There would have been no Transmission Gully road, but we do not hear anything from Darren Hughes now. There would have been nothing for the South Island, and nothing for anywhere else.
I want to thank the members of the ACT Party for what they have done. I thank them for the great work they did in helping with the line by line reviews. This Government has saved $2 billion. That has allowed us to spend on other areas of greater importance and greater productivity to the economy. And those members have played an important role in the development of Auckland. I thank ACT for what it has done.
Safety and security has always been a priority for this Government. We have delivered 600 extra police, and 300 of them will go to South Auckland. I say well done to Judith Collins for getting those extra police officers, as well as 246 probation officers, 26 psychologists, and hundreds of millions of dollars for extra beds in prisons. That is a great result.
I would be remiss if I did not mention the cycleway for a moment. So much joy for $50 million—so much joy! The Minister of Finance tried to give me $100 million, but I said I must not be greedy and $50 million would be enough. We will build that cycleway across New Zealand, and it will provide great opportunities. Tourists will flock from overseas to enjoy it, New Zealanders will bike on it, and jobs will be created. It will make New Zealand a wonderful country.
This Budget has been put together in difficult conditions. It has been put together against the backdrop of rising unemployment around the world. But when one looks at the Budget, one realises that in the worse scenario gross debt would top out at around 43 percent of GDP in about 2016 or 2017. We can compare that with the situation in the United Kingdom or in the United States, where debt will be 100 percent of GDP by 2012, or in Japan, where debt will be 220 percent of GDP. Unemployment in the United States is at 8.5 percent, and even in Australia it is at 5.7 percent. When one looks at all of those factors and considers—
Hon Trevor Mallard: What does your mate Jeremy Baker say?
Hon JOHN KEY: Gosh, it is duck-shooting season again, so someone should deal with that member; he is on the lake of despair and hope over there!
We are not in the easiest of conditions, but when I look at the billions of dollars going to health and education and to preserve entitlements, at the balancing of the Budget, and at the sending of a strong message that we are a Government that absolutely supports enterprise, ambition, and hope, all I can say is although New Zealanders will go to bed tonight knowing that the conditions are not easy, they will also be saying thank goodness for that little town of Dipton and the young man it produced all those 47 years ago, Bill English.
Dr RUSSEL NORMAN (Co-Leader—Green)
: The Green Party remains disappointed with the lack of vision in this Budget. It is a lack of vision for moving Aotearoa New Zealand towards sustainability with fairness. The Prime Minister likes to compare himself to US President Barack Obama, but this is not an Obama Budget; this is an “Oh, bummer” Budget. As so many other countries take seriously the need to grapple with our economic and environmental crises at the same time, this Budget will go down in history as not even standard and mostly just poor. This is, in fact, the “standard is poor” Budget. The Government got this Budget signed off by Standard and Poor’s before it presented it to Parliament and the people of New Zealand. What have we come to when the Government of the day goes grovelling for approval to a failed international rating agency like Standard and Poor’s before it comes to the people of New Zealand? Let us remember that Standard and Poor’s is the agency that helped to cause the current global financial meltdown by giving triple A ratings to dodgy subprime mortgages. It gave Enron a triple A rating a few weeks before that corrupt corporation collapsed. It is shameful to watch the Minister of Finance grovel before the failed “standard is poor” rating agency.
The standard of this Budget is poor also because there is no real strategy to get us out of debt—debt that means the Minister has to kowtow to an international rating agency. This Budget locks in our dependence on imported oil, which added nearly $8 billion to our overseas debt last year. This Budget does not do enough to invest in the innovation and research that would see us climbing out of debt. This Budget does nothing to protect New Zealand companies from foreign ownership that results in billions of dollars in dividends flowing to overseas owners every year; in fact, this Budget will make it worse by weakening the Overseas Investment Act. This Budget does nothing to change the tax incentives around investment properties. Those incentives encourage New Zealanders to borrow money from overseas to buy property for capital gains.
Mr SPEAKER: I apologise to the honourable member for interrupting his speech. Although I do not mind interjections that relate to a speech where provocative statements might be made, I object to the rudeness to this House of members standing up and conducting loud conversations all around the Chamber. If members want to have conversations that do not relate to the speech that is being made, they should go out into the lobbies to do so. It is most discourteous to the member who is speaking. I apologise to Dr Norman for interrupting his speech and for the noise being so loud when he was speaking.
Dr RUSSEL NORMAN: Thank you, Mr Speaker. The Minister of Finance talked more about creating new prisons than he did about protecting our precious natural assets or lifting our children out of poverty. His focus is on reforming environmental law to make it easier for developers to further exploit our already overallocated natural resources.
A Government’s first Budget is a time to show the nation what its vision looks like in action. As New Zealand faces a recession, this Budget was an opportunity for the National Government to show the people of Aotearoa what values it stands for when times are tough. Do Government members stand up for those who are hit the hardest, insisting that we all tighten our belts a little to help our neighbours? Or will some
continue to see the good times roll while others go hungry? Does the Government uphold every Kiwi kid’s right to a fair go? Does it uphold every Kiwi’s right to decent health care, a warm home, a good school, a clean river, and a safe climate? Or does it leave our most vulnerable citizens to slip through the ever-widening holes in what was once a cradle-to-grave safety net?
The benchmark for a Budget delivered in hard times is the first Budget of Michael Joseph Savage, who came into office when times were tougher for New Zealanders than they are now. Savage was elected in the middle of the Great Depression, when there was very high unemployment and great pressure on the Government’s accounts. At its first meeting, his Cabinet agreed to pay a Christmas bonus to the unemployed, and a week later it approved 7 days’ annual holiday for relief workers. The first Budget of the Savage Government raised allowances for the unemployed and increased the wages of young workers. It began the construction of State housing, regulated mortgages for farmers, and much more. In the middle of the Great Depression, Savage’s Government put the people first. It was a Government that said that all New Zealanders are worthy of dignity and respect, and it put its money where its heart was.
In our current times an equivalent Budget to that of Savage’s means rolling back the 1991 benefit cuts introduced by National and never overturned during 9 long years of a Labour Government. That is what a truly responsible Government would do. A caring Government certainly would not axe the pay and employment gender equity commitments to women working in the Public Service. In current times a Michael Joseph Savage Budget would extend the Working for Families tax credit to beneficiaries. Labour introduced Working for Families with the express purpose of discriminating against those who were out of work, something that many Kiwi families are just discovering as they lose their jobs and their Working for Families tax credits at the same time. Labour’s scheme left the poorest families in our society the worst off, and a truly caring Government would overturn that discriminatory policy and give a break to those who are falling out of work in this recession.
Will this Government show its heart and live up to the Savage standard? The times are different from Savage’s era in at least one very important respect: our awareness of the ecological crisis we face. We have to deal with both the economic and the ecological crises at the same time. This year we in the Green Party put our heads together and devised our own green stimulus package. We figured out how many jobs we could create by growing parts of the economy that need to grow—jobs doing desperately needed work. The Minister of Finance has failed to say how many jobs his Budget will create. Our package of initiatives is a first step towards what we and others call a green new deal. It aims to save the economy and the environment at the same time. Lots of countries around the world are busy adopting green new deal plans.
Our billion-dollar stimulus package includes “shovel-ready” projects that create jobs and stimulate the economy in a way that responds to pressing environmental problems, including climate change. The proposed package covers energy efficiency, transport efficiency, protecting waterways, building more homes, and community sector initiatives. The stimulus spending over the next 3 years amounts to just over $1 billion per year—approximately the same amount the National-led Government has spent to combat the recession so far, and less than most other countries have spent. Our Green MPs have been on a listening tour, taking our ideas around the country and adding to them the ideas of hundreds of New Zealanders, because we think building a sustainable and fair economy is a topic on which every Kiwi deserves to have a say. New Zealanders have plenty of ideas. They know that the country has finite space and resources, and we cannot have infinite growth in resource use.
So how does this Government’s first Budget measure up? Is it a Budget to protect those who are hardest hit, or a Budget to protect the balance sheets of the wealthy? Is it a Budget for those who have the reins of power now, or is it a Budget for the future and for those born today and tomorrow who will one day sit in this House and wonder how we could have left them with such an almighty mess? It is time to build an economy as if we were still going to be here in 2015, or maybe even 2050. Can this Government budget for the future?
There is at least one point of light for which the Government deserves credit and congratulations. In last year’s Budget the Green Party negotiated enough money to insulate all State homes. A little later, we negotiated a billion-dollar fund to help get private homes insulated via the emissions trading scheme. Although the Government has put that scheme on hold, it has worked with my colleague Jeanette Fitzsimons on a fund to make private homes warm, healthy, and safer for the climate. In what may be some kind of parliamentary record, the Green Party has successfully negotiated with two separate Governments in less than 1 year to provide a massive funding increase to improve Kiwi homes. The Greens have campaigned for this over many years, and it is good to see that we have multiparty support and money committed to making it happen. Warm, dry, and healthy homes make sense economically, socially, and environmentally. I thank the National-led Government for embracing this sensible solution.
The Greens estimate that the $323 million of new money for insulation in this Budget can create 2,700 new jobs and preserve the jobs that already exist within the EnergyWise home insulation scheme. This is great for our economy during a time of economic crisis, and it will continue to pay us back for generations. It will also help us to tackle the environmental crisis. This is what a green new deal looks like in action. The Greens expect to continue working closely with the Government to ensure that the insulation programme runs smoothly and effectively. It is important to remember that almost 900,000 Kiwi families live in damp, cold, and unhealthy homes, and it will take time to make that right. Critics may argue that there is enough money in the Budget for only the first 4 years of the scheme, but that is how the Budget process works. Members will see that out-years beyond year 4 are specifically referred to in the Appropriation (2009/10 Estimates) Bill. The Greens have an expectation that this programme will continue regardless of who is sitting on the Treasury benches, and we will push to ensure that further years are funded. We will not rest until every one of those 900,000 Kiwi homes is warm and healthy; it is not good enough for kids in this country to get sick from their own homes. I am proud that the Greens have been able to do something about that.
Beyond this bright spot, things get a little grim. The Green Party believes that a strong Public Service is essential for providing a fair deal for all New Zealanders. All Kiwis are entitled to a good education, high-quality health care, and employment opportunities. The Budget does not provide enough of this. It does not provide opportunity or fairness for everyday New Zealanders. In these dark times, it does not offer hope. The National Government has not kept its promise to just cap the Public Service; it has cut into the Public Service, and this will inevitably lead to cuts in the services that Kiwis receive. Already we have seen an estimated 1,400 jobs lost, and an effective wage freeze in the public sector. This is not a cap; it is a sinking lid. The wide-ranging cuts we are seeing across the public sector—in the Ministry of Justice, the Ministry of Social Development, the Department of Labour, the Accident Compensation Corporation, the Ministry for the Environment, and the Tertiary Education Commission—will keep coming.
We see no evidence of the Government’s rhetoric of moving office staff to the front line—perhaps it has discovered that the person booking the surgical appointment is not
always qualified to operate the scalpel. The Government is straight-out cutting jobs; it is not moving them. Cutting the number of backroom staff sounds good in theory, but in practice it means there will be no staff in hospitals to make sure records are kept current—so who will do this work? Do we want it to be pushed on to doctors and nurses? Do we want doctors filling out forms, or do we want them treating patients?
I am worried about how this Budget will affect the most vulnerable. The statistics for Māori in terms of wealth and health give a clear message that the articles of Te Tiriti o Waitangi are yet to be honoured by the Government, and this Budget’s failure to fully address that is truly a shame. The measure of a society is how it provides support and opportunity for those in danger of being left behind. That is the measure. This is even truer in a recession, and I fail to see how this Budget will help those who need help the most. We have already seen staffing cuts at the Ministry of Social Development and the undermining of non-governmental organisation funding for those who work with the needy, and we look destined to return to the failed competitive tendering models of the past.
The economy is not the only thing in recession. Our environment is also groaning under the weight of human pressure. We are taking resources at a rate beyond what can be replenished, pumping out pollution and waste at a rate that the planet cannot absorb, and losing the wild and natural places and species that we Kiwis love so dearly. National recognised our deteriorating environment in its blue-green policy, but I ask members whether the Government has backed it up with action in this Budget. Sadly, just as this Budget fails to address the economic recession, it also fails to assist the environment. In fact, it worsens a dire situation by cutting funding to our two key environmental agencies, the Ministry for the Environment and the Department of Conservation. Conservation funding has been slashed by 6 percent, with the Department of Conservation’s budget cut by 9 percent. Fifty-four million dollars that were desperately needed to keep our iconic kiwi from extinction have been stolen from our natural heritage. The Bluegreens of the National Party will be hanging their heads in shame. Vote Environment has also been shaved to the scalp. Despite an additional $4.4 million to implement the Greens’ Waste Minimisation Act and develop policy to protect our lakes and streams, the Ministry for the Environment’s operational budget has been cut, and despite the fact that our global climate crisis is only getting worse, the climate change operational budget is down.
Nine million dollars have been set aside for the reform of the Resource Management Act. The purpose of this reform, as the Minister of Finance told us, is to enable business to make more money. This Government cares so little about our natural heritage that even the environment budget has been pilfered to benefit developers. Fisheries compliance, including observer programmes, has been cut by 6 percent, and biosecurity surveillance has been cut by 11 percent. That is outrageous. Those services are essential to protect our ecosystems and export economy from exploitation and contamination. Biosecurity is fundamental to the New Zealand economy. By contrast, a green new deal Budget would invest in protecting our waterways, whereby a $600 million investment over 3 years would create 4,500 jobs, restoring our lakes and streams in order to allow swimming, and protecting our all-important “clean, green” brand. The premium value of that brand to our dairy and tourism industries has been calculated at over $1 billion per year in export earnings. There are good economic and environmental reasons for the Government to invest in protecting our land, water, and wildlife, yet this Budget cuts protection to those areas. It is environmental and economic illiteracy to ignore the environmental recession, and to make investment decisions and funding cuts that deepen it.
In health, an ounce of prevention is ignored by the current Government in favour of a pound of sugar. Money to fight child obesity has been canned, while earlier this year junk food was let back into schools. Is it politically expedient to sacrifice kids’ health? When kids develop type 2 diabetes and their teeth are rotting, will this be a great win for the politically incorrect out there? Who will foot the bill for the extra dialysis machines, the extra medication, and the extra doctors and nurses we will need to keep an unhealthy population alive? It will be, of course, the taxpayer. This is the ultimate in short-sighted thinking. Today’s Budget initiatives to retain doctors and train new ones will be essential, given that this Government has launched an attack on illness prevention. Members should make no mistake: these are ideological cuts from an ideological administration. Canning the Obesity Action Coalition’s funding will not lead to economic prosperity. It is not the vision of hope New Zealand needs; it is just petty.
Nowhere is the distinction between our current economic trajectory and a more sustainable one more obvious than in transport. The amount we collectively spend on transport is at least $10 billion for the term of this Government. Most of that $10 billion is spent on roads, and the Government is actually very proud of that. In fact, for every dollar spent on sustainable modes of transport—buses, trains, walking, and cycling—National will spend $7 on roads. Why do we place all of our bets on roads, when we are vulnerable to the price of oil? Why would this Government place all its bets on roads, when the carbon dioxide produced by traffic destroys our climate? Why would we place all our bets on roads as a measure to relieve congestion, when all the local and international experience shows that it does not work? I cannot tell members why, because we do not yet understand the mind of the problem gambler. When the Minister of Transport announced earlier this year his intention to build seven roads of national significance, he did so without any kind of economic analysis as to the benefits or costs of his proposal. It is a case of build first, justify later.
Our recommendation for transport in our Green stimulus package is fiscally neutral. In the short term, we would shift $1 billion of State highway spending into more sustainable, more productive, higher-quality alternatives, taking pressure off existing roads. Our measures would create 40 percent more jobs and, at the same time, would make our transport network more resilient to the inevitable oil price shocks. That is a real jobs package, and that is what a green new deal looks like.
As far as education is concerned, this Budget is like a bad student party where the theme is retro. I ask Mr English, if he is going to take us back in time, to please avoid the 1990s. The majority of those who put this Budget together got the very best the New Zealand education system had to offer, but they are happy to leave the current crop of tertiary, secondary, primary, and preschool students with a little, empty chip packet. Many of us in this House went to university when the concept of a loan was likely to involve the university library, rather than tens of thousands of dollars of debt. This Budget wages an intergenerational war on those who want an education now and in the future. It takes money away from early childhood education. How can that make sense? It is good that in education the Government is concentrating on infrastructure, but if this comes at the expense of teachers, then it is a false economy.
On the matter of housing, we see that the number of building consents is sinking rapidly and builders are laying off staff. Surely, there could be no better way to support the building sector than building new housing stock. One of the central ideas of the green new deal package is investing in thousands more State houses over the next few years, to keep people in jobs, to keep roofs over people’s heads, and to keep the economy moving. Building 6,000 State houses would only begin to meet the need out there, and it would make more sense than demolishing hundreds of homes so that we can spend $1 billion to plough a motorway through the Mount Albert area. Will people
be living out on the streets this winter because of this kind of thinking? Last year Mr Heatley railed against Labour over the disgraceful situation of those who are poor, sick, and unwell living in rat-infested boarding houses. Mr Heatley pointed out, quite rightly, that this situation was the result of a housing supply shortage. It seems that this Budget has an ideas shortage. We have an ideas deficit over how to solve the housing crisis and create work for our building sector. The Green Party does not want people to sleep rough, we do not want Kiwi families living in squalid boarding houses, and we are very happy to help the Government with ideas.
In conclusion, I say that although we are pleased that we are on the way to getting all New Zealand families into warm, dry, healthy homes, overall this Budget worries me. I am worried for the families who will suffer because of a stingy, ideologically blinkered Government. I am worried for the children who will grow up without a fair go.
Hon Sir ROGER DOUGLAS (ACT)
: This is a Budget of deficits: a deficit of spending, a deficit of current account, a deficit of courage, and, most important, a deficit of imagination. Why do I say a deficit of imagination? Because the Prime Minister and the Minister of Finance have taken the soft option: they have decided to borrow and hope.
The best thing I can say about this Budget is that it is as good as any of the nine Budgets Labour’s Michael Cullen delivered. Then again, that is hardly the standard one should hold oneself to. After all, during Cullen’s time as Minister of Finance, total Government spending increased in real terms by $5,500 per person—that is $22,000 per annum for a family of four, or over $400 per week. I ask the Labour members to consider what the lives of those families would be like if they still had that $400. What did families get from Cullen’s spending? Much of it was wasted on the bureaucratic empires of health, education, and welfare, without any increase in productivity. This Budget continues that trend. Some of the money was taken from us and then used to turn most New Zealand families into welfare beneficiaries under Working for Families.
In these circumstances, what happened to the Government’s line-by-line review, which was meant to cut waste? The Government managed to find $301 million. Let us put that in context.: it is 0.4 percent of Government spending. Really? Was that seriously all it was able to find after Cullen had increased Government spending by $18 billion over and above inflation? In my view, National has missed the opportunity to cut Government waste by scrapping some Government functions and Government departments.
What was Labour’s response in this House to those modest cut-backs? It was outrage. To Labour, every area of Government is underfunded. Having spent up large for 9 years, it believes it can always find new projects to waste money on. I worry that Labour might be right. When it says it will not cut spending, it is really saying that it wants to have higher taxes. Over 9 years Labour tried to tax this nation to prosperity. The only effect was to slash productivity growth, helping us to slip further down the OECD ladder. Our productivity under Labour was one-third of what it was between 1984 and 2000. The difference to average New Zealanders is that today they receive 25 percent lower wages than they would have received if productivity growth had been maintained.
After 9 years of tax abuse, is National much better? The reality is that National did not have to go down the debt path. In fact, National had choices. One choice was to do what National has always done—that is, to take all Labour’s policies as a given, tinker with them around the edges, and hope to manage the system somewhat better. It could be the conservative party it always—with the possible exception of the National Government of 1991 and 1992—has been.
The other choice was to look to the future. The party that looks to the future always sets the real political agenda. When Labour looks to the future, it sees a large State, higher taxes, and more control for meddling politicians in Wellington, and that is what we have ended up with. When National looks to the future, it sees administering Labour’s programme more efficiently. It is, by this Budget, bereft of vision. National suffers from a deficit of courage and imagination. If National wanted a vision, it could have looked towards a future of low taxes, personal responsibility, personal freedom, and prosperity. Instead, it has chosen high taxes, expenditure as a percentage of GDP going up by 4 percent over the 5 years to 2013, Government ownership and delivery of social services, and more power for politicians and bureaucrats.
National has continued the trend for Governments since 1993 to take soft options, deciding once again to borrow and hope. National promised that it would not touch health, education, and welfare, but those areas make up 66 percent of the Government Budget. Saying it will not even look at ways to open these areas up to competition and other reforms is to give up on fiscal prudence and to sentence New Zealand to low productivity growth. We cannot have 66 percent of the Budget—30 percent of GDP—in areas that just take more and more money. In this Budget, when underlying inflation is at 1 percent, we are increasing health care costs by 6 percent. Cullen had 5 percent underlying inflation and increased health care costs by 10 percent. It is simply madness.
Making cuts to Government spending does not mean denying anyone access to health, education, and welfare; all it does is change the way we go about offering help to those who need it. One way to help is to shovel money into the bureaucracy, as Labour and National do, and hope like hell that it will eventually reach people in the form of decent education, quality health care, and welfare that helps rather than harms the poor. But, as we have seen through Labour’s health spending, not all the money goes to those who need it. There has been a 15 percent decline in doctor productivity and an 11 percent decline in nurse productivity. That will continue. In fact, the only increase in hospital productivity has been for orderlies and cleaning staff, who have been outsourced to the private sector. I wonder why there was an increase there?
The other way to help is to give money back to those who earned it, and encourage them to purchase their own education, their own health coverage, and their own insurance against risks like job loss, accident, and sickness. The most obvious difference between the two systems is who has the power. In the status quo run by Labour and National, the bureaucrat is all-powerful. The bureaucracy decides where our children get educated, it decides whether our medical treatment will go ahead, and it decides what level of income assistance is required. The recipients of handouts—be they parents, patients, or welfare recipients—are treated like children, to be managed by a bureaucrat who knows very little about them and cares even less.
Is it surprising in these circumstances that within this environment more money does not deliver better outcomes? The only way yet discovered of improving outcomes while keeping costs down is to restore control to the individual. Ultimately, for all of us—unfortunately, for all of us—in terms of this Budget, National is soft. It suffers from the tyranny of the status quo. The only thing National seems to know is how to spend. If spending means borrowing, then National, unfortunately, will borrow and hope.
Hon TARIANA TURIA (Co-Leader—Māori Party)
: Tēnā koe, Mr Speaker. Tēnā tātou katoa. This is a significant day for the Māori Party, as we consider the opportunities for tangata w’enua that emerge from this Budget. None of us were under any illusion that the economic and fiscal outlook would sustain a generous spending programme to meet every need. All of the forecasts warn us that we are heading into a deeper and more prolonged slow-down, with unemployment likely to peak in the middle of next year.
The reality of recession is felt particularly by Māori w’ānau. Frankly, I mihi to their resilience, their ability to be collective, and the way in which they support each other. In its most basic form, although the Māori employment participation rate increased in the last year, the rise in employment was similar to the overall employment growth, and we are talking about growth of between 0.5 percent and 0.7 percent. But for unemployment, the contrast is stark. We are currently sitting on unemployment rates for Māori of 9.2 percent, which is over twice the annual rate for all persons of 4.5 percent. We are particularly alert to the needs of our young Māori people aged between 18 and 24 years—a group that has suffered disproportionately and consistently, not just in this year 2009, but in the 10 years leading up to it. These are grim times, and we must prepare for the certainty that the pressure on households will intensify. We are talking about families who have already had to adjust to a 70 percent increase in electricity costs over the last 10 years and, even more staggering, a 91 percent increase in petrol costs.
This, then, was the setting into which the Māori Party sought to negotiate to support our people to support themselves. Our motivation was clear. We wanted to soften the hard edges of recession for Māori, to protect those who would be most vulnerable to the weakness of the global market. But we wanted also to position our strategy around the wider economic development, to prepare the ground for w’ānau to be positioned to be part of the acceleration once the economy recovers. When our kaikaranga prepare themselves to pōw’iri, they will stand strong, summoning all their wits about them for the solemn responsibility of their role. Me hangai to titiro ki te mahi. Kei w’ati!: Keep your focus firmly fixed on the job, in case you may break or become diverted from the task. This is how we have approached 2009. We were determined to hold the line: to stay strongly attuned to the hopes and aspirations of our people to do for themselves. So we are proud that we have succeeded in safeguarding some important policies and programmes, while at the same time achieving gains that will help to lay a strong foundation for the times to come.
This Budget is a careful Budget. For the Māori Party, protecting the vulnerable was an important priority in our negotiations. In the area of social services, we sought to ensure that the people would benefit from accessing their full and correct entitlements, while at the same time recognising our collective responsibility to keep the economy moving, to keep people in jobs, and to create opportunities to generate hope. We welcome the allocation of up to $40 million for community responses to the recession. In our journeys across Aotearoa we come across amazing stories about everyday entrepreneurs who are designing solutions for their own local issues. The Community Response Fund is an opportunity to support the people to devise their own answers to the needs that will inevitably flow as a result of the economic downturn. The investment in infrastructure is another open door for our people. The $7.5 billion is a create-work scheme on a massive scale. It is a scheme that will result in the construction of major projects, and in the longer term will contribute to the lifting of economic growth.
Our approach to Budget 2009 was also developed around holding the line on w’ānau ora. There is nothing of more importance than thinking of the families who inspire us to build this nation in a way that takes their well-being into account. We celebrate the Healthy Homes approach that has been achieved. We are delighted that the Warm Homes standard has been demonstrated, with $323 million allocated to insulate and heat homes built before 2000. We will ensure that our people benefit from that. We are proud of the commitments made in allocating $12 million over the next 2 years for the Rural Housing programme, as well as the investment opportunities signalled in the Housing Innovation Fund. These are two areas where Labour failed our people miserably. This morning I met with a small but devoted group of women who have
pioneered the Ngāi Tai housing project alongside of the Torere and Districts Families Credit Union. Their approach was purely and simply that by working together and sharing the load, they were able to build their homes, one w’ānau at a time. Twenty-one homes later, they are now able not only to claim a shelter for their community, but to share the success stories of 18 of their families enjoying full-time employment and the pathway to further education. That is a real celebration.
This is exactly what we mean by self-determination: creating the destiny that we aspire towards. Within this Budget we are also really pleased that almost $70 million has enabled our kō’anga reo and playcentres to benefit from the expansion of the 20 hours’ free early childhood education initiative. Our policy priority has always been to boost participation in early childhood education for Māori, who have traditionally had low participation rates, so this is a big gain for us. Then we have the $20 million to extend the kotahitanga programme in schools, to ensure that teachers are equipped with the skills and strategies to ensure Māori reach their full potential. Holding the line is also about creating the best economic framework, to plan for Māori prosperity across cultural and tribal assets. We are really pleased with the additional $4.5 million that will enable w’ānau Māori every opportunity to access te reo Māori in their own homes. We are glad that there is pūtea put aside to support iwi radio in meeting its operational costs.
This Budget brings with it some $22 million devoted to speeding up the process and reducing the time it takes to settle Treaty claims. We know that streamlining the process is a clear mechanism to achieve the enduring reconciliation between iwi, hapū, and the Crown that our tūpuna believed was possible when they signed Te Tiriti o Waitangi. We acknowledge the close working relationship we have enjoyed with the Minister for Treaty of Waitangi Negotiations, and we are especially positive about the opportunities for involving independent facilitators and the support for promoting chief-to-chief negotiations—both policies that we brought into the relationship with the National Government. That relationship has been one that has been the road least travelled, but a road, nevertheless, on which we have been able to walk together in a way that has respected the concept of a mana-enhancing relationship. We have always maintained that every issue is a Māori issue. We know that if the Budget does not work for Māori, then it is not a good Budget for New Zealand; and, conversely, initiatives that may appear to promote tangata w’enua interests are also about promoting the unique and distinctive identity of Aotearoa.
So in this 2009 Budget we can see the influence of the Māori Party right across the Government, including gains achieved in our ministerial positions. The Māori affairs appropriation has managed to survive largely intact, despite the rigours of close scrutiny for savings. In my portfolios I am pleased that more than $11 million has been set aside to support those unsung heroes in our community—the informal carers—the people who support an ill, disabled, or frail aged family member. I am proud too of the support that will enable stronger engagement amongst local communities. This is what it is all about—he tangata, he tangata, he tangata.
Hon JIM ANDERTON (Leader—Progressive)
: This is a Budget that has all the competence one would expect from the people responsible for Melissa Lee’s Mt Albert by-election campaign. The good news is that inflation is no longer a problem. We finally have the low-inflation economy that the National Party always said would deliver us its dream economy. However, how is that working out? National has produced a lacklustre Budget that Bill Birch would have been proud of. In troubled times when the economy is rocking on the waves of global economic storms, the Government has responded weakly, not with a vision for the future and not with the bold steps that would lead New Zealand on a developmental path, but with a weak, uncertain, sitting-on-its-hands response.
Governments around the world are investing in the future; this Government has slashed the future. This is the broken-promise Budget. The total value of primary sector science investment falls from $2 billion under the New Zealand Fast Forward programme of the last Government to as little as $1.2 billion now. The Government is cutting nearly as much out of the science and research budget in the primary sector as it is investing in infrastructure. Government spending on science and research on a like-for-like basis falls from around $1 billion in the New Zealand Fast Forward fund to $610 million in National’s replacement programme.
With matching private sector funding, the total investment in primary sector research and development actually falls by $800 million, or about 0.4 percent of GDP. In addition, the Government has not replaced a cent of the cancelled research and development tax credit. This is a huge cut in scientific research and development. It is, in fact, a disaster for the future of New Zealand’s economy.
Other developed countries are preparing themselves to come out of this recession stronger than when they went into it. New Zealand is preparing by switching from science and research to poltergeists and UFOs. The Government promised the private sector that it would spend more on scientific research and development. That is what David Carter said last week. He promised that it would spend more and that its Budget for scientific research and development would be bigger than the Labour-led Government’s. Farmers in the agricultural business community will be looking that up, and they will not find increases; they will find cuts. The Government has broken that promise as surely as it has broken its promise on personal tax cuts.
I want to turn to some other features of this disappointing Budget and to draw the House’s attention to the table on page 55 of the Fiscal Strategy Report. In that report the Government points to its expected increases in nominal average wages over the next 4 years. If we deduct these from the cost of living index, there will be no increase in real wages for 4 years. Boy, if John Key thought that people left New Zealand for Australia in droves under the Labour-led Government, he should just wait until they figure out what 4 years of no real wage increases mean for them.
This is the curious branch of economics that says the way to make New Zealand better off is to make everyone else worse off. The people who will be the worst off will be the people whom Tariana Turia represents, but what will she do about this Budget? She will vote for it. Well, over the next 2½ years I will be waiting for the outcome of that for the Māori people of New Zealand, and I will hold her accountable for that. Not since the 1980s have we had an economy that did not increase real wages for 4 consecutive years. It is hardly conducive to keeping working New Zealanders here.
There was a time when National would have said that the way to fix things is to spend on tax cuts. We have to give John Key and Bill English credit for one thing—they have now accepted that tax cuts do not always stimulate the economy. But they promised New Zealanders tax cuts. They now say they cannot afford them, and that is fair enough as, in truth, we cannot. Back then, though, when they wanted New Zealanders to vote for them they told them that they would reduce taxes. Mr Key said that National has structured this economic package to take account of the changing international climate. So National members knew what was coming and they promised tax cuts, but now they say: “Oh, shock, horror, things aren’t as good as we expected even though we did expect them to be bad, and we’re cutting taxes even though we promised we wouldn’t.”
So when the National members said their tax-cut programme would not require any additional borrowing, that was actually true because they did not intend to make any tax cuts, so they would not have to borrow any money, and that is exactly what has happened. Last year John Key said his tax policy was “appropriate for the current
conditions and would require no additional borrowing”. Well, now we know what the truth of that is.
I was here in 1991 when the “mother of all Budgets” was presented. Initially there was a sort of “Shock, horror, we are in difficult times, we had better accept all of this.” reaction, but, boy, over time did that come back to haunt the National Government. National was actually down to 19 percent in the polls in that period from 1991-93. We will just wait and see how this Budget works out; I do not think it will be any different.
John Key owes New Zealand an apology for getting himself elected on a promise that he knew he could never keep. Did he know before the election that the economic situation was deteriorating, or did he find out only when Treasury told him? He is the smart money dealer; he is the smart market dealer; he knows everything about the markets, so he must have known, but he promised that there would be tax cuts. That is deceitful.
In the time that I have left I want to turn to the cuts in the Superannuation Fund. This is pretty sneaky politics. Cutting the Superannuation Fund now reduces the ability of any Government in the future to provide for superannuation at anything like existing rates or retirement age.
Paul Quinn: Rubbish!
Hon JIM ANDERTON: Someone said “Rubbish!”. The member’s mind must be rubbish if the member does not believe that. Bill English is pushing out by 10 years the hard decisions about the huge tax increases or cuts to superannuation that will be needed to make superannuation affordable. I was on the superannuation task force and I know what is required to make superannuation fundable by 2040, and that is a doubling of the equivalent tax rates for superannuation by 2040. The only way we could get there without having to do that was to put aside the funds we were putting aside. But, no, the National Government will run this economy in such a way that nothing will happen until 2021. Somehow, between then and 2040, some mug Government will have to come along and fix it. It clearly will not be that of Bill English; he knows full well that he will not be here. I would say he will not be here after the next 3 years, either, so we may have a chance of fixing it.
Bill English has delivered an enormous burden for future taxpayers. The affordability of superannuation in the future must decline, because we are no longer putting aside something now to pay for some of it in the future. In my view, that means that the age of eligibility for superannuation will be increased. When we had the superannuation task force, Treasury wanted the retirement age to be increased to 72; well, it may well get its wish under this Government if we are not very careful.
The Greens must be really pleased with the memorandum of understanding they have made with the Government, but there is not a word in that speech today about climate change—not one single word. I mean, it is the monumental problem facing the world, but we have not had one single word about it. The Greens got $244 million of new spending for their home insulation scheme, but when we look at the infrastructure spend, we can see that the Government is shifting $258 million of spending on rail on to the roads. I thought that that was what the Greens did not want. So what has happened is that the Greens have lost $14 million net, as spending has gone from the rail system to the roading system, and they have got even less than that for their insulation scheme. The Greens have actually lost money.
Then, as I said in relation to the Māori Party, the people who will be hardest hit by this recession are Māori and Pacific Island people. National is not doing anything for new jobs; the Māori Party is voting for that. At least Pita Sharples can wave at the unemployed as he drives past them in his new car—that might make him pleased.
Hon PETER DUNNE (Leader—United Future)
: This Budget was prepared against a backdrop of a most extraordinary set of circumstances. At the time of last year’s Budget, the then Minister of Finance warned that existing increases in expenditure—
Hon Tariana Turia: I raise a point of order, Mr Speaker. I would like Ruth Dyson to withdraw and apologise for calling us sell-outs.
The ASSISTANT SPEAKER (Hon Rick Barker): Well, I have to say to the member that this is a robust place for robust comments. It would be difficult to convince the Chair that calling someone a sell-out crossed the line and was offensive. But if the member feels that she wants a withdrawal and apology, she may ask for it.
Hon Tariana Turia: Thank you. I would like her to withdraw and apologise.
Hon Clayton Cosgrove: I raise a point of order, Mr Speaker. I ask you where, in any of the Speakers’ precedents about unparliamentary language, the word “sell-out” is put forward. You will know that in the last Parliament, when Labour was in Government, all sorts of extremely unparliamentary language was used regarding the Electoral Finance Bill by the now Leader of the House and others over on that side. Many of those terms were not ruled out by presiding officers; they were allowed. If we are to rule out “sell-out”, what is left?
Hon Gerry Brownlee: I think the point is that it is not the choice of words but the tone and the intention—
Hon Members: Oh!
Hon Gerry Brownlee: Is this a point of order, or not?
The ASSISTANT SPEAKER (Hon Rick Barker): I tell members that points of order will be heard in silence.
Hon Gerry Brownlee: I have listened to numerous comments from across the House to me, about me, etc., and I accept that they are just throwaway remarks, but in this case a particularly offensive remark was made. Because people exercise their political judgment in a particular way does not mean that they have sold out. “Sold out”, in the context that it was said across the House, is an exceptionally derogatory term, and I do not think that it would hurt for the remark to be withdrawn. I understand what the expression was meant to say—that this was not what the Māori Party had intended to do, or something else—but to use a term that was so derisory in the circumstance in which it was delivered is, I think, offensive.
Hon Clayton Cosgrove: I would argue that in the history of this Parliament the terms “sold out” or “sell-out” have sometimes been thrown around by members about others within their own political party, because their colleagues have chosen to vote in a different way, or because they said things before an election, then did things differently afterwards. If we are now, as the Leader of the House contends, going to rule out words based on the tone that somebody has used—and he is a baritone, perhaps—then I would argue that that is completely absurd. We had interjections throughout the Budget speeches today where people used similar language with a similar implication. I put it to you, Mr Assistant Speaker, what is next if “sell-out” or the tone used is ruled out? I cannot find a Standing Order that deals with the tone of one’s voice. I think that would be absurd.
The ASSISTANT SPEAKER (Hon Rick Barker): Thank you, members. I have heard good contributions on this. I come back to the point that one of the things that this House is about is free speech. People have to be able to say what they will. There are some constraints on it—of course there are. But there has to be a high threshold. This is a robust debating chamber. It is a debating chamber, and it is about robust debate. In my opinion, the term “sell-out”, although it might cause offence to a person, does not go beyond the line.
Te Ururoa Flavell: I raise a point of order, Mr Speaker. I ask you to consider not just the wording in this case. If a member takes offence at a particular term, whatever that term might be, and asks for the member who said it to stand and apologise, is that not the benchmark that is used to assess whether the term is in order?
The ASSISTANT SPEAKER (Hon Rick Barker): Well, if we were to take it that if a member took offence there would be an automatic requirement that the comment be withdrawn and apologised for, then the members of this House would set the tone, not the Speaker. It would be entirely up to members; if they said “I take offence at that.”, there would be a withdrawal and an apology, and gradually, piece by piece, the standard would be eroded, and this House would not be a House of robust debate. This House is a House of robust debate. People do have reputations and they do have feelings, and I acknowledge that, but this is a debating chamber, and I put my point again: it is a robust debating chamber, and it is about free speech.
Hon PETER DUNNE: As I was saying, this Budget has been prepared against an extraordinary combination of circumstances: a declining New Zealand economy during 2008, warnings from the then Minister of Finance that the current levels of expenditure increases were unlikely to be sustained in the future, and, added to that, a rapidly declining international situation during 2008. Members will recall the extraordinary week in October last year when on the Sunday—New Zealand time—the Irish Government, much to the consternation and surprise of the rest of the world, announced that it was going to guarantee bank deposits. By the end of that very week, every country of that type was doing likewise. That was how quickly things were moving. We have seen a rapidly increasing debt track in New Zealand, and we have seen a rapidly declining revenue profile as the consequences of the international slow-down have started to bite.
So when it came to putting together this Budget, the Government had a number of options. It could have reverted to slash-and-burn policies of the type we saw in the early 1990s. We still live with the social consequences of those cutbacks, so that was not an option. It could have adopted the agenda that was being promoted by the ACT members to my right a little earlier on this afternoon, but that was clearly not an option. What the Government has taken is essentially, I think, a prudent middle way. There has been a significant increase in spending—and the Minister of Finance made it clear this afternoon that that spending track will slow over the years ahead—there has been a commitment to reducing long-term debt, and the Government has taken the view that some of the things it might like to do today need to be set aside for tomorrow in order to enable it to maintain some of its core commitments.
I regret as much as anyone else the fact that tax cuts are being deferred, but when we do not have the money to pay for those cuts it is irresponsible to continue with them at this time. What that does is to give fresh urgency to the work that is under way to align our corporate tax and trust top rates, and to see how the broad based - low rate policy that has been a consistent thread of our tax policy in this country for at least the last 20 years can be enhanced and we can bring it to fruition. That will be one of the big challenges over the next little while.
Where we stand at the moment, in terms of New Zealand, is simply this. The international economy may well start to recover later this year or early next year—there are already some incipient signs of a recovery under way—but the New Zealand economy will be on a longer recovery track. The message that needs to be got through to New Zealanders is that this is not just about an international recovery; there will be some benefit to us from that, but a long, hard road lies ahead in terms of restoring our economy. The challenge that the Government faces is how to balance the need for
restoration with the need to retain critical social services. I think this Budget has been a prudent balance of those often competing objectives.
There are some things in this Budget on which I think the Government could have gone further. For example, I welcome the increase in public health expenditure, but I think the day is not far off when that level of increase cannot be sustained, and we will need to look to much greater private-public partnerships for the delivery of services, particularly elective surgery services. One of the things we will need to start to think about in terms of how we encourage that shift is moving, in the first instance, to a tax rebate for those over the age of 65 who contribute to health insurance programmes, so that we encourage them to retain their health insurance programmes and therefore to stay outside the ambit of the public system, thus reducing a critical amount of the pressure on it. But that, of itself, can be only a first step. We need to take the example of our accident compensation scheme and our KiwiSaver scheme much further, and to develop a comprehensive national health insurance scheme whereby the premia paid by taxpayers are offset against their marginal tax rate so that the net effect is self-balancing, but the competitive power of the insurance fund can be used to drive down prices in both the public and the private sectors, deliver greater capacity, and ensure that New Zealanders have access to the quality health-care—particularly for surgery—that they require. That is the way that most countries of our type around the world have been forced to go in recent years, and I do not think New Zealand, at this end of the world, will be immune from that challenge in any shape or form. So we need to start now to think about the steps we have to take to get to that point.
I welcome the commitment contained in the Budget to continue a level of community engagement, and I appreciate the work of my colleague sitting to my left Tariana Turia in that regard. The community and voluntary sector in this country is, in many senses, the lifeblood of social service provision. Often those agencies do a far better job than Government agencies, because they bring a much greater level of dedication, commitment, and expertise to that role, and a much closer identification with the communities that they service. The whole purpose of the charitable donations policy that we have been implementing over the last 2 or 3 years has been both to create a greater culture of giving in New Zealand and to recognise a greater role for philanthropy in the provision of those types of services, so that we can utilise those skills far more effectively to benefit New Zealanders as a whole, and thus free up critical areas of Government spending for the more vulnerable people and situations that often escape the net at the moment in terms of the service that they require. That is the challenge that this Budget seeks to address. I think it is a step along the way, but it is a starting step none the less.
The question that has excited a lot of attention is that of the home insulation fund, and I go back to the advice that the Prime Minister referred to in his speech—to the prudent, preventive advice that if people’s homes have good heating and good insulation, the chances of their health status being improved are very high. The modest per capita investment that this scheme requires is a prudent step in the right direction, but I make this point: it is all very well to set up a scheme of that type, but its delivery and its implementation will be critical. I am not confident, based on constituency cases that I have dealt with, that the infrastructure that is there at the moment, through the Energy Efficiency and Conservation Authority and other agencies, is sufficient to ensure that people can actually have insulation fitted as quickly as they require it. I know of people who made bookings in the summertime and are still to have their insulation put in place in time for the winter that is now upon us. That is clearly absurd, and if that sort of approach is maintained, it will detract from the credibility of this policy.
A lot has been said over this Budget and previous Budgets about infrastructure investment, and this Budget specifies a couple of important strands in that regard, building on the work announced recently by the Minister of Transport in terms of the seven roads of national significance. It is important to put some of those things into perspective. Although I do not want to get involved in the Waterview project debate because I am from Wellington, not Auckland, the reality is that the Waterview project as originally proposed was so expensive that a number of projects close to my heart, like the Transmission Gully road, for instance, could have been funded three times over for the cost of it. The rebalancing that is occurring will serve the needs of the people of Mount Albert effectively, but also will free up resources for other areas of New Zealand to get their roading priorities funded by the Crown—because that is an important part of the policy announcement that was made a little while ago—and that is a welcome step and in the interests of all New Zealanders.
This Budget will excite the usual round of criticism, the usual round of people feeling they have not got what they expected from it, but in the circumstances of the times—unprecedented, according to some commentators, since 1930, and far more extensive in their scope since the entire cost of World War II—this Budget is an appropriate response for New Zealand. This Budget helps to set this country forward with confidence. It creates the circumstances for growth but it also sends out some challenges. I say to the Minister of Finance that the next two Budgets will be the critical ones, as the consequences of this Budget start to come through, the consequences of the international recovery—hopefully, it will be under way—start to come through, and the big challenges out there in terms of where this economy heads are also on the table. So balancing expectations in 2010 and 2011 will be as critical as managing the process of bringing about the transition that this Budget heralds. It is a useful step forward and it is a good start, but, as with all of these things, much more needs to be done yet.
Hon GERRY BROWNLEE (Leader of the House)
: I move,
That this debate be now adjourned.
A party vote was called for on the question,
That the motion be agreed to.
| Ayes
69 |
New Zealand National 58; ACT New Zealand 5; Māori Party 5; United Future 1. |
| Noes
52 |
New Zealand Labour 42; Green Party 9; Progressive 1. |
| Motion agreed to. |
Taxation (Budget Tax Measures) Bill
First Reading
Hon PETER DUNNE (Minister of Revenue) on behalf of the
Minister of Finance: I move,
That the Taxation (Budget Tax Measures) Bill be now read a first time. As announced in today’s Budget, the second and third stages of the personal tax cuts that were to have taken effect on 1 April 2010 and 1 April 2011 respectively are being deferred to prevent further increases in Government debt. Large Budget deficits are already being forecast for 2010 and 2011 and these will clearly have an effect on gross debt that Treasury projects could have increased to above 70 percent of GDP by 2023 in the absence of any policy changes.
The current and projected fiscal position therefore constrains policy choices and places greater emphasis on maintaining revenue flows. As Minister of Revenue I am acutely aware of the need to ensure that our tax revenue remains sufficient to finance Government spending on the essential services that New Zealanders expect—a point I was making in an earlier address a moment or two ago. By delaying the second and third tranches of personal tax cuts, the Government estimates it will save around $900
million a year from 2011-12 and that has to be seen as prudent fiscal management for difficult times.
Let me turn for a moment to the language of the bill. As drafted, the bill speaks of “repealing” the further tax cuts rather than “delaying” them. That is merely because the date when these tax cuts can be reinstated is not yet known. If an undated delay were legislated for, it would combine the repeal with a provision to allow the dates of the cuts to be restored by Order in Council, which is not the most appropriate way to set tax rates. Tax rates are the province of Parliament, and Parliaments historically in this country and elsewhere have fought quite properly to retain the right to set tax rates and have always resisted deferring those to an Order in Council or other mechanism outside the parliamentary process.
This delay should not be interpreted as the end of further tax cuts. The Budget states clearly that the Government is committed to further reducing income tax rates as the economic and fiscal conditions allow and it clearly identifies further tax cuts as a fiscal risk, meaning that the Government’s future reinstatement of the tax cuts has been explicitly taken into account. We have already made clear our medium-term commitment to aligning the top personal, company, and trust rates at 30c in a manner consistent with the broad-based low-rate approach.
This bill also cancels the associated increase of $5 a week in the independent earner tax credit, which was to take effect from 1 April 2010. At present that credit puts an extra $10 a week in the pockets of those earning between $24,000 and $44,000 a year who do not receive a benefit, Working for Families tax credits, or New Zealand superannuation.
The second part of this bill relates to the KiwiSaver mortgage diversion facility, which allows KiwiSaver members to divert up to half of their contributions to their mortgage repayments. That facility is to be closed to new applicants from 1 June 2009, although it will remain available to existing participants so long as their providers and their banks continue to offer it. Not all banks currently offer mortgage diversion and it appears that only about 600 people out of a KiwiSaver membership of more than 1 million have actually taken advantage of it. Now, I acknowledge that this was the initiative of a former member of United Future—one whose name I dare not speak because it has become a byword for treachery—but in practice it has been demonstrated that this policy has not worked, that any benefits of the facility are completely outweighed by its many disadvantages, and I frankly see little reason to continue with it.
Mortgage diversion imposes additional and unnecessary compliance costs on KiwiSaver providers and on the banks, and these costs have been generally passed on to members who use it through increased fees. A further problem that has arisen with mortgage diversion from a policy perspective is that it goes against a basic principle of KiwiSaver, which is to lock in savers’ funds until they are 65, thus helping them to save for their retirement. With mortgage diversion, on the other hand, it becomes possible to sell the house in question before the member is 65 and thus for the member to gain access to his or her funds. There is no easy way of preventing members from gaining early access to those funds through mortgage diversion so it is much simpler to close the facility altogether to help reduce the costs of running the KiwiSaver scheme and to leave things pretty much as they are for those who might currently be in the scheme.
Let me conclude by saying this bill is a response to the difficult challenges that face the country today. It gives effect to measures that were announced in the Budget a couple of hours ago, and I therefore commend it to the House.
Hon CLAYTON COSGROVE (Labour—Waimakariri)
: I say from the outset that Labour will be supporting the passage of the Taxation (Budget Tax Measures) Bill to cancel the tax cuts, and we do so for a number of reasons. Firstly, we have been
consistent in our view that these tax cuts were unaffordable, inequitable, and wrong. That is why we will be voting to cancel them. But the great crime in this House today is not actually the fact that these tax cuts are going to be cancelled; it is the great deception created by a Government that before the election bribed the people of this country by saying over and over and over again that they would get their full tranche of tax cuts.
I point to an article by Brian Rudman. The great alibi that Mr Dunne and the National Party have put forward is that times have changed, and the economic environment has changed. They say that when they walked through the door of the Cabinet room for the first time, the veil fell from their eyes, and they realised that the world was in a global economic meltdown. They said they knew about that, effectively, only when they got into Government. Mr Rudman made some very interesting points in his article in the
New Zealand Herald
on 27 May. He said: “It seems we’re drifting back to those bad old days. Earlier this month, Prime Minister John Key signalled to an audience of his friends at a Business New Zealand meeting the promised tax cuts would be delayed to some unspecific time in the future. He said New Zealand could not afford ‘a runaway balance sheet’.” Yet, Mr Rudman goes on to say that on 30 September last year, Bill English criticised Michael Cullen, saying: “Dr Cullen cannot be trusted to deliver on any future tax promises.”, and that he criticised Dr Cullen for being cautious.
The alibi that National put up was a bribe. It won an election largely based on a bribe that said that everybody would get tax cuts.
Hon Member: Except the poor!
Hon CLAYTON COSGROVE: Except the poor. It put the first tranche of the tax cuts through. We know now that National’s version of economic stimulus was to give the top 3 percent of income earners in this country one-third of the tax cut package. Families earning $40,000 or less a year—I know this will not affect Mr Boscawen, of course—got absolutely nothing. That was National’s version of stimulating the economy. Who did President Obama pitch his tax cuts to? He pitched them at low-income earners. Who did Prime Minister Rudd pitch his tax cuts and his stimulus package to? He pitched them to low and middle income earners. Why? Because low and middle income earners will spend the money. Those at the top, who have discretionary income, will either retire debt or save, and that is not stimulatory.
Iain Lees-Galloway: Or take an overseas trip.
Hon CLAYTON COSGROVE: My colleague is probably referring to somebody on the opposite side of the House.
Then National tried to do what it has always done throughout its history. It came into Government and said it had not known about the economic conditions. It said that the rules had changed and the environment had changed, and it said to the New Zealand people that it must pass this legislation to be responsible. I tell members that if the National members did not know back in October and September that the world was in an international and economic meltdown, then they must have been the only people on the globe who did not know that. The Nats knew all right—I ask members to listen to more of Brian Rudman’s article: “The International Monetary Fund’s October 8, 2008 World Economic Outlook … said the world economy is ‘entering a major downturn’ in the face of ‘the most dangerous shock’ to rich-country financial markets since the 1930s.” That is what the IMF said in October last year. Mr Rudman goes on to say: “That was about the time Mr Key was unveiling his ‘responsible’ and ‘appropriate for the current conditions’ catalogue of tax-cut bribes.”
It is not good enough for Mr English and Mr Dunne, who walks with National now, to say that the world has changed, and that that is why National must go back on its word. It is ironic that Mr Dunne got up to quote from Part 2, because, as he said himself, part of this bill expunges a part of United Future policy. How embarrassing is
that? It is not good enough for National members to come down to this House and say, in the traditional Tory slap-happy way, that they are sorry, but they have to go back on their word. Those members could not read what the rest of the world read in
The Economist, in
Time, and in material from the International Monetary Fund. The OECD said in October and September last year—well before the election—that we as a globe were heading into an economic hole. Yet what did National members do? They announced, to use the same words, a “responsible”, “appropriate for the current conditions” tax package. They knew all along that these tax cuts were unaffordable. They knew all along that these tax cuts were inequitable, but they announced them anyway.
I like this part of the article. Mr Rudman referred to the Budget and Mr English. He said: “Tomorrow, the albatross comes home to roost on Mr English’s shoulder. We can’t sue our politicians for breaking their word. But we can at least enjoy seeing them squirm.” I tell members that the people who are squirming out there are the poor battling New Zealanders for whom this Budget did nothing, and whom my leader, Phil Goff, talked about. Mr English squirms in this House because he broke his word. Mr Joyce broke his word. In fact, all those members over there broke their word.
Hon Trevor Mallard: Mr Joyce likes seeing Mr English squirm, though.
Hon CLAYTON COSGROVE: Well, that may be so. But the truth is—and history will show it—that those members told the country that it would get tax cuts. They accused Labour of being mean. They criticised us for being cautious. They told us not to worry, as it was a cast-iron guarantee. It was one of the guarantees that John Key signed. It was another case of “no ifs, no buts, no maybes”. I can hear the ghost of Christmas Past; I can hear Jim Bolger’s words emanating into the Chamber. National members did the old Tory trick. The lied to the people of New Zealand. They lied to them before an election. They said they would give people tax cuts come hell or high water. They read the IMF report and they still went on promising tax cuts, even though the IMF said this is the worst shock we have had in a generation, and possibly in our history economically.
Hone Harawira: Hold it up again!
Hon CLAYTON COSGROVE: Do you want to make a speech, or do you want to sit down? The Māori Party might like to consider that, because, of course, it voted for the first tranche of tax cuts—
David Garrett: I raise a point of order, Mr Speaker. It is about the use of the word “you” again.
Hon CLAYTON COSGROVE: Speaking to the point of order—
The ASSISTANT SPEAKER (Hon Rick Barker): No, we do not need to debate this. The member makes a point. Technically, the member was using the word “you”. The word “you” is not ruled out on every occasion. I think that, on occasion, members just hear the word “you” and automatically think there has been an infraction of the rules. There has not. For the rules to be broken, the member must be directing the comments at the Speaker; I did not take the member’s comments to be directed at me.
Hon CLAYTON COSGROVE: Is that is the best he can do over there, as he shrivels up behind his desk? I say to that member of the ACT Party and that member of the Māori Party that every one of their constituents who earn under $40,000 a year got nothing out of the first tranche of tax cuts. Yet those members line up in the stalls—like a bunch of sheep led by the nose—to vote for the National Party every time. I invite Mr Harawira—there is no point in talking to Mr Garrett, because we know what his constituency is like—to stand up and finally explain to us why his party voted for a tax package in which 70, 80, or 90 percent of their constituency get nothing.
Hon Steven Joyce: Mr Assistant Speaker Barker—
Hon CLAYTON COSGROVE: No, it was a false start, so the member should sit down. He will get his chance, because in the words of the famous Paul Keating, “I want to do you slowly.”—I do not mean you, Mr Assistant Speaker Barker; I mean that member. I say to the Māori Party that maybe the Māori Party members can get up, instead of being lambs led by the nose lining up in the stalls to vote for that lot, and tell us why they sold out—and they did sell out—every member of their constituency.
We will vote to get rid of these tax cuts. Our position has been vindicated; our position has been consistent. We knew they were unaffordable, the IMF knew they were unaffordable, and the OECD knew they were unaffordable, yet Mr Key tried to treat people like idiots, and said that the first he knew that there was an economic crisis and that his package of tax cuts would be unaffordable was when he whipped up to the tea-making machine in the Cabinet room and realised that there was an economic crisis and a meltdown.
I say to Mr Joyce, who will get up next—with all the spin of his radio network background, and with his hair parted in the middle—that he will have to put his best spin on this situation for New Zealanders. I say to Mr Joyce that New Zealanders are not silly: they know a bribe when they see it, they know dishonesty when they hear it, and they knew there was a recession. But they got sucked in. They got bribed, sadly, because on and on Mr Joyce and his ilk promised the unpromisable, promised the inequitable, and promised the biggest tranche of tax cuts we have seen for many years, knowing, of course, that they would have to pull the pin, and knowing they would try to win an election and then go back on their word a couple of months after.
Hon STEVEN JOYCE (Minister of Transport)
: One certainly knows it is a tough day in Opposition when one is down to quoting Brian Rudman in the first speech. Brian Rudman is that noted economist and right-wing Roger Douglas supporter. This Budget—I just need to comb my hair before I start—is a responsible Budget for difficult times. It has been titled a “Road to Recovery”, which I think is an excellent name for it. I would probably prefer a “Multifunctional, Multi-modal, Low Benefit-cost Ratio Transport Corridor to Recovery”, but I will settle for a “Road to Recovery”.
This Budget makes some tough decisions, and one of those decisions is on tax reductions. The National Party is the party that understands that paying too much tax stifles initiative and removes incentives to work hard and get ahead. We understand that one of the big reasons we have had record migration out of New Zealand over the last 9 years has been high marginal tax rates. That is why we campaigned on reducing taxes, and we have done that. First we shamed Michael Cullen into doing it, and then we did it ourselves at an average of $30 a week per full-time worker in an 8-month period.
However, we are a party of realists. That is not something we could accuse the Labour Party of being. So as the world economy continues to accelerate in the wrong direction, we have made the tough call of postponing future tax cuts. Mr Cosgrove stood up before and said we knew the situation before the election. I need to acquaint him with some facts. The Budget 2008 forecast a surplus of GDP for 2009-10 as 0.5 percent of GDP. Prior to the election it was a deficit of 0.9 percent. The December forecast was a deficit of 2.2 percent. The Budget 2009 forecasts a deficit of 4.4 percent. The world economy fell off a cliff, and Clayton Cosgrove—surprisingly enough—did not predict that.
Postponing future tax cuts was not an easy decision to make. We work hard to keep our promises; we have kept nearly all of them. Tax reduction is important to grow the economy, but we also cannot have New Zealanders burdened by higher than necessary interest rates because the Government cannot balance its books. I am pleased to report that, this afternoon, Moody’s upgraded New Zealand’s credit watch from negative to stable after the Budget was released today. The Labour Party thinks that is not
important, but I tell members that everybody who pays interest in this country thinks it is important. We made the right call. We fronted up and said we could not have tax cuts. But members should rest assured; reducing taxes will remain top of mind.
There is only one party in this House that can keep tax rates under control and control spending, and it is certainly not the party of the member for Waimakariri. It is certainly not that lot over there: the “Never-Never Land Party”, which believes in the financial fairies at the bottom of the garden. It is a party that is now doing a very passable impression of the old Social Credit Political League. All that those Labour members need is the old Skodas and the crimplene suits. They say we should not cancel any spending. They do not want to control any costs. They do not want to run the ruler over expenditure. They do not want to suspend payments to the Superannuation Fund, despite their own architect of the Superannuation Fund saying it is exactly what he would do if there were no surpluses.
Back in 2000 Michael Cullen said any contributions had to be paid for out of a cash surplus into the fund. He also said back in 2000 that “The government will make contributions to the Fund from available surpluses. Where these are insufficient for making the required contribution a reduced contribution would be made.” That is what Labour’s architect of the Superannuation Fund said back in 2000. Not only do Labour members not want to stop spending but also they want spending increases. If they were allowed to be in Government today, they would be proceeding with something called the deep tunnels for the Waterview Connection. They would have no changes to the Government policy statement on roading. They would have either $2.8 billion or $3.2 billion being spent, depending on whether there would be two or three-lane tunnels. That would take the deficit this year from $7.7 billion up to $10.5 billion or $10.9 billion, which is getting up towards 7 percent of GDP—just like that. They are not responsible. They are basically saying they do not believe in taking any responsibility for governance in this country.
We need a responsible Government; a Government that preserves people’s entitlements, gives people confidence, and encourages jobs. What we do not need is a Government that guts the economy. I am sorry but I cannot agree with Sir Roger. The best accolade that could, and has, come out for the Budget today is that it is pretty boring and predictable. In New Zealand right now we do not need wild-eyed spending ideas from the current Labour Party. We also do not need the radical cuts to social expenditure that others propose. We need a steady, conservative hand on the tiller, and we have that with John Key and Bill English. New Zealand will be thankful for that tonight.
Hon LIANNE DALZIEL (Labour—Christchurch East)
: I am pleased to take a call on the first reading of the Taxation (Budget Tax Measures) Bill, which is being passed through all stages under urgency. I think the bill is wrongly named and has been brought to the House rather quickly today. National was able to table it only after the urgency motion was moved. I think what National meant to call the bill was the “Pre-election Promises (Post-election Breach of Faith) Bill”. That is what the bill should have been called, because that is precisely what it is. We had pre-election promises that we were told would not be put on the chopping-block, no matter what happened.
I ask a question of the Prime Minister of New Zealand. I ask John Key what he means by the words “personal guarantee”. Is it not interesting that the words “personal guarantee”, when one thinks about what they are intended to mean, mean that a person will stand behind his or her assurance and personally guarantee the result of the outcome?
Let us have a look at what John Key actually said in the letter he sent to every single household before the previous election. I am told that the covering note sent with the
pledge card stated: “Well, unlike Labour I’m going to be straight-up about my priorities. That’s why I’m sending a card to all of you. It’s called ‘My key commitments to you’ and it will be delivered to every household in New Zealand over the next 10 days.” I will read out the introductory clause and first key commitment on the card that John Key sent: “If National is elected to lead the next Government, I personally guarantee that we will—strengthen the economy, increase after-tax incomes and ensure Kiwis can get ahead under their own steam by reducing personal taxes on 1 April 2009, 1 April 2010 and 1 April 2011.”
Not only did John Key say that but he signed his personal guarantee as “National Party Leader”. That first commitment has a red cross through it. It is not the Red Cross Society, as in who might save us in an emergency situation; it is a red cross for a failure to deliver on the personal guarantee. I think that is where Brian Rudman’s comments come into play. I do not really care what Steven Joyce, the previous speaker, thinks about Brian Rudman’s comments. Brian Rudman was simply making the point—and quite reasonably so—that people were very clear in September last year. I will quote from the article: “Yet back on September 30 last year, Mr English was mocking then Finance Minister Michael Cullen for being over-cautious on the issue. He said: ‘Dr Cullen cannot be trusted to deliver on any future tax promises.’ ” He compared that with National, which will—and I quote from Mr English—“have an ongoing programme of personal tax cuts. It will be a responsible programme and a transparent programme.” Mr English said he would treat Labour’s tax cuts, which came into force the next day, as the “first tranche in our tax-cut programme. That will be followed by another tranche of tax reductions on April 1, 2009, and further tranches in 2010 and 2011.”
I want to know whether Mr English advised John Key to sign a personal guarantee, knowing full well that we were heading into a major economic recession. I suspect, given the huge smile and the laughter on the lips of the Minister of Finance when he was reading out the announcement on the cycleway budget, that there was not a personal commitment to that particular policy from the Minister of Finance. I wonder whether the Minister of Finance has set up the Prime Minister of New Zealand with this personal guarantee, because it will come back to haunt him over and over again.
National members have proved that they were really prepared to say anything to get elected, and then act surprised as if they had not noticed that there was an impending financial crisis. That is the issue I am deeply concerned about. I will comment further about what Mr Key went on to say about the tax cuts. He was contrasting what he believed to be the position the Labour Government would take if we had been re-elected at the previous election. He went on to say: “unlike Labour we won’t cancel our tax cuts”. Is there any leeway on that? Let me just read that statement, and let us just see whether anyone can read any words of doubt into it. He said: “unlike Labour we won’t cancel our tax cuts”. I think that is pretty clear-cut.
He went on further in his Budget speech last year and said that New Zealanders really could rely on, and trust, the National Party’s tax cuts. He said: “Most of all, New Zealanders will be able to believe our tax cuts, they will be able to trust our tax cuts … You see, we believe in tax cuts, we believe in the power of tax cuts, and we will deliver them. What is more, we can afford to do it.” Well, I am afraid that every single statement that John Key has made and his personal guarantee have proved to be completely and utterly out of sync with the legislation we are now debating in this House.
The Taxation (Budget Tax Measures) Bill undoes the second and third series of tax cuts scheduled for 1 April 2010 and 1 April 2011. We knew that the tax cuts National was promising were unaffordable, and we said so. We took a responsible approach with our policies. We pulled back on policies that we wished to announce as part of Labour’s
election campaign, as we decided that we did not want to misrepresent the situation to the people of New Zealand.
As my colleague Clayton Cosgrove said, we will be supporting this bill because we never believed that National’s tax cuts were going to proceed. We knew they were unaffordable. More important, we always knew that National’s tax cuts were inequitable. I remind the people of New Zealand—most of whom are probably tuned in as we speak, listening to this important debate—that 30 percent of the last round of tax cuts on 1 April this year went to 3 percent of the top income earners.
Stuart Nash: Disgraceful!
Hon LIANNE DALZIEL: That is disgraceful. I totally agree with my colleague behind me who intervened; they are utterly and completely unaffordable.
Hon Tau Henare: What’s his name?
Hon LIANNE DALZIEL: That member knows perfectly well who he is.
Hon Tau Henare: No we don’t, nor does New Zealand.
Hon LIANNE DALZIEL: Well, if that member would like me to give Mr Nash a complete free hit here, then that is fine. Clayton Cosgrove was making the point that it is shameful the National Party’s focus was always on delivering tax cuts to high earners, but that would have the least impact on stimulating the economy, something that National promised. We all know that it would be much better to focus those tax cuts at the bottom end, where people are spending every cent they have.
The other thing that is mentioned in this legislation is the reminder we have of the major changes that the previous Government made to our investment and savings environment with the Cullen superannuation fund and KiwiSaver. There is an absolute reneging on those, and it is a reminder that the crucial research and development tax credits we had in place for investing in export industries have been completely gutted by this Government.
It is really hard to give this Budget a name. One of the bloggers today came up with “Dark Grey Budget”. It is not really a “Black Budget”, but it has not got very far.
Iain Lees-Galloway: Looming.
Hon LIANNE DALZIEL: The “Looming Clouds Budget”—but there ain’t no silver lining in this Budget, and that is one of the problems. I personally think that this is a Budget that represents a complete waste of opportunity, and this particular measure we are debating proves that.
JOHN BOSCAWEN (ACT)
: The ACT Party will be supporting the Taxation (Budget Tax Measures) Bill, but we are supporting it with a great deal of reluctance. In essence, this is a bill to delay tax cuts. We heard from the Labour Opposition this afternoon that the National Party went out and campaigned on a programme of tax cuts, and it has reneged. Yes, we find the country in difficult circumstances and there are a number of reasons for that. One reason is the last 9 years of financial mismanagement that saw Government spending, in real terms, increase by $5,500 per person in this country. That is $22,000 for a family of four. Allowing for the effects of inflation, the previous Labour Government went out on a spending spree over the last 9 years and took $22,000 on average, in real terms, out of the income of an average family of four.
Rather than face up to the issues or the need to go through and review Government expenditure, National has taken the easy option. It is proposing to postpone tax cuts. It is interesting that the Minister of Revenue said earlier this afternoon that the date of the tax cuts is unknown. We cannot say when the tax cuts are going to take place. We are looking at tax cuts that next year would have cost the taxpayer $1 billion. Let us put that in context. That $1 billion is out of total Government expenditure of $65 billion, which is $18 billion more in real terms than what it was 9 years ago. If Government expenditure had kept pace with inflation over the last 9 years, we might have expected
Government expenditure to be $47 billion. But, no, it is $65 billion. It is $18 billion higher as the result of 9 years of financial mismanagement.
It was interesting to hear the Minister of Finance talk about what makes this country a richer country, and how we raise our living standards. How do we raise the income of New Zealand vis-à-vis our nearest neighbour, Australia? The reality is that incomes in New Zealand are some 20 to 25 percent lower than those in Australia. Our citizens are leaving for Australia and they are not coming back Our young people are going overseas and in years gone by they would come back to New Zealand, but in increasing numbers they are not.
One of the issues this country has to address is our productivity and our need to raise it. I will come back to productivity very shortly, but there is a second thing: we also need to get right the incentives to work. We just heard the Hon Lianne Dalziel talking about people on lower incomes. Well, it was the Labour Government that put in the Working for Families package. That was a badly designed scheme because it effectively puts the recipients of Working for Families support on a marginal tax rate of 54c to 59c. Where is the incentive to go out, work hard, get promotion, work longer hours, and work overtime to try to raise the living standards and income of one’s family, when one knows that some 59c in the dollar is being taken away?
Another key issue is productivity. We have to raise our productivity. Both the Minister of Finance and the Prime Minister spoke on that this afternoon, and I commend them for it. We absolutely have to raise our productivity. The Minister of Finance referred to infrastructure. It is a theme that Mr Key came back to. I struggled to hear what Mr Key was saying; I literally could not hear him. The banter backwards and forwards between Labour and National members meant I could not hear what Mr Key was saying.
I commend National for the decision to proceed with the Waterview Connection. Labour could have built that connection when it was in Government for 9 years. It was able to build a 4.5-kilometre motorway from Hillsborough to Mount Roskill. There was nothing to stop it from building from Mount Roskill to Waterview, but it chose not to because its option of building a $3 billion tunnel was totally unrealistic. It was an expense and a folly. Rather than front up and complete the job, as this National Government is proposing to do, it did not; it postponed it. National is now required to deal with that issue. That project will cost $1.4 billion, and I heard the Prime Minister say that 60 percent, or just under two-thirds, of that tunnel will be underground. People would not realise that on listening to the speech by Mr Norman this afternoon. Mr Norman, the chief doom master, talked about the bulldozers cutting a swath through Mount Albert. Of that motorway, 1.5 kilometres is on the surface. It follows the railway designation, and that is the same designation that Mr Norman would like to put a train set on. It is not a motorway that cuts through Mount Albert in the way that Mr Norman, the chief doom merchant, said.
We need to raise our living standards and we need to raise our productivity, but, first and foremost, we need to reduce waste. We need to provide an incentive for New Zealanders to go out and work and to contribute to this economy. We need to provide rewards. We need to provide incentives. Over the last 9 years we have had financial mismanagement on a scale that has never been seen before in this country. It has taken 100 years to get Government expenditure to $13,500 per family—over 100 years. In 9 years the Labour Government was able to increase it from $13,500 per family to just under $19,000 per family. For a family of four—two parents and two children—that is $22,000 taken out of the family budget.
The ACT Party will be voting for this legislation. It will be doing this with disappointment, and it will be doing this as part of ACT’s agreement to support the
National Government on confidence and supply. Yes, ACT members will be voting for the deferral of these tax cuts, but we do so reluctantly. We only wish National had the courage to fulfil the promise it made to the electorate last year to provide those incentives and to create the environment where people want to go out to work and contribute to the economy.
Hon Dr PITA SHARPLES (Co-Leader—Māori Party)
: Tēnā koe, Mr Deputy Speaker. Tēnā tātou katoa e hui nei i tēnei ahiahi. The first seven words of the explanatory note of the bill tell us all we need to know about Budget 2009. This day will for ever be recognised as a response to a “difficult fiscal climate”. The Minister of Finance has described this Budget as sitting within the context of a global economy that is experiencing the deepest, most synchronised recession since the 1930s. What does this mean for us at home? We know that just in the last few weeks employers throughout the nation have had to lay off workers in the timber, manufacturing, telecommunications, and textiles sectors. Just how dire this situation is can be seen in the numbers of unemployed benefit recipients. There are now 44,000 New Zealanders actively seeking work, with 14,000 of these being Māori, and with close to one-third of Māori job seekers in the 18-24 year age group. It is that group of some 5,000 young people that has been on our minds as we have embarked on the road to recovery articulated in Budget 2009. These were not the lucky New Zealanders who benefited from the $1 billion allocated from the Government’s first round of tax cuts. These are New Zealanders, all the same, who deserve every opportunity—
Hon Shane Jones: Welcome home!
Hon Dr PITA SHARPLES: I did not bring the member a Happy Meal! But these are New Zealanders—
Hon Shane Jones: Hoki mai ki te kāinga!
Hon Dr PITA SHARPLES: Hoki ki a McDonald’s! But these are New Zealanders, all the same, who deserve every opportunity for the light to shine in their eyes. They are New Zealanders who may well take up leadership positions in the future. They will be our scientists, our entrepreneurs, our teachers, our sportspeople, our tribal leaders, and our parents. This Budget recognises that every New Zealander is entitled to enjoy the basic rights of citizenship, to benefit from quality public services, and to maintain a standard of living that we can defend despite the rigours of a global financial crisis.
The Māori Party will support the Taxation (Budget Tax Measures) Bill on behalf of the young people and those to follow. We celebrate the fact that despite worsening economic and fiscal conditions, the Māori affairs portfolio has been maintained intact. We believe that the decision to defer the second and third tranches of the personal tax cuts is a sign of responsible management, thinking of the collective well-being of all New Zealanders, and balancing the Budget in a way that will protect people from the sharpest edges of the recession. The Māori affairs budget has been rigorously scrutinised to ensure a careful yet secure footing from which whānau Māori can emerge from the recession. In many ways it mirrors the type of budgeting that we may see in Māori homes around the motu. [Interruption] E, kāre koe i te whakarongo. It reflects a conservative approach to ensure bread and butter on the table, while also enabling whānau to be opportunity-driven. We have given priority to whānau as the social structure that best provides protection and resilience during times of stress. Investing in whānau is not about what we will do to them; investing in whānau is about what they will do for each other. As Minister of Māori Affairs I have heard the call from whānau: “Let us create our own solutions.” So in early July I will be looking to announce a network of whānau advocates who can work closely with our—
Hon Clayton Cosgrove: Eighty percent of your constituents got nothing out of the tax cuts.
Hon Dr PITA SHARPLES: If you listen, you might get educated. I will be looking to announce a network—
Mr DEPUTY SPEAKER: The member is bringing the Chair into the debate; he cannot do that.
Hon Dr PITA SHARPLES: I think another member did that the other day, but never mind. This reflects the conservative approach to ensure that there is bread and butter on the table. We have given priority to whānau, because it is the social structure that is best provided to protect resilience during stressed times. Investing in whānau is not about what we will do for them; it is about what they will do for each other. As Minister of Māori Affairs, I have heard their call, and on 1 July I will announce a network of whānau advocates who can work closely with our whānau to ensure they have all the assistance they need to be strong. Resilient whānau are those who can ride out the storm, because they are supported to be the best they can be. Resilient whānau need jobs. They need a spirit of optimism. They need education. They need healthy homes. They need a strong economic base to build their future on. This Budget will help to make that happen.
The fact that our whānau who are earning under $40,000 a year will now not have to cope with extra taxation—up to something like an extra $8 a week—is something that we welcome. The previous approaches to taxation were based on a trickle-down economic theory, which says that boosting the incomes of middle to high income earners through tax cuts will create economic benefits that will trickle down to the lower-income earners from the spending that creates jobs, demand for services, and the like.
Hon Clayton Cosgrove: That’s why you voted for it.
Hon Dr PITA SHARPLES: That is exactly right. If the member listens, he might learn something. But we always had concerns that those who are already vulnerable might never gain from the trickle-down effect.
Hon Trevor Mallard: Who wrote this rubbish?
Hon Dr PITA SHARPLES: If members only listened until I finish, they might get educated. The already vulnerable might never actually gain from the trickle-down effect, because instead they will be watching the trickle-up effect, which contributes to the growing income inequality, with the well-off becoming wealthier, and the lower-income families in their wake. Deferring tax cuts will instead save around $900 million a year, which can be used to sustain—
Hon Trevor Mallard: 836!
Hon Dr PITA SHARPLES: —the member should check his figures—and support New Zealanders in the times ahead. We must look forward in order to ensure that when the recovery begins, our people are ready to respond quickly. So one of my first priorities as Minister of Māori Affairs was to establish the Māori economic development task force, to develop a Māori-led response to the recession. The task of that rōpū is to advise me on how to protect existing jobs and businesses, but also to think about the long-term vision, a vision in which our young will benefit from increased education and training, and investment will be made to maintain and build a skilled workforce, ready to go, when the economy is recovered. It would be great if the task force were able to directly create jobs, but my challenge to it is to take a longer-term view of Māori economic development opportunities and look at systemic change across its own areas of expertise, to ensure that Māori and Māori assets can take a role in leading Aotearoa out of the recession.
Also encompassed by the journey towards economic self-determination is the commitment I have taken up to strengthen the Māori economy by establishing the Māori Trustee as a strong, independent, accountable, and sustainable trustee for Māori
landowners and beneficiaries. I remind the House that that was the first bill put through this Parliament by the independent Māori voice of Parliament, the Māori Party. That is another important legacy of this time, and members should not forget that.
Hon Clayton Cosgrove: The sell-out party!
Hon Dr PITA SHARPLES: Oh, get a life! I want to point out just one more highlight in respect of the Māori affairs budget, and that is the investment in whānau language development.
This Budget initiates $4.5 million over 3 years for the retention and revitalisation of te reo Māori, using te ātaarangi kei roto i ngā whare [the Cuisenaire rods method in homes],
andthere is $1.2 million allocated to iwi Māori radio operating funding.
All of these initiatives are ideas that are about creating opportunities for our people, and for establishing a stable platform for growth to occur. But there are other opportunities right throughout the appropriations, which I would like to point out in my closing remarks.
In making the decision to defer further tax cuts, the Government has acted responsibly. Such an approach is also reflected in the $22 million allocated to speeding up Treaty settlements. Settling past injustices is an important part of any future constitution reform for New Zealand, as is restoring an economic base for iwi. I acknowledge my colleague Chris Finlayson for the constructive working relationship we enjoy. Similarly, I am proud to have signed, alongside my colleague Phil Heatley, the fishing aquaculture settlement, to which the Budget allocates $15.9 million for aquaculture. Kia ora rā, Mr Deputy Speaker.
JEANETTE FITZSIMONS (Co-Leader—Green)
: The one time that urgency is often seen to be justified is when on Budget day urgent financial legislation needs to be passed overnight, so that people cannot take advantage of knowing the change is coming before it is law. This is not such an occasion. In this urgent legislation, we are cancelling tax cuts that take effect in April next year.
Hon Trevor Mallard: And the year after.
JEANETTE FITZSIMONS: And the year after. It is very hard to see why anybody could claim that this legislation was urgent enough to bring Parliament together into the night on Thursday and again on Friday morning. The Green Party did not vote for the urgency motion. We believe urgency ought to be used quite cautiously, if there is to be support across the House for urgency when it is actually justified. There are times when it is justified, but this is not one of them.
We will, however, vote for the Taxation (Budget Tax Measures) Bill. We are not voting for the Government’s Budget—we are not voting for this Government on confidence and supply—but we will vote for this bill because the obviously sensible thing to do in a recession is to cancel two rounds of tax cuts for which we would have to borrow billions of dollars. We are glad that the Government has chosen to do the sensible thing in that case. The Greens never supported the tax cuts in the first place.
I have to say that when the Government took urgency to rush through tax cut legislation in December last year—some of which is already in force from 1 April this year and which is not being cancelled—it was already obvious that New Zealand was in a recession. It was already obvious in December that the tax cuts would put the Government into serious debt. But because National campaigned around the country on tax cuts, I suppose National members felt obliged to put them into practice. Now National is coping with the consequences of a Budget that is very, very hard to balance because so much was given in tax cuts. Tax cuts are something that we do when the economy is in surplus, when we are having the good times, and when we know that it is a structural surplus, and that we will be able to keep on doing it. In December last year we were not in that situation economically, and we are even less in that situation now.
However, it is better late than never, and we are glad to support the common-sense approach of cancelling the next two slices of tax cuts. If the first slice had not gone ahead in April this year, and if that December bill had not been passed, the savings to the Government Budget would have funded our entire Green New Deal stimulus package, which would create 43,000 new jobs. Yes, people like having $30 a week more in their pocket from their pay packet, but I bet that if we asked most New Zealanders whether they would rather have a tax cut of $30 a week or 43,000 more jobs in the economy, they would choose the latter. They would know that their neighbours, their kids, and their friends would have employment and that there would be spin-off effects in the economy. They would know they would see all the other benefits of the Green New Deal package, such as clean rivers, better export returns from New Zealand being clean and green, warm, insulated homes, better public transport, more community development, and 6,000 new State houses to tackle homelessness. I bet that most Kiwis, if they had been asked whether they wanted $30 a week or a better society for themselves and their children, would opt for the Green New Deal package and all the benefits that it would bring.
I will quote Jane Clifton, whose comments in the
Listener I always enjoy. Back in April, she had this to say: “But so much has changed since we first hankered after tax cuts, that it’s all the most depressing let-down.” This was April, when the tax cuts first came in. She continued: “Once again, we can see the extra money will not compensate us for dairy product, petrol, power, school-fee, and mortgage-interest hikes. It will not supply a nest-egg for any redundancies set to hit our households.” She knew those would happen. “It will simply be sucked into the maw of our existing financial struggles, and grateful as we are for it,”—this is the interesting bit—“our central existential problems will continue unabated.” She is saying that tax cuts are not a recipe for happiness and greater well-being, and that there are better ways that that money could have been spent.
The part of this bill that we struggle to understand is the closure of the mortgage diversion facility in KiwiSaver. Apparently only 600 people so far have used the opportunity to divert savings from KiwiSaver to their mortgage payments. Those 600 people may well have faced mortgage foreclosures if they did not have that facility, and it is very important that they were able to do that. It does not sound as if, with 600 people participating, this was a huge compliance cost for KiwiSaver. It is very hard to see where the problem is that this is trying to fix. So I look forward to hearing the Government explain that measure a little bit further. The Greens may well, therefore, not vote for Part 2 of the bill. However, we will vote for Part 1 and we will vote for the bill overall. We are glad the Government has finally seen sense and realised that making tax cuts when the country is in a recession does not make sense.
CRAIG FOSS (National—Tukituki)
: First of all, I take this opportunity to congratulate our Minister of Finance, the Hon Bill English, on an absolutely fantastic Budget for these strained times. It is a Budget for the future. It is a Budget that builds the platform for a much more aspirational, realistic, transparent New Zealand. It is not a Budget for the next headline. It is not a political Budget. It is realistic, it is transparent, it is robust, and it is fair. Some may even call it a boring Budget, but I say to members opposite that this Budget should probably have been in place about 4 years ago.
This is the Taxation (Budget Tax Measures) Bill. It is part of the “road to recovery Budget”. I just note this point after hearing the Hon Phil Goff’s Budget speech. Is Labour not missing the Rt Hon Helen Clark and the Hon Dr Michael Cullen? We know that Labour members are missing them, because Phil Goff’s speech was a total shocker. It was as if he had turned up and could not deliver the speech he had written earlier. I
think he had talked himself into thinking that entitlements would be cut, that superannuation would be cut—
Hon Members: It was.
CRAIG FOSS: —and that Working for Families would be cut. To that I say no, no, and no. I could pose the question to anybody as to how much his or her superannuation was changed by this Budget. How much? Actually, the answer is it was changed by zero. Superannuation is unchanged, and it is committed to. All entitlements are unchanged and the commitments that were made were held, because so many New Zealanders need to have some certainty to get through these unfortunate times, this one-in-60-year event.
I would like just to take issue with the foresight that Mr Cosgrove has suddenly developed. He told us that apparently, 2 years or so ago, when the IMF issued a report—I think I remember the one the member was talking about—that the current global economic conditions were all known. He alleges that Mr Key and Mr English should have foreseen these conditions. I will turn that question round. Did Mr Cullen, the finance Minister at that time, foresee it? I recall a quote from Mr Cullen, talking about how the subprime crisis in the US would not hit the shores of New Zealand. I think that was said in about April last year, 2 or 3 months before his 2008 Budget.
I point out that so far this National Government has delivered over $1 billion in tax cuts, which will assist over 1.5 million New Zealanders. That is in addition to the $500 million or more of tax compliance improvements that we have made for small businesses. I come back to the foresight that Mr Cosgrove developed. I will point out some figures. In the operating balance before gains and losses in Budget 2008—we remember that New Zealand went into the recession under the previous Government about a year before the rest of the world—a 0.5 percent surplus was forecast. In the Pre-election Economic and Fiscal Update, on 6 October 2008—members will remember that, prior to the election—a 0.9 percent, almost 1 percent, deficit was forecast. Remember that that is when we started to get into the decade of deficits, which was basically if the policies of the previous administration had continued in their current shape and form, we would be in awful shape, worse than today, because this Budget is starting to put us on the road back to recovery. In the December Economic and Fiscal Update, on 18 December 2008, the surplus was minus 2.2 percent. We can see that the numbers have shown a marked deterioration until this point today. In Budget 2009 we are at negative 4.4 percent. That is unfortunate, and none of us like to be in that position, but I am so pleased that a National Government is in place to start to bring some accountability, some transparency, some robustness, and some prioritisation into the Government’s accounts.
I will go back to Mr Goff’s speech. He seemed to totally ignore the fact that $50 billion less will be coming in revenue to the Crown over the next 3 years. That is $50 billion less to allocate to entitlements, or whatever. He has totally ignored that point. Mr Goff, Mr Cunliffe, and Mr Cosgrove have all been talking about what a great time it is to buy assets. That implies the question: why did they buy so many in the last 5 years? They are saying assets are now cheap. I say to these financial gurus of forecasting, which they have suddenly turned into, that actually hindsight is a great thing. But I say to them not to go down that track, because they will be caught out—somewhat tragically for their personal standing. Thank you, Mr Speaker.
STUART NASH (Labour)
: I find myself in the unique situation of standing to support the Taxation (Budget Tax Measures) Bill under urgency, after standing to oppose the original bill, the Taxation (Urgent Measures and Annual Rates) Bill, under urgency less than 6 months ago. It is a strange situation, which anyone with half an eye on the global economic situation could have predicted 8 months ago. But, first of all, I
say to Dr Pita Sharples that 80 percent of his constituents got nothing out of the tax cuts. Pita Sharples sold his people out. Is that fair? No, not at all.
I would like to talk about one thing in my 10 minutes’ speaking time: the fact that Mr Key and Mr English knew of the impending economic crisis and its potential impact upon the New Zealand economy, yet they never pulled back from their tax cut package during the last days of the election campaign. This is not right, and it is simply not fair. I think it is quite interesting to note that today ANZ and the National Bank upped their interest rates, on the day that we were given a jobs Budget. Will those two major banks upping their interest rates help the ordinary Kiwi bloke? Of course it will not.
I know that Mr Key and Mr English are smart men. Let us give credit where credit is due.
Hon Trevor Mallard: Why?
STUART NASH: I will tell the member. Someone like Mr Key, who made significant money in international finance, knows about risk management and the fundamentals behind assessing financial risk. Mr Key knows how to read economic forecasts and future financial trends probably better than anyone in this House, except for David Cunliffe, Mr Mallard, and Mr Horomia. That is how our Prime Minister made his fortune—by trading. It is all about assessing risk, then putting in place strategies to mitigate and beat the odds. A lot of it is about bluff and big balls, because if they get it wrong it can go spectacularly wrong, and many in this game do not succeed. We have ample evidence of this in the collapse of Mr Key’s old firm, Merrill Lynch.
The fact that Mr Key made so much money analysing and then beating the odds means he was probably pretty good at it—in fact, pretty damn good at it. Good on him! He was a good money market trader. He knew how to play the odds. But did he play us? Were the voters of New Zealand simply lines of data on a spreadsheet, to be manipulated in the same way that was used in an attempt to manipulate data on the international currency movements? Were the voters of New Zealand who ticked National on election day taken for a ride on the promise of tax cuts? That is an interesting question, and now it appears we have our answer.
Let us look at Mr English. Sure, he is as machiavellian as they come. He would have to be to become leader of the National Party, after previously being the Minister of Finance in charge when fiscal management mistakes were made over the handling of the last recession suffered by this country, in the late 1990s. Luckily that recession was cyclical and not structural, which basically means that our export markets held up and we could trade our way out of it. This recession is structural, which basically means that the fundamental way we do business, both in New Zealand and globally, has changed. It has to change. But Mr English was not quite machiavellian enough. He got rolled for the leadership by the right-wing ideologue Ruth Richardson masquerading as Don Brash, after being trounced in the 2002 election by a Prime Minister who knew the country wanted substance and vision. Mr English could provide neither, nor can he today.
When Don Brash’s time was up, Mr English got rolled again, by another very smart odds and numbers man in John Key. That must have hurt. [Interruption] I ask Dr Coleman what we, the people of New Zealand, have ended up with today. We have a money market trader who understands risk management, and therefore is an expert manipulator, as Prime Minister, and a machiavellian man who has not quite the grasp of political or economic philosophy, or numbers, as Minister of Finance. Let us face it. If he knew the numbers he would be Prime Minister now, and he would not have been rolled by Brash and then passed over by his colleagues for Key. Ouch!
Hon Dr Jonathan Coleman: He’s just read the Budget today. I think it’s a lot more fun than the Opposition.
STUART NASH: In October of last year, when Dr Coleman was out there telling his constituents that under National they would get tax cuts, these two puppet masters—let us call them “M and M”: the manipulator and the machiavellian, the then Leader of the Opposition and the then deputy leader of the National Party—were reading
TheEconomist magazine. It was commenting at the time on the state of the global and the New Zealand economy. “M and M” would have, no doubt, read the following from
The Economist. On 29 October last year, a little over a week before New Zealand’s general election, it stated: “After the most eventful and creative six weeks in the history of central banking, a half-point interest rate cut by the Federal Reserve on Wednesday October 29th was almost anti-climactic. Nonetheless, it was an important strike at the deepening recessionary forces surrounding the American economy … Within America the financial crisis is showing signs of easing, but the economic crisis is only just starting, as the Fed broadly acknowledged. ‘The pace of economic activity appears to have slowed markedly … Moreover, the intensification of financial market turmoil is likely to exert additional restraint.’ ”
Let us go over that again: “the economic crisis is only just starting,” “The pace of economic activity appears to have slowed markedly”, and “the intensification of financial market turmoil is likely to exert additional restraint.” This is all in the world’s largest economy—the global engine room. I can picture how this went. “M and M” would have sat down over a coffee in the manipulator’s office. Key says to English: “This is bad, Bill. The world is going to hell in a handbasket and we are promising tax cuts that will be totally unaffordable. I have done the numbers, and it won’t work.” English says to Key: “For God’s sake, John. It’s about winning this election at all costs. Let’s promise them the world, and when we get in we can tell them whatever we want. Key then says to English: “So, if we fool them all, can I become Prime Minister, Bill?”. English says to Key: “In name, yes, John. Now go out there and tell the people what they want to hear. And that stuff about the ides of March is just a story; we all love you, John.”
I tell members that “The M and M Show” knew exactly what it was doing, and rushing the original tax bill through Parliament was all part of the plan. In my humble but educated opinion the voters of New Zealand were hoodwinked in a way that only the National leadership can do. I say to Dr Coleman that National would do anything to get elected. It is cynical politics. The people of New Zealand need to know this, and today they have found it out.
I am rapt about this bill because it means that Napier will return to Labour. I am sorry for Mr Tremain, but there is nothing wrong with being a list MP. This bill is not what the people of New Zealand voted for.
Craig Foss: Come on, what odds?
STUART NASH: If I win Napier, I will give Mr Foss my tax cut next year and the year after. Oh, hold on a second, they have just been cancelled!
I remember sitting opposite Mr English at the Finance and Expenditure Committee and asking him whether, in light of the fast-deteriorating global economic crisis, National was still going to push through its tax cut legislation. Mr English’s response was that it would, because it is what the voters voted for. Well, Mr English has now taken away what the voters voted for, and hence has taken away the reason he thinks National won. What will he tell the people of New Zealand who put him there on the promise of a tax cut?
“M and M”—the manipulator and the machiavellian—are now in a spot of bother. They are in a catch-22 as they are shown to be either the master manipulator and the machiavellian who misled the majority of the masses, or slightly slow. What would they rather be—sneaky or simple, standard or poor? It is not for me to decide, but I can tell
members that my mates have called me and texted me about this situation and they are not particularly happy. When I said to them that they knew this was going to happen and that tax cuts were not affordable, most said that they knew that, but they did not really think—they trusted Key. But no more. They say that the honeymoon is over and the love is gone. To “The M and M Show” I say that 2011 cannot come quick enough to get rid of the show of broken promises. The people of New Zealand know that this is simply not fair. Thank you.
CHRIS TREMAIN (National—Napier)
: On one of the most important days for New Zealand this year we hear a fictional play written by Mr Stuart Nash. If he thinks he will win back Napier he can dream on.
We should be focusing on the facts, and I want to tell members about a fact that will appear in the headlines tonight in the Television One and TV3 news. It is the Standard and Poor’s announcement: “International credit rating agency Standard and Poor’s has cast a favourable verdict”—not a negative verdict, but a favourable verdict—“on the Budget, upgrading New Zealand’s outlook from negative to [positive].” That is a fact. Standard and Poor’s, one of the most important credit rating agencies in the world, has said that it is putting a positive outlook on our Budget as a result of what was delivered today. There is nothing fictional about that. No fictional playwriting is going on in that regard.
Craig Foss: It was negative when Labour was in; it’s positive now.
CHRIS TREMAIN: Exactly. When Labour was in office we had a negative outlook. Now that National is in office we have a positive outlook, and that has to be good for New Zealand. What does it mean? Let me make just a couple of quick points. It means $600 million in savings on interest rates alone. As a result of that improvement in our rating, we have delivered $600 million into the back pockets of Kiwis through not having increased interest rates. That is a fantastic outcome. What is even better, though, if we put that aside for a moment, is that it will allow the arteries of finance to stay open. The veins of finance will continue—
Stuart Nash: I raise a point of order, Mr Speaker. On Mr Tremain’s facts, he knows that 75 percent of people in Napier earn under—
Mr DEPUTY SPEAKER: The member will sit down. That is not a point of order; it is a debating point. The member cannot bring in that sort of material on a point of order.
CHRIS TREMAIN: It will keep the arteries of finance open and it will allow businesses to stay operational. They will be able to continue to borrow and we will be able to get on the path to recovery. That is what has happened.
Another fact from Standard and Poor’s will end up on the news tonight. It said today that the Budget delivered a sound outlook. That is high praise. Just a few minutes after Bill English had delivered his Budget, we received the following high praise from Standard and Poor’s: “The change in the outlook on the … rating reflects our view that the measures announced in today’s budget will support stabilisation in the government’s fiscal position over the medium term.” If that is not positive, I do not know what is. Here we are in one of the biggest recessions of the last 60 years, and the Government has delivered a Budget that has put us on a pathway to a strong recovery. It is absolutely fantastic.
What did we see from the Opposition today, apart from the fictional play that we had before? We saw “Visa-nomics”. We saw Mr Phil Goff—“Whack-it-on-the-bill-Phil”—recklessly say in the House today that we should keep on spending. He said that we should keep on increasing our debt and putting ourselves in a position whereby our kids will have to pick up that debt down the track. It was absolutely crazy. Delivering that sort of Budget would burden Kiwis with an immediate downgrade. But it is not that we heard anything of any note from Phil Goff, apart from increasing expenditure. Did we
hear anything about what he would change in order to deliver that? No, we did not. He just talked about more debt—“Whack-it-on-the-bill-Phil”. It was all about putting more on the Visa card and burdening Kiwis with more debt.
What we heard from National was a reflection of where the real economy is. The really important thing is that out there in New Zealand businesses are doing it tough. They are going through their profit and loss statements line by line, looking to see how they can take expenses out of their budget so that they can remain in business. It is not so that they can make a profit; many businesses out there are trying to keep afloat, and they are going through their budgets line by line to do that. There are people out there who have recently lost their jobs, or who are facing the prospect of losing their jobs. They are not faced with a situation where they can be fiscally prudent; they have to be tough and go through their budgets line by line. That is what this Government has done. It has gone through the Budget line by line and taken out as many expenses as it can. It has provided a Budget that will take us forward, which is fantastic.
On the other hand, “Whack-it-on-the-bill-Phil” thinks we can just keep on spending and racking up debt—spend, spend, spend, and the debt grows. National members understand the position the economy is in and we have had to make some tough calls. Whether or not members opposite like it, when New Zealand is in a situation like this the Government has to make tough calls, and we have done that. At the time of the election, when we made our initial call about tax cuts, we made some tough calls in order to afford tax cuts, based on the Pre-election Economic and Fiscal Update delivered to us at that point in time. At that time we made some calls about research and development tax credits and KiwiSaver. Once again, in this Budget we have made some tough calls about what we have to do, and one of those tough calls has been to stop the second and third tranches of the tax cuts. That is something we have to do in this economic environment.
Mr Ross Robertson asked us before about what the future was under this Budget. It has given us a debt track that is rising but will then go down. It has given our kids a strong outlook for the future. Today we are in the position of having to hit the tax cuts on the nose with this tax bill so that we can go forward, and Standard and Poor’s has delivered us a fantastic result because of it.
IAIN LEES-GALLOWAY (Labour—Palmerston North)
: Before Christmas we were in this House late at night, day after day, ramming through tax-cut legislation under urgency. National could not get it done fast enough. Why? It was because the Government wanted to stick to Mr Joyce’s mantra: “Find out what they want; give them what they want; then tell them that you’ve given it to them.” The Government wanted to be able to say before Christmas “We’ve given it to you.” It wanted to put on the façade of a hard-working Government that was getting on with it, but it was all smoke and mirrors. National knew before the election that those tax cuts were completely unaffordable. Now, a mere 6 months later—not even that—we find ourselves under urgency with the Government running as fast as it can away from the broken promises that it knew it could not keep. The Government knew full well that there was not a chance that these tax cuts would go ahead—not this year, not next year, not the year after. Bill English was not talking about the tax cuts when he used those words, but he may as well have been. There is no doubt that this Government cannot be trusted on anything.
- Sitting suspended from 6 p.m. to 7.30 p.m.
IAIN LEES-GALLOWAY: Before we headed off for the dinner break I was reflecting on the bizarre symmetry that has been created by this situation. Before Christmas there was a need for urgency to rush through some incredibly important
policies that the Government needed passed by Christmas so that it would look like it was doing something. We forced through tax cuts under urgency, yet tonight we find the Government, under urgency, running as far away as it can get from those tax cuts. The Government has done a handbrake turn so sudden and so violent that its members should have their cars crushed. It is just incredible how quickly the Government has turned around on this policy.
When Bill English talked about not this year, not next year, not the year after, he was talking about the cycleway, but John Key crushed him on that, did he not? Mr English was actually talking about the tax cuts—they will not happen next year or the year after.
Before the election, when all these promises were being made, John Key liked to compare himself to Barack Obama. He knew that Barack Obama was on to a winner so he thought he would try to ride that wave and compare himself to Barack Obama. One could write a thesis on the differences between John Key and Barack Obama, but I would like to focus on one difference in particular. Obama’s campaign phrase was: “Change You Can Believe In”. He was upfront, he was honest, and he delivered the tax cuts that he said he would deliver. He costed them out, made his pledge, and delivered on every single one of his promises. He promised to cut taxes for low and middle-income earners. Why? Because it was fair and it was the best way to stimulate the American economy. That is unlike what we have seen in this country, where tax cuts have been delivered to the rich, who will save them or spend them on overseas trips, and where poor, low-income families have been shafted by the Government and have received absolutely nothing. Obama delivered, but this Government we cannot believe in.
The one thing that this Government has not done a U-turn on is research and development tax credits. They were gone before Christmas, and they are still gone. In my hometown, Palmerston North, research and development tax credits—Mr Power knows this—were welcomed with open arms. Palmerston North is an innovative city, and so much of its economy is based on research, innovation, and scientific development. Those credits were something that this country could have seen as a way out of this recession. Recently, Moana Mackey came up to Palmerston North, and we spoke to the science sector there. Those people said that they wanted to be taken seriously as a sector that can lead New Zealand out of the recession. But what has this Government done? It has slashed those research and development tax credits and taken the Fast Forward Fund with them. What have we seen today? We have seen an attempt at an about-turn, but it is not even half of what the Fast Forward Fund had and not even half of what Labour pledged. It has nothing like the security that that innovation fund offered to the science and research community. Those in the science sector want to know that their funding is secure, and this Government cannot deliver them that level of security.
How can we move towards being a high-wage, high-earner economy? How can we catch up with Australia, as this Government keeps insisting we can? Government members said over and over again when they were in Opposition that we were far behind Australia, and they pledged that our wages would catch up to Australia’s. But how will we do that if we insist on focusing on being a low-wage, no-innovation, dumb economy with moves like scrapping research and development tax credits and the Fast Forward Fund? The talk is all about productivity. Well, research and development is all about productivity. John Boscowen from the ACT Party said earlier on in this debate that it is all about developing productivity. But then he got into what he really wanted to talk about—
Hon Darren Hughes: Himself!
IAIN LEES-GALLOWAY: No, no, there was not a lamington in sight. What he really wanted to talk about was how awful Working for Families was. He absolutely slated it. In fact, he was in good company, because John Key called it “communism by stealth”. But not today! John Key was crowing today about the fact that the Government was able to maintain Working for Families and interest-free student loans. He even crowed about the tax credits that were delivered on 1 October. I know that John Key wanted to lead a Labour Government—he said so himself—but he is taking the flattery just a little bit too far. He should watch out for Bill English. The knives will be out, and he will be in trouble soon if he keeps flattering the Labour Party with that sort of rhetoric.
But the dark, grey clouds are looming. There are ominous references throughout these Budget documents, and they say that New Zealanders have to prepare for changes. There will be shifts in funding from low-priority, unproductive areas to more productive areas. We know what they on the other side of the House do not like. We know what dead rats they had to swallow: Working for Families, interest-free student loans, universal superannuation—which is in a whole world of trouble now, and will not be around by the time I retire, that is for sure—and KiwiSaver. The Government has already put a dent in KiwiSaver, and, I tell you what, it is lining it up. KiwiSaver is even referred to in this bill, in the provision allowing mortgage diversion. I understand—although I was not in the House at the time—that that policy came from United Future. But that is OK, it does not matter, it does not mean anything to Peter Dunne. He has jumped ship before and he will do so again. He has jumped ship on the provision to allow mortgage diversion.
The Government members are having a drag race to see who can get the furthest from tax cuts. They want to try to position themselves far away from the promise they made before the election. They want to get as far away from it as possible. The promise that John Key made at the National Party campaign launch was: “We all know what will be the first to go under Labour, whether they want to admit it or not, and that is the rest of their tax-cut package. Well, unlike Labour I’m going to be straight-up about my priorities. That’s why I’m sending a card to all of you. It’s called My Key Commitments to You and it will be delivered to every household in New Zealand over the next 10 days.” His very first commitment read: “strengthen the economy, increase after-tax incomes, and ensure Kiwis can get ahead under their own steam by reducing personal taxes on 1 April 2009, 1 April 2010 and 1 April 2011.” In other words, next year, the year after, and the year after that. Mr Key went on to say: “And unlike Labour, we won’t cancel our tax cuts.” He also said: “Most of all, New Zealanders will be able to believe our tax cuts, they will be able to trust our tax cuts, … What is more, we can afford to do it.”
This bill is dastardly, deceptive, and dishonest. That is how this Budget has been, and that is how this one-term National Government will be remembered.
NATHAN GUY (National—Ōtaki)
: The previous speaker was Iain Lees-Galloway from Palmerston North. He failed to tell the people of Palmerston North that he will be voting for the Taxation (Budget Tax Measures) Bill. He has been whipped into line and will support this bill.
I need to make a few introductory remarks. The Labour caucus is all over the place on this bill. Tonight on
Close Up I heard the Labour leader, the Hon Phil Goff, say that we should have more tax cuts, yet in the House tonight Labour is supporting this bill. I also heard the Hon Phil Goff say this afternoon that the National Government was lucky enough to inherit an economy that was in good shape. Well, what a misnomer that is! How could Phil Goff possibly stand up in the House today and say that with any credibility, when the books were open at the Pre-election Economic and Fiscal Update,
and there was a decade of red ink and deficit? That member is an absolute embarrassment.
He also said that this Budget was a Budget of missed opportunities. I need to bring to the House’s attention that this is a very tough economy. It is the toughest since 1930, and, indeed, we are in our sixth quarter of negative growth. A member who has recently departed the House—Michael Cullen, the former Minister of Finance—said on 20 March 2008 that a recession was unlikely. The following day he said that he expected a technical recession. He squandered the good years—the magnificent years—that we had, which were nothing to do with what the former Labour Government did. All those years were squandered. We came into Government, opened up the cupboard, and found that—whoopsie—the cupboard was bare.
If we want to set the record straight, I say that the now dumped president of the Labour Party, Mike Williams, said there was a deep dark secret in the 2005 Budget. Wait for it! Then in 2005 the Minister of Finance said that Labour was moving the income thresholds, and that the average worker would benefit by 68c—just half the cost of a packet of chewing gum. Then, lo and behold, the Labour Government had to cancel the tax cut.
This Government is going about its job in particularly difficult times. We have already rolled out our tax package—$13 a week to the average hard worker—and we are actually moving on and supporting entitlements. All the constituents in the Ōtaki electorate, particularly those over 65, will be pleased to know that we are supporting them in superannuation. Those who are reliant on Working for Families in particularly hard times will be very pleased to hear that we are supporting their entitlements. This bill has the support, I believe, of those members across the other side of the House, as well, which is surprising because when we hear their speeches, we wonder whether they are supporting it.
I think Labour members owe it to the public of New Zealand to give them a bit of an indication on this two-part bill, which is only a couple of pages long, as to whether they will filibuster this bill like they did with the Local Government (Auckland Reorganisation) Bill to the tune of 8,000 amendments in this House. The next speaker from the Opposition should stand up in the second reading and say where Labour stands in terms of the Committee stage, and whether it will support this bill in its current form.
Second Reading
Hon PETER DUNNE (Minister of Revenue) on behalf of the
Minister of Finance: I move,
That the Taxation (Budget Tax Measures) Bill be now read a second time. As I said in the previous debate, this bill is necessary to ensure the Government can deliver its explicit medium tax policy goal of a broad based - low rate system that raises revenue in the most efficient manner to support the objective of aligning the top personal, the trust, and the corporate rates at 30c in the dollar. It is something that I have long advocated. I think it is a necessary solution to the problems we currently have within the system of people using companies and trusts to shelter personal income, because the current misalignment of the rates provides scope for people to use those entities to structure their affairs in a way that benefits and reduces their liabilities.
Hon David Cunliffe: Just stop progress to that end.
Hon PETER DUNNE: I should say to the member that we have in place the tax policy work group under the aegis of Victoria University, and it will be putting forward a wide range of options for public debate in an open environment over the next few months. The Government will then make some calls early next year on where it wants
to go in terms of those options and the pursuit of that objective. One of the things that we have lacked in this country for a long time—
Hon David Cunliffe: You can’t make money out of thin air.
Hon PETER DUNNE: I would have thought that the member opposite would be keen to have an open, wide-ranging debate about tax policy and about the future structure of tax policy.
Hon David Cunliffe: We’ll be there.
Hon PETER DUNNE: The member says that they will be there. I welcome that. I look forward to his input, and I look forward to the outcome being one that will see us better placed to achieve the objective that I have just stated. Let me come back to the bill.
Hon David Cunliffe: Roger Douglas wants 20c.
Hon PETER DUNNE: Well, I am not Roger Douglas.
Hon David Cunliffe: But you are heading in that direction day by day. You should be very afraid!
Hon PETER DUNNE: Let me say to the member that he might like to speculate upon many things, but I think both Sir Roger and I would be horrified if we ever ended up in common company.
Hon David Cunliffe: You both used to be in the Labour Party.
Hon PETER DUNNE: The Labour Party was a very—
Hon David Cunliffe: It was a very broad church in those days.
Hon PETER DUNNE: That is dead right. In fact, I do not think there are many people in New Zealand who were not in the Labour Party at some stage; the trouble is that most of them grow up. Let me move on. When the Government’s tax cuts in April this year—[Interruption] Well, there is one over there. The problem with the Labour Party is that it is a great launching ground for political careers; most people, however, grow up and move on to other things.
Let me come back to the bill. Delivery of the first round of personal tax cuts in April this year was a critical part of this Government’s policy. It followed on from the legislation introduced before Christmas, and it put an extra billion dollars into the pockets of about 1.5 million New Zealand workers. That round of tax cuts and the tax cuts introduced by the previous Government in October last year were affordable. The April tax cuts this year were funded by concurrent changes to the KiwiSaver programme, the abolition of the research and development tax credit, and the replacement of the out-stages of the previous Government’s tax cuts. So those changes currently in place are not affected by the bill before the House today, but the future tax cuts for 2010 and 2011 have become unaffordable in the meantime, for the reasons outlined in the Budget. If we look at the Budget tables, we see a revenue decline that shows that the 2008 revenue levels are unlikely to be reached for another 3 or 4 years. There is a question of how one pays for those costs.
To go ahead with tax cuts in this environment would simply add to Government debt at a time when we are already in deficit, and when we need to reduce the debt burden not just on the Government and the economy but on households, which bear the burden.
Hon David Cunliffe: That’s right.
Hon PETER DUNNE: I am glad the member opposite agrees.
Hon David Cunliffe: You knew before the election. You did.
Hon PETER DUNNE: At the time of the election a lot of things were going on in the international economy, and they were changing day by day. To suggest that there was a crystal ball out there that made all of what has happened this year, and all of the changes that the Americans, the Australians, and the British have had to cope with, predictable in October or earlier last year, is simply fanciful. No one actually knows
what the depth of the international recession is, except, perhaps, for Mr Cunliffe, who is now sharing his knowledge with us. I think it is wonderful to have his omniscient presence in our midst, and I am sure that when he does speak he will share some more wisdom with us about the state of the international economy, when New Zealand will recover, and all of the things that we need to be doing by way of economic policy.
In the meantime, let me come back to a bill that has to be passed now to put on hold those tax cuts for the future, to make clear to New Zealanders where they stand, and also to give some certainty and direction, which has already been positively welcomed by the rating agencies since this Budget was brought down.
Part 2 has effect more urgently. It closes off the KiwiSaver mortgage diversion option. The member who spoke at the end of the first reading debate, Nathan Guy, said it was a United Future initiative, and he was absolutely right. It was put forward by a former colleague of mine; it has not worked. I was the Minister who recommended it—
Hon David Cunliffe: There are a lot of those.
Hon PETER DUNNE: Yes, of his particular initiatives. I dare not mention his name, because it causes me grief—the member will know why. But the fact of the matter is that it was my proposal to get rid of it, because it is simply not working. We have more than 1 million people in KiwiSaver, but fewer than 600 have taken up the mortgage diversion arrangement, which is spread over a number of funds, and in a number of cases there probably are fewer than 100 people per fund. It is simply unworkable. We therefore are saying that those people who are currently in the system can stay in it as long as their fund providers wish to retain the option, but for new entrants we are closing it off with effect from 1 June this year. It was potentially a good idea, but it has not worked. I am sure the member opposite who is nodding his head would agree with me that if there are good ideas that do not work, we should get rid of them. This is one of those, and I do not think anyone will greatly mourn its passing.
With those few comments I am very happy to commend the second reading of this bill to the House this evening.
Hon DAVID CUNLIFFE (Labour—New Lynn)
: Before the election, the only thing National was going to cut was taxes. After the election, that is about the only thing it is not going to cut. Today is Budget day. The kimono has been opened, and we find that there is not a lot there. This bill makes a liar of the Prime Minister. The man who signed the personal guarantee to say that there would be tax cuts—
Chris Tremain: I raise a point of order, Mr Speaker.
The ASSISTANT SPEAKER (Eric Roy): I do not think you need to explain what your point of order is. All members are honourable members. I think the way in which the member phrased that was beyond—I will ask him to withdraw the comment.
Hon DAVID CUNLIFFE: Speaking to the point of order—
The ASSISTANT SPEAKER (Eric Roy): No, I have ruled that the member will withdraw the comment. That is all I require.
Hon DAVID CUNLIFFE: I withdraw the comment.
I raise a point of order, Mr Speaker. Respecting your wisdom in this matter, it none the less leaves me on the horns of a rather uncomfortable dilemma. As you will see from the speech that follows, I can find no other explanation for the course of events than that the leader of the National Party knew before the 2008 general election—or should have known—that these tax cuts could never be affordable.
The ASSISTANT SPEAKER (Eric Roy): I have the gist of what the member is saying, and that argument has been tried many times in the House. There is no way that the member can imply that about a member or use the word that he did. All members are honourable members. The member has to exercise his brain to express himself in another way. The member will continue.
Hon DAVID CUNLIFFE: The key point here is that the Hon John Key knew before the election that these tax cuts could never be afforded. There are only two logical possibilities: either he knew, or he should have known.
As a matter of evidence, let us look at the historical record. The International Monetary Fund issued a warning in October 2008 in its
World Economic Outlook. It said: “The financial turmoil that began in the summer of 2007 has mutated into a full-blown crisis,”.
Craig Foss: What did you do at that time, when you knew that?
Hon DAVID CUNLIFFE: I am coming to that, if the member will just wait patiently. On 14 September 2008 Mr Key’s old firm, Merrill Lynch, was gobbled up by the Bank of America. On the next day, Lehman Brothers went bankrupt—nearly 8 weeks before the election. Mr Key likes to remind us that he was a member of the foreign exchange committee of the Federal Reserve Board of New York—a very august body. He would have been patently unqualified for that role if he had been unable to take the hint that two major investment banks on Wall Street had bitten the dust and there was a tad of trouble. One cannot have it both ways. One cannot be qualified to serve on the Federal Reserve Board of New York, yet miss the hint—Lehman Brothers hitting the wall is a bit of a giveaway, right? If he knew, yet promised to continue with tax cuts, the Assistant Speaker has better wisdom than me of how one might describe that. The word I wanted to use, I cannot use, but I cannot think of another. There was a deception, an untruth, a very long stretch of the imagination. But either way, the public of New Zealand were conned. They were conned that they could have everything that they had liked under Labour—they could have Working for Families, smaller class sizes, and cheaper doctors’ visits—and they could have 3 years of tax cuts as well.
You know, the tax cuts were always economic lunacy. The first one took three-quarters of a billion dollars from people below the average wage who really needed the help and would have spent it straight away, and, by the Minister’s own admission, transferred it to upper income earners. But worse than that, it gave 30 percent of it—
Hon Simon Power: Just keep walking.
Hon DAVID CUNLIFFE: Mr Power may laugh, but Mr Power unfortunately will not be in the top group that got one-third of the money. Three percent of income earners got 30 percent of those tax cuts—3 percent of income earners. I do not know who would call that fair, but certainly not the taxi drivers I have been using. They are gobsmacked by that; they talk to everybody. So let us assume that ordinary New Zealanders think that was a rort. It was a political payback to the people who bankrolled the National Party to deliver for them—and it did. That was the 1 April tax cut. We are all good-humoured in this House, but sometimes one just has to call it like one sees it. It seemed to me to be political payback.
The key point—and it is a Key point—is that the Prime Minister, then the Leader of the Opposition, must have known before the election that this tax cut could not be afforded. Before Christmas, this House was thrown into urgency to pass the tax bills in the dead of the weekend to get them through. And here we are, in the dead of the night, un-passing them, because the penny has finally dropped in the National Party that they were ridiculous. I ask colleagues to contrast that with the responsible actions of the New Zealand Labour Party, which canned a whole lot of election campaign promises—I did in health, and there were whole portfolio manifestos we did not even release—because we did not want to promise more than we could afford. We did not want to promise more than we could afford, because the public of New Zealand have had a gutsful of being conned.
Today is Budget day. Today is the day National cannot hide any more. It has to open the books, and the public has to see. It is no surprise, therefore, that on Budget day the
charade was finally dropped. The argument in this House is not whether the tax cuts were a good idea—finally National has come round to our way of thinking, which is that they were always bollocks. Now that National is voting them down, we are happy to support that. There is no confusion in the Labour position, because it has not changed. The senior whip on the Government side should be reminded that it is his party that has done the U-turn. It passed the tax cuts, and it is repealing them, and good on them for having finally mustered the courage and the wisdom to do so.
Nathan Guy: You’re voting for it.
Hon DAVID CUNLIFFE: We are for it—that is what I am saying. You did not used to be; you have changed your mind—not you, Mr Assistant Speaker Roy. He changed his mind. You, Mr Assistant Speaker, are known for your consistency and wisdom.
Hon Members: Oh!
Hon DAVID CUNLIFFE: Look, a man has to take his chances when he can get them. He is such a good Assistant Speaker, is he not? Labour today stands alongside the hundreds, probably thousands, of decent, hard-working New Zealanders who will be joining the unemployment lines. We are disappointed and we are angry that certain decisions have been taken that mean that some of them actually need not be there.
On Budget day, we are faced with a Budget that is remarkable for what it does not do. As, I think, Vernon Small from the
Dominion Post said, it does nothing for the short term. There is no new stimulus. There is some reprioritisation of old money and dressing up of old programmes. There is no new stimulus, and these tax cuts remove part of the stimulus that was there—it was not a very good stimulus. Those unemployment lines will grow. And it does nothing for the long term. There is no plan. There is no growth strategy. Heck, there is not even an Economic Development vote of much meaning left. There is no research and development to give tax cuts for. There is no Foundation for Research, Science and Technology to speak of; there is no Fast Forward. There is no Skills Strategy. There is a doughnut with a gaping great hole in the middle that is New Zealanders’ future.
The punchline of this Budget has been the decade of deficits in superannuation. It is one thing to suspend contributions for a year; it is another thing to suspend them for 10 years. Our children will have to pay $30 billion out of their taxes because this Government did not have the fortitude to buy assets when assets where cheap, and maintain the consistency of that purchasing fund. Not only that but if that Government really had to take a holiday, what would have been wrong with doing that for a year or two, and then telling the people of New Zealand how it was going to catch up again? But, no, those members could not do that; they had to have a 10-year holiday. It is like people not going to the gym for a decade and then thinking they will still be fit.
Maybe Mr Key does not mind his second great con—the con that he would personally guarantee to maintain superannuation—because he knows that he will not be the Prime Minister when those chickens come home to roost. So his personal guarantee is as useful on superannuation as it was on tax cuts: “I personally guarantee 3 years of tax cuts—this year, next year, the year after—oh, sorry, is that what Lehman Brothers going bankrupt really means? You mean there is no growth? There is a deficit? We can’t afford them, after all? Sorry we put you into urgency before Christmas. Sorry I told you in the House that these could be afforded. I guess I was wrong. Gee, whizz, how silly of me; I’ve been saying that for 6 months. I know I was a merchant banker, I know I should have known, I guess I just got it wrong.” Nobody believes that. The taxi driver does not believe it, ordinary New Zealanders do not believe it, and they will have their returns in 2011 when we win the next general election and restore integrity in New Zealand politics.
Hon SIMON POWER (Minister of Justice)
: That was David Cunliffe, the man who cannot decide whether he is an attack dog, a statesman, a policy wonk, a poet, an orator, or a leader-in-waiting. You see, the strange thing about his contribution is that while sitting through the Budget and watching closely the reactions of members on the front bench of Labour I picked up three interesting facts: the majority of those members had their heads down and did not look up during the entire speech given by the Hon Phil Goff; Trevor Mallard, at the conclusion of the speech, clapped between six and nine times and sat down before anybody else—a long period before anybody else—and the only other person who strayed from either of those models was the Hon David Cunliffe. There was a grin on his face as broad as a picket fence. He was pleased with how badly the Hon Phil Goff did, because his numbers person, Moana Mackey, was back there with the clipboard, doing the numbers, working out that she alone had the key to his popularity, and tipping him on the numbers required to shift him across one seat.
We could see in David Cunliffe’s contribution to this second reading debate how he was edging towards Phil Goff’s seat as he was speaking. He was positioning himself just at the point where he could comfortably drop into the seat, knowing that Ms Mackey was quietly ticking away there in the background. She has been beavering away with Ruth Dyson and Darren Hughes to get the numbers together for David Cunliffe in order to make sure he has sufficient numbers to get him over the line.
I came down to the Chamber for the end of the first reading, thinking to myself that this second reading debate could be interesting. I came down to listen carefully to some of the contributions being made, and my colleague from the Manawatū Iain Lees-Galloway gave a spirited contribution. I sat and waited, the vote was taken, but the only sound I heard was that of a tumbleweed. There was no vote. After all the protestations from the other side, and all the clicking of pens from Moana Mackey as she did the numbers for the Hon David Cunliffe, what did we get? There was not one vote opposed.
The interesting thing about all of this is that when I came to Parliament in 1999—and this is my tenth Budget—I learnt that—
Hon David Cunliffe: What is the point of this?
Hon SIMON POWER: This is the point: the first lesson of Opposition is to oppose. We have come down to the Chamber for the new Government’s first Budget and for the first bill under urgency after the first Budget to find that Opposition members are for it.
What an unusual arrangement we have here. I would not have picked Moana Mackey as David Cunliffe’s numbers person, and I would not have picked that for the first bill under urgency after the Budget, when we are down here ready for a spirited fight, we would have a big pause, the sound of tumbleweed, and a vote that Labour members are for the bill. That is unbelievable.
We heard today that fiscal conditions have changed dramatically in recent months. The Hon Bill English gave a speech this country can be proud of. He delivered a Budget this country can be proud of. What is more, the first bill to come to this House after the Budget has the unanimous support of every party here. That has not happened before in my 10 years here.
I also say that we learnt very soon after the delivery of the Budget that Standard and Poor’s has removed the negative outlook from New Zealand’s AA+ foreign currency rating. Moody’s Investors Service says that New Zealand’s triple A rating, which is on a stable outlook, is not immediately affected. Not only did we maintain entitlements, and not only have we set the course for a difficult but achievable task ahead, but the ratings agencies have backed the Budget today. For the first bill in urgency after the Budget has been delivered, they are not the only ones backing this Budget; that party across the Chamber is voting for the first bill following the Budget.
Let us just cut to the chase here: nobody in this House believes that this bill is anything but sensible, necessary legislation to keep this country on course on what we know is a crucial path to ensuring productivity and improvement to this economy and our way of life. That member opposite, David Cunliffe, talked about the children of future generations. If it were not for this legislation and this Budget, their plight would be far more difficult.
Today we are seeing a Government prepared to make the hard decisions. They are not easy decisions to make, but they have to be made to ensure that this economy has the capacity to drive growth in the way that is necessary—that is, a credible and balanced approach to dealing with a major recession. Those Labour members opposite left few choices—aside from those that were unfunded—for the new Government to come in and deal with. So I say to Labour members that if they are serious about contributing to this debate on this bill and on this Budget, then they should come up with some alternatives and get on with it.
MOANA MACKEY (Labour)
: It is always nice to see Mr Power in the House, dealing out his own special brand of fantasy in the way that only he can do. He said that it was amazing that Labour was supporting this first piece of Budget legislation, but that is because the legislation is repealing National policy. The first piece of Budget legislation we have in this House is repealing National’s election promises. That is why Labour is supporting this bill, so for National members to claim that they find it surprising that we would do that, just shows that they have no idea what it means to be consistent. Labour has been consistent on this issue. We said during the election campaign that National’s tax promises were unaffordable. National members told us that we were scaremongering. When we went through urgency just before Christmas—and the legislation was rushed through with no select committee process—we said that the tax cuts could not be afforded, and National said that that was scaremongering. Well, less than half a year later, members should look at where we are. We have a bill repealing the very tax cuts that we said were unaffordable—the very tax cuts that those members said could be afforded—yet they are calling us inconsistent for supporting this legislation.
I have one prediction: even though Labour is supporting this legislation, so that it has widespread support across the House, Gerry Brownlee will still stuff up the management of the House. Even though Labour is supporting the bill, Gerry Brownlee will still struggle to get it through under urgency.
Mr Simon Power went on to talk about Standard and Poor’s and the fantastic announcement that we had today. Well, of course Standard and Poor’s would say that, because that agency effectively wrote this Budget. Standard and Poor’s got to see the Budget before the National caucus saw it. It got to see it before the people of New Zealand did. National stands up and acts surprised that Standard and Poor’s liked it, but when they were the only people who were allowed to see it before it was delivered, that should hardly be surprising. Mr Key said it was great that the Budget got such a high rating from Standard and Poor’s, and that is not a bad thing, of course. But so did Enron, as Mr Goff pointed out in his speech. So what we have from Standard and Poor’s is a triple A rating for Enron, for subprime mortgages, and for Budget 2009. I can see why Mr Power would be very, very excited about that.
Here we are; it is déjà vu in this House. I remember the 1990 election. I was at high school. I went out delivering pamphlets locally. I remember the election promises made by the National Party at that time, and all the things it was going to do. Basically, it adopted Labour Party policy, and then added a whole lot of stuff on, just like it did in 2008. Then National got into power and it claimed that it never saw the recession that
everyone else saw coming. National members said they never knew it was going to be as bad as this, and they used that as an excuse to back down on their election promises.
When it comes to Tory Governments, the more things change, the more they stay the same. Here we are again. Mr Key was either the only person in the entire world who did not see the global recession, the financial crisis, that was coming, which would be unusual given his background, or—and this is the more likely scenario—he did see it coming, and knew how bad it was going to be, but he made those election promises anyway because he wanted to buy the election, just like National did in 1990. It has done so again in 2008. When we in Labour stood up on the campaign trail to point this out and said we would have to shelve a whole lot of election promises that we were going to make, because we knew that we were not likely to be able to afford them—
Craig Foss: You didn’t say that!
MOANA MACKEY: I say to Mr Foss that we did. We also said that we would do a mini-Budget before Christmas. Because things were changing so quickly, we needed to introduce a stimulus package. National told us that we were wrong. National chose to coast and wait until May this year, as was its prerogative. It did not have to do a Budget before Christmas. Now National expects the people of New Zealand to seriously believe that it did not know that its tax cuts were unaffordable when it promised them. Labour knew that this legislation was coming. We knew that it was coming when we were forced under urgency before Christmas to pass those tax cuts—a full third of which, by the way, went to the top 3 percent of income earners.
Hon Ruth Dyson: What?
MOANA MACKEY: A full third went to the top 3 percent of income earners. How is that a stimulus for our economy? How is that a stimulus? Not only does it not help the low and middle income New Zealanders who need that extra money right now, but those earners were the people who were going to go out and spend it. They were the people who were going to spend that money and stimulate our economy. But no, National members had some favours to repay from the election campaign, so they rejigged the tax cuts that Labour gave to low and middle income New Zealanders and gave them to the top 3 percent of income earners. Then for the rest of New Zealanders, we are here now debating this legislation, just like Labour said during the election campaign we would be doing, and just as Labour said when National was passing its tax cuts under urgency before Christmas. National called it scaremongering, but the truth has been shown here today. This legislation repeals National’s tax cuts.
What did John Key say about this when he was desperate to get elected? He said that his very first commitment—his personal guarantee—was to strengthen the economy, increase after-tax incomes, and ensure that Kiwis could get ahead under their own steam by reducing personal taxes on 1 April 2009, 1 April 2010, and 1 April 2011. He then went on to say that, unlike Labour, National would not cancel its tax cuts. So what is this from the party that stood up on the election campaign trail and said that it would not cancel tax cuts, unlike Labour? Let us remember that Labour gave significant tax cuts during our term in Government. We are the only party that ever gives business tax cuts, ironically. We have given tax cuts for research and development, and we have given tax rebates for families through the Working for Families package. What has National done, when the rubber hits the road, what is it doing in its first Budget? It is cutting the tax cuts. Labour is supporting this legislation, because we are consistent. We said that it should not be done, when the legislation was passed before Christmas. We opposed the legislation for the tax cuts that we are now repealing. So not even 6 months later, after rushing through tax cuts under urgency, here we are in urgency again, cancelling those tax cuts. How efficient!
Given John Key’s position on the election trail, perhaps instead of being called the Prime Minister he could now be called the “Prime Misleader”. He knew very well that we would be here today. He is a nice guy, he smiles a lot, and yesterday he quoted “On the Good Ship Lollipop”. As Bill English said, he bounces from cloud to cloud. I think he thought his personality would pull him through this. The fact is that this is a rort; this is an absolute rort. The people of New Zealand were absolutely conned at the last election, again—just like they were in 1990. It is really tragic because we should be here tonight discussing legislation that creates jobs. We should be here—
Amy Adams: We are!
MOANA MACKEY: Cancelling tax cuts that were lied about during the election campaign does not create jobs. I am sorry; it does not. We should be here passing a package that creates jobs and supports jobs. We should be here passing legislation that will increase wages, not decrease wages. We should be here reinstating the research and development tax credits that National foolishly cancelled last year. These are tax credits that help our most innovative companies, tax credits that will help our exporters, and tax credits that everyone in New Zealand agreed with, apart from the National Party.
David Bennett: How can you afford tax cuts? Tell us how you’re going to pay for them!
MOANA MACKEY: Those are the policies that will grow this economy, I say to Mr Bennett. Mr Bennett went out on the campaign trail and said that his party’s policy on the Fast Forward Fund Ltd was stupid, and that the Fast Forward Fund Ltd should stay, and he was right in that respect. The Fast Forward Fund Ltd has been replaced by a sickly and insipid replacement. This is from the party that said that the replacement would be as good as, or better than, Labour’s. That was another con; another broken promise. This is a shameful, shameful night for the National Party, and a very sad night for New Zealand.
KEVIN HAGUE (Green)
: My colleague Jeanette Fitzsimons spoke in the first reading debate of the Taxation (Budget Tax Measures) Bill. She indicated that the Green Party intended to support it, but that we had not yet made up our minds about Part 2 of the bill. That is still the case: I rise to support the bill, but to express reservations on Part 2.
It is a pleasure to be able to support this bill in an environment where apparently everyone in the House, including our colleagues from the ACT Party, are now opposed to these future tax cuts and will be voting in favour of the bill. I intend to speak not to beat up the Government for changing its mind, but to praise the Government for changing its mind. It takes a certain amount of maturity and bravery to indicate that one was wrong in the first place, so I think the Government deserves the House’s praise for saying that it was wrong to introduce the legislation to provide for the tax cuts, the Taxation (Urgent Measures and Annual Rates) Bill, and that is why it is repealing them today.
This legislation is not the only area in which the Government has shown bravery in its performance today. In the House, prior to Christmas, one of the lines of questioning that the Green Party had for the Minister of Finance was in relation to the number of green-collar jobs that the rolling maul of measures to deal with the recession would create. I think it is fair to say that the response we had indicated a fair amount of ridicule towards the idea of green-collar jobs. There was a sense that they did not really matter, because a job was a job, and a green-collar job was no better than any other kind of job. It was with a sense of pleasure that I heard the Minister of Finance in his Budget speech today refer to green jobs being created by one of the Budget measures.
The third area the Government has today fessed up to having been wrong on prior to Christmas is the Green Homes Fund. The Green Homes Fund was a $1 billion fund over
15 years that had been created through the Green Party liaising with the then Labour Government. One of the first actions of this National Government was to scrap the Green Homes Fund. We said at the time that that was the wrong thing to do, and it is with an enormous sense of pride that I am able to stand here today and acknowledge the particular contribution of the outgoing co-leader of the Green Party, Jeanette Fitzsimons, who has championed the issue of home insulation and energy efficiency over more than a decade in this House. She has the single greatest responsibility for having wrought the multilateral consensus that home insulation and energy efficiency are sensible and prudent measures for any New Zealand Government to take. I salute Jeanette Fitzsimons and I also thank the Government. I thank the Government for admitting that it was wrong to scrap the measure before Christmas, and I thank the Government for having the courage to come back to the measure and to reinstate home insulation.
That particular new policy has been brought about through the Green Party’s memorandum of understanding with National. I note that our two parties will be working together on further areas of energy efficiency in the future. I look forward to further gains we can make, because all of this learning the Government has done over the past several months, moving on from decisions made before Christmas that turned out to be wrong, has the potential to be transferred to other areas.
I have just returned from the Green New Deal listening tour, on which I spoke at five public meetings over the last week about the Green Party’s Green Stimulus Package. Home insulation is certainly one of the measures we advocated. We were saying it is possible to address simultaneously the economic crisis facing this country and the environmental crisis that also besets us. If it is possible to address both crises simultaneously, then why on earth would we not do so? We advocated measures not only in home insulation and energy efficiency but also in transport efficiency. It is possible to create 40 percent more jobs by investing in public transport, walking and cycling initiatives, and traffic demand management than by investing in motorways, which is this Government’s choice. We advocated measures to protect waterways in rural areas and thereby protect New Zealand’s “clean, green”, “100% Pure New Zealand” brand, which is at severe risk, but has huge economic benefit to this country. We advocated building 6,000 State houses to a high energy-efficiency standard. We also advocated a variety of community-based employment opportunities, including more housing and waste minimisation schemes.
All those schemes would have created assets and jobs for New Zealand. It is $3.3 billion worth of spending, and at least 43,000 green-collar jobs. The Green Party’s fervent hope is that it will be possible for us to take the learning the Government has done over these three measures—repealing the tax measures, understanding the importance of green-collar jobs, and the Government’s new commitment to home insulation and energy efficiency—and transfer it to some of those other areas. This is the kind of green new deal that New Zealand so desperately needs. It is a green new deal that solves our economic problems and addresses our environmental problems at the same time. The Green New Deal should include taking some effective action on climate change. I look forward to the day when it is possible for all members of this House to support effective measures on climate change, just as we are all supporting the repeal of these taxation measures today.
I also note that one of the other causes we have been championing on the Green New Deal listening tour is innovation. The answer to New Zealand’s need to increase productivity is not everyone working harder; it is actually using innovation and thinking about how to do things in different ways—changing the goalposts and changing the ways we reach them. This Government can also do some learning around innovation.
Research and development tax credits have been scrapped. The Fast Forward fund has been scrapped and replaced by an anaemic copy. I spent a day this week with the Sustainable Business Network. It is a fantastic organisation that actually has the answers to improving New Zealand’s productivity, and has just had its funding slashed by this Government. So there is an awful lot of potential for transfer of learning.
I will conclude with a couple of comments about urgency. When the Government took urgency for its 2 weeks of shock and awe before Christmas, the Green Party objected to urgency at that time. We said it was not necessary and would lead to bad decision-making. We were right on both counts. As Jeanette Fitzsimons said in her first reading speech today, we are also right in saying that urgency is not required at this time. Urgency has been taken today because the Government is embarrassed about changing its mind. We say that the Government does not need to be embarrassed, because it is doing the right thing and it should be proud of the fact that it is prepared to learn from its mistakes. In respect of Part 2 of the bill we see the exact reason why urgency is a bad idea. We have yet to hear an argument in favour of Part 2 of the bill. If the bill had been referred to a select committee, then maybe we would have heard an argument in favour of Part 2 and we would be able to vote for it. We will support the bill but oppose Part 2.
Hon Sir ROGER DOUGLAS (ACT)
: I was interested in Kevin Hague’s comments about green initiatives. The Taxation (Budget Tax Measures) Bill includes a major green initiative, which the member referred to—home insulation. But the thing that distinguishes my approach from the approach of the member, who believes that only the Government can do these things, is that I believe that we need to think about the issue in other ways. Can we get a market mechanism to do this so that the Government does not have to spend this sort of money? The decision to spend the $323 billion is based on research that is quite suspect. I will not go into that, but I will make one suggestion of what we might have done to achieve the same thing. For example, we could have made it compulsory to state on a land information memorandum whether a home was insulated. Currently, a land information memorandum report does not have to state whether a house bears insulation. If it is stated on the report, then people who are about to buy a house would haggle on the price and there would be a done deal. Similarly, if a rental property is advertised as being uninsulated and the rent drops, landlords then receive an incentive to insulate it. Sometimes one can do these things in ways that do not involve a huge Government expenditure. But that is not really what I stood up to talk about.
Let us understand what this bill does, why the Government believes that it is necessary, and what are the consequences of the bill, along with other measures that are being taken by both Labour and National. This bill defers—if we believe that—or gets rid of the tax cuts for 2010 and 2011. Those tax cuts would have reduced Government revenue by somewhere between $900 million and $1,000 million in a full year. National had a choice. Let us understand that. National had a choice of whether to cut expenditure by $1,000 million, to not introduce new initiatives of $1,000 million and have the tax cuts, or to refuse to cut expenditure and refuse to defer new expenditure initiatives. National decided to get rid of the tax reductions, breaking—as Labour members have pointed out—its election promise. I think that choice has the support of virtually everyone in this House. If the expenditure reduction is not made, then the tax reduction cannot happen.
My personal preference would have been to reduce expenditure and, as a result of that, have the tax cuts. I say this because we are in a recession and this country will have to make an adjustment. This House is deciding who will feel the pain. People will feel the pain of adjustment, and this House is deciding that the people in the private sector
will feel the pain. The farmers and their workers that National represents will feel the pain. The unionists on the Labour side and their members in the private sector will lose their jobs and feel the pain. There is a choice, and there is no free lunch. Let us understand that. For example, an across-the-board 2 percent cut in Government expenditure—and it is a blunt instrument—would have enabled us to have these tax cuts.
Let us look at what has happened. If we go to the core Crown expense tables on page 176 of the Budget Economic and Fiscal Update, we see that from 2008 to 2010 core Crown expenses as a percentage of GDP have increased by 5.5 percent. We need to understand what that means. That 5.5 percent increase in core Crown expenditure is equivalent to $10 billion. So in this bill and in other ways we are taking $10 billion out of the private sector and giving it to the public sector. That period includes 1 year of Labour and 1 year of National Government. We are making a deliberate decision in this House that all the costs of adjustment, all the pain, and all the unemployment will be out there in the private sector. When there are jobs lost in members’ constituencies, members should remember that they decided that that is what they wanted and what they voted for.
We really are saying that the public sector is immune to a downturn; we will just lift the percentage of expenditure to GDP to make it immune. Worse than that, we are saying that the Government will expand it during a downturn. That means that ordinary people in the private sector will have to make the adjustment. They will have to absorb the shock. The collective decrease in GDP over 2 years will be around 5 percent, but if the public sector does not shrink, then it means the private sector—60 percent of our economy—is forced to bear the full effects of that reduction in GDP. In other words, the private sector has to contract or reduce by $10 billion. That is what we are deciding. There is no free lunch. There is opportunity cost. We can kid ourselves, but that is the reality. We have decided that we will put a lot of people in the private sector out of work. Unless that $10 billion is spent as effectively in the public sector as it would be in the private sector, we will lose by a lot more as well. When the local restaurant closes down, when the local petrol station closes down, or when 100 people are laid off from a plant, remember that it was a result of these sorts of decisions we made in this House. Per week, $200 million will be taken out of spending in the private sector and unemployment is likely to increase as well.
The only way that we can get through this and for this country to prosper is to start to increase productivity. If we as a nation continue to throw money at health as we did under Labour, and see the productivity of doctors continue to decline by 15 percent and that of nurses by 11 percent, we are going nowhere. When we look at the health sector, we see that the only part of that sector where productivity increased was where the work was contracted out—for cleaning staff and orderlies. We had better learn.
Hon Ruth Dyson: Where they pay low wages.
Hon Sir ROGER DOUGLAS: It is not about wages.
CRAIG FOSS (National—Tukituki)
: It is a shame that the previous Minister of Finance, the Hon Dr Michael Cullen, was not here during the Budget speech to listen and read—second-hand, of course—the Budget that had to be put in place to repair the damage from the last 9 years, and in particular from the last 3 years of the previous Government. I will point to some of the numbers in a moment, but I am sure he has picked it up on the radio wherever he might be. The last 3 years were something of a travesty for the New Zealand economy, and we are paying the price right now. I commend the new Minister of Finance for making the hard call.
I again note that so far under this National Government over $1 billion has been put back into the pockets of over 1.5 million New Zealanders. They are enjoying over $1
billion due to tax cuts that were marked in October last year and came into effect on 1 April this year. That is in addition to the $500 million in the pockets of small businesses around the country—the engine room of the economy—given by the Taxation (Business Tax Measures) Bill, which was passed in February this year.
Part 1 of the Taxation (Budget Tax Measures) Bill is about delaying changes in tax cuts that were previously flagged. There are no secrets about that; we have been quite upfront. The key is why it is necessary that this happen. Part of the consideration, which I alluded to, is the last 3 years of the last Labour Government. One reason why the accounts of the New Zealand Government that we inherited are in such an appalling state—contrary to the opinion of the Hon Phil Goff, who thought we inherited a great set of accounts; perhaps he was looking at them upside down through the wrong end of a telescope or something—is that in the last 3 years there was an ongoing, compounding, 50 percent structural increase in spending. OK, some might like that—the Keynesians over there might like that—but the problem with it was there was only a 25-odd percent average structural increase in revenue. Hopefully someone sees the problem there. When expenses go up 50 percent and revenue goes up only 25 percent—half of the increase in expenses—there is a major problem. It is a compounding problem.
The impact of the shambles of economic management we had in the last 3 years is nowhere better demonstrated than on page 1 of the Minister’s Executive Summary at the front of the Budget. The graph shows “Gross debt with and without Budget 2009 policy changes”. Quite simply, that could also read “Gross debt track with a National Government or without a National Government”. This graph shows us that without any changes, gross debt was going to peak at something like 70 percent of GDP. However, with the changes the Minister of Finance has made, the courage and leadership he has shown, and the Budget that we have before us tonight, the gross debt will peak at just over 40 percent, then track down to an average of about 37 or 36.5 percent. The reason that graph is so important is that it represents New Zealand’s future. If the gap were not addressed, and the blue line—the line showing gross debt without the Budget 2009 policy changes—kept going up, that would mean our youngest leaving for brighter shores and a further slide down the OECD rankings.
I heard previous speakers from the Opposition talking about what a wonderful thing it was that they had delivered on their commitments, or something like that. I seem to recall that one of Labour’s commitments was to have New Zealand in the top half of the OECD within 10 years. I recall that that promise was made in 2001 at the Knowledge Wave conference; I have not heard about that promise in a while. We are almost in 2011, and I ask members whether we heard anything from Mr Goff or Mr Cunliffe about getting New Zealand up to the top half of the OECD. In fact, I think we were No. 22 and sliding when Labour left office.
Why is this legislation necessary? International conditions that have been unheard of and unseen since the Depression years of the 1930s are forcing some very hard decisions on this Government, but it is prepared to make them. This Government is prepared to do what is right for New Zealand, for New Zealand’s future, for our children, and for our great country.
I note that Opposition speakers—and I will come back to this point in a minute—seemed to imply that they knew everything was coming, and they knew that global economic conditions were going to be where they are today. Labour knew that the subprime mortgage situation was going to go all the way and wash on to these shores. They knew all these things! Actually, as I noted in a first reading speech, Dr Cullen, the previous finance Minister, is on record as denying that. It is very interesting. I do not quite know the angle that the Opposition is trying to go for. It keeps on alluding to an
IMF report from midway through last year. As I said, I recall that report, and it begs the question: given that Labour knew in July last year, when it was in Government, the conditions that were going to be thrust upon us now, what did it do about it? In July last year, according to Mr Cosgrove and Dr Cullen, the Labour Government knew. They are accusing Mr Key of not doing enough about it in Opposition, but Labour was in Government in July last year—with all the knowledge of being in Government, with all the forecasts, and with the information—and it did nothing. The accusation that members opposite have been making is somewhat misleading, and very, very generous with the truth. It is perhaps revisionist of their final months in office.
Mr Cunliffe keeps talking about the Superannuation Fund, and what a great time it is to buy assets. If he knows that, and if he knew the market was going down, why did Mr Cunliffe not sell assets when he was in Government, when the assets were priced higher? Why did the previous Government buy so many assets when they were so expensive? Why did it not sell them? Mr Cunliffe knew that we were going have these incredible conditions that have not been seen since the 1930s—according to his speech, it was obvious! Well, the central bankers did not know. Heads wiser than many in this room did not know. Treasuries around the world did not know. President Obama did not know. The Bank of England did not know. The General Motors Corporation did not know. Prime Minister Brown in the UK did not know. But the members opposite—Mr Cosgrove, Mr Cunliffe, and the Hon Phil Goff—did. They somehow knew!
Since then, about a trillion dollars worth of assets across the globe have been wiped out. The Labour members say they knew, but they cannot have it both ways. If they knew about the recession back then, what did they do about it? They did nothing. They alluded to a mini-Budget, but they were not going to tell us about it. I recall that when Dr Cullen was asked about it, he was a bit smug. It was more of a one-off comment of his, I think. Labour did nothing. I ask Labour to show us the information and to show us what it was going to do, because if those members say that they were not going to tell us, then they went to the electorate under some kind of untruth. The Labour Government was going to have a mini-Budget because it knew, with its lovely IMF report, what the economic conditions were and the fact that things were going to deteriorate somewhat badly. Yet back then Labour did not do anything, even though it had a mini-Budget that was going to solve it all, but which it is not going to tell us anything about.
I think we need to hear a bit more from the members opposite. I note the sagacity of these people; I keep asking them what the Lotto numbers will be next week, given that they know everything else. I will give members a quote, because we will be hearing about the Superannuation Fund: superannuation entitlements are exactly the same now—today and tomorrow—as they were yesterday. They are exactly the same. The entitlements are “66 at 65”. The entitlements were “65 at 65”, but with the agreement of the Rt Hon Winston Peters they went up to 66 percent. National has taken those rates up. I recall an offhand comment that, I believe, Dr Cullen made about the Superannuation Fund. His words were along the lines of: “Well, we’re going to have these surpluses. I’ve got to stash away $2 billion a year, because I can’t let those nutters get hold of them.” I bet he was talking about his colleagues. To be fair, that was a somewhat off-the-cuff comment from Dr Cullen.
I will round up by talking about Part 2 of the bill, which makes changes to the mortgage diversion facility. I acknowledge the Hon Mr Dunne for his confession, if you like, that it was a policy brought in by United Future. I recall one of his party’s members speaking at the time about the nuttiness of the Government trying to have the KiwiSaver savings scheme at the same time as it was trying to encourage debt. Lo and behold, the policy has not worked. Only about 600 people out of over a million have
taken it up. I look forward to working with this bill as it goes through the House. Thank you, Mr Deputy Speaker.
BRENDON BURNS (Labour—Christchurch Central)
: I am very pleased to follow the thrusting and hands-on chair of the Finance and Expenditure Committee, Craig Foss, who is marked for better things in this Government. Yet—
Chris Hipkins: No, he’s not.
BRENDON BURNS: —supposedly—he has the temerity to say to the House that the previous Labour Government in its Budget of last year should have known what was coming. He is part of a Government that introduced the tax measures that this Taxation (Budget Tax Measures) Bill is repealing tonight, and he stood up to defend that.
There were to be three rounds of tax cuts and none of them were affordable or fair. Here we are on a Budget night under urgency. It is not unusual to have urgency on Budget night, but normally it has something to do with a compelling initiative or change that introduces important and relevant measures. That is not the case tonight from this Government and this Minister of Finance. After the “doughnut” Budget—all hole and missed opportunities with just a bit of recycled dough—the Government introduces this bill. It is not a bill that truly requires urgency. Its main provision does not take effect for another 10 months, and the rest 1 year after that. I say to members that, yes, this Labour Opposition supports the bill. We acknowledge that we are in a recession. We knew that last September-October when we as a party revised our pledges to the electorate in the face of what we knew was a gathering storm. But the National Party, the then Leader of the Opposition, and the then Opposition spokesperson on finance did not. They maintained the facade, as the Crosby/Textor manual requires, and told people that they could have their cake and eat it too.
That facade told people that they could have most of what the Labour Government had given to them, including Working for Families, secure superannuation—although we know that that is now under some question—interest-free student loans, and the whole package, and that they could also have three rounds of tax cuts as well. That facade was maintained throughout September, throughout October, throughout the election campaign, and throughout the introduction in this House of those tax cuts in legislation, which was debated under urgency last December. We knew it was dubious, we knew the fundamentals were simply not there to support it, and now that is being acknowledged with this bill tonight.
Those promises were made, so the Government had to construct an escape route. It had to soften up the voters and tell them that the economic conditions, known to most people by the end of last year, were such that the second and third round of tax cuts could not now be afforded. Yet the Government still proceeded with round one of the tax cuts, and it introduced those tax cuts in a way that gave a third of the money to just 3 percent of taxpayers. Those tax cuts ignored people who were on below the minimum wage. The Government refused to acknowledge that the first fundamental imperative of a recession is the need to put the money where it is most needed, and to put it in the direction of people on the average wage or below who will spend every dollar they get—people who will not save it, or use it to go on overseas holidays, or to pay debt. That is why Labour accepts the need for this bill and why we support it.
We knew that those tax cuts were a false premise and a false promise. We knew that last September, last October, and last December. The Minister of Finance knew that in December with Treasury’s financial update. He knew it in February when he spoke to the departmental chief executives and said there would be no new money. This bill now before the House is no surprise to anyone. It is part of a “cut and hope” Budget, a Budget that took a line from Dickens’
A Tale of Two Cities. It was described as a “worst of times” Budget. It could have also been, to quote Dickens, a “best of times” Budget
that projected to the future and provided some investment for training. It could have done that, but there is barely a word about training and investment in this Budget.
It is also a Budget that had only one reference to the environment. That was in the context of water management and the need to allow for quick and efficient decisions for productive investment. I acknowledge the funding for insulation in the Budget, an issue I have long championed; it has not been an exclusive issue for the Greens. We want to ensure, as we look through the detail of the announcement on insulation, that the legislation will extend to rented properties, where many of the poor housing stock exists. One suspects that the Government’s motivation in respect of this issue is that this initiative will deliver quick results, and that is great for people who live in cold, uninsulated homes. There are 900,000 homes across New Zealand that either do not have proper insulation or lack any insulation at all. But in terms of where the Government is coming from, one suspects that it is part of that equation that asks whether there will be a quick return in the electoral cycle. We have seen that in the area of health. We have seen that with money spent on hospitals rather than on primary or public health initiatives, which do not deliver the quick returns. We have seen it in transport, where roading infrastructure gets funded but not rail or cycling. So much of the Budget is built around getting those sorts of early results.
I will comment briefly on the Budget’s supposed focus on productivity and export-led growth, which is an issue that some members opposite have touched on. I note comments tonight from the Manufacturers and Exporters Association saying that this Budget contains little in terms of changes to support any real economic development. It says that although some attempt at—
Paul Quinn: What did Business New Zealand say?
BRENDON BURNS: I say to Mr Quinn that the Manufacturers and Exporters Association represents the productive sector of this economy. The association said that incentives to invest in research and development of productive assets, such as equipment and machinery, are lacking.
The research and development tax credit was cancelled to fund tax cuts elsewhere. Here we are with a bill in front of us that wipes the second and third tranche of tax cuts, in part funded by the abolition of the 15 percent tax credit for research and development. What a travesty! This bill takes away the incentive for productive New Zealand, for manufacturers, and exporters to do well and grow the economy. To give it away in tax cuts, of which one-third was taken by the top 3 percent of income earners, is trickle-down economics if ever we saw it. It is an absolute travesty. Here we are, axing rounds two and three. It is no real surprise. Most hard-working New Zealanders will be very disappointed by this Budget. They know they have been diddled. They know that this Budget should have focused on jobs, but it did not. It is not a Budget that delivers for them. There is no mention of investment in training or of creating jobs.
This is a Budget that had its focus on having an eye on the 2011 election. Those members opposite should be shamefaced. Two weeks ago we were in this House debating other legislation, and members opposite were crying down at every opportunity the use of urgency to defend the rights of Aucklanders to have a say in the future of their city. Members opposite cried down that use of urgency, but at least it was appropriate. It had a strong connection to a relevant issue. Here we are tonight under urgency debating a bill that takes effect in 10 months’ time and then 1 year on from that. It is not a matter that truly deserves urgency. We should be debating real initiatives to help New Zealanders to create jobs and to take the nation forward, and not simply be debating a tax measure that was a failure in its inception—which should have been known, and was known certainly by members opposite. It was pledged to this nation and now the National Government is backtracking, using urgency to do so. Shame on it!
DAVID BENNETT (National—Hamilton East)
: Today is a fine day for the leader of the National Government, John Key; it is a fine day for the Minister of Finance, Bill English; and it is a fine day for the National Party. It is a fine day for our colleagues in the Māori Party, United Future, the ACT Party, and the Green Party, and it is a fine day for New Zealanders. They have got a Government that has listened to what is needed and has delivered what is required. This Budget will go down in history as one of the most successful Budgets, because if I ask members to show me anyone out there who is against this Budget, there is no one—there is no one. All the emails we have been getting all afternoon have said that this is a great Budget, a perfect Budget, and the best Budget that can be made in these situations. That is what political commentators have been saying, that is what interested parties have been saying, that is what even political parties have been saying, and that is what the people of New Zealand have been saying.
New Zealanders are out there struggling, and they know how difficult the times are. They know what it is to have the possibility of losing their job on Monday. They know what it means to have a high mortgage on which they do not want to see interest rates go up on Monday. They know what it is to struggle out there, so they have wanted a Government that has commitment, that has decency, and that has made the right decisions. And they have got it—they have got it today. They have a Government that is showing leadership, direction, and smart ability to deal with the situation. That is what the National Government has delivered, and that is what we will deliver for many years to come, in this Parliament. The voters out there understand the dilemma of this world, this economy, and this country. They have wanted one thing: they have wanted a steady ship. In these uncertain times they have wanted certainty, and that is what they have got. They have got leadership that has delivered a certain future for New Zealanders.
And what did people have within an hour of that leadership being shown? They had international commentators, people who determine the cost of credit for this country, saying that it was a great Budget and one that would turn us round and put us on the right path. That is the support we had from the international community within an hour of this Budget’s announcement. It took only an hour and we delivered what the international community had not seen.
The other parties that are supporting us today have had big paybacks in the areas where they were looking for them. The Māori Party has done exceptionally well in this Budget, and the Green Party has done well in this Budget. Let us look at the Opposition. Labour members have sat in Government for 9 years, but what did they give the Green Party or the Māori Party? What did they give those small parties in 9 years—9 long, hard years? They gave them what?
Hon Members: Nothing!
DAVID BENNETT: They gave them nothing. The National Government has given them something. It has given them pride, it has given them respect, and it has given them a role in this Parliament. That is what we have given to New Zealanders today. We have given them a role, pride, respect, direction, and leadership. That leadership has been given the big tick, and that tick will go down in history as the first one for many successful Budgets for this country and this Government.
SU’A WILLIAM SIO (Labour—Māngere)
: Thank you for the opportunity to take a call on the Taxation (Budget Tax Measures) Bill. Mr Bennett said that this is a fine day for National and for the Government. I say it should have been a fine day, but it was not. It was a disappointing day. Many of the people who have been listening to this debate are now looking towards a long, dark, and cold winter. This Budget was about broken promises, about no jobs whatsoever, and about continuing unemployment for many hard-working communities throughout New Zealand. This Budget means that a
lot of ordinary families will be reduced to receiving lower incomes for the next 5 years. That is what has been forecast in the Budget by this Government.
Earlier I listened to the Hon Roger Douglas conveying his philosophy to this House. I felt that it was a cruel philosophy. It is a philosophy based on the law of the jungle, whereby the strong survive. That is not the kind of New Zealand that I am prepared to create. At least one thing is that I can appreciate that the Hon Roger Douglas was making things clear for the rest of the nation about that kind of philosophy. It is not the kind of philosophy that I support, but at least he has been up front about it. But I cannot say that about the National Government and Mr Key.
The bill that we are debating repeals the National Government’s tax cut promises. This Government made promises at the beginning of its becoming Government and rammed through legislation to give tax cuts to 3 percent of the population. National members campaigned hard that a National Government would give tax cuts, and now we are having to debate this matter again, under urgency, to repeal it. Yes, the Labour Party is supporting the bill, because tax cuts was the wrong thing to promise in the first place, and it continues to be wrong.
Earlier today we heard from the Prime Minister. He cracked a few jokes at the expense of the Labour Party, and all the National MPs laughed and took great joy and relish in making fun of us. As usual, the public would have been watching that and would have noted that Mr Key uses jokes and laughter to hide the truth. What is the truth? I will quote it. John Key, in his speech at the National Party election campaign launch on 12 October 2008, stated: “In laying out our economic plan, National has been very clear about our priorities. We all know what will be the first to go under Labour, whether they want to admit it or not, and that is the rest of their tax-cut package. Well, unlike Labour, I’m going to be straight-up about my priorities. That’s why I’m sending a card to all of you. It’s called My Key commitments to You and it will be delivered to every household in New Zealand over the next 10 days. In it are 11 commitments that I make to you.”
The very first commitment on “My key commitments to you” reads: “Strengthen the economy, increase after-tax incomes, and ensure Kiwis can get ahead under their own steam by reducing personal taxes on 1 April 2009, 1 April 2010 and 1 April 2011.” Mr Key then stated “unlike Labour, we won’t cancel our tax cuts.” What does this bill do? It proposes that the final two tranches of personal tax cuts in the 2010-11 and 2011-12 income years be repealed. That is what this bill is about. The tax cuts are being repealed.
This is a Budget of broken promises. Mr Key promised the nation that he would give tax cuts, he was laughing about it, making fun of it, and now we are having to repeal them in urgency. Mr Key and the National Party should never have promised to have tax cuts. They knew it was wrong. They were warned. The Labour Party protested about them. The Government should never have implemented the tax cuts, particularly when they favoured higher-income earners. What about the ordinary New Zealanders who not only are working day and night to make their families better off and trying to support their families but also are moving the engine of New Zealand ahead?
When the tax cuts were introduced, they created greed and individualism amongst many people who probably would not have ever considered tax cuts. It was probably the wrong thing to do, because in these times, and in the circumstances that we find ourselves in, we should be working together. We should be helping the weak, those who need help the most. But the Government did not give tax cuts to that group of people.
John Key, in my view, owes New Zealanders across this nation an apology for the Government’s turn-round. We know, because before the election he made those promises, and to now renege on them is wrong. It should never have happened. I call on
Mr Key to be up front and go out to the public and apologise. He should not smile about it. He should be serious. These are serious times, and people want real solutions that will help them to overcome the recession that we are currently in.
It is a shame that the bill makes a liar of the Prime Minister, and voids his personal signed guarantee to the people of New Zealand.
Mr DEPUTY SPEAKER: The member cannot use that term. He should withdraw that comment and carry on.
SU’A WILLIAM SIO: I withdraw that comment. The bill shows up the Prime Minister as somebody who did not tell the truth. He gave a personal guarantee to the people of New Zealand that they would receive personal tax cuts for each of the next 3 years. People would have made plans based on that statement, and now what happens? What will happen to those plans?
The only way that tax cuts were ever going to provide an economic stimulus was if the people receiving the tax cuts spent them, and the only way the tax cuts were ever going to provide any meaningful relief to New Zealanders in an economic downturn was if they were directed at those who need them the most. National’s tax cut promise was completely misguided on both of those counts. Either John Key was oblivious to the catastrophic recession when he promised tax cuts, or he did know and chose to continue anyway.
That is why I say that the Prime Minister, Mr Key, was not telling the truth. There are harsher words that ought to be used, but I know that you, Mr Deputy Speaker, would pull me up again and ask that I withdraw them. The Prime Minister did not tell the truth. He knew that what he was doing would not eventuate. He went ahead anyway, rushed things through this Parliament in the beginning, and now we are having to rush through a bill to repeal the tax cuts. He is using, I believe, the recession to be able to repeal them.
Listen to what Colin Espiner said about the Budget in his blog today. He stated “there’s no real vision or big new ideas.” The Government has already raided KiwiSaver, and now it has stopped contributions to the New Zealand Superannuation Fund. How will the more than $20 million lost to the Superannuation Fund be paid back sometime in the future? Mr Colin Espiner asked what we got for this recklessness. We got nothing; not even new training, not even new investment to ensure that this economy will grow.
A lot of fancy words are being used when I listen to this debate, but they are all hollow words. There has been no substance. I know that families out there who are listening to this debate will see the hollowness of this Government’s words.
AMY ADAMS (National—Selwyn)
: Today I am so proud to be a member of this National Government. I am so proud to be a member of this Government, because today we have seen the Minister of Finance deliver a Budget that is solid, that is sensible, that is prudent, that is responsible, and that is what this country needs right now. This Budget is putting us on the road to recovery. It is the first Budget that will take New Zealand through these hard times, and it will bring us out of them the stronger for it.
This is the worst recession in more than 70 years. Business as usual is not an option. We cannot carry on as though the recession does not exist. Today the Hon Bill English had some very difficult choices to make. He could have followed along in the mode of the previous Labour Government; he could have followed Michael Cullen’s lead and carried on the massive explosion in Crown expenditure and not worried about burdening every single New Zealander with $45,000 worth of debt. The Labour Party would have every man, woman, and child carry $45,000 in debt, not to mention another 1.5 percent being added on to the interest rate on every mortgage of every family in this country. We could have carried on in that way, as Labour would have done, but we
were not prepared to see debt blow out to 70 percent of GDP. That is not acceptable to us. National was not going to sit back and cripple future generations so that it could buy its way back on to the Treasury benches.
Bill English has not only stopped that path to destruction; he has done it while protecting the entitlements of all New Zealanders. He has protected superannuation, he has protected Working for Families, he has protected interest-free student loans, and he has not cut any entitlements. He has protected New Zealanders. But in order to do that, hard decisions had to be made. We cannot achieve the wonderful outcomes that our Minister of Finance has achieved, without making some choices.
Today the Labour Party has demonstrated why it is incapable of managing an economy in times like this. It does not understand the seriousness of the debt situation. Labour members clearly have no grasp of the impact of credit downgrades. They do not understand that without our protecting that position, this country would be spending more on debt servicing than it does on health. A Labour Government would have spent more on debt servicing than it did on health. Labour members want us to know that they saw the recession coming. I find that hard to believe when they could not even see the billion-dollar hole in the accident compensation scheme books. Labour members are financially illiterate. They want us to borrow another $2 billion. They want us to rack up an extra $2 billion in debt every year, to pay 5 percent interest on that money, and to put it into the Superannuation Fund, which has lost 4 percent a month over the last 10 months. In the time that the Superannuation Fund has been going it has achieved half of what one could have got from putting the money in Government bonds. But Labour says that we should not let that stop us, that we should rack up another $2 million of debt on the credit card and chuck it into a poor-performing investment. That is great business!
It is no wonder the people said that they do not want that crowd leading them through the recession, and that they want John Key and Bill English.” Today they have delivered a Budget that I am proud of and that New Zealand needs. I congratulate them on it.
In Committee
Part 1 Personal tax cuts and independent earner tax credits: repeal of later years’ changes
CHRIS HIPKINS (Labour—Rimutaka)
: It was a slightly surreal feeling to sit through the first and second readings of the Taxation (Budget Tax Measures) Bill under urgency and hear National members rant and rave about how important it is to cancel the tax cuts that they passed under urgency just 5 months ago. How things have changed in 5 months! I thought it might be quite good fun to go back to the
Hansard of 9 December 2008 and hear what National members had to say about why tax cuts were so vitally important. I go back to the speech made by David Bennett, who spoke not long before me tonight. I have a very good quotation from him from 9 December 2008, and I think it is quite a reliable one: “One cannot say yes to tax cuts before an election and then say no to them after an election,”. I have here the National Party’s pledge card from before the election, in which it promises tax cuts every year—in 2009, 2010, and 2011—yet here we are sitting under urgency and National is taking those tax cuts away only 5 months after dishing them out.
There is even better stuff from David Bennett. He said: “The National Government, with its coalition partners, will deliver a tax cut programme. We will not just talk about it; we will not just put legislation out that is about some time in the future. We will
actually deliver that tax cut programme, and that is what we as a Government are about.” In December 2008, that is what National was all about. It was the core part of what National came here to do, but 5 months later it is already backing down and going back on its key election promises.
John Hayes talked about it not being a 1-year programme. Here is the really honest thing he said: “Mr English has been extremely ingenious in constructing this tax cut package.” It turns out he was a lot more ingenious than National members realised at the time, because he never intended to go through with it; he was going to abolish the tax cuts anyway. John Hayes talked about the fact that it would be a pattern every year. Yet here we are, not even a year in, we are only 5 months in, and National members are doing away with tax cuts already.
Bill English talked about his tax cuts being prudent and responsible, but, he said, they would give New Zealanders the kind of hand-up they need when they face the most challenging economic outlook in a generation. The economic outlook has become more and more challenging, yet somehow we now do not need the tax cuts any more, so they will be taken away. Clearly the Minister of Finance, Bill English, can have no credibility when it comes to any promises that National made prior to the election. We know that.
Chris Tremain is sitting there. He talked about building trust. He said the National Government was delivering on its promises and it would continue to build that trust. I ask Mr Tremain to stand up and say how cancelling the tax cuts only 5 months after the Government legislated for them is building trust with New Zealanders. National members have not lived up to the trust they were given by New Zealanders on 8 November 2008. Helen Clark and Michael Cullen were dead right when they said that the National Party could not be trusted to deliver on its promises. Five months later John Key and Bill English are already backing down on the core centrepiece of their entire election manifesto.
I notice that National members have suddenly gone very quiet. They are very embarrassed about being hauled up on their pre-election rhetoric. Every New Zealander will now know that the pledge card that National put out before the election is not worth the paper it was written on, because there are 11 promises on it and the big red crosses here show that three of them have already been broken. We are not surprised about that, because this is the party that promises whatever it needs to in order to get elected, then does whatever it wants to once it gets into Government. If we look back to 1990 and the superannuation surcharge, we remember it was going to go, “no ifs, no buts, no maybes”, but National increased it. At the last election National promised that it would deliver tax cuts every single year. National members said that unlike Michael Cullen’s tax cuts, they would actually deliver them. It took them 5 months to break that promise.
I go back to the book
The Hollow Men, and to the advice those men received from a former Minister of Finance, the Hon Ruth Richardson, who said one must say whatever is required to get elected because, in her own words, “being in Government is everything.” Members can then do whatever they like to the people who voted to put them there, and they do not have to worry about keeping any of their promises. Ruth Richardson said that.
Today has been Crosby/Textor’s day, has it not? Crosby/Textor practically could have written the Budget speech today—it probably did write the Budget speech today. It just goes to show that this Government has no principles. It had no intention of keeping its pre-election promises; it was always going to do whatever it felt like, once it got into Government.
National’s tax cuts were never affordable, and Labour said that prior to the election. Yet John Key and Bill English ran up and down the country saying we were
scaremongering when we said tax cuts were not affordable. They were going around the country telling everyone that they could have all the things they had under Labour, but with tax cuts as the cherry on top. They said that everything would go on, hunky-dory, despite the fact that we were already in recession prior to the election. The world financial crisis had already started prior to the election. In fact, let us go back and read the
Hansard—I have it here in front of me. We can see from the
Hansard that the National Government used the world financial crisis as the justification for its tax cuts when it passed them on 8 December last year, only 5 months ago. Yet, suddenly, here we are, back under urgency, repealing them again. National members’ arguments have gone completely full circle. They are now saying the world financial crisis is the reason for not delivering tax cuts. Five months ago it was the reason for delivering tax cuts, and 5 months later it is the reason for taking the tax cuts away again.
This Government has absolutely no credibility when it comes to keeping its promises. Effectively, the last general election can be summed up in three words: the Key con. That is what it was; that is what all of the National Party’s manifesto promises amounted to. They were nothing more than a con that the National Party had absolutely no intention of sticking to. It was an absolute fraud on the New Zealand people. The National Party had no intention of keeping any of its promises, and the tax cut situation absolutely sums that up. New Zealanders were promised tax cuts each year. As Darren Hughes said, the pledge card with John Key’s name on the front and his signature underlining his commitments to the people went to every letterbox in the country. The pledge card said: “If National is elected to lead the next Government, I personally guarantee that we will:”—pledge No. 1—“Strengthen the economy, increase after-tax incomes and ensure Kiwis can get ahead under their own steam by reducing personal taxes on 1 April 2009, 1 April 2010, and 1 April 2011.” Yet the tax cuts are gone; National has delivered on only one-third of that promise, and the rest of it is gone. It just goes to show that none of the National Party’s pledges are worth the paper they are written on.
The Hollow Men
theory prevailed during the election campaign, with National members promising whatever they liked. I am reminded of one of the emails I read about in
The Hollow Men. It was from one of Don Brash’s advisers, and it talked about splashing the cash around before the election. It said that he had to throw some cash around to get people to vote for him. He would not need to worry about keeping promises after the election, because by then he would be firmly ensconced on the Treasury benches. He would be able to do whatever he liked to Kiwis, and they would not be able to do anything about it. It has taken only 5 months, and boy oh boy, are those members looking smug and arrogant already! It has been done in record short time. They are laughing about the fact that they are taking away the centrepiece of their pre-election manifesto—the centrepiece of their promises to New Zealanders—which was to give tax cuts every year under a National Government. John Key signed his name to that and said he personally guaranteed it.
Hon Lianne Dalziel: I think Bill English told him to do that.
CHRIS HIPKINS: Oh, Bill English probably told him to do that, because he is the one who is pulling all of the strings here. Maybe Steven Joyce is pulling a few of the strings, as well. It is a battle royal between Steven Joyce and Bill English as to who should be the Minister of Finance. They do not want John Key to have any credibility.
HEKIA PARATA (National)
: Tēnā koe e te Heamana. Huri noa i te Whare, tēnā tātou katoa. I rise to support the Taxation (Budget Tax Measures) Bill. I do so along with my colleague the member for Selwyn, who spoke so fluidly and flawlessly about the pride we each have in supporting this Government. The Opposition has spent the
last couple of hours haranguing this Government about all the values and principles it lacks itself.
We recognise that these are difficult times. We have all been made aware that this is the most difficult time in two or possibly three generations. So it takes courage, leadership, fortitude, and realism to know that the mix of requirements at this time has to be different in order to meet what confronts us now. We do not blindly fling ourselves at the wall of ideology as our opponents do. We take the measure of what is required for this country, and we are prepared to take the hard decisions. That is why so many New Zealanders have put their faith in us, and we honour that faith.
Tonight we are debating this bill because it is necessary, in the mix of ingredients required to get this country back on the road to recovery, to make savings. We must not burden all New Zealanders today and into the future with debt that will cripple them. We are realistic about what is possible. We understand that it is not possible to deliver the tax measures for 2010—this is where Labour members will start singing—and 2011, because they will add too much to the burden of debt. Instead, we are able to save New Zealanders $900 million in the out-years of 2011 and 2012.
The Government remains committed to lowering personal income taxes. It has deferred, not cancelled, the second and third tranches of tax cuts that were due to take effect in 2010 and 2011, respectively. It has been a difficult decision, but making difficult decisions is what good Governments are put in charge to do. We make the hard calls. This Government is prepared to do that, and all we get are vituperative attacks from scaremongering opponents at a time when the citizens of this country are entitled to expect good leadership from the top. They are certainly getting good leadership from this side of the Committee, and it would be appropriate at this time for those opposite to question the tactics they are employing at a time of deep concern and challenge for many New Zealanders around this country.
It would be a failure of leadership not to recognise when change is required. It would be a failure of leadership not to be prepared to take the direction that circumstances call for. Those on this side of the Committee are not prepared to fail that leadership challenge. We go forward with New Zealand’s support, recognising that we have to soften the hard edges of this recession and that we have to make decisions—for the short, medium, and long term—to ensure that this country is in the best possible position to emerge into a recovery.
That is what New Zealanders are looking for from this Government, and that is what the Budget today has delivered to each and every one of them. It is a Budget that is committed to recognising the need for sustainable, long-term recovery of this country. We care about that recovery. The Government is not made up of expedient, cynical, and scaremongering people—
Hon Members: Yes, you are.
HEKIA PARATA: No, members opposite misunderstand the English language if they do not understand that making courageous leadership decisions about what is and is not possible is a test of leadership that this Government has fronted up to. On the basis of commentary, including our rating, we are passing that leadership test—and we are passing that test with the support of New Zealanders. Members opposite can wave their pieces of paper around and feel good as they do it, but we are not here to see comedy acts; we are here to help New Zealanders face the challenges that confront them and to help lead the way to the recovery that this country deserves.
The mix of ingredients in this Budget consists of the kinds of things New Zealanders want to see held up to them. The Budget is a mix of very sensible measures and of what is possible. We need to balance both the spending and the burden of debt that this
country is encountering, and as part of that we are prepared to make the very difficult decision to defer tax cuts. I am proud to be a part of this Government.
Hon CLAYTON COSGROVE (Labour—Waimakariri)
: I have to say that the Taxation (Budget Tax Measures) Bill is based on one premise: a lie. It is an absolute lie. In fact, we could rename this bill the “Taxation (Lie) Bill”. It is based on a deception—and it does not matter how high Mrs Parata raises her voice.
She said this Government is not expedient. [Interruption] I know that the Cheshire cat sitting in the Government’s front row might want to grin about her Budget bid. Members opposite say this Government is not expedient. An International Monetary Fund report that came out on 8 October said that the world economy was entering a major downturn in the face of “the most dangerous shock” to rich-country financial markets since the 1930s. It came out at the same time as John Key came out with what Brian Rudman called a “catalogue of tax-cut bribes”; on 8 October John Key said he was unveiling a tax package that was “responsible” and “appropriate for the current conditions”. That was how he characterised his tax package, although he knew about that International Monetary Fund report. We had only to turn on the radio or the TV to work out that the world was imploding in a financial crisis.
And Mrs Parata says National is not expedient. She says that it shows courage and leadership. Well, what shows courage and leadership? To say one thing before an election, knowing that that member and her Government cannot deliver on it? She characterises that as some sort of standard of courage, some sort of standard of leadership. We now have a new definition of leadership and courage in this Parliament, and that definition is to deceive. That is what National members did and that is why they are hoist with their own petard.
I say to Mr Dunne, whom I differentiate slightly from National members as being a more honourable person, that I suspect that in the deepest dark of the night he squirms a little at the thought of having to front this bill. Mrs Parata puffs her chest out, raises her voice, and tries to convince the New Zealand people that she did not deceive them, when as she and her ilk climbed and clawed their way up the political greasy pole of the National Party list to get to where they are. They said anything that they could; they were the archetypal definition of expedience before an election. I invite her to go out on the stump, to go to the constituency she purports to represent, and try to convince people.
National was ambitious for New Zealand. National said if people voted for it, it would deliver tax cuts. National members criticised Michael Cullen because Michael Cullen was cautious. They said it was an outrage that he was cautious, it was an outrage that he squirreled away the surpluses. I say to Mrs Parata that she has raised to a new height the standard of gall in this House. She stood up and tried to persuade us that National had shown leadership by deceiving—knowingly, not by accident—every member of the New Zealand public. Does that member really think it is credible for her to tell the New Zealand people that, miraculously, when she and her ilk entered the Cabinet room somebody passed a note to the Prime Minister that said, by the way, there is a global recession—in fact, the worst we have seen in the history of the globe—and, by the way, his tax cuts probably will not work? Does anybody think the New Zealand people are so stupid that they would accept that thesis from that member? Even that member, Crosby/Textor, Mr Joyce, and the myriad spin doctors that National has over there cannot now deceive the New Zealand people, because they know that they were deceived knowingly and with intent.
It should not surprise us, because it is a typical Tory trick. National has done it for decades. It goes to the people and says that, shock, horror, it has opened the books, everything is terrible, and it has to break its promises.
Hon Darren Hughes: No ifs, no buts, no maybes.
Hon CLAYTON COSGROVE: Exactly. What all of them have done—and old “Sooty” in the front row in the pink shirt ought to remember, because he—
TODD McCLAY (National—Rotorua)
: After the previous speaker, all I can say is “Thank goodness for platform shoes.” My mother could see that member speaking from where she was, but without his shoes she would not have seen him.
This is a great debate on the Taxation (Budget Tax Measures) Bill in the Committee stage. I have been sitting here quietly listening to the debate, and I say to the members opposite that they are whingers, whiners, and woolly left-wing liberals. They are socialists dressed up and pretending to be liberals. They are excuse makers, they are complainers, and they are better off over there on the other side of this Chamber. They are like a group of 4-year-old girls who are crying and looking for their comforters, because they are not big enough to handle the deepest recession New Zealand has faced in 60 years. New Zealand is better off because those members are over there. They were a fair-weather Government, and now the storm is here they are sadly absent. They have no ideas; they are all excuses. New Zealanders are glad to see the back of them, and, absolutely, so is this Parliament. The pretence that those members are worried about New Zealanders has been too little, too late.
This Government is about delivering for New Zealanders, and today, with Bill English, a great Minister of Finance, we have delivered 600 more police and at least 200 more correction officers to make New Zealand and New Zealanders safer.
The CHAIRPERSON (Lindsay Tisch): Part 1.
TODD McCLAY: This is all about Part 1.
The CHAIRPERSON (Lindsay Tisch): Part 1 is about tax cuts.
Hon Darren Hughes: Mr Chairman, how do you know what he’s saying?
The CHAIRPERSON (Lindsay Tisch): Thank you for that comment. Look, I invite the member to concentrate. This debate is limited to parts, and this part is about personal tax cuts. I ask the member to continue in that vein. Thank you.
TODD McCLAY: Thank you very much, Mr Chairperson. I still have time left, so I am happy to speak more slowly for the sake of my great friend, the former member for Ōtaki—the defeated and failed member for Ōtaki. I thank the former Minister.
This bill is about tax cuts. In a very difficult economic time, why have we not been able to deliver tax cuts in following years? It is so that we can deliver 600 more police for New Zealanders, and more than 200 corrections staff to make New Zealand safer. It is so that our police can have Tasers on the streets—again, to make New Zealand safer. These are all funded promises that have been delivered today. That is why this bill is saying tax cuts in the coming years will be more difficult.
What about health—doctors, nurses, operations, and aged-care services? There will be $3 billion extra over the next 4 years to deliver for front-line health service in New Zealand. Where is that piece of paper members had before? I ask members to hold it up for me again; I want to see it. It has gone now. Oh, there it is. Could the member move that a little further to the left, as the voice of that member is too much—at least, the people of New Zealand watching TV will not then see the member’s face, as the voice and the face together are far too much.
Hon Damien O’Connor: I raise a point of order, Mr Chairperson. Sorry, but as the newest member in the Chamber I would just like a clarification of the Standing Orders. I was of the understanding that there is a Standing Order relating to the reading of speeches in the Chamber. I would just like to check that that member is not reading.
The CHAIRPERSON (Lindsay Tisch): No, there is no such Standing Order.
TODD McCLAY: I raise a point of order, Mr Chairperson. The member is right, in that I am one of the members on this side of the Chamber who, compared with members on that side, can actually read. But I was not reading—
The CHAIRPERSON (Lindsay Tisch): No, no, that is not a point of order. The member will continue; he has 1 minute and 35 seconds to go.
TODD McCLAY: Thank you, Mr Chairman. As I have a few moments left, I confirm that, yes, on this side of the Chamber we can read; I am sure that on the other side members cannot.
I will come to a conclusion—well, I do not have to, but I will, none the less. This is the deepest recession in 60 years. That is why tax cuts are not going ahead. This is a Budget to get New Zealand through a downturn. That is why tax cuts cannot go ahead. It is about improving growth and productivity. That is why those tax cuts cannot go ahead. The Budget is to keep New Zealand on the front foot. Standard and Poor’s recognised that today. New Zealand recognised it today. I say to members opposite that they should wake up, give up, get ready for more tomorrow, and recognise it today, as well.
Hon PETE HODGSON (Labour—Dunedin North)
: This story began last year when National members went on to the hustings and said we do not have a debt problem but we have a growth problem, and therefore we have to have some tax cuts. As the election campaign unfolded and as the clouds of economic gloom gathered, they said that we do not have a debt problem. They maintained that mantra right up until 8 November; we did not. We said, in the course of the election campaign, there would be no more spending promises. We said we did not believe that there was an opportunity for large expenditure, be it in the form of tax cuts or in the form of new Government programmes. And that is how both parties went into the election.
But wait! There is more! After 8 November, all of a sudden the advice to Michael Cullen and therefore to the Labour side stopped, and the advice to Bill English and therefore to the National Government started. That advice grew gloomier by the day. Even after the election, the news got worse. By the time we came to the second week of December, these Government members, having been in receipt of 6 full weeks of Treasury advice, said we could still afford tax cuts. They said they were part of the Government’s 100 days of action. I guess we are now in 100 days of U-turns. They said we could afford those tax cuts, so they went ahead.
We opposed the tax cuts, which I presume means we have to support this legislation today. But we will do more than say “We told you so.” We will say “You misled us.” That was never better explained than yesterday in Brian Rudman’s article in the
New Zealand Herald, where he talked about the need for the National Government to squirm. He pointed out in words of one syllable that by the second week of December the National Government knew very well the circumstances that this little country was in.
Do members know what happened yesterday? The Prime Minister of this land rang the editor of the largest newspaper in this land and tore a strip off him for running that article. What is prime ministerial about that? Why did John Key say to the editor of the
New Zealand Herald he did not want to see that sort of stuff run in his newspaper? Who does the Prime Minister think he is? Does he think somehow that we have a democracy in which the Government should not be challenged for breaking promises? Does he think somehow that this Government is able to get away with broken promises without there being some sort of public spat? The Prime Minister has a habit of doing this. Remember when he did it to that Northland agency before he became the Prime Minister? The nice man appears to—
Craig Foss: I raise a point of order, Mr Chairperson. We are in the Committee stage. We have had about 2½ or 3 minutes of this gentleman’s speech and we are yet to hear anything about what is in the bill.
The CHAIRPERSON (Lindsay Tisch): I do not need any help. I ask the member to continue. We are on Part 1. I know that some of your comments have strayed a bit.
Hon PETE HODGSON: Mr Chairperson, my speech has been entirely about tax cuts—their passage under urgency, their reversal under urgency, and now the Prime Minister getting up and ripping into the editor of the
New Zealand Herald because he did not like a bit of criticism. You see, Brian Rudman made the mistake, apparently, of pointing out that in the second week of December the Government must have known the circumstances the country was in. That is what he said. In other words, the urgency before Christmas was known to be a fake, and that is an outrage.
Government members were so full of themselves, so big on their 100 days of action, and so triumphalist that they were prepared to fool themselves and the rest of the nation with legislation, and that was only 5 months ago. They have made a U-turn in 5 months: from tax cuts to no tax cuts. When someone gets up and says that is a broken promise and the National Government had better get ready to squirm, which is what Mr Rudman said, the Prime Minister rings up the editor of the
New Zealand Herald
and does his nana. He cannot take the criticism. He is happy to break the promise, happy to do the U-turn, happy to do the deceit, and happy to fool everyone that in December the tax cuts were real—
PAUL QUINN (National)
: Thank you—[Interruption]
The CHAIRPERSON (Lindsay Tisch): The member has not even started to speak, and there is a barrage of noise from the cross benches.
Hon Clayton Cosgrove: I raise a point of order, Mr Chairperson. I accept that, but you should know that we were just so pleased you had called him to speak.
The CHAIRPERSON (Lindsay Tisch): I thank the member. Well, I am calling him again.
PAUL QUINN: Thank you, Mr Chairman, and I do intend to address Part 1 in my short stint. But in so doing, I want to comment on the rather gutless performance of the previous Labour speaker, Pete Hodgson, who lambasted a high-quality Māori leader—
Hon Clayton Cosgrove: I raise a point of order, Mr Chairperson. I think you can anticipate my point of order. That was totally unparliamentary language. That was offensive, and it has been ruled out many times. We cannot say that of other members of Parliament.
The CHAIRPERSON (Lindsay Tisch): I ask the member to desist from making those sorts of comments—
Hon Clayton Cosgrove: He should withdraw and apologise.
The CHAIRPERSON (Lindsay Tisch): —withdraw that comment, and then continue.
PAUL QUINN: I withdraw the comment, and I say that that member—
The CHAIRPERSON (Lindsay Tisch): No, the member cannot qualify the ruling I have made. I am asking him to just continue with his speech.
PAUL QUINN: Thank you, Mr Chairman. Can I say, then, that the member lacked the intestinal fortitude to face that woman, one of New Zealand’s leading Māori women, and look her in the eye while he lambasted her. He spent the whole time with his back to her, looking at the monkeys behind him and looking for applause. He did not have the fortitude to look her in the eye and front up to her. That is the sort of person we have in Opposition.
Hon Luamanuvao Winnie Laban: I raise a point of order, Mr Chairperson. I would like you to ask the member to withdraw and apologise. I really feel truly insulted that we have all been identified as monkeys.
The CHAIRPERSON (Lindsay Tisch): The member has taken exception to the comments the member has made. I ask him to withdraw and apologise for those comments, because a member has taken exception. That ruling is under Standing Order 116. I ask the member to withdraw and apologise for those comments and to then continue.
PAUL QUINN: I withdraw and apologise. Now, having said all that, I will refer to Part 1, which relates to personal tax cuts. [Interruption] Of course, I see the so-called Opposition Leader of the House, who cannot decide whether he is a young Trevor Mallard or an older Chris Hipkins, because he does not have the ability to stand up against Trevor Mallard every time he gets up. He does not know how to act as the Opposition Leader of the House.
Turning to Part 1, I say in terms of these tax cuts that this Government has changed its mind—right? I see that Darren Hughes got three black marks in school today. Oh, the teacher has given him three bad marks on the chart he is holding up—not very good. Anyway, we are prepared to front up, which is a lot more than the members of the previous Government, now on the Opposition benches, were prepared to do in the pre-election fiscal update. They hid the accident compensation figures from the public, and when the true costs were known, they ran a mile.
The CHAIRPERSON (Lindsay Tisch): We have under 2½ minutes left. I would actually like to hear a little about the words “tax cuts” under Part 1, because the heading states: “Personal tax cuts and independent earner tax credits:”. So I ask the member—[Interruption]—I am on my feet. I ask the member to seriously consider Part 1; otherwise I will terminate the speech.
PAUL QUINN: Mr Chairman, I can explain: my speech is focused on why we are prepared to front up to reverse these tax changes. It is because we have to meet a heavy burden of Government expenditure: a decade of deficits, left behind by the previous Government. It would not front up to the truth, which came out only after the election. That is why we are prepared to front up, unlike the Labour Opposition. When Labour was in Government it hid everything to try to get another term in office. But National fronts up because we are honest and we have integrity, and when the situation changes we are prepared to accept it and be honest with the public.
We are not prepared to have a level of Government expenditure of $1 billion a week. If that level of spending was left unchanged, it would leave a structural deficit in this country of $135 billion by the year 2023. The interest alone on that figure is $13.8 billion. We are not prepared to do that, because $13.8 billion could go towards supporting hospitals. That is why we have changed the tax cuts. We are realists, and we front up to the situation as it presents to us. As part of that process we will examine Government expenditure, line item by line item, so that the time before those tax cut changes are reversed can be kept to a minimum. We get rid of things like hip-hop tours. We get rid of wasteful expenditure in order to deal with the fact that the tax cuts are, for the moment, not as much.
The CHAIRPERSON (Lindsay Tisch): I ask for some decorum from Moana Mackey.
MOANA MACKEY (Labour)
: What you will get, Mr Chair, is a speech that is about the bill, for a start. I say to “Lady Parata” that we are very, very sorry if we have offended “your royal highness” in any way.
Hekia Parata: I raise a point of order, Mr Chairperson. I do not have a title other than Ms Parata or Hekia Parata. I would prefer that I was addressed respectfully in those terms. Thank you.
The CHAIRPERSON (Lindsay Tisch): I ask the member to respect that request.
MOANA MACKEY: I withdraw and apologise, if that is what happened. But I say to Mr Paul Quinn that he does not need to patronise Hekia Parata—
Craig Foss: I raise a point of order, Mr Chairperson. That was not a withdrawal and an apology. The member said “if that is what happened”.
The CHAIRPERSON (Lindsay Tisch): She withdrew and apologised. [Interruption] The member took exception; I will ask her to clarify.
MOANA MACKEY: I withdraw and apologise.
The CHAIRPERSON (Lindsay Tisch): I ask the member to please continue.
MOANA MACKEY: Paul Quinn does not need to jump up and protect Hekia Parata. She is perfectly capable of defending herself in the Chamber.
What an extraordinary contribution from Mr Paul Quinn. He did not speak at all about Part 1, because he is ashamed of what National has done here—if, indeed, he understands what it has done. What has struck me about National members’ speeches is that those members have all jumped up to say how proud they are of the fact that they are now reneging on their election promises, how brave they are that they have broken the promises that they made during the election campaign, and how much courage it takes to deceive the people of New Zealand and then stand up and cancel the tax cuts that won National the election.
Hon Darren Hughes: It’s so tiring!
MOANA MACKEY: Democracy is very tiring, as we found out during the last sitting week with the super-city legislation.
Part 1 cancels the personal tax cuts that National promised during the election campaign—it was National’s No. 1 promise. John Key said there would be tax cuts on 1 April 2009, 1 April 2010, and 1 April 2011. He said, unlike Labour, National would not cancel its tax cuts. That deceit has been shown up for what it is in today’s Budget. It is galling in the extreme that Government members have been getting up and acting as though they are really proud of what they are doing here, having deceived the people of New Zealand during the election campaign, and as though they are proud of the fact that they bought an election with promises that they knew they could not afford. It is galling in the extreme. Apparently, they expect us to believe that John Key and Bill English were the only people in the world who did not see the financial crisis coming.
Hon Darren Hughes: And Paul Quinn.
MOANA MACKEY: I can believe that Paul Quinn did not see it coming. He probably thought Lehman Brothers just had a little run of bad luck. He probably thought that Enron just did not dot the i’s and cross the t’s. I can understand that Mr Quinn might not have seen the financial crisis coming, but for John Key to seriously expect the people of New Zealand to believe he did not know he could not afford to keep the promises he was making, when everyone was telling him that things were getting worse, and when Labour members stopped making campaign pledges because we knew we would not be able to afford them, is utterly ridiculous. John Key did know.
Paul Quinn: I raise a point of order, Mr Chairperson. I was interrupted at least three times, I think, in respect of staying within the ambit of the part—
The CHAIRPERSON (Lindsay Tisch): That is not a point of order. I will decide. It is not a point of order.
MOANA MACKEY: Now I understand Paul Quinn’s speech. He does not realise that Part 1 cancels the tax cuts. He thought it did something completely different from that. Now I understand why he did not refer to the bill at all in his speech; it is because
he does not know what it does. I will tell Mr Quinn what Part 1 does. Part 1 cancels the tax cuts and breaks the election promise—the No. 1 election promise—that National made during the election campaign. Part 1 shows up the con of the National Party at the last election.
I said in my second reading speech that maybe instead of calling John Key the Prime Minister, from now on we should call him the “Prime Misleader”, because that is what he is. He is the “Prime Misleader” because he knew during the election campaign that the tax cuts could not be afforded. We said they could not be afforded, and National said we were scaremongering. Six weeks after the election—after National had had all the Government books and had seen the state of the finances—the House took urgency to ram through these tax cuts. Labour, in that debate, said the tax cuts could not be afforded, and National said we were scaremongering. Less than 5 months later we are repealing, under urgency, the tax cuts we passed under urgency. Why? Because we cannot afford them.
The only thing that is consistent about the National Government is its inconsistency. Labour said before Christmas that the tax cuts could not be afforded. We voted against the tax cuts. But we are voting for this bill because it repeals the tax cuts that we said could not be afforded—and we were right. National would have us believe that no one could possibly have foreseen the economic conditions worsening.
AMY ADAMS (National—Selwyn)
: Finally, we might get some sense in this debate. The previous speech was another five wasted minutes of droning, moaning, hand-wringing, and histrionics based on a whole lot of nothing. Today is about this document in my hand. Today is about a Budget that will put this country on the road to recovery.
Iain Lees-Galloway: No, it’s about this.
AMY ADAMS: I know about that. Mr Lees-Galloway should not worry about it. Today is about making the hard decisions that it will take for this country to undo 9 years of disastrous Labour leadership from a Government that would not have known how to manage its way through a recession if its life depended on it. Unfortunately, the Labour Government’s life did depend on it. Labour can spend money, but it does not know how to manage in a recession, which is why New Zealand voted out Labour, and why those members are over there, and why New Zealand put its faith in this National Government. Part 1 of the Taxation (Business Tax Measures) Bill defers the tax cuts—[Interruption]
The CHAIRPERSON (Lindsay Tisch): There is not much time to go. I ask members to give the member speaking a fair go.
AMY ADAMS: Part 1 defers the tax cuts, because we understand and we know that right now it is more important to New Zealand families for them not to have to pay another 1.5 percent on their mortgages. New Zealanders do not want to be paying that. They do not want to be saddled with a second mortgage for every family of four because that party on the other side of the Chamber could not contain its Government spending and does not know how to manage anything. This Government is making the decisions that need to be made. It is looking after the people of New Zealand. Right now, at this time, in this climate, and with the information in front of us today, we know that what is important is getting our debt under control, looking after New Zealanders, protecting their entitlements, and getting this country ready for recovery.
