CHRIS TREMAIN (Senior Whip—National) : I seek leave for the Committee stage of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill to be taken as one question, notwithstanding Standing Order 333, and for there to be unlimited calls.

The CHAIRPERSON (Lindsay Tisch): Leave is sought for that purpose. Is there any objection? There is no objection.

Hon DAVID CUNLIFFE (Labour—New Lynn) : Mr Chairperson—

Hon Simon Power: It was just about all over.

Hon DAVID CUNLIFFE: The member should not confuse politeness with indecision.

Hon Simon Power: Fair enough.

Hon DAVID CUNLIFFE: Fair enough. I am pleased to say civility in the Chamber is not dead. Labour supports the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill, but there are a number of important matters in it that bear the Committee’s consideration in some detail. I give notice that Labour will be introducing an amendment from Stuart Nash to this bill, which will seek to exempt local authority rates from the higher rate of GST during the year of transition to that rate. That amendment follows from the massive 28 pages of amendments on Government Supplementary Order Papers that are already known as the “whoops, we forgot about the changes on the way to breaking our promise” amendments.

A number of important measures contained in this bill are worthy of the consideration and support of the whole Committee. The trans-Tasman portability of retirement savings has long been an issue, and this Government is now seeking to legislate on it, based on work started by the previous Labour administration. We commend the Government for bringing that work to a conclusion, and we thank our partners across the Tasman for facilitating an agreement on that matter. The bill introduces new rules for 18-year-olds who seek to enrol in KiwiSaver; flexibility in the provisions applying to a resident cooperative company; the effective cancellation of branch equivalent tax account debits around conduit-relieved dividends; a number of new rules around binding rulings, which will be of particular interest to the banking sector; and exemptions from gift duty for gifts made to local and central government.

It has been interesting to read press reports about the Crafar farms deal, because the current Government appears to be receiving $200,000 in gifts from the consortium behind the Crafar farms deal. If I might, I will interrupt this bipartisan broadcast to say what an outrage it is that this Government is accepting that kind of, I hesitate to say bribe, but gratuity—

Hon Simon Power: No, he can’t say that.

Hon DAVID CUNLIFFE: That is why I hesitated.

Hon Simon Power: I raise a point of order, Mr Chairperson. You may have missed it while you were having a conversation with the Minister in the chair, but the phrase just used by the member who has resumed his seat, in relation to a matter that has no bearing on this Committee stage or the bill that is being considered by the Committee, is outside the Standing Orders. The member should withdraw and apologise for using that phrase.

Hon DAVID CUNLIFFE: Speaking to the point of order, Mr Chairperson, I point out in the first instance that it cannot be outside the scope of the bill, because the bill contains an exemption for gifts made to central government. That was why I raised the point. But, more important, I used the phrase “I hesitate to say” a word, which I then did not use. So the Minister is rather jumping at shadows.

Hon Simon Power: You did use it.

Hon DAVID CUNLIFFE: I used the word “gratuity”, and I submit that that is not outside—

Hon Simon Power: No, that is not correct. Although I accept the first part of the member’s explanation that he said something to the effect of “I would hesitate to use”, it was the word that followed those introductory remarks that members on this side of the Chamber have taken offence to. It was not the word “gratuity”; it was another word. The member knows what the word is, and he should apologise for using it.

Hon DAVID CUNLIFFE: To clarify the point, I said “I hesitate to say bribe, but gratuity”. So I did not, in fact, use the word “bribe”, and there is nothing—

The CHAIRPERSON (Hon Rick Barker): I say to the member that that might be cute, but it does not cut the mustard. To simply say “I’m not going to say something” and then utter the word is effectively the same as using the word. The member has condemned himself by his own words. The member will stand, withdraw, and apologise.

Hon DAVID CUNLIFFE: I withdraw and apologise. This is a very important bill, because it shows that in the Government breaking its promise not to raise GST—and there can be no doubt that the Government did make a promise and it did subsequently break it—it has fallen afoul of the huge complexity that is now falling on ordinary Kiwi businesses and households. That is why Ernst and Young and other prominent consulting and accounting firms are saying things like this. I quote from Ernst and Young last week: “As we face the harsh reality of the 1 October GST increase to 15 percent many are realising this is not a modest increase and the issues are actually more complex than anyone first imagined.”

If anybody doubts the truth of that statement, he or she needs to look no further than the Minister’s own 28-page Supplementary Order Papers, the “Whoops, we should have thought of this before we made the change” amendments, which it is very important that the Committee now addresses.

David Garrett: You’ve made that joke, David.

Hon DAVID CUNLIFFE: That brings me to Mr Garrett. Mr Garrett has Supplementary Order Paper 158 in his name on KiwiSaver contribution rates, which Labour, after sincere thought, will be supporting. The Supplementary Order Paper suggests that members of the public should have the choice to up their KiwiSaver contribution rate to 4 percent, 6 percent, or 8 percent. What is really interesting about this is that there is no matching contribution from employers or the Government. We think that is a matter of concern. Although we do not oppose people having choice about their contribution rate, we note that in the last 24 hours the Minister of Finance, Bill English, has told the country that any changes recommended by the Savings Working Group to improve KiwiSaver must be revenue-neutral. Well, let us hang on a second. If the Government will not contribute to better incentives for savings, if it thinks that a big, bold solution is required, and if the employer is not to contribute, which the Supplementary Order Paper makes clear, then exactly who is to contribute to it? The answer is logical: Kiwi households and individuals. If New Zealanders around the country are not to be incentivised, why would they pay more?

One can only reach the interim conclusion that compulsion is coming to a town near you. Compulsion is coming from the Government that has railed against the nanny State. Will it be the granny State, with compulsory superannuation? Has Crosby/Textor thrown a loop somewhere? Has something gone wrong with the polling that the Minister has been doing? What has got into this Government? Here is a Supplementary Order Paper masquerading as a measure that will provide more choice. At the same time, the Minister of Finance is saying there will be no new incentives from the Government and the measure has to be fiscally neutral, yet the Government is making no move to improve employer contributions. That means only one thing: New Zealanders will be stuck with higher GST and compulsory savings, which will be met from a pay cheque that has hardly moved during the recession. And many people are without jobs. How many people are unemployed? It is 159,000 people, which is 19,000 more people than a couple of months ago. It is absolutely clear in that context that there is no recovery hitting Main Street. It is not hitting Wall Street either, but it is certainly not hitting Main Street in the country towns and cities of New Zealand, because the dole queues are lengthening.

The debate that the House is about to have on KiwiSaver and improving New Zealand’s saving rates is indeed crucial; no, more than that, it is fundamental. It is fundamental because New Zealand’s international debt is approaching 100 percent of GDP. It is more than $40,000 for every man, woman, and child, and most of it is personal private debt that has been used to borrow for home mortgages in order to bid house prices up. There are some problems with that. The first is that we cannot eat our house, so it is a very awkward form of retirement savings. Secondly, the capital that we borrowed from foreigners has not gone into supporting our businesses or improving productivity. It is simply making housing less affordable. I would argue that that helps nobody in the long run.

The Government, after 2 years of having no plan, and after 2 years and two Budgets of denying that the savings gap even exists, has finally woken up to the mess and said it had better get a plan. It wondered how it would produce a plan, given that National did not think of one while it was in Opposition, so it decided to have another working-group. After two Budgets and 2 years of National being in Government, finally there is to be a committee.

Dr Ashraf Choudhary: Another committee?

Hon DAVID CUNLIFFE: Another committee. It is to be just like the Tax Working Group, when eminent people from the private sector and academia were put to work on a hard problem, but then the Government ignored most of the recommendations. Will the Government ignore the recommendations of the Savings Working Group? Or has it thoroughly tied the hands of the group’s members before they start? The poor old experts on the group will have a very narrow ambit within which to come up with recommendations: no new Government money, a Government shy of employer contributions, and no more incentives. Oops, that must mean compulsion.

When we look at the fine print of the terms of reference for the working-group, we find a couple of other sneaky little things. The first is the phrase “Government savings”. We all know what Government savings are, do we not? Government savings are slash-and-burn in the Government’s Budget. That is how the Government saves, under National. Three-quarters of the Government’s Budget is spent on health, education, and social services, which means that if we are to have Government savings, it will be saving on the teachers in our kids’ schools, the doctors, nurses, orderlies, and cleaners in our hospitals, and the cops on the beat. That is how the Government makes savings. There are no more back-office services to be cut. This Government is through the fat and the meat, and is into the bone.

The other sneaky little phrase in the terms of reference is “a lack of incentives”. KiwiSaver was right down the bottom of the list. It was almost as though the Government was embarrassed to cover it. But when the Government did cover it, it talked about examining the fairness and equity of KiwiSaver, as though it is to try to pull it apart. There was no language about boosting KiwiSaver. There was no language about strengthening the scheme in order to get more New Zealanders involved. There are 1 million Kiwis in KiwiSaver at the moment. It is the best and biggest single attempt that New Zealand has ever made to improve the savings rate since Norman Kirk started the New Zealand superannuation scheme. And of course we know what happened to that: Rob Muldoon killed it. That was a $50 billion mistake, which is rivalled only by the decision of Bill English and John Key to can the pre-funding of the New Zealand Superannuation Fund.

Hon PETER DUNNE (Minister of Revenue) : I begin by congratulating the member who has just resumed his seat, David Cunliffe, on an extraordinary effort to make something out of very little. It was a commendable effort, and I am sure it is a good lead-in to the line he will follow throughout the remainder of this debate.

Let me remind the Committee what we are debating this morning. We are debating the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill 2009. This bill came into the House last November to make, as the member conceded, a number of worthy changes that most people support. This is not a bill to debate measures that were put into the public arena only yesterday, that will be the subject of public debate over the next few months, and that will lead to some decisions being made, which will come to the House next year.

The member also made some comments about the changes that Supplementary Order Paper 157—which is 13 pages, not 28—introduces to the GST regime. I found that rather extraordinary. I appreciate the member was not in the House in 1989—I was—when the Labour Government increased the rate of GST from 10 percent to 12.5 percent. The contrast between what has happened now and what happened at that point is worth bringing to the attention of the Committee. In May 1989 the Government announced an increase in the rate of GST from 10 percent to 12.5 percent, to take effect from 1 July that year—so there was 8 weeks’ lead time. No compensation was paid to low-income groups, or to anyone on a benefit or any form of fixed payment who might be adversely affected. Contrast that with this year’s changes, which were announced in May and take effect on 1 October. There will be full compensation for all those on fixed incomes and benefits, superannuation, etc., including National Provident Fund and Government Superannuation Fund recipients. This is a vast change from the 1989 situation.

In 1989 business simply had to adjust to all of the issues around the transformation within the space of 8 weeks. This year we established the GST Advisory Panel for the specific purpose of allowing those upon whom the rate change would have some technical impact to have their issues considered, and for those issues, if they required a legislative solution, to then be addressed in this bill when it came to the House at this time. So the Supplementary Order Paper, and I gather from the member’s comments that he supports the provisions in the Supplementary Order Paper, deals with a number of taxpayer-friendly situations that will give specific relief on a number of the issues that have arisen—for instance, lay-bys, insurance contracts, and so on and so forth—all of which fall in that particular transition period. So I find the member’s complaint that this is an “oops, we should have done it better last time round” measure to be somewhat ironic, given the history. The last time his party was in a position to change the GST rate, it simply stated: “The rate takes effect from this date. You fall where you may, in terms of your compliance with it.” What we have done, through the GST Advisory Panel and the amendments before the Committee, is give some clarity and some certainty to the business community and to the consumers of New Zealand who will be affected by that change.

Finally, I was grateful for the member’s confirmation, in the round-about way in which he spoke, of something that I have long suspected was the Labour Party’s long-term agenda with regard to savings and taxation. When the member spoke about the work of the Tax Working Group and the fact that the Government chose not to implement some of its recommendations, it was clear that he was signalling that a land tax, a capital gains tax, and some of the other measures that this Government has so specifically ruled out, are very much on his party’s agenda. As the debate begins, it is good to have on the record that the Labour Party is saying it would introduce a capital gains tax and a land tax; that is great to know, as part of the ongoing debate.

This bill is substantially user-friendly. It makes a lot of changes in terms of savings portability with Australia, in terms of the implementation of the GST changes, and in terms of other matters that have been the subject of some public angst for a while and are now being addressed in a way that is satisfactory and favourable to the interests of most taxpayers. Therefore I commend the bill to the Committee.

STUART NASH (Labour) : I would like to say just one thing: I did not hear the Hon David Cunliffe say that the Labour Party was going to introduce a capital gains tax or a land tax. The reason I did not hear that was David Cunliffe did not say it, at all.

I have put forward a typescript amendment to the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill. The intent of the amendment is to exempt local authority rate payments for residential properties due during the 2010-11 financial year from the GST increase legislated to come into effect on 1 October 2010, and I urge the Government to support it. There are two reasons why I have introduced this amendment. The first reason is that I have a very real concern about the impact of the GST increase on the vast majority of New Zealanders, and the second reason is that I believe we need to do something about that.

The Government has already recognised that the increase in GST will cause a number of issues for taxpayers. Accordingly, it has introduced amendments to exempt a number of contracts and transactions, such as 5-year finance leases, lay-by sales, and insurance contracts, from the increased GST rate over a transition period. Local authority rate instalment payments are similar in principle and practice. They are a contract between the local council and the homeowner, for which an invoice has already been sent. Although councils are offering to charge a GST rate of 12.5 percent to ratepayers who can pay their bills in one lump sum as they fall due on 1 July, many New Zealanders are not in the position to take advantage of that offer. Those who are unable to pay in full will be required to pay some of their annual rates bills at the current 12.5 percent GST rate and some at the new 15 percent GST rate, which puts them at an additional disadvantage compared with those able to pay in full. Essentially, those who are least able to afford it will be required to pay more. I do not think this is fair.

This amendment amends the bill to ensure that no ratepayer is unfairly disadvantaged by the increase in GST over the transition period. I make the point that times are tough for many hard-working New Zealanders at the moment. I take the example of the Napier electorate where the median income is only $22,700, which means that 73 percent of people in Napier earn below $40,000 a year. Napier is a city typical of many around the country where a significant proportion of the population will see very little, if any, benefit from the 1 October tax cuts. When we add in the impact of the GST rise, we know that the family budget will be stretched to breaking point.

Many of these fine people are, however, living the Kiwi dream; they own their own homes. They have saved hard and they take pride in the fact that they are bringing up a family, or have brought up a family, in their own house. However, the cost of owning that house is about to increase. Residents, by and large, understand that rates go towards paying for essential services in the community. This time, however, a portion of any increase will not go towards improving their communities; it will go into the pockets of the Government in the form of GST.

Times are tough out there, and people who doubt this should go and talk to the budget advice services operating in their communities. I have, and I do it on a regular basis. I know that the fantastic people in those services are beginning to see a different type of clientele, such as homeowners who have lost their jobs that once provided good incomes, and that is of huge concern. I urge the Government, through the Minister of Revenue, to cut the good people of New Zealand a bit of slack and support this typescript amendment that exempts local authority rate payments due during the 2010-11 financial year from the GST increase legislated to come into effect on 1 October 2010. That is fair, that is just, and we are on the side of the angels here. We do not want the good, hard-working people of New Zealand to be disadvantaged any more. I urge the Government to support this amendment. Thank you.

BRENDON BURNS (Labour—Christchurch Central) : As a member of the Finance and Expenditure Committee I am very pleased to contribute to this debate, and to support the amendment in the name of my colleague Stuart Nash, in respect of some effort—some small effort—at some relief for the modest and low income New Zealanders who will be walloped by the increase in GST from 1 October. Those sorts of people, such as those in my electorate of Christchurch Central, 76 percent of whom earn less than $40,000 a year, are the sorts of people who need every bit of assistance they can get. This amendment is very timely and appropriate for assisting those people most in need. It acknowledges that those who have the money in the bank can pay their rates on 1 July, and pay them at a GST rate of 12.5 percent, but that most New Zealanders cannot do that. They will pay on a rates instalment system, so they will be subject to a rate of 15 percent for GST across the balance of the year. Obviously, this amendment provides a sensible mechanism for acknowledging that many New Zealanders are under very real pressure at the moment—very real pressure. We are feeling it across the country. The recession is still with us, and the economy is still not in real recovery, so we need to assist those on middle and lower incomes across New Zealand and do all we can to make sure they can survive. This amendment is a very appropriate and modest measure, and I urge the Government to consider supporting it, just as we in Labour are supporting the Minister’s Supplementary Order Paper. That is a very small method towards providing some relief for low and middle income New Zealanders.

I will comment for a moment that of course the Minister in the chair, the Hon Peter Dunne, is a great fan and supporter of the whole process of income splitting, and is obviously moving that forward as much as he can at the moment. That is a measure that particularly assists those in higher-income brackets, but this amendment is about assisting those who are in the middle and lower income brackets. They are the ones most deserving of assistance.

The primary function of this bill is to allow the flow of savings generated in Australia by New Zealanders who have been resident there for some time to be brought back home. I applaud and encourage this bill in respect of that. It makes absolute sense when our economies are very intertwined and when many New Zealanders have spent a considerable portion of their working lives in Australia. They have contributed, of course, to that country’s compulsory superannuation scheme at the rate of a 9 percent employer contribution. That is a fantastic savings record. Those people can bring back earnings that are many multiples of what many New Zealanders are able to save towards their retirement. That will be a very good cash-flow back into the New Zealand economy, so this bill is very, very appropriate in that respect, and very important.

I note that the Government is now finally recognising the importance of savings. It is finally recognising the importance of savings. The Minister is now setting up a working party on savings, but I note that that working party has been told overnight—and certainly the public has been told—that there will be no Government contribution to any proposals for compulsory superannuation emerging from the working party. So having set up the working party, the Minister of Finance is now prescribing to that working party that it go away and look at the issue, then come back with a comprehensive report. Already, he is starting to ordain what the shape of that report should be, and is removing any prospect of there being any Government contributions to a compulsory savings regime. Well, we have to ask what the heck is the point. What the heck is the point of going into the establishment of a working-group to look at the very important issue of compulsory savings? It is the sort of scheme whereby through this bill we are allowing New Zealanders who have been resident in Australia to bring their savings back from Australia, in order to generate some investment in our economy, and to support and assist people who have lived in Australia but who have come back to New Zealand with their Australian-generated schemes. Why on earth is the Government saying now that we should not consider whether there will be any Government contribution to a compulsory savings regime? It is a daft idea, and it really fires a shotgun at those who have agreed to take part in that working party. I think it is very, very short-sighted thing.

The other issue I need to comment on is the fact that the Government has called this review on compulsory savings at a time when it has instigated two rounds of its own tax cuts in our economy, the most recent of which will take effect in October. It has done that without any consideration of whether it might have been appropriate, before it embarked on handing over tax cuts, to look at what the Australians did when they set up their compulsory savings regime. The Australians very cleverly constructed a deal where there was a forgoing of wage rises for a period of time by Australian workers. I believe there was also some consideration of tax cuts, but they decided to put their money into a savings regime.

But not this Government. This Government went to the polls promising a new wave of tax cuts and introduced a second wave to take effect from 1 October, and now it is scrambling around realising that it needs to have some form of savings to stop us becoming, as the Prime Minister puts it, tenants in our own land. We do need a savings regime, but he squandered the opportunity to consider whether some of the two rounds of tax cuts might well have been better directed to a savings regime, rather than giving them to people in a way that will obviously only add to inflationary pressures and will not contribute to anybody’s savings regime. We need a balanced approach to this matter, and this Government has squandered two opportunities to consider whether some of those tax cuts might have been directed towards a compulsory savings regime.

It is typical of this Government. National wrecked the first contributory scheme that this country ever saw, which was established by the Kirk-Rowling Labour Government in 1972-75. Muldoon went to the polls and completely shafted that scheme, abolishing it by executive fiat, then had to put through amending legislation to enact what he had already announced. We then saw in the 1990 election campaign a “no ifs, buts, or maybes” promise by the then National Party leader, Jim Bolger, in respect of the national superannuation surcharge, which he had to later back away from. Here we have another National Government coming into office and squandering the opportunity to have tax cuts considered as part of a savings regime, putting on hold New Zealand Superannuation Fund contributions, and axing 2 percent of the 4-percent contribution that employers were starting to make towards the KiwiSaver regime, which was the first thing we had done in respect of savings since Muldoon axed the Kirk-Rowling scheme in 1976.

This bill is exempt from the Government’s record on savings, as it introduces a very sensible measure to encourage New Zealanders to return from Australia by being able to bring their savings back. But what we are doing is relying upon the largesse of Australian tax authorities and employers to build savings for New Zealanders who live there. We are doing nothing towards the building of savings for New Zealanders. That is what we should be debating in this Chamber. What we have instead are proposals on income-splitting, an increase in GST with no relief for middle and lower income New Zealanders, and an attempt to have a working party review of superannuation. But on Morning Report this morning the Minister of Finance ruled out any Government contribution to a savings regime, which really pulls one leg away from the stool and makes it very much harder to get savings up and running.

This bill is a sensible move in respect of bringing back savings that were made in Australia under a scheme that the Australians had the wisdom to set in place. We are going in the opposite direction. We have seen KiwiSaver cut, we have a freeze on the Superannuation Fund, which Michael Cullen established, and we are going backwards in terms of savings. Although it is a step forward in respect of savings generated by New Zealanders living in Australia, this bill is doing absolutely nothing towards the savings that New Zealanders need to be making so that we do not become tenants and peasants in our own land. We need a savings regime that encourages New Zealanders to invest and create the funds so that we do not need to go overseas, cap in hand, every time we need funds.

Dr RUSSEL NORMAN (Co-Leader—Green) : This debate has, I think, become quite sensibly focused on issues of tax policy and savings policy. The Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill addresses both issues, so I think it is quite a good opportunity to have that debate on the issues surrounding this bill.

Often overlooked in the debate is the fact that Part 1 applies to annual rates. Clause 3 sets the annual rates for the 2010-11 tax year, and basically it implements the income tax cuts that the Government has introduced. These cuts involve borrowing to give tax cuts for upper income earners. Even when we look at the Government’s Budget overall, in the net position of looking at all of the Government’s tax changes put together, we see that the Government will still have to borrow about $1 billion over 4 years in order to fund its tax changes. But the cuts to income tax will cost considerably more than that, although they are balanced to some degree by the increase in GST and by some other smaller changes.

The Government’s tax strategy has been to cut taxes for those at the upper end of the income scale, and to borrow from future generations in order to fund those tax cuts. The Green Party thinks that borrowing in order to fund tax cuts for upper income earners is not a very clever economic strategy. The reason we think that it is not a very clever economic strategy is that it will increase inequality in our country, a country that already has major problems with inequality, and that it will add enormous levels of debt to future generations. By adding debt to future generations we are increasing the interest payments they will have to pay, so we are simply kidding ourselves to think that we can somehow give tax cuts to upper income earners—in order to get votes, I guess, which is part of the Government’s strategy—and that future taxpayers can pay the bill. It seems to me that that is a fiscally irresponsible strategy.

The Green Party does not support an increase in borrowing in order to pay for tax cuts for upper income earners, and I am very surprised that the Minister of Finance and the Minister of Revenue have taken us in the direction that is implemented through both this bill and the Budget legislation. I wonder why we are heading in that direction when, it seems to me, it is such a fiscally irresponsible approach for a country in which there has been high levels of private debt, and in which currently there is increasing public debt because we have had to borrow more heavily during the global financial crisis in order to fund the economic stimulus package. Yet we are now increasing levels of public debt to fund tax cuts for upper income earners.

We also know that in terms of a stimulus package, tax cuts for upper income earners are not a very good way to produce jobs or stimulate the economy. We know that if we deliver tax cuts to low income earners, they tend to spend most of the money because they simply cannot afford to save it, whereas, if we deliver tax cuts to upper income earners, they are able to save the money because that is the position they are in. Although that is fine for those people and makes perfect sense for them at an individual level, in terms of delivering a stimulus to the New Zealand economy it is extremely ineffective. Whether we read the papers of the OECD or of any other body, those papers will tell us that tax cuts, particularly tax cuts for upper income earners, are not a good way to deliver a stimulus package. When we realise that we are funding those tax cuts through increased public borrowing, it seems to me that the strategy is a tremendously irresponsible economic and fiscal strategy.

When the Minister of Revenue spoke previously, he criticised the Labour Party over the capital gains tax. The Green Party is on the record as being in support of a capital gains tax that excludes the family home. We think it is a very sensible strategy. It has been used overseas and would raise roughly $4.5 billion a year once it was in place; it would take a number of years to raise that much money. We think a capital gains tax that excludes the family home is both a very good revenue-raising measure and a very fair tax. It is a very progressive form of taxation, because it tends to fall mostly on those who have the most wealth and the higher incomes. It would also have some positive, beneficial effects in terms of trying to dampen demand for investment housing, which has been a big problem for New Zealand over the last decade. There has been a big increase in the price of housing, which has been driven in part by the treatment of tax. In response to the Minister of Revenue’s comments on this issue, then, the Green Party thinks, yes, a capital gains tax excluding the family home is quite a good idea.

Looking at the savings side of this legislation, the Green Party agrees that some of the changes for KiwiSaver are very positive, and we support them. We think that the trans-Tasman portability of savings is a positive move, and that some of the new rules about under-18-year-olds needing guardians’ or parents’ permission to enrol make sense.

I think, though, that the debate we are having today on savings raises the broader issues about what we are doing with savings in New Zealand. This bill addresses those issues partially, but it is obviously a broader debate. We face two simultaneous problems when it comes to savings, one of which is the issue of the baby-boomers bubble coming through the system: how to afford the superannuation payments for those people from the public purse, and the ratio between those who are retired and those who are of working age. That is one significant challenge for us.

The other part of the challenge is national savings. The fact that as a nation we have been dissaving for so long has resulted in us running a very large current account deficit, and we have been funding the current account deficit through two mechanisms. On the one hand we have been borrowing large amounts of money, and on the other hand we have been selling off New Zealand - owned assets into overseas ownership. The effect of our poor level of savings over such a long time, and the fact that we have had to increase borrowing and sell off assets in order to cover the current account deficit, mean that only about 93 percent of GDP now stays in New Zealand. Back in the 1970s about 100 percent of GDP on a net basis stayed in New Zealand and was distributed to New Zealanders, in the form of profits, wages, or investment. Now the percentage is down to about 93 percent. We are losing about 7 percent of GDP every year, which is going to overseas owners, either through debt—on money we have borrowed from overseas and on which we have to pay interest payments—or through dividends and profits that get paid back to overseas owners because of overseas ownership of productive assets within New Zealand.

So our problem about savings has long-term implications for how wealthy and prosperous New Zealanders will be. If we are measuring GDP as a record of turnover, currently only 93 percent of that turnover stays in New Zealand, to be distributed as wages, profits, and investment. That is because we have had that savings problem. So the Green Party supports increasing savings in New Zealand, but we recognise there will have to be contributions from employees—from individuals—and there will have to be employer contributions and Government contributions. They all need to come together. Those three parts are the three necessary parts of the savings puzzle, so although this bill makes some positive changes to KiwiSaver, there are much bigger issues, particularly in light of the ongoing discussion on compulsion in superannuation. Those three components will have to be part of the solution if we are to improve our savings record using the KiwiSaver mechanism, but it was very disappointing to hear the Government opposed to any kind of increase in Government contributions, and it has also been disappointing to hear opposition from some employer groups about employer contributions, because that is an essential part of the package of savings if we are to extend the KiwiSaver system further.

On this bill, and on savings issues more generally, the Greens have had a lot of concerns about the way the Government is taking advice on this kind of legislation. We have been concerned about the role of banks, and in particular of PricewaterhouseCoopers, which provides some of the key advice on tax and savings in New Zealand. PricewaterhouseCoopers was, of course, the key adviser to banks that avoided, unlawfully, $2 billion worth of tax. So we are concerned about the constant use of these kinds of advisers becoming involved in the debate around tax and savings, when they have had a track record of providing advice to banks about how to avoid tax. I really do recommend to the Government that it needs to go to someone else for advice rather than to continue going back to that particular source, because we all know the record of that source.

In finishing, I say there are some good changes on savings; we support those. But we do not support the direction of the Government around income tax policy, and for that reason we will not be supporting the bill. Thank you.

CAROL BEAUMONT (Labour) : I rise to speak on the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill. As others have said, we are supporting this bill, and a number of very sensible changes are being proposed. I note that much of work was started under the previous Labour Government. We also have a Labour member’s typescript amendment in the name of Stuart Nash, which I intend to come back to.

The issue of improving trans-Tasman portability of retirement savings is a very important one given the movement of people between our two countries. Quite a significant amount of money is potentially being covered here, up to NZ$16 billion. We think that improvement is a positive thing, which potentially will assist individuals so that they are not stung by multiple fees for the administration of their retirement savings account. Obviously it will assist in something that both countries value, which is ensuring that people can save for their retirement and have an adequate standard of living in their retirement. So that is a very positive part of this bill.

It is interesting to note the question of the relationship between Australia and New Zealand and movement between the two countries. That question has been raised, certainly when Labour was in Government, and we have been raising it quite strongly in recent times, given the increasing gap in wages between Australia and New Zealand. I know that others have tried to assert at various times, particularly when Labour was in Government, that the reason New Zealanders move to Australia is the difference in tax regimes—well, for the record, that claim is obviously rubbish. The main reason is the differential in wages, which is around 30 percent and growing, as we know.

That is very worrying for us, and I note that the Government has no plan to address that particular problem. Its economic development strategies do not focus on the workplace or on lifting workers’ skills. If we want to transform our economy and create the sort of high-wage, high-skill, highly productive workplaces that we need in order to be successful internationally, we really need to focus on lifting wages, lifting skills, and looking at how we organise and invest in our workplaces.

But let me come back to the matter at hand. We are supporting, again, some of the Supplementary Order Papers. It is interesting to note the fairly extensive transitional provisions that have had to be made to get the GST increase through without creating some very strange anomalies and unintended consequences. That is probably a consequence of the way the Government forced through GST increases under urgency in Budget 2010 without really considering some of the compliance costs and unforeseen consequences. I think that is a real shame.

Accounting firm Ernst and Young stated last week: “As we face the harsh reality of the 1 October GST increase to 15 percent many are realising this is not a modest increase and the issues are actually more complex than anyone first imagined”. One of the transitional arrangements relates to the fact that the changes were forced through without considering all the consequences, and now have to be tidied up in this bill.

Very importantly for members on this side of the Chamber, GST increases will have a hugely detrimental effect on New Zealand families and business. Every day my colleagues and I have people talking to us about their concerns about the additional costs they will face with GST rising, the implications of that rise for inflation, and their recognition that the so-called compensation they will have is absolutely ludicrous. People do not buy it when members opposite say that their concerns have been taken account of by the paltry, for most New Zealanders, tax cuts or the small increases for beneficiaries that have been made. People are not silly. They are really struggling already, so they see that as a real issue.

That is why I really want to speak in favour of the amendment put forward by my colleague Stuart Nash to exempt council rates from the increase in GST over the transition period. That is a very sensible provision, and I urge members opposite to consider it. Basically it will exempt this year’s local government rates from the increase in GST to 15 percent. As I have noted, there are a number of transitional provisions in this legislation that look at exempting at 5-year finance leases, lay-by sales, and insurance contracts from the increased GST rate. The underlying reason for that is broadly similar to the reason that Stuart Nash has put forward his amendment on exempting council rates.

Let us look at why we need to make the amendment. As I have already mentioned, the costs being faced by New Zealanders at the moment are enormous and people out there are struggling. The majority of wage earners and salary earners are seeing their wages and salaries lift by a massive zero percent. That is right; most people are not getting an increase in their income. Many people have lost hours of work, including overtime payments, and I know that if members opposite are honest, unless they are wandering around with their eyes closed and not talking to people, they know that to be a fact. Here in this amendment is a small thing that we can do to help relieve the pressure that families are facing.

Mr Nash referred to budgeting services, and I will also put on record my acknowledgment of those people. They do a fantastic job against the odds in trying to help struggling New Zealand families. Recently I was at a meeting hosted by the Māngere Budgeting Services Trust. It was a packed meeting, with people from across Auckland present, and I think some of the things that were raised at that meeting are worthy of the Committee’s interest.

The budgeting services people noted what had just happened, which was that 150 jobs were advertised at the New World store in Mount Roskill and 2,700 people had tried to get those jobs, showing that there was a huge issue with unemployment. They also talked about the fact that the average level of debt of those people approaching budgeting services was on the increase. They said they were seeing more and more people coming in with debt related to loan shark loans, with rates of interest of over 100 percent. We know that members opposite have failed to take the opportunity to address that particular issue. I acknowledge the Hon Peter Dunne, because he, in fact, did not take that position on my private member’s bill. He supported the Credit Reforms (Responsible Lending) Bill, which would have made a difference.

The budgeting services people also told us that when people were looking for housing—and, as we know, it is a very tight housing market in Auckland at the moment—they were being pushed more and more into the private sector. Many gave examples of people paying upwards of 65 to 70 percent of their income to a private landlord. That does not leave much for food.

The thing that came through from all of the budgeting service people was that what was really being squeezed, the thing that households could control—and the question is whether we think this is appropriate—was the food that they put on the table for their children and themselves. People are trying to live on ridiculously small amounts of money, and they are not eating properly. They are really struggling, and there has been a massive increase in food grants. I think it is worth noting some of those concerns raised by budgeting services in that very recent meeting.

Coming back to the amendment, I say that it will help. It will help people who are paying their rates, by creating a situation where they do not have to pay the higher rate of GST on their rates for this year—that is, the rates bill from 1 July 2010. Again, I urge members opposite to support that change.

I will also take this opportunity to talk about KiwiSaver. I acknowledge that we have Supplementary Order Paper 158, which I understand is now in the name of Mr Garrett. I assume that he is replacing Mr Boscawen, our new Minister of Consumer Affairs, in moving that amendment. We support that Supplementary Order Paper. We think it is logical.

I note that it is extremely difficult for wage earners and salary earners to save at the moment, for the very reasons I have outlined. It is very difficult for people to make ends meet. They are facing higher costs across the board, so that is a problem. None the less, the bill is a good move. Having a workers’ superannuation scheme has given Australia a real advantage over this country. A massive amount of capital has been built up in Australia as a consequence of having decent workers’ superannuation. Effectively it is a virtuous cycle, because workers are saving, so they get a good outcome in their retirement, and the economy has access to capital.

CRAIG FOSS (National—Tukituki) : It is very interesting to note that Carol Beaumont, the previous speaker, is advocating asset testing for superannuation, which is what they do in Australia. So when members opposite get up and speak about the Australian superannuation scheme, at the end of the sentence should be “and asset testing of the recipients”. It is fair enough to have the debate, but they have to give the full sentence in order to give the correct context, rather than just give blank numbers of contribution rates of 2 percent for KiwiSaver and of 9 percent for the scheme over there. Asset testing for superannuation is on the agenda of the Labour Party, unless another Labour member denies that, just as a capital gains tax is on the agenda, unless another Labour member denies that. It would have to withdraw some of the videos out there from its various spokesmen, and various press releases. What else is on the agenda? Oh yes, a land tax is on the agenda of the Labour Party at the next election.

What is not on the agenda of the Labour Party at the next election, apparently, is axing the tax. Labour members are voting for the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial matters) Bill. They sent a bus around the country opposing a tax switch on GST—

Aaron Gilmore: Paid for by the taxpayer.

CRAIG FOSS: —yes—but, actually, they would not reverse it, going by the way they are talking, and they are voting for this bill. Members on the other side should focus a wee bit. Let us get on with things that matter, because those members would not actually axe the tax—at least, that is the latest version, but who knows?

Members opposite also talk about economic literacy. Well, there is no better example of the need for national standards of numeracy and literacy than a pamphlet Labour put out about GST recently. It talks about “National’s 15 percent GST”, somewhat misleadingly, conveniently, and dishonestly—am I allowed to say that—while ignoring the fact that GST went from zero percent to 10 percent under a Labour regime, and went from 10 percent to 12.5 percent in 1989, with 8 weeks’ notice and preparation, under a Labour regime, without any compensation whatsoever. That is in total contrast to what we have coming in on 1 October, which is a change in GST from 12.5 percent to 15 percent, and a huge reduction in income tax, one of the biggest changes in income tax and other taxation rates in 25 years, which will produce a $3.5 billion to $4 billion boost to our economy over the year. That is what is coming in on 1 October. Again, when members opposite talk about GST changing and all the damage that may occur, they need to finish the sentence by saying that it is accompanied by a switch from income tax to consumption tax. It surprises me that the Green Party is voting against an increase in consumption tax, when we line it up with all its other rhetoric.

I will come to the bill in one moment, because there are some interesting clauses in it, but I ask why people are struggling after so many years under a Labour Government. Yes, there is a recession going on. Hopefully, it has bottomed out. Hopefully, we are coming out of it. But in 9 years of a Labour Government, real wages in New Zealand increased by only 3 percent. Over 9 years they increased by only 3 percent. People who are going to Labour members’ offices and to our offices to tell us that they are struggling are quite right, because under the 9 years of the Labour regime the affordability of living increased by only 3 percent, and that was in the best economic opportunities and conditions that this country had seen in many a generation. Labour blew it. What it did was almost criminal. When Labour members have a go at us for trying to slow it down, trying to fix it up, I say that thus far, after 20-odd months of the National Government, real wages have increased by 8.7 percent—8.7 percent after only 2 years. That is a response to some of the somewhat silly allegations from members on the other side of the Chamber.

A married couple on superannuation is about $120 better off after the 2 years or so of this Government, because of changes to after-tax wages, an increase in average wages, and lower inflation and interest rates. Also, the changes on 1 October will be indexed. At the same time that GST changes, superannuitants will be paid up front. Normally, that occurs a year or 6 months later in this case. All distribution that can be indexed will be indexed. If only members opposite would finish their sentences and get off their high horse. The contradiction is that they say all this stuff but they are voting for the bill. They are actually voting for the bill. A reduction in the number of speeches from members opposite would be a nice wee contribution towards eliminating global warming; I wait with bated breath.

A couple of speakers from the other side have been talking about budgeting advice. That is a very good point, and it is quite correct. Budget advisers around the country are seeing quite a few more people who are trying to balance their affairs. As I said earlier, the affordability of living has improved somewhat over the last 2 years, but after 9 years of only 3 percent growth in real wages, people are struggling. When they go to a budget adviser, what does the budget adviser do? The budget adviser looks at both sides of the ledger, at how much money is coming in and how much money is going out, at what they cannot afford, what they would like to afford, and what they need. The budget adviser looks at basic necessities. Imagine Dr Cullen or Mr Cunliffe going along to a budget adviser. What would the adviser say? He or she would tell them to stop all these silly promises and commitments that mean they end up borrowing money; to manage the money coming in, try to distribute the income a bit more, and try not be at the risk of recessions, if they can; and to try to grow the real part of their wages.

Jacinda Ardern: Don’t borrow for a tax cut. And suspend your super savings.

CRAIG FOSS: “And suspend your super savings”—from a somewhat economically illiterate person over there. Here is a point: the New Zealand Superannuation Fund manages about $15 billion or $16 billion. It manages that, and it will return about 4 percent or 4.25 percent this year. The Crown is borrowing about $15 billion at 6 percent interest this year to keep the lights on. [Interruption] No, the tax cuts are fiscally neutral. Again, I am more than happy to lend some quite basic textbooks with nice diagrams—perhaps in comic form—to some of the members opposite so that they can understand what is going on. The real side of the New Zealand economy is having a boost, after the real side of the economy being in recession for 5 years, with no real growth and hardly any real growth in wages. Actually, the tax switching and some of the other changes in this allegedly non-controversial bill are all part of setting that platform—for example, the changes in the branch equivalent tax account regime, the controlled foreign company changes, KiwiSaver transportability, and the transportability of the Aussie scheme to New Zealand. It is all good stuff, and was done in anticipation of New Zealanders coming home as a result of the election of the National Government in 2008 and, perhaps, in 2011—we will see how that goes.

I acknowledge the Finance and Expenditure Committee. The process around this bill at the select committee was quite admirable. I acknowledge that. Generally, there was consensus across the committee. We made some changes to the bill that originally came into the House. I acknowledge the members of all parties, I acknowledge the officials, and I acknowledge the independent advisers. I look forward to the continued debate, which will perhaps be somewhat more formed as we go through the clauses in the bill. Thank you.

Hon SHANE JONES (Labour) : Kia ora anō tātou. Naturally, we support the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill, and it follows that it could do with a few improvements, not the least of which lie with the very thoughtful contribution offered by my colleague Mr Stuart Nash. Up and down the country, people on fixed incomes are facing pressures. Those pressures will definitely rise over the next 6 to 8 weeks. [Interruption]

Mr Foss is right in one respect: the gales of rhetoric across the Chamber will go on, but what will not go on is the ignorance about what the Government’s agenda is in relation to fiscal policy. Never mind what we say in the House, come October, the changes and the cost rises will begin to bite. They will affect people’s pockets and they will affect their perceptions as to why the Government decided to shift the base of its tax revenue to consumption, whilst at the same time borrowing from the international capital markets to fund tax cuts. That cannot be explained away.

It is unfortunate that the spirit of companionship that my colleagues on the Finance and Expenditure Committee showed to Mr Foss and his confrères has not carried over to the savings debate in the Committee. The Savings Working Groupis required to report back by 20 December. It will cover, or obfuscate, the gaping hole in the Government’s thinking. The Government has now outsourced to the Assistant Governor of the Reserve Bank, Dr McDermott, and a host of other identities from the commercial world, the responsibility to find the answers that the Government can take forward and use to plug the gap. Although the Government is now running the rhetoric—of which this bill is a small part—that the problem is capital accumulation in the New Zealand economy, it has found itself unwilling to derive, or incapable of deriving, ideas from amongst it own ranks, or it has probably found that there is already within Treasury a belief that there is no savings crisis. The small changes in this bill were largely Labour policies anyhow. They are just a small set of minuscule changes grafted on to the architecture that the Government inherited, in terms of savings.

But there is a deeper point at stake. That point is that if the Government shares the view that the problem with the economy is capital accumulation, then why has it made retrograde decisions over the last 18 months to disincentivise people to save, and, also, to undermine New Zealand’s domestic sovereign fund? Those two decisions show that the Government acted in a panic-stricken state and has never had a strategy to deal with savings.

I accept that a number of the identities in this task force have a positive contribution to make, but it will be a contribution that they will be required to make within the pipeline of the Government looking for ideas to take to the next set of elections. It is a tragedy that taxpayers’ funds are being used to subsidise this crowd and its absence of intellectual rigour or original thought as to how New Zealand should deal with that deficiency.

I will come back very briefly to the suggestion that we ought to offer relief in relation to the application of GST on rates. Gordon Copeland, a colleague of the current Minister in the chair, the Minister of Revenue, warbled on about this at length, which probably meant that the idea was never going to go anywhere. However, having said that, he had that suggestion and a host of other ideas. Given the obvious skill base and a host of other very positive attributes represented in my colleague Mr Nash, who is bringing the idea forward, the idea has obviously come on time.

It is disappointing that, quite apart from the refinement changes, the Government is not addressing some of the deeper challenges, and I daresay it is incapable of doing so. It seems as if it is gripped by a whole set of systemic problems and is unwilling to move on from the mantra of the 1990s, and, at the same time, is unwilling to embrace a new paradigm or a new set of ideas to move New Zealand on to its next phase. Quite frankly, if we strip away the refinement changes and Mr Dunne’s contributions, etc., we find that, deep down, the architecture of this bill does not significantly differ—other than the tinkerings of the current Government—from what Dr Cullen sought to do in 2000 and 2001, and it does not bring forward an original contribution to arrest the decline of savings.

If we seek to achieve the things that Mr Brownlee and others tend to talk about from time to time—such as boosting the productivity, etc., of New Zealand firms—we will find that that cannot come unless we have access to capital. Unlike the Prime Minister, members on this side of the House have grown quite tired and quite apprehensive about the flood of international capital—which is about to be shepherded through, no doubt, by the current Government—and the Government’s unwillingness to stop the sale of farmland to overseas interests. That, no doubt, will be an item that we will fight vigorously at the next election.

We are no longer in the camp where we can see a worsening current account deficit and the laissez-faire attitude of the current Government that it does not mind where capital comes from. We actually want to husband sources of capital in our own country, and we want to build reservoirs that give meaning to people when they say that they actually want to feel they have an ownership stake in their own economy, in their own communities, and, indeed, in overall society. That is why, broadly speaking, Labour is supportive of the refinement changes in this bill, but we are not supportive of the other agenda, which is to meander forward without a clear sense of direction, in the absence of any compass that gives confidence to the next generation, to the mokopuna—our grandchildren.

When we listen to David Carter, it is almost as if he contemplates a future where our country is one large farm, and the Prime Minister contemplates a future where our country is one large hotel. Well, that is not our view. We believe that in order to grow our wealth we need to deepen and broaden the diversity of the goods and services that we create. We cannot drive without a decent reservoir of savings capital that can be deployed to suit the agenda of New Zealanders, rather than the agenda of nameless, faceless international fund managers who do not care at all for the national interest of Aotearoa New Zealand. Their agenda, quite rightly from their perspective, is to find opportunities, exploit them, and grow the wealth of the funds that they hold. But if anyone tells me that we should embrace indiscriminately the portfolio theory of investment, I will tell them to look at the actual record of many of those portfolio theorists over the last 5 years, as we have watched international wealth and capital melt. That is why there is a key distinction here.

I am sure that there is a desire amongst a host of our colleagues on the other side of the House to advance the savings debate, but we differ. Our desire is to ensure that the savings are not all sent overseas but deployed to develop our own country and to develop endowments that create value.

It is time that the current Government stopped trying to cadge the ideas of Dr Cullen and actually put forward a debatable point as to what its vision is. Labour’s vision is to continue to husband savings, but to have them disproportionately deployed on issues at home, and to create enterprises that actually build new firms and create more jobs. None of that has actually happened to date, and that is a consequence of the current Government’s approach to economic growth and fiscal policy, which is driven largely by panic-stricken reaction, to the point that not even the business or the corporate community knows any longer what the Government stands for.

On this side of the House, in relation to the savings debate—and, of course, KiwiSaver is only one element of the savings debate, but it is the most innovative—there will be no ambiguity and no vagueness as to where we stand. We support the bill, but there is much unfinished business.

Hon DAMIEN O’CONNOR (Labour) : I have great pleasure in taking a call on this bill. I have come into the Chamber and been astounded, really, that we have the bill here, supported by the National Government. In fact, it is National’s bill. There is some sweet irony here, I guess. I have written a new title for the bill, and it is the “Save Bill’s Butt Bill”, because Bill English and the National Government in their first Budget slashed savings and any attempt to have savings in this country. Now we have a bill that quite rightly—and Labour will support it—facilitates superannuation payments made in Australia being brought back into this country. The Government now realises that there is value in having superannuation funds available to invest in this country, to develop it. Well, it is a bit late, I say to Bill English, the Minister of Finance, because he—and Gerry Brownlee and John Carter, his fellow Ministers—have been asleep.

In fact, I heard a question from Mr Brownlee before: “What did Labour do?”. Well, we set up Kiwibank. We set up KiwiSaver. We set up a superannuation fund. That is what we did to develop higher levels of savings in this country. As the previous speaker said, we understand the value of investing in ourselves and utilising savings made by us. The Australians—although we might criticise them, and their rugby and their netball, from time to time—have been so smart for so long. Eight percent of their income is invested in superannuation. That is smart. Now Bill English—the same Minister who destroyed our attempts to get savings up and running in this country, destroyed Labour’s initiatives, parked up the contributions to the superannuation fund and to KiwiSaver, and undermined the superannuation fund—realises that if we are not doing it ourselves, maybe we should get access to the $16 billion that has been accumulated in Australia by New Zealanders through a compulsory scheme that says that 8 percent of one’s salary should go into superannuation. That is smart.

Labour started out with a rate of 4 percent, and was moving in that direction. In fact the ACT Party now, through its Supplementary Order Paper, is saying that people should be able to contribute more. The ACT Party, with all its ignorance on most issues, I have to say, now realises that superannuation is very smart. Thank God ACT members have learnt something in this House over these years! The National Party has, too. Rather than continue with the savings initiatives put in place by the Labour Government, the National Government slashed that, gutted it, undermined it in its first Budget, and now, to make up for that, says it wants some of that Aussie money—that it wants to get its hands on that $16 billion. So we have the “Save Bill’s Butt Bill” so that Bill English can stand up in a year’s time and say that savings are up and running and we have an inflow of money into the country, so we can look at investing in ourselves.

Noises have been coming from National on that issue just recently. National members are saying that we should start thinking about our savings, because they have not been quite good enough and that we cannot invest and control our own destiny. I say “Wake up!” to Mr Brownlee and Mr Carter. That truth has been there for a long time, and the Labour Government moved on it. We moved on it through the superannuation fund. We moved on it through KiwiSaver, and National slashed and gutted those two key initiatives. Now they are talking about reinventing something, and they are saying, through this bill, that the money accumulated in Australia, the $16 billion, should be able to come back to New Zealand. That is great. It is smart. It is exactly why the Labour Opposition is supporting the bill, but it is a bit sad to know that the same Ministers who gutted our savings regime are now attempting, in a piecemeal way, to get a savings task force, or think tank, or chat room back up and running. Well, if they had just taken a little bit of advice from the previous Labour Government and continued on with our commitment to superannuation and KiwiSaver, we would all be a lot better off and we would not have to rely on the $16 billion that this bill will help bring back into the country.

Hon DAVID PARKER (Labour) : Firstly, I will respond to Gerry Brownlee’s interjection during Shane Jones’ contribution. Mr Brownlee asked what Labour did for New Zealand investment and New Zealand ownership. Well, it is a very long list, I say to Mr Brownlee, and I am sad that Mr Brownlee, as the Minister for Economic Development, does not realise that.

What did Labour do? Well, we set up the Cullen fund so that in a time of Government surpluses, the Government saved towards future retirement costs. We did that against the opposition of the National Party. National, at every Budget, called for what were patently unaffordable tax cuts, which would have meant that we were not running a surplus in a time of plenty, and that New Zealand would now be in the same position as Portugal, Spain, and Great Britain. We would not have been as badly off as Greece, but we would have been on the road to having the problem Greece has with rising Government debt, because we would not have put away money in a time of plenty. That is the first and probably the most important thing we did. We ran Budget surpluses consistently, and we had tax cuts only when the economy was going into recession, so that they were countercyclical.

The second thing we did was recapitalise Air New Zealand. We made sure that Air New Zealand was maintained in the ownership of New Zealand. Who opposed that? Does anyone remember?

Hon Members: National.

Hon DAVID PARKER: That is right—National opposed that. What else did we do? With the leadership of Jim Anderton we set up Kiwibank. Jim Anderton actually deserves more credit for that than Labour does, but we supported his doing it. Kiwibank has been an outstanding success. What else did we do? Someone yelled out “KiwiRail”. That is quite right. We made sure that the monopoly rail infrastructure was in New Zealand ownership, and that was the right thing to do. What else did we do, against the criticism of the National Party? We maintained Auckland Airport in New Zealand ownership when the National Party said it should be flogged off.

What else did we do? We set up KiwiSaver. What has National done? Well, if we look back a bit we see that it cancelled the Kirk savings scheme. I give credit to Sir Roger Douglas, because for decades he has consistently supported improved savings in New Zealand. He was the designer of the Kirk scheme. It was National that reversed that scheme. As Brian Gaynor recently said in the New Zealand Herald,if that scheme had been left to mature, the New Zealand capital markets would be $300 billion deeper than they currently are, and we would probably be in even a better position than the Australians are. They are plainly better off than New Zealanders because of their deeper capital markets. National also scuppered the Peters superannuation savings plans, which were backed by ACT, in the late 1990s. National has undermined KiwiSaver.

National is not running Budget surpluses; it is running excessively large Government deficits to pay for its ridiculously extensive and unaffordable income tax cuts, 35 percent of which go to the top 5 percent of income earners, I think—the people who already earn the most in New Zealand—

Stuart Nash: That’s not fair.

Hon DAVID PARKER: It is patently not fair. It is one of the reasons why New Zealand’s Government deficit is so large.

Against that background, what economic plan did we have from the Government in February this year, in its February document? At that stage it was still promising a step change in the New Zealand economy. It was focusing on extensions to mining, it talked about the possibility of New Zealand being a financial services hub, but it did not talk about savings. It did not talk about savings. What happened in August this year, in the Government’s latest plan? There was still no talk about savings on 1 August this year, despite that being the standout difference between the New Zealand economy and the Australian economy. The 1 August plan stopped talking about any step change in the New Zealand economy; the Government has given up on that ambition. It will not make any promise for which it can be held accountable between now and 2025 for bridging the wage gap with Australia, notwithstanding the fact that that was National’s central election promise at the last election. The 2025 date is a long way out, and the gap is growing wider. The Government has been widely criticised in the media for trying to spin the numbers to pretend that the gap is narrowing when it is, in fact, widening. But still there was no talk on 1 August in respect of savings.

Now we have a committee. Now we have a committee that is to report at the end of the year. It is due to report at the end of the year on what is probably the most serious challenge facing New Zealand—that is, the contribution of our invisibles to our current account deficit. It is caused by New Zealanders consuming too much and not saving enough. It is a problem that has bedevilled New Zealand for decades and is bad now. So the Government set up a committee. I thought that as the Government it was meant to lead. I thought that after 9 years in Opposition National would have some idea as to what it wanted to do. After close to 2 years and two Budgets, it has come along to Parliament and conceded that the Labour Party is right and that it needs to improve New Zealand’s savings. That is essentially its message at the moment. It is not yet admitting it was wrong to undermine KiwiSaver; it is not yet admitting it was wrong to run Government deficits to pay for income tax cuts, 35 percent of which go to the top 5 percent of earners; it is not yet admitting that it is wrong to stop contributions to the Cullen fund; and it is not yet admitting that it has got the tax mix wrong. But it has set up a committee to give it advice on all of those issues, because it does admit that New Zealand is not saving enough. After two Budgets and 2 years, it admits we have a problem with, as Shane Jones says, capital accumulation. It admits New Zealand has a problem in our failure to properly save, but it does not know what to do.

That is an indictment upon a Government in respect of a country that has growing unemployment, a growing wage gap with Australia, and broader and broader realisation amongst New Zealanders that the problem—or a major part of the problem—is our lack of savings. It is an indictment that the Government has taken 2 years to get to that position, after it had 9 years in Opposition—9 years in Opposition. It ought to have realised before now that the major difference between New Zealand and Australia is not mining schedule 4 land and land in national parks, but New Zealand’s relative lack of savings compared with Australia’s.

The Government has squandered the last 2 years. By December this year, it says, it will have some recommendations. Well, by that time we will be in the last year before the election. The election has to be held by November next year, and there are rumours that the Government will hold the election before the Rugby World Cup, in July or August next year, so effectively it will have wasted a whole term in office in respect of the single most important economic issue facing the country, which is our relative paucity of savings. The fact is that every year we get poorer. More and more of our country is sold off overseas because we are running a current account deficit so much of which now relates to invisibles—the interest and dividend flows that are paid to overseas investors in New Zealand.

The Government has not taken any steps in respect of savings except negative ones. The list of the negative steps the Government has taken is long: stopping the contributions to the Cullen fund, undermining KiwiSaver, and, of course, the tax cuts, which are too much weighted to those already on high incomes—35 percent going to the top 5 percent of income earners. We have a Government deficit of many more billions of dollars every year than would have been necessary had National’s tax package been more responsible and more equitable.

It is lamentable that after inheriting one of the strongest Government balance sheets in the world from the prior Government, this Government has both squandered what it inherited and gone backwards on what is the most important difference between New Zealand and Australia—that is, savings. The Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial matters) Bill, which we are currently considering, ought to have provisions that strengthen KiwiSaver; it ought not to be limited to measures that ease the trans-Tasman transferral of KiwiSaver and Australian superannuation savings balances. That is a good thing to do, but it misses the bigger point that New Zealand is short of savings. The Government is transparently without any adequate plan in this area. It has been exposed for its inadequacy on this front, once again.

AARON GILMORE (National) : One would think that David Parker was a Luddite in a time warp, given the speech we have just heard. The bill we are talking about today is the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill. The bill is not about anything that that member was talking about; it is about tidying up and improving our savings environment in terms of bringing home hard-earned savings from those Kiwis who want to come back to New Zealand from Australia—and thousands have done so since the election.

I want to talk about a couple of things: in particular, two Supplementary Order Papers that have been put forward, and the crazy amendment put forward by the member over there, Mr Nash. In particular, I will talk about the Supplementary Order Paper that has not been discussed earlier, which has some nice tidy-ups around imputation credit accounts. That Supplementary Order Paper, which has not been discussed here, will allow the finance company restructuring that is occurring as we speak to occur in a better, more efficient way to allow those imputation credits that are retained in a finance company to go with that group as that finance company restructuring occurs. They are good things that occur. They are some of the little steps that help our economy move and grow a bit faster.

Mr Nash’s amendment is window dressing that puts in place an arrangement whereby, for little overall gain to ratepayers, there could be a one-off putting aside of GST. I will give an example. The average ratepayer in somewhere like Napier probably pays about $1,000 in rates. So Mr Nash is talking about a $25 one-off gain to a ratepayer. Our tax cuts and changes will bring $25 per week to the average household—$25 per week. We have heard from members on that side of the Chamber that 75 percent of people earn less than $40,000. Well, I can tell members that in my household 75 percent of people earn less than $40,000, because I am the only worker in my household. I have two children and I have a mother at home who looks after the children. Is that outrageous? No, it is not. Those are the numbers those members use—they use selective numbers—to tell a story that is absolute rubbish, and they know it.

The real truth is that real after-tax wages—the wages in people’s back pockets—have been going up under National. After 9 years under Labour what did wages do? They went up by 3 percent—3 percent in 9 years. It is ridiculous. What was going on there? And what were those members saying at that stage? Nothing.

This bill puts in place nice, little changes that help our economy grow a bit faster. It allows savers to bring cash into New Zealand to invest in things that make sense. The bill does not invest billions of dollars in train sets, which was an absolute disaster and made some investor in Australia richer. This bill allows Kiwis to bring home their own money and invest it more wisely in ways they see fit. That is a wonderful step in the right direction.

We have heard Labour members talk about many savings-related issues that are not relevant to this bill. This bill is about tidying up GST and the tax system to improve savings in New Zealand and to improve our economic growth. It is not about what those members talk about, which is absolutely irrelevant. I wish they would talk a bit more about what this bill does.

Peter Dunne, the Minister of Revenue, has done a good job of bringing forward these Supplementary Order Papers and putting in place some changes that make the bill work more efficiently. I think that is a good thing. There was some wonderful work by the officials, who listened to what people said and realised what was actually going on. Members on the other side of the Chamber do not want to argue, because they do not have any answer to it—and I find that outrageous.

This bill allows for great improvement, economic growth, and changes. The bill allows New Zealanders to save a little bit more of the money that they have earned overseas, so that when they get out of the 747s and are home in New Zealand—like the thousands of Kiwis who have already done so, and like the many members of my family who have done so—they do so because they want to live in New Zealand under a John Key - led National Government. The bill allows them to bring home their superannuation savings from Australia and invest them in New Zealand. That has to be a wonderful thing. Thanks very much.

Hon PHIL GOFF (Leader of the Opposition) : That rave by the member Aaron Gilmore shows just how out of touch this Government is. He treats with contempt the ratepayer who will have to pay on average maybe $30 or $100 a year more for the three-quarters of a year Supplementary Order Paper 157 covers. He treats that person with contempt.

This reminds me of a letter that was sent to me yesterday that had been sent to the Prime Minister. It was from a businessman. He said that this Government just does not understand what the impact of the increased prices it is imposing on businesses will be. He said that he will be paying more GST on everything, including his food. He will be paying more for his rent because of the changes in property taxes. His business will be paying more in road-user charges, GST, accident compensation, and the rest of it. He said to Mr Key that he had been a National voter but he would be changing his vote next time, because Mr Key has put his business out of business and has imposed more taxes on people that he promised he would never impose.

I say to Mr Gilmore that the small gesture in the Nash amendment, which brings rates into line with other things like 5-year finance leases, is a way that we can give a little relief to hard-pressed New Zealanders, and by God they need it! Half of all New Zealanders did not get a wage rise last year—half of all New Zealanders did not get a wage rise last year. The fat cats on the other side of the Chamber did. They got big tax cuts. The tax cut for the average New Zealander is about $13 a week, while the costs imposed by this Government—[Interruption]

The CHAIRPERSON (Eric Roy): I am sorry to interrupt the member, but members who are not in their own seats should not be barraging in the way that they are.

Hon PHIL GOFF: Those members should stop shouting, stop showing their arrogance, and listen to what their constituents are actually telling them. Their constituents are telling them that at a time when people have not been getting wage increases, the rise in GST is the straw that will break the camel’s back. It will break their backs on top of things like the fact that most renters in Auckland are paying $20 a week extra before increases to property taxes are brought in. Most people who have children in early childhood education will be paying $20 to $30 a week more for each child. It is no wonder that the early childhood centre that John Key opened last year in Māngere—a low-income area—has sent a letter to the Government saying that it will have to charge $20 to $30 a week more for early childhood education, but that the parents simply cannot afford it.

Mr Gilmore arrogantly says that it is a small amount of money. We know that it is a small amount of money to Mr Gilmore and the Minister of Finance, but then the Minister of Finance gave himself $48,000 a year to rent his own home—$48,000 a year to rent his own home. This is the Minister of Finance who tells us that New Zealanders should not worry about the increased costs that this Government is imposing on them daily.

The rate of GST will be 15 percent.

Craig Foss: Tell us about the 3 percent.

Hon PHIL GOFF: Does Mr Foss know what that rate makes consumption taxes in New Zealand? It makes New Zealand the fourth highest country in the world in terms of consumption taxes that a Government imposes on its people—the fourth highest in the world. What do we know about consumption taxes? We know that they fall heaviest on low and middle income earners. They will be paying a higher proportion of their income in consumption taxes, while the income tax cuts to Mr Foss and Mr Brownlee will be in the hundreds of dollars—[Interruption]

The CHAIRPERSON (Eric Roy): Sorry to interrupt the member. Mr Foss, you will either desist or sit in your own seat.

Hon PHIL GOFF: Thank you very much, Mr Chair. Mr Foss and Mr Brownlee do not understand that when one is on a high income one gets big income tax cuts, whereas the families that Labour talks about, whom Stuart Nash is trying to help, are ordinary New Zealanders who are finding that the cost of living is going up at a far faster rate than their wages.

I ask Mr Brownlee what the Budget tells us. It tells us that the rate of inflation will be 5.9 percent by the end of this year. Well, more than half of all New Zealanders did not get a wage increase last year. The National Government can spin all it likes, but the fact of the matter is that New Zealanders will know when they go through the supermarket checkout, and they will know even more in 37 days’ time, that they have less in their pockets, and not more, as the Prime Minister told them.

Hon PETER DUNNE (Minister of Revenue) : As I listened to that speech I was reminded of a comment that Winston Churchill once made about Aneurin Bevan in the House of Commons. He said to him: “One member should not develop more indignation than he can contain.” What we saw from the Leader of the Opposition was extraordinary huff and puff about the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill. The only problem with his comments was that they were at direct variance with everything his colleagues had been saying in this Chamber for the last hour and a half. If one had just come into the debate or switched on one’s television or radio, one would assume from the Leader of the Opposition’s comments that Labour would vote against this bill. But every single one of its speakers to date has been at pains to point out his or her support for the legislation.

The attitude of the Leader of the Opposition seems totally at variance with his colleagues. But there were some great gems during his remarks. He objected to forthcoming property taxes that the Government is allegedly about to levy. Well, what we are doing is removing the capacity for people to depreciate property under certain circumstances. But we are not doing what every Labour speaker has failed to deny this morning is in their intent, and that is bring in a capital gains tax and a land tax to punish investors. We heard the Leader of the Opposition say that there is some dastardly plan afoot on the Government’s side to bring in a property tax, although his colleagues are standing here this morning, one after the other, criticising the Government for having ruled out a land tax and a capital gains tax. He is simply out of touch with the reality of his own side, let alone the attitude of the rest of New Zealanders.

The Leader of the Opposition then complained about the fact that our GST is allegedly the fourth-highest consumption tax in the world. But we heard nothing in his speech, and no amendment has been moved by his party, to date, to give effect to one of the other great policies—taking GST off fresh fruit and vegetables, which he has been touting of late. If this is the fourth-highest consumption tax in the world, and if people are suffering to the extent that he claims, then I thought he would have moved his pet amendment today so that the Committee would have had a chance to consider it—but absolutely not. In fact, the professions of support from his colleagues for this legislation continue unabated.

The Leader of the Opposition cannot have it two ways. He cannot come down here and make a strong and vigorous speech opposing the legislation while his colleagues on the Opposition benches continue to get up, one after the other, and profess their support for it and for the Government’s amendments as being user-friendly and just what is needed to make the measure work more effectively.

One can only draw some internal conclusions about the state of the Leader of the Opposition’s party from those remarks. One can also say that they make no contribution whatsoever to the quality of this debate. They make no contribution to the issues that are being put before the Committee today. These measures, which have been worked through by the GST Advisory Panel, and are in response to submissions received from the general public, are positive and beneficial, and it is no wonder that they are supported by the Labour members opposite. It is just a great pity that none of the Labour members over there have sought to inform their leader of the position that their party is taking. As a consequence, the Leader of the Opposition comes in here, stands exposed—wrong speech, wrong occasion—and the reality is that his colleagues will continue to support this bill. His colleagues will continue, as they have all said during the number of calls they have had to date, to profess their support for the bill’s provisions. Maybe someone should tell the Leader of the Opposition where his party stands.

Hon DAVID CUNLIFFE (Labour—New Lynn) : I wonder which Chamber the honourable Minister, Peter Dunne, was sitting in during the excellent speech made by the Leader of the Opposition. It clearly was not this one. The Leader of the Opposition said, as members on this side have consistently said, that although Labour will support this bill because hardworking New Zealanders need some relief from the tremendous shambles of the introduction of this tax, we will put forward an amendment that will give ratepayers temporary relief and ease the burden this year on ordinary New Zealanders from the oppressive increase to this tax.

New Zealanders up and down the country know that National is so out of touch. Aaron Gilmore said in the previous speech but one that the amounts were very small—so why would the peasants and the serfs notice? Because they cannot put food on their tables, I say to Mr Gilmore. Our constituents are crowded into houses—two and three families are crowded into a house—and that is why $20 of GST a week makes a hell of a difference. If Mr Gilmore had to choose between taking his children to the doctor and putting food on the table, paying $20, $30, or $40 a week more in GST would not seem like a small amount.

That is why Labour is bringing relief in respect of the cost of living with our Supplementary Order Paper, which was put forward by Mr Nash. It will ease the adjustment for ratepayers, and it is a step that will be welcomed by all New Zealanders. In contrast, the Minister in the chair, the Minister of Revenue, has had, in desperation, to bring to this Chamber 28 pages of tidy-up Supplementary Order Papers, which are focused on all of those little things that went wrong in the drafting of the main bill.

It is extremely complex to change GST midway through the year, and the small businesses up and down New Zealand will be paying another price. Not only do they take the risk and have to collect the tax that the Government is taking from them, but they pay the price of the overheads in the system change, the staff training, the uncertainty, and the risk that customers will keep their wallets closed during the so-called aggressive recovery—so called because it is not happening. It is not happening, because the New Zealand public does not believe that the Government has a plan, and they are right. The Government has no plan for jobs, no plan for growth, and no plan for leading New Zealand forward.

If there was any doubt about that, the Government’s latest U-turn on savings is proof positive. For the 2 years of this National Government, Labour has been saying that New Zealand’s savings gap is critical. Labour has been out front saying that our net international debt at 90 percent of GDP is a killer and that the Government needs to focus on it. After 9 years in Opposition, 2 years in Government, and two Budgets, National has finally set up a committee—a committee. So bereft of ideas is the Government that it is reaching out for others to tell it what to do, in the face of this enormous yawning international debt and crucial savings gap, and that is instructive.

It is instructive that in the ACT Party’s Supplementary Order Paper on this bill, which gives New Zealanders the option of increasing their contribution rate—in other words going back to what it was under Labour before National gutted it—there is no mention of an employer contribution. So they are putting it back on hard-pressed Kiwi householders who are already facing a rise in GST, and they are asking them to save more as well. How will they do that? It will be by compulsion. How do we know that? Because Bill English has said that there will be no new sweeteners, no new money; this will be fiscally neutral. So whatever the savings committee comes up with, it will have to make it fiscally neutral. There will be no sweeteners; that leaves only compulsion.

The word around the building for New Zealanders out there is that the Government will almost certainly go the route of compulsion. If it is not, why does it not rule that out now? Why do Government members not stand up and reassure hard-pressed Kiwis who cannot afford groceries that they will not force them to take more money off the table in the middle of a recession? There is silence, not a word. Silence speaks for itself.

DARIEN FENTON (Labour) : Just for the record, I assure the members opposite and the Minister in the chair, the Minister of Revenue, that Labour supports the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill. The work on it started under a Labour Government—

Hon Member: Go upstairs and talk to Phil.

DARIEN FENTON: No, Labour supports this bill, as does Phil Goff. He was very, very clear, and he made some excellent comments during his speech—

Hon Member: And by the way, why is your leader here at the Committee stage of the debate? It’s bizarre.

DARIEN FENTON: Would National members like us to withdraw our support for this bill? Is that what members opposite would like? Would they like us to spend the next 12 calls criticising this bill?

The reason we support the bill is because the work started under Labour. We also support ACT’s Supplementary Order Paper, which puts back in place some things that were removed by this Government. We support the Government Supplementary Order Papers, and we have also introduced an excellent amendment to exempt council rate payments from GST.

This bill is a hopeful bill. It is hopeful because it hopes that droves of New Zealanders who have gone overseas to live in Australia—those who have gone for a better life because they are not finding it here under this Government, and those who are still moving to Australia by the planeload every week as we speak—will come home and bring their savings with them. I ask the Minister and National members opposite why those people would return. Why would they come back from Australia when their GST will increase on 1 October, when they will pay more in rates, and when this Government has gutted many things, particularly for retirees? The Government has made it difficult by cutting support for hearing aid subsidies, by cutting home help, by cutting elder abuse education, by cutting elder driver courses, and by allowing ever-increasing electricity bills. Why would people come back from Australia and bring their savings with them?

There is a good idea behind this bill; retirement savings portability is sensible. We have been told that potentially $16.6 billion in lost contributions from New Zealanders working in Australia could come back to New Zealand under this scheme. The Government hopes that they come back to New Zealand, but if even a fraction of lost contributions come back to New Zealand it would have a positive impact.

It is interesting that the Government, in the last couple of weeks, has belatedly decided to do something about savings. KiwiSaver is an excellent scheme and the Government has continued with it even though it gutted it at its first Budget when it came into Government. It has had to acknowledge that Michael Cullen, Helen Clark, and the Labour Government had an excellent idea with KiwiSaver. It has been enormously popular: over a million people have signed up to it. This Government has finally realised that there is a problem with savings, and it wants to do something about it.

Even though it supports KiwiSaver it has, of course, attacked the Cullen fund. It has stopped the contributions and, in typical Government fashion, made no decisions. That nice Mr Key has said that the Government will have a committee that will start with a blank sheet. It sounds to me a little like the National plan for the economy—a blank sheet. It will set up a panel of experts who may or may not report back before the next election. As other speakers have said, when this Government has no ideas it forms a committee. We have so many committees, review groups, and so on. I wonder whether one of the first recommendations the committee will make will be to reverse the stupid decisions around suspending contributions to the Cullen fund and to put back the holes that National created in the KiwiSaver scheme when it first came into power.

Let us think back a little bit about what the Government did under urgency to the KiwiSaver scheme before Christmas 2008. The minimum member contribution rate was reduced from 4 percent to 2 percent, and 2 percent became the default contribution rate for new employee members from 1 April 2009. Then, of course, compulsory employer contributions were capped at 2 percent, as well.

Inevitably we talk a lot about Australia, because the Government has no plan for catching up with Australia and we are drifting further and further behind. I cannot help but reflect that the Australians got it right a long time ago. They were smart. They got it right. They got together with the unions and workers—

Craig Foss: They brought in asset testing for superannuation.

DARIEN FENTON: They brought in compulsory superannuation.

Craig Foss: Asset testing.

DARIEN FENTON: That is right. They brought in compulsory superannuation.

STUART NASH (Labour) : I want to make one thing perfectly clear to this Committee that Mr Foss and the Hon Peter Dunne have got wrong. Labour never supported an increase in GST. Labour will never support an increase in GST. This bill is not about an increase in GST. If this bill were about an increase in GST we would be opposing it with every single fibre in our bodies, as the vast majority of New Zealanders have done. I want to make that abundantly clear now. We did oppose the increase in GST, and we would do it again.

But we do support this bill and its Supplementary Order Papers, and there are three things I would like to comment on specifically. This bill is necessary to ensure the integrity of tax legislation. It is also about doing business and making the transfer of savings funds across the Tasman relatively easy. The second point is what an absolute shambles this whole implementation of GST has been. The third point is to ask where the hell the Government’s plan is. What is the plan for savings, and what is the plan for this economy?

I have a couple of things I would like to say beforehand. Mr Foss stood up and spoke about honesty. I can tell this Committee that Phil Goff, our leader, would never stand in front of the nation and say, as Mr Key did, that he would not increase GST, then increase GST. It must make Mr Foss feel rather uncomfortable whenever he watches the video and sees Mr Key say to the nation: “National will not increase GST.” Yet National members have the nerve to stand up and lecture Labour on honesty. That is the reason why Mr Key will be a one-term Prime Minister and why Mr Goff will be the next Prime Minister of New Zealand. It is because he has integrity and he is an honest man.

Then we had Mr Gilmore. He was unbelievable. He stood up and asked why we would take GST off rates, as it was only $25 a week. He said: “My household can bear that.” I challenge Mr Gilmore to live on the median wage in his electorate for 1 month. I think it is about $30,000. I challenge him then to come back to this House and tell us that $25 a week is not much money.

Then we had Mr Tremain and Mr Foss from the Bay stand up and shout it down. They are so out of touch that they do not think the people of Hawke’s Bay are concerned about an increase in their rates. I challenge Mr Tremain and Mr Foss to hold a public meeting and explain to the people of the Bay why an increase in GST on their rates is necessary. No one in the Bay wants an increase in GST on their rates. That increase in rates will not go towards the city council’s coffers at all. It will go to the Government. The people of Napier will pay more in their rates but not one single cent of it will go to the City of Napier. It will go to the 6 percent of people in Napier who earn over $70,000. So those members should not talk to me about honesty.

As for Mr Gilmore, wow, he is one man who is way out of touch. He is on $134,000 and he stands up and says that an increase in his rates will not make any difference to his household. I can tell Mr Gilmore that he is one of the lucky few in this country who is on a salary of that level. He is one of the lucky few who is about to get a tax cut of approximately $100 a week. Those people in his electorate who are on the minimum wage will get about $3 a week. Mr Gilmore said that $25 a week means nothing. He should try to live on the median wage.

I would like to talk about what this bill does and the reason why we support it. The bill introduces changes to the tax rules to allow New Zealanders returning home from Australia to bring their retirement savings.

PESETA SAM LOTU-IIGA (National—Maungakiekie) : I rise to support this bill as a Government member. But before I talk about the bill, I want to straighten out a few facts that Mr Nash, the member opposite who has just spoken, did not quite understand, or maybe he was deliberately distorting the representations made by Mr Foss and Mr Gilmore. Mr Gilmore referred to rates for a year—not $25 per week. The reference to $25 per week was a reference to our tax cuts. He said that there would be tax cuts of a minimum of $25 a week. I ask Mr Nash not to distort the picture or the representations made by my colleague Mr Gilmore, please.

Secondly, Mr Nash said that Labour was not a party that would increase GST. He forgets that Labour was the Government that imposed GST, from zero to 10 percent. It was a Labour Government that increased GST in 1989 from 10 percent to 12.5 percent. I do not understand the views of Labour members today. Some Labour members oppose it and some are asking for an increase. I do not know where Labour members stand today. I do not know who is leading the Labour Party today, but there is certainly some conjecture and uncertainty on the cross benches.

We also heard this morning that there was no plan, yet in this House Labour members regularly ignore the fact that we have set out a plan for the building of infrastructure, we have set out a plan for the taxation mix to promote investment and savings in this country, we have set out a plan for increasing the standards in education, and we have set out a plan for delivering front-line services in health and other social services. Members opposite choose to ignore the plan. Members opposite choose not to listen to the people. Why is that?

After 9 long years of a Labour regime, when we have export growth that has been negative now for 5 consecutive years, I ask how we will get this economy moving. How can we get an economy moving when exports, year on year, are decreasing? How do we get our real wages moving in comparison to Australia’s when for the last 9 years under a Labour Government, we had an average wage growth of 3 percent? I ask Mr Foss how much it was.

Craig Foss: 3 percent.

PESETA SAM LOTU-IIGA: It was 3 percent. Yet in the less than 2 years that this Government has been in charge of the Treasury benches, our wage growth has been—I ask Mr Foss—

Craig Foss: 8.7 percent.

PESETA SAM LOTU-IIGA: —8.7 percent. We know that 2 years is not enough time to turn round this economy. We know that we have a job to do as the National Government, and we know that we have had to sort out the mess that we inherited from members opposite.

I return to the bill. The bill is supported across the House, despite the protestations from members opposite. The bill opens the way for New Zealanders who have worked hard in Australia to bring their retirement savings home, and that is particularly important. They are able to bring their retirement savings home. Of course there is reciprocity in this bill. Australians who live here can take their savings home. But we all know that the benefits of this bill will largely be felt by New Zealand citizens who are returning home.

The bill is about allowing people who have made compulsory contributions to an Australian fund to return those funds home. The funds are required to be put into KiwiSaver accounts. That is important, because it will ensure that in the long term those funds are invested in our superannuation scheme. This bill improves the plight of New Zealanders, and obviously I commend it to the House.

Hon PAREKURA HOROMIA (Labour—Ikaroa-Rāwhiti) : Mr Chair—

Hon Gerry Brownlee: A rare moment!

Hon PAREKURA HOROMIA: I can hear a gentleman burbling on the other side. He did not even know how to say no twice yesterday, so the Minister of Finance took the question off him. That is what is happening with this Government. Its members are not too sure who is steering what, or who is in charge of what.

What is important is to make sure that we get this message across. I listened intently to Minister Dunne’s response. The previous speaker, Peseta Sam Lotu-Iiga, should be ashamed, because he knows what is going on in relation to Pacific people. Let us talk about the wage gap between New Zealand and Australia. It is flattening out at 20 percent. The effort in this bill is needed to ensure that incomes made there come home, because since this Government has come into office, for the top end of the exodus of people, especially working-class people, the gap has increased by 26 percent. When Labour was in Government, members opposite kept on parroting about closing the gap. They said they would come up with a plan that would mend all of those relevant issues and ensure that people would stay in New Zealand. The group of people going to Australia is the largest in the last 34 years. Put that in your pipe and smoke it! It is a disgrace.

That member over there has been going on about the increase in wages—

Peseta Sam Lotu-Iiga: I raise a point of order, Mr Chairperson. I object to the member telling you to put it in your pipe and smoke it. I think the member should withdraw and apologise for making those comments about you. I believe that you do not even smoke, Mr Chairperson.

The CHAIRPERSON (Eric Roy): The point of order is upheld in terms of the pronoun that the member used. I know that in times of passion members get a bit sloppy about that, but the Chair is not to be brought into the debate.

Hon PAREKURA HOROMIA: I withdraw and apologise. Being a non-smoker myself, I say thank goodness, because the working class in this country is being punished.

Let us talk about the rate rises. A farmer on the main road gets nothing. Do members know what they are told? They are told they have the use of the library and the swimming pool, but nothing else. Worse still, for Māori in Porangahau, where that member over there comes from, and whose family are well known in the sense of building sites and selling sections, the rates are going up something unreal. How do we manage that? My colleague and neighbour Minister Tolley knows what I am about to say. In the sense of multiple-owned land, Māori get nothing, but they pay the same rates. It is an imbalance. I refer to the people in Porangahau, who have lived there for years and years, and those in Bayview in Napier, who have lived there for years and years. That bloke over there says that everybody can afford the increase. Labour’s common-sense notion that we have a freeze until the end of the financial year is something that surely the Minister could support right now. That is the difference here.

I turn to the increase in GST. Mr Foss argues that there will be an increase in the wages taken home.

Craig Foss: Real wages.

Hon PAREKURA HOROMIA: Real wages. But when we go to the supermarket, we find that costs have risen by 18 percent, and the GST increase will make costs go up further. There is no rise in the minimum wage. The last time that group was in Government it took the minimum wage up by 52c, or it might have been 58c. Labour took the minimum wage up nine times. That was alongside our clear economic plan, which stabilised export productivity and ensured that farms, on average, were coming through at 19.9 percent in the sense of free returns at the top end. We made sure of that. What has happened now? It has jammed. The timber returns are real because of the world uptake. [Interruption] This is relevant to GST, I say to Mr Foss. He is supposed to be the finance brain. This is relevant to GST.

Craig Foss: Well, try and get to it.

Hon PAREKURA HOROMIA: We are at it, I say to Mr Foss, and he should be ashamed that 40 percent of the people in Hastings are unemployed. How can he sit there, pontificate, and see people losing their jobs? In Auckland 150 jobs were advertised and 2,700 people turned up for an interview. What does he have to say? He should get out to Maraenui, get out to Flaxmere, and see what is happening to the families. They cannot afford a whole lot of things. That member dared to suggest that this increase was not much of an increase. That is shameful, and he knows it is; it is shameful.

Craig Foss: 3 percent over 9 years is a terrible increase. It is a shocking, shameful increase.

Hon PAREKURA HOROMIA: But alongside it we had income-related rents—

Hon DAVID CUNLIFFE (Labour—New Lynn) : I rise to correct some factual inaccuracies that have been conveyed by members of the Government—no one will be surprised about that. There are two in particular I would like to turn the Committee’s attention to. The first is the spurious claim that National has magicked an 8.7 percent wage growth since it came to office. I will just look into those numbers for the benefit of the Committee.

Craig Foss: Real.

Hon DAVID CUNLIFFE: That is far off the mark. The other is that Kiwis are somehow $25 a week better off through paying more GST. Let us look at the first one. I was interested that the National Government seems to be repeating the claim that somehow Kiwis are 8.7 percent better off in real terms since it was elected, but that does not feel right, does it? Everybody knows that the recovery is not happening, everybody knows that the Government has no plan, and nobody is feeling better off. Where did that number come from? Well, we had the research unit have a bit of a look at it, and this is what it has told us so far: the 8.7 percent includes Labour’s tax cuts in Budget 2008. So the National Government has counted the policies of the previous Labour Government as part of the credit for its administration. Well, that is the best way I know for National to say that Labour did a really good job, that National is sorry it got elected and Labour did not get a chance to keep doing it, and that National is going to count Labour’s policies as its gain.

Interestingly, of course, it follows that it is not wage growth at all in the context that an ordinary New Zealander would understand it; it is net wages after tax. So if we correct those anomalies and put Labour’s policies into Labour’s total, and National’s policies in National’s total, where do the numbers go? It is very instructive.

Chris Tremain: This is what matters: if people can buy more next year or the year after.

Hon DAVID CUNLIFFE: The National senior whip might care to listen to this, because it will be big in the Hawke’s Bay. When we correct the total, National can claim at most only about 4 percent net wage growth, but even that seems a huge stretch of the imagination. Labour had at least 6.3 percent. We know there was at least 6.3 percent real growth under Labour and this National Government is nowhere near it. We can talk about slipperiness. My youngest child was just given a book by a friend called TheWonky Donkey. It is a lovely book, but every time I see it I see the “Shonky John-Key”. The “Shonky John-Key” is the leader of a party that would take Labour’s tax cuts and count them into National’s wage growth—ridiculous!

How about the second claim that somehow New Zealanders are $25 a week better off after the Budget? I ask members how that could be true, because GST takes $2.1 billion from them and there are about $1.95 billion of tax cuts back, of which a third go to the top 5 percent. So what do average Kiwis have? They will be worse off until 2014. We think that they will be from $20 to $50 a week worse off. Why? Because according to the Government’s own Budget forecasts there will be 5.9 percent inflation next year. That means that with 2 percent wage growth and 6 percent inflation, people will go backwards. It is not difficult to work it out. In fact, on our numbers people will be going backwards until after the 2014 election.

National is saying that it will put up GST now, and that people will pay more but have less to put towards the grocery bill every year until two elections away—two elections away. What are New Zealanders supposed to do in the meantime if they cannot pay the rent, the power bill, and the rates, and buy food? That is why at the very least our amendment gives people relief from the increase in GST on their rates for this year, by saying that the increase will not apply until the next financial year. It would reduce the compliance costs of doing funny money changeovers in the middle of the year. They would be funny money changeovers like the other funny money changeovers in the 28-page tidy-up Supplementary Order Papers that the Minister of Revenue has had to bring to the Committee, with his tail between his legs in order to beg for mercy today, because the legislation is a mess. It was a bad idea, it has been badly implemented, and it is a shocker.

STUART NASH (Labour) : As I was saying before, Labour supports the Taxation (Annual Rates, Trans-Tasman Savings Portability, Kiwi-Saver, and Remedial Matters) Bill. The reason we support it is that it is a remedial matters bill, and it also introduces changes to tax rules to allow New Zealanders to return home. Labour always supports sensible legislation that makes it easier for ordinary Kiwis—or extraordinary Kiwis—to do business and work.

I will talk about just a couple of bits in this bill. The bill brings in trans-Tasman portability of retirement savings. Sam Lotu-Iiga hit the nail on the head when he said that this bill will help Kiwis coming home from Australia. Why is that? It is because they have significantly greater savings than do New Zealanders in New Zealand. New Zealanders in Australia have significantly greater savings because Australia has had a superannuation scheme going for a long time. New Zealand also had a superannuation scheme. It was set up by Roger Douglas, but it was cut by a National Government. My colleague David Cunliffe has alluded to it. Can we imagine the size of our capital markets now if that superannuation scheme had been allowed to continue, like the Australian scheme? I think the estimation of worth is about $300 billion. The reason we have such a savings deficit at the moment is that a National Government cut the superannuation scheme—National cut it.

Sam Lotu-Iiga stands up and talks about the necessity of a GST increase. I challenge that member to hold a public meeting in Maungakiekie with the title “Why GST is important”. I challenge him to do that; I know that my colleague Carol Beaumont would come along. Sam would be ripped limb from limb. There is no reason why that increase in GST is important, especially when the money has been set aside for tax cuts for the wealthy. It is just not fair.

I will talk about Peter Dunne’s Supplementary Order Paper. It shows what an absolute shambles this whole GST implementation has been. Mr Dunne talked about Labour’s introduction of GST in 1989, well over 20 years ago, and I hoped he might have learnt from that experience and come to the House with a bill that did not need 28 pages of Supplementary Order Paper. In fact, Ernst and Young, one of the largest accountancy companies, is throwing up its hands in frustration and saying that it is a little more difficult than New Zealanders would have thought—“this is not a moderate increase”. Those words were from Ernst and Young, not the Labour Party. We agree with that major accountancy company, which is highlighting the fact that this is an absolute shambles.

I have heard stories that Inland Revenue Department staff are being inundated with calls on questions to do with GST that they simply do not have answers to. People are tearing their hair out because the Inland Revenue Department staff themselves simply do not know the answers. Mr Dunne set up a GST commission, and that was a mighty fine idea. It has reported back with 23 pages of Supplementary Order Paper, but obviously it has not been communicated to the Inland Revenue Department staff on the ground.

The reason we support Mr Dunne’s Supplementary Order Paper is that its changes have to be made. There is no way we can put through such a flawed bill that leaves so many holes and that leaves taxpayers not knowing whether they are Arthur or Martha. That is what we are supporting—the integrity of the tax system. We are not supporting an increase in GST. We have never supported an increase in GST. We went to the people of New Zealand from Kaitāia to Bluff, and none of them supported an increase in GST, at all. This is an absolute shambles.

Let us talk about the savings history time line. In 1974 Labour and the Kirk Government introduced a compulsory superannuation scheme. As mentioned, Roger Douglas was the architect. As an aside, I think it is quite sad to note that the last speech I heard Roger Douglas give was in support of a rort on workers’ rights. He is a man whose father and grandfather were Labour Party MPs. Labour Party philosophy is in his blood, but at some point he turned to the dark side, and now he is giving speeches in the House against the rights of workers.

CLARE CURRAN (Labour—Dunedin South) : I will talk a little bit about why the Labour Party is supporting the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Amendment Bill. I will also talk about the fact that this Government does not have a plan, and about some of the issues to do with GST, the rise in GST, and its effect on ordinary working people. I will also talk about the importance of attracting people back from Australia to New Zealand.

There is no doubt that Labour is supporting this bill. We are supporting it because it is based on work that was done by the previous Labour Government, not because the National Government has somehow magically created this amazing plan that will create jobs, provide incentives for New Zealanders to come back from Australia, and close the wage gap between Australia and New Zealand, because that is just not the case. The legislation is all based on work that was done by the previous Labour Government.

I want to talk a bit about the provisions for retirement savings portability, because I am one of those New Zealanders who came back from Australia, as I know that this is the best place to be. I was really supportive when the previous Government began work on ensuring there would be retirement savings portability, because I know how many New Zealanders there are in Australia who have built up savings under the industry superannuation scheme who will benefit from that provision. It certainly is a sensible arrangement. We have been told that potentially $16.6 billion is lost in contributions by New Zealanders who work in Australia and who could, under this scheme, come back to New Zealand. Even if a fraction of that money was to come back home, of course that would have a positive impact, and we certainly support that.

Although it is one positive step for current and future New Zealand superannuitants, this Government has ultimately undermined its commitment to New Zealand superannuation and to superannuitants. We had that stunning Budget 2009 decision to undermine the Superannuation Fund by suspending contributions for 10 years. The Minister of Finance has been trying to justify his short-sighted decision ever since. However, the foolishness of that decision is plain, with the Superannuation Fund gaining by $3.35 billion since last year’s Budget. We have heard Treasury analysis, which was released the day after the Budget, that showed the Minister of Finance’s plan guts the Superannuation Fund by 50 percent, and it will never be able to catch up. The analysis said that the fund will be short by $35 billion. We know that Budget 2010 only made the situation for most superannuitants worse. Bill English said that we could not afford to contribute and that we would have to resume contributions when we got back into surplus. This year’s Budget revealed that we will be back in surplus in 5 years, but contributions do not resume for a further 4 years after that.

Although this bill will make it easier for superannuitants to return to New Zealand and bring their savings with them, which is what we want them to do, the Government’s most recent Budget will have many questioning whether the move is worth it. If I were in Australia looking at New Zealand at the moment, I do not think I would be making the decision to come back right now if I thought that I would be any better off. It would be interesting to get a sense of that from some of the New Zealanders who are living in Australia and looking across the Ditch, at this place. For one thing, where would they get a job? How would they get a job? It is not exactly a very supportive environment to come back into, especially with young children. If people have young children they would be looking at the 20 hours’ free early childhood education and thinking how long it will last, and if they get a job there will be a measly tax cut, but GST is going up.

STUART NASH (Labour) : We are nearing lunchtime so I will sum up some of the arguments the Labour Opposition has made in the debate on the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill. As has been alluded to by Minister Dunne, Labour supports this bill. It supports two Supplementary Order Papers, one put forward by Minister Dunne and one put forward by the ACT MP David Garrett, and we ask Minister Dunne to seriously consider supporting Labour’s amendment.

One of the main reasons that Labour has put forward this amendment is to give some GST relief in terms of rates relief to good, hard-working New Zealanders. The other reason we would like Mr Dunne to consider supporting this amendment is that in principle and in practice it is incredibly similar to the other provisions that are being exempted until the end of this financial year. By that, I mean that the rates bills are out. Ratepayers have the bills in their hands, they have been in the letterbox, and they know what their rates will be. A lot of councils have put on the bottom of the rates notice that if the bill is paid in full, ratepayers will pay only 12.5 percent GST, but if payment is staggered, ratepayers will pay 12.5 percent GST on the first part and 15 percent GST on any payment after 1 October.

There are two reasons why this is a good amendment. As mentioned, the first is that it provides a measure of relief to good, hard-working New Zealanders, and the second is that it fits into the general practice and the general theory of the other parts of Mr Dunne’s Supplementary Order Paper 157, which Labour is supporting. So we would like the Minister of Revenue, Peter Dunne, to support this amendment and to look at it with the philosophical and the practical approach taken by his other Supplementary Order Papers.

There have been other arguments. It has been held up by Mr Foss and Mr Dunne that Labour is supporting this bill, and that by supporting it we support an increase in GST. Nothing could be further from the truth. I want to have it on record once more that Labour does not support any increase in GST. Labour has never supported any increase in GST. If this bill were about an increase in GST, then we would absolutely not be supporting it. In fact, we are supporting amendments that limit GST to 12.5 percent through to the end of the financial year.

We have talked about savings. We have talked about the complete and utter lack of a plan. Labour is the party that put measures in place to increase the savings of New Zealanders. There was the Kirk Government savings plan, which National abolished, and there was the Cullen Superannuation Fund, which National has stopped making contributions to. We now have a Government that comes out and says that it will set up a committee. It is to set up a committee. Two years after assuming the Treasury benches, it will set up a committee. I wonder whether that is what its polling tells it to do.

Labour has been talking about savings for a long, long time. Ever since we assumed Opposition for this brief 3-year period, we have articulated clearly the issue of savings. As Mr Dunne will know as Minister of Revenue in the previous Labour Government, savings was a big part of Labour’s platform. As the vast majority of Kiwis will attest to in any sort of polling done by any party, KiwiSaver was incredibly important and the Cullen fund was supported.

Again I come back to the Labour amendment, because we are talking about savings and we are talking about families. Mr Dunne, in fact, set up the Families Commission. In the Labour amendment we are asking for some relief for families who are living the dream, who own their own home, but who will struggle to pay the rates at 15 percent GST. When someone like Mr Gilmore stands up and says that it is only $25, I suggest that that member is a little out of touch. Any amount of money is important to families who are really struggling. They are struggling to budget with an increase in GST anyway. The price of their petrol, the price of their food, and the price of their clothes—basic necessities—are to go up. We are asking the Minister in the chair, the Minister of Revenue, to give them some relief along these lines, because it is in absolute alignment with the Minister’s own principles about families. It is absolutely in line with the Minister’s principles as set out in his Supplementary Order Paper.

We support this bill for a whole raft of reasons. It closes loopholes, it makes it easier for Kiwis to come home—which we support, even though I doubt that many will come home under this Government—and it makes it easier for Kiwis to do business. Thank you.

CAROL BEAUMONT (Labour) : I will pick up from where my colleague Stuart Nash left off and talk about the question of savings. One area of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill that we support is the provisions relating to KiwiSaver. KiwiSaver, as we know, was introduced by the previous Labour Government. It is a good savings vehicle. It has had huge pick-up by New Zealanders. It is obviously intended to supplement New Zealand superannuation rather than replace it, but it is an important vehicle to try to lift New Zealand’s savings.

The previous Labour Government had a very proud record in terms of savings, as Mr Nash has indicated. This is unlike National Governments, which we can see have, over a period of time, worked against the idea of building up savings within our economy, to our detriment. That is to the detriment of all of us and our children and grandchildren. We do not have the level of savings we need as a country to move forward and to look at lifting our economic performance. That is a huge mistake and I think we should acknowledge it in this Committee.

This bill makes some provisions for KiwiSaver that will ensure greater clarity—for example, with regard to the enrolment of under-18-year-olds. There is perhaps some emphasis by some of the KiwiSaver providers on looking at that particular demographic, and the bill will provide some clarity on who has to enrol people who are under 18. It provides for those under 16 to be enrolled by their legal guardians, with those who are 16 and 17 co-signing the enrolment.

Supplementary Order Paper 158, which is in the name of David Garrett from the ACT Party, suggests amendments to KiwiSaver. Again, it has the sensible suggestion of providing for additional rates at which workers can save in KiwiSaver. Of course, we need to acknowledge that in the current environment that is incredibly difficult, because people are struggling. As many of my colleagues have pointed out, it is tough out there, and the Government is fooling itself if it does not recognise that. We have heard spurious figures about wages increases earlier today.

• Sitting suspended from 1 p.m. to 2 p.m.