[Sitting date: 24 May 2012. Volume:680;Page:2424. Text is incorporated into the Bound Volume.]
Taxation (Budget Measures) Bill
Hon PETER DUNNE (Minister of Revenue)
on behalf of the
Minister of Finance: I move,
That the Taxation (Budget Measures) Bill be now read a first time. The year 2012 is going to hold challenges, with economic uncertainty ahead, and the Budget announced this afternoon is one, therefore, aimed at returning the New Zealand
economy to surplus. A key to that is getting the Government’s finances in order, getting debt under control, and reducing our overreliance on foreign debt. To continue to provide effective public services and functions, it is important that Government spending continues to be financed through efficient taxes that are as fair and efficient as possible. It is also important that the Government makes prudent choices about where and how it spends taxpayers’ funds. The measures contained in this bill, therefore, continue the Government’s focus on improving fairness in the tax system by ensuring that the tax burden is shared fairly, and on removing unjustifiable spending. This bill will repeal the tax credits for income under $9,880 and the tax credit for childcare and housekeeper expenditure. It will replace the tax credit for the active income of children with a limited tax exemption. It will legislate a change made in March this year to the livestock valuation election rules, and will repeal the student loan voluntary repayment bonus.
In Budget 2011 the Government announced its intention to review the rules for livestock valuation elections and the tax treatment of assets that are used for both business and private use. With regard to livestock valuations, the previous rules were too loose, and allowed some farmers switching between the two main livestock valuation methods to receive an unfair tax advantage over those farmers who applied the rules as they were intended. In March the Government moved to disallow elections to exit from the herd scheme except in narrow circumstances, effective to elections made from 18 August 2011. This bill will put that change into law, with the supporting detail to be included in legislation later this year.
This bill will also abolish three outdated tax credits that are expensive and, frankly, unjustifiable. These are the credit for income under $9,880, the tax credit for childcare and housekeeper expenditure, and the tax credit for the active income of children. The tax credit for the active income of children is being replaced with a limited tax exemption. That credit will ensure that children will not need to file a tax return if they have small amounts of income that are not taxed at source—for example, from mowing their neighbour’s lawn. Transitional rules have been developed for people who are claiming one of these tax credits in the current year through the PAYE system. The transitional rules will provide employers with time to update their payroll systems.
I described the tax credits as outdated; let me illustrate what I mean. When the tax credit for income under $9,880 was introduced it was aimed at people on a full-time salary of less than $10,000 per annum. Times and salaries have moved on significantly from that time, and the tax credit no longer applies to the group it was originally established to support. Similarly, the child tax credit was a transitional measure introduced by Sir Robert Muldoon in 1978, in an era when most employers did not deduct tax at source. Now they do, so that credit has similarly become outdated.
I mention also in this context the housekeeper tax credit, which dates from 1933, in a time of completely different social practices to those that prevail today. I also mentioned earlier the need to focus on prudent spending, and the Budget this afternoon contained measures that are designed to improve the quality of the Government’s investment in the student loan scheme. This bill will repeal the voluntary repayment bonus. The Government continues to focus on encouraging student loan borrowers to pay their loans back. However, the repayment bonus does not seem to be improving the value of the scheme, and it has failed to achieve the policy objective of encouraging repayment from borrowers who were slow to repay in the first instance. Instead it appears that what has been happening has been that the people claiming the bonus are borrowers already repaying their loans anyway. More alarmingly, there is evidence that the bonus was actually encouraging some students to borrow when they did not need to. In 2011 alone, some 2,611 borrowers repaid their loans in the same year that they borrowed them,
receiving $1.8 million in bonuses from approximately $13 million of annual bonus payments. This has resulted in a cost to the Government, one which is clearly unnecessary. The $44.6 million being released by repealing the bonus will be able to be better used on other priorities.
Like the tax credits I have mentioned, the bonus scheme has also been overtaken by events, and the Government has since introduced a number of initiatives to increase student loan repayments. Overall, the measures that I have outlined so far will make the tax system fairer; they will also raise additional revenue. These measures and this bill are a measured and judicious response to the difficult challenges facing the country today. It is a prudent set of responses enabling us to move forward, and I commend the bill to the House.
Hon DAVID PARKER (Labour)
: This Budget has already been termed by some of the commentators as a drab Budget without any really pro-growth agenda. This Budget legislation, the first piece of Budget legislation that the Government is passing under urgency, is illustrative of how little of substance there is in this Budget. The Taxation (Budget Measures) Bill runs to nine pages. Although it is dropped on us under urgency without any forewarning, in the 5 minutes that I have had to study it, it is abundantly clear it is not a substantial piece of legislation that is going to affect the future growth prospects of our country, because it does not deal with the difficult issues.
There are three parts to this legislation. The first part deals with, as the Minister has said, removing some tax credits. I think we have already heard the phrase that this Budget picks the pockets of paper deliverers. It picks the pockets—
Hon Trevor Mallard: Who said that?
Hon DAVID PARKER: I think it was Trevor Mallard who said that first. It was a very good characterisation of this Budget—picking the pockets of paper girls and paper boys up and down the country, and ignoring the big issues that this country faces.
Now why do I criticise the fact that the Taxation (Budget Measures) Bill does not have more substantial measures in it? Well, the reality is that the Government’s own forecasts show that under current settings it has had to downgrade its growth forecast. Not only have we already had the lowest growth under any Government in the last 50 years for the period that this Government has been in office so far but also for this coming year it has downgraded the growth forecast from 4 percent to 3 percent, and for the following year it has downgraded it even more, to 2.6 percent. We have got lower growth than was previously projected. We have got lower employment growth than was previously projected, which has gone down from 170,000 new jobs to 154,000 new jobs over a 4-year period. So the growth in our economy is not as good as was previously predicted.
In addition to that, we have got rising net international indebtedness, and the sorts of measures that are needed to address that are a lot more substantial than those that are in this taxation bill. The Government’s own Budget figures show that the current account balance gets worse every year from here. So under the current tax settings in this economy, our current account deficit goes from negative 3.6 percent of GDP this year to negative 6.7 percent of GDP in 2016, and it is negative every year in between. The current account deficit gets worse every year. What does that mean? That means that every year New Zealand has to sell more assets and borrow more money from overseas to bridge the gap. Even after the Government limps back into surplus in the Government’s books, it will not have dealt with the structural imbalances in our economy.
What does that mean in terms of New Zealand’s net investment liabilities in the world? What we owe to the rest of the world grows and our net investment position goes backwards, so that by 2016 New Zealand’s net international indebtedness, our net
international liabilities, increase to 80 percent of GDP—80.1 percent. That totals an astounding $205 billion—$205 billion—of net international liabilities by then, which is up from where it is currently, this year, at $134 billion. That is just about all private debt; it is not Government debt. It is because we do not earn enough from our exports to pay for the cost of our imports and our interest. And what does this Budget show? It shows that getting worse, not better.
In terms of the pretty miserable GDP growth that we have got in this Budget, just about all of it comes from residential investment. The great majority of it comes from residential investment, rather than from investment in our export economy and growth in exports. In fact, our growth in exports is miserable. We heard the Prime Minister today reading a speech that had been prepared some days ago, saying that exports were up on the very day that Statistics New Zealand said that exports are down by about $700 million compared with last year. No wonder this bill from the Government is so narrow in its focus.
There are some measures in it that we agree with. In fact, I was one of the ones, with Stuart Nash, who called for overhauling the rort that we had in the agricultural system, whereby you could change from revenue account to capital account for your capital livestock. What farmers could do was—if dairy prices were going up and they had 1,000 cows, and those 1,000 cows were going to increase in value by $200 each, that would be a $200,000 increase in their assets. If it looked like the cows were going up in value, they could elect early enough to put it on capital account, and they would pay no tax on that increase in value. But if it was going the other way, and dairy prices were going down, there could be a $200,000 decrease in the value of their livestock. They could put it on revenue account, claim a tax deduction, and reduce their taxable income. That was a real rort. We called for its overhaul. We are glad to see that is being fixed up.
We also agree with changes to abolish the 10 percent bonus on early student loan repayments. We opposed that when it was brought in, because we knew it would not work. This is the Government reversing one of its own measures from one of its recent Budgets. The measure was so silly that 3 years or 2 years later the Government is having to repeal it, because it did not work. The Government created a 10 percent bonus for early repayments, and the only thing it found was that it was not getting any extra repayments. So it gave away the 10 percent voluntary repayment bonus for no increase in overall voluntary repayments. It is that sort of mismanagement of the economy that means that this Government is not growing the economy in the way it should. [Interruption] That is right. If we had performance pay in these ministries and on the part of the Government, then there would be a fair number of its Ministers who would be having a drop in salary. They would be earning less than backbenchers in Labour, because they are not as good as we are on this side. They will not do that for themselves, even though they are enforcing it upon the teaching profession.
This Budget is a “no-growth in exports” Budget. The export profile going forward is flat. As a consequence, the current account deficit goes up and the New Zealand deficit goes up. Debt goes up, and we have to sell more assets as well as borrow more money to meet that gap.
The fiddling around with the tax credits that were previously available to some low-income people is necessary, partly because the Government’s income tax cuts in prior Budgets spent $2.5 billion per annum in respect of income tax cuts to the top 10 percent of income earners. I think that 40 percent—was it, Mr Cunliffe—of the income tax cuts in that Budget went to the top 10 percent, and, as a consequence of the pressure that that has put on the Government’s finances, it is now having to take away the small amount of tax break that a person doing a paper round used to get.
This Taxation (Budget Measures) Bill will do nothing to stop the flow of people to Australia. Indeed, the Budget documents themselves show that New Zealand’s changes in population and labour force assume that a large number of people will continue to head to Australia for the next 2 or 3 years. They assume that we are going to be losing a large number of people. As David Shearer said today, it was somewhat ironic to have the Prime Minister, before he was elected, saying that if he was elected he was going to stop the equivalent of a Westpac Stadium crowd going to Australia every year. And now, of course, he would have to make that same speech and substitute Eden Park with some extra seats, because that is the number of people who are leaving. More than 1,000 a week are going to—
Hon Trevor Mallard: The stands—the temporary stands.
Hon DAVID PARKER: What is that?
Hon Trevor Mallard: You’d have to bring back the temporary stands.
Hon DAVID PARKER: Bring back the temporary stands—yeah, that is right. The ones that they had up at the Rugby World Cup would have to be rolled out so that the stadium in Auckland could fit in enough people to represent the number of people who are going to Australia in a year—now more than 1,000 people a week.
This Budget has lower growth forecasts, lower employment growth forecasts, higher external debt rising to over $200 billion, and a $70 billion increase in external liabilities—net international liabilities—over the next 5 years. This is a very, very narrow bill, which does not do anything to cure the fundamental problems in the New Zealand economy.
Peseta SAM LOTU-IIGA (National—Maungakiekie)
: It is my honour and pleasure to stand and talk about this Taxation (Budget Measures) Bill. Today has been a historic day. It has been a historic day because we have seen clearly in this House the difference between true leadership, in John Key, the Prime Minister, and a make-believe pretender, in David Shearer. When the two leaders spoke today we saw the reactions from the respective benches. The reactions were of positivity, clapping, and handshakes from the National benches. We looked across at the Labour benches and we saw a lot of planning and backstabbing, because we do not know who the leader is today.
But it was about John Key’s leadership in managing the finances. This is a responsible Budget. It is a Budget that will put New Zealand back on the track to recovery. It is a Budget that will get us to surplus by 2014-15. It is also a Budget that smoothes out the rough edges of the recession, protecting the vulnerable by investing funds in both health and education, as well as in science spending. It is also about creating jobs, because the only way we will get out of the economic mess that we inherited from Labour is by creating jobs. There have been in the last 2 years 60,000 net new jobs, and we estimate that in the next 4 years 154,000 will be created.
I would like to also acknowledge the work of the Hon Bill English. Bill English has shown a plan in his fourth Budget. In his first Budget he spoke about the road to recovery. He spoke about the mess that we inherited from Labour and what we would do about it. In his second Budget he talked about building recovery. He talked about the tax switch, which was fairer to all New Zealanders, put more money into New Zealanders back pockets, and put a lot more trust and confidence into New Zealanders. Last year the Budget, despite it being an election year, was built on building our future, and it was a responsible, balanced Budget. But this year we talk about investing in our future. And what does investing in our future look like? Well, it looks like increasing spending on science and innovation, because we, the National Government, are about building a more productive and competitive economy.
The Prime Minister also talked about the Future Investment Fund and how those proceeds will go towards modernising schools and building roads of national
significance—which I know that the Hon Gerry Brownlee will be happy about. It will also be about hospital redevelopments. The investment of $4.42 billion in new spending is focused on front-line public services. So we know that health and education will get more spending. We know that law and order is part of National’s focus in terms of getting the crime statistics down. I also know intimately, as chairman of the Social Services Committee, the welfare reforms that we are putting in place. And we cannot forget about rebuilding Christchurch. Christchurch may have the best rugby team in New Zealand, but it also requires assistance from the Government and from all New Zealanders.
What does the increase in the science and innovation fund look like? Well, it is $1.3 billion a year—[Interruption] That is right, Simon O’Connor, the member for Tāmaki; it is $1.3 billion every year right through to 2015-16. I acknowledge Minister Joyce for creating a superministry that will be the engine room and the catalyst for providing the framework and conditions for us to get out of our economic predicament. It is also about $166 million that will be put towards developing a new Advanced Technology Institute. But it is also about $100 million extra to increase the Performance-based Research Fund. I look at members across the aisle there. They do not believe in performance. They do not believe in performance in schools. They do not believe in performance in public services. They just do not care, because their idea of growth in this country is to tax more, to borrow more, to spend more, and to hope a lot more.
The Future Investment Fund is about ultra-fast broadband. We heard from the Hon Bill English that it is about planning for spending on 21st century schools. I know that this is exciting in my electorate of Maungakiekie—from Point England to Onehunga. Kids are thirsting for knowledge, they are thirsting for a breakthrough in technology, and they certainly will welcome the investment that we are going to put into broadband and into our schools.
We have also set some targets. We are the only Government of recent note to set targets: 85 percent of 18-year-olds to have National Certificate of Educational Achievement level 2 or equivalent by the year 2017. That is up from the current rate of 68 percent. Some would call it ambitious, but we would call it aspirational, because we are a Government that believes in aspiration, hope, and expectations. It will help Māori and Pacific audiences, because it is about lifting expectations, lifting achievement, and lifting the quality of teaching in our schools.
We will also be about reducing prisoner reoffending by 25 percent by the year 2017. That is right—25 percent. Recently I visited Pāremoremo jail to check on the programmes.
Hon Trevor Mallard: And they let the member go?
Peseta SAM LOTU-IIGA: The member for Hutt South might actually get to know Pāremoremo very well, given the court case currently facing him. He could get to know the boys at Parry very, very well—thank you very much, Mr Mallard.
I also want to acknowledge Minister Turia. She has put $6 million into a Pacific Innovation Fund. That will help with services across the various portfolios, whether it be education, health, or justice.
This Budget, as I said at the beginning, builds on the Budgets of 2009, 2010, and 2011. This is a Government with a plan for growth. This is a Government with a plan for employment and opportunities. And this is a Government that is responsibly looking after our finances. I commend this bill to the House. Thank you.
Hon TREVOR MALLARD (Labour—Hutt South)
: This is an interesting debate on the Taxation (Budget Measures) Bill. I think we have just had a leader—or someone who aspires to be the leader of a party—make a speech pretending that he was a leader speaking on the Appropriation Bill, which was the previous legislation, rather than on
the bill that we are currently debating. The member has been here for 4 years now, and I would have thought that at some stage he would know that the leaders speak on the Budget and then we deal with other legislation. He totally missed—
Hon Member: It’s called the Budget measures bill.
Hon TREVOR MALLARD: It might relate to Budget measures, but there is enough—
Peseta Sam Lotu-Iiga: I’ll take a call.
Hon TREVOR MALLARD: Well, if the member wants to have a general, wide-ranging debate and keep it going for days, well then I am quite willing to do it. But I am telling the “member for Vodafone” that he should at least read the bill that is being debated, rather than having a very wide-ranging debate on things that do not even come close to it.
Peseta Sam Lotu-Iiga: I raise a point of order, Mr Speaker.
Hon TREVOR MALLARD: I want to work backwards through the bill and start off with the student loan repeal—
Mr DEPUTY SPEAKER: Order! A point of order has been raised.
Peseta Sam Lotu-Iiga: I raise a point of order, Mr Speaker. I am happy to take that member’s call if he is—
Mr DEPUTY SPEAKER: No, that is not a point of order. The member will sit down.
Hon TREVOR MALLARD: Thank you very much, Mr Deputy Speaker. I am not going to refer to a point of order, but I did notice that the member could not even get to the bill himself. He could not even get to the bill himself. Maybe Vodafone did not give him the notes. Maybe the deputy chair of the Commerce Committee at the time, who was dealing with regulatory matters, should have thought twice about accepting a trip from Vodafone. Absolutely—
Maggie Barry: So says the scalper!
Hon TREVOR MALLARD: Sorry? He is a scumbag? I agree with the member.
Maggie Barry: Scalper.
Hon TREVOR MALLARD: He is a scumbag, says Maggie Barry. I absolutely agree that that was a terrible thing to do, but I am surprised that Maggie Barry said it, to start with.
Let us go back to the repeal of the 10 percent voluntary repayment bonus in respect of student loans. We told the Government this was nuts. We told the Government that this scheme was a sign of absolute educational failure. Anyone who was not in the last 18 months of their repayment period, who did this, was nuts. It would have been an indication that the tertiary education system—at least in the numeracy and accounting area—had failed, because it was better to stick the money in the bank to collect the interest on the money, and to pay it back once someone got close to the end of the loan, rather than use the scheme. We told the Government that. Now, I am told, actually, that there were a few students who used it, and that is a bit sad. But it is an indication of the quality of our tertiary education system. I probably take some responsibility for that, over time. That is sad. But what is also not made clear now is that that actually was doing the Government good. The Government is claiming that it is saving money by abolishing this scheme. But that is actually not true. That is actually not true, because if people were paying the money back early, then in fact the bonus was going to the Government and not to the student. But it was nuts. It should not have been introduced, and Part 3 is something that we will support.
I think it is fair to say that Part 1 of the bill is a bit of a mixture. I think that David Parker made some comments about things that both you, Mr Deputy Speaker, and Mr Speaker, who comes down from up north, know pretty well, and that is that farmers are
good at rorting the livestock system. They move their valuations around to take advantage of the tax loopholes that are available. I can see from the wry smile on the face of Mr Deputy Speaker he understands exactly what I mean. It is a loophole that David Parker called for to be closed, at one stage in the past. Members opposite said it was ridiculous at the time and we should not do it. But I am glad to see that someone has learnt something over the years about closing loopholes. On this particular occasion, it will not hurt for this rort to be closed, although there are plenty of others that farmers take advantage of that are still open.
The reason that the Labour Party is voting against this bill is the mean attack on the kids who deliver newspapers around New Zealand. It is a mean attack on the kids who earn under $45 a week, and previously got a tax credit—like a way of saving. Either they get it directly or they could leave it with the Inland Revenue Department and at the end of the year get a tax credit. For some of them it was $50 or $60 a year. Sometimes they got $50 or $60 a year back. That was a good thing and a fair thing. They got all of their tax back, if they earned under $45 a week and they were kids. I want to make it clear that that was earned income. It is not the farmers putting the assets in the kid’s name and the interest being paid to the kid as a way of minimising the parents’ tax. This is earned income. When it is earned income under $45 a week the kids used to get it back and that was fair. What has happened here? Bill English and John Key have put one hand each into the kids’ pockets and taken the money away. They have taken the money away.
The worst thing is they have done it retrospectively. We have had these kids, since 1 April this year, accumulating $1 or $1.50 a week with the Inland Revenue Department, as part of their tax credits, and what is happening? John Key is taking the money off them. That money is theirs and is sitting in the Inland Revenue Department, and this retrospective legislation is retrospectively picking the pockets of the kids who deliver papers. Is it the kids of the members opposite? No, it is the kids of the poorest New Zealanders, who need the money to survive. They thought they were saving up a bit of money with the Inland Revenue Department, but the Government has reached in there and taken that money from them. It is cruel, it is nasty, and it is typical of Tories to pick on poor kids—to pick on poor kids, who need the money. Some of them earn only 20 bucks a week. Their—
Hon Chester Borrows: You’re a bloody bigot. You wouldn’t know what our kids did to earn pocket money.
Hon TREVOR MALLARD: Sorry?
Hon Chester Borrows: You wouldn’t know what our kids did to earn pocket money. You’re just a bloody bigot.
Hon TREVOR MALLARD: Mr Deputy Speaker, I think you were just called a bloody bigot.
Mr DEPUTY SPEAKER: Order! I was checking something out in the Standing Orders and I did not hear what was said or the context it was said in, but it certainly sounded unparliamentary. I just caution the House that we will desist from that.
Andrew Williams: I raise a point of order, Mr Speaker. I clearly heard the statement from this point in the House. I was offended by it, and I would like that member to stand, apologise, and withdraw. I was offended by it.
Hon TREVOR MALLARD: Speaking to the point of order, just to make the Standing Orders clear to the member, the only person who could object to it was the Deputy Speaker, because he was the person who was described as a bloody bigot.
Mr DEPUTY SPEAKER: Order! I have just said it is inappropriate. We will desist from it. As for the context in which it was said, I have to apologise to the House; my attention was somewhere else. Let us move on.
Hon TREVOR MALLARD: Thank you, Mr Deputy Speaker. I want to make it clear that the people who have little Tory pocket money schemes, where the parents slip their kids the cash, will not be taxed. So the people who go out to work and the kids who go out to work are the ones who will pay tax, and the ones whose parents can afford to give them their allowances will not be taxed.
Andrew Little: It comes out of their trust fund.
Hon TREVOR MALLARD: It comes out of their trust funds. They do not care where it comes from. We are voting against this legislation because of one rotten area in it.
Dr RUSSEL NORMAN (Co-Leader—Green)
: Speaking briefly to this bill, the Taxation (Budget Measures) Bill, because I do not think it is worth a very long speech, the Greens will also be opposing the bill, on the basis of the elements in it that are punishing hard-working children, which seems a very strange thing for the National Party to be doing, by introducing a scheme that makes it harder for children to go and earn a bit of pocket money. I would have thought that the National Party was of the view that we want to get people into the work ethic early on. So we want to encourage them, but then the Government is introducing a special piece of legislation to punish newspaper boys. It is having a special piece of legislation coming into the House, and there will be millions of dollars spent on it—because you have got all these people sitting around, and they are all going to discuss it—so that we can punish kids who are earning a little bit of pocket money. That seems a very strange thing for the National Party to bring to this House as part of its great tax reforms.
Of course, what is really needed in this bill, the missing pieces of this bill, are the structural transformations in the economy driven by the tax changes. Where is the thing in this bill about introducing a capital gains tax? Why is that not within this bill? If we were talking about making the structural changes in the New Zealand economy so that we can actually move capital into the productive sector, then we would have a bill in front of us, and part of the bill would be that it was introducing a capital gains tax. When you look at the projections that are in the Budget that was just put out, they are for the current account deficit to get worse. Let us be clear: the Budget papers put out today, which form the background to the bill in front of us, were for the current account deficit to get worse over time. The background to the bill that we have in front of us is the Government’s Budget analysis, and it says that as a result of what this Government is doing, the imbalances in our economy will get worse. If it was serious about dealing about the real imbalances in our economy, then surely it would deal with that, and that would be something that would be within this bill.
I mean, to look at it in a larger picture, when this Government came in during 2008, the real economy was in trouble. There was a very large current account deficit and large private sector debt, but the Government books were in excellent shape. During this period of economic crisis the Government has been able to use the fact that there has been a lot of leeway to borrow money on the Government account, so it has borrowed a lot of money on the Government books to buffer the situation we have been through. It had the advantage of that very low Government debt. However, when it is kicked out of office in 2014, we are going to have a situation where not only will the real economy still be in deep trouble—because its projections are that it will still be in deep trouble, with a large current account deficit and the net international investment position getting worse—and in a bad position like the one National inherited, but also there will be no opportunity to buffer it through Government borrowing, because National is borrowing $75 billion.
The big picture that sits behind this Budget is that National is ruining one of the good things it inherited from the Labour Government that came before it, which was that the
Government’s debt was very, very low. That has given it the opportunity to buffer the situation that we are in. When National loses office in 2014, not only will the real economy still be in deep trouble because of the huge current account deficit, the huge imbalances in our economy, which Bill English quite rightly identified when he first became finance Minister but has done nothing to fix, according to his own projections in his own Budget. He has done nothing to fix it, but then by 2014 the big buffer that the Government had available to it, which was the ability to borrow money on the Government account, will be gone. Not only will we be left with very large levels of Government debt but also we will have an underperforming economy with huge imbalances. That will be the legacy, based on the projections in the Budget that was presented today, of this Government.
We have a bill in front of us to make some very small changes, in terms of “broadening the tax base”, as I believe Bill English described these things—putting a tax on newspaper deliverers is broadening the tax base these days—when the real thing that we should have been doing to broaden the tax base and to actually make structural reform within the New Zealand economy is not happening. That is the reality of what this Government has done. That is a terrible travesty; that is a missed opportunity. It had the opportunity to actually begin the rebalancing of the New Zealand economy, and it has failed to do it.
One of the things, of course, that the Government talks about a lot is Kiwi mums and dads. Well, I think in the context of this bill we should also talk about Kiwi mums, dads, and kids, because, you know, the Government is putting a tax on children. The Government constantly tells us that Kiwi mums and dads have all of this special cash out there, which they are going to be using to buy shares in the State-owned assets when they are privatised—and children perhaps, as well; I do not know—but the reality for actual, real New Zealand mums and dads is that they are struggling to pay the bills. The reality, because this Government is so wildly out of touch with the real world, is that real Kiwi mums and dads are struggling to pay the bills, so they do not have lots of cash out there that they can use to buy shares in these State-owned enterprises, which they currently own as taxpayers. They are actually struggling to pay the bills, because GST was put up by the Government in order to pay for tax cuts for upper income earners. The reality for real mums and dads is that they have to pay more for their food, because the Government increased GST. Why did it increase GST? In order to pay for tax cuts for the wealthy—for upper income earners. That is a ridiculous fiscal strategy, and it is an offensive fiscal strategy.
The Green Party will not be voting for the bill to tax hard-working kids. We think it is a ridiculous proposal. What we would like to see the Government bring to this House are some actual proposals that will rebalance the economy and make some real reforms, rather than this kind of legislation.
KANWALJIT SINGH BAKSHI (National)
: It is my pleasure to take a brief call on the first reading of the Taxation (Budget Measures) Bill. National is focused on building a more competitive and productive economy. This can be achieved only by lifting our economic performance, creating more jobs, boosting incomes of all New Zealanders, and improving living standards.
This bill deals with a very important aspect by removing three tax credits that no longer fit the purpose for which they were set up. First is the income under $9,980 tax credit, second is the childcare and housekeeping tax credit, and third is the tax credit for the active income of children, the latter of which will be replaced by a limited exemption. The changes will save $117 million over the next 4 years. These changes will help modernise the tax system and ensure tax deduction and tax credits are being targeted to the areas they are intended and needed for. I commend this bill to the House.
ANDREW WILLIAMS (NZ First)
: I rise on behalf of New Zealand First to oppose the Taxation (Budget Measures) Bill. It reminded me today, when I heard about the nickel-and-diming of our paperboys, of a song that was sung back when I was on the stage. I was the Artful Dodger and Fagin sang that famous song: “You’ve got to pick a pocket or two, You’ve got to pick a pocket or two, boys, You’ve got to pick a pocket or two.” I could recall being on the stage back then, and as a young person who delivered newspapers back then, who made money delivering newspapers and delivering the milk on a cold morning in Waipukurau, I could remember those words of Fagin’s. We are reminded of those words today by this incredibly, incredibly austere Budget, which ends up basically going after the young children of New Zealand, because they will not even get a tax credit for the small wages that they make. The babysitter who makes a few extra dollars will not get a tax credit for that.
This is appalling. This means that, basically, this Government has run out of ideas, so much so that it has to start going after the young children of this country who earn a pittance. Why did it not go after the likes of the people who sold TradeMe for $700 million and did not pay a dollar in tax? You can sell TradeMe for $700 million, but the Government does not go after you; it goes after the children of New Zealand.
Why does it look forward 3 years and suggest that it can make only a $197 million surplus in 2014-15, in 3 years? If that was a poll, that would be less than the margin of error. If the Government can come up with only a $197 million surplus in 2014-15 in its Budget, then, basically, it is working within the margin of error. We heard all the promises in 2009-10, we heard the promises in 2010-11, and they were repeated in the House today. All those promises of the two previous Budgets under the Minister of Finance, Bill English, have come to nothing. Most of the promises have been just absolutely not worth the huge piles of paper that they are written on. They are not worth the paper they are written on, because the promises of those last two Budgets have come to nothing. The promises of this Budget will be the same.
We heard today from the Rt Hon Winston Peters, who was in the House with a number of the members here when the “mother of all Budgets” was delivered by Ruth Richardson 20 years ago. The Rt Hon Winston Peters said that this Budget is a repeat all over again of failed measures by the National Government, failed policies going back 20 years. We could call this the “mini-me Budget”. This is the “mini-me Budget”. Bill English was a mini-me back then under Ruth Richardson, in those days. Now mini-me has grown up to be the big mini-me who is delivering the same Budget 20 years later, which basically is another failed Budget.
The Minister of Revenue is trying to net sprats instead of going after the sharks. This is a nickel-and-dime Budget. This is a pathetic Budget that really does bring New Zealand down to the lowest common denominator, maybe putting us just slightly above Greece in terms of our financial capabilities. Instead of this Government going after the big-picture stuff, it is going after the little sprats. I am not surprised to see today the headlines from the papers already, after this Budget. The headline in the online
New Zealand Herald
this afternoon was that this Budget is “A most forgettable (and dull) Budget”—a most forgettable and dull Budget. Imagine, the biggest newspaper in this country and that is how it describes this Budget. Further, the New Zealand Manufacturers and Exporters Association this afternoon has put out a statement saying that this Budget still needs step change to turn round the economy, and that the “fundamental problems, such as a lack of export growth, have once again gone ignored.” That is from our own New Zealand Manufacturers and Exporters Association. It says the fundamentals are being ignored and, once again, there will be a lack of export growth.
Hon Gerry Brownlee: Who said that?
ANDREW WILLIAMS: That is the chief executive of the New Zealand Manufacturers and Exporters Association.
Hon Gerry Brownlee: What’s his name?
ANDREW WILLIAMS: You should know his name. You should know his name.
Hon Gerry Brownlee: What is his name?
ANDREW WILLIAMS: I have got his name written down here, but I will not get into it. I will arrange an appointment for you to go and see him.
It gets worse. The overseas merchandise trade statistics were released today, and I wonder whether the Minister from Christchurch knows what the figures were that were released today. Does the Minister know?
Hon Gerry Brownlee: They’re all good out of Christchurch.
ANDREW WILLIAMS: They were not good. Today the overseas merchandise trade statistics show that exports are down 17 percent on April last year. They are down 17 percent on April last year. That is appalling. This country is dependent on trading our way out of the recession—which keeps getting referred to by the Government—and if we do not export more, this country will continue to slide. To have a 17 percent drop compared with 12 months ago means this Government is not performing. But it is not surprising, because the future growth that the Government sees is in the likes of a conference centre in Auckland—all looking inwards; not looking at the harbour and not looking at the beauty of Mount Eden or the beauty of the
Waitematā, but looking inwards at its pokie machines, looking inwards at its 500 pokie machines. That is the Government’s vision for New Zealand—a conference centre. People fly from all over the world to come to beautiful New Zealand to see what is being provided by our Minister of Tourism. Who is he again? Who is our Minister of Tourism? Does anyone know who our Minister of Tourism is?
Le’aufa’amulia Asenati Lole-Taylor: “Spray and Walk Away”.
ANDREW WILLIAMS: Oh, “Mr Spray and Walk Away”. I had forgotten. That is right. “Mr Spray and Walk Away” is our Minister of Tourism. People come all the way here, and what do they get? Our economic development package for this country is 500 more pokie machines—500 more. Is it not ironic that those 500 pokie machines are going to be in the very same building that the National Party had its election night party in, the very same building that the National Party had its national conference in, and the very same building that it launched its 2011 election campaign and its 2008 election campaign in? They were launched in the very same building where there are going to be 500 more pokie machines. It is interesting, is it not, that National’s economic development seems to go hand in hand with where it has its conferences. It seems to go very much hand in hand with where it has its conferences. You do just wonder where the strategy is.
So when we see figures today and we are told today that the future hopes are out of Christchurch and it is all going to start, we ask when it is starting. We were down there last month, and it all seems to still be coming down. There is not a lot going up—not a lot going up. There seems to be an awful lot of tradesmen and an awful lot of builders heading off to Australia and other places where they can get work. There is not a lot happening down there—not a lot happening down there.
New Zealand First certainly does not support this Budget. We think this is, again, just like the
“mother of all Budgets” in 1991. This is another absolutely hopeless Budget for the New Zealand economy. The New Zealand economy is not going to gain from this. This is not addressing issues such as where the New Zealand dollar is, what we are going to do about the New Zealand dollar being overinflated in terms of its value, how we are going to stimulate exports, how we are going to help grow the export sector, and how we are going to create jobs. This Budget is all about nickel-and-diming. This is all
about taking money off the young people of New Zealand. This is about attacking middle-class and poor New Zealand families, and keeping the money in the hands of the rich and the wealthy—keeping the money in the hands of the mates of the National Party, basically. This Budget is about protecting National’s mates and keeping its mates in good pasture, particularly those who go to the likes of gambling halls, who can use the pokie machines, and who have disposable income to go and get involved in all that sort of thing.
What we need to do is have a rethink. We need to have a rethink. At the next election I am sure this country will elect a Government that will start to stimulate the economy, stimulate exports, get alongside the likes of the New Zealand
Manufacturers and Exporters Association, and get this economy moving, not one that attacks the children of New Zealand to nickel-and-dime the Budget.
MARK MITCHELL (National—Rodney)
: It is with great pleasure that I stand in support of the Taxation (Budget Measures) Bill. I would just like to say that as a 12-year-old I actually did have a paper run.
Hon Simon Bridges: Don’t tell me you were paid under the table.
MARK MITCHELL: Well, I have to say that I cannot ever remember submitting a tax return as a 12-year-old paper boy. It never happened, and I cannot remember any of my mates rushing home to fill out their tax returns and get them in either.
This is an old piece of legislation. It is about time we cleaned it up, and we are cleaning it up. I watched something today in the House as a new member of Parliament that I really could not believe. I could not believe the fact that when the co-leader of the Green Party Russel Norman got up and made a speech I actually agreed with something he said.
Hon Members: No!
MARK MITCHELL: Yes, I did—I did. When he came out—[Interruption] I know, I know. But when he came out he made a bold statement by saying that National inherited a mess in 2008—National inherited a mess. I looked down at the Labour benches and there was just stony-faced silence. But it was all too good to be true. Mr Norman just came back into the House, and I think the leader of the Labour Party, Mr Shearer, must have called him and said: “Russel, we’re putting strain on the bromance here. You’re going to have get back in there and correct this.” He came back into the House and I listened to him for 5 minutes trying to retract and trying to step away from what he said in his earlier speech.
Catherine Delahunty: You don’t know Russel very well.
MARK MITCHELL: I know him well enough to see what I saw. Anyway, I am very happy to stand in support of this bill. It is time that we updated a lot of this old legislation, and this is a very good step in the right direction. Thank you.
Dr DAVID CLARK (Labour—Dunedin North)
: This bill, the Taxation (Budget Measures) Bill, carries some real fish-hooks. It is a terrible shame and it is a waste of opportunity, as this whole Budget that we have witnessed today also is. We are spending a couple of million dollars’ worth of parliamentary time tinkering—tinkering—and it is a shocking waste of taxpayers’ money when we are picking the pockets of paper boys and girls around the country because there are no other bright ideas, it seems. This comes from a Government that has already delivered tax cuts, 44 percent of the value of which went to the top 10 percent, and just 2 percent of the value of which went to the bottom 20 percent. That was those 2010 tax cuts. The GST has been cutting in for those on low incomes as well, and we know there are a lot of people around this country who are hurting right now. This Budget brings them no hope—no hope whatsoever. It is tinkering.
We have in this bill the proposal to abolish three tax credits. It is a miserly proposal—a miserly proposal—picking the pockets of the paper boys and paper girls around the country. I too, like the last speaker, Mark Mitchell, was a paper boy in my younger years. I got paid, I think, $2.86 or $3.16 for my deliveries of my first paper, and that was on a contract. On my next delivery round I delivered the
Auckland Star, and finally I was promoted to delivering the
New Zealand Herald. Those little bits of money enabled me to appreciate the value of earning money, and like many members of this House I have enjoyed many, many jobs since. It also gave me pride in being able to earn that money. I know that National members do not think that is much, and they do not care particularly for the little bits of money that those paper boys and paper girls earn around the country. But to take from them the money that they were getting in a tax credit, that they looked forward to, seems to be nothing but miserly. There is no other word for it.
The next thing we see in this bill is the abolition of elections to leave a herd valuation scheme, and that is a sensible move. It was proposed by the Labour Party and it is delightful to see that it has been taken up. But again, that we need to go into urgency to achieve this change shows how limited the range of options for the Government is in terms of bills to debate.
The final part of that bill deals with punishing students who have worked hard to pay off their loans. The rebate—the encouragement to pay off their loans more quickly—has been removed from these students. We know that lots of students are struggling. I see them in Dunedin all the time. Those students work hard. They study hard. They are eating noodles from bowls. They are making ends meet, and they are doing their best. But this Government seems determined to make it harder for them, and it seems determined to shut more and more students out of education. The Government has frozen the level of the incomes that the parent threshold relates to in order to make sure that fewer and fewer students will qualify for student allowances. Many of these students also go out to work to support themselves through their studies, and they will have to work longer and harder under this Government and will have less time to work hard on their studies to ensure that they are good, contributing taxpayers in the future. This Government seems to have no vision for educating its citizens, for making sure they get the best skills, for encouraging them to do that, and for making sure they can make the most of their opportunities.
We will hear more about the way in which the years of allowance have been taken from these students so they cannot get the longer degrees, so they cannot add the value that they might add to this country. It is going to eliminate a group of students—those who are middle and low-income earners. It is not going to affect the really wealthy ones. It will affect only the low and middle-income earners. It is wasteful—it is wasteful of our talent. We have also seen that the real value of student support is going down. It has been going down. It has been trending down for a long time. The last thing we need is more punishment for students. But that is what we have got here in this bill—that is what we have got.
If I can return to the matter of—
Andrew Little: The kids.
Dr DAVID CLARK: —the kids, that is right—the paper boys and girls. What we find when we look at the regulatory impact statement is something quite astonishing. This attempt to broaden the tax base of New Zealand through pinching money from the kids not only, perhaps, is a little bit of a strange idea to members on this side of the House but also we can see that it is an inefficient idea. I read from the regulatory impact statement: “Generally speaking, the proposed option should not impose any new compliance costs on business.” That is how these things regularly start. But wait. It says
further: “However, businesses that employ only school children on very low wages (below $2,340 p.a.) may have to begin withholding PAYE from these employees from 1 April 2013.” This is increasing compliance so that we can take money from kids who earn under $3,000 a year. That is outrageous. If this is the Government’s big idea, it is embarrassing. This is a zero idea. Businesses employing schoolkids earning below $2,340 per annum, those very low wages, may have to begin withholding pay as you earn. That means increased compliance.
We can see that that is not going to be all. There will be other employers in the same situation. We will see it is not only schools that have to go through with this measure. We will find small delivery companies around the country, with other low-paid workers, that will have to ensure that those kids who are doing jobs for them go out there and pay as you earn, and get robbed of their little tax credit.
This is not base-broadening. This is certainly not visionary stuff. We have got an economy that is struggling. There is no doubt about that. We have been buying more than we sell for too long, and this Government seems to have no plan to address it. It is very focused on Government debt. That is a problem that we agree is not too difficult to solve. Labour would have got there in the same time the National Government is planning to get there. But there are bigger issues. We have got this issue with buying more than we are selling. Our exporters need support. We need pro-growth tax policies, not pinching money from paper boys and paper girls.
We have had the idea of pinching money from the paper boys and the paper girls. We have got this tinkering. It resembles the wider Government tax programme, which I am sure we will hear a little bit more of as the year goes through. It is very much in the same line. There is no attempt to wrestle with the bigger issues, such as the capital gains tax that would push money towards the productive sector and the monetary policy that would support our export businesses. If we do not change anything in this area of taxation, nothing will change. New Zealand will continue to limp along, 50,000 people a year will continue to leave for Australia, 50,000 more people a year will end up on the unemployment benefit, and 50,000 more people a year will end up out of work. This is not good enough; it is simply not good enough.
In some of the publicity put out with these changes regarding the tax credits, we see that the childcare and housekeeper tax credit is being removed also. The reason given is that it affects mainly high-decile people. That may be true, and if the data presented in the publicity material, which we have had a very short time to look over, is correct, then there may be some very good reason for amending that. But we also see that at least 20 percent—and, by the look of it, closer to 30 percent—of those families who receive this tax credit are actually from lower-income households. We are going to remove that tax credit from them because it is too hard to do anything different, it seems. It is all about making sure that things are simple, in one sense, yet we are going to increase compliance on schoolkids in the other sense. It makes no sense.
As I draw to a close I want to state again that if we do not change things greater than this in our tax system, we will continue to see those same trends that we have seen up until now. We will continue to see our country borrowing. We will continue to see private debt growing. We will continue to see our citizens buying more than our exporters sell, and we will continue to see exporters struggling in the face of unhelpful policies that the current Government is putting forward. Fifty thousand more people will end up going to Australia every year, 50,000 more people will end up unemployed, and 50,000 more people will end up on benefits. It is not good enough. We need bolder tax policy. This policy is not going to do it.
MAGGIE BARRY (National—North Shore)
: I rise to speak to the Taxation (Budget Measures) Bill, which is part of a Budget that I absolutely believe is the correct
and right Budget for these times. It is our second zero Budget, and it is an effort to lift our economic performance, increase the amount of jobs, and grow this economy. This is something that we understand very well on this side of the House, but is something that does not seem to be at all appreciated by our opponents. The job growth, of course, will be occurring in a place like Christchurch. We have 17,000 alone that are needed quite soon. That is an excellent thing. Also, what is excellent about this bill is that Peter Dunne as the Minister of Revenue has meticulously, as is his wont, gone through all the obsolete, old legislation, looked at our tax carefully, and started to cull and prune to get rid of a whole lot of rubbish. We have heard a whole lot of rubbish from our opponents, who seem to be preoccupied with pick-pocketing, with the strange things—I seem to think that the man who burst into song from New Zealand First was actually admitting to petty larceny in his early days.
Hon Gerry Brownlee:
X Factor failure.
MAGGIE BARRY: Yes, well, indeed, that too. They all seem to sing their way through life. But it is an unedifying spectacle to see this issue taken so lightly.
Much has been made of paper delivery. I myself was a paper delivery person, as was my colleague Mark Mitchell, and many others, including David Clark. Who amongst us ever filed a tax claim? Nobody—because it is not what kids do. So what the Government is doing is carefully looking at getting rid of the nonsense. We cannot get rid of all the nonsense, but what we can do is get rid of the obsolete, outrageous, and silly things so that our tax system becomes modernised and ensures that tax deductions, and tax credits for that matter, are being targeted at the areas where they are needed and intended. So that is something we are approaching with rigour.
Unlike the Opposition, we acknowledge that times have changed, and with those changes wider Government policies have also changed. So when we look at things like paper delivery boys, we look at the fact that the children will certainly not be able to claim that refund of tax that is already being correctly deducted and paid by an employer. So the claim is not needed. These tax credit changes will also be helping to make the Inland Revenue Department much more efficient. I think a lot of people are filing tax returns simply to get these outdated tax credits. This is not needed and is not necessary. Unlike the Opposition, we want to get rid of a lot of this chaff and nonsense, and concentrate on getting the economy back on track, where it belongs.
The student loan scheme is something that has been talked about quite a bit. By repealing the voluntary repayment bonus, we will be saving about $12 million a year. It is well known that we have one of the most generous student loan support systems in the world, and we are committed to interest-free student loans, but we are determined to reduce that write-off. Since we came into Government we have reduced it from 49c in each dollar down to 45c, and we do intend to get it down, over time, to 40c in the dollar. This Budget, the 2012 Budget, the right Budget for the times, will help in that goal.
We are going to require graduates and ex-students to pay off their student loans a little earlier. We are doing them a favour—“Get the monkey off your back early, before you get into mortgages, and kids, and all the rest of it.” We are encouraging them to do the right thing. That is what this Government does all the time, and that is what previous Governments have failed to do—absolutely woefully.
So I commend Peter Dunne for his meticulous work. There were a lot of obsolete elements. We are closing the loopholes regarding livestock. Even the farmers admit that they have been getting away with that one for a long time. So unlike the Opposition, we do understand that we need moderate growth in this economy and that we do need to reform the tax system, and this is an important part of it. Thank you.
Mr DEPUTY SPEAKER: The 11th call is a split call.
Dr MEGAN WOODS (Labour—Wigram)
: It is my pleasure to join the great tax debate of 2012, following the Budget. Are we here today to debate the re-gearing of the New Zealand economy, to turn it into a productive economy that will deliver jobs, growth, and a decent income for New Zealanders? No, we are not. Instead, we are here to literally raid the piggy banks of the nation’s youth. We have been told by members opposite that this is just petty cash. Well, this just shows that this is a Government that is out of touch and does not realise what this money means to these kids. The Government is closing the loopholes, and we have got the great euphemism in terms of it trying to crib back this $117 million—it is that the Government is “tightening these tax credits, including the active income from children.” I love the language. So here we have it: part 3 of the great economic strategy; the one that started with a cycleway, then moved on to the “Holiday Highway”, and part 3, ladies and gentlemen, is the paper route. Is this the brighter future that we were promised?
One can only imagine the policy discussion that took place: “It’s time to crack down on these little bludgers. They’re getting away with far too much. They’re not paying their fair share. Get more out of them!”. So there we have it—$117 million clawed back, pinched from the pockets of our kids. The Government needs the income, the members opposite tell us, and what do they need the income for? Well, it is our children who are being pick-pocketed to pay the $120 million tag of flogging off our assets. The Government is clawing back $117 million from the pockets of the children of our nation, but we could be saving that by simply not paying the bill to sell our assets.
Labour opposes this Taxation (Budget Measures) Bill because it is mean-spirited. We oppose it because it just shows that this is a Government that is out of ideas. It is a Government that has no plan to fix the economy. It has no plan to create jobs, and it has no plan to deliver higher incomes. Instead, what it is doing is targeting young people. The Budget is targeting young people, and it is disincentivising them from going on and achieving their potential in tertiary studies and post-graduate studies. The most mean-spirited part of it all is that it is taking back a little bit of an incentive for kids to work. These are the hard-working children of our nation, who are eventually going to get on a jet plane and leave our country, because we are not sending messages of hope, and we are not sending messages that there is a future in New Zealand.
This is a Government that is certainly not delivering a brighter future for any child in New Zealand. This pernicious piece of legislation, which has come before the House this afternoon, is showing the very little value that this Government puts on our nation’s youth. It is not a laughing matter. We have been accused by members opposite of not taking it seriously. We take the abandonment of the children of this nation by members opposite very seriously, and I am proud to stand here and oppose another part of the abandonment of the children of New Zealand in this legislation.
GARETH HUGHES (Green)
: Kia ora, Mr Speaker. Ngā mihi nui ki a koutou. Kia ora. The Budget delivered today has been called all sorts of names: a zero Budget, the nickel-and-dime Budget, the “black” Budget, the boring Budget, and the tinkering Budget. What is clear is that in National’s Budget there is a clear deficit: we have over $8 billion of deficit. But, more important, this Budget has a deficit of vision, a deficit of compassion for our kids—those 200,000 kids growing up in poverty—and a deficit of ideas. I think you can most graphically see that deficit of ideas in the first Budget bill this Government has put to this House, to pass through all stages under urgency: the Taxation (Budget Measures) Bill. All the bill does is pinch the pockets of those hard-working kids, as Megan Woods put it, by removing the $240 tax credit. The bill also removes the failing 10 percent student loan repayment bonus. A deficit of ideas is exactly what we are seeing in this bill.
This country has a huge number of challenges, and many of them were elucidated by the Minister of Finance. We have an $8 billion deficit. We have $75 billion in foreign debt. We have the lowest growth in 50 years. We have huge structural problems, and we have concerning global economic conditions.
- Sitting suspended from 6 p.m. to 7.30 p.m.
PAUL GOLDSMITH (National)
: It is my pleasure to take a call on the Taxation (Budget Measures) Bill. We have had a lot of overblown rhetoric on the other side about what it will or will not do, but, really, it is more a sensible tidying up of the tax system. It is an omnibus bill that deals with three mains areas: the livestock valuation rules, three tax credits that are no longer fit for purpose—removing those—and cancelling the student loan repayment incentive. All up, we estimate that it could bring in an extra $300 million of revenue over 4 years, and that is not an inconsiderable sum. It is not going to change the world, but it will build on the important tax changes that were made in the 2010 Budget and that have formed a basis for a lot of the economic growth that we have had in the last while. It will build on the strong economic performances in the 2010 Budget.
It has been hard to figure out what the Opposition has been saying on this bill. First, we had Mr Mallard saying it would be crazy for people to pay back their loans, then we had David Clark saying we should be keeping this 10 percent student loan repayment incentive. I was not quite sure where we had got to there. It is worth thinking just quickly on this bill where we might have been if things had gone awry and Labour had control of the place. We would have been looking at a capital gains tax coming in. I just wonder how you tax your way to growth. How would New Zealand have been saved by Labour taxing every small business, every shareholder, and every farm? I do not know how that would have developed growth in this country.
We talk about vision. The only vision we seem to see on the other side of the House is one that is about expanding the size of the State and expanding the size of the tax system. Our vision is to set people free to be as enterprising as they desire, and that is what this Budget is all about. I am very pleased to speak in favour of this bill and I commend it to the House. Thank you very much.
A party vote was called for on the question,
That the Taxation (Budget Measures) Bill be now read a first time.
||New Zealand National 59; Māori Party 3; ACT New Zealand 1; United Future 1.
||New Zealand Labour 34; Green Party 14; New Zealand First 8; Mana 1.
|Bill read a first time.
Hon PETER DUNNE (Minister of Revenue) on behalf of the
Minister of Finance: I move,
That the Taxation (Budget Measures) Bill be now read a second time. Ours is a broad - based low rate tax system that aims to raise revenue in the most efficient manner to support the Government’s aspirations for the economy. We value fairness in the system, to ensure that everyone pays their fair and proper share of tax. For this reason, this bill seeks to repeal two existing tax credits, replace another, and also remove the voluntary repayment bonus for student loan repayments, as well as introduce new changes to livestock regime rules. I will not go through each of these in
detail, because they were covered during the first reading debate, but let me take some time to discuss some of the issues that have been raised.
I want to talk first about the tax credit for income under $9,880. This was originally devised as a temporary means for compensating a small group of workers following the 1986 tax reforms, which I think Mr Mallard will recall—maybe other members will have read about them in the history books. The important point is that today none of the original target audience of those reforms actually qualifies for the credit, but it is still being claimed by other people for whom it was not intended. There is no clear policy rationale why people who currently claim that credit, such as those who work full-time for a small part of the year, should pay less tax than others with the same income but who earn it a different way, such as someone who works part-time for the whole year, who is not eligible for the credit as it stands. It is also not fair—
Hon David Cunliffe: We see him in full flight tonight!
Hon PETER DUNNE: Well, there is a long night ahead of us, I am told.
Hon David Cunliffe: You’ll need all your flair.
Hon PETER DUNNE: Just be patient, Mr Cunliffe; it will come.
It is also not fair that although the majority of farmers—
Hon David Cunliffe: How long has the member been in the House? We’re still waiting.
Hon PETER DUNNE: A lot longer than that member has been and is likely to be. What I was saying is that although the majority of farmers comply with the letter and spirit of the existing tax law, some farmers have been exploiting some of the existing rules with regard to the herd and the livestock schemes, the herd and the standard cost schemes, to their tax advantage. In respect of those measures, we announced in last year’s Budget a consultation process for change. This Budget gives effect to the outcome of that consultation, the decisions of which were announced in around March of this year.
I want to say a little word or two about the student loan repayment bonus changes. The important point here is that that bonus was introduced as a way of encouraging people to make their repayments, but it is being abolished now because what we have actually discovered is, one, that some of the other measures that have been put in place subsequently have been far more effective in terms of encouraging repayment, and, two, as with the transitional tax measure I referred to earlier, the purpose is being distorted, and we are getting people claiming the repayment bonus in the same year that they are making a repayment and actually benefiting from the system. That was not what was intended at all, so that is why that is being repealed.
I want to talk now about paper boys, which Mr Mallard will be delighted about. It was interesting during the first reading debate how paper boys somehow seized the public imagination. At a somewhat frivolous but none the less relevant level, I should point out that since the demise of evening papers, we actually no longer have paper boys. Mr Mallard is a wily character. He may well say—
Tracey Martin: We have paper boys!
Hon PETER DUNNE: There is a squawking creature to my right, whom I will ignore. I come to Mr Mallard, who—[Interruption] I cannot understand a word you are saying, I am sorry. Mr Mallard may well say in response—
Hon Trevor Mallard: Community newspapers.
Hon PETER DUNNE: Exactly, and I shall tell him that community newspaper workers are actually, funnily enough, described as “pamphlet droppers” and were never covered by this regime anyway. In fact, their income will be under the $2,340 threshold, which will still apply.
What we are doing here—and I thought that the member would be interested in this—and what we are putting in place is the last nail in the coffin of Muldoonism. The existing child tax credit was introduced by Sir Robert Muldoon in 1978 as a temporary measure, because at that time—
Hon Trevor Mallard: At the point he put taxes up to 66 percent.
Hon PETER DUNNE: Probably. At that time—
Paul Goldsmith: That was later—1982.
Hon PETER DUNNE: You can have this argument all you like—I think you are right actually, Mr Goldsmith; it was, because there was the caravan and the boat tax at the same period. But the point I was making was that in 1978 this was put in place because at that point most—
The ASSISTANT SPEAKER (H V Ross Robertson): Order! My left and my right: you cannot interject on each other. The Minister has the floor.
Hon PETER DUNNE: In 1978—this is a riveting story, I know, but it needs to be placed on the record, to put some context around this debate—very few employers deducted tax at source. A number of the people in the category of being paper boys and girls, and others of that ilk, found themselves facing the potential of tax bills at the end of the year because the tax had not been properly deducted. So this temporary transitional measure was put in place. Thirty-three years later, most of the paper boys and girls have long since ceased to be in that role, but, more important, most employers now actually make deductions at source, anyway. So the purpose for the concession, if you like, has become outdated. It is no longer necessary. The people who are affected, if they are earning above the $2,340 threshold, will be able to file their tax returns in the normal way that they have been able to do for some time.
Hon Trevor Mallard: And if they are earning under?
Hon PETER DUNNE: And if they are earning under that, we are not particularly interested in them, frankly; the exemption will remain.
Hon Trevor Mallard: No, it doesn’t. The member is absolutely wrong. He should read his own bill.
Hon PETER DUNNE: Well, I drafted it, and I should know what it says, Mr Mallard. I appreciate that that is not something—
Hon Trevor Mallard: He should read his own press statement.
Hon PETER DUNNE: Well, it is rather difficult to make that claim when you actually write your own press statements.
Anyway, the point is that this is not a significant measure. It is removing something that has become completely outdated. Frankly, a lot of the heat that has been generated about it has been good fun in the context of the debate, but members opposite complained earlier about, I think, a couple of million dollars being spent on Parliament passing this allegedly unnecessary legislation, and that is a pretty expensive price to pay for a little bit of fun. I commend this bill to the House, and move its second reading.
GRANT ROBERTSON (Deputy Leader—Labour)
: Normally, the second reading would be taking place after a select committee process, had this bill, the Taxation (Budget Measures) Bill, been sent to a select committee. I wonder how many of what the regulatory impact statement tells us are the 68,600 children receiving the tax credit that Mr Dunne has just told us that no one is getting, whom Mr Dunne does not care about, and I wonder how many parents of these 68,600 children who are mentioned in the regulatory impact statement would have come to the select committee and said: “This tax credit is actually very good. This is about helping to teach our children about the value of work, the importance of paying tax, but that when you haven’t reached a certain income threshold you can actually get that money back.” That would have been something that might have happened in the select committee.
Is it not amazing that the Government’s big tax idea, the first thing up straight after the Budget, is to pick the pockets of paper boys and paper girls. That is the big, big idea in taxation from this Government. We are not standing here tonight debating whether or not there should be a capital gains tax. We are not standing here tonight debating whether or not we should make the tax system fairer. No, we are debating whether or not the Government should penny-pinch from children who are getting their income—
Maggie Barry: Fruit and vege GST. What else have they dropped?
GRANT ROBERTSON: Well, Maggie Barry wants to start a debate about GST and about it going up to 15 percent. We could have had that debate, but, no, we are not. We are not having a debate about a capital gains tax, and we are not having a debate about actually taxing all income, not just the income of actual workers but the income that people get from selling off their second homes and other capital gains that they make. We could be debating that. We could be debating how to broaden our tax base, how to make sure we actually have a fairer tax system, but, instead, the bill that comes in front of us tonight sets about picking the pockets of 68,600 children. That is a ridiculous thing for this Government to be focusing on. It is pathetic penny-pinching. It has nothing to do with growing our economy, and it has nothing to do with making our tax system fairer. Instead, that is what the Government thinks is its No. 1 priority to come to the House with tonight. It is bizarre politics.
But it fits with a Budget that has completely missed the point, that has sent people over to Australia, that has said to New Zealanders that this Government has no plans for growth, this Government has lost all of its ambition, and, instead, it wants to bring in a tax bill to get to 68,600 children and the meagre income they get from doing this kind of work. The fact is that the Inland Revenue Department collecting that money, which is a little bit of a bonus for those children at the end of the year, the bringing of them into the workforce and enabling their understanding of how things work, has to be got rid of. That is the kind of pitiful taxation bill that is in front of us tonight.
I want to also refer to the student loan repayment changes. I do think that here we have an example of where the Government is finally getting around to doing something that we have recommended from day one. Mr Mallard was highly critical of the education standards of New Zealand that might lead to people actually using the repayment bonus scheme, because it did not work for them. But it did turn out that some people did use it, which is reasonably remarkable. The fact is that not very many of them did use it, and, actually, it has not worked at all.
If we want to go back just a little bit to when National brought in the policy in terms of a loan repayment bonus, we can see some of the excited statements that were made at the time. We have a statement here that says: “We estimate that this measure will reduce repayment times of those who take up the bonus by 1.5 years, and we believe that it will decrease the upfront cost of new lending to 39.4c. How could anyone vote against that?” Anne Tolley said that in, I believe, a brief period when she was the Minister for Tertiary Education, before Steven Joyce came and took that portfolio off her. That is what she told us. She asked how anyone could vote against that. Well, it will be interesting to see what Anne Tolley does tonight. Will she vote for the repeal of this thing that she said nobody could vote against because it was going to reduce the upfront cost of lending to 39.4c? Well, it did not do that. It did not work at all, in fact, but Anne Tolley told us that.
But it was not just Anne Tolley. We also heard, in most earnest tones, the following statement: “This bill is a significant step to encourage student loan repayment and, more important, to reduce the overall repayment times. The message, very clearly, is that our young people will be debt-free sooner,”. Who said that? Louise Upston said that. She was up just after Anne Tolley, extolling the virtues of the student loan repayment bonus.
But there is one more person who got on his feet to proclaim the importance of this, and he said: “I say to the House that this is a significant incentive for students to pay their loans earlier. I cannot fathom why anyone would oppose the introduction of such an incentive.”
Hon Member: Who said that?
GRANT ROBERTSON: Peter Dunne said that. That is the Minister. That is the Minister who moved the bill today. That is actually a new record for Peter Dunne. Previously we have had Peter Dunne standing up in the House to repeal bills that he had put forward when he was a Minister in a Labour Government, but I do believe that this is the first time that the Minister has come to repeal a bill that he put up when he was in a National Government. It is not about shortening repayment times; it is shortening Mr Dunne’s time to go back on what he has already done.
Hon Trevor Mallard: Hardly a flip-flop; just a straight flop.
GRANT ROBERTSON: Well, yes, Mr Mallard, a complete flop. From 2009 to now Mr Dunne has turned round. He said that he could not fathom why anyone would oppose the introduction of such an incentive. Well, I cannot fathom why it was introduced in the first place by Mr Dunne, and here he is, 3 years later, as Mr Mallard said, not a flip-flop, just a flop. Louise Upston and Anne Tolley got up on their feet to tell us what a wonderful thing this is. Here we are, straight after the Budget, ready on this side of the House to debate the overall taxation system and what the fiscal policies should be, but, instead, what we are debating is the National Government flip-flopping on something it did in 2009, and trying to take money out of the pockets of 68,600 children. That is the best we have got from the National Government out of this Budget: a debate about things that those members did that they want to change 3 years later, and petty penny-pinching from children in this country.
We could be having a debate today about a capital gains tax. We could be having a debate today about superannuation and about savings. We could be doing those things.
Todd McClay: We did that at the election.
GRANT ROBERTSON: Todd McClay says the election. I am not sure. I went to about 22 public meetings with my National Party opponent in Wellington Central and I am pretty sure he did not get up and say: “We’re going to take the money out of the pockets of paper boys and paper girls.” I might have missed it. Did any of my colleagues hear that?
Hon Members: No.
GRANT ROBERTSON: No, none of us heard that. Todd McClay said that there was an election. Mr McClay, I think Rotorua might have turned on taking the money out of the pockets of 68,600 children. I think it might have turned on that. If Mr McClay had been upfront with the voters of Rotorua and said that he was going to take money out of the pockets of paper boys and paper girls—68,600 of them, according to the regulatory impact statement—then I do not think Mr McClay or a host of other National MPs would be back here today.
Clearly, this is the most important taxation measure that this Government feels it needs to bring in front of the country. This is a ridiculous piece of legislation. This Government’s Budget is so poor that this is the best that it can do. This is the best that the National Government has got for New Zealand, and it is simply not good enough.
TODD McCLAY (National—Rotorua)
: Where might one start after that last speech from Grant Robertson? Actually, you know, at the last election the National Party campaigned on a brighter future for paper boys and paper girls. It might be OK for members on the other side of the House to say that at the age of 40 you should still be delivering papers, but the money that we put into education in this Budget will give every single paper boy and paper girl a brighter future in this country. Before the last
speaker goes, I just wanted to say that he should not be such a bully when it comes to talking about the hard-working Minister Anne Tolley and the very hard-working member for Taupō, Louise Upston. Together their majorities added up to more than the total number of people who voted for him in the Wellington Central electorate.
Hon Christopher Finlayson: And he was third in the party vote.
TODD McCLAY: He was third in the party vote. Well, that is a good start—that is a good start. Welcome back. That is a good start. What happens on this side of the House when we do our maths is you take a majority from this member and a majority from that member, you add them together, and if it was more than the total number—
Grant Robertson: I seek leave of the House to table the results from two electorates—
The ASSISTANT SPEAKER (H V Ross Robertson): No, no—order! The member knows that is not a point of order.
TODD McCLAY: And that is their problem with the Budget.
Hon Trevor Mallard: I raise a point of order, Mr Speaker. It is a longstanding tradition in this House that members do not sit in the Prime Minister’s seat unless they have ambitions to be there. I wonder whether that member is showing that ambition now.
The ASSISTANT SPEAKER (H V Ross Robertson): The member may well be right, and the member on my right has to suffer the consequences.
TODD McCLAY: I notice that nobody is willing to sit in the seat of the Leader of the Opposition at the moment, and that tells us more about what is going on here tonight. That is the difference between this side of the House and that side of the House. When it comes to the Budget, that side is worried about the issues that New Zealanders are not caring about; we are focusing on what is important. What I want to say is that over the dinner break I was invited to go out and make a post-Budget speech and talk to some people—some everyday New Zealanders—about what is important to them. Can I tell you that it is a wonderful place: the Angus Inn Hotel on Waterloo Road in Lower Hutt. There were people lining up to come in to hear the good news about this Budget. One of them asked what the difference is between the Government and the Opposition. I said it was straightforward: we are ambitious and we want to do more for New Zealand; the Opposition wants to borrow and spend, borrow and spend, borrow and spend. Do you know what I found in that Hutt South electorate when I walked outside looking for my car to come back here? There were Greek restaurants all up and down Trevor Mallard’s electorate—all up and down the street. That is all they want to do: make us like those poor countries, those poor people over there in Europe.
This is an ambitious piece of legislation that brings balance to our tax system and that does good things for New Zealand, and I give you a guarantee that the party opposite will vote against it, just like members of the public in New Zealand voted against that party in droves only 6 months ago.
Dr David Clark: Mr Speaker.
The ASSISTANT SPEAKER (H V Ross Robertson): Is the member calling?
Dr David Clark: Yes.
The ASSISTANT SPEAKER (H V Ross Robertson): I call the honourable member David Clark.
Dr DAVID CLARK (Labour—Dunedin North)
: Mr Speaker—[Interruption]
The ASSISTANT SPEAKER (H V Ross Robertson): Order! I can hardly hear the member who is trying to seek the call. Courtesy is contagious. I call the honourable member David Clark.
Hon Anne Tolley: I raise a point of order, Mr Speaker. In fairness, he did not seek the call; you asked him whether he wanted the call, and he said yes. So this side was calling for the vote, in fairness, because no one else in the House had called.
The ASSISTANT SPEAKER (H V Ross Robertson): Thank you, thank you. The member has now called.
Dr DAVID CLARK: Thank you for the call. I was somewhat surprised that the member did not have much more to say about this bill, the Taxation (Budget Measures) Bill. Then again, perhaps I should not be. There really is not too much more that one can say about this bill. It is tinkering. It is the worst kind of tinkering: pinching the money from our paper boys and paper girls around the country, but dressed up as something more. This is a Government that gave tax cuts to the wealthiest New Zealanders not very long ago. We know that in 2010 the wealthiest 10 percent of New Zealanders got 44 percent of the value of the tax cuts. Just 2 percent of the value of those tax cuts went to the bottom 20 percent. That is the Government’s idea of tax change. It has done it, it is all over, that has all happened, and now it is just tinkering. That is really not going to get us back on the right track. We have issues as a country. We have been buying more than we have been building, selling, and exporting. This has been going on for some time. Our country must address the problem that we have with our trade balance, and this Government seems to have no ideas at all.
We are here under urgency to pass a bill that would rob tax credits from 68,000 children. That is what we are reduced to. That is the base-broadening vision of this country. The base-broadening vision is to pick the pockets of the paper boys and paper girls around the country. Mr Goldsmith seemed to suggest I wanted to keep the student loan scheme situation that was encouraging students to pay off their loans more quickly; I was merely trying to point out that it fitted a pattern of trying to take things away from students. The actual detail of that part of the bill is something that Labour does not oppose, but we were merely pointing out that it fits with a pattern. Mr Dunne himself introduced it not so long ago, as we have just heard from my colleague Mr Grant Robertson, and far from doing a flip-flop, it was so recent it can only be described as a flop. It was not meeting its intended purpose.
In my previous opportunity to speak I pointed out that in the regulatory impact statement, which I am now searching for, the point is made that—thank you to my colleague Mr Mallard—businesses that employ only schoolchildren on very low wages, below $2,340 per annum, may have to begin withholding pay-as-you-earn tax from these employees from 1 April 2013. We are talking about the kids who clean after school. We are not just talking about the paper boys and paper girls of this country; we are also talking about those kids doing low-wage jobs to help them get a bit of pocket money, maybe to help out at home, maybe to buy one or two things, or maybe to buy some school books. And the Government is trying to claw that money back. As my colleague Megan Woods said, we can imagine the conversation round the Cabinet table: “How are we going to broaden that tax base? Why don’t we have a go at the kids on their bikes out delivering newspapers? That’s our big vision—we’re going to go for it.”
The point that I did not make in that previous address was that, actually, what this regulatory impact statement tells us is that there is additional compliance introduced here. Employers are being required not only to pinch from the pockets of kids but to do it at their own expense. Their time and effort is being put on the line to pinch this money from the kids. So not only is it the wrong thing to do but also it is an expensive thing to do. We know that there will be many small businesses operating pamphlet deliveries or whatever that have kids out doing that work, and they too will have an increased overhead as a result of this bill. It is not a bright idea, and not a great way to increase our future and brighten our future; it is already going to drive kids offshore to
see that their opportunities are going to be greater in Australia. There will be 50,000 more people leaving the country for Australia every year, there will be 50,000 more people unemployed—this is the record of this Government—and there will be 50,000 more people collecting the unemployment benefit. But also it is going to cost business more. This is National’s big idea, and it is going to cost business more. I ask you: pinching pennies from kids and charging businesses more for the privilege—most business people would be embarrassed by that. I am pretty confident in saying that most business people will think that pinching pocket money from kids is not a good idea. And most business people would think that having to pay for the opportunity to do that is just outrageous. This is just not a good idea. But it does fit with this theme of tinkering with the tax system.
If you look at the Government’s tax work programme for this year, you will see that there are some fair objectives, some loopholes that are going to be addressed, and some attempts to do some minor base-broadening here or there, but you will not find inspiration there. If you are going there in the morning to have something to read over your bowl of muesli, then you will be back asleep in it before you know it. We need real, inspirational change if we are going to turn our country round. We need pro-growth tax measures. We need measures that are going to support our exporters. We do not need measures that are going to take the pocket money away from our kids. I cannot say much more about this bill, because there is not much more to say about it. It is tinkering, it is no more than tinkering, and therefore we will oppose it. Thank you.
Dr KENNEDY GRAHAM (Green)
: This Taxation (Budget Measures) Bill, unsurprisingly, reflects the general priorities of the Government’s 2012-13 Budget. Let me in my short time do two things: first, to judge what is in the bill and, more broadly, the Budget as presented this afternoon, and, secondly, to discern what is missing from it. In judging what is in this bill and the Budget, let me compare the National and the Green positions on the stated priorities that provide the overall framework. National’s starting point is the three demons that provide the setting for a zero Budget—one global, one national, and one local. There is the global financial crisis, there is the 2008 national recession, and there is the Christchurch earthquake crisis. These together create a dire situation that justifies a zero Budget, and on top of that was the irresponsible fiscal management of the previous Government. From that the Government justifies fiscal austerity, so that New Zealand avoids the fate of Greece.
The bill proposes to abolish three outdated tax credits, the transitional circumstances credit, the housekeeper credit, and the children’s active income credit, and there are plans to restrict the livestock valuation method for farmers and repeal the 10 percent voluntary repayment bonus in the student loan scheme. Why does the Government have to engage in this kind of tax sleight of hand? Because it judges such legislative changes to be essential to its 2012-13 Budget. There can be no other way it can afford it.
So what are the main components of such a strange Budget? There are four main components to this year’s Budget. First is the goal of sound financial management. With that as a precondition the Government identifies three priorities: economic competitiveness, public sector efficiency, and Christchurch recovery. New Zealand’s outlook, says the finance Minister, “is more positive than most. We are a food-producing economy [in] a rapidly growing middle class … region.” Unlike other developed countries New Zealand is going through a “moderate adjustment”. So long as the Government sticks to its balanced economic programme we shall pull through. “New Zealanders have shown … resilience in challenging times [and this Budget] supports their aspirations for a brighter future.”
So let us compare National and Green policy on these components. First, sound fiscal management. Rather than slash spending or dramatically increase taxes, National
chooses to run larger deficits and curtail growth in public spending. The result is the proclaimed ability to stay on target for a Budget surplus by 2015. But giving tax cuts to the richer income earners is not sound financial management. Selling off State-owned assets and borrowing more from overseas is not sound fiscal management. It is a form of fiscal theft.
The alternative Green Budget has sound fiscal management. It recognises what the Government does not: that our national economy is afflicted with a structural imbalance. That imbalance is an overseas-funded private sector debt driven by excessive consumerism, exacerbated by a distorted taxation regime, resulting in a rising current account deficit and an increasing negative net investment position. The Green Budget would rest on alternative forms of both revenue and expenditure that reflect three values: sustainability, resilience, and equity. The revenue would rest on a capital gains tax, a resource rental on water, increased mining royalties, a temporary levy for Christchurch, a phase-out of emissions trading scheme subsidisation with a real price on carbon, savings off the absurd roads projects, and increased revenue from a higher minimum wage. Green fiscal expenditure would include reprioritised items, ending child poverty, reinstating training incentives, initiatives for river clean-up, new social housing, extended home insulation, and reforestation initiatives.
Consider National’s first priority: economic competitiveness. The Green Party agrees that economic competence, rather than a ruthless competitive efficiency, is a sound national goal, but how much, and how is it to be paid? With National having sold off the country’s State assets to the tune of some $6 billion, it will put $385 million of new investment in research, science, and innovation. The alternative Green Budget would apply from the savings within its fiscally neutral Budget—some $1 billion over the next 3 years—which is roughly comparable in amount to National’s plans, but the way of funding it is different. Green taxation reform would be specifically dedicated to green technology.
Consider National’s second priority: public sector efficiency. Of course this is a national goal shared probably by all parties in this House, but the difference is over what it means. National is amending the State Sector Act, the Public Finance Act, and the Crown Entities Act. It will reduce long-term welfare dependency, support vulnerable children, boost skills and employment, reduce crime, and improve interaction with government, according to its Budget speech this afternoon. The Green Budget already has plans for bringing 100,000 children out of poverty and identifies $100 million over 3 years for a start-up fund for cleantech small to medium sized enterprises.
Consider National’s third priority: Canterbury earthquake recovery. National has committed $5.5 billion over 6 years, which is about $1 billion a year. The funding has helped in the rebuilding of 75 percent of the 1,000 buildings that require demolition, some 13,000 repair jobs have been generated, and 5,000 of the 7,000 homeowners have accepted the purchase offer. So that is some modest progress, though it has not been without pain and not without continuing controversy. But the main problem is how to fund it, because National is funding this through overseas borrowing. Green funding would be a national levy that would generate $5 billion over the next 5 years—also about $1 billion a year. This would avoid the need for further overseas borrowing and greater national debt, and the Government prides itself on fiscal prudence. That fiscal prudence is a sick joke. It is a recipe for social inequality and political instability.
Finally, let us recognise what is not in this Budget, which requires the Taxation (Budget Measures) Bill. What are the omissions? What is missing in the broader recognition of the true global situation? There is no recognition of a global ecological overshoot—a 50 percent overshoot—with the current human population of 7 billion and
the associated resource depletion and biosecurity loss. There is no recognition of the projected growth in human population from 7 billion to 9 billion over the next four decades, a 28 percent increase that will also increase the ecological overshoot beyond the 50 percent obtaining at present. It ignores the critical part of that overshoot: the increase in carbon emissions, which will also increase the ecological overshoot beyond the 50 percent obtaining. And it will cause serious and possibly catastrophic climate change, which in turn will cause social instability.
This bill, as part of the Budget, is seeking an illusory national redemption in a dysfunctional global framework. As the global economy deteriorates, the New Zealand Government believes its destiny lies in being more competitive on neoliberal terms. As we head towards the cliff, the Government presses down on the accelerator. The global framework is dysfunctional, because we focus on the global economy only and regard the ecology as external collateral damage to be remedied. We fail to realise that the economy is part of the ecology and that the global situation will be rectified only if ecological economics replaces the neoclassical economic framework as the guideline for macro policy by New Zealand. For these reasons, the Green Party will be opposing this Taxation (Budget Measures) Bill.
PAUL GOLDSMITH (National)
: I would like to apologise to the previous speaker, Kennedy Graham, for the noise from my jeers. He might be rather dull, but he is very earnest, and I think we should pay him more respect because he is very earnest. I was kind of interested to find out his solution. He was talking about the growth of the human population and I wanted to know what his solution to that problem was going to be, but he did not get on to that.
We have had a lot of hot air from the other side about tinkering in this Budget. What those members do not seem to understand is that this Government, in the 2010 Budget, got the tax settings of this country in good shape. We did away with the ridiculous gap between the top income tax rate and the trust rate and shifted the weight of the tax from work to spending. That was the whole point—from income tax to GST. That has helped encourage the significant shift we have had towards saving, and the progress that we have made. This Budget from this Government is all about consistency. It is about strong, stable Government, and continuing on a path that we set out after the election in 2008, and consolidated in the important Budget of 2010.
This bill, the Taxation (Budget Measures) Bill, is about the maintenance of the tax system. It is about plugging occasional loopholes and it is about clearing up anachronistic old taxes that cost more to administer than they bring in. I think this bill, the Taxation (Budget Measures) Bill, should be read a second time, and I fully commend it to the House. Thank you very much.
ANDREW WILLIAMS (NZ First)
: It is no wonder that the Government members are taking such short calls this evening and have done so for much of the day, because their short calls reflect the size of these bills that we are presented with and the amount of information that they contain. Members sitting on the other side of the House must be embarrassed to be fronting with these sorts of documents.
If you look at them, you see they cover the likes of taxation on children. I never thought in my lifetime I would read in the explanatory note of a bill that “Section LC3 provides for a tax credit for children.” and that section LC3 is repealed. Is that not sad reading in this House? The explanatory note of the Taxation (Budget Measures) Bill mentions a tax credit for children, which is repealed. In the same piece of paper, in respect to the student loan scheme, the 10 percent voluntary repayment bonus to try to encourage students to get on top of their loans, to try to encourage them to put more money into their loans and get them paid off, is being taken away. No wonder today in
Auckland there are students marching in the streets. Students are marching in the streets because, again, they are being hard done by.
Tomorrow I would not be surprised if farmers were marching in Dipton as well, because down in Dipton the farmers will probably be disappointed with the abolition of changes to the herd valuation scheme. Again you wonder whether this Government just wants to offend everybody. Do Government members want to offend everyone? They are obviously going to offend a lot of their farmer friends. They have obviously written off the fact that students may as well just get on planes and disappear overseas to get away from their student loans. They obviously want to offend the up-and-coming younger generation who are trying to save some pocket money and maybe get their taxes back. They want to offend them, as well. There are not many people at the moment they do not want to offend. The only people they seem to support are the ones whom 2 years ago they gave huge tax credits to. You start to wonder in this House how it is that 2 years ago such massive tax credits—billions of dollars—were given to their mates, their wealthy mates, and 2 years later they are going after the children of this country, they are going after the students of this country, they are going after minor adjustments to farming requirements, and they are going after absolute trivia.
It is no wonder that today there are so many reports coming out in the media saying how disappointed the nation is in this Budget. The Budget has come from the Minister Bill English, who learnt from Ruth Richardson’s “mother of all Budgets”, and today he has delivered the “mini-me of all Budgets”. This is the “pick a pocket or two Budget” where basically he is out to get the last nickel and dime—the last nickel and dime from wherever he can scrape it. There is no vision in this Budget. There is no vision at all.
I have come from a background of 30 years in exports, and I can tell you this is so disappointing for exporters. In the good old days there were incentives for exporters to get out there and earn export dollars for New Zealand, to bring more dollars home, and to put this country on the world map. Where are the tax incentives for exporters to be out there? There are none. There is nothing. There is nothing there to help our companies get offshore and make taxes. There is nothing there. And at the same time we are getting statements from the likes of the New Zealand Manufacturers and Exporters Association today saying: “The … fundamental problems, such as a lack of export growth, have once again gone ignored.” The manufacturers and exporters are saying they have gone ignored. At the same time, as I mentioned earlier in the House, today there are the appalling trade statistics that we are seeing. The April statistics show that we are 17 percent down on the same time last year for our exports—17 percent down. Our members on the National benches over there just sit there and say “What a wonderful Budget. Aren’t we producing great results?”, while our exports are down, while our Manufacturers and Exporters Association is saying this is an appallingly poor Budget, and while the online
New Zealand Herald
is making statements such as this is “A most forgettable (and dull) Budget”. Quite honestly, this Government should be embarrassed.
But it all boils down to, basically, the Government members having no vision. It is very clear they have no vision. We are seeing more and more in this House that this Government is running out of ideas, and so early into the second term of a Government that it is almost unheard of. You would expect a third-term Government to start running out of ideas, or maybe a fourth-term Government, but not one only 6 months into a second term to be already running out of ideas and repeating the same old promises from the Budget of 2011 and the same old promises from the Budget of 2010—and none of those promises came true. And now again they trundle out the same sorts of promises, only to know in their hearts—if they put hand on heart, they know—that half
of what they have printed in these documents is incorrect in terms of where we will be in 12 months’ time.
They know that last year they promised 4 point something percent growth and we got 1.1 percent. You know, they promised more jobs and now we have got 50,000 more unemployed. John Key, when he was Leader of the Opposition, promised that the exodus to Australia, which was only at 35,000 people a year, would stop. We heard today that he said that the 35,000 people sitting in Westpac Stadium represented those who left for Australia a year. Now we are heading towards 50,000 or 60,000 a year. So 3 years later, now that he is the Prime Minister, he must be absolutely embarrassed by the statements he made when he was Leader of the Opposition that he would stop all that. He has stopped nothing.
The situation is getting worse and the people of New Zealand are starting to wake up to it. I was out on the streets in North Shore last week and I was surprised. I was getting signatures for the petition to keep our assets and I was surprised to have National voters coming up and saying: “Please let me sign the petition.” They were even saying: “I’m a National voter, and I have been a National voter, but I am pleased to sign this thing. Boy, am I getting pretty disgruntled with this Government, and I won’t be voting for them again.” National voters in a blue ribbon seat like North Shore—Maggie Barry over there knows that it is blue ribbon—are coming up and saying “We won’t be voting for National again. They are selling us down the river.” And it is not down the river on a cabbage boat. It is not down the river on a cabbage boat. It is absolutely down the river, well and truly.
We have been the witnesses of, yet again, an appalling Budget today. This country is looking for growth, it is looking for export drive, it is looking for lifting our performance internationally, and we are not doing that. This is like the Skycity conference centre—this is looking inwards. This is concrete bunker stuff, looking inwards. This Government is looking inwards on itself, not looking outwards to expand our opportunities internationally on the export market and globally. This is all about cut, cut, and more cut. When you run out of things to cut you start cutting into the children of this country. Quite frankly, I think the Minister of Finance will not sleep well tonight. He will probably have dreams about Ruth Richardson from 20 years ago. He will be dreaming about Ruth and the “mother of all Budgets” and saying: “My God! I’ve done it all over again. I’ve brought in another failure of a Budget.” In 20 years’ time people will look back and say: “My goodness, National made a huge mistake in 2012, made a huge mistake in 1991. Why did the people of this country allow that to happen?”. New Zealand First will certainly continue to oppose this Budget. We will stand for growth in the economy, growth in our international markets, growth in job opportunities, and growth in opportunities for our young people. We will not be a “Fagin Government” like this Government is.
DAVID BENNETT (National—Hamilton East)
: Today we have a great Budget for New Zealand and New Zealanders. It is a Budget that sets up the future for this country going forward, and it is a Budget that has the right signals and incentives. It is a Budget that the people wanted and they got. But all Opposition members can do in this House tonight is talk about students and children losing some tax credits. They cannot talk about the big things that will grow an economy. They do not understand what the people out there actually want. People want stability.
Hon Clayton Cosgrove: I raise a point of order, Mr Speaker. I just raise the point that the member is speaking rather loudly, and Mr Finlayson is asleep or maybe—
The ASSISTANT SPEAKER (H V Ross Robertson): No, the member will be seated. That is not a point of order and the member knows it. He has been here a long time.
DAVID BENNETT: For new members, that is the Clayton Cosgrove trick. When he thinks that a speech is going the wrong way for his party, he tries to raise points of order.
Labour members are scared because they know they have got it wrong. They have gone out to the public, and what will the public think tomorrow? They will think that the Labour Party and the New Zealand First Party are not interested in what people are going through out there. They are not interested in getting money on the table so that people can pay their mortgages. They are not interested in people having jobs tomorrow. They are not interested in building a stronger community that will give people that brighter future. All they are interested in is picking holes and—what is it—nickel-and-diming. Well, if that is all you can find wrong in this Budget, then there is not much to worry about. This is a good Budget. It sets a good springboard for the New Zealand economy going forward. We look forward to it going through this Parliament tonight.
I thought it was quite interesting to hear from the New Zealand First Party that we should not look inward. For the New Zealand First Party of all parties to talk about not looking inward! This is a Budget for New Zealanders, for the right time and the right place. It has been accepted and supported by the public, because they understand what is needed this time. We look forward to the success of this Budget building that stronger economy.
ANDREW LITTLE (Labour)
: Today has been a day of fantasyland in this House. This has not been a Budget about New Zealand and its future. This has not been a Budget about growth. This has been a Budget about picking away at the most trivial issues in this country. This is not a Budget for growth and it certainly is not, as the last speaker said, a Budget for the people. It has been a Budget for a very small number of people, but not for the people who are struggling and hurting in this country today. This has not been a Budget to grow the economy.
Let us recall what the challenges are that we have at the moment. So we have a country where the net Crown debt is about $50 billion. We have a Budget that has a deficit now, for the financial year that we are talking about, of $9 billion. We are steadily heading towards a net Crown debt of over $70 billion. What do we have? We have the removal of a tax credit for 68,000 kids, which is going to raise $14 million. It will raise $14 million, but the problem is $70 billion big. This is not a Government that is taking this country and this economy seriously. It is a waste of time. We have got a country with the slowest growth ever, with wage growth stagnant, and with a real economy that simply is not working—and getting smaller. We have a Government whose own projections are showing an economy in crisis. What does the Government want to do? It cuts a tax credit worth $14 million. I think we could have expected better.
We were entitled to expect the Budget to talk about the people on the street. The
New Zealand Herald—that balanced, august piece of journalism in this country—is now reporting that this is a Budget that has either disappointed or not even registered the interest of 70 percent of New Zealanders. That is how this Budget has attracted the attention of New Zealand. It is a Budget that has done nothing, by a do-nothing Government. The
New Zealand Herald
described it this morning, in anticipation, as “The Love Song of J Alfred Prufrock” Budget—that great piece of poetry by T S Eliot. It was described that way because that poem describes eking out, coffee spoon by coffee spoon. There is another line in that poem that says:
I grow old … I grow old …
I shall wear the bottoms of my trousers rolled …
Do I dare to eat a peach?
This is a Budget about trivialities; this is a Budget about trivialities. This is a Government whose Ministers and whose members could not care about what is happening to people who are struggling, who do not get pay increases, who are struggling to make ends meet. All the Government is concerned about is taking a bit of extra money off the kids, out of their pockets, taking their pocket money, and making it harder for everyone.
The Government’s only strategy, apart from reducing Government revenue and increasing its debt, is to sell off the revenue-generating assets that it owns. It is selling the revenue-generating assets that it owns. Well, that is the big strategy. When I look at the practices of the Tory rich—[Interruption]
The ASSISTANT SPEAKER (H V Ross Robertson): Order! I am sorry to interrupt the member, but I would like to refer the members on my right and on my left to Speakers’ ruling 60/5 about interjections.
ANDREW LITTLE: I could barely hear myself speak. The greatest travesty of this Government, and there are many of them, let us face it, but the greatest travesty just today is its reaffirmation of a policy that is about continuing the bankrupt policies for this country. So now it wants to take the great blue-chip revenue-generating assets of the country and it is going to proceed down the path of selling them. The Government has now introduced this new fund that it is going to put them into. So having told the public it is going to sell these assets and pay down some debt, now it has a new fund that the sort of best guess of $5 billion, or $6 billion, or $7 billion is going to go into. We are now going to repaint the schools and upgrade the hospitals. There is not a single revenue-generating asset amongst them. So we will destroy the balance sheet, we will lose the revenue, and we will be no better off. What a crooked Government. What a crooked thing to tell the people of New Zealand when we are looking for some hope and looking for some vision. This Budget offers neither. It offers nothing else.
The only other revenue-generating measure the Government has is to increase the price of smokes. It will put the price of smokes up, because this is a Government that is about to go up in smoke. It will do that, but it will not raise much revenue. Sure, people will stop smoking and it might help the health statistics a little bit, but it is not going to fix the core problem. This Government does not have an idea about investing in productive activity and investing in the productive investment sector to get real growth, to get jobs—high-skilled jobs, high-wage jobs—that will make a difference to people and give them a chance to get ahead. The Government is interested in the low-value jobs. It does not mind when foreign direct investment is about simply substituting for investments we have already got and promoting and encouraging low-value jobs.
Labour is a party that wants to do the opposite—encourage investment and good skilled and high-skilled good jobs, and increase the wage base. We do not want to see good New Zealand workers going overseas. This Budget and these measures are about driving more Kiwis offshore. Can we please have a Government that leaves the kids alone, and leaves their pocket money alone? When it comes to them being in the classroom, leave them with their good quality teachers. Do not jam more kids in the classroom, put the teachers under more stress, and make it harder for them. That is not going to help anybody. That is not part of the high-wage, high-skill economy; that is the old way.
This is a tired old Government, and it is in only its second term. It is a tired old Government with no new ideas but to fleece the kids, make it harder for the kids, and harder for their families. What a travesty. What a tragedy. [Interruption] And they know it—and they know it. Members opposite sit in the back rows and they run out of words because they have no arguments to defend it; they have no arguments to defend it. This is not a great day. They sit there and cheer on the ringmaster, but the rest of us know
that the joke is on us. They are the clowns and we are meant to laugh, but the joke is on the rest of New Zealand. The joke is on the rest of New Zealand, because this is a Government that has introduced a zero Budget that will take us nowhere. We are debating a zero bill, the Taxation (Budget Measures) Bill, like the finance Minister; a zero bill, part of a zero Budget, that will take us absolutely nowhere, and members opposite know it. They know it, because the more I remind them of it, the louder they get, and they hate it.
Well, this is not good, and we will debate every measure, because it is important that every New Zealander knows—the 70 percent who are disappointed in it or do not even know about it will know—that this Government has gone off them, does not care about them, will take the money out of their kids’ back pockets, will jam more kids in the classrooms, take away their teachers, reduce the skills of their teachers, and we will just wave to more good Kiwis as they go to the airports, pay their departure taxes, and take the poisoned fruit into Australia, because we do not have any biosecurity here; we will wave them goodbye.
That is the tragedy for New Zealand: a Government that offers no hope, no real measures, and nothing for the working Kiwi. They are looking hard, because the thing about this side of the House is that we rub shoulders with them. They are looking for something better, and they are looking to Labour and the parties of the Opposition. They say: “You parties offer us real hope. We don’t want the party of the rich any more, taking money out of our kids’ pockets. We don’t want the party of the rich doing down our teachers and jamming more kids in the classrooms. We want something better.” They will get it better. We will have this debate, and we will work to make this country a better place, where kids can grow up in confidence. They will know that when they do their paper rounds and do the gardening and mow the lawns for the old ladies, they will reap the benefits and the rewards of the labour, and they will learn what being good citizens is about, unlike the members opposite. We will have that debate, and we will remind New Zealand that we offer a better chance, a better hope, and a better country.
The ASSISTANT SPEAKER (H V Ross Robertson): Order! I just remind members, regarding interjections, that running commentaries are out of order. Interjections are to be rare and reasonable. I ask members to have a look at Speakers’ ruling 60/5(1), (2), (3), and (4). You might learn something.
MAGGIE BARRY (National—North Shore)
: I must say to my own people on this side of the House that there is a lot we can learn from members opposite about trivia, about going up in smoke—or do they inhale it? What manner of nonsense have we heard from these people? What a ridiculous notion.
I am a fan of recycling; this is taking it too far. We saw the unedifying spectacle of one of the members for Dunedin reading the same speech twice. Fortunately his colleagues came up to him and they gave him notes to help him out. It was pretty much a waste of time, though. We are looking at Groundhog Day over here. They are recycling the most trivial of notions and making them work. We saw the unedifying spectacle of the list member of Parliament for North Shore roaming around the streets of Takapuna, pestering the locals—and the foliage, possibly, as well—and annoying people about things that had no relevance at all, and then bringing it into a debate about taxation. I guess largesse takes on whole new definitions when it comes to their interpretation of speaking to a bill, but truly the trivia and the nonsense—
Jami-Lee Ross: What about the little man with the big voice?
MAGGIE BARRY: The little man with the big voice?
Stuart Little? Yeah, the mouse that roared—yeah, absolutely. But, I mean, the braying and the nonsense that we are getting from the other side of the House does not detract from the purpose. It does
not detract from the fact that this Taxation (Budget Measures) Bill is an excellent bill, and it is a sensational Budget.
This is a day to be proud to be in the National ranks. We are doing well. We have an excellent taxation measure, meticulously worked through, as I said earlier, by the Minister of Revenue, Peter Dunne, rather than dwelling on the minutiae of the occasional piece of stuff that members opposite pick up. They have not got the intellectual rigour to actually examine what he has pulled up, but what we are doing is examining the detail of it.
This is a good bill. I commend it to the House, and I am sure it will get through this very evening. Thank you.
The ASSISTANT SPEAKER (H V Ross Robertson): Just before I call the honourable member, I wish to advise members that this is a split call. For the speakers, they will get a bell with 1 minute to go.
Hon DAVID CUNLIFFE (Labour—New Lynn)
: The test of a good Budget is not only what is in it but also what is not in it. Here we are in urgency, we are debating, but we have deferred the main Budget debate. We are taking away the main select committee process, and this bill, the Taxation (Budget Measures) Bill, is retrospective. What could be so important that we are doing all those things? I know: we are picking the pockets of paper boys—picking the pockets of paper boys—and that is the best this dreary Government can come up with. You know, it would be laughable if it was not so sad.
Is this the secret base-broadening measure that Bill English and John Key were talking about, the measure that would bring fairness to the tax system, the measure that got the journos thinking they were going to do a capital gains tax after all? No, no; nobody guessed. Penny-pinching pickpocketing of paper boys—that was the big, deep dark Budget secret. Were they going to do something brave like, I do not know, reinstate capital gains tax or research and development tax credits that would turn our companies into engines of innovation? Were they going to do that? Nope, they are going to pick the pockets of paper boys.
You know, it is laughable—because it can only be a joke—that the Government’s top priority was retrospectively pinching pocket money from our children: 68,000 children lose their pocket money because this is the Government’s top priority on Budget night. It suspended the Budget debate so we can pickpocket our kids. But I think it is actually quite sad. Sad because it is a lost opportunity, and sad because of all the New Zealand families that are working hard, playing by the rules, and trying to get ahead, and this Government is absent without leave, absent on the job. It ought to be lifting the standard of living for New Zealanders, instead of picking the pockets of paper boys. But are they doing it? No.
Where is the vision in this Budget? There is not one. It is a zero Budget, by the Government’s own admission: zero vision, zero hope, zero plan, zero new exports, zero new jobs, and zero future. And that is why 50,000 New Zealanders a year, 1,000 a week, are heading for the airport departure lounge, because they have given up on John Key’s National Government, and, sadly, given up on their homeland. How many grandparents do we know around the country who are worried that their grandchildren are going to be brought up in a country not their own because these clowns think the top priority is taking pocket money off paper boys?
It is just so ludicrous, is it not? We suspended the Budget debate to take pocket money off children. That is going to turn the boat round, and members opposite are squirming. They are squirming in their seats. Mr Bennett with his three dairy farms, sitting pretty; he knows that this is not going to turn the boat round. The “member for Vodafone”, Mr Lotu-Iiga; he knows it is not going to turn the boat round. Mr Ryall,
sitting there, knows he has not given the health system enough to keep going. He knows people are going to get sick and die because of this Budget, yet the best they can do on Budget night is pinch the penny pocket money off paper boys—pinch the pocket money off paper boys.
John Key continues to overpromise and under-deliver. Every year growth is just around the corner, every year there are going to be 70,000 new jobs, except not this year. This year the Government has finally admitted the truth: there are not going to be that many jobs. This year, yet again, it has had to push back the growth, because it is not happening. It is not happening because Christchurch is too slow, it is not happening because there is no growth plan—it is not happening.
The Government trumpets science and innovation in this Budget. Megan Woods knows that this was the big new spend. Do you know what? The Government took away three times more out of economic development than it put into science. It took away $120 million out of economic development and put $40 million a year into science, and that is supposed to be vision. Here is a so-called pro-growth Government that is killing off the Ministry of Economic Development, building a new
Titanic for Steven Joyce, and pinching the pocket money off paper boys as its top priority.
JAN LOGIE (Green)
: This is my first Budget as a new MP, and I would like to take just a moment to talk about how deeply strange I am finding it. It is quite interesting that we have suspended debate on the Budget, and just before 5 p.m. tonight we were told that the Government would be introducing three bills into the House relating to the Budget. The Opposition parties were given a copy of this bill, the Taxation (Budget Measures) Bill, at 4.45 p.m. Labour, at least, was required to speak on this bill just after 5 p.m., and the Greens, you know, we had a bit more time. I know I am a political naïf, but this does not seem like democracy to me. I thought, you know, in that idealistic view, that we would have bills, and we would consider them, and we would debate them on the content, and we would come to a common understanding. I know it is naïve, but that is just how it is. I have to say I am disappointed. I am disappointed in the process of democracy that I am seeing displayed tonight.
I would like to speak tonight briefly about a couple of points in the bill: the abolition of the transitional circumstances tax credit—also known as the income under $9,880 tax credit—and the repeal of the 10 percent voluntary repayment bonus for student loans. But before I get to those specific points, I would also like to take just a moment to talk about Budgets and the economy. So much of the commentary that I have heard around this Budget has been about the importance of the economy, as if the economy was something in itself, and something that was worth pursuing for itself, whereas, in actual fact, although the Greens obviously have a very clear vision of how to grow our economy, the point of the economy is to serve our people and our environment. The economy has no purpose in itself, beyond serving our people. Part of the tragedy of traditional economics is that it has made our lives and our environment into an abstract theory that enables almost sociopathic behaviours to result from the practices. All too often people’s lives, and the impacts of these decisions on people’s lives, are lost.
I would now like to talk a little bit about the experiences that people have that are related to these changes. I would like to talk a bit about a mother I met recently, who, when her daughter complained about getting stones and grass in her shoes because she had holes in them, had to tell her: “Don’t worry, it’ll make you run faster.” because she could not afford to get her kid new shoes. These are the people whom this Government is taking money from. I would like to talk about another woman I met, whose abusive ex-partner took all of her furniture when he left. Work and Income refused her $15 for a chair from the Salvation Army so that an elderly aunt could visit her in her home. These are the people whom this Government is taking money from. The children who are
living in cold, damp houses who are getting sick and are ending up in hospital—we are paying for that because we are so abstracted from the concept of what it means to be connected to our fellow human beings that we allow these kinds of things to happen.
Also, with the student loan aspect of this bill, I think there has been a picture created that students are the ones out drinking, so getting just a bit tough on them and increasing the repayments of the graduates is going to be a good thing. Well, actually, 40 percent of those with student debts are couples aged between 18 and 24 with children, and about 30 percent of those with student debts are between 25 and 34. This group is already shouldering a completely unreasonable burden, and they really feel as if this is an intergenerational attack on them by this Government. It is hard to see how it is not. Most of the people in this Government managed to get the largesse of a free education, and now they are pulling it away from the next generation.
Peseta SAM LOTU-IIGA (National—Maungakiekie)
: It is an honour to speak on this Taxation (Budget Measures) Bill. I just want to bring the debate back to the bill and talk about the benefits of this bill. What this is is an omnibus bill. It deals with livestock valuation rules, and the changes to those will bring about over $184 million over 4 years in savings. It will also remove three tax credits that are no longer fit for purpose, which the Hon Peter Dunne has referred to, and it cancels the student loan repayment incentive scheme, which will save $12 million a year. So what does that mean? Well, added up it equals $349 million over the next 4 years. That is right—$349 million over 4 years. And why is that important? Well, it is important because it funds the early childhood education of our children. It is important because it will build new hospitals and new roads for those of us who want to get on with our lives. It is important because this Government is creating an environment and a framework for job growth, for export growth, and for opportunities. It is important because those people out there who want to work will work, with some of our welfare reforms. So I support this bill because this bill actually provides for a better future for our children, our communities, and this country. I support this bill.
A party vote was called for on the question,
That the Taxation (Budget Measures) Bill be now read a second time.
||New Zealand National 59; Māori Party 3; ACT New Zealand 1; United Future 1.
||New Zealand Labour 34; Green Party 14; New Zealand First 8; Mana 1.
|Bill read a second time.
Part 1Amendments to Income Tax Act 2007
JACINDA ARDERN (Labour)
: It is my pleasure to stand and give a contribution during the Committee stage of the Taxation (Budget Measures) Bill. I do so with a strange sense of irony. I started this afternoon at a protest on the forecourt that was led by people who were protesting on behalf of children in New Zealand. At that time they were protesting on their behalf to try to keep those children’s assets. By “assets” at that point in time they of course meant a majority share in our power companies, probably not realising that actually the attack on their assets was a little more direct than that. In fact, it was going directly to their back pockets.
I want to explore that, because we are debating Part 1 of the Taxation (Budget Measures) Bill, which goes directly to the issue of exemptions that relate to minors, and, in fact, to slightly above minors. I want to discuss that in a little more detail also.
Part of me also wonders whether or not this is part of the Government’s attempt to try to educate children in the area of financial literacy, because any under-18-year-old is now going to need to be aware of where their earnings sit, to see whether or not they are eligible for exemptions. But let us get into that in a little more detail.
Part 1 relates to the children’s active income tax credit. I wonder whether most New Zealanders knew such a thing existed. The Government is stating in its general policy statement that these tax credits, along with others, which we will discuss with my other colleagues, are being abolished as “they are fiscally expensive but have long since ceased to have a strong policy justification.” It goes on to state that “a new exemption is created for children, using the same eligibility criteria as for the abolished credit.” I find that there is a slight contradiction in the general policy statement, because it goes on to state: “This new rule aligns more closely with the original objective of the children’s active income tax credit: reducing compliance costs for children by not forcing them to file income tax returns for small amounts of income.”
First of all, I would not mind the Minister in the chair, the Minister of Revenue, sharing with us how many tax returns are involved in this particular area. How many children are affected, who would have been filing these income tax credits for such small amounts of money? Secondly, if it really was about saving them compliance costs, why would this change alone be generating revenue for the Government of $14 million? This is not about trying to reduce bureaucracy for children. This is about trying to increase revenue for the Government from our most vulnerable—from our most vulnerable. This is truly a “paper boy Budget”, and it is an absolute disgrace that we have got to that level of desperation.
But let us dig into this a little bit more deeply, because I want to explore where the exemption level now lies, as set out in Part 1. Basically it says that a child earning over $2,340 of such income is required to pay tax on every dollar of that income. So $2,340—what does that mean if we were to distil it down for a paper run, for instance? I am sure the members on that side of the Chamber have not done this level of research in their break, so I am very happy to share this with you.
Peseta Sam Lotu-Iiga: Share it.
JACINDA ARDERN: Mr Lotu-Iiga, I can see you listening intently. From the brief research I have had an opportunity to conduct, I can tell you that one paper run for a child of, say, 100 houses will generate an income for that child of roughly $16 per week. If you increase that to delivering to, say, 300 houses for your poor paper-run boy or girl, you would immediately be over $45 a week, which is where the threshold the Government has now set for them lies. So basically if a paper boy or girl delivers to 300 houses or more, they are going to now be “required to pay tax on every dollar of that income”, and that is how this Government is generating $14 million in revenue in its desperate “paper boy Budget”. It is an absolute disgrace that this aspirational Government is digging—
Hon PETER DUNNE (Minister of Revenue)
: I think it would be helpful at the outset just to go through what actually is happening here in Part 1 of the Taxation (Budget Measures) Bill. It is very simple and straightforward, and it does not necessitate the type of hype that is being generated on the other side. The tax credit for the active income of children was introduced, as I said earlier, in 1978, and it was done so to reduce the compliance costs of employing children on a part-time basis. What it meant then was that employers with low annual salaries did not need to withhold PAYE in respect of those children. The credit now serves that purpose very rarely, because most employers prefer to apply their normal payroll systems, including deducting PAYE, to all of their employees. The credit is now mostly claimed by a child who files a tax return at the end of the year, which means that because the original credit was designed
to reduce compliance costs, it is no longer achieving that goal and it is actually adding to the compliance costs of those people because they are required to now file a return.
Let me go through the limited exemption that is being introduced in this particular provision. I want to say this very clearly to members because it is quite important and it is being misrepresented. Children do not need to pay tax on up to $2,340 of income that is not taxed at source. So that is money for mowing the neighbour’s lawns, babysitting, and those sorts of things. The tax exemption does not apply to income on which tax has already been paid, such as salary and wages or interest. Well, that is unlikely to be a major calculation in this respect. If the child earns more than $2,340 from income that is not taxed at source, then the exemption does not apply to any of the income because they would have to pay tax on the full amount. So we are dealing with a very specific issue here. It does not amount to taxing the paper boys. Previous speakers have raised the question of the 68,600 people, or children, really, who are allegedly affected. They are the people who are in the category of being able to make the claim. We do not have information on the actual numbers of people involved. We know that the average amount of the credit paid is $240.
Dr Clark earlier in the second reading debate quoted from the regulatory impact statement. Unfortunately, his quote was selective. He talked about—[Interruption] I think it was on page 3. He spoke about the fact that there could be compliance cost implications for a number of employers. But what he failed to point out was the following sentence, which is on page 1, the fifth paragraph: “We expect that very few employers would be in this situation,” So here is Dr Clark getting up and saying that this is an outrage because we are now going to have a number of employers having to deduct income from children working for them on very low wages, but he did not go on to read the next bit of the same statement: “We expect that very few employers would be in this situation,”.
What this measure is about, and the other measures in this part are about, is changing and getting rid of a number of small tax credits that have long outlived their usefulness. What members of the Opposition are really saying tonight in opposing this is that they actually think we should keep these things on the books, even if they are being misrepresented and distorted. If we are giving up around $350 million to $400 million in revenue over a 4-year period to do so, their attitude is “so be it”. What does it matter? It is only money. It comes and goes. It is on the tree that they have, the tree that they get it from. This is about responsible Government. It is about making the tax system work the way it was intended, and there should not be any more debate about it.
Tracey Martin: Mr Chair—
The CHAIRPERSON (Lindsay Tisch): Order! Members, I actually would like to hear the member calling, and I would like to hear what members are saying. So keep the interjections down, please. I am calling Tracey Martin.
TRACEY MARTIN (NZ First)
: Again, as with my learned colleague from the Green Party, this is my first Budget and I found it fascinating—fascinating for what is not in it; fascinating for how small it is and how little vision there is in this Budget. What an opportunity lost, is all I can say to those on the Government benches—what an opportunity lost. You had an opportunity to actually grow the pie.
But my main question here is for the Minister in the chair, the Minister of Revenue, and I wonder if you can clarify something for me. Nobody has mentioned it, and I can find no regulatory impact statement on the removal of the housekeeper tax credit. Again, if I had had this earlier I agree I would have been able to do further research on it. But can you clarify for us, please Minister, whether the removal of this tax credit has any effect at all, and whether anybody has gone to find out whether it has any effect at all on working women today who employ other women to do housekeeping for them.
This is an income that some women use. So, again, I would be interested if the Minister could address that, because there is, as I say, no regulatory impact statement on it. It is almost as if the women whom this may or may not affect do not count. We have regulatory impact statements on animals. We have a regulatory impact statement on a few of the other small, little movements inside these taxation bills, but there is nothing here that could possibly give me, or any other woman here in New Zealand, a deeper understanding of how this might affect them. And that is unfortunate, Minister. So I do hope that once I have finished we can actually clear that up.
I do also think that it is a shame, Minister, that just because times have moved on, an Act must be dismissed because it does not serve the purpose of the 1960s and the reason the bill was originally put in place, without considering it carefully inside the values that we have here in the 21st century. I think that it is very interesting that the explanatory note of the bill says: “The present approach does not achieve this goal”—the goal of the 1960s, which was an administrative goal—“as many children file tax returns solely to gain access to the tax credit—”.
I noticed that my colleague Mark Mitchell said that he used to do a paper run but he never filed a tax credit. Well, that is fine for you, Mr Mitchell, and I appreciate that, but some of us actually have acumen in this sort of area. Some of us who did do these sorts of jobs went through that process and put in our own effort. There was no administrative cost for us, and we gained those tax credits. It was part of that understanding that I believe we are asking from our 21st century students around commerce. I believe that is what we are asking when we want our 21st century students to understand about working, about taxation, and about filling out these forms so that they can fully participate inside government and inside our society. So I think it is a shame that those young people who did go to effort of filing for tax credits—and I think the figure was $240 or something that you mentioned, Minister; that was often the return—will no longer get them, because, apparently, what it was set up for in the 1960s does not apply any more. That is it, and we will do away with it.
I also think that the lack of encouragement to earn over $2,340 is interesting. I think that is an interesting way to write it into the bill. I do appreciate that the Minister has addressed, to a certain extent, the reasons for that. But I thought that the National Government was actually about encouraging innovation, encouraging people to work, and encouraging them to raise their incomes. But if these children earn more than $2,340, a new step is suddenly put into place.
So I appreciate, Minister, that you have tried to give an explanation for that. I would appreciate an explanation around the housekeeping, and I do also appreciate the whip now providing me with the well-hidden regulatory impact statement. Thank you.
Hon CLAYTON COSGROVE (Labour)
: Part 1 is a very sad part of this bill, the Taxation (Budget Measures) Bill. What we now know is that the National Government, aided and abetted by the Minister in the chair, Mr Dunne, is going to raise revenue of approximately $14 million out of the pockets, out of the piggy banks, and out of the wallets of approximately 68,600 children, according to the regulatory impact statement—14 million bucks from 68,600 children. These are kids who are doing paper runs, and things like that—
Hon Member: Cleaning.
Hon CLAYTON COSGROVE: —cleaning—and delivering the community papers. They will be delivering “Do not vote National” pamphlets at the next election, I am sure, in the back of the little—
Hon Trevor Mallard: They will be volunteers.
Hon CLAYTON COSGROVE: They will be volunteers. And you know, I just wonder, for instance, whether Gerry Brownlee ever had a paper run. No, sorry; that
would be an oxymoron. That would be completely absurd—a paper run! I am told, though, that Gerry Brownlee had a milk run, you know, back in the old days, when there was full-cream and double-cream milk. But I think very little actually ever got delivered to the front gate.
Maggie Barry talked about the fact that she believed in recycling. Well, I have got to say, if ever there was a member who has come into this House who has been recycled, with the odd scent of compost swirling around her, then, my word, it is that member. It is the member who sits in select committees and intimidates submitters by asking them how they voted. Well, I wonder whether Maggie Barry—
The CHAIRPERSON (Lindsay Tisch): Order! Pull it back. [Interruption] I was not a paper boy—we had courier pigeons. Come back to the bill.
Hon CLAYTON COSGROVE: I am sure, Mr Chair, that you aspired to the sort of pizza delivery type of deal, rather than a paper round.
I just say this to this Government. This is the big idea in the Budget. Take 14 million bucks off a bunch of kids. This is the big strategy lined up alongside flogging assets off, and National is trying to hoodwink people by saying, “Oh, if we buy non - revenue-generating assets, that is a good thing, is it not?”—until the money runs out, of course. So the big idea in the Budget is not to deal with the big issues of taxation. National fails to remind us that it is borrowing $300 million a week so that the top 5 or 10 percent can get the vast majority of the tax cuts. But it is awake enough to take 14 million bucks out of the piggy banks of 68,600 young people.
Hon Trevor Mallard: Retrospectively.
Hon CLAYTON COSGROVE: Retrospectively. Well, I say that Mr Dunne is the man who will go down in history as the biggest auctioneer in our history, if he votes for asset sales—going, going, gone. He is now, of course, the “Uncle Scrooge” of the Parliament”—the “Uncle Scrooge” of the Parliament. What a great legacy Mr Dunne will deliver as he has flip-flopped from party to party. He is, as I think the record will show, the longest serving revenue Minister in the history of the parliamentary Commonwealth. He has been in more parties and in more coalitions that I have had hot dinners, and more than Gerry Brownlee has had hot dinners.
The CHAIRPERSON (Lindsay Tisch): Order!
Hon CLAYTON COSGROVE: No; sorry, that would be silly. But I say this. I ask Mr Dunne to reflect on the provision in Part 1. Does he really want to go down in history as the man who took 14 million bucks out of the piggy banks of 68,600 paper boys, delivery people, cleaners—
Maggie Barry: More trivia.
Hon CLAYTON COSGROVE: —oh, sorry; there is one over there, the old turnip in the corner—and paper girls? Does he really want to go down in history—[Interruption] Go on gardening leave, I say to Ms Barry—go on gardening leave. You will be better at it. It is a better occupation for you, I think, than intimidating submitters to select committees.
So Mr Dunne will go down in history as a person who took the money out of the mouths of babes. That will be his legacy to the Parliament—that, and helping the Government flog off assets. What does Mr Dunne say to his grandkids? Has he had a conversation with his grandkids and said: “Sorry, guys. You know how you were going to do that after-school job? Sorry, I’m the revenue Minister, and I’m going to sneak around the back, and as you get your 45 bucks I’m going to whip out the tax from you before you can slip it into the piggy bank at home.”?
National is the party of aspiration. Was not this the party that was encouraging entrepreneurship? Well, should we not be doing that with our young people? Is it not Miss Bennett who says: “You should get off your backside and get a job.”, even though,
of course, the unemployment rate has gone up by 50,000 under her wonderful legacy? So National is saying, on the one hand, “Get a job.” We have 68,600 young people working in jobs, and for many of them, I say in all seriousness, it is no longer an after-school job for a bit of pocket money. No—if you are out on Struggle Street, battling away, thanks to this mob, paying higher GST, paying the higher charges, having lost your job, and having been absolutely gutted as a family, then the paper boy’s or paper girl’s job, or the little bit of cleaning around at the butchers shop, is no longer about pocket money. It is actually about helping mum and dad try to make ends meet.
To the geniuses over there, one of whom has poddled off to the back of the vege patch in the garden, I say this. Forty-five bucks to some of those people over there may not be a big chunk of dough. Oh, no—not to some of them, of course.
Andrew Williams: A bottle of wine.
Hon CLAYTON COSGROVE: Yes, a bottle of wine. Yes, and I think a few of them over there have been imbibing tonight. But to a child, earning 45 bucks—and every dollar they earn they will have to pay tax on—that is their contribution in many poor families to the family food budget, the power bill, the rates, the rent, and all those things. I wonder whether, in her sort of blasé way, Miss Bennett has actually considered that as she leaves a legacy of 50,000-plus people unemployed. How does she balance that against the call for aspiration? Oh, do not look at me with dagger eyes, Miss Bennett—I know it hurts, but they are the facts. There are 50,000 people unemployed, thanks to that Minister and her inaction. She says: “Get off your backside and get a job.” Of course, she has not provided any jobs. In fact, she has presided over an administration that has gutted jobs from this country—gutted them. Yet she is prepared to sit there—I do not think she is talking to herself. I presume that might be an unintelligible conversation. She talks to herself. I wonder if she will go out and talk to the young people in her electorate, and tell them why she is aiding and abetting this, and tell them why they should not believe what she said about aspiration, because, of course, she is going to take their dollars.
Oh, hang on: the balloon has burst. I say this: is she going to go out to her electorate and actually talk about that? Is she actually going to go and talk to her constituents and explain to their mothers and fathers why this is happening? Because, as Trevor Mallard said a little while ago, those 68,600 young people will not want to get paid to deliver pamphlets at the next election—they will volunteer. They will volunteer to deliver “Don’t vote for National” cards into every letterbox in this country. Of course, Paula Bennett tries every trick to divert us away from the fact that her legacy is 50,000 people on the scrap heap—the lost and lonely—and now you add to that a dash for cash for $14 million.
Well, I just say that she can squawk all she likes and talk about all sorts of things, but the problem Paula Bennett has is she cannot walk away from facts and history. She cannot walk away from her own legacy. She cannot walk away from 50,000 people on the scrap heap. I just wonder, as members go out this weekend to their constituencies in Whanganui and a few other places around there—I wonder if Mr Borrows will front up to the parents, whip down to the primary school and see the teachers, and tell the kids that their paper round is over and they may as well go home and sit on their backsides, because the Government is playing “Uncle Scrooge”.
Let us come back to it in context. This is not the biggest issue of moment for this economy; nor is it the biggest issue of moment that should be addressed in this Budget. We were looking for a strategy, for a plan, for anything, as are businesses in Auckland and Christchurch and other places. The best they could do in Canterbury—the best Budget announcement down there—is for Mr Brownlee to announce he has spent half the dough—
The CHAIRPERSON (Lindsay Tisch): We are on Part 1. It has got nothing to do with Canterbury.
Hon CLAYTON COSGROVE: Oh, yes it has. Oh, that is my next speech. Part 1 has a heck of a lot to do with Canterbury, because we do have young people down there who do after-school jobs. We do have young people down there who are scraping for it. We do have families down there who are destitute. I beg to differ, without challenging your ruling, that this has everything to do with Canterbury and the rest of New Zealand. It is a bill that has no ideas in it and no strategy in it. The whole Budget is encapsulated around the odd nickel-and-dime tweak and a bit of spin. It has everything, I say to you, Mr Chairperson—try visiting there sometime—to do with Canterbury. There are 10,000 families down there who will not have the means to carry on for much longer if this Government does not come up with some ideas on how to employ people, how to engage people, and how to support people, and ditch silly little mean-spirited ideas like this, in this bill. It is a mean-spirited bill from a mean-spirited Government, wrapping it up in austerity. No one believes it.
TODD McCLAY (National—Rotorua)
: The last speaker in this debate, Clayton Cosgrove, used to be a man of vision. He used to have passion for New Zealanders. He wanted to do the right thing for New Zealanders. I would for a moment say, before I talk about Part 1 of the Taxation (Budget Measures) Bill and how concerned I am about that last speech, that in as far as Canterbury is concerned he has worked extremely hard over the years for Kate Wilkinson’s constituents to make sure that they have a better lifestyle down there. So what I would say to you is that—
Hon Clayton Cosgrove: Is that the best you can do?
TODD McCLAY: No, there is some more coming, Clayton—just wait. There is certainly some more coming. In 2008 he and his party opposite were out of touch and out of time. What has happened this year? They are still out of touch, but they have got all the time in the world. He has had lots of time this afternoon to read Part 1 of this bill, but that was all we got: the same old rhetoric that always comes from the Labour Party. New Zealanders were sick of it only 6 months ago, and, of course, 3 years before that, and it keeps on coming. Well, can I ask one thing of the members opposite: please keep it coming, because on this side of the House we want to get out there and talk about the issues that are important to New Zealanders.
So what is important to New Zealanders? Important to New Zealanders, and it is in Part 1 of this bill, is balancing the books, investing more in education, and making things fairer for all New Zealanders—not the things we have heard from members opposite.
I want to come to clause 5 in Part 1. I want to say to members opposite—only those in the Labour Party—do not be worried any more; this clause does not apply to you. There will be no restrictions on the use of the herd scheme when it comes to the way you get together and work out what it is that we must do for New Zealanders. This is about livestock, not members opposite in the Labour Party. The reason that that is important—[Interruption] What was that?
I am going to yield in a moment because I am keen to hear from the Minister in the chair, the Minister of Revenue, but I am keen to know, in terms of clause 5, which is restricting the use of the herd scheme, whether there are farmers who use this scheme who take a cow from one of their neighbours—maybe a neighbour gives them a cow—and decide to go on TradeMe and sell it to somebody else for more money than it was given to them for or they bought it for. Could this part of this bill be used to sell on TradeMe something that had been given to you, or maybe something that you had bought? Let us say you buy a cow from your neighbour for $500; could you go and sell it on TradeMe the next day for $1,000? Or if he gave it to you, could you sell it on
TradeMe for an amount more than it is worth? I would be interested to hear from the Minister on that. I would hope no member on this side of the House would do that. What about tickets to go and view that cow singing or dancing? Could you sell them on TradeMe—tickets to see that cow—under this part of the bill? I think not.
I want, as all of my colleagues on this side of the House want, to get back to my electorate. Many of us are electorate MPs, and we want to talk to New Zealanders about the important parts of this Budget. This is an important bill and we must move forward with this. This is an important bill because it helps rebalance our economy, helps us focus on what is important for New Zealanders, and helps us spend money in areas where New Zealanders want us to spend it—to be more productive, and on education for our children.
As most people are watching television, I say to them that a Labour MP will get up in a moment. Do not adjust your TV. The sound you hear is meant to come from them; there is not a problem with your television. Thank you.
SUE MORONEY (Labour)
: Yes, if people are still tuned in, that was the big idea brains trust from National about what will fix these economic woes that this country has: Todd McClay talking about cows on TradeMe. That is the big idea that they have! Part 1 of the Taxation (Budget Measures) Bill—
David Bennett: You didn’t get the joke!
SUE MORONEY: It was hard to understand what he said, but it was about cows on TradeMe. That is the big issue that is going to fix the economic woes of this country. Part 1, I think, shows how out of touch this Government is with the economic woes of this country and the issues faced by ordinary families in New Zealand. They have found in Part 1 the culprits to our economic woes. They have gone looking for them and they found them: the culprits are the paper boys and paper girls of this country not paying tax. That is what they are going to fix up to bring this country into economic growth. Well, that just goes to show how devoid of ideas and how devoid of an actual plan for the brighter future they promised this country that Government actually is. Part 1 of this bill says what we are going to do—and why we suspended the Budget debate to fix the economic woes and the absolute bottoming out of the economy in this country on that Government’s watch—is we are going to start taxing children who are doing paper rounds. They are children, in fact, who come from probably some of the poorest families in this country. They are the children who are out there earning more than $2,340 a year not because it is fun, not because they feel like doing it, but because that contributes to their family’s income. Those are the very families that that Government is going after. The Government is making them the culprits for its lack of having a plan, its lack of having any ambition of bringing this country out of the economic doldrums that it got us into.
I go on to also let people know about another part that goes after children, in Part 1. This Government, going after children all the time as it is, has taken away the tax credit for childcare. That is right. It has not been spoken about much, but it is saying that it does not want working families to be able to have a tax credit for the childcare payments that they pay. But it is about actually joining the dots together, because not only are they taking the tax credit away but they have frozen the subsidies to early childhood education in this Budget today. That means that fees are going to go up for parents. That will even further stretch the family budget that is already stretched to breaking point. That is how out of touch that Government is with working families, because it does not understand how bad their budgets are.
Part 1 actually makes it worse. Not only are fees going to go up for early childhood education but now they are taking away the tax credits that parents can currently claim for childcare expenses, and that is being done through Part 1 of this bill. It is a mean-spirited bill, because it does not fix any of the economic woes of this country. We are flatlining economically. We are in an economic rut thanks to that Government and its lack of any plan.
What is the Government doing to fix that? Well, it is pickpocketing the pocket money of our children and it is also saying that families can no longer claim a small, but important, tax credit for childcare expenses. This is on the back of delivering a Budget today that increases childcare expenses for all of those families, as well. That Government is showing, by Part 1 of the bill, that it is completely out of touch with the struggles that working families face. It is completely out of touch with that. Not only does the Government’s saying that it will put a financial veto against extending paid parental leave show how out of touch it is with the everyday struggles of working families but it is using Part 1 of this bill to attack working families all over again and to say that they can no longer claim a tax credit for childcare expenses.
Those childcare expenses are going to go up as a result of other measures that the Government has taken in the Budget today. This is just a double whammy for working families with young children. Is it not interesting that the Government wants us to think that it is interested in vulnerable children? Paula Bennett wants us to believe that, but here she is, in Part 1 of this bill, attacking those very children.
Hon PETER DUNNE (Minister of Revenue)
: That contribution reminds me that I ought to reply to the New Zealand First member Tracey Martin who spoke earlier about the housekeeper and childcare rebate. For the benefit of the member in the Chamber—I gather she may now have the regulatory impact statement and will have read paragraphs 7, 8, and 9, which set out the background fairly clearly—can I simply say this. The rebate was first put in place in 1933 in quite different social circumstances from today. The average claim on that rebate is now $263 per annum, so it is not a huge money-spinner for the families who might have been making that claim. It is about $5 a week. The member who has just resumed her seat spoke about the cost of childcare. The $5-a-week subsidy has been in place in an environment where since 1933 a huge number of changes have been made with regard to the provision of childcare. For instance, we now have 20 hours free, we have $1.4 billion being expended in the childcare area by the Government each year. The rationale for the policy has long since ceased to be.
With regard to the housekeeper claim, it is worth making the point—for the benefit of the member—that there are a number of families with disabled children who currently use the housekeeper claim in respect of their circumstances. In fact, when you look at the range of disability support services currently provided and the money that is provided for in this Budget and last year’s Budget, when you also look at the Ministry of Social Development’s child disability allowance and the disability allowance generally, the rationale for then saying that on top of that you can claim a claim that has a maximum of $310 a year really ceases to be. What this particular provision is about, like the earlier provision we discussed regarding the child allowance and like the transitional allowance, is removing a provision that no longer serves the purpose for which it was established. We have a different way of dealing with these issues now.
At the time when this particular credit was established in 1933, there was certainly nothing like comprehensive childcare, there was certainly nothing like comprehensive funding or support for that childcare, and I doubt that there was care for those with disabilities in anything like the way we have today. The circumstances over the intervening just under 80 years have substantially changed. The Government’s view is that a credit of this nature, which ties up a fair amount of resource, is poorly targeted, is not even being claimed by significant numbers of the lowest-income groups in the group, and has outlived its usefulness. That is why, I say to the member, we are removing it.
ANDREW WILLIAMS (NZ First)
: I rise to take another call on behalf of New Zealand First in regard to what I call the “Fagin Budget”. We are very fortunate that it is after 8.30 at night now, because people who might be watching Parliament out there in New Zealand television land would not probably be able to conjure up the same images before 8.30, because it would almost have to be censored—the thoughts of Fagin from the famous movie
Oliver. If you can imagine Fagin and what Fagin looked like, then put into your minds what Bill English and John Key look like, and then go back to what Fagin looked like, there is an incredibly close comparison of the three. They are all as miserable as sin.
The CHAIRPERSON (Lindsay Tisch): Order! Come back to Part 1.
ANDREW WILLIAMS: When I look at this regulatory impact statement, all I can think of is that it is a “Faginistic” regulatory statement. When you read a sentence such as: “Generally speaking, the proposed option should not impose any new compliance costs on businesses. However,”—and this is the however—“businesses that employ only school children on very low wages (below $2,340 p.a.) may have to begin withholding PAYE from these employees from 1 April.” Is that not appalling? And you wonder how this all gets through the process. It is all done by smoke and mirrors by this Government. Further down, and this is written by the Inland Revenue Department, it states: “Due to the need for Budget secrecy”—this is the Budget secrecy around children’s pocket money—“and the short time frames involved, there was no opportunity to consult in the usual manner” with affected parties. There was no opportunity to consult in the usual manner with affected parties. “The Treasury and Inland Revenue were the only agencies involved in developing the proposals and carrying out the analysis.”
I am quite shocked by that and the fact that this will impact on over 56,000 young people in this country, who basically are going to have their pocket money robbed from them in terms of tax taken off from 1 April 2013. Employers will have to start deducting PAYE tax from a very small wage that each individual child might be receiving. It is appalling.
When I look over the page I can see the housekeeper and childcare tax credit. I can remember as a young father, with my wife and our family, when we needed after-school care for the children from time to time. I can recall, as a young earning family, that we greatly valued the fact that at the end of the year we did get some tax credits for getting childcare after school and things like that. You look at this now—a miserable $310 per year for young families needing after-school care, needing assistance to take care of children for maybe a couple of hours, who up until now could claim up to $310 to help pay for that after-school care and cannot get it any more. Is that not miserable? Is that not absolutely miserable? Is it not—
The CHAIRPERSON (Lindsay Tisch): Order! I sorry to interpret the member, but can I ask members to be a little bit more succinct with the interjections.
ANDREW WILLIAMS: We have seen from this National Government tax rebates and tax deductions and reductions in tax for its wealthy mates for several billion dollars in the last year or two. We have seen several billion dollars of reduction in tax for its friends and its mates—high income earners. We have seen $1,000 a week for the Prime Minister—$1,000 a week less tax he pays, as the Prime Minister. But the same National Government, 2 years later, after giving all those tax cuts to its mates—
The CHAIRPERSON (Lindsay Tisch): Order! Part 1.
ANDREW WILLIAMS: —will take it out on the poor young children of this country, the young families who might get a bit of a tax credit for their child-minding, the students who maybe were—
JACINDA ARDERN (Labour)
: I am pleased to take a call, because I have been reading the regulatory impact statement that relates to Part 1 of the Taxation (Budget Measures) Bill and I was looking for something quite particular. I was looking to see whether or not the Inland Revenue Department, in particular, had done any costings around how much it would impact on the department for it to have to redo its communications, and in particular its website. Why, you might ask. Well, quite simply because the Inland Revenue Department’s website currently features what I would call a paper girl poster child. I am not sure whether you can see this, but currently on the Inland Revenue Department website you have got a child of probably, I would say, roughly the age of, what, 13 with the title above her of “Not sure how to go about your tax?”. I have to say to the Minister in the chair, Minister Dunne, that now, I guess, that child is no longer going—
Todd McClay: I raise a point of order, Mr Chairperson. Could the member table that iPad? I would like to have a look at it.
JACINDA ARDERN: If Todd McClay would like to see this online, it is on the Inland Revenue Department website, on its home page. That is the first thing that will come up when you go on to the website, if you would like to see that. But I could suggest, if the Minister would like to save some money, that you could keep this as is, leave the words “Not sure how to go about your tax?”, and just add “Now you don’t have to.” Or perhaps we could just leave it and have it say: “It doesn’t matter how old you are or where you are, we will find you.” That is essentially the change that we are seeing today.
In lieu of the regulatory impact statement featuring the changes that the Inland Revenue Department will, no doubt, have to add to its communications, I was interested to see that there were several options considered by the department in considering the changes to this particular tax credit. It is interesting that the first option was to replace the tax credit with a limited tax exemption, and that is essentially, obviously, what the Minister has opted for. But I wonder how much the exemptions, in his mind, are going to equate to. Of the $14 million we are going to save, does he have some kind of estimation as to what amount those exemptions will equate to of the $14 million the Government intends to save from making this change? And would the tax exemption apply to child modelling? I am just interested, as an aside.
Finally, paragraph 25 of the regulatory impact statement says: “The second option, repealing the credit with no replacement, would mean large numbers of children earning small amounts of income would be pulled into the tax system.” That is why I am interested in that question, Minister, because if we are actually still talking about large numbers of children being pulled into the tax system because not enough are exempt, then essentially you will not have achieved your intended outcome. I would be interested in the evidence that the Inland Revenue Department has generated for you on that.
I want to come back to Part 1 and, in particular, new section CW 55BB in clause 4(1), which sets out the age groups that this exemption applies to. Although, of course, we have been leaning back on the paper boy and paper girl, we are in fact talking about young people, younger than 15, who could be in full-time work. I know that we assume in this country that that should not be happening and that a child should be in school, but there are a significant number of 15-year-olds who get exemptions from secondary education and who are entering into work. Now, obviously, this will impact upon them. Of course, those younger than 18—not exactly the child tax credit we were thinking of—who are, in fact, impacted on by all of the Minister’s welfare reforms are in many ways, for all intents and purposes, often treated as adults in our system, rightly or
wrongly. So if you are younger than 18 you are now also going to lose out on this tax credit.
I imagine that good, hard-working National members would at some point in their aspirational childhood careers have had at least one job, if not multiple jobs, and that they themselves have benefited from this provision previously. No doubt, as the good, taxpaying children that they would have been, I am sure they would have paid tax and filed their tax return, just like the child on the Inland Revenue Department home page, Mr McClay. So in that sense we are essentially seeing yet another change that this Government’s members themselves have directly benefited from.
How much are we saving per person in this? A couple of hundred dollars. But it is still amounting to $14 million for this Government, and that is what demonstrates that we are scraping the bottom of the barrel—
Hon DAVID PARKER (Labour)
: I want the Minister in the chair, the Minister of Revenue, to tell me what analysis of the long-term effects of undermining the work ethic of our youngest people as they first enter the workforce lay behind this measure. We are told by the National Party people that prices always matter, that the amount that people get paid in real terms is what matters. Whenever we remind Government members of the fact that it is having a larger and larger wage gap with Australia, they always say “Oh, it’s the after-tax number that matters.” But here, for the youngest people in society—for the youngest people in society—no, it is not. It is a different rule for them. It is not the after-tax amount that matters; it is the pre-tax amount. What is wrong with having young people a little bit more incentivised to work, by making sure that they do not have to pay as much tax as they will when they are older? What is wrong with that? What is wrong with that?
Hon Member: When you’re earning under 45 bucks.
Hon DAVID PARKER: Yes, limited to $45 a week. I ask the Minister whether he is aware that his Government blocked measures to protect some of these very vulnerable young workers from being not paid not just a youth minimum wage, which is what the National Government wants to pay them, but the minimum wage. A lot of these people who work delivering pamphlets do not get the minimum wage. They do not even get the equivalent of a youth minimum wage. They get a contract rate that is so low that I am surprised that some of them are motivated enough to do the work, but they are—they are. We ought to be celebrating the fact that these people do it, despite the pittance that they get for delivering pamphlets. They do not even get the minimum wage, because the National Party would not back our legislation to extend the minimum wage to contract workers. And now the Government is saying that it is going—
Mike Sabin: It’s a bit rich to be accusing people of not backing things. Do you vote for anything? No.
Hon DAVID PARKER: What was that? I did not hear that.
Mike Sabin: No, I didn’t say anything.
Hon DAVID PARKER: Oh, OK, you did not say that. Actually—[Interruption] Thank you, thank you. I think the Hansard staff got that. “I did not say that.” he said, and acknowledged his own comment. We will look to see what Hansard caught of that. I did not catch it, but he is obviously embarrassed, because he would not repeat it.
This is short-sighted. This is mean-spirited. I thought Megan Woods’ contribution earlier was interesting: first we had the cycleways, then we had the motorways, and then they went after the paper round.
Hon Trevor Mallard: Paper routes.
Hon DAVID PARKER: What was that?
Hon Trevor Mallard: Paper routes.
Hon DAVID PARKER: The paper routes—that is right. She put it far better than I did. They were standing around the Cabinet table and they thought: “Who can we get? Who is not paying their fair share? Who is not paying their fair share?”. And who did they not look at? They did not look at the top 10 percent, who got 40 percent of the income tax cuts in the tax rounds; they went for the lowest paid, for people not even on the minimum wage and delivering pamphlets for, sometimes, $2 an hour. It really is sometimes $2 an hour. Now, not only will the employer be required to deduct income tax from that amount—compliance costs for the employer, compliance costs for the Inland Revenue Department—but the people who are being paid a miserly amount, and it is sometimes only $2 an hour, will not be able to get a tax refund. They will not be able to get a refund of the tax that they have paid. Some of these kids are poor. Some of them are not, but some of them are. This is the only money they have got, perhaps—
Hon Trevor Mallard: Averages $5 a week.
Hon DAVID PARKER: The average is $5 a week. The average is $5 a week, and to some of these kids that $5 a week is the difference between their being able to occasionally go to a movie—
Hon Trevor Mallard: Oh no, no. It’s half their school uniform.
Hon DAVID PARKER: I agree; I was going to come to that. For some of them it is actually what they get to go down to the op shop and buy a few clothes. You know, I think this is pretty mean-spirited. If there were not other things that the Government could have done, if this issue was the last bit that was going to tip this country over the edge, then, you know, maybe. But it is not. It had lots of choices other than this. I want the Minister to stand up and say why the Government picked this choice rather than other choices. Why is it undermining the work ethic of these kids, who are already working for, sometimes, a piddling $2 an hour? They are being taxed on it and they cannot get a break from the Government. It is being taken off them. I hope the Minister stands and takes a call.
Dr MEGAN WOODS (Labour—Wigram)
: I am pleased to take a call on this bill, the Taxation (Budget Measures) Bill. What we are seeing here today is that we are picking the pockets of our kids to fund an ideas deficit from the members opposite. They have delivered a Budget today that offers zero hope, zero ideas, and a zero future for young people in New Zealand.
Only 6 months after re-election this Government has completely given up on its brighter future. It is quietly slinking away from any idea of aspiration, and all it can do is tinker around the edges as it stumbles towards being thrown out of office in 2014. But all I can say to the members opposite is wait until the kids whose pockets you started picking today come of voting age. They are going to be angry, and we have got a sure source of voters there. This Government is spent. It is out of ideas and it knows that its 2010 tax switch was a failure. Now all it can do is tinker round the edges and try to fix things up, and this is just a straight-out revenue grab.
I talked in an earlier contribution on this bill about the stunning economic policy we are seeing from the National Government being rolled out in this term and in its previous term. David Parker mentioned this in his contribution tonight. It started with its cycleway. Failure—no jobs. Then there was the “Holiday Highway”. That stimulated the economy, but hang on. That is right: not all of the jobs that were promised in the last Budget eventuated. And then today we have this stunner—the third part in the trilogy—the paper route. This Government is taking it to the kids and taking the money off them.
These are not the taxation issues that we should be talking about tonight. We should be talking about taxation and about how that can be used to stimulate our economy. We are told by members opposite that they do not want to be talking about the things that are not important to our nation. Well, put something in the Budget that is, instead of
taking money out of the pockets of our children. For 4 years Labour has been imploring National to put children at the centre of its policy and to do something about the 270,000 Kiwi kids who live in poverty. That is one in four, or 25 percent of them. But we did not mean this in terms of putting children at the centre of your policy. We did not mean for you to go away and come up with a taxation policy that seeks to put your hands into their pockets and take away their pocket money. We did not mean this.
As I have also talked about, one can only imagine the thinking that got the National Government and its coalition partners to here. They were thinking: “Fourteen million dollars—we really need $14 million. There are those bludging kids. We need to go after them again. For too long they have had it too easy. They don’t pay for their own accommodation. They are on the take. They are demanding an education, and do you know what? When they get a bit older, they might even want to go on and do postgraduate training. We cannot let that happen. So we need to make sure that they know they don’t have a future in this country.” What are those members thinking? That there are too many grubby little hands looking for a hand up?
National is the party that talks of aspiration, and this is a joke. These are just kids who are working hard, and what the members opposite do not understand is the income that these kids are receiving. It is being chortled about what a small pittance this money is, but this income is important to these kids, and it is important to their families. Frighteningly, increasingly, this money is becoming part of household budgets in this country and becoming an important part of household budgets in making ends meet. One of the things that I think is interesting in the regulatory impact statements is that we see that the credit is received by approximately 68,600 children, averaging $240. But the regulatory impact statements do not go on to note that the tax credit does not apply to income from interest or dividends—meaning a child must pay tax on the first dollar of income from these sources. So, for the members opposite, is this about equality? Is this about thinking working children are just getting a bit of a break and you need to bring them into line? This is just not fair.
Dr JIAN YANG (National)
: I move,
That the question be now put.
Su’a WILLIAM SIO (Labour—Māngere)
: I want to begin by quoting a text that has been sent to me. It is a text that was sent to Peseta Sam Lotu-Iiga, and this mother has forwarded it on to me: “My son delivers a paper. He makes $5 a run that takes him about 1½ to 2 hours to do. How can your Government tax him on the pittance he makes? You should be encouraging kids to work hard. Shame on you.”
This mother is obviously listening to this debate and is saying to this Government: “Shame on you. Shame on you for trying to take money out of young kids who are trying to make ends meet.” I quote that because the people listening to this debate have children delivering papers, earning, as she says, a pittance, and this Government is now ready to put its hands in the pockets of those young kids. I do not think that this Government here understands the struggles of hard-working communities struggling to make ends meet. They will remember that the first Budget of this Government was mana-enhancing. Those were the words. Well, there was no mana-enhancing for the community. The second Budget, I understand, was “the road to recovery”—[Interruption]
The CHAIRPERSON (Lindsay Tisch): Order! The member cannot say “Tell the truth.” In future—
Hon Member: Withdraw and apologise.
The CHAIRPERSON (Lindsay Tisch): I am ruling. I do not know where it came from, but whoever said it, you cannot say “Tell the truth.”
Todd McClay: Tell another lie.
The CHAIRPERSON (Lindsay Tisch): Who said that? The member will stand and apologise for that comment.
Todd McClay: I apologise.
Su’a WILLIAM SIO: That speaks loud, does it not?
The CHAIRPERSON (Lindsay Tisch): I have ruled and that is the end of the matter. Proceed with the debate.
Su’a WILLIAM SIO: So their first Budget was supposed to be mana-enhancing. There was no such mana-enhancing in working-class communities. Their second Budget was called “the road to recovery”. All we got to see was the dead-end. All we got to see was the dead-end, because what they did was they fixed the tax rate so those on the highest income got the biggest chunk of the tax cut, while the rest of working-class New Zealanders got GST increases. That is what we get from this Government.
We also heard last year about a brighter future. Where is the brighter future for 160,000 people unemployed? Where is the brighter future for people who are jobless and who would work—and I am referring to the changes in the Taxation (Budget Measures) Bill here in clause 3—where are the changes? Where is the brighter future for the people who are jobless, want to work, but cannot find a job? This Government says it is on the road to recovery. Well, the recovery continues. There is no such recovery for working communities who are struggling to make ends meet. The only recovery that many of the community are experiencing at the moment is coming from Australia—the 50,000 people who are going there, 1,000 every week, is what we are seeing.
The CHAIRPERSON (Lindsay Tisch): Part 1 is a very succinct part, and I bring the member back to it. Just concentrate on Part 1.
Su’a WILLIAM SIO: Part 1 amends the Income Tax Act. The 50,000 people travelling to Australia do not see a future, because this Government keeps taking from them the very little money they have. So there is no brighter future. When we read clause 4 in Part 1, “Amendment to Income Tax Act 2007”, what future is there for this mother who is saying that her young son is earning money, trying to scrape by and saving? Perhaps this money goes towards the cost of the uniform, but all they are hearing from this Government is that it will take away the very little money they are earning.
I do not think this Government has any understanding of the struggles that our communities are going through. I suppose it is because the Government does not understand that $3, $5, or $10 to a low-income family is worth so much more than it is to those who earn quite significant amounts of money. I suppose that Ministers, who earn over $200,000, probably have no idea of the struggles of a young boy who, in this case, is earning $5 a day on average. They do not understand what this young man is going through.
So I am saying to this Government that we should have been debating ways of ensuring that families who are struggling do get money in their pockets. Families having money in their pockets and being paid decent wages are the sorts of debates that we should have been having tonight. But, no, all we have is a Budget that does not provide any hope to young people who want to get an education. It does not provide any hope for people who are unemployed at the moment and who want to be able to find jobs. It does not provide hope to people who want to see New Zealand grow.
A party vote was called for on the question,
That Part 1 be agreed to.
||New Zealand National 59; Māori Party 3; ACT New Zealand 1; United Future 1.
||New Zealand Labour 34; Green Party 14; New Zealand First 8; Mana 1.
|Part 1 agreed to.
Part 2Amendments to Tax Administration Act 1994
A party vote was called for on the question,
That Part 2 be agreed to.
||New Zealand National 59; Māori Party 3; ACT New Zealand 1; United Future 1.
||New Zealand Labour 34; Green Party 14; New Zealand First 8; Mana 1.
|Part 2 agreed to.
Part 3Student loan scheme: Repeal of 10% voluntary repayment bonus
CHRIS HIPKINS (Labour—Rimutaka)
: I remember not long after I became a member of Parliament participating in a debate that introduced this very provision that we are now deleting, as set out in Part 3 of the Taxation (Budget Measures) Bill. I have to say that I welcome the National Party’s about-face on this. It has actually got it right at long last, because this repayment bonus was a total rort of the system when the Government introduced it, and it has finally worked that out. But is it not interesting what a difference a couple of years make? What were Government members saying when they introduced this piece of legislation? Well, we will start with the Minister in the chair, Peter Dunne, who said: “I say to the House that this is a significant incentive for students to pay their loans earlier.” And it gets better; it gets better: “I cannot fathom why anyone would oppose the introduction of such an incentive.” This is the Minister who is now in the chair deleting the very incentive that he could not possibly fathom how anybody would be opposed to, and now he is in the chair, doing away with that very same incentive.
Well, the Labour Party was right, because this is a rort. It is a total rort, and now the Government has got the officials’ advice to say that it is a total rort. What has the Ministry of Education said? It said: “In 2011,”—last year—“2,611 borrowers repaid their student loans in the same year they borrowed, receiving $1.8 million in bonuses … This resulted in a cost to the Government.” In other words, what the Ministry of Education is claiming is that people who did not need to take out the loans were taking out the loans in order to get the repayment bonus. It was a little kickback, so I am actually surprised that the National Party is doing away with this, because it is normally quite good on that sort of stuff—rewarding people and creating all these loopholes in the system. The National Party is normally quite good at that. That is normally what it quite enjoys doing, but thankfully in this particular case it has finally realised that it made an awful mistake when it introduced this ridiculous repayment bonus, which was only ever going to encourage people who did not need to take out student loans to take out student loans.
People have always been able to repay their loans faster. In fact, the National Government—the National Party, I should say, because it was not the Government at the time—opposed the very thing that halved the repayment times for student loans, which was making them interest-free. That halved the repayment times for student
loans, and what did John Key call that? He called it a hoax, and he said that he was going to fight it with every bone in his body. Well, I am not sure how many bones he has left, but interest-free student loans are still here, and John Key did not put up much of a fight, and now he says that he is going to keep the interest-free student loans. So it was not really much of a fight. That was the thing that halved the repayment times for student loans.
Unfortunately, the National Party keeps trimming around the edges of the student loan scheme, but we know that eventually it will get to the point where it will say “Oh, we just can’t afford it any more.” It is softening people up for it. It is trimming all around the edges of student support, with its trimming of student allowance eligibility, and with its trimming of who is eligible to get a student loan in the first place. Let us bear in mind the fact that the student loan scheme was set up, in the first place, to ensure that nobody was prevented from entering tertiary education because of financial barriers. That is why the loan scheme was set up. Of course, the loan scheme was set up as a result of a broken promise by the then National Government back in 1990—or 1991, I think it was, when it technically did it—
Hon Clayton Cosgrove: Who was that? Who was the Minister?
CHRIS HIPKINS: I am not going to get into that, but I do recall that the Minister at the time had campaigned up and down the country pledging to do away with university and polytechnic tuition fees, and that he would resign if he had not done so. So what did the Government do? It did away with the Government-established tuition fees, and instead introduced institutional tuition fees, which were higher than the ones that the Government had put in place. [Interruption] That is right. It introduced the student loan scheme to allow the students to pay for those, because the criticism at the time was—and it was a legitimate criticism—that those new fees introduced by the then National Government as another one of its broken promises were going to act as a barrier to participation. So it set up the student loan scheme in order to overcome some of those barriers.
The student loan scheme, I think, has improved remarkably since the then Labour Government back in 2005 removed the interest on student loans. That halved—more or less halved, give or take—the repayment times for student loans. I think that was a very positive thing. Those are the sorts of bold initiatives that a bold Government takes when it wants to change something. This Government would not know a bold initiative if it tripped over it in the street. We have not seen any bold initiatives in this Budget. This, most certainly, is not a bold initiative—
The CHAIRPERSON (Lindsay Tisch): I am sorry to interrupt the honourable member. The time has come for me to leave the Chair.