1. Hon PHIL GOFF (Leader of the Opposition) to the Prime Minister: Does he still expect that the vast bulk of New Zealanders will not be worse off under his proposed increase to GST; if so, which New Zealanders does he expect will be worse off?

Hon JOHN KEY (Prime Minister) : I expect that the vast bulk of New Zealanders will be better off under a tax switch that comprises an increase in the rate of GST to 15 percent, together with a reduction in personal income taxes across the board and upfront increases in benefits, New Zealand superannuation, and Working for Families payments. If the Government cannot achieve that, we would not increase GST. The member will have to wait until the Budget, however, for confirmation of any tax switch, let alone the details of its effects.

Hon Phil Goff: Last night in a survey by Television One it was shown that over two-thirds of New Zealanders were opposed to raising GST, and the vast majority said they thought they would be worse off; how precisely will people be better off, and can he answer the question he did not answer last time about who will be worse off?

Hon JOHN KEY: I think what the poll last night actually showed was that if we ask people whether they want tax to rise, their answer will be no. In the same way, if we ask them in isolation whether they want income taxes to fall, their answer will be yes. When we ask them about the package, the message we are getting pretty clearly from New Zealanders is that they are looking forward to it, and that is why the party vote numbers were so strong in that poll for the National-led Government.

Hon Phil Goff: Does he accept the recent estimate by Westpac that, with his increase in GST, inflation will hit almost 5 percent next year, and does he also accept its view that that will damage growth, not assist it?

Hon JOHN KEY: In terms of the latter point, absolutely not, because the advice we have received about the overall economic benefits of the package strongly support a move away from taxing income at such a high rate, and taxing consumption at a higher rate. Secondly, there will be a one-off effect if prices rise by 2.2 percent. The estimate from Treasury that I last saw on a document was about a 2 percent increase. It is a one-off, just like it was in 1989 and 1985, when the then Labour Government increased GST.

Chris Tremain: How many New Zealanders were made worse off, the last time GST was raised in 1989?

Hon Trevor Mallard: I raise a point of order, Mr Speaker. It is a pretty simple question of responsibility. That was not dressed up as a report. It was a matter for which the Prime Minister had no responsibility—I do not know whether he was even in the country.

Mr SPEAKER: The interesting thing about the question that was asked is that it did not ask the Prime Minister to comment on the wisdom of the policy; it just asked for a reporting matter—how many people were worse off. Ministers do have reporting responsibilities for matters that took place prior to their time. That is why I accepted the question. I believe that, so long as the Prime Minister does not launch too much into attacking the Government of the time, he may answer the question.

Hon JOHN KEY: Every New Zealander was worse off, actually, when the 1989 Government, of which Phil Goff was a member, raised GST without compensation. Hopefully, when Labour members are out there on their magical mystery bus tour, they can give out an apology for not compensating New Zealanders back then.

Hon Phil Goff: Is it correct that, as a result of his increase in GST, superannuitants will face an immediate increase in their costs, but they will not be compensated for that for maybe 6 months or a year? That will leave them worse off. Does he intend, therefore, to amend the legislation to ensure that that does not happen?

Hon JOHN KEY: No, the member is completely jumping to conclusions. While the member is on his feet next time, maybe he could tell us whether he will be campaigning to drop GST and increase personal—

Mr SPEAKER: The Prime Minister had answered the question perfectly well, but the last part of the answer was not in order. Mind you, in fairness, I have to confess that part of the question was not in order, either, but still.

Hon Phil Goff: Is it true that no one at the last election voted for an increase in GST, because he explicitly promised that he would not increase it?

Hon JOHN KEY: No one at the last election voted for National to increase taxes to cover the deficit, and we are not doing that.

Hon Phil Goff: Nobody believes that. Is it true that, from what he is promising, GST will simply be a money-go-round—taking with one hand and giving with the other—that the real changes in tax policy will come from reducing the top tax rate from 38c to 33c, and that that will give him and his Ministers several hundred dollars a week, but that lowering of the tax rate will deliver nothing to people earning less than $70,000 a year?

Hon JOHN KEY: No, that is not true. It is interesting, though, seeing the Leader of the Opposition has raised the issue of the top personal tax rate, that when TV3 asked New Zealanders whether they wanted the top personal tax rate reduced, the number was something like 53 or 54 percent of New Zealanders who wanted that to happen, despite the fact that only 12 percent of New Zealanders pay the top personal tax rate. Why is that? It is because New Zealanders are aspirational for their country, ambitious for their earnings, and want a stronger New Zealand. I say to those New Zealanders “Good on you! We’re a hundred percent behind you.”

Hon Phil Goff: I raise a point of order, Mr Speaker. I draw your attention to the fact that a specific question was asked about whether anybody earning under $70,000 a year would get anything from lowering the tax rate. There is a yes or no answer to that; the Prime Minister simply did not address it.

Mr SPEAKER: Had the honourable Leader of the Opposition asked exactly that question, I am sure a more precise answer would have been possible. But the honourable member may recollect that he had made some fairly lengthy statements around the question, as well, which the Prime Minister latched on to, in his answer. That is why I cannot assist the honourable member any further.

Hon Phil Goff: Will anyone earning under $70,000 a year get more money in his or her pocket simply by the lowering of the maximum tax rate from 38c in the dollar to 33c?

Hon JOHN KEY: I can now see why Labour’s economic policies are going off the rails—

Hon Phil Goff: I raise a point of order, Mr Speaker. I have two points—

Mr SPEAKER: I hear the honourable member. I think—well, I will let him make his points.

Hon Phil Goff: Not only did the Prime Minister not address the question but he deliberately turned his back on you, Mr Speaker, so that he could pretend not to see you standing in order to call him to order.

Mr SPEAKER: Members must not comment like that on points of order. The point of order the Leader of the Opposition is raising is perfectly valid, and there should not be that comment. I think the Leader of the Opposition indeed had a fair point, on this occasion, because a fair question was asked about whether anyone earning below $70,000 a year would gain from a tax reduction in the top tax rate. Instead of answering that question, the Prime Minister launched straight into something to do with the Labour Party, which, I am quite sure, is not an appropriate way to answer that question. I think the House would appreciate an answer to the question.

Hon JOHN KEY: Let us assume that the Leader of the Opposition knows something about tax scales, so he will know that the top—

Hon Phil Goff: I raise a point of order, Mr Speaker. You know what the point of order is.

Mr SPEAKER: I do, and again I say to the Prime Minister that I do not think that that is a very fair way to respond to a question—and I mean it. The question that was asked was a fair question but the answer seeks to belittle the questioner, with the Prime Minister saying he is not sure what the Leader of the Opposition knows about tax scales. It is out of order to do that; it is absolutely out of order.

Hon JOHN KEY: People earning under $70,000 certainly will get a tax cut.

Hon Phil Goff: I raise a point of order, Mr Speaker. Once again, as you pointed out, the question was very specific. The question was whether they would get any benefit from the top tax rate going from 38c in the dollar to 33c. I put it to you, Mr Speaker, that the Prime Minister is deliberately evading that question and not addressing it.

Mr SPEAKER: On this occasion I have to support the Prime Minister, because in response to the question, if I heard the Prime Minister correctly, he said that those earning below $70,000 would be getting a tax cut. I suspect he has answered in that way because maybe there is no logical answer to the question the member asked. So I think that it is a fair answer.

Rahui Katene: Does the Prime Minister believe that raising GST would create financial pressure, which, judging by McDonalds’ record profits since the recession, would encourage people to eat unhealthy foods; and what progress has he achieved in examining the issues for low-income New Zealanders?

Hon JOHN KEY: There is no reason why people will be driven to unhealthy foods if their incomes are compensated for the increase in GST, and if the relative prices of foods stay the same. A rise in GST, for example, will not affect the relative price of an apple compared with a packet of chips. I also say to the member that different rates of GST on different foods would create huge complexities, and hundreds of pages of tax rules on things like a chocolate biscuit.

Te Ururoa Flavell: He take whakatua, e te Mana Whakawā. Aroha mai, engari, nā runga i te āhuatanga o ngā kōrero o tērā taha, kāore au i tino rongo Ki te whakamārama a te Pirimia ki te pātai a te Pāti Māori i rere atu ki a ia. Te tikanga me rongo mātou i ngā whakautu. Koi rā, kei te īnoi atu kia tukuna a ia kia whakautu i te kōrero, kia taea ai e mātau te rongo i te whakautu.

[I raise a point of order, Mr Speaker. Apologies, but because of the way that the members on the other side conducted themselves, I really did not hear the Prime Minister’s explanation to the question put to him by the Māori Party. Surely we have the right to hear the responses. So my plea is that you allow him to respond again so that we can hear it.]

Hon Trevor Mallard: I make it clear that the Opposition will have no objection to that answer being tabled. It is written.

Mr SPEAKER: The House is in fairly high spirits today and I absolutely accept that, but the point of order made by Te Ururoa Flavell is a perfectly fair point of order in that a Māori Party member Rahui Katene asked a question and could not hear the answer. I invite the Prime Minister to repeat his answer, and I want to hear less interjection.

Hon JOHN KEY: It is true; it is written, and that is because they are harder questions to answer. The ones from the Leader of the Opposition are pretty easy so I just wing them. The answer is there is no reason why people will be driven to unhealthy foods if their incomes are compensated for the increase in GST and the relative price of food stays the same. A rise in GST will not, for example, affect the relative price of an apple and a packet of chips. I also say to members that different rates of GST on different foods would create huge complexities and hundreds of pages of tax rulings on things like chocolate, whether it is inside or outside the biscuit.

Hon Peter Dunne: I raise a point of order, Mr Speaker. I ask that the Prime Minister—

Mr SPEAKER: A point of order is being heard and this one will be heard in silence.

Hon Peter Dunne: I ask that you ask the Prime Minister to repeat that last answer in silence, because after about the first two sentences it was simply impossible to hear it in this part of the Chamber.

Mr SPEAKER: It was the Prime Minister’s fault that that happened. The Prime Minister made a gratuitous comment before commencing his answer, and as Speaker I cannot expect the other side of the House to sit there in silence in such a circumstance. The Prime Minister knows that he has actually been a naughty boy and there is not much I can do about it. But if members—

Hon Peter Dunne: I raise a point of order, Mr Speaker. That may well be so, but there is a further aspect to this, which I would ask you to reflect upon and that is that since we moved away from having the headset amplification at our chairs it has become much more difficult, with the overhead amplification, to hear in these rather rowdy situations. I think that is something that obviously you cannot resolve today but to which some consideration does need to be given, because although this will be a robust place it is becoming increasingly difficult to hear people from all sides of the House if there is a lot of noise around.

Mr SPEAKER: The member makes a fair point and I am interested in the medium term in making it possible for members to hear through their earpieces when there is noise like that. The point I made still stands—that discipline is required if members are asking questions of a party, or if a member who is part of the Government, if you like, is asking a question of a Minister, and Ministers make that kind of remark, there will be noise, and I cannot stop that. It is unfair for me to treat the Opposition differently, but I would ask members to be mindful and try to not let the House get too noisy.