Estimates Debate — Vote Revenue

I want to turn my attention in Vote Revenue to the $1.316 billion that is paid to administer and pay, amongst other things, the family support tax credit, the family tax credit, the child tax credit, and the parental tax credit. Before I do so, I will reflect for just a moment on the concerns we had with the Working for Families package, and the interaction of those particular payments that are to be made. During the Budget debate we highlighted—and members will recall this—the rather disastrous situation, we believe, where potentially a great many New Zealanders could be put into a situation whereby they face very high effective marginal rates of taxation. Someone with two children living in, say, Wellington or Auckland and earning $38,000 could indeed receive an after-tax income, in excess of that gross income, of about $43,000. When compared with someone earning $60,000 with two children—maybe a next-door neighbour—we find that person’s after-tax income would be only about $2,000 more than that of the person earning $38,000 gross. People on $60,000 face an effective marginal taxation rate of around 90c in the dollar.

When we highlighted that after a little bit of digging, the Minister for Social Development and Employment, Steve Maharey, responded with one of those classic lines: so what? Well, here is the beef, if the Minister missed it. The beef is that people will not necessarily want to get up on Saturday mornings to do a bit of extra overtime when they receive only 10c in the dollar. Here is the beef, if the Minister does not necessarily get it: people who go out and educate themselves further often incur costs in doing that—it is called a student loan—or they go and borrow some money, or take out some form of debt on their credit cards, or whatever.

💬 Judith Collins: Why bother?

Why bother? Exactly—that is the point. If someone will receive only 10c in the dollar, why will that person bother to do so? Clearly, in case the Minister for Social Development and Employment missed it in relation to his comment of “So what?”, here is the beef. Quite often when one is earning $38,000 in a job, vis-à-vis earning $60,000 or $70,000, it could well be that the job paying $60,000 or $70,000 has a considerable amount of additional responsibility. Therefore, one may have to consider whether to change jobs and be prepared to take that extra responsibility in order to earn 10c in the dollar—I think not. That is the answer to Mr Maharey’s “So what?”. All the international evidence—which I am sure the Minister was aware of, but conveniently forgot, especially when he was interviewed on Radio New Zealand—proves that this measure does exactly what the National Party has been saying, in terms of deterring that kind of behaviour.

I want to take a moment, if I may, in talking about child tax credits and accommodation supplements to reflect on whether this Budget has a little more spin in it than maybe first meets the eye. I say that because while many others in the Committee may have gone to sleep after a Budget that was one of Labour’s biggest giveaways, yet could not get Labour a kick up in the polls at all—and that is pretty disappointing—Michael Cullen was sitting there, and expecting and promising the ninth floor that he would deliver a few more points in the polls to stave off what will be the inevitable collapse when the Māori Party takes all Labour’s Māori seats in a year’s time. He promised the Prime Minister that, and he failed. He has failed dismally, and he has tied himself up and has no room to move. An interesting spin came out on the Budget. Members heard it from Clayton Cosgrove earlier, when he talked about the good the Government would do for hard-working families. Well, interestingly enough, I asked a parliamentary question about the accommodation supplement and was told that 266,000 New Zealanders will receive the accommodation supplement in 2007, on Treasury’s predictions. But I was very surprised to learn that of those 266,000 New Zealanders, Treasury predicts that 260,000 will earn $25,000 or less. In fact, the vast majority would be classified as welfare beneficiaries. I am not knocking that; I am simply pointing out that the statements being made by the Government to the people of New Zealand—in relation to the accommodation supplement, anyway—are simply not correct.

That led me to wonder whether Michael Cullen and Labour’s finance team had possibly been trying to mislead the people of New Zealand with their statements—and members saw that before, with regard to Mr Cosgrove’s comments. So I picked up fact sheet 7 of the Working for Families package, and I found to my surprise that example 1 was a very interesting example. Rod and Barbara sound like a lovely couple; they have two children, and they live on the North Shore. Rod works 40 hours a week, and earns $52,000 gross per year. [Interruption] I am sure he probably does vote for National. Rod and Barbara pay $385 a week in mortgage costs. Their total income from work and the accommodation supplement is $766.55 in the hand. Lo and behold, in example No. 1 on fact sheet 7—a prime example, and up in lights—thanks to the generosity of a Minister once described as Scrooge McDuck by all the cartoonists around the country, that couple gets $170 per week, by 1 April 2007. Fantastic! Rod and Barbara are absolutely high five-ing themselves over on the North Shore, which is a seat held by National MP Wayne Mapp—and may I take a moment to say what a wonderful job Wayne Mapp does for the people of North Shore. Anyway, there are Rod and Barbara over on the North Shore, having a really good time. Fact sheet 7 of Working for Families was distributed widely to the people of New Zealand and talked about by the Minister of Finance, by Clayton Cosgrove, by the Minister for Social Development and Employment on Radio New Zealand, and by Mr Darren Hughes, the translucent member for Otaki who is out there pumping out all the spin that the Government has.

Why was that couple scenario No. 1 on fact sheet 7 of Working for Families? Because it was the proudest moment for Labour. Not only did the Government manage to infiltrate middle New Zealand—Rod and Barbara, a lovely couple with two kids, who live on the North Shore and earn $52,000; members know the drill—with welfare dependency, which is not necessarily something the majority of New Zealanders is necessarily proud of, but lo and behold, the subliminal message was that middle New Zealand should not worry, because it was getting something out of the Budget. Okey-dokey! So away I went, and did a little research. Members will be surprised to know, as I was—and I was absolutely shocked at this—that Rod and Barbara are one of six couples who earn between $50,000 and $55,000. I have more fingers than there are couples in New Zealand in that situation! Michael Cullen can name them individually; he has had a cup of tea with every couple earning between $50,000 and $55,000 that is getting something out of this Budget. It is a hoax! Government members look confused—and they should be confused, because those are the facts from Treasury. Unbelievably, the situation of Rod and Barbara, even though they earn $52,000 and are a nice couple who live on the North Shore with two kids, is constructed from a very unusual set of circumstances.

If any members are interested, I could give quite a long dissertation on why that couple is one of six couples on that income—and in fact one of only 104 out of 266,000 couples earning anywhere near that amount of money—who will get an accommodation supplement, and so will get something from the Budget. So when Clayton Cosgrove, the Minister of Finance, the Minister for Social Development and Employment, the translucent member for Otaki, and anybody else want to get on their feet in this Committee and tell the people of New Zealand what a wonderful job this Government is doing for middle New Zealand, I have only one comment: it is baloney. What a load of baloney it is! Rod and Barbara happen to be in a very unusual set of circumstances. I want to congratulate Treasury, and probably the Inland Revenue Department, because they must have spent months finding Rod and Barbara. It must have been very difficult to find that couple. They must have absolutely trolled through the phone books to find the one in six couples that earns between $50,000 and $55,000 and will get anything out of Working for Families.

That is why the public of New Zealand resoundingly voted against this Budget, and is why three-quarters of the people who voted on the Holmes poll did not want it. It is why Labour has had no kick out of it, and why Michael Cullen completely failed the Prime Minister when he told her not to worry, because the Government would have a big spend-up and fend off the Māori Party that is going to take the seven Māori seats. It has failed, it is a hoax, and it is a load of baloney. No one will believe Working for Families is a good package for middle New Zealand.

I think Mr Key’s problem is that he is not yet fully National Party potty-trained. He has not yet learnt the mocking insincerity that drips off Tony Ryall and Roger Sowry at a moment’s notice. Mr Key is sometimes an intelligent person. He started off by telling us that there were thousands and thousands of middle-income families that will have over 90 percent marginal taxation rates. Now one gets to that only if one also gets the accommodation supplement abatement. Mr Key told us that there were not actually thousands and thousands of those families getting the accommodation supplement, but that there were only six families on incomes of above $50,000 receiving it. So all that heavy breathing from the National Party in opposing the Working for Families package was trying to find people whom I have had a cup of tea with but who would not go anywhere near the National Party with a cup of free water, because they would not trust it in that respect.

Again, what Mr Key did not tell us was the answer to one simple question: if, in some sort of fit of idiocy, the public votes for the National Party at the next election, would a National Government remove the Working for Families package? [Interruption] That is right, he should. That has got that on the record; I have been waiting for that for some time. I hope Rod and Barbara are listening out there. Mr Key has just announced that they will lose their $170 a week under National, but the really good news is that although they may be something like $150 a week worse off as a consequence—because the tax changes will not give them much—their effective marginal taxation rate may be a bit lower. I hope, as they try to pay for the kids’ shoes, the school fees, the mortgage, the rates, and all of that, they will be able to say to themselves that if only someone popped in tomorrow and offered them a job as a brain surgeon, their effective marginal taxation rate would be lower than it would be under Labour. That would probably not be a great solace to Rod and Barbara.

The National Party has to explain what its policy is to deliver gains of that order of size—an average of $100 a week for all families with kids where those families earn between $25,000 and $45,000 a year. What is the National Party’s alternative? Its alternative, as it said itself at the time, is that those families are not seen as hard-working New Zealanders. That is the National Party’s view. One is not a hard-working New Zealander, in the National Party’s view, until one gets to about the $100,000 a year range. The vast bulk of Kiwis, in the National Party’s view of life, are not hard-working people. The National Party sees them as “welfare bludgers”, and if they are Māori welfare bludgers, well, it is even better, from the National Party’s perspective on those matters. The National Party does love to make that connection whenever it can—in front of the right sort of audience, of course. When its members get in front of a different audience, it is a somewhat different story.

So what is the National Party’s position on those changes? It is that we should not have any of them. Instead, we should just knock a cent or two off the taxation rate in the middle range, which would give the people on $38,000 or $40,000 next to nothing in the hand—a couple of peanuts and the chance to work harder as a monkey is what the National Party’s approach would be. It would knock off those people’s fourth week’s holiday, make their working conditions worse, sell out the country to nuclear ships, and flog off the schools and the hospitals. That is the National Party’s entire agenda, because it has not yet come up with a single idea that it did not put into place in the 1990s. Each of the four policies announced by the National Party is what it did last time around and lost on. Those policies now have sort of “Brash knobs” on them, making them even worse.

I say that we are proud of the Working for Families package. We will be happy to go to the election, saying to people that under Labour they will keep their fourth week’s holiday, the Working for Families package, and those increases in income. If Mr Key stabs Mr Power in the back and gets on the front bench in Government, then people will lose the Working for Families package, the fourth week’s holiday, their country’s independence, the decile funding, and all those things. I do not reckon that National will be in power after that.

Vote Revenue agreed to.

Vote Economic, Industry and Regional Development agreed to.

Vote Community and Voluntary Sector