Estimates Debate — Vote Finance

I am wondering why, in the Treasury estimates, the Government pays for its policy advice, because it certainly does not take any. I will give just one example. A couple of years ago the Minister of Education, on the prompting of Treasury, initiated a value-for-money review. I have had the privilege, as Opposition spokesman on education, of spending the last 6 months trying to track down exactly what happened in the value-for-money review. Yesterday I finally got the conclusive letter from the Minister of Education, who said that he was not going to give me any of the pieces of paper because he regarded it as “ongoing work”.

Parliament is appropriating millions of dollars to fund policy advice from Treasury. In every major expenditure area that Treasury advice is questioning the value of the spending of taxpayers’ dollars, because Treasury officials see more evidence of the waste than we do. In just the last week we have had a report on law and order, showing the extent of the cost and the feebleness of the Government’s efforts to deal with it. Treasury has raised fundamental issues about the lack of productivity growth in the health system. The patients have not had all the extra money; the system has all the extra money and does not have much else to show for it. In education, the Government has clearly turned itself inside out with concern about the enormous waste that has gone on in the tertiary sector. So why does the Government keep paying for policy advice—not all of which is accurate but most of which is sound—that it never takes?

Dr Cullen has managed to persuade himself, if no one else, that he is what he calls a “fiscal conservative”. I guess in the Labour Cabinet he is a fiscal conservative, in that he has an interest in at least counting the money as it flows out. Other Ministers, like Steve Maharey, do not even care about counting it, and that became quite clear in the tertiary education debacle last year. So in that sense Dr Cullen is conservative; he likes to count the money. But he has done almost nothing about establishing value for taxpayers’ dollars. We will see, time and time again, endless examples from the Opposition where clearly there has been no focus on value.

I will give another example from the education sector. Five years ago the tertiary education system cost $40 million to run. That sounds like a lot of money, and it is. It is a lot of student allowances, a lot of operations, and a lot of extra students who could be at university. There was $40 million spent to run the Wellington machine, to oversee the tertiary education system. Five years later, it costs $140 million to run the tertiary education system—an extra $100 million. That number has so many zeros that most people cannot imagine it. Five years ago it cost $40 million, today it costs an extra $100 million, so it now costs $140 million to run the tertiary education system—and it is worse. Its institutions are in worse shape, its revenue outlook is in worse shape, but a few bits of it are working better.

The Minister in the chair, Mita Ririnui, should tell us why we are paying for that advice. He should also tell us Treasury’s response to the Ministry of Social Development social report. Any Government can fail according to the yardstick of its opponents, but once a Government fails according to its own yardstick it is in serious trouble. There is no doubt that the Labour Party meant what it said back in 1999 and 2000—that is, that it would bring in a range of policies to deal with inequality of incomes across New Zealand. In fact, it was one of the major themes of its 1999 election campaign. But the Ministry of Social Development report, from a Government agency, has said that things have become worse for the very groups that Labour targeted, saying they should get better. There was $934 million spent on the closing the gaps programmes. The Government changed the name but it did not take the money back. It has now spent the $934 million, and it is stuck with the verdict of its own social agency—whose analysis, I would have to say, is patchy at best but sometimes useful—that inequality has become worse. The Government will talk about Working for Families as being the best way—

I rise to speak to Vote Finance, which is allocated $52.8 million. Further to what Mr English has just pointed out about policy advice, I say $2.7 million of that $52.8 million is for policy advice about the management and ownership of State-owned enterprises. I think that taxpayers deserve an explanation of that, because Mr Mallard totally ignores that $2.7 million for policy advice and totally bulldozes any suggestion that is outside his own preferences. An amount of $2.3 million is allocated for policy advice on various taxes. Mr Cullen, the Minister of Finance, calls that an ideological burp. He totally ignores it, totally bulldozes it, and gives us one of his witticisms to explain why that should be ignored. We can point to about 10 percent of the $52 million that should be savings for taxpayers. I am a big fan of Treasury, but if the current administration totally ignores its advice, let us put it out to pasture. Let us save 10 percent. That is probably the next lot of waste we will see on wastewatch.co.nz—the National Party’s new site that will highlight much of this Government’s wastage.

I think it is very important to look at the environment in which we are asked to consider this appropriation. Inflation is now at 4 percent. Inflationary expectations are nudging 4 percent for the next 2 years, as a result of waste, of being unproductive, and of sending money to the squeakiest and loudest wheel, as opposed to measuring productive outcomes for the New Zealand taxpayer. Further to that environment, growth is struggling to beat even 1 percent over the same 18 months to 2 years. The emerging Asian tigers would be disappointed if they did not get 1 percent growth per quarter. In an environment where New Zealand’s gross average income is less than the Aussie average net income, it is no wonder that 640 New Zealanders per week are leaving to go to Australia. This is an environment where, for goodness’ sake, there is a tax bill before the Finance and Expenditure Committee that will incentivise New Zealanders to invest into our biggest competitor, Australia, and into the Guinness Peat Group—and it will do that in an environment where New Zealand is struggling to save money.

As was alluded to earlier, the New Zealand living standards reports show that those who are suffering the most from the policies of the current Government and the forecast spending have grown to 17 percent. All we have heard is rhetoric and spin. If we get on the ground and talk amongst the people in the lower socio-economic levels, we find they are struggling. The Labour members should absolutely hang their heads in shame at what is happening out there to real New Zealand.

With regard to the inflation blowout, I think it is a good idea to look at the effects of inflation bursting out to 4 percent. What are the dangers of that, who will be most at risk, and what are some of the effects? Those who will be hit the most are people on fixed incomes—mostly superannuitants, who are struggling right now to pay $1.77 per litre for gas, when about half of that goes in tax anyway. Those who are struggling on superannuation and on lower incomes will struggle as they try to meet the day-to-day demands to pay for their petrol, electricity, and simply just fruit and vegetables.

The blowout in inflation creates a very interesting question as to whether the indexation of the tax brackets will still happen. There is a lot of uncertainty about that. Higher inflation means that more New Zealanders will lurch into the top tax brackets, and they will recall the 1999 Labour pledge that only 5 percent of taxpayers would be in the top bracket. Well, I think that currently about 16 percent of taxpayers are in that bracket, and that will start to move towards 20 percent right now. We will be able to watch the flights to Australia start to fill up even further than at present. The price of oil has been blamed as part of the reason for the consumer price index increase, and that is fair enough. That has contributed, but the wanton waste, the “spend-athon”, and the gross overtaxation of New Zealanders by this current administration is absolutely to blame for the current situation.

Further to the current environment, what is another result of inflation bursting out through 4 percent? Today I heard 100 percent mortgages being advertised on the radio. One of the constant claims of the Reserve Bank and the Minister of Finance is that there is over-investment in property.

In speaking on Vote Finance in the appropriation debate, I would just like to say that it does not surprise us in New Zealand First that we have had a blowout in inflation rates. We have long contended that there is a difference between importing and getting monetary wheels turning in that way, and exporting, which is what we believe should be happening now and should have been happening in past years. New Zealand has simply imported too much and exported too little.

New Zealand First is one of, I think, only two parties that believe in incentivising the taxation system. It is good to see that David Skilling, who heads a thinktank in Auckland, talked about the same thing in yesterday’s New Zealand Herald. It is an appropriate time, given that 2007 is Export Year—a New Zealand First initiative—to talk about those sorts of things.

In Hamilton we have what we call an innovation park, which is for people of a like mind who believe they can add value to, mainly, dairy exports and dairy commodities, and send them overseas. These are the sorts of things we believe should be supported by the Government. They are the sorts of things we believe will get New Zealand out of the exporting hole, and they are the sorts of things that will drive up the income level of average New Zealanders—in fact, all New Zealanders. It will not be some sort of whizzo greenfields find, which people have sought in the past; it will not be some sort of quest for extra production; it will be clever slants on products we already know and already produce. It will be those things that make the difference when it comes to exporting dollars.

💬 Hon David Carter: Dog chips!

R DOUG WOOLERTON: Mr David Carter mentions dog chips. I suggest that he had a dose of that on the brain a wee while ago. In actual fact, one of the products in the Waikato Innovation Park is the electronic marking of animals through eartags, which will lead to better productivity. Dog chipping is simply an extension of that. It is something that the National Party chose to ignore in the backward-looking step that it took. New Zealand First will tell National members about that in the future, because it was a very, very old-fashioned stance that they took.

I shall give members an indication of what happens at the innovation park. A small company has invented a sweetener to replace sugar that has virtually no calories. It is based on a fruit rather like the kiwifruit. Unfortunately, we have to get that fruit from China, but the company, which is based in Hamilton, is now exporting something like 25 tonnes of that product to America. It will get the amount up to 100 tonnes in the future, and the money from that will go into New Zealand coffers. We would like to say that all of it will, but some of it will, obviously, stay in China, where this stuff is manufactured.

New Zealand First members think all of those things should be done in New Zealand. If we have taxation incentives for our exporters, the likes of which they compete against in many other countries, and as Mr David Skilling is talking about, as New Zealand First has talked about for many years, and as will be recognised in the 2007 Export Year, we will get the innovative, high-value products that will take New Zealand to another level.

It is good to follow Mr Doug Woolerton. I can only agree with him, but I do not think he goes far enough. I agree that we should have tax incentives for exporters, but why just exporters? What about tax incentives for workers? What about tax incentives for dairy owners? What about tax incentives for every business in New Zealand? Each and every one of those business people is working hard. Each and every one of those people could do with more money in their pockets. Mr Woolerton’s ideas were so good that he should be in Government. I say that we should have tax incentives for every working person and every business in New Zealand.

But we are looking at Vote Finance. We could save a great deal of money in New Zealand, because we have a Minister of Finance, Dr Michael Cullen, who knows everything. He actually does not need advice. He knows all about economics and he can grasp everything in a heartbeat. We have a Minister of Finance who does not need evidence or theory because his own ideology tells him everything.

Michael Cullen knows as a fact that tax cuts do not work. Michael Cullen still believes—he used to teach history, and I guess it has just carried on from that faculty—that tax does not matter. He believes that we can have any old tax rate and any size of government—it can be big, small, or medium—it makes no difference to the functioning of the economy. Michael Cullen illustrates this by saying that he would not work any harder if his taxes were lower. That is his complete grasp of the relationship between size of government, tax take, Government spending, and economic growth.

Of course, Treasury, being smart and being made up mostly of economists, knows that is complete nonsense, that taxes have an enormous effect on whether people choose to invest, on whether people choose to be entrepreneurs, on whether people choose to work a bit harder, and, in fact, on whether people choose to stay and live in New Zealand. It does not take much of a change in our growth rate to change our fortunes over 5 years, 10 years, or 15 years.

Michael Cullen, in a speech he gave just this month to the Nelson chamber of commerce, warned against tax cuts, because tax cuts could give a fiscal stimulus. This was from a man who has overseen an increase in the size of government from 36.1 percent of GDP to a whopping 42.1 percent of GDP—a 16 percent increase; an increase per year of $25,000 million. But in Michael Cullen’s world it works like this. He can take money off hard-working New Zealanders, he can bring it into Government, he can spend it on the most wasteful projects that even a kindergarten could not come up with, throw the money against the wall, and that is not inflationary.

But, oh boy, if he did not take that money in the first place, if he left it with a hard-working Kiwi mum or dad, if he left it with a small-business person who is up all night filling out GST returns and who is part of the productive sector of New Zealand, then those people might spend it on their groceries, on some extra education for their kids, on employing another person, or on an extra plant for their business. To Michael Cullen that would be bad; that would be inflationary.

So we do not actually need Treasury because we have Michael Cullen as the Minister of Finance and he knows everything about the economy, including that tax makes no difference.

One of the most galling things about this Parliament is having to listen to Rodney Hide criticising the Minister of Finance. Rodney Hide is some sort of second-rate ballroom dancer who cannot hold on to his partner—

💬 Hon Trevor Mallard: No, he’s a wrestler.

That is right—he is a wrestler. He has come back to this House, finally and eventually, after being off doing other, far more important things to try to boost the poll ratings of the ACT party—

💬 Darren Hughes: From one to two.

Yes, and of course doing hopelessly—

💬 Hon Trevor Mallard: It went from two to one.

Yes, that is right; it went backwards as a result of his performance. To have Rodney Hide of the ACT party criticising the Minister of Finance is absolutely and utterly galling.

Of course, the ACT party is still chanting the same old mantra, which is tax cuts. It is interesting that when we actually analyse the tax cuts that it is talking about, we see that they mean roughly a $100 tax cut for Rodney Hide and $10 for the average worker. That is the kind of thing that has happened in Australia. It is the kind of thing that happens to Mr Rodney Hide. Of course, he is always the first to come out and say we should have more inquiries into this matter or that matter—costing more money—and do more for roading and the sorts of things he says are holding up Auckland’s development. Yet when he comes into this House he chants the same old mantra about tax cuts that the National Party chants.

ACT and the National Party have said in the past that they would borrow to fund tax cuts. I heard that during the election campaign. They were not going to spend the surplus on them but were going to borrow to finance them. There was some kind of voodoo arrangement—

💬 Darren Hughes: Getting it from overseas.

That is right. They were going to do it not by borrowing but by getting it from overseas. [Interruption] That is right—something like that. With smoke and mirrors and a bit of voodoo economics, these tax cuts were somehow going to materialise. Of course, everyone knew what was going to happen, and that is why the National members opposite and the dregs of the ACT party are still sitting over on that side of the House.

Those parties could never actually bring themselves to say they would sell State assets. They talked about a few farms here and there. Every time they were pushed on State assets they said: “We were going to sell Kiwibank, but we’re going to keep it, and we were going to sell Landcorp, but, no, we’ll keep it.” They were always going to sell something, but when pushed on it they would never define what. They knew that if they actually came out and said what they would sell, they would not be electable. No one would support them because everyone had had a gutsful of asset sales. That is something the Labour Government learnt a long time ago, and that is the reason we decided—

💬 Hon Trevor Mallard: We learnt it hard.

We learnt it very hard in 1990, as I recall. Our caucus went from about 62 down to about 29. That was a lesson we learnt. Clearly, the National Party and the ACT party still have not learnt it.

Of course, there is no question in our mind that those members opposite would cut superannuation. Superannuation would be back on the agenda, and the stability we have had for the last 6 years would be completely lost. It would be gone. Don Brash talked about not caring who owned the schools. People know what that is code for. It is code for flogging off things like the schools and the hospitals again.

If we weigh that up against what the current Minister of Finance, Michael Cullen, has been able to do, we see he has been able to salt money away to ensure sure that when the economy goes a bit soft—and we know that that is happening at the moment—we have an automatic stabiliser so that we do not have to wrench on the handbrake, which is what National would have had to do if it had carried out those tax cuts. Right about this time those members would have had to be cutting funding for health and education, and they would have been saying to the elderly that they would have to do something about superannuation because of the huge tax cuts they needed to fund somehow.

Michael Cullen has a careful plan, which involves economic transformation, making sure our Working for Families package is funded properly, and building things around our national identity—our film industry and others things—to make sure New Zealanders feel proud again. It is a proper economic programme. But what do we hear from the National Party and the ACT party? We hear the same old tired mantra about tax cuts and flogging off State assets. They are talking about the 1990s. They want to drag New Zealand back, kicking and screaming, to the 1990s—back from the growth, including huge employment growth, that New Zealand has had. Most people have forgotten about the 1990s. That period is now like a bad nightmare they had. The National Party is about going backwards; the Labour Government is about going forwards.