Taxation (KiwiSaver and Company Tax Rate Amendments) Bill

I certainly want to speak to Part 2 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Bill because, looking through this really complex legislation that the Hon Peter Dunne and the Hon Michael Cullen have cooked up, it springs to mind that one important question has not been asked in the debate so far. I would ask how many more Inland Revenue Department officials will be employed to manage this extremely complex KiwiSaver scheme. How many more high-rise buildings in Wellington will be filled with Inland Revenue Department officials who have to work through the complexity of a scheme that even Treasury, which is known for its optimism in floating the scheme, says that only 50 percent of wage earners will take up?

With this legislation, we will have a scheme whereby come 1 July employers must, by law, sign up everybody who works for them. All the wage calculations will have to be redone. Many people in New Zealand farming situations are paid on a regular basis with an automatic payment. Those payments will all have to be changed. There will be huge complexity for the employer, huge confusion for the employee, and lots and lots of bureaucrats trying to sort it out.

An employee is signed on to a scheme, presumably a little tagged account is opened in KiwiSaver for this person, and 2 weeks later this lower-income New Zealander will say: “I like the idea of it, but I simply cannot afford to stay in.” So this person will go back to the employer and ask to be taken out of the scheme. Treasury is saying that 50 percent of employees will take this option; I say to Peter Dunne today that it will be more than 50 percent, judging by the calls coming into my electorate office this morning.

So once this employee asks to be taken out, the poor old employer will have to go back and recalculate the wages and PAYE deductions, and will have to go back to the bank, where the employer will probably incur a charge to change it back to what it was prior to 1 July 2007. Then the Inland Revenue Department—with its hundreds more bureaucrats—will have to post out a cheque to the employee for the $20 or $40 that has gone into the account in the couple of weeks before the employee made the decision that he or she could not stay in the scheme. That sounds incredibly complex and incredibly stupid.

We can see the shock on the faces of the New Zealand First members, who have only just realised that this will happen. Yet they are signed up to support this nonsense. Labour members have not even thought this through. Michael Cullen has—this scheme employs lots of bureaucrats; that does not seem to worry him—but the Labour members themselves obviously have not realised how complicated it is.

That is why we saw Dr Cullen getting a really hard time on Close Up last night. Then he came down to the House at about 8 o’clock last night and lost his rag because he knew he had lost the argument with John Key on the benefits of the KiwiSaver. He knew then that New Zealanders had not swallowed it hook, line, and sinker. He has been too clever by half, and has stuck something in here that his own Labour caucus simply does not understand.

Today, when we analyse this scheme in detail, we realise just how massively complicated it is and how much more Inland Revenue Department bureaucracy we will have to build to manage something that in a couple of weeks will revert to the status quo for low-income New Zealanders. Peter Dunne, instead of sitting there, should actually stand up and defend this legislation. He is part of the design of the thing. He will go down as being attached to the folly of Dr Cullen for the KiwiSaver scheme, which will not work. It will not work, because lower-paid New Zealanders simply cannot afford to stay in the scheme.

I look at the complexity of the Dr Cullen scheme and at the simplicity of the scheme of Peter Costello, Treasurer for the Australian Government. He has come in with five Budgets, one after another in a row, and he has been able to simplify the tax system by delivering tax cuts and giving the chance for wage earners in Australia to keep more of their own money. But no, Dr Cullen says: “That would be wrong, we cannot leave that money in the hands of New Zealanders.”, and says that he can do better.

I want to speak just briefly in support of the bill and to take some real-world examples, in response to some of the issues that have been raised by previous speakers. I am looking at the second page of this morning’s Dominion Post, where a couple of calculations really give the lie to some of the sillier claims we have just heard.

There is the example of a single person on the minimum wage, earning $11.25 an hour or $450 a week. If that person decides to join KiwiSaver on 1 July, he or she will have to put away $18 a week. We have heard, from polls and surveys of people’s savings habits and intentions, that people really want to be able to save, and they really want incentives to join this scheme. I think that many New Zealanders, even if they are on modest incomes, will look at that requirement of $18 a week, look at the incentives that now exist—or that will exist when this legislation passes—and will think they will make a real effort to put that sort of money aside. Now if that person puts $18 a week aside, which is the minimum contribution—4 percent of gross salary—then the Government would add, under this legislation, another $18. From 1 April next year the employer will pay $4.50 a week. Then, stepping up the scheme, by 2011 the employer would have to match the contributions up to 4 percent. Assuming that the person retired in 35 years, there would be $150,000 in the bank, which is enough to earn about $8,000 a year in interest in today’s dollars. That assumes a very conservative rate of return on the funds of about 2.5 percent.

It seems to me that there will probably be quite a high uptake of the scheme if those figures are correct. People have been crying out for some assistance and some incentivisation to help them to save. That will now exist, and it is the answer to the question of what the kiwifruit worker in Kerikeri or the school bus driver would do—questions that John Carter raised earlier. That is a living example of the figures those people will have to think about in order to join the scheme and of the benefits that they will get.

There is another example: that of a single person on the average wage. If a 50-year-old who earns a gross salary of $45,000 contributes 8 percent, which is about $70 a week, by the time that person retires at 65 there will be accumulated funds of $110,000, which is enough to generate $8,000 a year during retirement over and above the superannuation contribution. Now that is real money. It is the sort of fund that people have been wanting to build up—the sort of nest egg that ordinary Kiwis would like to have but that they have not had the assistance or wherewithal to put together. I am very proud that this legislation and the accompanying package will allow that to happen.

This scheme will be good not only for the average Kiwi worker but for the country. If members look at the projection of the funds that will be built up over time, they will see that KiwiSaver funds under management by about 2030, again assuming a very conservative rate of return—2.5 percent—will be $100 billion. Now when members look at that and at the Cullen fund, they will start to see a strategic reserve for the first time being built up in this country, and will understand the importance of saving. Of course, we know about the wider economic benefits of having a decent savings scheme and a decent capital fund such as this. We will have stronger and deeper capital markets, leading to a lower cost of capital over time and easier access to capital for New Zealand businesses.

The scheme will also reduce the pressure of inflation. We know we have a current account problem. Well, finally, we have the opportunity not only to help ordinary Kiwis but also to build up the sorts of strategic reserves that our neighbours across the Tasman, whom we have heard about in speeches today, did some time ago. It was interesting to hear the model from across the Tasman being idolised by David Carter, the previous speaker. I wonder whether that means he wants the Australian model of a 9 percent payroll tax on employers, rather than the sort of scheme that has been designed for New Zealand and will be presented through this legislation.

Like the rest of this Budget, this is good legislation for ordinary Kiwis, for the country, and for all of us.

The member Charles Chauvel, who thinks he will be the member for Wellington Central, but he will not be, demonstrated the kind of cargo cult that Labour is trying to build up around the KiwiSaver system. It is only Labour people with that kind of champagne socialism attitude who think people on $11.25 an hour are saying: “Oh yeah, I’d love to put away $18 a week.” People on $11.25 an hour are the last people who will go into the KiwiSaver scheme, and they are also the first people who missed out in this Budget. If the Government had kept its promise to move the tax thresholds to allow for inflation, people on $11.25 an hour would at least have received something—it may have been chewing gum, but at least they would have received $2 or $3 a week. This would have been some recognition that they are paying a bigger percentage of their income as tax than they were 5 years ago, simply because of inflation and a lazy, big-spending Government.

The reality, I say to that member, is actually much different from the cargo-cult mentality that he is trying to cultivate. People on $11.25 an hour, even people on $15.25 an hour, will be the least likely to opt in to KiwiSaver. The Government’s message to those on $11.25 an hour is “Cut your spending, profligate!”. The Government says that these people are the ones who are causing inflation, the ones driving up the housing market. The Government is telling people on $11.25 an hour to cut their spending because they are part of the savings problem.

I guess that would have some credibility if the Government was cutting its spending. But, of course, it is not. There is a record new spend in this Budget; it has never been $3.8 billion before. It will be $3 billion or $4 billion next year. Is that not typical? This is champagne socialism. People on low incomes have to cut their spending to be patriotic, while MPs and bureaucrats on high incomes go on spending up large, taking money out of their cash deposits in the bank and shifting it into KiwiSaver, with no increase in their rate of saving. What a hardship! They are thinking: “This is a terrible scheme; we will have to shift some money around.”

The Labour MPs believe Dr Cullen, who has told them this scheme will create a whole lot of new savings. Well, it will not. There are only two ways to get more savings into KiwiSaver: to shift it from somewhere else, or to spend less. Labour are telling us today that the people they expect to spend less are the ones on $11.25 an hour. Well, I invite Mr Chauvel to get out to the supermarkets and tell the people stacking the shelves and serving on the counters that Labour’s vision for them is to give up $18 a week—and give up all prospect of pay increases for the next 4 years, because the employer has been compelled to put the pay increase into their KiwiSaver account—and get it all back in 40 years’ time. I invite Mr Chauvel to come with me to the supermarkets around Wellington. We will get all the staff in the morning tearoom and tell them the truth: that Labour says: “Put $18 a week into an account. We can promise you jam in 40 years’ time if you give up your bread now.”

That is why, yesterday, Labour members were looking really worried about this scheme, because they know what a big gamble it is. The people who will take the tax advantages of this scheme vote National. They will bank it—they will. Their accountants are all on the job today. But the low-income person and the small employer have been ambushed. Small employers have been ambushed by the compulsory contributions, which they never expected, and which come just after they have had to find the money for the 4-week holiday and the time-in-lieu provisions of the Holidays Act. Low-income people have been ambushed by a Labour Government they thought supported them.

The difference between the National Party in the last speech, given by its deputy leader, and this Labour Government is that this is a Government that does not believe that a section of the economy should be permanently parked on $11.25 an hour. The changes to KiwiSaver are the first and important step to lifting the incomes of our lower-paid people to a higher range of brackets. It has been done in many ways, such as increasing the funds for research and development to increase the skill base of our Kiwi businesses. I notice that John Shewan, writing this morning, welcomes the 45 percent subsidy by the Government on research and development, and notes that it is urgently needed and will be great for investment. The editorial in the Dominion Post this morning also writes of welcoming research and development, and also welcomes investment into the superannuation scheme, noting that if there had been a tax cut instead, it would have merely fuelled inflation. We know whom the fuelling of inflation would assist—the very people National wants to support by voting against this bill today.

It is not true to say that this bill supports National Party voters. If that were true, National would vote for the bill. But it is voting against the bill, because its members know that the overall picture enhances the welfare of so many New Zealanders, including those currently on $11.25 an hour. In fact, those on $11.25 an hour will get two tax cuts from this part of this bill. They will get a $20 contribution as soon as they make their $20 payments, and then as the money is invested in a portfolio investment entity, that entity’s investment rate will come down from a 33c tax rate to a 30c rate. So there are two levels of tax cuts for the lower-income people who put money into KiwiSaver.

I want briefly to address the point raised by David Carter, who claimed that this legislation would increase the level of complication, and who saw us increasing the level of expenditure on civil servants. I draw the member’s attention to clause 54, in Part 2. That clause provides for the electronic furnishing of returns, which of course is now a well-established practice for the Inland Revenue Department, and which will extend to the KiwiSaver provision. So as the computers in employers’ offices and the Inland Revenue Department become clearly able to interface, it will ease the workload on both the offices of employers and the Inland Revenue Department. When David Carter made that trite and ill-considered criticism, he failed to address Part 2 of this bill, which includes clause 54.

I will talk briefly about how KiwiSaver will help those on lower incomes. But first of all I will remove this myth that has been bandied around today that 50 percent of New Zealand workers will not be able to take part in the KiwiSaver scheme.

💬 Hon Member: That’s what your own Government says.

No, it does not; the members should read the papers more carefully. The scheme has been launched on the basis that there will be a 50 percent uptake. There are no figures at all to suggest that that 50 percent uptake will omit lower-paid workers. Maybe the best standard to consider is what the uptake is at present in other schemes that are voluntary, and 50 percent seems to be about the norm. Of course, if National members were so confident in their rhetoric, they would be voting for the bill if that 50 percent were to come from their voters. But they know that the voters who will be most advantaged from this scheme are those who find it, at present, difficult to save.

Every person who joins KiwiSaver and puts in $20 a week will get $60. There is no better return in this country for anybody who can pay $20 a week than to get a $60 return straight away. That is a simple truth. And that is the advantage of Part 2, because it brings the scheme into reality for everyone who has trouble in saving. It is not a scheme necessarily for the rich and the wealthy; it is a scheme for mums and dads, and for young people who are considering the need to provide for their future.

So what does Part 2 do? It sets up the framework so that if a couple on an average wage, at age 30, join the scheme, after 5 years they will have a deposit for their first home. This is the only realistic way in which many people today will be able to afford to buy their first homes, because the speculation in the property market has pushed homes beyond the price able to be afforded by many.

I came to the debate about KiwiSaver, and the concept behind it, with a reasonably open mind. I thought about what it would mean for my constituents. These are people who over the last 7 or 8 years have come into my electorate office and said to me: “I am a truckdriver.”, “I work in a supermarket.”, and “I am an apprentice mechanic.”, or words to that effect. They are trying hard to etch out a living, to look after their young children, and to get that extra little bit of discretionary spend that would make the difference for them as they go through the supermarket, buy the stationery for the school year, or purchase the new pair of shoes for the school year’s commencement.

I sat down and read through the documentation relating to KiwiSaver, and thought about how it would affect those people today. The answer is that it will actually make them worse off, because their discretionary spend, at the introduction of the new scheme, will get no bigger immediately, and then will actually decrease over time as the employers’ contributions increase and as the inflation-adjusted wage rise they would otherwise have got disappears into the KiwiSaver scheme. Government members argue that when these individuals, in the communities that we all in this House represent, hit 65, they will have something for their retirement. That may well be the case, but the problem is that the individuals I see in my electorate office, who are in jobs like working in local supermarkets, driving trucks, or working as apprentice mechanics, will have less discretionary spend from Budget day plus 1 year, plus 2 years, plus 3 years, plus 4 years.

The Government is saying to those individuals in the towns of Feilding, Marton, or Taihape: “We want you to take a portion of the wage that you already get”—with which they struggle to make their way in purchasing basic necessities for their families—“and we want you to put that aside for a rainy day.” The problem is that for those people it is raining now. It is bucketing down, actually, for those people, as we speak. You see, those people need the relief and the discretionary spend to increase today, in order that they can go about their business. Those people are the people whom Labour for so long has purported to represent.

This is my eighth year in this House and I have heard time and time again Labour members on the other side of the House interjecting comments like “What about the worker?” The answer is to throw the question back to Labour members. I say to those members on the Treasury benches: “What about the worker? What about the person who needs the extra discretionary spend today?”. If the argument were that we are all in this together, we all have to pull together in order to save for tomorrow—which means pulling back our discretionary spend—and we will all do that as a country, it might be easier to sell the argument. The problem is that the Government spend is increasing. The very people who need the discretionary spend are having it denied, while the Government does nothing to cut its own spend over the next 4 years.

I see that the Minister of Corrections is in the Chamber. We will get on to the fiscal risks in that area in another debate, but they are substantial and we are talking big, big bucks in that area. The one thing I am worried about is the 35-year-old dad in Feilding, who drives a truck, whose wife works part-time, and who has two kids. He is not worrying today about his situation in 40 years’ time; he is worried about getting through this week. The Government is not doing its bit but is asking people in those situations to do their bit.

I want to reply to Simon Power, who has just spoken, because he and Mr Carter, who spoke earlier, are probably the only two contributors from his side of the Chamber who, during the course of the debate, have got remotely near what the Taxation (KiwiSaver and Company Tax Rate Amendments) Bill is about. I say to Mr Power that I relate very much to the last part of his speech. I recall that as an 18-year-old I took out a life insurance policy for the princely sum of $1,000. It was to mature when I reached the grand old age of 55, which I am not yet—

💬 Simon Power: Years away!

Lightning years away! I did that on the basis that contributions made then as a student, then regularly throughout the duration of the policy, would secure me a wonderful future entitlement. We can laugh today about the sums involved, but the reality is that there is something in the psyche about wanting to provide for one’s future. That is why the package the Budget introduces—and this legislation gives effect to—regarding the new, enhanced KiwiSaver provisions will be attractive for many people. Mr Power went on to use an example of a 35-year-old truckdriver with a family of four and all of the demands that go with that. That truckdriver will be eligible, and has been eligible, for the Working for Families tax credits, so he will be getting a considerable uplift—

💬 Simon Power: It’s making them dependent on the State.

This is where I think we get into a fallacious argument from both the left and the right—on the one hand of making people dependent on the State, and on the one hand of this being a money-go-round. The fact of the matter is that we are delivering assistance to people—or, if one likes, making a return to people—that enables them to get on with their own lives. I think that is the bottom line for most people.

I have come across very few people who, when they get their Working for Families tax credits, say that they do not want the money because it comes from the State. It does not come in a different-coloured coin, and the cheque is not different; people actually appreciate the fact they are getting something back. The National Party says it would give it to them as a tax cut. That is still giving something back; it is not going to come as a different cheque at the end of the day. So I think the member is indulging in an argument that is essentially irrelevant to most people.

I come to Mr Carter. He asked a question some time ago about whether this measure would see the Inland Revenue Department spreading its tentacles even more widely into buildings in Wellington.

💬 Hon David Carter: No—how many more employees.

I heard the member’s question, and I am going to answer it. Mr Carter shares the impatience of those who think they know best. They ask a question, then they become scared stiff they might get an answer, so they try to shout one down. Let me answer his question. It was in two parts. Firstly, the Inland Revenue Department is actually trying to consolidate into one building at the moment, both in Wellington and in Christchurch, so there is not to be a spread of tentacles. Secondly, the major processing area for KiwiSaver is actually at the Inland Revenue Department in Te Rapa, which I visited a couple of weeks ago. It has the staffing capacity at the moment to be able to address KiwiSaver both as it stands and as it is enhanced. So the notion that hordes of new bureaucrats will be employed simply does not stack up.

We are running an operation that is, as I think Mr Fairbrother pointed out, using new technology and working effectively. It has a call centre in place now taking inquiries, literally as we speak. I think the member will see in due course that there is not the army of bureaucrats he fears might be out there waiting to be employed.

This part of the bill is really about the technical changes required to bring in three elements of the Budget package. The first is the changes to KiwiSaver, and the second is the reduction in the company tax rate. They are probably the two that have received the most attention. But the third element is probably, in many senses, more important than both of the first two.

This bill is establishing, over a whole range of savings entities, a uniform tax rate of 30 percent. We are levelling the playing field in that regard and giving New Zealanders who save a very big boost in terms of the taxation on the funds they contribute to. That is one of the critical strengths of this bill, and I think it is important to note that investments in unit trusts, group investment funds, widely held superannuation funds, widely held group investment trusts that attract—

💬 Katherine Rich: Mr Chairman—

If the member will give me just a minute, I will conclude. I will simply go through the range of funds that will now be taxed at 30 percent, which will cover the whole range of savings made by New Zealanders, regardless of whether they are KiwiSaver compliant. When we put that alongside the KiwiSaver regime and the enhancements included in the Budget, we are creating a very positive benefit and savings opportunity for New Zealand.

Finally, let me make this point. I have listened to a lot of debate in this House, over the 23 or 24 Budgets I have sat through, where the concern about New Zealanders providing for their future—saving either for their retirement or for the benefit of the country—has been addressed in many respects. Yet this measure is the first coherent measure to give effect to those concerns that I have seen in that time. The big difference between it and some of the other attempts that have been made to introduce savings schemes is that this is not being compulsorily applied top down; this is a voluntary scheme, and its success will depend on the extent to which people take it up. The original estimates for KiwiSaver said there would be a take-up rate of around 20 to 30 percent as the scheme kicked off. Estimates have now improved to nearer 50 percent. I do not think that is a cause for concern—in fact, quite the contrary. As this scheme becomes more well-known, as people become more aware of its capacity and of the opportunity it gives them, we will see an even bigger uptake, and we will actually start to see some addressing of this country’s underlying problem with long-term savings. Whatever side of the political spectrum people are on, that has to be a good thing.

I say to those people who for so long have compared us with countries like Australia, Singapore, and Chile, and who have said how much better those countries are doing with their good savings records and with the massive savings schemes they have in place, that we are actually now starting to catch up. In respect of infrastructure, education, health, and all the other things, we are starting now to build the investment base that will allow us to grow those things for the future. That is what this bill is about, and that is why I am pleased to support it.

I am always keen to hear from that Minister. He is a Minister who, on this side of the Chamber, we have a lot of respect for. But I think he overestimates the interest of 18 or 19-year-olds in this particular legislation. The Minister would have been a rare 18-year-old in taking out superannuation when he was at university, although it is quite nice to think that while most 18-year-old men were thinking about beer, girls, and rock ‘n’ roll, Peter Dunne was taking out his first superannuation policy, planning for his future. I think he is a rare person who demonstrates common sense.

One of the things that concern me about this legislation is that there is very little in it for people who vote Labour. We heard Russell Fairbrother talk about the person on $11.25 an hour and how he or she would benefit. I say to him that people on $11.25 will not opt into KiwiSaver, because they cannot afford it. They cannot afford it, because if they earn that amount of money they are struggling to put bread and butter on their tables and cover their costs. Those are the people who were shouting the loudest for tax cuts so they can increase their discretionary income and cover a few more of their bills.

So low-income Kiwis on $11.25 an hour will now be in a position of subsidising the superannuation of higher-income people, who have the ability to put some money away and save. And that is the thing. The $11.25 an hour wage earner will be hit in two ways. First, those wage earners will not have the true option to opt into KiwiSaver. They will not put their money away. They will not be able to get credits through KiwiSaver, and they will also be asked to subsidise high-income Kiwis who do have the option to save. But the last thing is that they will not get any pay increases.

We have heard from the Minister of Finance and the unions that in order to appease some of the concerns of employers, they are sending the message out right now that no pay increases should be expected. Basically, this is the pay increase for those wage earners. So those people will get very little whatsoever, and I think that will dawn on a lot of people as they suddenly work out the details of this package. I think of all those 18 and 19-year-olds in my home town right now. They are not going to get all excited about this. They will not see that they will be better off by getting a payment in 45 years’ time, so I do not think they will be particularly excited about it.

I think what we are seeing here is a debate forming about the difference between independence and dependence. Members heard my learned colleague Simon Power make the point that those Kiwis who are earning the average wage want to be able to survive and to be independent. They do not want to have a relationship with a Work and Income manager if they can help it. They do not want to spend their lives filling out forms, because they believe that they are only getting back money they have earned in the first place. Therein lies the difference between National and Labour. We believe that people should be independent, that they should not have to form a relationship with someone from Work and Income unless they really have to, and that we should do more to allow people to stand on their own two feet and not continually have more money taken from their pocket, only to have it handed back by the Government, which believes that they should be grateful for getting their own money back.

Even if we look at the Budget, where has the chewing gum gone? In 2005, when Michael Cullen handed out this tax cut and thought that this would appease those calling for tax cuts, he said: “You can have one, but it will be in a couple of years.” Well, that has gone, as well, and albeit that it was small, I think it is something that many Kiwis will be disappointed about. We have heard lots of other announcements today that will bring benefits supposedly in a few years’ time, but they are not forthcoming.

One of the things that I think it is important to consider when we are looking at our savings problem is that it is not because people are lazy or short-sighted. The fundamental problem is that most New Zealanders are not earning enough to be able to put money aside. What we have here does not solve that; it just postpones the problem. The fundamental problem is that Kiwis do not earn enough. I am surprised that more Kiwis are not getting on a plane and going to Australia, because in the last four or five Budgets we have seen Peter Costello deliver more money into the pockets of Australians.

I want to pick up a couple of points in speeches made over the last few minutes. A couple of things seem to be missing from the Opposition’s analysis of KiwiSaver, its application, and its potential uptake. First of all, has the Opposition not noticed that the social debate around savings has altered—that people are very aware of the need to put aside money for their retirement? In fact, after listening to some of the vox pop coverage expressed yesterday in the wake of the announcements about KiwiSaver, it is patently obvious to me that of the four young people I heard, all four would rather have the $20 put aside for them to complement their own savings than to have that $20 in the hand. That was said by four out of four people who were asked about that. They were young people who were watching their parents approach 65 years. One woman in particular said that her mother was approaching 65 and it was getting a bit scary. To a person, they would rather have the money put aside and contributed to KiwiSaver than to have the $20 now—which they thought would go nowhere.

This is, absolutely, a savings regime for the poor and the low paid. This is exactly who it is for. This is the best opportunity for the poor and the low paid to provide for their retirement—the best opportunity. The sooner the Opposition understands the structural shift in the economy that this KiwiSaver initiative represents, the better. How will they go out and say to people: “We will give you a $10 a week tax cut across the board. You can have $10 now.”? People will say: “Oh yeah, great; thank you. That’s not going to do much for me. I would rather make sure that I have $20 a week that’s going forward to my future.” This is the best opportunity that low-paid workers have of providing for their future.

Given that the National Party seems to think it is on a crusade to woo the women’s vote, it may like to consider what this means for women’s superannuation. It is an absolute given—it is well known—that women do not accrue the same level of savings as men, and they do not receive the same amount back in superannuation as men do, for all the reasons that we know about. First, women are located predominantly in the lower-paid parts of the labour market. Secondly, women have interruptions to their work history that interrupt their payment into savings. Thirdly, we still have a persistent gender gap in earnings. Therefore, there are three structural reasons why women do not achieve as much in the way of superannuation returns as men do.

This is the best opportunity for women to be preparing in their own right, as well as with their family and their partner, to receive very substantial returns for their superannuation in years to come. KiwiSaver allows for holidays on payments. It allows for those holidays so that if and when women take time out of the workforce to raise children, they can be seen to be continuous contributors, including those holidays from their actual payments. It means they will have safeguarded accounts they can rely on when they turn 65.

The first Labour Government was known for the welfare State and for provision for the poor and the needy. In Norman Kirk’s day the Labour Government was known for independent foreign policy. This Labour Government will be known for its contribution to older people and for security in the future.

We have just learnt a new term—social debate. What the hell does that mean? What is a social debate? It is just another politically correct term from that Government and from one of the most politically correct members of a politically correct Government. The people who pay for this will wonder what a social debate is, as opposed to an unsocial debate, I suppose. What does it mean? I say to Ms Street that most people here do not sit around talking in the language of social debate. Most people have to look after their kids. Most people have to pay the bills. Most people have not been living off the Government for years and years and years, and working the taxpayer system. Most people have to work for a living.

When I listen to that member and other Government members speak about this, I ask who KiwiSaver is really going to help. Will it help the poor? Laila Harré says that it will not do a thing for the poor, and I think she is right. Let us have a look at the people it will help. The Inland Revenue Department had to hire 400 more people just to bring in the most basic version of KiwiSaver last time. So we can forget the 1,000 new police; we will have 1,000 new tax bureaucrats in the Inland Revenue Department. That is just what this country needs—not! It is just what this country needs—sure! What this means is more bureaucracy and more taxes paid to pay for this Government to be able to give people back some of their own money.

What we do not know is who will be eligible for this. I would like to ask the Minister in the chair whether all public servants will be eligible for this. Will all public servants on the Government superannuation scheme at the moment be eligible for this? If that is true, then will that not do something to the blowout in the Budget? Will that not actually have an effect? If it is not true, then why are public servants being treated differently from everyone else. Is that true?

I would like to know about the stay-at-home mums. What is in it for them? What is in this Budget for the women whom Ms Street has just said she thinks so much about? What is in it for them? There is absolutely nothing in this Budget for them—absolutely nothing. What they are being told is: “Get ye out to the workforce.” That is what they are being told. We hope these mums are having three or four children, because someone has to have three or four children. We have to have a decent population in this country. Those people need to be praised and they need to be helped. They do not need to pay for this Government trying to give a tax credit to people who are saying they do not even have enough money to buy into the scheme.

Most people, unfortunately, do not earn enough at the moment. What we have to understand is that most workers in New Zealand get about a third of what they would get in Australia for doing the same job. That is what they end up with. All this Government wants to do—instead of looking to the future and saying: “Let’s try to grow this economy.”—is to grow the Government. We now get $20 billion of taxpayers’ money going into the Government—$20 billion more each year than we had under the last National Government in 1999. That is a huge increase, and most people in this country are finding it very difficult to cope.

We do know that the rich have got richer and the poor have got poorer. The people who are now becoming poor are the people with a couple of kids—two, three, or four kids, or people who have one income, or even two incomes for one person. Those people are our new poor. They have become the new poor under a Labour Government that likes to stand up on its hind legs and talk about the rights of women. Well, what about the rights of women who do the work, who look after the children, and who help us have a better society because they work with their kids and are good mothers? What about them? There is absolutely nothing for them under this Government.

The only thing they should know, of course, is that Michael Cullen has hinted that this will lead to some sort of means testing of national superannuation. He hinted at that yesterday when he spoke about how that would help to ensure that there would be enough money for national superannuation. Why would it help? These are supposed to be individual savings plans. Of course, it will help only if this Government has in its mind that it will means test national superannuation. That will utterly destroy superannuation for those stay-at-home mums, and destroy superannuation for people who have been on disability benefits for years because they are invalided and really cannot work. Means testing will destroy superannuation for the poor people.

Tēnā koe, Mr Chairperson. [Interruption] The nation is rejoicing, from the tail of the fish to the head of the fish. Even in Horowhenua people are happy. For their infrastructure, their bridges, and their roads, improvement is on the way. We will not see much of that member in the House; he will have to employ someone else on, hopefully, good wages to milk the cows—unlike Mr Bennett, who has been feeding off the udder. That is an example of massive infrastructure development.

I have been in and out of the Chamber to take toll calls from people up and down the country who are totally overwhelmed by the potential to improve savings, improve the efficiency of firms, and improve the prospects of children and grandchildren. These people are waiting with bated breath to hear how refined this product will actually be after it has been sifted by, and shepherded through, our Finance and Expenditure Committee. Like all proposals, obviously, the policy will be passed here, but there is a need for further detail. The proposal is based on vision, and the vision will be strengthened through attention to detail. I could not think of a better committee to undertake that role.

I hope the members on the other side of the Chamber rise to the occasion and toss away this hyperbole, this irrelevant rhetoric, and bring real skills to the debate. I accept I may have been a tad irreverent in describing Mr Bennett as constantly lacquering his head with pottles of oil. He has just come back; he now has powdered his nose. We know that, and that is why every contribution he makes in an attempt to undermine our mātua Winston Peters is an irrelevancy. He has been mothered on milk he did not buy.

I will say that at least those members towards the back of the Chamber make an attempt to contribute constructively, but they overlook the fact that this debate is about a grand narrative that is moving Aotearoa forward. They seem to believe that the way to improve the roads is to constantly study the shape of the spark plug. No, if one wants to lay down a better trajectory, one has to step out of the minutiae.

💬 Simon Power: I raise a point of order, Mr Chairperson. I was reluctant to interrupt the member, because I was enjoying his contribution to the Committee. But I want to make sure that the same latitude of debate will be afforded to members on this side of the Chamber. I do not believe that Mr Jones, in what was a highly entertaining description of a large seagoing creature, has actually referred to Part 2, at all. You have let him go on, Mr Chairperson, which is fine by us, but I want to be assured that the same latitude will be allowed National members, given that he has got so far through his speech without interruption.

The CHAIRPERSON (Hon Clem Simich): Thank you for raising that. The same latitude? Not necessarily. I was trying to attract the attention of Mr Jones. The volume of his voice was such that he could not hear me. I was going to draw that matter to his attention. Can we commence on Part 2 please, Mr Jones.

I accept that counsel, that guidance, from my kinsman, a learned parliamentarian. I will gladly take responsibility for any sense of offence that the institution might have suffered through, largely, my reciting members’ names. Let me come back, however, to the Budget. When our committee deals with the bill, there are three things—

💬 Jacqui Dean: Three things!

No, two things are happening. We are passing legislation under urgency, but the elements of the Budget that National members want to ape will be referred to our committee. Let us just see what they are: KiwiSaver, which was laid down last year and added to this year; and the ability for firms to grow their wealth through better efficiencies and better incentives. It is a fantastic day we are looking at.

The Taxation (KiwiSaver and Company Tax Rate Amendments) Bill will make businesses $1 billion worse off than they are today. You see, what is happening here is that although the corporate tax rate will be cut from 33 percent to 30 percent, the cost of implementation for an employer will be higher than that 3c in the dollar cut. Where is the fairness and where is the equity in that? This measure is a tax increase. It is a compliance cost increase for small business. We all know that 95 percent of the businesses in New Zealand are small to medium sized enterprises. There are 300,000 businesses that fall into that category. Sixty percent of those businesses will not benefit from the corporate tax rate reduction. Sixty percent of 300,000 is 180,000. One hundred and eighty thousand small to medium sized businesses—that is, businesses employing fewer than 20 people—will get no actual benefit whatsoever. Why? Because they are either sole traders or partnerships, they will miss out.

However, those businesses will still have to contribute to an employee’s KiwiSaver account. If an employee decides he or she wants to opt into the KiwiSaver scheme, then deductions will have to be made. As we have seen, the real hoax in yesterday’s Budget is that there will be a compulsory employer contribution. Who thought of that? The real hoax in this Budget is that businesses will carry the can. In fact, it is—

The CHAIRPERSON (Hon Clem Simich): I am sorry, Mr Tisch. This debate is on Part 2, which is entitled “Amendments to other Acts and Regulations”. Your debate was appropriate for Part 1, and it will also be appropriate for clauses 1 and 2, which are coming up shortly.

Well, any sorts of amendments that come through in these parts have a reflection on the way we do business—whether it is as employees who are wondering what is in it for them, or whether it is as a business owner. These points are very relevant, because they add to the compliance costs associated with doing business. I think we have to make it very, very clear that this measure is a hoax for small businesses—an absolute nonsense.

When we look at any associated legislation that may be impacted on by this measure, we see that it adds once again to compliance costs. What does KiwiSaver, and all of the associated amendments that go with it, actually mean to employers? What is the process they will have to go through?

💬 John Hayes: Cost.

Well, it will end up being a cost. When I have gone around talking to business owners, I have found that only about 5 percent of them actually know how the KiwiSaver scheme works. Yet, that measure will be implemented from 1 July. The horrendous costs we will see with regard to it will be quite significant for small to medium sized enterprises, which do not have the resources to employ somebody specifically to spend his or her time on the new payroll tax and to work through the process of whether someone will opt into or out of the scheme. The cost is associated with any provisions in other legislation that impact on what the whole scheme is about.

In dealing with this issue—the process that one must go through in looking at whether an employee will opt into the scheme—the employer needs to be able to tell the person what is in it for him or her—what the employee will receive in terms of benefit. I will not discuss those things, as I know they are not part of this debate. But I think we need to bring it back to the process that will be followed—with all the implications that go with it—and that the employer will have to go through. If the employer is a company, then it will receive a tax reduction from 33c in the dollar to 30c in the dollar, but if the employer is a sole trader or a partnership then he or she will get no benefit whatsoever. The compulsory contribution to an employee’s KiwiSaver account is where the compliance costs come in, and that is what National is opposed to. This scheme is a hindrance and a hoax on employers in New Zealand.

Let us look at the process that we will go through from 1 July. Here it is. I have a graph here; it is a matrix of what will be involved.

I cannot help but agree with Lindsay Tisch’s contribution. I thought it was right on the money—and I will tell members about the money. New Zealanders are not going to get any of it.

I am strongly opposed to these proposals in Part 2 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Bill because Government members have not answered the three important questions I asked them earlier this morning. I have listened to this debate, and I have not heard one member opposite answer any of the three key questions that I asked earlier.

The first question I asked was how a low-income person in Ōtara benefits from this bill. If he or she cannot afford to save anything, what is benefiting that person in this bill?

💬 Shane Jones: You said that this morning!

And the member did not answer the question. I am repeating the question. I ask the member, “Mr Tamihere”, to take a call and to answer the question. [Interruption] I ask the member to answer the question. The first question is how low-income people in Ōtara will benefit from this if they cannot save. What in this bill will increase their pay packets and give them more incentives? Nothing in this bill will do that. The second question is this. What effect will this have on the pay packet of a low-income person in Ōtara? The Labour Government has got employees into these multi-employer contracts so that everyone gets paid the same, regardless. The union representatives of those low-income people in Ōtara will go to see the employer, and the employer will say that there will be a 2 percent reduction in their pay increases, because that is for KiwiSaver. That is what Dr Cullen said would happen. He said that the increased burden on business can be paid for through lower pay increases.

So what will happen to that low-income family in Ōtara that is not in KiwiSaver is that their pay will be suppressed by the people who are in KiwiSaver, because that is the way Labour has industrial relations these days—one gets paid the same, regardless. Well, what will the Government do about that? I have not heard a single answer to that question in the debate today. The question is simple. How will the Government stop low-income people having their pay increases suppressed because some of their workmates may be in KiwiSaver under multi-employer collective agreements? It cannot answer that question.

The third question that Labour cannot answer is this. What in this bill will actually make people wealthier when they work hard? What is the incentive in this bill for people to work hard, get ahead, and keep money in their pockets? None of those three questions has been answered in this House today. Frankly, that is simply not good enough.

But let us look at what also is affected by Part 2—the lower company tax rate, and the impact that will have on Part 2, particularly in some of the later clauses associated with the bill. I want to quote this comment, which was made in 2001, and I want Government members to answer this—I wonder how they will rebut this argument: “The actual benefit of a lower company tax goes to foreign resident shareholders, for whom it is, in the main, the final tax. Leaving aside the political question of whether our fiscal priority is to give tax breaks to foreigners, the core question is whether this actually attracts any new foreign investment. Since this is a small increase in what is left over from profitable investment, is the business community really saying to me that the profit potential of investment options for foreigners here versus elsewhere is so finely balanced that this will swing deals? I doubt it,”.

And who is the person who said that it is important to identify that for New Zealand resident shareholders “company tax is merely a withholding tax. They are eventually taxed at their marginal tax rate”, and that the principal beneficiaries are foreign investors? Who said that? Dr Michael Cullen. He is the man who, year after year, has opposed lower company taxes, saying that they will not work and that they do not benefit ordinary New Zealanders. The point of the National Party is this. The priority should be lower personal taxes for New Zealanders. Yes; send that message out to every home in New Zealand. Ring it out loud. The priority is lower personal taxes, because that is what helps the poor person in Ōtara. KiwiSaver does not help the poor person in Ōtara, and this Government cannot in any way argue that it does.

I move, That the question be now put.

I raise a point of order, Mr Chairperson. Standing Order 137(3) states: “The Speaker may accept a closure motion if, in the Speaker’s opinion, it is reasonable to do so.” The reason I raise this point of order is that we are in urgency and Part 2 is mainly around KiwiSaver, about which the Opposition has some big concerns. According to my records, we have had 10 or 11 speakers, and we have many more to come. So I would ask that you rule accordingly, Mr Chairperson.

The CHAIRPERSON (Hon Clem Simich): The member is making a plea for further debate. He is quite right; the debate was meant to be around Part 2 and very little of it has been. Therefore, I will take one more call.

Yesterday out of this Budget we got one phrase that has not been in the papers yet, and that is: “Is that it?”. Is that the last Budget from Michael Cullen? It is. Is that the last Budget from Helen Clark? It is. Is that the last Budget of the New Zealand First – Labour coalition? It is. Is that the last Budget where New Zealanders will be kicked around by this Government? It is, because New Zealanders will stand up now and want a Government that will not tell them what to do. They will want Budget legislation with a Part 2 in it that actually reflects what they want to see happen. They will want a Part 2 that will deliver for all New Zealanders.

Those people in New Zealand who work hard and try to make a living will be, under this Budget, put to the sword by this Labour – New Zealand First Government, which has no recognition of hard-working New Zealanders. This is a Government that thinks it knows best. It thinks that by taking money from people, then spending it and giving it back to them, it knows better than those individuals who should have had the money in their hands in the first place. This is a Government that thinks it knows what people should do. It thinks it knows how people should live their lives. It thinks it knows how people should spend their money. Part 2 should not be like that.

Part 2 should reflect ordinary New Zealanders’ ability to live their own lives, determine their own destinies, and have some tax cuts they have been promised over many years—tax cuts we were told about, and tax cuts to the value of chewing gum that have now been put away. It is no good giving people “chewing-gum” tax cuts now, because they are too small. We will have to wait till next year to get any tax cuts, will we not? People will have to wait until the “Budget of all Budgets” in election year—the Budget where there will be a pay-out to buy the votes of people who have saved up for 9 years. That is what New Zealanders will have to wait for to get tax cuts, and that is simply not good enough.

The CHAIRPERSON (Hon Clem Simich): Mr Bennett—

But there are some other parts in Part 2 that we need to look at. In this Budget we see a number of things about KiwiSaver. The selling of this programme will be the goal of Labour over the next 6 months. It is Labour’s golden ticket to beat the polls, so that it can come back and say it is doing what ordinary New Zealanders want to see happen. There is an element of truth to that, I must admit. New Zealanders want to see some kind of savings policy, but—

The CHAIRPERSON (Hon Clem Simich): You have made a number of references to Part 2, but I ask you, please, to let me know which Act or which part you are speaking to—the Tax Administration Act or the Companies Act?

The KiwiSaver Act and company tax amendments.

The CHAIRPERSON (Hon Clem Simich): So you are speaking to the KiwiSaver Act 2006?

Yes.

The CHAIRPERSON (Hon Clem Simich): OK.

When we look at the KiwiSaver scheme, we see there is an element of truth to the need to have some kind of savings regime, but we cannot have a savings regime when the people who are most in need of savings will be left out. The people on low incomes, who need a savings policy that will assist them through their lifetime, will now be left out of the scheme. They are the ones who will be left out of it. It is all right for all those academics over there on the Labour benches who have been living off the hand of the Government for all their lives. They will get their tax cuts, and they will take advantage of them, but they are not looking after the people who voted them in. They are not looking after the people this House represents. They are looking after themselves; they know they will get tax benefits. They know they will get the advantage, but they do not care about the people out there, because they know they have a year and a half till an election, and in a year and a half people will forget about this stuff. The real stuff will be in a year and a half when they go out there and go around the country promising handouts to certain interest groups. That is what they will be doing. They are not worried about ordinary New Zealanders making a go of it today.

It is all right to talk about a charities policy now from this Government—a charities policy that National put out there but that has been stolen by the Labour Party and dressed up in its own colours. It is a policy that National put out there, and New Zealanders had the advantage of knowing that National led the way. National was going to look after charities in New Zealand, not these guys. The only charity they see is themselves, and they see that they have the advantage.

I move, That the question be now put.

The CHAIRPERSON (Hon Clem Simich): I thank members. They have clearly indicated that they want to have a wide-ranging debate, and that will be afforded during debate on clauses 1 and 2. So I will put the question.