Taxation (KiwiSaver and Company Tax Rate Amendments) Bill

There will be one debate on the title and commencement, in which contributors may, if they wish, summarise all other aspects they have covered. So there will be one debate and two questions.

I want to cover one or two points that were raised by Labour members during this debate on the Taxation (KiwiSaver and Company Tax Rate Amendments) Bill. The first point I would make to the Committee today is a comment on the rather amazing contribution from Shane Jones. Shane Jones said that when this legislation goes to the Finance and Expenditure Committee, his select committee, the committee will refine it. The reason that comment needs to be exposed today is that he is indeed chair of the Finance and Expenditure Committee, but we are here in urgency pushing this legislation straight through the House because the Government does not want it to go to the select committee. So Shane Jones should get up to speed and realise that in fact he will not have the opportunity to refine this legislation before the select committee.

The next time this legislation comes before a select committee Shane Jones will not be chairing the Finance and Expenditure Committee; the next National Minister of Finance, the Hon Bill English, will be the one who has to send this back to the select committee to get it tidied up, because that is the first opportunity it will have. Shane Jones certainly will not be the chair of the select committee, and I suspect he probably will not be a member of Parliament. Given the way that Labour is rating at the moment, it will not get many of its list members in here, at all.

The second point I would make is to take this opportunity to thank Mr Dunne for answering my questions. A number have been raised throughout the debate and finally I had an answer from Mr Dunne to my questions about whether this would increase the size of the bureaucracy of the Inland Revenue Department. I accept the answer that Mr Dunne gave me that although the scheme is complicated, the department will not need any more staff. The question then arises, if this is complicated and will put a lot of work on to the department’s employees, what are those employees doing now that the department has all this spare capacity? I look forward to an answer from Mr Dunne.

The third contribution I will remark on was the most amazing one of all, from Ms Maryan Street. One or two of the questions raised by the National Party throughout this debate asked what is in this for low-income New Zealanders. Do members know that in the Chamber this morning Maryan Street said that low-income wage earners do not need $10 to $20 a week.

💬 Hon Members: What would she know!

She said that low-income New Zealanders do not need an extra $10 or $20 a week. Doug Woolerton heard that comment. Well, they will need $10 a week simply to keep putting petrol in the car, if they live in Auckland.

Lianne Dalziel is chipping in now, but was not prepared to make a contribution during the debate. I look forward to hearing her take a call shortly.

Then we had an amazing contribution from Mr Chauvel. He got hold of page 2 of the Dominion Post and mentioned a couple of points. I looked at the last part of the piece he was referring to and it is attributed to Government Budget document propaganda. It was not written by any Dominion Post editor, so the interesting point is to look at some of the other comments in the newspapers.

The Christchurch Press, which is not known generally for supporting the National Party, states that the Budget is an “opportunity lost”. That comment is right on the mark on this occasion, because Dr Cullen had the opportunity, with the hugh surpluses that have been amassed, to deliver a Budget that would have given growth to this economy. Instead he has fiddled with the KiwiSaver scheme, which even his own Treasury officials say will not achieve greater than a 50 percent uptake. It has now been adequately explained throughout the debate that the very people who will not take up the option of KiwiSaver are the people earning $11.25 an hour, who simply cannot afford to take it up.

At one stage we had an interjection from Mr Mallard: “What about the workers?”. I say to Lianne Dalziel: “What about the workers?”, the very people in the electorate of Christchurch East who voted for that member of Parliament. They have been let down completely by Lianne Dalziel. She does not care about the workers; all she is interested in is sitting in her plush chair in Parliament, banking her big salary. She has lost touch with the people who voted for her.

I rise to support this legislation because I find this a very interesting Budget and a particularly interesting scheme. Budgets can make some changes to how we live as people, and I want to take members through, in a sense, the experience of my parents and their behaviour, and my behaviour in terms of debt.

My parents lived, through the Depression, and consequently they never ever borrowed to buy something. They saved before they bought a fridge; so we did not have a fridge until about midway through the 1950s. We did not have car until about the 1970s; and that was a Skoda, and that was doubtful! They would never ever do things like borrowing to buy something, because they were brought up very strongly with this idea that one saved money before one went out and spent it.

I have a look at myself and I find that if something goes wrong with the dryer, I will very easily take my credit card to the company and buy a dryer, on the credit card, and then pay it off. That is so much the reverse of what actually happened in our parents’ lives. That is what this Budget and this bill are about. It is about returning us to a different way of acting, to a way of responsible acting that accumulates money in this country, instead of making us always subservient to money that we have to borrow overseas.

This is a Budget about building capital for this country, and I would have thought the capitalists who are so good at borrowing capital from overseas and who sit on the Opposition benches might be interested in this debate. [Interruption] I cannot hear them; they are yelling so much. This bill is about bringing discipline, self-pride, and security to both individuals and this country’s economy. It is something that we desperately need to do.

I have been out and about today, and doing a radio programme with some economists. Have I found there has been a real buying of this legislation? You bet I have! The response from young people on the streets of Wellington has been: “A $20 a week tax cut disappears very fast—four lattes, four bottles of beer. But $20 from the Government, going into my savings account instead of a tax cut, is money that will grow. It is money that will grow for the country’s capital development, and money that will grow for me as a person. I would much rather have money saved than have money squandered.” That is the difference in what is being offered here.

People on the other side condescendingly talk of the poor not being able to save. At the moment the “poor”—the people they refer to so blissfully at the Otara market, which I do not think they have ever been to—are the people they refer to as not wanting to save. People do want to save, and people want to find a way in which they are supported in their saving. This bill builds on that scheme and gives an incentive to save. The Opposition would rather give that incentive to be spent right now, rather than saved. It is not a question of starving or saving, because with this legislation the same Government is returning money to those very people whom the Opposition refers to as starving. They are the people who will receive better money, because they will pay less when they go to the doctor and pay less for prescription charges, and those aged 25 to 44 are the last group in this respect. That is money that is being saved and it is being awarded from this Budget. Therefore, it is not a question of starving or saving; it is a question of supporting people into saving, and supporting people into security for the future.

I find it absolutely hypocritical to hear members opposite talk about a sound economy. I must say it is always really interesting that whenever one is on the hustings with the National Party people they always say, very quickly: “It’s all right; for those roads we’ll just go out and borrow.” Where would they be borrowing from? It would be from overseas. Who has to pay back the money for that? The taxpayer has to pay back the money, borrowed from overseas. This KiwiSaver is about growing capital in our country and growing security.

I have heard some hypocrisy in my time and that last speaker definitely wants to take us back—

The CHAIRPERSON (Hon Clem Simich): No use of that word, please. I will not want an apology; just go ahead.

I thought I said “that last speaker”?

The CHAIRPERSON (Hon Clem Simich): Just carry on.

Thank you, Mr Chair. Let me come back to the points being made by the last speaker. In my view this Government wants to take us back to the 1930s when we did not have a huge exodus from our country of people floating off to better terms and conditions in Australia. The Government wants to create the conditions that trap people here and stop them from leaving this country.

This is a control-freak Government. The 2005 “chewing gum Budget” tax cuts have now been abandoned. This Government is clearly saying to the community through this KiwiSaver legislation that it knows better than individual citizens how to spend their money. The Government has decided that people in my community in the Wairarapa should leave their money with the Government. They can spend it later; they cannot spend it now.

The problem is that this control is unnecessary. What is necessary is that the Government stop its own excessive capturing and spending of the surplus wages that we might contribute to saving. The problem in this country is that Government spending is far too high. It is also not properly focused. I spent yesterday afternoon trying to help a member of my community in Masterton who is paying $230 a month for an unfunded Alzheimer’s disease drug. This person lives in rented accommodation, is on a benefit, gets the maximum disability allowance, and does not have enough money to live on. How is that person going to engage in this savings scheme? I think of the standard person living in Kurīpuni with four kids, working for $11 or $12 an hour. Where is that person going to get the surplus from to contribute to this savings scheme?

The reality is that at least half the people in this country who are actively engaged in the economy and are not on benefits are never going to have the surplus to engage in this scheme. What you are doing is grabbing savings and trying to capture people from leaving this country and going to Australia. You are trying to stem the outflow of people from this country by restricting their access to their own money. I am really concerned that a good proportion of my electorate, who are in a low-decile economic group, will never be able to afford your KiwiSaver scheme. The 1,000 bucks you are going to throw in upfront will not make the slightest difference. My community wants jam to put on the bread, not to give you the bread—

The CHAIRPERSON (Hon Clem Simich): I do not need the bread. You must not refer to me. You do that by saying “you”.

This Government is locking up tax cuts and future pay increases.

Let us see how much support this Government has when future generations of workers over the next 3 or 4 years say to their employers that they need a wage increase. For example, yesterday a constituent said to me that there had been no change in their accident compensation levy since last year, except for the bill, which was up 17 percent. I think of every person in my community who is paying 12 to 20 percent rate increases on his or her property. Where will those people find the surplus to lock up in a savings scheme when they do not have sufficient money to put into their pockets now to meet their costs of living?

As my colleague Lindsay Tisch said, this scheme is about another tax imposition. It is a tax imposition on a community. It is a tax imposition on small business. The Government is saying that we have had 8 years of golden economic weather—but what is New Zealand doing? It is slipping down the OECD table. This Government has never had a better opportunity to increase standards of living—and what is it doing? It is sending us backwards. This savings scheme is going to send us further backwards. There will be a significant outflow of people from this community, because they are going to say that there will be more Government control, more bureaucracy, and more people telling us what to do.

Before getting into the guts of the bill, I will just respond to Marian Hobbs across the other side of the Chamber. She is a member for whom I have a lot of respect and time. She told us a very nice story about her family, and about how they had learnt to save after the Depression and put away every dollar. But that is kind of rich coming from a member of a Government that for the last 7 years has spent an additional $20 billion—$20 billion. This year in this Budget—I am not talking about saving—another $3.8 billion is being spent. I just think the member needs to take that into account before lecturing members on this side of the Chamber about saving.

I also apologise to the Chair, Clem Simich, for the disparaging remarks from Mr Jones earlier on about my colleague David Bennett and various hair creams needed. I trust, Mr Chair, that you did not take that personally. I am just apologising on behalf of Mr Jones.

I want to take a short call and address the Minister in the chair today, Mr Dunne. I have three questions for him; I would like him to take a call and come back to me on them. The first issue concerns the tax cut for companies and, more important, the businesses in this community that will not achieve that tax cut. They will be lumped with a cost on their businesses. There are three areas I want the Minister to address if he takes a call. There are 118,000 small to medium sized enterprises that are not corporatised but that are sole traders or partnerships. They will not get a reduction in the tax rate but they will have to meet the employer contribution. I understand that there is a $20 credit for each employer, and that that covers only up to $500 per week. But the average wage in this country is not $26,000; it is $45,000. How are we going to sell this policy to those 118,000 small to medium sized enterprises?—I am sure there are a number of them in the Ohariu-Belmont electorate and certainly many in the Napier electorate—because they will get an increase in costs.

The next area I would like the Minister to take a call on concerns exporters. I spoke to the Minister previously about a number of the exporters in the Napier electorate who at this point in time are not making a dot. They are faced with an economic climate in which it is very difficult for them to make a dollar. They will not have a tax cut but will be faced with the additional costs, above $500 per week, of an employer contribution. That cost will rise by 1, 2, 3, and 4 percent over 4 years, so it will be an additional 4 percent cost on their businesses. The Minister, Mr Cullen, told us that it is not a problem and that those costs will be negotiated as part of ongoing wage rounds. The problem is that the policy has become compulsory now, not optional. It is negotiable when it is an optional policy, but as soon as it becomes non-optional policy it will be off the negotiating table.

We need to answer to the 118,000 businesses I talked about, to exporters, and to all those other businesses that have large labour costs that are much higher than their profit margins. For the majority of businesses in this country—as Mr Woolerton knows—the cost of labour is way higher than the profit at the bottom. On the one hand, the Government is saying that there will be a 3 percent cut at the bottom—if the business is making a profit, then that is good—but why a 4 percent increase over 4 years in the top line of expenses? I cannot see how that is a benefit to those businesses. I ask Minister Peter Dunne to take a call and let this side of the Chamber know how that sting in the tail will benefit those businesses I have talked about today.

Here we are today in urgency, and on this side of the Chamber we have about a dozen National MPs, while on the other side of the Chamber we can see two. That is how seriously Labour is taking this legislation—

💬 Hon Chris Carter: I raise a point of order, Mr Chairman. The member knows perfectly well that he cannot refer to the absence of members, and obviously he certainly cannot count them. There are a lot more Labour MPs here than that.

As I was saying, we are taking this legislation under urgency extremely seriously. The Government wants to ram it through and not put it through to a select committee.

Sitting suspended from 1 p.m. to 2 p.m.

I am keen to see the Government actually explain how it will sell KiwiSaver, because I believe that a lot of the low-income earners in the area where I live, in the likes of Foxton, Shannon, parts of Levin, and Ōtaki, will struggle to see any benefits from KiwiSaver. So I want to see, and I want to hear today, how the Government will get out there and sell this policy. I heard Gareth Morgan talking the other day. He believes that 30 percent of New Zealanders think KiwiSaver is something to do with saving the kiwis in the bush in New Zealand.

So here we now have, under urgency, Dr Cullen ramming this bill through the House. He has bolted so much on to KiwiSaver that no one really understands it, and he is expecting the House to adopt it here today under urgency. It will be implemented on 1 July under a mad, mad rush.

What we have seen under this Government—under Labour, in particular, and Dr Cullen’s ideology—is no tax breaks for the last 8 years. He expects low-income earners to save more and reduce their spending, when we have a big-spending Government on the other side. So those hard-working people from the likes of Foxton, Shannon, and Levin—some of whom are on $11.25 a hour—who are expected to contribute $18 at 4 percent of their wage into KiwiSaver, will struggle, will they not? They will be in the smoko rooms, or talking while they are working. A worker might be thinking: “What benefit am I going to get when I’ve got high interest rates, I’ve got my mortgage being rolled over right now—where am I best to invest my money? Where am I best to put my hard-earned money? Is it better to put it into KiwiSaver at about $18-plus a week, or not?”. That is what Mr Hughes will struggle to explain as he moves around the Otaki electorate, which is the most marginal in the country, and tries to sell this policy to hard-working New Zealanders.

Right now, half the workforce, as Dr Cullen said when he addressed us here in Parliament, will not sign up to KiwiSaver. If people have mortgages, they are better off paying those off than investing in KiwiSaver. It will cost about 13 or 14 percent, on my maths. High interest rates plus tax mean that people will be better off paying off their mortgages than putting money into KiwiSaver.

Another thing I want members to explain is the duty of care and the trust deeds around KiwiSaver. Is the money secure? What is the reliability of people getting their money back when they are 65?

The other thing that is really important in this bill is the taxation part of it. We have seen the reduction of the “chewing gum tax”. That has gone, for the low-income earners. The union members of the Labour Government know that employers will have to negotiate with union members, and I want to see how they will handle that, when employers say that they have contributed part of workers’ pay increases because of the money they have contributed into KiwiSaver. So we will not see much of an increase in pay rates under this Government and under this proposal.

Now we are seeing a huge divide between Australian and New Zealand wage brackets. In particular, in Australia they are receiving a third higher in their net weekly pay in the hand. It is no wonder we are seeing 700 people a week leave New Zealand and head off to Australia. I understand we have a saving problem in this country, but this will not fix it.

To assist my constituent Mr Guy, I seek leave to table a document indicating that the National Party supports the KiwiSaver scheme.

The CHAIRPERSON (H V Ross Robertson): Is there any objection to that course of action being taken? There is.

That contribution from Mr Nathan Guy was another of what I call the National Party financial adviser speeches. The people who will be better off under the KiwiSaver scheme, the people who will be advantaged by it, are the people who just know they need to save. They have been unable to save hitherto, because there were no incentives, no help from the Government, and no help from employers or anybody else. But those people know they should save. It saddens me that the National Party does not give people, apart from the wealthy, the credit for wanting to do what they believe to be the right thing for themselves, for their families, and, in fact, for the country. People do want to save. They do want to put money away for the future. They do want to have the security that comes from doing that. But hitherto they have been absolutely unable to do so.

The KiwiSaver scheme—especially the enhanced KiwiSaver, which we are talking about now—enables people, for just about the first time ever, to save. We cannot stand here as New Zealand First and not applaud that. We have made an issue of the need for savings from the time we first came to Parliament, and we will continue to do so. We are proud to support this bill, and we do not take any heed of the manipulations that the National Party thinks people will have to go through in order to decide whether they will be part of this scheme.

I want to attend to the issue of 50 percent participation in KiwiSaver, which is being made a lot of. It has been said people cannot afford to participate in KiwiSaver and will not participate, and, in fact, only 50 percent of people will participate. The community is just not divided up like that. There will be a time when people who do not participate in the initial stages will participate. They may not get all the benefits that early participation will give to anybody—we all know the rules of compounding interest—but they will be able to participate at some stage. It is not right to talk about only 50 percent of people participating in KiwiSaver, then, in the next sentence—or in the same sentence, many times—to talk about communism, compulsion, and our socialist regime. If there was compulsion, people would all be in KiwiSaver. I do understand that some members of the National Party have taken the time to at least say that the compulsion component they are talking about is on the employer when the employee decides to participate, and that is certainly true. But one cannot talk about a 50 percent take-up on this issue and then talk about compulsion in the same breath, because that is just not credible.

We in New Zealand First have talked for years and years about the issue of encouraging saving. I have congratulated Mr Dunne before; I will do so again. I will also congratulate the leader of New Zealand First, its deputy leader, who is here, and—

Dr the Hon Lockwood Smith: What about anybody else?

R DOUG WOOLERTON:—I was just going to do that—and the whole caucus, because we have stuck to our guns over this issue. We have not played politics with it. Whenever a bill has come up that has had a savings component to it, whether or not we agreed with it in its entirety we voted for it. There are many cases we would like to see. I am sure many other members of this Parliament would like to see the company tax rate come down to 20 percent—not just equal with Australia’s rate, but more competitive than it. But that is not to be, at this point, and we understand that in this Parliament most change is incremental. When it is not, it is really, really scary, so we would look forward to further enhancements not only of KiwiSaver but of a lower tax rate variety to the taxation system.