Debate on Budget Policy Statement

I move, That the House take note of the report of the Finance and Expenditure Committee on the Budget policy Statement. The Budget Policy Statement is published with the Half Year Economic and Fiscal Update and outlines the Government’s intentions for the 2008 Budget and also for future years. The best thing I can say about this Budget Policy Statement is that Labour will not be involved with it in future years.

The people of New Zealand are sick of the controlling tentacles of this Labour Government reaching into every aspect of their lives. They are sick of the burgeoning bureaucratic regulation under this Labour Government. They are sick of this Government getting bigger and bigger at the expense of ordinary New Zealanders, whose financial position is getting worse as this Government takes more and more tax off them. If members doubt what I have just been saying, the submissions to the Finance and Expenditure Committee covered a number of these issues, and I will outline a few of them.

We at the select committee heard from business and farming interests in New Zealand. They were quite clear when they told the community that they were alarmed—that was the language they used—at the rate at which government spending has been increasing, leading to higher inflation, higher interest rates, and a higher exchange rate. That was their language—they were “alarmed” by it. They said that the higher overall taxation levels we have under this Labour Government are simply crippling the productive sector of this country. But, worst of all, they said that collapsing productivity growth has got them really worried, because that is leading to higher inflation and higher interest rates.

What we see is a lost opportunity. We have had probably the best international environment for economic growth since the 1950s and 1960s, and this Government has squandered it. It had a chance to do something to really raise New Zealand’s productivity levels. The submitters to the select committee pointed out that productivity since Labour came into office in 2000 has collapsed. That was their language—productivity has “collapsed”. When productivity collapses we cannot get growth without inflation, and we therefore get high interest rates hitting every mum and dad with a home mortgage in this country, and, of course, those high interest rates push up the exchange rate, hitting all of our exporters as well.

Interestingly, though, it was not just the business and farming organisations that made submissions. So too did social interest organisations. There was a submission from one group called the Child Poverty Action Group, which is actually an interesting name for a bunch of researchers from Auckland University. This group is based at Auckland University and is made up of academic researchers. They told the select committee that the Working for Families package, which is the Government’s flagship policy, has failed New Zealand’s poorest families. They went on to say that KiwiSaver benefits the better-off, interestingly.

In their evidence on the Working for Families package, they told the committee that 185,000 children from families at the bottom of New Zealand’s income levels get little out of it. In fact, they pointed out in their submission—and it is covered in the committee’s report to the House—that if the mums and dads of those 185,000 children try to earn more for their families, this Government taxes them on any dollar they earn by over 90 percent—90 percent! And if they try to get off the benefit and try to stand on their own feet the Government taxes them at 100 percent—100 percent! If they dare to earn another dollar under this Labour Government, the Labour Government takes it all off them—and Government members say they care about the poorer people of this country!

What is interesting is that we asked Dr Cullen—because Dr Cullen came to the select committee—whether the Budget will do anything for those 185,000 children whom the Child Poverty Action Group identified. Dr Cullen said no. He said there would not be anything in this Budget to help those 185,000 children from our poorer families who were identified by the Child Poverty Action Group from Auckland University. [Interruption] And Steve Chadwick says Labour cares! We know when Labour members care. They care when they are 15 points behind in the polls. That is the only time they care.

This Budget Policy Statement covers the vexed issue for Labour of tax cuts. I think poor old Dr Cullen is allergic to the words “tax cuts”. I think Dr Cullen genuinely believes that New Zealanders are too stupid to know how to spend their own money. Dr Cullen believes he knows far better how to spend people’s money, and he goes quite septic at the thought of tax cuts. In his Budget Policy Statement he outlines four conditions for tax cuts. He says the Government will cut taxes without increasing borrowing, without cutting public services, and in a way that does not exacerbate inflationary pressure. He says the Government will cut taxes in a way that does not lead to greater inequalities in our society.

I think that Dr Cullen forgot two conditions for tax cuts. I am sure he would have included them had he remembered. The first condition is that we have to be in an election year. We know that Labour considers cutting personal taxes only in an election year. The second point Dr Cullen forgot is that Labour will cut taxes in an election year only if it is more than 15 points behind in the polls. Do members remember the last election? Dr Cullen promised the “chewing gum tax cut”. Do members remember that? Well, of course, that final condition was not met because Labour was not more than 15 points behind in the polls. So Dr Cullen just said: “No. We won’t cut taxes, because that final condition was not met. We weren’t 15 points behind in the polls.” So even though it was an election year, after the election Labour broke its promise and did not cut taxes. New Zealanders should remember that. New Zealanders should remember that although Labour might talk the language of tax cuts before an election, it will find every excuse in the book after an election to cut back on them or cut them out altogether.

This Budget Policy Statement has a big headline on page 8: “Revenue forecasts are being revised upwards,”. That is why Labour promised tax cuts. But, of course, since this Budget Policy Statement was published in December things have turned to custard a bit. We have had the international financial markets continuing to gyrate. We have had the housing market hitting a thicker wall than people had actually expected. We have had droughts hitting a crucial part of New Zealand’s economy—the agricultural sector. And what do we see? The Government’s latest financial statements to the end of January—the latest financial statements—show that revenue is down. Whoops! The Budget Policy Statement forecast revenue to be up, but the latest financial statements show that revenue is down $700 million.

Already the Labour Government is having to borrow money. The Budget Policy Statement makes that very clear—members should look at the tables on page 57. Already the Government is having to borrow money to fund its operations. Now, with revenue down by $700 million, it will have to borrow more money to fund the tax cuts, and that will breach Dr Cullen’s test about no borrowing for tax cuts. Which will go? That will be the test. Will Dr Cullen breach that test, or will he scrap the tax cuts the way he did before?

The people of New Zealand should be very suspicious of this Labour Government when it comes to tax cuts. New Zealanders right now, under this Labour Government, are facing climbing house mortgage and rental costs, spiralling food and petrol costs, and rising electricity prices because of a rushed emissions trading scheme. They are facing an exchange rate that is crippling our exporters. The only thing that is likely to grow under this Labour Government is more bureaucratic regulation. This will be Dr Cullen’s last Budget.

I put a simple question to that member Lockwood Smith, or to any member from the National Party: will National keep Working for Families, or will it scrap it?

💬 Hon Member: We’re not telling.

Oh, National members are not telling us. You see, this is the problem. National has said it will not tell us. Do members know what that is called? It is called being slippery. The leader of the National Opposition is saying he will not tell us what he thinks, because he knows that people do not want to hear the things he thinks.

The Budget Policy Statement sets out the guidelines for the Government’s Budget decisions and the priorities going forward. Although the Government is coming up with ideas on taking the country forward—for example, the fabulous New Zealand Fast Forward programme launched yesterday, which I will talk about in a minute—some very, very slippery things are going on in the National Party. The problem is that the party is stuck. It has had to agree with things it does not support, it supports things it does not agree with, and it is being slippery about things it wants to support but knows the public does not support.

This is precisely the problem the National Party has, and it was summed up beautifully in a cartoon in a recent New Zealand Herald, entitled “Flight of the bumble-key”. In this cartoon we see the Leader of the Opposition as a lovely bumblebee, buzzing round and round in circles and not able to make up his mind whether to fly off to the left sign, “Expediency”, or to the right sign, “Principle”. He buzzes round and round in circles and cannot decide what to do.

Let us look at all the things the National Party does not like but has had to agree with. Mr Key said New Zealand was missing in action in Iraq, but then went on to say National would not have sent troops there. He said climate change was a complete hoax, and a little later on he said he firmly believed in climate change and always had. His comments about student loans were a beauty. He said interest-free student loans were unaffordable and an irresponsible cost to the country. Then in January this year he said National would keep interest-free student loans for tertiary students. He said being nuclear-free was bad news for economic growth, but then said National would stick with anti-nuclear legislation. When commenting on State housing he said the public housing planned for Hobsonville was economic vandalism, and that National was committed to cancelling it, but in February this year he said: “I’m in favour of the affordable housing they might be building there.” When KiwiSaver was set up he said it was fundamentally flawed and a glorified Christmas club, but last August he said it was probably going to be successful and not too bad. In terms of Auckland airport and strategic asset sales, he said National would not have changed the rules as the Government did, but 1 day later he said: “We’d put a new one in that says that there must be majority ownership held in New Zealand.” On Treaty settlements he said National had no firm date for a deadline but would like to see them cleared up by a certain time. Then just 12 hours later he said: “I gave the impression that National did not have a date. That was wrong.”

The National Party is being found out, and that is why the answer to the question I asked earlier about whether National would keep Working for Families was so good. The member down the back said: “We aren’t going to tell you.” That is part of the problem. We know what that statement actually means. It means that National members know they cannot tell us the answer, because the public do not want to hear it.

There is a whole litany of things that the Leader of the Opposition has said about Auckland International Airport, but regrettably I do not have time to talk about that. Another classic example is Mr Key’s comment yesterday about the New Zealand Fast Forward programme. The programme is an investment of $700 million, which with interest will probably go up to a billion dollars. With dollar for dollar from the private sector it will probably go up to $2 billion investment in research and development in pastoral and food industries. What did the National leader call the programme? He called it a “gimmick”. He was the only one who opposed it. Everyone else said it was a good idea. Then a little bit later he said: “National will be rolling out a comprehensive research and development policy closer to the election. We will make long-term funding commitments that provide certainty to the sector because we see it as a way of lifting productivity and helping to make New Zealand a smarter nation.” Pray tell me, what is New Zealand Fast Forward all about? That is precisely what it is about. So Mr Key opposes a good idea that was announced yesterday, and then waffles on and tells people that National is serious about research and development funding. That is simply not believable, and that is a problem for the National Party.

What about the fiasco over Treaty settlements and Māori seats? The problem here is that Mr Key is trying to placate two groups at once. He is trying to placate the Māori Party by saying that the Māori seats could go at some stage but not just yet. This is because he wants to go into coalition with the Māori Party. But then again he wants to placate the rednecks in the National Party who want to get rid of the Māori seats. The problem is that he cannot say both things at the same time, because someone will catch him out. That is the rule of politics. It is much better to be principled, much better to say what one believes, and then take the consequences. The public will honour and respect a person for that but they will not respect people who slip and slide and say things they think the public want to hear. It is exactly the same with Treaty settlements. Mr Key did not say there was a date—I think he had forgotten. He said he could not remember he did have a date. Once again, he did not want to offend the Māori Party by saying National would sort this out and get it over with quickly, but also he wanted to placate the rednecks in the party who do not think there should be Treaty settlements full stop. The problem is that one cannot say different things to different audiences when everybody is listening.

Of course, we know what will happen if the National Party should ever get into Government—not in my lifetime, mercifully. If it ever did, we know what it would do. National would scrap the 20 free hours’ early childhood education. We know this because it argued against it. We know that National wants to privatise the health system. Members opposite got in a mess when they were asked about this, because they really did not want to say they want to privatise health, so they tried to say something else and got caught out saying both things. KiwiSaver would be gone, but National members cannot bring themselves to say that. As someone down the back said: “We’re not going to say; we’re not going to tell you.” I think this comment that National is not going to tell us what it would do about Working for Families is a code for saying that would be gone, too. We remember that a previous National Government cut national superannuation, so we can say that New Zealand superannuation will be cut again, if the National Party ever gets near the Treasury benches. Lord knows what National ultimately thinks about transport.

The Listener has a beautiful cartoon showing John Key saying: “Would we sell airports? … We would love to see wages drop. Want a $200m meat subsidy? State housing will lower property values. I want to lead the Labour Party.”; and two people in the corner saying: “It’s the pressure of saying only what people want to hear.” I say: “When the cartoons are having a go at you, when the cartoons are pillorying you, you know that your time is up.” National members thought they would sleepwalk to victory, but we now have a decent fight on our hands. Suddenly people are working out that those members are trying to say two things to two different groups, and those members have been caught out. Thank goodness that slippery, slipping National Party has no show of getting into Government at the end of the year.

It is a bit rich for that member to be quoting a cartoon when the Prime Minister of New Zealand blames the problems of the Labour Party on Minhinnick, the cartoonist who I think left the New Zealand Herald 30 years ago. That shows just how out of touch she is with the public mood. That is the contrast we are seeing here. Labour plays all these fancy little political games. Dr Cullen sets trapdoors, makes traps, and dreams up clever little moves, like how he is against the Auckland airport deal when he is for it. But the public are facing the reality of 8 years of mismanagement of economic growth. [Interruption]

I invite the member Jill Pettis to turn up in Wanganui and take responsibility for the fact that she is part of the problem that has caused 10 percent interest rates. She should explain why that is to people in Wanganui with mortgages. I think that is why she is retiring. She has figured out that there is no way she could get voted in in that seat. The member sitting beside her, Steve Chadwick, knows she will not be representing Rotorua for the very good reason that people in Rotorua are facing 10 percent mortgage rates, their morning tea discussion is about the price of butter and cheese in our supermarkets, their tax rates have not changed for 9 years, and they see Dr Cullen on the TV saying “Don’t worry, folks. My borrowing is low. My bank account is in surplus. But your borrowing is way up. It has never been higher. Your interest rates have never been worse. One of the reasons is because I took much more tax than I needed.”

Every time Dr Cullen is on TV, Labour loses support. People know that when he is boasting about what good shape the Government’s books are in, it is at the expense of their overdraft and now their house price. If Labour thinks that will work when people’s house prices are starting to drop and when even if the Reserve Bank drops interest rates it may not drop mortgage rates, then it is mistaken. It is not all Dr Cullen’s fault, but that is the reality that people are facing. What is happening is that the events of the last 8 years are starting to look a bit different from how they looked even 12 months ago. Dr Cullen used to portray himself as the magical manager of the economy over that 8-year period. Now that it is starting to look a bit gloomy, I think we will find him arguing that he was not really there; it was someone else’s fault.

I want to raise just one example with the Labour members. They have claimed relentlessly that they are totally responsible for the drop in unemployment. They have claimed that relentlessly. Well, the Reserve Bank forecasts that over the next 3 years, unemployment will go up by 60 percent—from 3.4 percent to well over 5 percent. Who takes credit for that?

💬 Pansy Wong: Cullen?

I do not see Michael Cullen getting up and saying: “I’m responsible for the rise as much as I was for the fall.”—no, not at all. That rise in unemployment is a direct result of his management of the economy. It is likely to be the case that if National has the privilege of becoming the Government we will have to deal with that mess—with sharply rising unemployment that is partly a result of 9 years of mismanagement of the economy.

The problem now is that the public do not believe anything Dr Cullen says. We have had a few questions in the House over the last couple of days about debt. Dr Cullen has been obsessing about debt for the last 6 or 7 years. As we know, he has been looking for any excuse to make sure he keeps up his punishing rates of taxation of middle New Zealand, whereby people on $39,000 pay what used to be the wealthy tax rate of 33c in the dollar. We know that is a problem, because after Kevin Rudd’s tax cuts in Australia, someone on the average wage in Australia will pay half the tax rates that someone in New Zealand pays.

Dr Cullen has kept pretending that there is a big problem with debt. Just a couple of days ago he gave a speech in which he said: “Anyone who talks about borrowing money talks about it only because they want it to finance tax cuts we cannot afford.” A little light bulb went off in my head. I thought “I wonder whether Dr Cullen is borrowing money.” And he is. This year, Dr Cullen is borrowing $2.7 billion. I will ask Labour members to answer the question that he has asked us: “What is he borrowing $2.7 billion for?”. Is he borrowing it to finance the increase in the number of teachers in our schools? Is he borrowing it to finance the army of useless policy analysts who served up the analysis behind the Fast Forward fund? It was 10 pages of Cabinet paper waffle that we will absolutely not put up with. Is he borrowing it to finance his tax cuts? I will tell members how tricky Dr Cullen has been. One of his tests for tax cuts is that he says: “I’m not going to borrow for tax cuts.” So what he has done is borrow this year, before 1 July, so that after 1 July, in the run-up to the election, he can then say: “I’m not borrowing for tax cuts.” He is borrowing $3 billion this year but none in the next financial year. He is hoarding the cash now; borrowing now, for the cash he needs next year. He will go on TV and say: “I’m not borrowing for tax cuts.”

Fortunately, our public accounting system is transparent enough that Dr Cullen has been uncovered. One of his tests is that he said: “I’m not borrowing for tax cuts.” We can confirm that Treasury has put in the accounts that he is borrowing for tax cuts. Not only that but also Treasury has said—and I will quote, because journalists do not believe me—

💬 Chris Auchinvole: What do they say?

Treasury says: “The Government is increasing borrowings to meet the cash shortfall.” How could it be any more blunt? Cash surpluses become deficits because of the tax cuts, and those deficits are going to be “met by borrowings”. Dr Cullen is working on the principle that if he shouts loud enough that someone else is burning down the house, someone else might burn down the house but no one will notice that he is burning down the house across the road.

The man has no credibility. He has gone on for months about how he is not borrowing, and he is. Then today he claimed that he has reduced gross debt. Actually, he has not. I will quote from the financial statements of the New Zealand Government, which show that in the time he has been in office—2000-06—gross debt has not dropped a dollar. He has not repaid a cent of debt but he has spent 7 years saying that he has done nothing else. Sure, as a proportion of the economy it has dropped, because the economy has grown; it is not because he has paid it off. He has told taxpayers he needed all that extra revenue to pay off debt, and he has not paid off a cent. This year, after 8 years, debt will go up by $2.7 billion. The man is a fraud. He has given up any pretence to competent economic management, because only one thing matters to him: the re-election of the Labour Government. At any cost to anyone at any time, the Labour Government must be re-elected. The very heartening thing is that out on the street they know that. It will not matter if he throws the kitchen sink at them.

In fact, after the announcement yesterday, which tried to make the numbers look big, my constituents have been ringing up and saying: “Why is he spending $750 million to get my vote?”. In fact, one of them said: “He could have got it for $1 million; why is he spending $750 million?”. The bigger that Labour members try to make the numbers, the more cynical the public will be. The New Zealand public know what is going on. They do not actually need us to lay it all out.

For those who are not aware who that last speech was from, it was from the desiccated coconut of the National Party. What I am told happens to the desiccated coconut is that the insides are torn out—

💬 Hon Bill English: I raise a point of order, Mr Speaker. The member cannot—

The ASSISTANT SPEAKER (H V Ross Robertson): I know what the member’s point of order is about. It is a personal reflection. The member will withdraw.

I withdraw. Mr Key is not the only slippery political version of a conger eel on that side of the House. Mr English is in a very, very difficult position. He has to stand up and try to articulate some sort of National Party policy, when his leader cannot even get it straight.

But, in fairness, we should not focus just on Mr Key. I am going to talk about asset sales. I am not going to talk about the particular sale of Auckland International Airport Ltd because I have some responsibility for it. I will confine my comments to State-owned assets. Mr Key is not the only slippery individual in the National Party. I find it ironic that Mr English finished the last part of his speech by accusing us of saying that we will say anything to win. Well, we have had a litany from Paul Swain today of the flip-flops, the greasiness, the slipperiness, and the movements. “We do not believe in climate change.”, Mr Key said. Then he changed his mind. “We do have a date for Treaty settlements.”, then it was “No, we do not.” And on it goes. But these issues are not confined just to Mr Key.

I will read, as we talk about State asset sales, from a transcript of the Agenda programme on 23 September 2007. Guyon Espiner asked: “Are there any state assets that National thinks should be sold?”. The response from Mr English was, and this is a cracker: “Well if the nation says we want to retain control of these state assets then we can’t expect to be a government and say we’re going to go and head off in the opposite direction, …”. Now, not a day later, not an hour later, not a minute later, but about three paragraphs into the transcript later, Mr Espiner asked: “What about the electricity companies, they’re big assets, and what about giving Kiwi mums and dads a shot at owning some shares in those?”. Mr English said in response, four paragraphs later: “Well I mean I wouldn’t exclude any,”—he was talking about the electricity companies—“clearly those kind of assets are very topical at the moment, …”. Then we go to a day later, I think it is, 24 September on National Radio, Mr English said: “So partial sell-downs of SOEs is one way the Government can build this savings culture.”

So what we do know is that the conger eel of the National Party, “old slippery” over there, is but only one. Mr English has flip-flopped more times on asset sales than anyone can count.

Then we fast forward to last week’s proceedings on another particular issue concerning an asset, which I will not talk about. We know what the National Party’s position is on that. Mr English—and people ought to be reminded of this—is the man who tried to have it both ways. He said “Well, we will not sell the country’s assets because we got in the poo last time, and it is unpopular.” Then he said “Well, actually we do believe in a partial sale of State assets.” We asked what that meant, and he said “Well, this KiwiSaver, the superannuation fund, and these funds are trawling around, looking for assets, so here is an opportunity for good old Kiwi mums and dads to buy those assets and have them invested.”

Mr Swain said that there is one problem with that, though—and he is right. Kiwi mums and dads, through the ownership stake that the Crown has in those SOEs, have already purchased them through their tax. Mr Key and Mr English would then have them sold off and recycled through the system, regardless of whether there is a Crown stake, to generously—says the National Party—give these Kiwi mums and dads the wonderful opportunity to spend their own money for a second time, buying back, through the superannuation fund or whatever, what they already own.

I would ask members how many ways we can slice the State-owned assets onion. How many storylines do those members think people will or will not believe? I think it was Mr Swain, or another speaker, who made this point. We cannot go down to one end of the public bar and say one thing to a group of folk, then go down to the other end of the public bar, or the workingmen’s club, and say the opposite, and not be stupid enough not to realise that those two groups will probably get together over a beer and have a chat and compare notes. The communities are not silly.

We ought to remind the communities of what this Government inherited when we came into office in 1999. That crew over there left behind a moribund, inward-looking, industrial graveyard when it came to the New Zealand economy. There was high unemployment, low growth, and low investment. Then they say to us, desperately looking for doom and gloom, that they believe employment rates will go up. We know, of course, that Mr Key got caught—ankle tapped or crash-tackled—by the Whangarei Bay Report newspaper when he admitted he would like to see wages go down. The facts are that he said it, it was proved, and then in that petroleum jelly, slippery kind of way he tried to back out of it. He tried to get around it. He tried to say that it did not happen.

💬 Christopher Finlayson: Like your hairdo.

There is the low-altitude flyer of the National Party, Mr Finlayson. He is the man who came here as a superstar. He is a barrister, of course, who was denied being appointed a Queen’s Counsel and has never got over it. He has never come anywhere closer to the front bench than he is today.

But National left this country an industrial graveyard—industrial archaeology. We now have the lowest unemployment rate in over 20 years—

💬 Chris Auchinvole: Here we go.

Oh, they do not like it. “Poppa Smurf” from the West Coast does not like it, and old “Albert Tatlock” does not like it either. But we are going to say it anyway. We have the highest and longest period of sustained economic growth since the Second World War, and some of the lowest Māori unemployment we have seen for years. Then those members stand up and say they are for families. The National Party stands up as if its members know something about families that no one else knows. They say they are for families, but what they are against is having any support for those families.

What National is for is an $11.5 billion tax cut, and I could not believe my luck when Bill English started talking about borrowing. In the last election Mr Key, as Opposition finance spokesperson, admitted on the record on the radio that half of the $11 billion for the tax cuts was to be borrowed. We know that last week Newstalk ZB got Mr English on the record, admitting that he would borrow for a tax cut. He would not borrow to build a hospital. He would not borrow to build a school. He would not borrow to build a road or a public transport system. [Interruption] Let them go, Mr Speaker. They make fools of themselves every time they open their mouths.

Mr English would not borrow for infrastructure. But, oh no, he would borrow for a tax cut. That is National’s stated policy. That is what its members said last time. That is what they will go with this time.

Let us compare the record. National abolished the Apprenticeship Act—I think it was in 1995. Apprenticeships were denied. Every young person was denied a chance at trade training. What is our record? There are 14,000 young people in Modern Apprenticeships now—a year ahead of time.

Bill English talked about pensions. I forgot to read out one quote on asset sales. Of course, the National Party would like to hoodwink the pensioners and ensure they forget about the three cuts that National made. Graham Stairmand, the national president of Grey Power, when quoted on 27 September 2007 about Mr English’s admission that he would sell assets, said: “This will seal the fate of the National Party … Nobody will be naive enough to believe that this is not going to be a step to full privatisation.” I do not know what Mr Stairmand’s politics are, but I think he has summed it up. Of course, it was National that cut the pension three times. It is Labour that has restored it, and increased it. It was National that pulled the rug out from under every elderly person in the country.

So we know today that the low-altitude flyers are over there. Mr English squirms every time Mr Key opens his mouth, because Mr Key does not know in which direction of policy he should go next. Mr Key thinks that he can say anything to anybody, and that they will not know that he talks out of both sides of his mouth. But the point today is that he has a deputy leader who is on the record, off the record, and all over the record on one primary issue that is central to the hearts of Kiwis—that is, asset sales. We now know what the agenda is. He does not want to admit it, but he would sell the family silver and sell out every New Zealander, like he did last time.

New Zealand First is in favour of the Budget Policy Statement, and when the Budget comes around, we will be voting in favour of that as well. But I will take the unusual step of pleading with Dr Cullen and Mr Parker, who are the Ministers in charge of the Overseas Investment Office. I will plead with them publicly on behalf of the farmers down in South Canterbury who are about to lose a dairy company called New Zealand Dairies Ltd. They are to lose that company to a group of Russians who want to increase their investment beyond what they already have. They will do that under the auspices of a so-called rescue package, with which they say they had to put money into the company a wee while ago to save it. In fact, the farmers and shareholders in that area have the money to ensure that the company lives and prospers. It is appropriate that the previous couple of speeches in this debate have been about asset sales, as we would ask Dr Cullen and Mr Parker to please, please, please turn down the application to the Overseas Investment Office from Nutritek for it to take a major shareholding in this company, because we do not want to see any part of the great New Zealand dairying industry going to overseas owners. It is not just the fact that these people are Russians; it would be the same situation if they were Americans, English, Chinese, or anybody else. New Zealand belongs to New Zealanders. The sweat of those farmers’ brows should earn them a return, and if it is their intent to set up a dairy company to enhance that return, then so be it. We do not want to see the Russians coming into this country in an overseas ownership situation that ensures that this company, New Zealand Dairies Ltd, continues to produce commodity products that are then shifted to Nutritek, the Russian-owned company in Singapore, for further processing into baby food, thus enhancing its value throughout Asia.

I will just take a minute here to correct some noddy who wrote in a newspaper that the processing of New Zealand dairy products could not be taken over by overseas owners because we would have to put in a pipeline for the milk, or we needed something else. The people who make those sorts of statements have not a clue. The first process is to reduce the water from the milk, producing powder. It is that unrefined powder we are talking about. It goes off our shores and is further refined in other countries. We want that to be done here. That is what New Zealand Dairies Ltd was set up to do: to take the product to its final stage, and thereby reap the benefit, in a vertically integrated fashion, to the farmers in that area. They have the money to take this company back. It was a vote of their board, which, unfortunately, got the majority to take the money from the Russians, instead of taking the money from the bank. It was a dumb decision. I cannot in any way excuse it, but that decision was taken, and this company should be bought back by the farmers in that area. They want to do it, and for that to be able to happen we need Dr Cullen and Mr Parker to turn down the application made by Nutritek to the Overseas Investment Office. We in New Zealand First take these things seriously. This is a precedent-setting decision. I ask what we will see going to overseas owners next. Will we see Synlait, AFFCO, and companies like that going to overseas owners?

I will just reply to a letter that I received today—I will reply formally, but I want to reply publicly—from Mr Peter Lavery, the chairman of New Zealand Dairies Ltd. He said that he wants to give me a briefing on how the company was formed and how it operates. I would just tell Mr Lavery—and members must excuse me if I do not pronounce the name correctly—that it is not the way the company is run that New Zealand First has concerns about. It is not about any of that. It is about ownership, and only ownership. Furthermore, it is about New Zealand ownership. It is not about whether this group of farmers or that group of farmers owns this company; it is about New Zealanders owning this company. Those are the concerns we have regarding this issue, and I want to make that absolutely clear. I am not involving New Zealand First in the running of the company or criticising those who are running it in any way for that. If I was to do that, then I could criticise the previous board for letting the issue get into this state. But the matter is in the Government’s hands now, and we plead with the Government to protect New Zealand’s interests.

Exporting is what this country is about. The success of our exports decides our standard of living. The New Zealand dairy industry, as we all know, contributes in excess of 20 percent of those exports. So to set a precedent by selling off a little bit of it to another country is a bad precedent, indeed, and it should not and cannot happen, in our view. I made these statements again when Fonterra was talking about listing that company on the stock market, and we said then—publicly, as well—that there was no way we could hold that company in New Zealand ownership if it was to be listed on the stock market. It appears that Fonterra has backed away from that ridiculous proposal, and I say “Thank heavens!” for that.

In talking about asset sales, I say that only one party in this Parliament has an unbroken record of opposing asset sales, and it is great to see that other parties are now coming on board with that stance. New Zealand First has been talking about the need for us to hold the wealth of our companies in New Zealand hands. Previous speakers have talked about Auckland airport today, so I do not need to go on about that, but that is just another case in question. With New Zealand Dairies Ltd, we appeal for reason and we appeal to our Ministers to keep this company in New Zealand hands. The local farmers have the money and they need to buy this company back.

Just in the last couple of minutes I have remaining and on the same sort of subject, I will address an editorial in the New Zealand Herald of 11 March, in which we had a most amazing diatribe from the editor, who said, in effect, that even if a policy of asset sales into private hands failed, it was still a success. That is absolute nonsense, and it is just absolutely outrageous and sad that a newspaper, especially one with the coverage the New Zealand Herald has, is joining in an argument that has been proven to be wrong by successive Governments. We are going to the expense of buying Air New Zealand back, we have gone to the expense of buying New Zealand’s rail network, ONTRACK, back, and it seems that it will be the same situation with the railways themselves, the rolling stock. But for this newspaper to set out, as I said to my leader, a form 6 diatribe—and he said that it was more like standard 6—is upsetting in the extreme. If the New Zealand Herald staff think that they are helping the National Party in some way with that sort of editorial, then I have to say to them that the opposite is true. There is no will in this country for us, and whichever Government of the day, to be selling assets, and it should stop.

I am going to do something a bit radical—and I hope it is within the Standing Orders—in that I will actually speak about the Budget Policy Statement.

The ASSISTANT SPEAKER (H V Ross Robertson): It is in the Standing Orders.

Thank you, Mr Assistant Speaker. Just last December the Budget Policy Statement forecast an increase in tax revenue this year. Now we know, just 3 months later, that tax revenue is actually $4 billion less than predicted. That figure of $4 billion is from the end of January, before the drought had even properly kicked in. The Budget Policy Statement forecast, once again, falling oil prices, and this week we note that oil prices are nudging $110 a barrel.

We are facing a year of significantly reduced Government revenue, with the likelihood of a US recession affecting our markets, with worse numbers still to come in when the effects of the drought work their way through, and with steeply rising oil prices, and the No. 1 priority for both of the old parties is tax cuts. Are we debating today the impacts of the Budget Policy Statement and the policy responses to it? Not really; no. I have listened to name-calling and personal denigrations from both sides of the House, and to some robust debate about who did what, when, and what they said they would do instead, but there has been nothing in the debate that takes us forward into how the country will respond to these very considerable risks.

Is this a good time to reduce Government revenue through further tax cuts, on top of the $4 billion reduction already noted, another $1.5 billion from tax cuts, and probably worse to come? Is this a good time for such a policy? Nobody is really addressing that question, either. Labour tells us that we will have tax cuts only if certain criteria are satisfied: the tax cuts will not be funded from borrowing, there will be no service cuts to fund them, and they will not be inflationary. We would sign up to that; we think those are good criteria. We say “Good on you!” to Michael Cullen. But it does not look as if the criteria will be met.

The Reserve Bank, in its Monetary Policy Statement from just last week, has already made allowances for an extra 0.3 percent inflation because of the likelihood of the generosity of the tax cuts putting more money into the economy. It says that the likelihood of tax cuts is delaying the time at which it can reduce the official cash rate and therefore interest rates, and, therefore—what will follow from that—the exchange rate.

I want the Government to tell us where that reduced $4 billion revenue and the $1.5 billion of tax cuts will come from. Just how will it be funded? Will anybody tell the House that? We desperately need capital investment in our rail system; we desperately need more investment in public transport. The Child Poverty Action Group came to the Finance and Expenditure Committee when we were looking at the Budget Policy Statement and said there are still 185,000 children living in poverty in this country because they are children from beneficiary families who do not get the in-work tax credit. Those families are facing higher food prices, higher energy prices, and higher transport costs, and the Government cannot think of anything better to spend this money on than tax cuts.

The Budget, which is due in a couple of months, will be interesting. Will the Government borrow, or will the sustainability deficit and the social deficit remain unfunded? National, on the other hand, has no criteria at all. It will just give tax cuts regardless. For National, tax cuts are a higher priority than public services, and it will borrow if necessary. Well, that is a clear position; at least we know where National stands. That is what National has said for a long time.

Let us look at the other forecasts made in the Budget Policy Statement. One thing is becoming a really regular pattern. Every time the Budget Policy Statement comes I just flip through until I find the appropriate graph, and, sure enough, the graph does exactly the same as it did last time: it notes that oil prices have increased. They have increased throughout the whole year, in fact.

R Doug Woolerton: You’re absolutely right on that.

Once again, the Budget Policy Statement predicts that oil prices will fall sharply, and it is absolutely wrong on that, I say to Mr Woolerton. It notes that oil prices are around $90 and predicts they will fall to below $75. Today oil prices are nudging $110. This has been going on for at least 4 years, and during the whole of that time oil prices have been rising and Treasury has not noticed.

Four years ago the Budget Policy Statement forecast that by now oil would have fallen to $19 a barrel. Whoopee! Three years ago Treasury reckoned that by this time oil would be $40 a barrel, 2 years ago it reckoned that right now oil would be $50 a barrel, and 1 year ago it reckoned that right now oil would be $67 a barrel. Members can see that the Government is gradually adjusting to reality, but it is a long, long way behind. How long will it take it to catch up? When will it get a grip and put some resources into planning an economy that has to not only withstand climate change but become much less dependent upon oil, and when will it involve business and the public at large in that planning? Surely that is the most important economic issue facing this country. It is completely ignored by both sides of the House. Neither of the old parties shows an interest in dealing with this issue. It will be left to the Green Party—and, I have to say, to the Māori Party, which has also shown interest in this issue—to lead the country when we return from the next election in much larger numbers.

Tēnā koe, Mr Assistant Speaker. I have been wondering whether this Budget Policy Statement 2008 will be top of the pops on the 6 o’clock news bulletin or will the really pressing issue for New Zealand be naming the MPs who are travelling on the so-called taxpayer junket to Eastern Europe—and good luck to them. Meanwhile, across the world all eyes are on the controversial list published in L’Osservatore Romano, the Vatican newspaper. After 1,500 years the Vatican has added seven new sins as having appeared on the horizon of humanity. Alongside lust, gluttony, avarice, sloth, anger, envy, and pride we now have ruining the environment, carrying out morally debatable scientific experiments, social injustice that causes poverty, and the excessive accumulation of wealth by a few.

When I looked at this report on the Budget Policy Statement for 2008 I wondered whether Pope Benedict XVI had received an advance copy, for there are certain areas within the small print that make us query whether this Budget Policy Statement has the balance right. The Māori Party is particularly concerned at the information in the report relating to the supposed growth in household incomes. Earlier this morning the Minister of Māori Affairs, the Hon Parekura Horomia, issued a press release in which he said: “What we need to do is get out into Maori communities and show whanau the real benefits of saving.” In the interests of cross-party communication I would like to suggest some pointers to the Minister about this critical issue of savings. There is absolutely no point in going out there and scolding Māori whānau, telling them what to do and how to save for a rainy day, if there is nothing in the piggy bank to start with. The reality is that the income levels for Māori come nowhere near the new deadly sin of excessive accumulation of wealth.

The New Zealand Income Survey shows that Māori aged over 15 years earn just 73 percent of what Pākehā earn. In dollar terms Māori earn $197 less a week. Although this Labour Government may crow about the participation rates for Māori growing to 68 percent, we always have to ask for the fine print—what does that mean in terms of putting bread on the table? The fine print means, for example, that when on another day Labour puts out its policy on affordable housing that requires homeowners to earn at least $70,000 a year to service a mortgage in an “affordable home”, the constituents in my electorate laugh—or maybe they just cry. What it comes down to is who is being factored into the average. Which New Zealanders comprise low and modest-income earners? The 2006 income data for my Tamaki Makaurau electorate counts us out. Median family incomes in my electorate are just $60,000—$10,000 short of meeting the grade for low and modest-income earners.

Why does all this matter? Remember the Pope’s new sin: social injustice that causes poverty. A month ago the Early Childhood Council came out and agreed with the Salvation Army that the availability of early childhood education is heavily biased against poorer urban communities, adding that it was “madness that we are not targeting more substantial resources at these children.” The council’s chief executive, Sue Thorne, was outraged by what she described as “pathetically little” of the money given to early childhood education being targeted at the most needy of children, making the clear link between low access to early childhood education in the most needy areas with Māori children being 2.7 times more likely than Pākehā children to be stood down from school for disciplinary problems, and that there were wide achievement gaps between low and high-decile schools.

A fortnight after those comments, the Canterbury District Health Board’s Executive Director of Māori and Pacific Health, Hector Matthews, declared that the gross disparity between Māori and non-Māori health was largely due to socio-economic conditions. It was his analysis that more than half of all Māori are located in the poorest three deciles in Aotearoa, meaning that the cost of their primary health care for conditions like asthma could be out of their reach. Māori children were also more likely to live in cold, damp, houses and as a consequence hospital admissions for very young Māori asthmatic children were a horrific 60 percent higher than for non-Māori. So when it comes to the Minister’s wisdom in showing Māori families the benefit of saving, he may like to tread a bit more carefully.

I return to the comments in the Budget Policy Statement that outline three different scenarios in just one paragraph related to the growth of household incomes. First we have the Prime Minister’s promise that household incomes will increase by 25 percent over the next 4 years. The Half Year Economic and Fiscal Update indicates a real increase in wages of 2 percent over the same period. Then we have the Salvation Army forecast of 5 percent growth over 10 years. What is it: pick and choose, or the best offer on the day? There is a world of difference between 2 percent, 5 percent, and 25 percent when people are looking at whether they can afford to get the car registered or to stay living in a house where the rent has dramatically increased. It is exactly these types of questions that we, the Māori Party, will continue to raise in differentiating between the fiscal priorities of how much total income we seek from taxation and the expenditure. We have always argued that the pattern of expenditure and the allocation of moneys should be fair and determined by both signatories to Te Tiriti o Waitangi.

In determining whether we have a surplus or a deficit, it is incumbent on both parties to take account of the methodology we have promoted within the genuine progress index. Such an approach would question the scope of negative expenditure, say, on monitoring, punishing, and constraining youth as opposed to investing in their development prospects. It would throw open the question of establishing a new entity, Māori Business Aotearoa New Zealand, financed out of the wallets of Māori Trustee beneficiaries but for the benefit of Government ratings. It would ask why the Government is exerting considerable efforts into offering iwi assets such as forests to top up funding in line with the relativity clause of settlements, or making a huge deal out of new arrangements for foreshore and seabed territorial deals when in the first instance the basic foundations of either policy are fundamentally flawed. The fact that iwi have made the best of the current legal situation and have negotiated agreements under the law does not alter the fact that the law is unjust and should be repealed. It is quite consistent to support iwi agreements under the Foreshore and Seabed Act, while at the same time seeking the repeal of that Act. The Māori Party already supports iwi to get the best deal they can from the Treaty settlements process, even though it believes that the process itself breaches the Treaty.

Budgets are times for weighing up both sides of the ledger, for attaining a true and accurate record of the state of the nation, a genuine indicator of the health and well-being of people. We cannot escape the irony that the Budget Policy Statement gives lip-service to the concept of our unique national identity, and states a commitment to foster a cohesive society when, in reality, in the lives of tangata whenua the inequities are painfully apparent and ongoing. It is not acceptable, it is unjust, and it is unfair. We know that the incomes of low-income families have been allowed to erode, and that our youngest and most vulnerable citizens are continuing to live in severe or significant hardship. We agree with the Child Poverty Action Group that what we need most is a poverty prevention success story. This Budget Policy Statement is not that.

I begin by responding to some comments made by an earlier speaker about the recent forecast figures in terms of overall revenue. It is not correct to say that the most recent set of statements indicated a $4 billion shortfall in tax revenue. What those statements indicated was that the largest contributor to the shortfall was a drop-off in earnings on some of the equities that we have invested in internationally through bodies like the Earthquake Commission, the Accident Compensation Corporation, etc. The actual tax component of those figures was approximately between $400 million to $700 million dollars. To put that into its correct context in terms of overall forecasting, that is within the general margin of error. As far as we are concerned, the good news is that the tax cut programme that the Government has committed itself to, as announced in this year’s Budget, can proceed, and can proceed on a staged basis.

As someone who was the Minister of Revenue the last time this country had personal tax cuts, which was over 12 years ago, I am particularly keen to see personal tax cuts advance now over a 3-year period in order to build on the business tax cuts that were introduced in last year’s Budget. They will give New Zealanders a dividend for a number of the costs that they have borne over the years of economic restructuring, and they are the fruits of the progress of that restructuring that we have seen in the last few years. I am looking forward to what the Minister of Finance may outline in that regard, because the case is overwhelming. New Zealanders are increasingly saying: “We cannot carry on paying more and more and getting less and less in return, and we expect some dividend from the Government for the contribution that we have made.” On a rolling basis, tax cuts would be a very powerful signal in that regard.

There is another lesson to be learnt from our recent experience. What New Zealand tends to periodically do is go through a process of reducing taxes, and then put them aside as having done that, to be forgotten for a time in the future. A moment ago I said that the last time we had personal tax cuts was 1996; it is not good enough to have to wait over a decade for the next round. The business tax cuts, which take effect in just a few weeks’ time, are the first business tax cuts in nearly two decades. It is not good enough to have to wait 20 years between business tax cuts; rather, we need to be embarking on a programme of smaller and more regular cuts so that New Zealanders can keep in touch with the rest of the international community. That is certainly something United Future is keen to focus on and will be looking to see achieved in this year’s Budget.

I will talk about a couple of other issues that are important to New Zealanders as a whole, on which there is the scope, this year, to make some significant change if the political will is there. Every day we hear stories of waiting lists for elective surgery in the public hospital sector. We have various scandals in some of our smaller district health boards. Yet at the moment around 150,000—over half of all—elective surgical procedures are carried out each year in the private sector and only about 2 percent of the total of those procedures are funded by public hospitals. We have the absurd situation of waiting lists in the public sector and underutilisation of capacity in the private sector. A country like New Zealand, with just over 4 million people, is simply not big enough to run and sustain two competing health systems in the way we do at the moment. There needs to be integration; there needs to be far more cooperation. What we ought to be doing—and the only thing stopping us at the moment is ideology—is utilising the overcapacity in the private sector to fund some of those shortages and reduce those waiting lists in the public sector. That is not an ideological statement; it is actually a statement of fact and common sense and, through astute utilisation of management and planning, it can be attained. We see that as being a far more productive way ahead than the continuation of this artificial division we have got into in recent years. The upshot of that is that the public sector would then be enabled to focus on the high-end medical procedures—the very specialist acute surgery, the breakthrough research, and so on and so forth that keep us at the top end. But we cannot do that while we have the problems we have at the moment. So we want to see significant steps taken this year to allow for greater integration of the public and private health sectors.

This is not about privatising the health system or any of that sort of rhetoric; it is simply about ensuring that New Zealanders get access to the operations they need at the time they need them. You know, if we look at the statements from the Ministry of Health about its expectations, and about what a New Zealander can look forward to in terms of elective surgical procedures, we see that those are not bold, ringing, or inspiring; it is simply a statement that it will endeavour to get a person the surgery he or she requires within a 6-month period, or if it cannot do that it will explain to that person when he or she might be getting that surgery. If people are hanging out there for serious operations—if they have painful hip or knee joints requiring replacement—and are being told that hospitals will try to do them within 6 months, and if they cannot then be told when that might be happening, it is hardly a ringing endorsement. United Future says that New Zealanders deserve better than that, particularly elderly and vulnerable New Zealanders who do not have the luxury of saying they will queue-jump by going private. We ought to be enabling them to get access to their surgery in a timely manner, and we ought to be doing that by utilising that overcapacity in the private sector.

💬 Christopher Finlayson: Don’t look at us; look at them.

It is not a matter of looking at either side of the House. I know that I have support on the Opposition side of the House for this policy, but it is certainly something that can be achieved, and ought to be achieved, regardless of party lines. This is simply common sense, not ideology.

I will say a couple of other things, because they come into the same category. Earlier today there was some criticism of the Families Commission because it announced its intention to undertake a $500,000 programme—and I get very angry with our total fixation always on dollars rather than on quality—about promoting parenting. Parenting is the most important task any one of us can take on. It does need to be affirmed, and it needs to be affirmed loud and clear and often and clear. Parents will tell us—they have told the commission, they have told the Government, and they have told every single one of us—that they feel undervalued, they feel under-appreciated. The best way we can strengthen and enhance families in New Zealand, and break down the cycle of dysfunction that so many are suffering from, is to enhance parenting, to boost parents and give them a pat on the back for what they do, and to make it clear that we, as a Parliament and a Government, stand alongside them in that important responsibility. So I applaud the commission for the work that it is doing, and I hope that as a result of this year’s Budget it will be in a position to carry on with that programme, rolling out support and encouragement to New Zealand parents and giving to the parents of today and the parents of tomorrow confidence that they will be supported in the difficult task they undertake. A number of parents feel that their ability to be effective parents is compromised by the student debt their children incur. United Future is looking forward to this Budget, and to the achievement of one of our confidence and supply agreement objectives about a better deal for students through lowering the age at which the parental income test applies for student allowances. That will be a very positive step, also, that we will look forward to seeing come through as part of this Budget.

I will raise one other issue as time runs out on me, and that is the issue relating to our overall approach to climate change policy. There is general agreement around this House and around this country that we need to develop a clear and coherent response, and it is generally accepted that an emissions trading regime is the best way of achieving that response. But the difficulty we have is that the headlong rush to put that into place may get in the way of resolving a lot of the individual complexities about the particular industry sectors, be they forestry, agriculture, transport, or the household sector. I made the point when the bill was introduced—and it has been borne out by subsequent events—that unless we get the buy-in of those sectors for the achievement of those policy goals, the real fear is that we will end up in a situation where, firstly, the objectives cannot be obtained so there is uncertainty, and, secondly, where the only certainty is that there is ongoing uncertainty and the need for further amendment. The consequence of both of those leaves us exposed, unprotected, and not in a position as a country to make forward progress.

I am looking forward to this Budget giving some strategy and some direction in terms of how we will face these issues in a reasonable and coherent way, and not simply to rush headlong to put in place a regime before this Parliament rises, because it suits the Government of the day’s political advantage to do so. Climate change is not a partisan political issue; it affects every single one of us, it is long term, and it will outlast us as individuals and outlast Parliaments. It needs to be approached on that basis. A strategy on climate change will not work in this country if it is simply seen as the property of the Government of the day to introduce and pass as it sees fit, and then to be amended by the next Government when it sees that what was put in place has not been working. So it will be important, as this legislation goes through, and as this Budget takes effect, that that strategy is produced in a coherent and clear manner. With those thoughts I conclude; if the Budget reflects those, New Zealand will continue down the path of reasonably steady growth that it has enjoyed over the last decade or so. But what is increasingly important now for people is that the quality of life they enjoy is recognised and becomes a greater part of the consideration of those issues.

I for one thought it was great that John Key has announced policy today, and says we should cap the number of bureaucrats in this country. I say that that is a great start, because when I go around the country talking to New Zealanders, I ask them what they want: “Do you want extra dollars spent on your health? Do you want an extra bed, or an extra desk?”.

💬 Tim Groser: They want desks.

Well, the Labour Party appears to want desks, and defends desks, but New Zealanders want beds. They find it a bit ironic that sick people are piled up in hospital corridors, unable to get a bed, yet there are extra desks in the bureaucracy counting how many are waiting for a bed. That is the problem we have.

Here is the other thing: I ask people what they would like—an extra doctor for their health dollar or a spin doctor? Do members know what they want? They actually want a doctor—a doctor who makes them well, not one who makes them sick. When I ask whether, for their health dollars, they would like some dialysis or some policy analysis, do members know what the answer is?

💬 Chris Auchinvole: What is the answer?

It is dialysis; that is what New Zealanders want for their health dollar. So I think that John Key is knocking it on the head when he says that we have had a bit too much growth in bureaucracy, and not enough growth in productivity. We have seen the dollars go in; we have not seen anything come out.

I feel that John Key has not gone quite far enough with his policy, and I guess that will be ACT’s role, happy role that it is.

💬 Tim Groser: Astonishing!

I know that seems astonishing to the National Party, but I think we can set our sights a bit higher. When we look at the bureaucracy, our interest is not just in the number of bureaucrats.

💬 Christopher Finlayson: Or what they do.

Or what they do not do. Our interest is also in the total spending of the Government.

When Labour came to office 9 years ago it said it would fix the problems of the health waiting lists. Labour members said they would put up the tax on the rich fellas—knock them a bit harder. But we were not to worry because they were only 5 percent of taxpayers—it turns out they are now 15 percent—and Labour would then get on top of the health waiting lists. We saw a couple of billion dollars poured into the health system. We saw the billions poured in at the top, but what we have not seen is anything out the other end. When we look at the spending, we see that it has been rather poor quality. I think we have learnt from this experiment, that pouring more money into the bureaucracy does not guarantee a better result. So I think we should be going further than just capping the number of bureaucrats. What we should be doing is putting a cap on taxes and total Government spending.

I think I would also observe, as we head into this election—and under the regulated period, we are in an election period right now—that New Zealanders want to have a greater say over the direction of their country. They do not want to live in a world where a few people turn up to this place each week and tell them what they can say and cannot say, how they should bring up their kids, how much money they will have to pay to the Government, and how it will be spent. They want to have a say over it. They also want us as politicians to exercise the same discipline in spending the dollars we take off them in tax as they have to apply in their businesses, at their places of work, and to their weekly budgets. The way to do that is to cap total Government spending in real terms. That means, as John Key says, that we would not cut one bureaucrat, cut any budget, or cut one dollar out of the current Budget. What we would do is hold it.

What would happen, if we held the current Government Budget in real terms, is that we would actually have to have, as politicians, as a Parliament, as a Government, a discipline on our overall budget. What happens now is that as New Zealanders work harder and harder and produce more, we take more. We do not just take more as a dollar amount; we take more proportionately, because as they earn more they go upwards in the tax brackets. The harder New Zealanders work, the fatter and richer the Government becomes. So there is an automatic escalator, if you like, that increases Government revenue to the advantage of politicians and to the disadvantage of taxpayers.

Taxpayers have another problem in that every now and then we come along with a new tax or a new charge, and very seldom do we eliminate them, because Governments, particularly this Government, like getting hold of the money and spending it rather than returning it to taxpayers. In fact, to hear politicians talk in this House one gets the sense that the money is the Government’s and does not belong to the people who earned it. It is Government money that the Government might think to return to taxpayers, rather than money that is taken from taxpayers through the tax system and held in trust to spend to their benefit.

So if we cap Government expenditure in real terms it would put a discipline on us, because if we came up with a new bright idea for spending money, we would actually have to find out where we would get the money from, rather than just enjoy the surpluses of Kiwis working ever harder and paying ever more tax. I say that if a Government wants to spend above that cap, that is OK. I think Governments should be allowed to do that, with a simple proviso, and that is that they get taxpayers’ permission and consent, because it is taxpayers’ money, after all, that we are spending. So we fix the Budget as it is now, adjust it for inflation, and if we want to go above that we need a referendum to explain why and to get permission.

If we had done that and had held Government spending in real terms since 1999, when Labour came to office, Government spending would be $9 billion less than it is now. That is a whopping sum. The budgets would be exactly what they were in 1999, adjusted for inflation and population growth. We have to cast our minds back to 1999 and ask ourselves some questions. Was our health system really that bad? Was our education system really that bad? Have we got an extra $9 billion a year worth of extra benefit? I do not believe we have. I think the money has gone in but the service has not come out.

I ask members to think of this: if we had that $9 billion and had not spent it, it would be sufficient to drop, for example, the top rate of personal tax to 20c and to drop the company rate of tax from 33c to 20c. If we had done that over 9 years we would not be looking now at a 2 percent rate of growth; we would be looking at a 5 percent rate of growth. People would have more money in their pockets because taxes would be lower, and they would have higher productivity, higher wages, and more prosperity. And picture this: a Government also has an interest in a stronger and more profitable economy because ultimately that is where our tax dollars come from. That is what we need—ACT’s Taxpayer Rights Bill. Thank you very much.

For a little over 8 years now we have had to live with a political fiction this Government has been promulgating to New Zealanders. That political fiction could, I guess, be expressed in different ways, but it generally takes the form of arguments that we have never had it so good and that the Government has a coherent strategy for dealing with New Zealand’s long-term structural issues. I think it is apparent, and not just to people who spend their entire lives in this Chamber watching politics 24/7, that this is becoming a bit threadbare. I think it is abundantly clear that other New Zealanders are also regarding it as threadbare. If the members of the Labour Government cannot sense there is a mood for change out there, I think they are living in a parallel universe.

It is not hard to understand why there is a mood for change. Let us just survey briefly some of the principal internal and economic factors bearing down on the state of the country and on what should be shaping the Budget in the next few weeks. I mention first of all the growth picture. We now have anaemic growth. The Reserve Bank is saying that it will be 2 percent but the risks will be on the downside. Translated from the jargon, that means, essentially, 2 percent at best. On the inflation side it is the other way around. It is above the band, with the risks on the upside, meaning, in plain language, that it is already outside the band of acceptable behaviour, and it is likely to be worse.

We have falling productivity. I think that this is the single largest issue facing New Zealand. Paul Krugman, the great American economist, said: “Productivity isn’t everything, you know.” Then he corrected himself and said: “It is almost everything.” We have falling productivity, which is a crucial issue facing this country.

We have the highest interest rates in the developed world. That is not some minor academic point; it feeds through into the actual pockets of New Zealanders. When this Government took over in 1999, it took 41 percent of the average wage to buy the average house on the median New Zealand income, using standard mortgage tables. That was a pretty hefty amount, but just manageable. We now have the second least affordable housing in the developed world. It takes 81 percent of the median wage to service the average price, on a standard table mortgage basis.

On top of all this is the statistic of real concern about the outflow of New Zealanders—75,000 of them last year, 80 percent of whom were under the age of 40. We have about half a million New Zealanders in Australia and 1 million New Zealanders in the South Island. About 50,000 of them have gone to Australia. If we do not arrest this departure, it will mean that more New Zealanders will be living in Australia than in the South Island in about 10 years’ time. We should just think about the implications of that politically for the sustainability of this country.

In external terms—well, we had excellent weather economically in the first 5 years of this 3-term Government, but the picture is becoming uncertain, to say the least. There is division of opinion amongst experts internationally on this, but quite clearly we are in a very difficult situation as the subprime crisis feeds its way through the world economy, and as the possibility of a US recession sits out there. Talk about the end of the golden weather! This is a very much less benign environment for New Zealand, with those internal statistics to be looked into. So it is not hard to understand why the public senses that a change is needed. If the Labour members of the House cannot sense that, they are living in a parallel universe.

I know it is very unfashionable to use rugby clichés this year, but I will go ahead and use one anyway.

💬 Chris Auchinvole: Go on!

I will; thank you, colleague. I think when the history of this 3-term Labour Government is written, it will literally be a tale of two halves. The first half is the period from late 1999 to—well, we could argue about this—probably late 2004, when the Labour Government was playing with a stiff and favourable breeze behind its back. Labour inherited power and had an arrogant, cocky, “we won, you lost” attitude, with the ideological disposition to deny the reasons why so much wind was in the sails of the New Zealand economy that it inherited.

💬 Hon Member: It was all their good.

Yes—apparently New Zealand woke up one day with a Labour Government in power, and everything turned rosy! That is unbelievable political fiction, when we know, for example—off the top of my head and going back to my favourite point about productivity—that the average rate of labour productivity growth in the 3 years from 1997 to 2000 was 3.5 percent. That was absolutely stellar, and had we been able to maintain that type of labour productivity growth, particularly with rising participation rates coming through in the labour input side, this country would indeed be moving back into the first half of the OECD.

So we had the first half with the wind behind the Labour Government’s back, but the second half has not been so rosy. The Government has sat there and milked the economy for everything it could, with essentially mediocre policy frameworks and nothing, I would argue, that was absolutely disastrous or catastrophic. I do not use adjectives like that to describe Labour Government policies, which are much more akin to “death by a thousand cuts” material. The chickens, economically, are starting to come home to roost, and politically, I believe, they will well and truly come home to roost in a little over 6 months’ time.

All of this has, of course, been masked by forward-looking rhetoric. Those members who have followed the debates over the last 9 years will remember that, firstly, we had the knowledge wave economy. What could be better than the knowledge wave economy? We then lost track of that, so we got into the growth in innovation framework—the “GIF” framework. I remember that inside the bureaucracy we could get any type of expenditure through the system as long as we said it was part of the “GIF” framework. Then that fell by the wayside, and we had economic transformation as the latest clothing we were asked to wear. And now we have sustainability. We cannot have a statement from the Prime Minister that does not have sustainability mentioned any less than 24 times in a 10-minute speech. I do not have any problem at all with any of that rhetoric—it all sounds like the right stuff—but what is it backed with?

I was pleased to hear Rodney Hide refer to our leader John Key’s speech today. In the middle of John Key’s speech there was a statistic that I think is truly awesome: in the 8½ years of this Government there have been 250 strategy documents. All of them are beautifully written, with polished pictures of happy Kiwis riding bikes through the pine tree forest—you name it, it is all there—but it is absolute rhetoric. They are not worth the dust now covering them on the bookshelves of Government departments throughout Wellington. I must say that Wellington is having a golden time in terms of rentals, if one happens to be lucky enough to own a commercial property here. But I am afraid that the first half of the summer is well and truly over. The summer of very favourable external and internal economic conditions—we had stellar productivity growth just at the point of political change, and high economic growth from 1992 onwards, with inflation falling dramatically and unemployment falling dramatically—is all turning a little bit darker now in its second half, which I would argue started in late 2004 or perhaps in early 2005.

I have to worry a little bit about a couple of things that happened last week in our political debate. I thought that the happiest man in New Zealand politics last week was Michael Cullen. He was partly happy because he discovered a deficit for the first time. Given the restructuring of the New Zealand financial accounts, it would be easier to find a yeti in the Himalayas than to find a deficit in the New Zealand fiscal envelope. But Michael Cullen finally found his yeti last week—he found a deficit.

💬 Jacqui Dean: A hairy monster!

It was quite a hairy monster, really. It was called “OBERGAL”. Just when we were getting used to “OBERAC”, along comes “OBERGAL”. They sound a little bit like the names of Viking maidens, but then we know that the Labour Party likes Scandinavian myths. In fact, these are accounting identities. I was very pleased that Peter Dunne understands how irrelevant this mythical deficit is, when it is to be used as a metric for the fiscal envelope for tax cuts. Actually, Peter Dunne understands perfectly how irrelevant it is, because when we strip out the revaluations as a consequence of the collapse in world equity markets through this subprime crisis, we find there is not a deficit at all and there is still scope for proper, comprehensive reform.

This is an interesting debate, following on from question time earlier when I watched the Leader of the Opposition questioning the Prime Minister as if he cared about low-paid families and worried about them being able to buy butter and cheese. He is the man who said on 20 December: “We would like to see wages drop.”

Unfortunately for the Leader of the Opposition—the man who would be the Prime Minister—that statement was recorded by a young man, with a tape-recorder, who was sitting in his vicinity. The young man who recorded Mr Key’s comments is called a journalist, and journalists are inclined to write things down and print them in newspapers. Of course, Mr Key said he was only joking—that was his excuse—and that he actually wanted to bring down wages in Australia. We are still waiting for the National Party’s policy on how it will lower wages in Australia. We are very interested in hearing what that is, because it was Mr Key’s second excuse. He said that it was a joke; it was about bringing down wages in Australia.

That same man, Mr Key, expressed concern in the House today on behalf of average families and asked how they cope with the cost of living. When we read the list of flip-flops and changes we can understand why this man is saying these sorts of things. Members should contrast that with this Labour Government’s actual record. Let us look at the graphs that show what real household incomes have grown by, and let us look at the 7 years that this graph I am holding deals with. It is a real household income graph that shows that real household income has increased by 25 percent under this Government’s policies. You see, we have policies for the future. One need only look at the record of the last 7 or 8 years to see that they have worked. One need only look at that statistic alone—real household incomes have increased by 25 percent.

The National Party leader said: “We would like to see wages drop.” Well, I can understand that. He does not like the fact that we have got wages up. He would like to drop wages. When that got reported—and he did not like it being reported—and he could not get the media to go away, he had to contact the publishers of the newspaper to get them to tell the journalists to retract it. What we have now is a letter from the workers—the journalists—who work for the New Zealand Herald to their boss, to the owner, saying that this is unacceptable. I agree with them.

I was a journalist, and you, Madam Speaker, have family members who were journalists and who were proud of their craft and proud of their principles. One of those principles, which is longstanding in a free and open democracy, is that the owner or the publisher does not interfere in editorial freedom. That is exactly what the New Zealand Herald journalists are telling the paper’s owners right now, because of John Key and the National Party standing over the owners to get his words retracted.

Well, John Key might like to retract a whole lot of words, because there are a few here. In July 2007 John Key said: “We wouldn’t have sent troops to Iraq.”, and many people reading those words, which I have written down in front of me, would say: “That bloke has the right ideas.” He said he would not send troops to Iraq. Who could disagree with that? This Government made that decision and New Zealanders are proud of it. It has proved to be the absolutely correct decision, as we see Governments in the UK, the US, and Australia struggling with their decisions around that issue. So one would have to say that that was an excellent statement made by John Key. He said in July 2007 that he would not have sent troops to Iraq. But whoops! In September 2003 Mr Key said that New Zealand was missing in action during the invasion of Iraq.

He changed his views, conveniently. Was that a joke, or was he talking about somebody else? Was he talking about the Australians, as he was with the wage gaffe he made? Then he said we should have had New Zealand troops in Iraq—or maybe he was talking about the Australians. Maybe it was really a joke and he did not know that somebody was next to him with a microphone and a tape-recorder.

It is the same when we look at the words he spoke on 6 November. He said he firmly believed in climate change and always had. Well, that is a sound statement. That is decisive leadership from a man who would be the Prime Minister. But whoops! Somebody was there with a tape-recorder in May 2005 when John Key said that climate change is a complete and utter hoax. Can this man make up his mind? Is he joking? Is he talking about New Zealand or Australia? We have just heard Tim Groser talking about a parallel universe. Well, he described his leader very well, because in May 2005 John Key said climate change is a complete and utter hoax, but in November 2006 he said he is and always has been a firm believer in climate change.

The list goes on. This is a very good statement: “We will keep interest-free student loans for tertiary students.”, said John Key just a month or two ago. But in 2005 he said that interest-free loans were an unaffordable and irresponsible cost to the country. That was the Leader of the Opposition’s opinion just 3 years ago. He said in October 2003 that the anti-nuclear legislation is bad news for economic growth and for our job market. But by September 2007 he said that National will stick with the anti-nuclear legislation. That was said by Mr Key, whom we are allowed to call slippery because everybody in the country is calling him slippery. Every piece in every paper I have read in the last few weeks has called him “Slippery Mr Key”.

💬 Hon Ruth Dyson: Why do they call him slippery?

Well, because one hears about those sorts of things. And it is a real problem when, as a local member of Parliament, he comes in here and asks question after question—and he gets his man down the back from Whangarei to ask them if he has not got the energy himself—about affordable housing. We have just heard about that from the previous National speaker too.

When we made sure that the land in Hobsonville was retained so that we could in fact have affordable housing—at the time, I was Minister of Housing—it was outside the urban limit, so we could not immediately start building on it. We had to wait for the proper processes. It was described by John Key as economic vandalism. He said National was committed to cancelling it. That was said in June 2006 by the local member for Hobsonville, one John Key. But then “Slippery John Key” said in February 2008 that he is in favour of the affordable housing that might be built there. In fact, I heard the interview where he was criticising the Labour Government for not getting on and doing it quickly enough. It was economic vandalism back in June 2006, and now we are being criticised for not doing it fast enough! Well, it is no wonder they call him slippery.

John Key cannot actually hold a position on some things for more than 12 hours. He told the media at 7 o’clock one morning that National had no firm date for Treaty settlements—absolutely no firm date. He was on national television telling everybody that National did not have a firm date on Treaty settlements, but by 5 p.m. that night he had gone back, talked to the people in his office, and they had said: “But John, we do have a policy. We do have a date.” At least on that occasion he was big enough to say he got it wrong.

How much more does he need to get wrong before people realise that he is a person who, if put in charge of a Government, could not keep the same opinion for 12 hours? He could not understand a brief from the people who work in his office and tell him what to say. He could not get out of the fact that someone had a microphone next to him when he said he wanted New Zealand workers’ wages to drop, so he went and heavied the owners of the newspaper—who have been running a campaign about freedom of speech and who use their paper every month and every week to have freedom of speech—and the owners of that newspaper stood over the journalists and told them they had to retract what they wrote. The owners were at the beck and call of the National Party. I want to know what self-respecting journalist in this country would put up with that and sit back and accept it. Thank goodness the New Zealand Herald journalists have said: “Enough.”

In my last comments I will talk about the latest announcement by the National Party on public servants. National has said it will take an “enough is enough” approach. It sounds a bit like the Destiny Church—it was the Exclusive Brethren last time, now it is the Destiny Church. National says that enough is enough, and John will take the axe to them. Oh, but not really. National will just go and have a look and see whether there are too many public servants doing too little.

💬 Moana Mackey: They won’t tell us which ones.

National will not take one out, it said. But it will look and see whether it can have a sinking-lid policy.

When we became Ministers in a new Government, we found that there was no capacity to do the work that was required to figure out how we could overcome an infrastructure problem in New Zealand because National had not built any roads in Auckland for a whole 9 years. National had not spent any money on public transport, and it did not have policies on anything that would in fact make our economy grow. So “slippery” is probably too polite a term for the nonsense we hear coming out of the mouths of Opposition members, and particularly from their leader, John Key.

The ASSISTANT SPEAKER (Hon Marian Hobbs): Before I call the next speaker I advise the House that this speaking slot, the twelfth slot, is split into two speeches of 5 minutes. I will ring the bell at 4 minutes.

Members of the public will be highly interested to know that that was Mark Gosche, a senior member of the Labour Party, who spoke then. He is not only a senior member of the Labour Party but a member of the Finance and Expenditure Committee. The reason I know that is not only that I am on the select committee myself but also that Mr Gosche’s name is in Appendix A of the Budget Policy Statement, which is in fact the reason for this debate.

This debate is to discuss the Budget Policy Statement, and one would have thought that Mr Gosche, being a senior member, would focus on the Budget Policy Statement and on the wonderful accolades he would be giving on behalf of the Labour Government. But did he talk about the Budget Policy Statement once? Did he discuss the amazing things it is doing? Not once. Why would one not take that opportunity to discuss one of the Government’s key documents—to advocate for the wonderful things the Government is doing? Why would one not take that opportunity? Whom did Mr Gosche spend the entire time focusing on? He spent it focusing on National’s leader. You know, when a senior Government politician spends his entire 10-minute speech focusing on the Leader of the Opposition instead of on a document that should be a key document for the entire Labour Government, setting the vision for it, then we know the Government is in trouble.

Why did Government members not focus on that document? Here are a few questions that show the key reasons for that. Why, after 8 years of a Labour Government, are we paying the second-highest interest rates in the developed world? Later on I will explain why that is the case, when I focus on some of the expenditure listed in this document. Why is the wages gap between New Zealand and Australia and other parts of the world getting bigger and bigger? Mr Gosche did not focus on that issue. Why does Labour give tax cuts only in election year? Tax cuts are budgeted for in these accounts, but Mr Gosche did not want to focus on that. He focused on the National Party leader. Why are grocery and petrol prices going through the roof? Mr Gosche did not want to talk very much about that, either. Why, as Mr Groser asked, are hard-working Kiwis unable to afford to buy their own home?

💬 Chris Auchinvole: Why not?

Because the cost has moved from 41 percent of the average take-home pay to 81 percent. In no way did Labour speakers want to focus on that issue.

Why, when Labour has an aspiration that New Zealand will become carbon neutral, are our greenhouse gas emissions continuing to rise at an alarming rate? Government members did not want to focus on that, but the Budget Policy Statement has key issues around the cost of Kyoto now and going forward, and around what needs to be budgeted for. And why has the health system not improved, despite billions of dollars extra being poured in?

The answers to those key questions are revealed in this Budget Policy Statement seriously, and if we look at page 36 and go forward to the summary of financial indicators, we see costs going up and up. That is why that senior Government member did not want to focus on the Budget Policy Statement.

When the Minister of Finance, Michael Cullen, came into office in 1999 he had high aspirations about putting a lid on spending. He made a virtue of declaring that the Labour Government would achieve the lowest level of spending, as a proportion of GDP, since 1978. Yet by 2005 the ratio of spending to GDP was higher than in 1999-2000, when the Government came into office. Although Dr Cullen had good intentions at the start, core Crown expenses have risen significantly under this Government and have continued to rise. The Budget Policy Statement shows a $53 billion spend for 2007, projected to be $70 billion in 2012. On top of that, core Crown expenses are expected to increase by almost another percentage point of GDP. Expenditure is going through the roof.

In the remaining minutes I want to focus on another set of accounts that were obtained in January. They show how much expenditure the Government has taken on. This is a year-on-year perspective; it is a comparison with last year. The January 2008 accounts, a full year on from those for January 2007, show total core Crown expenses have gone up from $29 billion last year to $32 million—a 9.7 percent increase. Inflation is floating at around 4 percent a year. The key expenses, like those for core Government services, are up from $1.2 billion to $1.7 billion—up by 33 percent in just 1 year. This Government is incurring massive increases in spending, and it is no wonder that Mr Gosche did not want to focus on this Budget Policy Statement but spent his entire speech focusing on John Key.

What a typical Tory speech that was from Chris Tremain. There was no policy, and not a single thing about what he might do if he ever got a whiff of the Treasury benches. There was nothing. I say to that member that if ever National manages to grab the Treasury benches, he may well learn how easy it is to pick holes in everything and how much harder it is to be a serious Government planning for the future of one’s country and planning to make sure that all citizens are looked after—in their youth, middle age, and old age. That is the challenge of a real Government, and that is what this Government is doing.

I put my support behind the announcement made yesterday of $700 million up front—and with interest added to it, it will be nearly a billion dollars—being put up by this Government for research in pastoral and food sciences. That is the single biggest investment we have had in this area. It is an area that we know we have to get smarter in. It is a risk area for New Zealand in the future. As other countries come on with high-volume low-cost products, we need to be doing things better than everyone else and we need the science to back it up. This money will go a long way, and not just that; it will be matched—dollar for dollar—by industry. Two billion dollars over the next 10 to 15 years is an extraordinary investment in the science capability of this country.

We heard from the Food and Beverage Sector Taskforce that New Zealand needed to do better in this area. We heard from the Pastoral 21 research consortium that we needed to do better in this area, and last year, at the Primary Industries 2020 Summit run by the Hon Jim Anderton in Christchurch, we heard again that this was an area that industry felt we really needed to get serious about. That is a forum, by the way, that the National Party opposed. National asked why money was being spent on the forum, because, of course, National does not think it needs to talk to anyone else about these issues. National thinks it knows everything; it knows best, and it does not need to listen to the sector.

That is extremely evident when we see that the National Party is opposing this funding. Every single other industry group in the sector supports the funding; every single other industry group in the sector says it is long overdue. In the words of Dr Andrew West, the head of AgResearch, it is a paradigm shift in the way we fund science. I welcome that. I want the people of New Zealand to know that the National Party has said it will scrap this fund. John Key said, on Radio New Zealand: “New Zealand does not need such a fund.” I suggest that National might want to go out and talk to the rest of the industry—the agricultural, pastoral, and food sector—and to the people on the ground about what they think they need. I know what the answer will be.

National has announced another policy, which my colleague Mark Gosche touched on briefly. National has said it will cut the number of public servants. We have been hearing for a long time—about 9 years—that National will fund tax cuts by cutting the fat out of the public sector. It will cut the number of public servants. We heard a speech made by John Key today, who stood up intending to be forceful. He was asked whether he would cut the number of public servants, and he said: “Ah, we don’t know. Maybe not; we’re not sure. We’re going to review it, then we might look at it, then we might focus-group it a little bit, and see kind of where the public wind is shifting to. Then we might keep numbers exactly the same, but then we might cap them.” That was interesting, given that every single member of the National Party caucus is currently travelling around the country telling people that their projects will be picked up and paid for by Government departments. I do not know who National thinks does that work. I think, like Mr Tim Groser said, they think it happens in some parallel universe where they put an idea up and somehow, magically, the policy forms itself.

Also it is important to point out what the Prime Minister mentioned in question time today. National talks about the growth of public servants under this Labour-led Government, but 85 percent of them are front-line public servants. We are talking about doctors, teachers, nurses, police, and social workers. If the New Zealand public think that those jobs are not under threat, then they need to think again. History tells us that this slippery National Party will say anything to get into Government and then do exactly the opposite once it gets there. I ask members opposite to name the types of public servants that they think are useless and do not need to be there. They should name those who are sucking off the public teat, not doing any work, and not providing any benefit.

💬 Chris Tremain: We said we’d cap them.

Mr Tremain should name which ones. He should get beyond the rhetoric, stop being slippery, and name the public servants that National thinks do not need to be there and are completely superfluous. Maybe they are the people in our public hospitals who are booking operations so that the doctors and nurses can get on with being doctors and nurses.

I am proud of this Budget Policy Statement. I am proud of the work Michael Cullen has done. This country is in fine hands and it will continue to be, beyond this election.