Taxation (Urgent Measures and Annual Rates) Bill

It is appropriate in the Committee stage debate of the title clauses to recall the overall significance of the measure that they represent. This has been an extraordinary debate so far on an extraordinary bill. What is clear, which will no doubt carry through into the third reading debate, is that thanks to the loss of mana by the Māori Party the Government will have the numbers, sadly, to pass this bill, and thereby these clauses will be enacted. That, I think, we can take as a given, based on the voting patterns so far.

What has become equally clear through the debate is that there is neither a valid social justification nor any valid economic justification for the measures that are proposed. There has been a growing recognition throughout the House, in the media, and amongst the commentators that when we strip it all away the bill is about politics, it is about who gets what, and it is about rewarding constituencies. It is not about growth, it is not about savings, and it is not about good policy design.

Let us recall that the bill that these clauses represent is going to cost New Zealand about $5 billion. Of that $5 billion, $3.5 billion comes from gutting KiwiSaver: providing not a 2 percent option but, effectively, a 2 percent cap, and thereby taking away with it not only the best chance working New Zealanders have ever had to have a nest egg—a big nest egg on retirement—but the hopes and dreams of many New Zealanders who had just started to believe that maybe they too could have a pool attendant like Mr Key one day. But those dreams are gone. So has the dream of paying off the mortgage when they can cash in their KiwiSaver, because 2 percent plus nothing will not go very far. It will cost the average income earner, starting at 30 years of age, about a quarter of a million each by the time he or she retires—thank you, National Government!

So the real losers today are ordinary New Zealanders, but the other loser here is actually the National Party, interestingly—and ironically—enough. Up until today National had done a pretty fair job of telling New Zealanders they could have everything they had under Labour. The polls were very clear. We were not a Government that was reviled by New Zealanders; they just thought maybe it was time for the other guys to have a go. We will find out in 2011. All of the data is showing that most New Zealanders thought that the economy under Labour was well managed, that the Government was doing a good job, and that overall it acted in New Zealand’s best interests. It is just that they were a bit bored and thought they could have all of that and some new faces.

The real problem with this bill—the bill supported by the title clause—is that the title should be the “Emperor’s New Clothes Bill”, or the “Wolf in Sheep’s Clothing Bill”, or the “New Zealanders Start to Come to Their Senses Bill”, because it dashes the hopes of the million New Zealanders who were KiwiSavers and it gives a kick in the guts to those Kiwis who were paying the self-admitted veto-driven $750 million loss that Bill English first confessed to, which is now on the Internet, and which he then withdrew—that was extraordinarily inept for his first week on the job. That is almost historic. I have never seen a financial veto withdrawn and taken off the Table after it has been posted on the Internet. Extraordinary!

Those people will not forget this. They will not forget this, because on our first day of business National dropped all pretence and reverted to type, just like Ruth Richardson’s first week on the job. Bill English once presented himself as the centre candidate in the leadership race against John Key—and why is it, by the way, that Mr Joyce is sitting right behind Mr English? We will figure that out.

💬 Hon Dr Michael Cullen: He gets to stab Bill before Bill stabs John!

I figured that might be something to do with it.

So we know who the losers are. I actually think one of the biggest losers here is the Māori Party. We had been hoping to build a working relationship with the Māori Party because I think there is some stuff we need to work on together. I fear that those members are not going to be here in 2011, because the majority of Māori Party voters, who voted Labour with their party vote, are not going to be impressed by the fact that the only reason that this veto was not needed, and the only reason they are not getting the $750 million insurance cheque from Michael Cullen’s amendment, is because Hone Harawira and his mates supported that bill. It is the beginning of the end for the Māori Party. It is like the foreshore and seabed legislation in reverse. This is the beginning of the end of the Māori Party, because it has put itself, let us hope unwittingly, in the situation of propping up a National Government that is already showing itself to be different from what it told the electorate—

💬 Hon Parekura Horomia: And what they told the Māori Party.

—and what they told the Māori Party. So I feel kind of sorry for them in this because they have been taken for a ride.

This bill could also be called the “Bad Economics Tax Reform Bill”. It is bad economics for four principal reasons. The first reason is the savings gap is one of New Zealand’s enduring structural economic problems, and it is one of the most important legacies of the outgoing Government that there was a structural solution that was working well. This guts it.

The second principal reason is because the measures in this bill are the opposite to productivity enhancing. They are funding a tax cut that will be either frittered on consumption or, perhaps, squirrelled away and have no multiplier. But either way—and Mr Bennett cannot count it twice—it does nothing for the drivers of growth. It does nothing for technology; in fact, it does the reverse. It cuts the research and development tax credit that was being used to good effect by our most innovative businesses.

The third reason it is bad economics is because it was never going to be an appropriate solution to a relatively short-run cyclical recession problem. It is a structural tax cut, which Treasury itself has confirmed was inappropriate. Members should read the bill, which says it was inappropriate. The briefing to incoming Minister states it was inappropriate. The flow-ons have not been quantified, and the briefing to incoming Minister makes it clear that after $9 billion of stimulus from the Labour tax package in Budget 2008, another $5 billion was imprudent. Between Budget 2008 and now—wakey, wakey!—the world financial markets have gone into a tailspin. That means it will be harder to borrow and banks are having to get expensive credit guarantees.

Against that background the last thing we need is to be driven further into debt. I tell New Zealanders that the fear is that we will be driven so far into debt that the decade of prudent management inherited from the outgoing Government will be wasted. We started off on 35 percent sovereign gross debt to GDP. We got it down to 17 percent. My bet is—

💬 Chris Tremain: At $48 billion. How can that be?

I tell Mr Tremain that National will not actually tell us. National will not publish the forward debt track. My bet is it is back up to 35 percent, in part as a result of this bill, and in part, admittedly, as a result of factors beyond the control of all of us. But it is not an appropriate solution to a cyclical problem.

Finally, this does not maintain a prudent stance in the markets. Both this and talk about driving the New Zealand Superannuation Fund to override good process and forcing it to buy assets in New Zealand will push up the price of assets, it will push up the price of debt, and it will make the borrowing problem worse. It is bad financial economics as well as bad real sector economics.

But let me conclude as I began this summary under the title clause. I think New Zealanders now know it is not about economics, it is about who gets what.

I would like to talk to the title of this bill, and to suggest some other titles that perhaps we could consider. It is the Taxation (Urgent Measures and Annual Rates) Bill. It is actually very, very urgent. Perhaps, when the Minister of Finance was drafting this bill, he considered naming it the “Labour Still In Denial Bill”. Those members are totally in denial. They are still not listening, as my colleague the Hon Steven Joyce pointed out before. They are not listening. They have not been listening for the last few years, they were not listening during the election, and they most certainly are not listening now. In every speech from the minute we started to debate this bill yesterday until now—and, no doubt, during the third reading—they have been totally in denial. They have been furiously looking around, trying to make themselves busy and trying to find a couple of academic points here and there. They are actually contradicting themselves from speaker to speaker. From the previous finance Minister to the current finance spokesperson, they are totally contradicting themselves.

Then we got some lecture from the spokesperson over there about cycles and all that. With regard to the denial part, he said something about a short recession. The Reserve Bank predicted New Zealand would go into recession late last year and early this year, and New Zealand followed its prediction and forecast. The Labour Government led New Zealand into recession long before any other country went into recession—in particular, the countries we compete with. New Zealand is still in recession and, sadly, it looks like we will stay in recession for a bit longer. None of us in this Chamber wants that, of course, but that is the situation, and members opposite should not deny it, because by denying it they are not doing their—probably short—legacy any good at all.

Something was also said about the forward debt track. Perhaps those members are in denial about the forward debt track. As I noted in an earlier speech, members opposite are asking what the forward debt track is. Well, I ask members opposite what revelations are still to come. What ticking time bombs have been set up in other portfolios, in other ministries? I cannot understand members opposite. One of them talks about before the Pre-election Economic and Fiscal Update, and another one of them talks about after the Pre-election Economic and Fiscal Update. They have talked about the debt to GDP ratio, etc. Yes, it is down to 18 percent, but the Pre-election Economic and Fiscal Update took it out to about 30 percent, and possibly even higher—and that was before the revelation about the accident compensation scheme.

Those members should get in the real world today and get out of denial. Why do they not celebrate this bill, which will mean that at long last New Zealand has an ongoing programme of personal tax cuts, of rewarding New Zealanders for their hard work? After 9 long years a bill to bring in personal tax cuts will be voted on; after 9 years—about 3,100 days under the previous regime—it will be in law very shortly. The first tax measure of the previous regime was to hike the top marginal tax rate from 33c to 39c, and 3,000-odd days later they admitted that, yes, they were wrong, and they brought in their tax cut plan when they were about 17 points behind in the poll. New Zealanders saw right through that. Labour members are still in denial in every speech.

One point I note is the disgraceful and disgusting attempt in the last few days by the Hon Trevor Mallard at wedge politics aimed at the Māori Party and low-income New Zealanders. Some of the language and the rhetoric that have been used are absolutely disgusting. Anyone reading Hansard will see it as simply disgusting and disgraceful racism.

Diddums is all I can say to the poor member Craig Foss, who has just spoken. Let me get this right. New Zealand is in a recession. That is not surprising—so is the United States, so is Germany, so is Japan, so is most of Europe, and so are all kinds of other countries around the world. The member says that the answer to the recession is as follows—and let me get this right. Firstly, we cut long-term savings; secondly, we reduce innovation; thirdly, we increase taxes on people on low incomes. Then, of course, we have the really brilliant part of the growth strategy: we get teachers to tell parents, in plain English, how their kids are doing. This in itself will drive increased productivity throughout the economy. This is the growth strategy. On top of that, the real big driver, the real turbocharger for this 1953 Morris Oxford that the National Party is putting up, is a $10 a week tax cut. People will flood into work for that; they will work so hard that the economy will take off and exports will double! We will be in the top half of the OECD within 3 years, thanks to a $10 a week tax cut! Does anybody believe this rubbish? Do people believe that that is a growth strategy in the 21st century? It would not have been very good in the early 20th century; it is hopeless in the early 21st century.

So what does this bill do? It increases taxes for many people. There is nothing urgent about this bill. The only thing that is urgent is that it is being taken under urgency. That does not make it urgent. The bill also provides for annual rates. Actually, it talks about KiwiSaver. I do not know why the Office of the Clerk approved KiwiSaver being in this bill, because there is no reference to it in the title of the bill. It says “Taxation (Urgent Measures and Annual Rates) Bill”. I would like to know how cutting KiwiSaver contributions come within that particular heading. National has got away with stuff I never got away with when Dave McGee was Clerk, I might say in that regard.

We know what the increased tax on low incomes is. The increased tax on low incomes is $730 million over the next 5 fiscal years. It is worse than that sounds, because the increase does not take place until 1 April 2010. So it is actually $730 million over about 3 tax years. It is actually about $230 million a year in increased taxes. On whom? On those earning $14,000 to $24,000 a year, on all families with kids that earn under $44,000 a year, and on quite a lot of families with kids that earn over $44,000 a year. They will pay higher taxes than under the current law. That is what this bill does.

The second thing it does is reduce innovation. It abolishes the research and development tax credit. We are told that this is because companies are rorting it. Well, not a single company has got a research and development tax credit yet, because the first tax year that it applies to has not yet finished. It is all very well that PricewaterhouseCoopers and all these people have been vetting these lovely schemes, but nobody has actually tested anything. I have heard complaints from accountants that the Inland Revenue Department is being too tough around the rules for the tax credit. Far from the tax credit being too easy to get, the complaint is that it is too hard to get.

What we do know is that if we do not have one and Australia has one, we will continue to see research and development sucked out of this country. I do not like tax credits in these areas any more than I like bank guarantees. We had to have bank guarantees because everybody else had them. If we did not have them, then we did not get the money linked to New Zealand banks, and we would not see New Zealand retail deposits in New Zealand banks. If everybody else does it, unfortunately we have to do the same thing. The same is unfortunately true with research and development tax credits. If everybody else is doing it and we are not doing it, that is an incentive to site research and development elsewhere.

What is research and development? It is the brightest brains, the highest-value jobs, the companies that produce the most, the companies that export, and the companies that are more innovative and pay higher salaries. National says that it is going to turbocharge this economy by taking those jobs away and exporting them across the Tasman. This is part of its great strategy for bringing people back to New Zealand. Can anybody explain the logic of this? Nobody in National can explain the logic of this. Basically, it is the same as with all the rest: the Labour Government did it, and therefore the National Government will reverse it because it hates stuff that looks good. That is what it has done. It is like Working for Families and it is like KiwiSaver.

Then, of course, we reduce KiwiSaver in this bill. We turn it from a scheme in which the average worker accumulates savings of 10 percent of his or her wages per annum, of which the worker pays 4 percent, to a scheme in which he or she accumulates savings of about 5 percent per annum, yet many workers—particularly the low paid—will still pay 4 percent, because the employer will shift the cost on to the employee. Mr English claims that lots more people will join, but he failed to answer the question. In terms of the money that National has calculated—and it has calculated money; it has come up with costings, and those costings are based on assumptions—one of the assumptions has to be what the increased uptake of KiwiSaver will be compared with the status quo. The fact is that National has not budgeted anything in that regard. It does not expect an increased uptake, at all.

Yes, the unions wanted to retain the “2 plus 2” entry point. But they were not arguing to stay at “2 plus 2”; they were saying that people could go in at “2 plus 2”, then gear up for “4 plus 4” with annual wage increases, so that they did not feel the initial pain quite as much. That is enormously different from sticking at “2 plus 2” over the lifetime of savings. The sixty-eight members of this House who voted for this are all entitled to an employer’s superannuation subsidy of between 8 and 20 percent on their superannuation scheme. They all voted to lower the subsidy for ordinary workers to next to nothing, and they conned the media into believing that they would get $1,040 a year. They will not—only if they contribute 4 percent continuing. At 2 percent, many will get a tax credit that is a great deal less than $1,040 a year, as a result of these changes. And the threshold of the employer’s superannuation tax payment has been lowered. It goes down from 4 percent to 2 percent. So if the employer continues to pay 4 percent, instead of 4 percent going into the employee account, 3.4 percent goes into the employee account.

Time after time after time, at every step, there is a cut in savings. This is a country with an appalling savings record, with a chronic current account deficit, with an excessive reliance upon foreign capital, and with endless debates about foreign ownership of the New Zealand economy—and this Government decides to cut savings. There is in an international financial crisis, partially driven by the growing gap between the debtor countries—the borrowing countries—and the savings countries, and the National Government has firmly nailed its flag to the mast of more borrowing and more spending. This is not an economic programme that makes any sense: a dumber economy, lower private sector research and development funding, more taxes on low incomes, fewer savings—that is the National Government’s formula. Somehow or other, a little tax cut in the middle and the top will make up for it!

We are not actually lowering marginal tax rates for most people; they barely change for the vast majority of people. So the incentives are not there, because economists tell us that the incentives are in terms of the marginal tax rate, not the average tax paid. Once one lowers the average tax paid, people just bank the difference—that is a given. It just becomes part of the family budget from then on. It does not change incentives to work from that point on.

The final point is the betrayal by the Māori Party of its constituents. Those members are voting for a bill that discriminates particularly against their constituents. The low-income people who lose under this bill are disproportionately Māori. Māori disproportionately benefited from, and were enthusiastic about, KiwiSaver, because it was particularly geared to helping low to middle income earners get a regular savings habit at work. For the first time for decades we were seeing significant Māori uptake of work-based superannuation. And the Māori Party voted for this. That is why the financial veto was withdrawn—the National Government was worried that the Māori Party members would abstain on, or vote against, the measure. The National Government leant on them and they caved in. Their so-called mana was not enhanced, at all. Their mana is knocking around somewhere in the gutter at the present time. They are feeling about this big. Mr Harawira said that he wants to kill Trevor Mallard because Trevor Mallard dared to point out that he has betrayed his own constituents. Well, utu time has a date: it is probably November 2011.

It is already launched; the blogs are turning against National. When one of National’s favourite journalists, the daughter and sister of National Party MPs, is attacking it in her blog today, we know that the worm is turning. The honeymoon is over. I say to the National members that it is time to get out of bed, boys and girls, and start trying to defend where they are, because the honeymoon is over as a result of the legislation that they are pushing through. They should listen to Checkpoint tonight, as group after group is lined up to attack the National Government. This is the real world those members are in. They will go back to their offices, wait for the officials to turn up and scare them with the latest frightening story, panic again, rush in, blame everybody in sight, and try to pretend they are not the Government. Well, they are the Government. We know where we are—we are the Opposition. They are the Government, they have to do it, and what they are doing at the moment is cutting the taxes of the wealthy, increasing the taxes of low-income people, cutting savings, cutting innovation, and betraying the very people who voted for them in this election.

Dr Cullen just cannot stand the idea that the National Party put a plan for the economy to the New Zealand public and they voted for it. It is a different plan to his plan. In fact, people who are voting for the KiwiSaver changes tonight are voting for a KiwiSaver that will be fair. It will be fairer for the simple reason—

💬 Hon Member: Fairer?

—it is—that Labour has never understood that most of the working-age population is not in KiwiSaver. Labour has always believed that the great battling New Zealand public should put their hands in their pockets to fund Labour’s latest little vote-catching scheme. We have changed the rules so that those New Zealanders get an opportunity to join KiwiSaver, because if they are able to join KiwiSaver they will get the benefit of the subsidies provided by the Government. If they cannot join KiwiSaver, which most working-age New Zealanders have not done, they do not get one cent to help them with their saving. If they are working on the average wage, trying to pay off a mortgage when interest rates have been rising, and cannot afford to join KiwiSaver because they cannot give up almost 6 percent of their net pay each week—which a lot of people cannot; and they are the ones who did not vote for Labour, because Labour would not listen to them—those people, who are struggling to keep their heads above water on their mortgages, now have a better chance. Because interest rates are dropping, they may now be able to enter KiwiSaver at 2 percent.

See, Labour did not listen to those people. They listen only to the people who take the cash and say they are grateful. Those are the only people they listen to. Also, through this debate, we found out that Labour always intended KiwiSaver to replace national superannuation. That is why they have been talking about—

💬 Hon Member: We did not!

Dr Cullen has been saying that his intention for KiwiSaver has been to make it like the Australian scheme. The Australian scheme is 9 percent, KiwiSaver is 10 percent, and that is how we should have it! The Australian scheme—as I pointed out to the House—replaces the public pension. It is viciously income-tested and asset-tested. New Zealand does not have income and asset-testing. We had a 20-year debate over it, we have settled on universal superannuation, and now, in addition to that, we are pre-funding it. So every year the New Zealand taxpayer puts $2.5 billion into the New Zealand Superannuation Fund to pre-fund national superannuation. That is staying where it is. That is part of the deal for retirement income. The KiwiSaver arrangements Labour had simply cut too many people out, so we have changed them.

The other example of Labour listening only to people who take its cash and are grateful is that of all those people in New Zealand who over the last 4 or 5 years have not benefited from Working for Families. The benefits of Working for Families for households with children have been significant: big increases in their net income—$100 or $150 a week in some cases. But people who earn under $44,000 who have no children, of whom there are 630,000—battling Kiwis who voted Labour loyally for 10 years—got nothing. The strongest economic growth in a generation, and they got nothing. Tonight we have listened to them, and we have given them something, so alongside families they now have the tax cuts and the share of the economic growth they should have had 10 years ago.

I stand to speak to the title clause of the Taxation (Urgent Measures and Annual Rates) Bill. Of course, the use of the word “urgent” in the title is rather perplexing. It does not seem to me that there is anything so urgent that this bill has to be rammed through the House tonight or tomorrow. What is so urgent about this bill that it could not be considered by a select committee? What is so urgent that we could not have a proper public debate about the content of this bill? What is so urgent that we could not let civil society, which is the foundation of our community, have a look at the content of this bill? And what are the urgent things that are not in this bill?

The UK Tory party, the Conservative Party, has become very interested in climate change, because it thinks that is quite an urgent thing. It has started to embrace the idea of using the tax system in order to move our society towards a more sustainable direction. Its leader, David Cameron, has talked a great deal about it. It seems to me that climate change is an urgent issue, and if we want to take urgency to deal with something urgent, then why not deal with climate change? Surely that should be at the top of the agenda, like green taxes are now at the top of the agenda for discussion by the Conservative Party in the UK. But there is nothing in this bill about climate change. There is no transition for the tax system—to shift taxes off income and on to resources and pollution. Instead, the only discussion we are having about climate change is that maybe the taxpayer should pick up more of the costs, because the Government is about to weaken the emissions trading scheme. Every time we weaken the emissions trading scheme, the taxpayer is going to hand over more money to pay for the pollution of other people. It seems to me that if “urgency” is what this bill is meant to be about, then we should be looking at climate change and what we are going to do about it.

What about discussing something else that should be dealt with in this bill? I think the state of our rivers is quite an urgent issue and is something that our tax system should look at. There is nothing in this bill about making sure people pay in that respect. There is the issue of a tax on commercial water-use. This bill is a tax bill, so it could have talked about a tax on commercial water-use. It could have something about that as an urgent issue. Then there might be a financial incentive to use water efficiently. Instead there is no financial incentive, because this tax bill does not really deal with the urgent issues that are facing our country.

What about another urgent issue that should be addressed by this bill—that is, inequality and poverty in our country? We have a major problem with inequality and poverty, and this tax bill will actually make it worse. Instead of the tax bill that we have already passed into law that would give tax breaks to lower and middle income earners, particularly lower-income earners, this bill reduces the tax breaks that we are going to give to those people. The tax cuts we were going to give to lower-income earners are being taken away.

But it seems to me that what is really urgent in this bill, and why it is so important that it is passed quickly, is that next year people are going to get tax cuts of one sort or another. Now, when they get those tax cuts, most of them will say: “Oh look, National gave us tax cuts, just like they promised to do.” That is what most people will say. They will not realise they were already going to get bigger tax cuts, particularly for lower-income workers. The reason this bill is so urgent is the politics of it. The Government needs to get it through quickly, before people realise what is being done. That is what is urgent about this bill and that is why it is being pushed through. The reason we are having this debate at 10.30 at night, and going through to midnight, is the politics of it, so that people do not realise.

What about the savings problem? That is another urgent problem that I would like us to address. The fact is that we have a massive current account deficit, most of which is an investment deficit, because we are highly indebted. We borrow lots of money so we can trade each other’s houses. What about dealing with that problem? Instead, this bill does not deal with that. It makes the problem worse. We have a bad savings culture. We are trying to do something about it.

KiwiSaver was very, very far from perfect but it was a step in the right direction. The Greens support the 2 percent but it should be “2 plus 4”. Why does the Government not do “2 plus 4”? Why does it have to be “2 plus 2”? Why not go to “2 plus 4”, if the Government really cared about savings? We have a savings problem and we all agree about that. What about “4 plus 4”? Why do we not go that way? Let us give people the option of 2 percent but let us support it. It seems to me that an urgent problem that we have as a country is our savings culture. But this bill puts things backwards.

We have another big problem, an urgent problem—because it seems to me that the bill should be about our urgent problems. We have another urgent problem, which is research and development. We do not do a lot of it in New Zealand. Most of it happens in universities and the public sector. Very little of it happens in the private sector. We had this idea of a research and development tax break in order to get more research and development in the private sector. It was not necessarily going to work and it was not perfect but it was trying to address one of the fundamental problems of our economy, which is that we do not do enough research and development in the private sector. That is an urgent problem, which we should be doing something about. Instead, we are going in the opposite direction with this bill.

It is urgent that the Government has another look at it, and that the Minister of Finance thinks whether this is really what he would want to be responsible for, or whether he really wants to put down as his first bill through the House something that does not deal with the urgent problems we face like climate change, water quality, inequality, savings, and research and development. In fact, it starts to put some things backwards. In terms of the urgent problem of the economic stimulus package—which is an urgent problem, I give you that—I ask whether we want to have a stimulus package that consists of tax cuts. A large part of those cuts will be spent mostly on imports, although not entirely. Therefore we will be stimulating the Chinese economy with our tax cuts. Some of those tax cuts will be saved, which is good. But if we really wanted a stimulus package to deal with the urgent problem, which is the fact that people are losing their jobs, why not build more State houses? Why not insulate cold, damp houses, which has long-term benefits, and employ New Zealanders? It would stimulate economic activity, because even though the Government does not think it is a problem, we think it is a problem that people live in cold and damp houses. We think we need more houses. If we insulate houses, it has benefits for the health system, the education system, and energy efficiency. That would be a good way to stimulate the economy. That would be a good kind of stimulus package, instead of this package, which is very, very focused on tax cuts. It does not look at the big picture—what we need to do as a society and what we need to do as an economy to prepare for the future. That would be a much better way to have an economic stimulus package.

I just want to respond to some of the comments made by the Minister of Finance when he said at the outset that what Labour could not get used to was the fact that the National Party had gone into the public arena with its tax policy, had made it clear to the public of New Zealand, and had won the election.

💬 Hon Gerry Brownlee: Title debate.

Well, let me just ask the Minister of Finance whether, when he went into the public arena to take part in an election campaign, he was in a position to spell out that those people earning under $20,000, or under $44,000 if they had children, were going to get a tax cut decrease compared with what was already in New Zealand statute? Did he tell the public of New Zealand that? I do not think so. Do we think he told the public of New Zealand who are earning between $44,000 and $50,000 that the $10 a week these people who have been missing out all this time were going to get is not coming after all? Did he say that to the people in the—

💬 Craig Foss: Between $24,000 and $44,000.

No, those on $24,000 to $44,000 are getting it. But National members campaigned that those on $24,000 to $50,000 would get it, and then they broke the promise. Mr English did not—

💬 Hon Bill English: That’s not right.

That is not a broken promise? Well, should we go back into Part 3, with the leave of the Committee, of course, and change the law so that we can have an amendment to make sure that the promises that the National Party made in the election will be kept? At the moment, unless we go back into Part 3, that is the case. The abatement starts to occur well before $50,000 and the measly $10, in Annette King’s words, is much less than that. Did he say to the people of New Zealand that any dollar above 2 percent paid by the employer would have to go and visit the taxman first? Did he say that? No, he did not say that before the election. In fact, he did not say it before yesterday. Yesterday the announcement came in the form of Mr English saying that it should not come as a surprise to anyone. Well, if it was no surprise, then why did he not just say so? He did not point that out, so National has gone into the election with one tax package and come into the House with another.

But the other thing I would like to say about Mr English’s remarks is that ridiculous comment about how Dr Cullen had hoped that KiwiSaver would replace New Zealand superannuation. This is what is ridiculous about it. If the previous Government had wanted that to be the case, we would not have made KiwiSaver opt-out; we would have made it compulsory.

You see, the whole point of making it an opt-out system was to give a bit of choice to the public of New Zealand, but also to protect New Zealand superannuation from right-wing Tories in future generations. This was in addition to New Zealand superannuation, which, the Minister was generous enough to point out, has now become a universal entitlement and is now being pre-funded thanks to the Cullen fund—there is $14 million in that fund, and I tell Mr English not to go near it.

So let us just see whether the logic of Mr English’s comments about Dr Cullen’s intentions is true. It is palpably false. A few things about the New Zealand economy are in good shape, and a few things about the New Zealand economy are not in good shape. Generally speaking, we can say that our net or gross debt to GDP levels are in good shape, and have been in good shape for a few years. We can say that we have a high—

💬 Craig Foss: Is 45 percent prudent? That is what Helen Clark said in the 1990s.

I do not know the member’s name, and I do not know where he comes from, but he would be very hard-pressed to back that assertion up with any record in Hansard. He should go and look; he will not find it. The member is just making it up.

But let us take a look at some of the good things about the New Zealand economy. We would probably agree that we have a relatively good credit rating internationally—in fact, we have a very good credit rating internationally. I think we could agree that the business regulatory environment is in good shape. The World Bank keeps telling us that, and other surveys keep telling us that we are near the top for setting up or pulling down a business and near the top for regulatory regimes for businesses. We have low or very low levels of corruption, and we are all pleased and proud about that. We have low unemployment, though we know that that will go up in due course. But we know that some things about our economy are not good. We are a low-wage economy, even though in 9 years the Labour Government managed to lift the minimum wage from $7 an hour for an adult to $12 an hour for an adult. In the 9 years prior to that it had been lifted by somewhat less than $1 an hour.

💬 Hon David Cunliffe: In 9 years?

In 9 years—less than a dollar an hour; $5 an hour over the 9 years of our Government. But we are still a low-wage economy. We are an economy that does not save, and we are an economy that does not do research and development. And we are passing legislation today that increases taxation on the low paid, that cuts research and development, and that causes dissaving. What is sensible about that? What is reasonable about that?

What is more, this change is structural. This is not a short-term stimulus. The Greens suggested that we might retrofit a few more houses or build a few more State houses—that would be a short-term stimulus. Or we could do what they did in Australia and say married superannuitants would get $2,100, and a single superannuitant would get $1,100—or whatever the figures are. It is a short-term stimulus. People on the equivalent of Working for Families in Australia would get $1,000 a child, or whatever it was—I am sorry, I do not recall the details. That is what a short-term stimulus is like. This is not a short-term stimulus; it is medium-term wealth redistribution. It is a structural fiscal change that will cause deficits.

💬 Hon Dr Michael Cullen: Social engineering.

It is social engineering at its worst. I cannot believe that National would use the offices of this House to ensure that its own social engineering predilections would come to pass. But that is what it is.

💬 Hon Annette King: It is putting the rich back on the dummy.

Yes, it is putting the rich back on the dummy. That is exactly what it is—a wealth redistribution in the medium term. The whole idea of fiscal restraint went out the door when the Speech from the Throne was read on Tuesday this week, and we heard that there would be fiscal deficits foreseeably. That is not acceptable. That is not prudent. That is something resembling shadows of Muldoon.

💬 Hon Gerry Brownlee: Ha, ha! No, it is a legacy of Labour, actually!

It is not a joke.

This country has come into a fiscally positive position in recent years, under successive Governments. It has certainly stayed there for 9 years of the Labour Government, and here, within days, we are moving into fiscal deficit. A fiscal deficit for a short period would be a good thing. You see, that is what a short-term stimulus would deliver; it would help to pull us through. But, no, the Government has not done that; it has eschewed the idea of a short-term stimulus and instead gone for a medium-term structural change, which is the redistribution of wealth. That is Tory behaviour at its worst. It is bad for our economy, it is bad for the rich-poor gap, it is bad for innovation, it is bad for saving, it is bad for exports, it is bad for high wages, and it is bad for our competition with Australia. I cannot think of a thing that is good about it, and the shame of it is that we had this opportunity and we blew it. That is the shame of it. We had the opportunity to do something that was going to be clever, and nothing clever came before this House. That is a shocking, shocking shame, and I am very, very sad that we will end the Committee stage of this legislation in due course, which shifts us in the wrong direction at the wrong time for all of the wrong reasons.

I move, That the question be now put.

I am happy to take a call on clauses 1 and 2. When we deal with the title, we can see that this bill would probably best be called the “Taxation (Tax Increases for the Poor, Less Security in Retirement for the Low Paid, and a Dumber Economy) Bill”. That is exactly what this legislation does. That is what the National Government thinks is so urgent that it needs to be passed at quarter to 11 at night in urgency—tax increases for some of our most vulnerable families, less security in retirement, because it is gutting KiwiSaver, and a dumber economy, because it is getting rid of the research and development tax credits.

With the kind of global crisis we are facing now, there are probably a few things that people might expect their Government to do. First, they would probably expect it to protect the most vulnerable—those who are most likely to lose their jobs, those who are most likely not to get pay increases, and those who are most likely to be unable to afford to pay their mortgages, pay their food bills, or be able to buy the kinds of things they need to send their kids to school. The second thing one might expect one’s Government to do is to promote innovation, promote research and development, and promote the kinds of policies that will bring in higher-paid jobs, increase exports, and put more money into the real economy. When the country has such high personal debt levels, the third thing one might expect the Government to do is to take savings seriously, and try to increase personal savings and increase the depth of capital in the country.

The astonishing thing about this legislation is not that National has ignored one of those things but that it is that it has ignored all of them. And not just that—it has done the exact opposite of everything one would expect a responsible Government to do in a global financial crisis. Indeed, it has done the opposite of what just about every other country we compare ourselves to is considering doing in this global financial crisis.

The most offensive thing about this bill is that the members who have spoken on it tonight have tried to make us believe that they are doing it because they care about poor people. They have tried to make us believe that they care about the low paid and about workers. Maybe this bill should be called the “Taxation (Merry Christmas, Low-paid Workers, and You Are Welcome, from the National Party) Bill”.

We heard from Mr Chris Tremain, who did a little dance while he said it, that workers should be thankful for this legislation. We are sorry, but we did not realise we were meant to be grateful for the fact that the lowest-paid workers will have their taxes increased, and for the fact that the lowest-paid workers will have their retirement savings slashed. When those workers get to retirement age there will be no point in doing any more extra work, because they will lose their independent earner tax credit when they work. They cannot supplement the retirement income they lost through this legislation by working, because they will be disadvantaged. Mr Chris Tremain told us that we are meant to thank the National Government for this legislation, because it is so good for our workers.

Then David Bennett came in. Amongst all the clichés, he tried to tell us how much he cared about young people. Well, I would welcome anyone to listen on the Internet to Mr David Bennett’s speech on the youth minimum wage abolition bill. He called that communism. He said that paying young people the same money for doing the same job as someone who is one day older than them was communism, yet we had to listen to speech after speech from Mr David Bennett, with all the clichés, telling us about how much he cared about those young people.

Young people are joining KiwiSaver, I say to Mr Bennett. Mr Bennett can stand up in this Chamber and tell us until the cows come home that this bill will make more people join KiwiSaver, yet he will not answer the simple question as to why those increases are not budgeted for. If the Government is expecting an increase in KiwiSaver participation, why is that increase not budgeted for? He now pretends he is reading his papers, because he has no answer to that question.

Those members know that this legislation single-handedly, with a stroke of a pen, destroys KiwiSaver. They know that this legislation single-handedly, with a stroke of a pen, will seriously damage the real economy. It will drive jobs offshore at a time when we need them the most. Other countries around the world will be saying: “Thank you, New Zealand National Government, for getting rid of your research and development tax credit, because we have benefited from it.”

Worst of all, this legislation will increase the tax on some of our most vulnerable families. I urge the Māori Party to think very, very seriously about supporting this bill. It is not mana-enhancing to take money out of the pockets of the poorest families in this country and give it to the people who need it the least.

We have just witnessed one of the quite interesting assumptions dished out by the Minister of Finance. I think Dr Cullen’s chronological order on the framework that it is supposed to stimulate the economy is spot on—take away the 2 percent, and make believe that the $1,040 is still there, but it is not against $26,000; it is against $52,000. Then we hear this preaching and leeching from people like Mr Bennett that this measure is about helping poor people. Roger Douglas stood up in this Chamber and said “Well, as a start you forget about the beneficiaries.”

💬 Hon Annette King: And the old people.

And the old people. That is what he was alluding to, and that was parroted by the Minister of Finance in a very simple way. He has put out the assumption that at the end of the day our superannuation fund is too generous. So all this hinting is going on. It was not too different from the rough talk and the make believe in relation to accident compensation. It was a whole lot of hogwash.

We have listened to Mr Bennett flick out the platitudes in relation to caring and sharing, and wanting to help young people and Māori along the freeway to the future. Well, the freeway to the future in this country has a hell of a lot of potholes in it—potholes brought about by mean-spirited people. We are heading towards Christmas, a time when the mistletoe is glistening and the fellow with the red cap comes ripping through town. [Interruption] What has Gerry Brownlee given to people? Big bags of nothing! It is a disgrace. Māori people are affected. Tēnā anō taku kōrero ki a koe, e Hone.

[I have told you that before, Hone.]

💬 Hon Gerry Brownlee: That won’t go down well at home.

It might not go down well with you, but our people will understand that.

The CHAIRPERSON (Eric Roy): Order!

I am sorry, Mr Chairperson. I should have said “Mr Brownlee”. It will go down well with our people because 73 percent of Māori who work miss out in this case.

What a sad day for Māoridom! That the Māori Party was not told, or that it was not explained clearly enough to them, is not too dissimilar to what was not told to the public. A whole lot of porkies were told to the public, and one does not have to be a rocket scientist to know that. Craig Foss huffs and puffs over there because he is a price-taker. He knows how to play the futures market; he knows how to let it slip. There are a whole lot of people with passionate theories about how to build up the price of the profit margin. That is why Merrill Lynch is down in the mud. That is why a lot of those big corporations, driven by price-takers and the leader of this country, have hurt people’s investments. That is why old people in this country are crying and worrying—it is because their superannuation has been taken away from them by bogus investors. Craig Foss knows about that.

At the end of the day it seems quite peculiar that the Minister of Finance is saying that this was a prelude to changing the KiwiSaver programme to take over superannuation. He is lucky that the Cullen fund is there. Treasury has told the Minister that a strong platform has been left for the National Government to work off. National is lucky, and it should be thankful that we have helped it along. But what does it do? On its first day in here it has come in and dealt to the poor people and to the Māoris. Those National people could not even run the House properly on the first day, and that was a sad example.

One does not have to be a rocket scientist to understand that when one stimulates business, there are fundamentals in it—one understands where the market is, one makes sure that the product is saleable, and one makes sure that there is good research and development. This bill has been about stripping the general research and development, which is something that the majority of businesses in this country asked for. What did the Government do? It closed research and development and shoved it down a ditch. Shame on it!

I move, That the question be now put.