Taxation (Urgent Measures and Annual Rates) Bill

When I rose last night and spoke very briefly, I moved that this bill be read a second time, and I pointed out that the one thing that was obvious from the first reading debate was that Labour still does not realise it has lost the election. With the attitudes on display, I see that that is a realisation that will take some time to sink in, but I will come back to that.

I remind members of the context in which this legislation has come before the House. New Zealand has already been in recession for a year, and of course there are questions about how we managed to get into recession before other countries did. The 2008 calendar year will show virtually zero growth—the much-vaunted legacy of the previous Government, I presume. During this debate I expect that Labour members will be able to explain to us just why the economy was in such apparent great shape when it had zero growth. We have been in recession for longer than any comparable economy, and that was before the international events that are now concerning us. So we are introducing this legislation in the context of an economy that already had quite significant problems because of 9 years of complacency about what it takes to grow an economy and allow people to have all the benefits that go with a growing economy. That is the first point.

We are introducing this legislation in the context of a country that was already in recession well before the international events that have created so much uncertainty. Of course, we have seen those events occur in the last couple of months, and we are surprised that in its dying days the Labour Government did not make much of them. The reason is that Labour was doing all of its dirty tricks, and that is a very obvious and high-profile legacy of this Government in the public mind; at a time when it should have been going through our proposals in detail, which are embodied in this legislation, and outlining its own ones in detail, it was chasing dirt files in Australia on the current Prime Minister.

If those members do not understand the detail of the legislation that is laid out now, that is why. They were too busy being focused on continuing their legacy of personal denigration and continuous scandal, and on issues that did not matter to the people who trusted them. That is why those members are on that side of the Chamber. Instead of looking at the detail of our economic policy and debating it in the election campaign in a way that would reflect the interests of the people who trusted them, Labour members were too busy chasing their strategy of personal denigration. The dirty, complacent Labour Party let its own people down because it did not focus on the issues that mattered to its own people. We did, and that is one of the reasons why Labour lost the election.

Looking ahead, we see that the New Zealand economy faces very significant uncertainty, and that uncertainty is—at the moment, anyway—largely to do with the state of the economies of our trading partners. In the last couple of months the economies of our trading partners, with the exception of China as a significant partner, are almost all headed into recession. That has happened quite quickly, even in Australia, which as recently as 2 months ago was forecast to grow at 2 percent per annum, but is now looking at a couple of quarters of negative growth despite the Government over there saying that it would not happen. So this legislation is part of a fiscal stimulus of around $7 billion over the next 2 years. That is not all of it; this will add to the stimulus created by a fairly big-spending Budget in 2008—well, another big-spending Budget from a Government that has tried all sorts of tricks to hide some of the impacts of its worst decisions—then the tax cuts on 1 October 2008. Those tax cuts were made somewhat reluctantly by the previous Government. Having spent 9 years saying it would never do that, it did. Having spent 9 years saying it would never borrow for tax cuts, in its dying days it turned round and borrowed for tax cuts. That is another reason Labour lost the election: it ended up doing the opposite of what it said after 9 years, which was “We will never cut personal taxes.” Then because National won that argument the Government was forced to cut them, and it lost the election anyway.

There is nothing worse than giving way on one’s principle and then regretting that one did it; that is what those members are sitting there doing. Would they not love to be able to say “We stood firm; we never gave in; we never cut personal taxes.”? They cannot; at the last moment, along with the blowout in Treaty settlements, endless promises on rail, and the big hole in the Accident Compensation Corporation accounts, they caved in and made tax cuts. Well, we are happy to claim those tax cuts as part of our stimulus package because, in Dr Cullen’s immortal words, “He lost”—he lost the tax cut argument.

When we add those three things together—the big-spending Budget in 2008, the 1 October tax cuts, and this tax package—the economy over the next 2 years will benefit from $7 billion of stimulus. Why does that matter? Well, it matters because it will put cash in people’s pockets.

💬 Hon Darren Hughes: Not all people.

Well, actually, just about everybody. I want to pay attention to one particular issue that has been raised, and that is the issue around Working for Families. Over the last 3 or 4 years there have been substantial increases in the net incomes—the after-tax incomes—of people with children.

💬 Hon Darren Hughes: Opposed by the member.

Well, no, actually we support it. Many other New Zealanders who were not part of Labour’s political strategy got nothing, so in this package people who got nothing for 9 years—loyal Labour voters who were meant to be looked after by the previous Government, which spent all its time on a campaign of personal denigration and incompetent scandal—will get something. It is true that there are no increases in Working for Families here. That is simply for this reason: families with children have had big increases over the last 2 or 3 years; people without children have had nothing. This tax package will give them some cash in their pockets, which will help to keep this economy ticking over and will protect people from the sharpest edge of recession.

As it happens, this is a decision consistent with our long-term goals, which are to improve incentives in the economy to encourage people to get ahead, and to let them make their own decisions with their own money, instead of being told what to do by a Government that takes too much tax off them. So the decisions that will help the economy in the short term to cushion the effects of a recession will also help the economy in the long term to achieve our objectives of raising our long-term growth performance. Of course, who would know where Opposition members start from? They are against tax cuts; they are for them. They are against borrowing; they did it. They think the economy matters, but when it matters they never talk about it, such as in an election campaign. They talked about everything else. I suspect that it will take, probably, another 12 months for Opposition members to figure out that Labour is no longer the Government.

That has to be one of the singularly worst speeches I have heard from a Minister of Finance in my entire time in Parliament—it is the worst, in fact. There is Bill English, saying we do not realise we have lost the election; I do not think he realises he has won. That was one of the bitterest, meanest, most angry speeches I have heard. We are in a better mood than he is, and we lost the election. I ask New Zealand what that was about. Was that the happy, friendly face of the modern National Party, or was that some warmed-over dipstick from Dipton? Look, I do not know about his mana-enhancing Treaty blowouts, and his carping and whining about the election campaign, but can members just imagine the situation if National had lost? How bad would Bill English’s mood have been then?

💬 Hon Darren Hughes: Oh, he’d be happy then. He’d be leader.

Ha, ha! That is terrific—that is terrific. He would have been happy then, because he would be leader—“Et tu, Bill!” It is a wonderful thing to watch the body language on the front bench of the Government—absolutely wonderful. Every time the poll ratings go up, Bill English’s face goes down.

Three things are wrong with this bill: it is bad process, it is bad economics, and it is bad for working Kiwis. The bad process stuff is obvious, is it not? The Government did not even put the bill on the Table before the debate started. It is not sending it to a select committee. What has happened to the flowering of democracy, the “Key spring”, in New Zealand? We cannot see that today. All I can see is a bill the National members must be ashamed of, because they are rushing it through all stages, with no opportunity for affected New Zealanders to comment and no opportunity for the detail of the bill to be tested.

You know, this bill is so shoddy that even the commentary on it says it is rubbish. It does not meet the Government standards for a regulatory impact assessment, according to page 10. The Government has not quantified the effects of the bill. It does not know whether the removal of the research and development tax credit will push innovation up or down. It does not know the net effect of the KiwiSaver changes, but we established yesterday—thanks to Dr Cullen—that it is not allowing for any growth in enrolments. So that move to make it easier for New Zealanders to enrol—that minimum 2 percent—is something we know the truth about, ladies and gentlemen: it is a cap. It is a maximum, because that is the default level that people will enrol at. That is all an employer will be allowed to subsidise, and that is bad for workers. It is bad for Kiwis, who need to save.

You know, the macro effects of this legislation are rubbish. If there is a short-term recession problem and the pump needs to be primed, the last thing to do is to have a long-term tax cut. Why is that? Well, there are two things. Firstly, any economist knows that the multiplier on Government spending is bigger than the multiplier on a tax cut. Why is that? Because if investment is directed well, it flows through the economy. If there is a tax cut, people spend part of it on stupid consumption items, they spend some on investment goods, and they save some away. That does not ricochet through the economy, so the multiplier on a tax cut is lower than the multiplier on good investment. That is why this measure is bad economics.

The second thing is that this is a long-term measure to address a short-term problem. It is a bill that does not work. The idea is to match a short-term problem with a short-term measure. So one does a temporary stimulus package, and does not lock in a structural tax cut that will blow out the debt track. But, hey, if National is confident about that debt track, I say it should show it to us. Why does it not tell New Zealanders the truth about where gross sovereign debt will get to in 20 years’ time? National has not told New Zealand that, because it is deeply, deeply ashamed about it.

Even Treasury, in its briefing to incoming Ministers—I tell Bill English that it is on about page 10, if he has not got that far—tells us that this fiscal stimulus is not required. That is because there is $13 billion of pump priming, of which $9 billion came in October with Labour’s package. Two-thirds of it has already been done, and we spent—as Dr Cullen said—right up to the maximum of where we felt that we could go, based on the information that we had, up to the point where we were borrowing to fund a tax cut, which is bad policy and bad economics. Ignoring Treasury advice and, like Rip Van Winkle, ignoring the entire meltdown of the global financial market, Mr English has done the politically populist thing. He says we should have a tax cut.

A tax cut sounds wonderful, until one works out who gets what. I say to members and to those who are listening that the answer is that if a person earns less than the average wage, less than $44,000, that person will lose, because National will have taken off the KiwiSaver enrolment subsidy. National is to cut $3.5 billion from KiwiSaver funding. That has to come from somewhere, and it will come from the workers—from the poor, as usual. And who gets what? Well, someone on $750,000 a year, a nice income for a good National Party supporter, will get $200 a week in tax cuts, which that person does not need. A person on the average wage of $45,000 will get $1.92 a week. Whoopee! That will really help at Christmas, will it not, even if one has not lost one’s job because of the 90-day sacking bill. I thank Mr English very much for the kinder, gentler, National Party.

The smiley face of National is hopping from cloud to cloud, forgetting to tell people the truth about what was in its policy. What about that superannuation tax credit that National just forgot to mention—that it was cutting the net rate from 4 percent to 3.4 percent. That would not really have pleased the oldies if they had been told about it ahead of time, so National did not tell them. The reason that we do not get to test these things is that there is no select committee process. This bill is being rammed through. National knows this bill is not well-thought-out. It is bad economics; it is bad for people.

This bill will make a lot of our old structural problems worse. Those problems were that people were spending a bit too much because their house valuations were going up, and they figured that they could take afford to take on a bit more debt. People did spend beyond their means; there is good evidence of that. But this bill makes that problem worse. It says National will cushion the effects of a short-term recession with a tax cut. The money will not go into investments; it will not do anything for productivity. That was National’s theme in the Speech from the Throne, just yesterday, when it said it would go for growth and productivity. Nothing in this bill will go into growth; it will go into wasteful spending and into things that will not help our innovators. The bill will not help our exporters, will not help our dynamic companies, and will not help families who are in need.

I ask what the bill was supposed to be about. What was it supposed to do, and what was the point of this bill? Was it to deliver on an election promise? What did National campaign on? It campaigned on the promise of good, open Government, and a fresh start for New Zealand. Do members remember those words? Well, they lasted about a day into the business of the House. The fresh start for Government meant doing away with the select committee process. It meant doing away with giving the Opposition adequate notice, in order for it to prepare a defence. It meant doing away with the constitutional safeguards that New Zealanders hold dear. If the process around this bill is anything to go by, let alone the 90-day Employment Relations Act amendment bill outrage that is coming later this week, New Zealanders are in for a very, very tough time.

Hey, members should not feel sorry for us. We are professionals. We understand that we are here to serve the public. We know that when the public wants us to serve them, we will be ready. Members should not feel sorry for us because we are in Opposition; that is another form of service. Members should feel sorry for New Zealanders who are going to suffer from the excesses of a Tory Government that is reverting to type on day one of holding office. They should feel sorry for New Zealanders who will suffer from the abuse of process and get bad economics delivered to them, with proposals that are ill-defined and badly quantified, do not meet regulatory impact standards, have effects that have not been quantified, and have loose and shoddy details.

This bill is a nonsense. It is about who gets what—and those who get it are the rich, and those who lose it are everyone with kids and an income of $44,000 a year or less. That is the truth of it, and that is why we strenuously oppose this bill. This Government has started the slide to 2011 on day one. This will be a one-term Government, because New Zealanders hate people saying one thing and doing another. They do not mind hardship if they have voted for it, but they really resent being sold something and getting something different from that. This bill is bad economics, it is bad for New Zealand, and it represents bad process.

In speaking to the second reading of the Taxation (Urgent Measures and Annual Rates) Bill, I want to say that given the speech of the previous speaker, the Hon David Cunliffe, he may well not last quite as long as the Hawke’s Bay District Health Board did. I think his colleagues were all murmuring as he spoke, and what happened last night was very indicative of the support they have for him. Earlier speakers—[Interruption]—and I think we are hearing them again—are still fighting the battles of yesterday. They are still fighting the battles of yesteryear. I half expect something about the Viet Nam War and the Springbok Tour to come out, and maybe it will in speeches to come.

The comments about process and select committees were interesting. I think almost every bill, amendment bill, and budgetary announcement on KiwiSaver was passed under urgency—all bar one, the first bill. They were all passed under urgency. They did not go to a select committee, etc. The difference between this bill not going to a select committee and the various changes, Supplementary Order Papers, and amendments that were rammed through under the previous administration without their going to a select committee is a thing called the general election. The thrust of this bill went to the select committee of New Zealand in the general election. Part of our 100-day plan, part of our core philosophy, and part of our ongoing plan for New Zealand is, quite simply, an ongoing programme of sustainable tax cuts leading to growth.

The previous speech was very revealing. The member spoke about people reverting to their true colours, or something along those lines. I could not believe my ears when he said that everybody knows that the multiplier on a tax gain is bigger than the multiplier on a tax cut. We now see the justification for Labour taking the top marginal rate from 33c to 39c. And I will concede that it was in its programme that it put before the public—fair enough. But if we take what the finance spokesman said to its logical extreme, we find that he is saying, basically, that we should hike taxes. He spent about 3 minutes talking about the multiplier on tax cuts versus the multiplier on tax hikes. I ask whether Labour is revealing its hidden agenda, now that the election is over. Is it revealing what would have been in the mini-Budget of the previous Minister of Finance? Presumably that would have been in December if Labour had got in. I ask whether Labour would have actually hiked taxes, because the logic of the previous speaker’s speech was about increasing taxes.

💬 Hon Darren Hughes: Why are taxes going up for people in Flaxmere?

The gentleman who was the previous electorate member for Ōtaki asks why taxes are going up. He should turn to his left and ask that question of the gentleman who, over the last 9 years, was responsible for the greatest tax increase in New Zealand’s history. If he wants to make some further comment, he should take a call later on.

I still cannot understand the logic. If the previous member had actually said something along the lines that conditions are such-and-such and we need to maintain the status quo, perhaps I would have found it logical. But when that spokesperson talks about multipliers, I ask whether he is talking about hiking taxes. I ask what his policy is. Is his policy to hike taxes now? The logic of what that member just said totally contradicts what the previous Minister of Finance, who is sitting behind him, said in his Budget of May 2008 when he announced his first series of tax cuts. Dr Cullen himself is on record talking about ongoing personal tax cuts, and now you are contradicting him. The factions and splits within the defeated Labour Party are starting to come to the fore.

💬 Hon Trevor Mallard: I raise a point of order, Mr Speaker. I am sure you did not contradict Dr Cullen, as this member has indicated. Mr Speaker, the Hon Dr Lockwood Smith, has indicated that he will be very strict on the incorrect use of “you”, and I hope it will apply to the Government as well as the Opposition.

I thank the member for bringing that to my attention. I apologise to you, Mr Deputy Speaker. I will continue.

We are starting to see some of the splits in the defeated Opposition come through. The Opposition members are contradicting each other on core policy, contradicting each other on their vision of what may be needed to take New Zealand forward. This proposal, the core policy in the Taxation (Urgent Measures and Annual Rates) Bill, went before the public of New Zealand, and 3 or 4 weeks ago over 1 million New Zealanders voted for it.

I will make a couple of other points about something someone spoke about yesterday, during the first reading. Opposition members talk about the debt to GDP ratio, and someone made fair play of that yesterday. I would like to note that in the 1990s, which the Opposition often talks about, the previous Prime Minister, Helen Clark, would often talk about a debt to GDP ratio of 40 percent, or even 45 percent at some stages, as being prudent. Yes, good global economic conditions took New Zealand’s debt to GDP ratio down to about 17 or 18 percent. In the Budget of 2008, it was around those levels. Of course, as the skeletons started to come out of the closet, and as the ticking time bomb started to tick louder, we saw in the Pre-election Fiscal and Economic Update that it was forecast to nudge 30 percent, I think, with a decade of deficits. Of course, those deficits have to be funded in some way. It is interesting that when I point that out, the Opposition goes very quiet.

I will raise two other points. Opposition members constantly talk about low-income earners. Well, I will make just a couple of points. There are many low-income earners in New Zealand—the Opposition is quite right—and that is because of the last 9 years of a Labour Government. Incomes have come down somewhat compared with those of comparable economies around the world. That is why there are a lot more lower-income people in New Zealand than in comparable economies, and that is why many of those people voted the National Party into Government, and threw the Labour Party out. I would like the member opposite, the Hon Darren Hughes, who is interjecting, to note that.

Everyone needs a doctor at some stage. We all want police, we all want chippies, we all want plumbers, and we all want good teachers. We want all those people, and, funnily enough, all those people are on the highest marginal tax rate in New Zealand, 39c. It is those people who have been leaving this country in droves for a brighter future elsewhere, after the last 9 years of a Labour Government. That is why they have been going across to Australia. We all have friends, family, and whānau over there who are getting a higher after-tax income than they could get here after 9 years of the previous administration. Low-income earners in New Zealand have to pay more for their plumber, chippie, truckdriver—you name it—because they have all gone to Australia. We are trying to build an economy that is attractive enough to bring them home.

I will make one other point. It has not been mentioned, but it needs to be mentioned, because there has been talk of debt funding, etc. Somebody was talking about debt projections, etc. Well, I ask what the total quantum of the Accident Compensation Corporation (ACC) mess is. The people over there in Opposition must have a fair bit of knowledge of it. I ask them for the total quantum. I ask them to give it to us to the nearest $50 million. The Government accounts are not narrowed down to the nearest cent; they are approximate, and there are contingent liabilities in there. You ask us for a debt projection; I ask you to put on the table all your knowledge about all the—

💬 Hon Trevor Mallard: I raise a point of order, Mr Speaker.

💬 Mr DEPUTY SPEAKER: I know what the Hon Trevor Mallard is going to say. Members cannot use the word “you”. It brings the Speaker into the debate, and that is not allowed.

I apologise again, Mr Deputy Speaker.

I ask members opposite who have any knowledge of any other black holes, of any other ticking time bombs, to put them on the table. They should put them on the table so that we have full knowledge of them. Then, and only then, will you see the forward projections that you are demanding right now. I suspect that the reason you want those projections so badly is that you know there are more ticking time bombs to come.

There are two questions left hanging. The ACC annual report did not have anything in it about this nonsense. Under the New Zealand International Financial Reporting Standards there is an obligation to put—

💬 Hon Trevor Mallard: I raise a point of order, Mr Speaker. It is not your report.

I did not say that.

💬 Hon Trevor Mallard: That’s exactly what you said.

💬 Mr DEPUTY SPEAKER: The member cannot use the word “you” or “your”. Please confine your debate to the subject and do not use those terms.

Thank you, Mr Deputy Speaker. I did not mean to use that word, and if I did I apologise. I meant to say “the report”.

Under New Zealand International Financial Reporting Standards, which the ACC’s accounts and annual reports are prepared under, this mess should have been noted. The Government accounts are prepared under those standards, so the Pre-election Economic and Fiscal Update should have noted this mess—at least in the contingent liabilities. Where was any mention of the ACC mess? Where was anything about the Government Shared Network mess? What other messes have we got coming?

New Zealanders should be very, very fearful of the legacy of the previous administration. We are discovering more and more by the day, and it is not a pretty picture. Members opposite are fighting old battles, because they do not want to talk about the future, and they do not want to talk about the appalling state they left the books in.

The reason we are fighting old battles all over again is that the National Party is fighting its old positions all over again. This is 1990 all over again. What was the key phrase in yesterday’s Speech from the Throne? It was “We’re going for growth.” Well, who made that slogan up? Ruth Richardson said in 1990 “We’re going for growth.”, and frightened the hell out of everybody as soon as she said it. What were the first two things that that Government did? It abolished employment equity and it started cutting the incomes of the poorest New Zealanders. What are this Government’s first two measures? It is introducing fire-at-will provisions and it is cutting the incomes of many of the lowest-paid New Zealanders. This is 1990 all over again from the National Government.

But the most extraordinary thing today was that Mr English, the Minister of Finance, gave a second reading speech in which he failed to answer a single question that was raised in the first reading debate, because he had no answers. All he did was say “Oh, somebody in the Labour Party had some dirty tricks in the election campaign.” Well, that is pretty rich, coming from the man who organised the leak of emails about Don Brash in 2005. That is pretty rich coming from that particular member.

But he put up the most extraordinary argument, and I want to go over it again. He said that the Labour Party lost the election because it failed to put the National Party’s policies under sufficient scrutiny. In other words, Mr English said that his policies were so weak in detail that if we had debated those policies in detail, National would have lost the election. That shows real confidence in what it went to the country on in 2008. That argument says “Our policies were rubbish, and why didn’t you rubbish them and save me, the Minister of Finance, from having to move this rubbish policy through Parliament under urgency?”. That, I think, is the most extraordinary argument I have ever heard from a Minister of Finance. Indeed, it went further. He said that because we did not do so, that was a justification for passing this rubbish policy. Goodness knows what else is going to be “justified” by us in being passed.

The attitude in Mr Foss’s argument was that if something were in the National Party manifesto, it need not go to a select committee. Well, that is going to leave select committees free from the rest of the work for the next year or two, since presumably most of the work coming through is somewhere within the National Party manifesto.

These questions were not answered by Mr English. Why is National increasing taxes on low-paid workers? Why is it increasing taxes on low and middle income families compared with what is now in the law—not some announced policy by the previous Government but in the law—to take place in 2010 and beyond? We have the ACT Party, which stands for cutting taxes no matter what, voting for increases in taxes in the House today. Why is the Government cutting research and development in the private sector? Why is it cutting savings? Why is it not costing its claim of an increased take-up with the lowering of 4 percent to 2 percent, and has it considered the issue of portability with Australia?

We are told that the whole point of National’s policy is to stop people going to Australia, yet what is one of the main attractions of Australia for workers? Workers in Australia get a 9 percent payment into superannuation funds paid by their employers. Under KiwiSaver, workers are still going to pay 4 percent, but they can expect 9 or 10 percent to go into their superannuation fund. This bill will cut that back to 4 percent or 5 percent, and the worker could end up paying the full 4 percent contribution thanks to other changes that will come through later this week or sometime on Saturday. That is the reality. That is a real disincentive.

But it is worse than that. If, as I believe is likely to be the case, the Australian Government says the superannuation portability is off the table because there is no longer a match between KiwiSaver and that Government’s compulsory scheme, then Kiwis in Australia now will be locked into Australia. They will not be able to come back to New Zealand because they will not be able to get portability from their Australian scheme into KiwiSaver. Under portability they were going to be able to transfer their Australian funds into KiwiSaver; they were going to have the option of moving back. High-quality Australian professionals and managers were going to be able to come to New Zealand and continue a scheme, and be able to move back to Australia if they wanted to later in life, and that option, that choice, was important to attract people over here from Australia. So what is the purpose of doing this?

It is clear that National has never thought through that issue. It is clear that National members have not talked to the Australian Government. It is clear from the stunned mullet looks on their faces that their caucus has never discussed this issue. It is clear they still do not know what it is they are doing in that particular respect. The member, Shane Ardern, can drive his own personal tractor up the stairs of Parliament as often as he likes; that is not going to bring anybody back from Australia. But having a proper superannuation scheme with portability will bring people back from Australia, despite a National Government within New Zealand.

Of course, the other thing we learnt from Mr English—and I tell Mr Flavell that I hope Māori Party members were listening—was that there has been a blow-out on Treaty settlements. Did Mr Flavell hear that? No, he did not hear that. He, as usual, whenever the National Party is talking, now puts his ear plugs in so he cannot hear what is being said, because he does not want to know. He has been parading around the marae, and at those huge hui with 10 or 12 people, with Māori activists, because the public was not supposed to know where the meetings were being held, saying: “We’re going to deliver everything to you. We’re going to deliver the ownership of the foreshore and seabed. We’re going to deliver mana-enhancing measures all over the place.”

Well, let us go through the mana-enhancing measures in this bill. There are increases in tax for those earning $14,000 to $24,000 a year. Does that sound like a group that might have a disproportionate Māori content within it? There are increases in taxes on families—all families with kids—earning under $44,000 a year. Does that sound disproportionately like Māori families? Has this member enhanced the mana of those families in voting for those increases in taxes? He voted for it yesterday. He will vote for it today, and he will vote again and again and again. I tell Mr Flavell that the cock will not crow just three times; it will crow many times during this day today. He will not be such a big man on the marae now when he goes back. He is going to have to explain, with Mita Ririnui present, why he voted to increase taxes on his constituents. Why will he be voting for a measure that enables lower-income workers with very little bargaining power to have the employer contribution to KiwiSaver transferred to the employee? Does that sound like a group of workers who are disproportionately Māori? It sounds like it to me.

The five Māori Party MPs have sold their souls for not even a mess of pottage—for not even a spoonful of pottage. They have sold their souls for an empty promise to enhance not the mana of Māori but their own mana. That is what that agreement was about, and they are launching down the same track as the New Zealand First Māori MPs from 1996 to 1999. They will be dog tucker at the 2011 election, because their mana is not going to be enhanced. Mrs Turia can drive up with the entire whānau in the VIP car to the 2011 election campaign, and Mr Sharples can drive up to his marae in the VIP car in 2011, but they will find silence on the marae, which is the bit that will tell them they are in the most trouble. That is what they will find in that particular regard.

This bill cuts private sector research and development investment. It is a dumber economy. It increases taxes on low-paid individuals. and it increases taxes on superannuitants and beneficiaries who are earning a bit more and working a bit more, trying to make their way in the world; it cuts taxes for the chief executive of Telecom. It produces a dumber society with slightly lower taxes, lower growth rates, lower productivity, and greater inequality, and more people will stay in Australia.

I rise to speak to the second reading of the Taxation (Urgent Measures and Annual Rates) Bill. The Green Party will be voting against this bill for a number of reasons. The first reason is that we think we can use the tax system to incentivise activities or to disincentivise, and in the first instance this bill decreases incentives to save. Green Party members in general have supported the KiwiSaver scheme. The scheme has always had some problems; it was a far from perfect scheme. We were dubious about whether it would increase the overall savings rates or whether it would simply transfer them. We were worried about the impact on Government savings, due to the cost of the scheme. We were also worried that we were using taxes to subsidise inequality in retirement income between those who could afford to save and those who could not. Nonetheless, it seemed to us that the KiwiSaver scheme was a sensible approach to try to increase savings. We think that the good part of this bill is that it introduces the 2 percent option, which the Green Party always supported, and there was a lot of support in the select committee for that. We also think that allowing low-income earners to get the full $20 a week is a positive thing. But overall the bill decreases incentives to save.

The Green Party supports tax shifting. We support taking taxes off incomes and putting it on resource use and pollution. However, this bill does a different kind of tax shifting. It takes tax incentives off savings to give income tax cuts. In terms of a long-term strategy for a nation with a chronic current account deficit, we think that it does not make any sense to reduce incentives to save. From our point of view, we think that we need to increase incentives to save. Having a bill—one of the first bills that the Government has brought into the House—that actually decreases incentives to save does not make any sense to us.

The second reason concerns the stimulus package. Is this the best way to deliver a stimulus package? When we pass on these income tax cuts, they are going to be either spent or saved, in one form or another. If they are spent, then a good proportion of that spending will be on imported goods—that is, the Government will borrow money from overseas in order to pass on income tax cuts so that people can then purchase goods from overseas. Effectively, we are borrowing money from overseas in order to stimulate someone else’s economy. A large part of the income tax cuts will simply be used to stimulate someone else’s economy, as people purchase goods and services from overseas. It seems to us that this is not the most sensible way to set up a stimulus package.

The other thing that will happen is that if people save, that will not have any stimulatory effect, at all. That is not necessarily a bad thing, in order to increase savings and to reduce household debt, but it is certainly not a good way to stimulate economic activity. It seems to us that if we were to put together a sensible economic stimulus package to save New Zealanders’ jobs, and to keep the economy ticking over at a time of recession, then it would be much better to invest in infrastructure than to have tax cuts.

We think that the infrastructure we should be focusing on should be infrastructure that does not produce demand for imported goods. One of the best ways to have that, of course, is to build houses, and to have home insulation. This country desperately needs affordable housing. There is a tremendous shortage of affordable housing. If people could have affordable housing, they would be far less in need of income tax cuts. What better way is there to build affordable housing than to build the kinds of houses that the Prime Minister grew up in? The Prime Minister got a hand up so that he could get ahead in the world, because he had access to State housing. But now the Government has decided to cap State housing so that other people cannot get a hand up. It seems to me that we should give a hand up to people so that they can have affordable housing. Building infrastructure is a much better way to have a stimulus package than simply giving out income tax cuts. It is a much better way to stimulate an economy, and it means we get something that is worthwhile, as well.

Building sustainable infrastructure not only is a much more sensible stimulus package but means we get long-term investment in our society and our economy. If we invest in public transport, for example, we can prepare ourselves for the future in which climate emissions will be constrained, because, unlike the ACT Party, the world has understood science. The world is getting its head around climate change, and we need to invest in public transport. In the long term, also, oil prices will continue to go up, and we need a world in which we have the capacity to get around. With public transport we would be producing fewer greenhouse emissions and using less oil, so actually having a stimulus package that invests in sustainable transport is a much better option.

A much better option, also, is to invest in sewerage schemes. It is a disgrace that right around this country we have very poor-quality sewerage schemes that are pouring sewage into our harbours, and people are unwilling or ashamed to eat the food from those harbours because it is contaminated. It is not very good for our tourism industry, either. If I were the Minister of Tourism, I would be very interested in a stimulus package that improved the sewerage schemes around our country, so that tourists would not come here and discover that the beaches make them sick. That seems to me a much better stimulus package than giving income tax cuts, which will simply result in a very short-term stimulus to someone else’s economy.

We should also be investing in trees. Planting trees on eroding land would be a much better stimulus package than these tax cuts. We have a major problem across this country of eroding land and land eroding into rivers, and the best thing to do about it is to plant trees, which is good for our greenhouse emissions. One of the problems we will have is that our greenhouse emissions will go through the roof, and that will be incredibly expensive for us as a nation and it will be a major problem for our taxpayers. Taxpayers will have to foot the bill, because this Government wants to weaken the emissions trading scheme so that taxpayers pick up more of the debt. If we plant trees on eroding lands, not only will we reduce erosion into our rivers and lakes but we will also sequester carbon, which will mean that we have fewer greenhouse emissions, less debt, and less of an impact on the taxpayer. It seems to me that a much more sensible stimulus package is to employ people to plant trees on eroding land. We should be focused on the long-term future of our economy. Making the investments in infrastructure that we will need for the long term is a much more sensible way to deliver a stimulus package than having a set of tax cuts.

Then we come to the process issue about this bill. It is with sadness, really, that I see that the explanatory note says “However, due to the time frames involved, the RIA consultation requirements have not been met.”

💬 Hon Darren Hughes: Who’s the Minister in charge of that?

I think the Minister in charge, the new regulatory responsibility Minister, or whatever he is called, is of course the ACT member, the Hon Rodney Hide.

It seems to me extraordinary that the very first bill that this new Government brings in does not have a proper regulatory impact assessment. There has not been sufficient time for the very first bill to have a regulatory impact assessment. So all that talk was bunkum—it does not mean anything. When it comes down to it, it is a case of just ramming the bill through. Who cares about a proper regulatory impact assessment? After all, the Government members will just ram the bill through so they can deliver tax cuts to their mates. So that is an incredible act of hypocrisy.

Then we come to the idea of a broad-based tax rate. This bill talks a lot about how we need low tax rates and a broad-based tax system. One of the ways to do that—and it says this in the notes on the bill—is to tax investment gains. I notice that even though there is support for a low-rate, broad-based tax bill, what we are really getting are just lower rates that are not broad-based. There is no move within this bill to actually broaden the tax base to cover capital gains, which is something that is missing in the New Zealand tax system—unlike the systems of pretty much every other OECD country. The Green Party supports a capital gains tax—excluding the primary family home—to broaden the tax base, which is, supposedly, one of the objectives of this bill. But the bill does not actually broaden the tax base. We also think it should broaden the tax base by taxing resources. We would like to see some of those elements in the bill, but unfortunately they are not there.

I will not touch on the issue of research and development, because I think that has been covered extensively in this discussion, but I will note the inequity of all this. I asked the Parliamentary Library to do some work about it. I asked how much less in tax someone earning $30,000 a year will pay after 1 April 2011. They say that under this bill that person will pay $160 less per year. Someone earning $250,000 will pay $5,160 less income tax per year. So that does not seem to me to be a very fair or progressive way to run the tax system, and it looks as if the Government is just passing a bill that will benefit rich people at the expense of poor people. Why would it support a system whereby someone on $30,000 gets only $160 less tax while someone earning a quarter of a million dollars pays $5,000 less tax? That does not seem to me to be a very fair system.

This bill has not been well thought out. It is being rammed through. It is not a good bill. It gives bad incentives. Why does the Government not go and have a think about it, and come up with a better bill?

Debate interrupted.