Taxation (Urgent Measures and Annual Rates) Bill

It is good to have an opportunity to discuss some of the detail of this bill, after what has been a very rushed process to date. I hope that some of the political rhetoric may subside for a while, and that we and New Zealanders can get our heads around some of the measures that are embedded in the bill.

Let us start, if we can, by going through exactly what will change for average New Zealanders with regard to the KiwiSaver component of this bill. Firstly, they will not get the $40-odd down payment for their registration fee. Secondly, although National has tried to fill in part of the gap, if someone is a low-income earner—by which we mean anyone earning less than around the average income of about $44,000 a year—and that person has kids, he or she will be worse off, despite the fact that National has, late in the piece, restored some of the Government’s contribution.

💬 Chris Tremain: I raise a point of order, Mr Chairperson. We are considering Part 1, which deals with personal tax rates. The speaker, who is a learned member of the House, is talking about KiwiSaver. I ask you to bring him closer to the part, please.

The CHAIRPERSON (Eric Roy): I think that is a fair call. Members can refer to something else, but they need to draw what is said back to the part, for comparative purposes or whatever other purpose.

Of course, the tax rates are funded largely by the changes to KiwiSaver, and I had thought it was appropriate to cover both the funding and the expenditure side of this bill.

However, let us go directly to the tax component. The principal difference here is twofold. The first difference concerns where the rates and thresholds are set, and the second is in the top rate. Let us turn first to the thresholds. Under Labour’s package some $8 billion has already been invested in the changes that came through on 1 October. They were designed to lift the thresholds, thereby providing all New Zealanders with approximately equal improvements in the tax actually paid. It was a very, very fair set of tax changes, and it would have carried on in that way. By 1 April 2011 people earning up to $20,000 a year would have been paying 12.5 percent, those earning $20,000 to $42,500 a year would have been paying 21 percent, those earning $42,000 to $80,000 a year would have been paying 33 percent, and those earning above $80,000 a year would have been paying 39 percent, in tax. What has happened, of course, under this bill from National is that people who are earning between $14,000 and $20,000 a year will now pay 21 percent, not 12.5 percent. That is a very, very significant difference. It means that many below average income earners, second earners, and families will face a higher tax threshold, a higher tax rate, at that level.

Why has that been done? This is a very artificially constructed tax cut. It appears to be built around the promise that National made during the election campaign to try to engineer a $50-a-week cut for the average income earner. So in fact the tax remission spikes around that part of the band, and then on either side of that it drops down. The real change occurs for those in the top bracket—over $70,000 a year. Why this Government thinks that people who earn over $70,000 a year deserve to be the biggest beneficiaries from this tax cut escapes me. Someone who is earning three-quarters of a million dollars gets $200 a week, and someone who is on the average wage gets $2 a week. Why is that? There is no economic justification for that. People who are very wealthy, of course, do not spend the tax cut that they get. They can afford to save it or invest it, and therefore it is taken out of circulation.

💬 Chris Tremain: So you admit that some people actually save it. Some actually save their tax cuts. That’s good to hear from you.

I say to Mr Tremain that that can be useful, but one has to be very careful about why one is doing it. The Government has said that the principal reason for this tax cut is to restore demand in an economy that is facing recession. It simply will not do that if the money is saved away. We have to start with $3.5 billion more in savings, because that has just been sucked out of KiwiSaver. Then we have to offset the $1.5 billion of innovation that we are not going to get—or more; probably $3 billion or $4 billion—because the research and development tax credit has been axed. I think we need to be very clear about the arguments for this tax change.

To summarise, we know we have a threshold problem for people who are on lower and middle incomes. We know we have a skew of benefits to people who are at the upper end of the income range, and we know that we have some perverse effects in terms of whether this tax change will help to offset the recession, as a result. There is a lower multiplier on tax cuts than on Government spending if it is well directed, and a very low multiplier on high-income individuals who are squirrelling the money away because, frankly, they do not need the tax cuts. Those are some of the economic arguments.

The next questions that we come to, around the tax rates, are what the actual fiscal impacts be will be and what the outlying debt track will be. Most New Zealanders by now understand that under the previous Labour-led Government, under Dr Cullen’s leadership, the gross debt to GDP ratio, the amount of Government debt that we owe other countries, was cut in half, from 35 percent to 17 percent. With the recession it is up to about 18 percent, but it is still very low by world standards. Why does that matter? It matters hugely because it means the incoming Government has the wiggle room to spend and invest in infrastructure or take other measures to offset the recession. The Government has the fiscal headroom.

The question is what has happened to that headroom, as a result of this package. Treasury’s briefing to incoming Ministers made clear that in Treasury’s view it was unnecessary to pursue further tax cuts on top of the close to $9 billion of stimulus that came in on 1 October. The reason for that was that it considered that stimulus to be sufficient, and that there were real risks about driving us deeper into debt.

How deep into debt are we getting as a result of this tax cut? The answer is that we do not know. We do not know because the new Government is not telling us. It has taken the unprecedented step of ramming a major piece of tax legislation through the House under urgency, with no select committee process, with no ability to interrogate it on the detail, and with no reliable statement of the macroeconomic implications of what it has done. This bill is a balancing act. Of course, we would all like to give tax cuts—and we want to give fair tax cuts—but we have to be constrained by the ability of the Government’s books to support them. There is no information provided to the public, let alone to the Opposition, about the state of those books as a result of this bill.

Let us now turn to some of the anomalies that arise. Some of those are deliberate; others may be unwitting. As Dr Cullen has said, there is an anomaly around pension portability. Australia has a 9 percent robust employer-funded superannuation savings scheme. We had a roughly equivalent scheme under Labour’s KiwiSaver scheme, and the previous Government had sought and received the approval of the Australian Government to allow people to move backwards and forwards between the two countries—something that was especially important, one would have thought, from a National Party point of view, because National members spent most of the election campaign grousing about people who cross the Ditch. So what is the implication? The implication, now that our tax package has resulted in a change to the KiwiSaver benefits, is that that portability could be eroded.

Regarding superannuation savings, the employer contribution for those who were seeking part-time work or who were close to superannuation age was at 4 percent on a net basis after tax credits. Now, that comes down to, I believe, about 3.2 or 3.4 percent net under this bill, undermining further the ability of New Zealanders to save for their superannuation, especially if they are doing so from a secondary income.

So a number of technical anomalies, alongside the headline rate and threshold changes, are built into this bill, and they deserve very significant consideration.

On the question of process, we have already discussed the lack of a select committee hearing. We have not really gone into the fact that the commentary on the bill admits up front—and I have never seen this before—that due to the haste with which the bill has been prepared, the Government has not been able to do a regulatory impact statement.

💬 Hon Member: Amazing.

That is amazing, given that the new Government campaigned on regulatory integrity and has a confidence and supply agreement with the ACT Party.

💬 Hon Darren Hughes: They’ve got a new Minister for it.

Yes, the Government even has a Minister, and on its first bill—

💬 Chris Tremain: I raise a point of order, Mr Chairperson. Once again, we are straying right off the subject. That is a matter for a speech on the title of the bill, and this debate is about Part 1. We are dealing with personal tax cuts and the thresholds.

I certainly respected the member’s earlier point of order, but I think, respectfully, Mr Chairman, that on this one he is mistaken. The regulatory impact statement applies to the whole bill, including the rate changes, which are the subject of this part.

The CHAIRPERSON (Eric Roy): I am not going to uphold the point of order.

Thank you very much. So we know that the proper processes for regulatory scrutiny have not been gone through on this bill.

The next problem is that the economic effects of this bill, as the commentary on the bill states, have not been fully analysed. We do not know those effects, not only because the Government has failed to publish the debt track but also because, according to the commentary on the bill, the analysis has not been done even by the Government’s officials. We do not know what the flow-on effects of the funding mechanisms of this tax change will be. We do not know the net impact on innovation. We do not know the net impact on savings. We do not even know the net impact of the spending multipliers from the tax change. I say to those who have not been in Government for a while that one normally does the work before one puts a bill on the Table. Otherwise there might be an unintended consequence.

One of the unintended consequences of this bill, from a Government point of view, is that a whole lot of New Zealanders are waking up and realising that this is not what they voted for. What they voted for, they thought, was a kinder, gentler kind of National Party that would leave in place the good things that Labour had done, and maybe offer a fresh face, such as it was. But that is not what they got on day one. Besides this bill, they have a very harsh piece of industrial relations law, which we will come to shortly, and they can see that some people have joined the flat earth society.

I will take the liberties that the previous speaker took around a wide range of topics, although he did eventually come back to Part 1. In speaking to Part 1, which is clauses 3 to 17 inclusive, I draw the Committee’s attention to the title of Part 1, which is “Personal tax cuts”. Does that not sound great? Personal tax cuts—right here in this bill.

💬 Hon Dr Michael Cullen: Oh God! Don’t slobber.

I will say it again for the member over there—personal tax cuts. I imagine that his first taxation bill said “personal tax hikes”. Is that what the member’s first tax bill said? Actually, all the way through the last 9 years the member’s bills have probably said various things about threshold and fiscal drag, etc.

There are a couple of points in this part. OK, the micro staff, which members on the other side of the Chamber keep talking about—$2 here and $3 there—is relevant, but what they keep missing and do not talk about, which says much about the head space they are still in, is the macro, the vision, the investment that this makes in New Zealand. The threshold changes in Part 1 actually are all about the biggest investment in the infrastructure of New Zealand—the people. It is saying to them: “We value your hard work. We value your staying, hopefully, in New Zealand, and we value your investment in your education, with your student loan, and these tax threshold changes will enable you to pay your student loan off earlier and will offer you a higher, more viable after-tax income.” I am yet to hear anything of that nature from members opposite rather the myopic vision they have of trying to justify things to each other, in spite of their somewhat diminished majorities.

Part 1 contains a pro-rata provision and explanations of it. As all members will acknowledge, there are many complicated issues around all things related to taxation, and this policy that the Government has introduced here was flagged very, very early on. So there is much certainty out there, and, in fact, members will see as they go through some of the detail in the bill, how, with the top marginal rate going down to 37 percent, the banks can start to use resident withholding tax at 38c from 1 April next year, because over the year the pro-rata will catch up. Most things will come out in the wash.

Previous speakers have mentioned that these changes will mean that 80 percent of New Zealand taxpayers will be at or under the 20 percent rate. That is not too bad, but why stop there? I was very interested in the speech made by the previous speaker, who this morning was basically arguing for higher taxes. He started to refrain a bit and tried to justify that a bit further, but his multiplier arguments were all over the show this morning. I guess he has gone out and googled the stuff in between speeches and realised what he was saying. What he was saying was that if this was his bill, the rates would all be going up, and the bill would be called the “Personal Tax Hikes Bill”—or at least this part of it would be. I look forward to debating and discussing further points in this bill. There will be some good and robust questions, I am sure, and the Minister in the chair is more than prepared to push further National’s vision and our ambition for personal tax cuts.

The various parts of this bill are either unfair, incompetent, dishonest, or stupid. Part 1 is the unfair and incompetent and dishonest part. Part 1 is entitled “Personal tax cuts”.

💬 Chris Tremain: Yes!

Well, the member may be able to afford a brand-new four-wheel drive to park out at Napier airport even further into the future, because he actually is not in the electorate; he needs the four-wheel drive at the airport to give the impression he is somewhere around. But in fact for many New Zealanders Part 1 is a personal tax rate increase. For many people it is a personal tax rate increase.

In the debate on Part 3 I will move an amendment—and I foreshadow this now because it relates to this part—that will provide an opportunity for the Māori Party in particular and the National Government. In the case of the Māori Party the amendment will give it the chance to put its mana where its mouth is, and, in the case of National, to put its money where its mouth is—that is, to move for a new tax credit that will apply where anybody under this legislation will be paying more tax than he or she would have done under the personal tax cuts legislation of 2008. Those taxpayers will be able to apply for a compensatory tax credit to make up the difference between what they would have received under the existing legislation and what they will get under this new legislation. It is very simple—they will be able to apply at the end of the tax year for that compensatory tax credit. That will show whether National believes that nobody is worse off under this bill. If nobody is worse off under this bill, that amendment will cost it nothing. If the Minister in the chair, the Hon Bill English, then issues a financial veto saying that it will have more than a significant impact on the fiscal balance, we will know that it will cost money. In other words, people will be worse off under this bill.

Who is worse off under these personal tax cuts? The answer is anybody earning $14,000 to $24,000 a year of taxable income. Why? Because the $14,000 threshold does not go up to $20,000 as it does under the existing legislation. The difference of $6,000 will be at a different marginal tax rate by 2011 of 7.5c in the dollar. That is $450 a year. That is nearly $9 a week. For a person on $20,000 a year, $9 a week is quite a lot of money. It is peanuts for the members of this Committee. It means nothing to Jackie Blue, who is looking bored over there. It means a lot to a person on $20,000 a year. Who is such a person? It is a second-income earner in the family. Maybe it is the wife going out on a part-time job. It is a cleaner—a beneficiary who is putting in some effort and earning some money himself or herself. And now these people will be paying a higher tax rate on that than they otherwise would have done. It is a superannuitant with a bit of investment income, or a superannuitant who has a small part-time job, maybe delivering pamphlets. Would it not be ironic if that superannuitant had been delivering National Party pamphlets at the last election, and ended up paying a higher tax on those deliveries than he or she otherwise would? So I invite members to consider this very simple amendment; let us just see what they will do with it. The amendment protects the low-income earners.

The second group who will lose under this bill are all families with kids who earn under $44,000 a year. There are quite a lot of those people—that is nearly the average wage. So by 2011 a single-income family on nearly the average wage will be worse off under this bill than they will be under the current Act. But even people earning a good deal more than that are worse off, because they lose their entitlement to the new independent tax credit if they are receiving Working for Families, and that is a cunning means of trying to stop them applying for Working for Families if they get only a little bit at the end of the day. They will all be worse off.

Surprisingly, Mr English has developed an antipathy towards modest-income families on small incomes. Why that is I do not know. Maybe he supports only large families on large incomes; he does not seem to support small families on small incomes. They will be penalised as a result of National’s taxation changes. So I say to Mr English that a family on 40,000 bucks a year, struggling to pay the rent and the mortgage—we have heard about them for the last 3 years from the National Party—will face a higher rate of tax and a lower net income as a consequence of this bill. How does that fit in with a Catholic social justice perspective? I remember asking Mr Bolger the same question in late 1990, when the National Government legislated to provide that a widow had to go to the Department of Social Welfare to apply for a widow’s benefit within a week or she would lose money. How did that fit in with those kinds of precepts? It does not fit in with those kinds of precepts, at all.

You see, we used to attack the National Party for the trickle-down theory—the notion that as long as the people at the top got more, eventually it would trickle down to those at the bottom. What was proposed for those at the bottom was not even a 6-litre shower but a half-a-litre shower, as the margin eventually trickled down to those people. Well, this is “trickle up”; it is a new theory from National whereby the taxes on low incomes are increased, and that trickles up to those at the top. And why? In one of his previous speeches Mr English gave away that it is more expensive to give tax cuts to people on low incomes, because, as he said, people on high incomes get that tax cut, as well—as if somehow that was wrong. That was a very interesting little slip there, as if to increase the bottom threshold or lower the bottom rate was somehow wrong, because everybody got it, because the rich also got it.

That was Mr English doing his usual strange reverse logic in trying to look equitable by saying that it is awful that rich people get the tax cut that poor people get. Of course, the point is that it is the other way around: poor people get the tax cut that rich people get, whereas if one does it the other way, and simply lowers the top rate, poor people do not get the tax cut that rich people get. But, of course, we were told that the important thing was the threshold. Under this bill the threshold that the top rate cuts in at is lower than under the existing legislation, because under the existing legislation it rises to $80,000 a year. Under this bill it goes up to only $70,000 a year. Do members remember when we were told that there was some kind of envy tax whereby the top tax rate would cut in at $60,000? That was in 1999 and 2000, which was 8 years ago. It is perfectly all right now to cut in at $70,000 a year some way down the track from here, and that is not some kind of envy tax! But, of course, the theory underlying this is that if marginal tax rates are lowered, people work harder. This is the capitalist version of the Stakhanovite worker—much beloved of the Soviet Union. This approach says that if we kept an extra 1c or 2c in the dollar, we would all work miles harder.

Well, Mr Bridges will not do so. He will get paid the same anyway; it does not matter how hard he works. Members should look at National members; most of them have not done a stroke of work for the last 3 years. That is becoming very obvious in the way they have carried on in the House in the last day or two. They have not done a stroke of work. They are pretty well paid. They received a personal tax cut on 1 October and did not even say thank you for that; it just was not big enough—they want more, please! In fact, the marginal tax rate goes up on those people who earn between $14,000 and $20,000 a year—the people we want to encourage into work who are on benefits, to earn a bit and to help themselves get started and move along. The superannuitants want to keep a little bit of work, to earn a bit, so their marginal tax rate goes up from $70,000 to $80,000 a year. That is a lot of senior teachers and nurses and other people, who will be paying a higher marginal tax rate than they would have done under the current legislation. It goes down to Mr Foss, who does not believe in work. He is the poor man’s John Key. He went overseas and did not make a fortune, then came back to New Zealand.

We have one area where there is a big cut in the marginal tax rate. Where is it? Between $42,500 and $44,000 a year, the marginal tax rate goes down 13c. So we will see an extraordinary country, a country where people earning low incomes will work less, because that must be the theory—the marginal tax rate goes up. People in the next range will work exactly the same amount, because their marginal tax rate has not changed. Then there will be this extraordinary group of heroes of the new sort of capitalist Soviet Union, earning from $42,500 to $44,000—the turbocharged people of New Zealand—who will be working incredibly hard until they get to $44,000 a year. Then, suddenly, they will stop working harder as there is no point, because their marginal tax rate would now be back to where it was going to be before, in any case. Of course, if the taxpayers are independent credit earners, then their marginal tax rate would not be 20c in the dollar but 32c in the dollar. So there is basically no change, at all. So from an economist’s perspective there are no real incentives in this at all that make any difference to people working harder. So the theory then became—because they have kept trying to invent new theories—that the whole purpose was a stimulus for an economy in recession, which many countries have been in for some time. But, in fact, if one wants to stimulate an economy in a recession, one does something temporary to increase demand in the short term, but one does not, in a country with a chronic current account deficit and a chronic savings problem, have a structural change.

I am following on from the man who lost about $5 billion or $6 billion in the last couple of months from the New Zealand economy, so those words were rich coming from Michael Cullen. The so-called promised tax cuts for New Zealand workers were in legislation that was never going to be delivered, because Michael Cullen would have delivered a post-election Budget that took away those tax cuts. That was Labour’s real plan. Michael Cullen should be honest and tell the Committee what he really wanted to do.

Today National is delivering on its promises. We are giving tax cuts to those hard-working New Zealanders who have been out there slaving away for 9 years, working hard, making all the right choices, and taking the right directions in their lives. They needed some support from the Government. They needed a Government that would stand up and deliver for them and give them the right signals and incentives to keep on that track—the signals and incentives that build a strong country—and that is what National is doing here today. National will give people tax cuts. We will make sure they have that reward for their hard work. We are giving them that reward for making the right decisions, and we are making them successful in the world economy. We will give them the money to help them actually go out there and survive in an economy that is difficult, an economy that is in recession as a result of the failed policies of the previous Labour Government, and we will actually give them an economy that will deliver a future for New Zealand.

This bill is the first part of delivering a growth economy. Through the personal tax cuts, this bill will give the impetus needed for the New Zealand economy to grow and be successful. With a growing economy, we can deliver in all the other areas of social spending, of research and development, and also of growth in our infrastructural investment, which New Zealand desperately needs and has not had in the last 9 years. The National Government, with its coalition partners, will deliver a tax cut programme. We will not just talk about it; we will not just put legislation out that is about some time in the future. We will actually deliver that tax cut programme, and that is what we as a Government are about.

We will deliver for the people of New Zealand. That is what the people on the street have been saying. They like what they see. They see a Government that says what it will do and then actually delivers it. That is what members are seeing here today. We will not muck around trying to tell people there is a better future sometime around the corner; we will deliver that better future now. We will give it to people in the first 100 days in Government; we will give them some constructive changes that deliver to hard-working New Zealanders. We will not lead them on a path and say we know best and they do not have choices in their lives; we will give them those choices. We will give them money in their hands so that they can make those choices; we will give them the personal tax cuts that are in this legislation. The tax cuts enable people, as individuals and as families, to make the right decisions about what they want to spend their money on, so that they can actually deliver for their families in these hard economic times.

These personal tax cuts are the first stage of delivering a brighter future for New Zealand. They are the first stage of delivering a situation where people can go out there and actually live the lifestyle that they expect to live in the First World. We need to give that impetus to the New Zealand economy, and we need to give that strength to our people who are experiencing hard-working days and reward them for their work. That is what National is about. We are here to deliver for New Zealanders—to deliver for the working people of this country. That is what this legislation is here for, and we will deliver to New Zealanders through personal tax cuts as part of that process.

If we look at the personal tax cut regime, we see that a big part of it is the independent earner tax credit, which is a great initiative. It is good for those young people who are making a start out there. They want to actually get some reward for their hard work. They do not want to be just looked down on; they want to be told they are doing the right things for themselves and for their country. Through the independent earner tax credit we are giving them that support. We are going out there and saying they are doing the right thing, and we are going to help them and make them more successful, and give them the opportunities that they desire in their lives.

That is what this legislation is about. It is about giving the right start for New Zealanders in a tough time, because it is tough out there and the world economy will get tougher. We need to give New Zealanders the ability to get through this tough time, and in order to get through it we have to give them some money in their hand, which is what this tax cut programme is about. It is about giving some stimulation to the economy.

I want to know what David Bennett will say when he goes back to Hamilton East and talks to the folk who come into his constituency clinic—presumably he has one—who are earning between $14,000 and $24,000 a year. What will the member say when they say: “Mr Bennett, you promised us a tax cut, but under your tax changes we are paying more tax.”? What answer will Mr Bennett give to the people in Hamilton East? What about when the hard-working family that Mr Bennett has just told the Committee he is representing comes in? They are earning less than $44,000 and they will come in and say: “Mr Bennett, you said you were going to look after the hard-working battlers in your electorate, but under your tax changes—the National Government’s tax changes—we’re paying more tax.” What will Mr Bennett say to those people?

The title of this part of the bill—“Personal tax cuts”—is a lie. It is a lie for many New Zealanders because for lower-income people, the hard-working battlers of this country, these so-called tax cuts are not tax cuts, at all; they are tax increases for those people. The Labour Party will vote against this legislation because of the unfairness of it. We know that people at the bottom of the heap—the people who struggle to pay the bills, the people who struggle to get their kids to school and to meet the cost of living—get nothing from the National Government. But if we turn up at a decile 10 school where the children’s parents are earning big money, we see that they will be getting hundreds of dollars of tax cuts.

The ordinary New Zealander has a sense of fairness. The ordinary New Zealander believes that people need to be given a fair go. Sixty-six percent of Mr Bennett’s electorate is earning less than $44,000—

💬 Hon Parekura Horomia: How many?

Sixty-six percent. I ask Mr Bennett what he will say to the battlers to explain why they are paying more tax, while those on a good income, such as Mr Bennett himself, will probably get $100-plus in tax cuts. I ask Mr Bennett where the fairness is there. There is no fairness, and that is why we are opposed to this bill.

The rhetoric that we heard in the Speech from the Throne was about how this National Government was not going to tolerate an underclass, and how it was going to stand up for the rights of the everyday New Zealander. What about the everyday New Zealander who was promised a tax cut by the National Party in Opposition, and now finds that in fact he or she will be worse off than if there had been a Labour Government and they were receiving the tax cuts that had already been legislated for? What about a couple where the man is earning $35,000 a year? Many people in Mr Bennett’s electorate are in that situation: the man is earning $35,000 a year, and probably is working in a factory; the wife may be earning somewhat less—say, $22,000 a year—because she is looking after the kids. They will actually be $14 a week worse off because of the so-called tax cuts that Mr Bennett has just got up in front of this Committee to defend. What will Mr Bennett say to those people? I would like to know the answer to that.

💬 Hon David Parker: “Sorry.”

“Sorry.” That is what he will have to say. “Sorry. Oh, you didn’t read the fine print?”—as Mr English said—“It was all there. We didn’t say it—we put it in the fine print.” That couple did not read the fine print so I am sorry but, caveat emptor, they have ended up with a National Government cutting their living standards, not raising them as they had been promised.

The truth is the National Government does not give a damn about the Kiwi battler. Those members do not even pay lip-service to the decent society that Jim Bolger once talked about. What happened to the decent society? What happened to that sense of fairness? The truth is that the people who will be paying more tax are the same people who are most vulnerable to job loss. As we saw, again, from the Speech from the Throne, there is no plan and there is no vision from this National Government about how it will protect people’s jobs. It can talk about tax cuts till the cows come home, but if one does not have a job, then a tax cut is no use. There was a lack of planning by National. It wasted 9 years in Opposition. It had no plan to deal with a situation where jobs might be threatened.

The people whom we heard about yesterday are the same people who will be denied protection against unfair dismissal. In the first 3 months of their working life they can be sacked for being pregnant, sacked for their eyes being the wrong colour, and sacked for standing up for their rights, and there is no right for them to get redress for the unfairness of those actions.

I tell Mr Flavell that I have a question for the Māori Party. This legislation is the first test for the Māori Party in this House. This legislation, whose first reading was voted for by the Māori Party, will damage the economic interests of almost all of that member’s constituents. The Māori Party members are collaborating with the National-ACT Government in doing that. This legislation is the first test for the Māori Party members as to whether they would stand up for the interests of their electorates, and they have been found wanting. They have been found wanting, because they are supporting this legislation, which undermines the rights, the income, and the living standards of ordinary Māori working families, who will be punished by this legislation. Those families will say to you, Mr Flavell, that you will go the same way as other Māori electorate members who made promises, then joined with a National Government—Māori electorate members collaborated with the last National Government—and failed to deliver and to stand up for the rights of your people. You should hang your head in shame at what you are doing in the Chamber today.

💬 Hon Bill English: I raise a point of order, Mr Chairperson. This member seems to be unaware of the Standing Order that we cannot address members of Parliament in that fashion—quite apart from the very distasteful language he is using. He was told yesterday by the Speaker not to use that terminology. He is doing it again today, and I suggest that the Chairperson advise him to become aware of the Standing Order and to practise applying it in the Committee.

💬 Hon Darren Hughes: The Deputy Prime Minister has a habit of taking this point of order when Labour members are speaking. The speaker before Mr Goff, Mr Bennett, repeated exactly the same phrase all through his speech, but we did not pull him up on it. We let the debate flow. The Deputy Prime Minister has decided he will raise this point whenever a Labour member is speaking. I thought we had one standard of citizenship in New Zealand.

💬 Hon Trevor Mallard: I think it is also important that when the Deputy Prime Minister opines on these matters, he is accurate. There are Speakers’ rulings on this matter; I think he will find that there is not a Standing Order. I think he should have a bit of a look at the Standing Orders, and, the next time he goes to break up a speech, at least get it right.

💬 Chris Tremain: I will speak to the senior Opposition whip’s comment about our being the only ones today to bring up the point about incorrect use of “you”. The Hon Trevor Mallard over there has brought it up on numerous occasions. In fact, throughout the second reading debate he brought up that point.

The CHAIRPERSON (Eric Roy): Let me make a quick ruling. Firstly, members know that they must raise a point of order at the time—that is important. Members cannot say that because they did not raise a point, it should not be raised. It is a matter of whether the institutional understanding and rules of the House are being broken. That is the first point. With regard to the point of order, I think the Committee needs to bear in mind that when it moves away from a certain standard of decorum, that does bring a degree of unrest within the Committee, which is not helpful to the debate. I ask the member to continue, and to bear in mind the points I have made. Thank you.

Thank you very much, Mr Chairperson. The first reason we have opposed this legislation is its inherent unfairness. The second reason is just as legitimate. It concerns how these tax cuts will be paid for. The first way in which they will be paid for is through cutting $1.5 billion out of research and development. At the time when New Zealand needs to be smarter than its competitors, this National Government is paying for short-term tax cuts by undermining the ability of our economy to be smart, to be innovative, to be creative, and to be competitive. One award-winning exporting company, Endace Ltd, made the comment through its chief executive, Mike Riley, that this cut flies in the face of the knowledge economy. We know that New Zealand, as a small and geographically isolated country, needs to be smarter than its competitors. That cut to research and development undermines our ability to be smarter, and undermines the ability of our industry to create the jobs we need to move forward in the world.

The second thing that is cut, of course, is KiwiSaver. Every economist for decades has told New Zealand that New Zealanders need to be greater savers.

💬 Chris Tremain: I raise a point of order, Mr Chairperson. We are on Part 1, which deals with tax cuts, but the member is talking about KiwiSaver and research and development tax credits, which have nothing to do with Part 1, at all.

The CHAIRPERSON (Eric Roy): There is a certain degree of flexibility. Members can raise issues for purposes of comparison. I do not think the Minister—no, the Hon Phil Goff—had strayed too far away from that. Thank you.

Your form of address is 2 years and 10 months premature, Mr Chairman!

The second way in which the tax cuts are being paid for is by gutting KiwiSaver—taking $3.5 billion out of the savings accounts of New Zealanders, who for the first time in our history have been given the opportunity and the motivation to save. This bill is a disaster from that point of view, as well.

I rise to speak to Part 1, but first I congratulate you, Mr Chairperson, on your appointment as Assistant Speaker of this Parliament. Secondly, I want to address a couple of the comments made by the Leader of the Opposition, who will be ankle-tapped by Shane Jones before he gets to 2 years and 11 months from now.

The difficulty we face in this debate, as politicians, is that the community wants more police to be on the streets. It wants better health services, it wants lots of big roads, it wants excellent welfare benefits, and it wants to pay lower taxes. People want to pay lower taxes, and that is why they voted against the last Labour Government. They knew that too many taxes were being collected, which were being spent inefficiently. We on this side of the Chamber want to avoid inefficiency, because if we did not, we would pass up the opportunity to make somebody better off at no cost to anybody else. That is what we do by increasing efficiency.

But taxes, by their very nature, cause some inefficiency, and most of us think we need to pay less tax. Most of us think—and this is the essence of the Labour Party’s argument—that taxes are about only the redistribution of income, to a lesser or greater extent, from the rich to the poor.

💬 Hon Trevor Mallard: This is redistribution from the poor to the rich.

Well, we have two contradictory imperatives, I tell Mr Mallard. The first is to avoid needless waste—and he wasted plenty, particularly through Sport and Recreation New Zealand—and the second thing is that we want to decrease inefficiency and increase efficiency, while making sure that wealth is at least somewhat evenly distributed.

This legislation aims to make the New Zealand economy both efficient and fair—both efficient and fair. If we look at the actual cuts that are being made, we see there is no change for people at the bottom of the income levels. Those who earn less than $14,000 a year will pay 12.5 percent in tax. The next step, to increase efficiency and put more money in the pockets of individual taxpayers, applies to those who earn $14,000 to $48,000 a year, who will have a 21 percent tax rate. The maximum income for that group will be moved to $48,000 a year, so those earners will be significantly better off.

We want to put more money in people’s pockets. We want to stop them leaving, at a rate of 80,000 people a year, and going to Australia. People deserted Labour, but National is interested in keeping those people in this country.

I will address the comments made by the Leader of the Opposition, when he said we were cutting research and development payments. That is completely untrue. He was arguing that there will be a huge drop in research and development in this country. That is not the case at all. Labour’s policy involved borrowing $700 million, and in year 1—this next financial year—paying out $20 million for research and development, in year 2 paying out $30 million, and in year 3 paying out $40 million. That is not what we are doing. We are paying out $75 million a year, over each of the next 3 years. That is significantly more than what Labour was going to pay for research and development, but we are doing it in a different way from Labour. We did not have to borrow $700 million in order to kick off that fund, and that is why we are able to start from lower base borrowing than the Labour Government did.

This is not a 1-year programme; Mr English has been extremely ingenious in constructing this tax package. In the year from 1 April 2010, for the earners group of $14,001 to $48,000 a year, we will lift the limit to $50,000 a year and give those people a tax cut. We will increase the tax cut available to people earning from $50,000 to $70,000 a year. Again, in year 3—in 2011—people in the $14,000 to $50,000 a year earners group will get a significant reduction in tax. That will be the pattern in every year. Why will we do that? We need to put money into people’s pockets. When I go to Kurīpuni in Masterton in my electorate, I see people who are on an average wage of $12 to $15 per hour. We need to help those people, because they have children to bring up, holidays to take, and transport to pay for. Tax cuts will pay for that.

I think that John Hayes, who I understand comes from Wairarapa, has an incredible cheek to speak on the Taxation (Urgent Measures and Annual Rates) Bill, because Wairarapa, other than the electorate of Dunedin North, which mainly consists of students, is the electorate in the country with the most people aged 15 years and over who earn $40,000 or less. This is the very group that has been most attacked by this legislation. I do not know whether John Hayes is thick, whether he has not read it, or whether he is being a hypocrite. I do not know which of those things he is doing, but I will leave one out and just say that he is silly. It is one or two of the other words.

💬 Hon Member: Why don’t you just come across and punch him. That’s a good idea.

No, no. Next time he tries to throttle me, I will.

Getting back to the legislation, I say that John Hayes did not understand the way that thresholds interplay with rates. As a result of this, he did not understand what was in the legislation that is now being taken out. The tax changes previously legislated for the threshold rate currently at $14,000 going to $20,000. The effect of this change means a loss of almost $500 a year to some of the poorest income earners. That is without doing some other things as well that impact on them in the KiwiSaver, and other changes.

I ask John Hay whether, when he goes to Masterton East, to the poorer areas, and to some of those schools, he will explain to people that he is putting his hand into their pockets, taking their wallets, and taking out $9 or $10—not a year, but every week. I wonder whether John Hay is prepared to act as a personal tax collector for the chief executive of Telecom, whether he is prepared to wander around 50 Māori families, to take $10 a week from out of each of their pockets, and hand it over to the chief executive of Telecom, who gets the extra $500. Is John Hayes prepared to work his way around?

💬 Craig Foss: His true colours are being shown right there.

No, no. I am making it very, very clear that the Māori Party is collaborating with this change, which will result in John Hay going around Māori families, and getting the tax collector to put his hand into the pocket of those Māori families—not all of them, only the poor ones—and taking out from their pockets $9 or $10 a week, and handing it over to the chief executive of Telecom, and his like. How many Māori families will John Hay have to go around in Masterton East? He will have to go around about 50 or 60 families to collect up the tax cut, which is being handed over to people on the highest incomes in New Zealand. As well as that, will he be prepared to tell the people in Masterton that the taxation bureaucracy in Wellington will climb enormously to handle the provisions of clause 12, which is within this part of the bill?

The CHAIRPERSON (Eric Roy): Speakers’ ruling 26/7 is quite specific about the use of the correct name. The member of Wairarapa whom you were referring to as Mr Hay is actually Mr Hayes. It is a small point, but if we do not use correct names, names can be used in a way that is inappropriate.

Which one is the correct one?

The CHAIRPERSON (Eric Roy): Hayes.

Thank you, Mr Chairman and I apologise to the member. He is one of a number of the back benchers who have not quite made an impression over the 6 years that they been in Parliament.

💬 Hon Member: Only for 3 years!

No wonder I did not notice him in the first 3 years.

Returning to the bill, I ask the Minister in the chair, Bill English, who I understand will take a call, what the extra budget is for the Inland Revenue Department to implement schedule 1 in clause 12 of this bill. Clearly this will involve a lot of extra work for the Inland Revenue Department. It will require extra staff, and I want to know whether these extra staff have been provided, and what the costs of those extra staff are to implement the schedules of the bill. I want to know from the Minister of Finance whether these staff will be regarded as front-line staff, or not. Are the people who are working out these credits, and it might be a very cunning job creation scheme on the part of the National Party—

💬 Chris Tremain: I raise a point of order, Mr Chairperson. We are wandering way off Part 1. Tax credits are in Part 3 of the bill. This is Part 1. Can you bring the member back to the part, please.

Speaking to the point of order, I point out that clause 12 is in Part 1, and it is the clause that puts in the schedule that implements the employers’ superannuation contribution tax.

The CHAIRPERSON (Eric Roy): I will not uphold the point of order.

The point I was getting to is that the bureaucracy that will be involved in this could well be a cunning job creation scheme to make sure that the unemployment in the electorate of Wellington Central—the electorate of Grant Robertson—does not fall. I want to know whether that is a deliberate policy. And I want to know from Sir Roger Douglas whether he regards clause 12 as something that is efficient, that is pure, and that works towards a fair tax system, or whether he regards it as something that pushes up the marginal tax rate—the effective tax rate—for a lot of lower and middle income earners. Because that is what it does. It pushes up the marginal tax rate, and at the same time it requires a bureaucracy of tax officials in order to check probably tens of thousands—and maybe hundreds of thousands—of returns, to make sure that people are eligible. In fact, it puts a whole new group of people into the group who have to file returns in order to get changes in tax rates.

We have had quite a good system over the past few years in New Zealand, where fewer and fewer people have had to file tax returns because it is all done as part of the wash-up, and if people consider they have been fairly treated, then they do not have to file a return. One of the effects of this bill will be that a whole new group of people, probably hundreds of thousands of people, will have to file a return, which then has to be processed. And we have to employ people to process it. Rather than moving towards being efficient, towards being proactive, and towards chasing some of the delinquents, in the way that has been done under the previous Minister of Finance—and that has had, I think it is fair to say, very good effects on the revenue—we will have, as a result of clause 12 in Part 1, a new army of people who look at the forms being sent in, load them into the computer, and then check them at the end of the year—

💬 Hon Annette King: Is it definite it’s a wash-up yearly, or—

No, no; it can be in the wash-up yearly, or it can be the other way. It does not matter; whichever approach is taken, there needs to be either bureaucrats at the front end or bureaucrats at the back end, if it is to be done as a wash-up. As a member of the Labour Party, and somebody who has had a lot to do with the Public Service Association (PSA), I welcome the approach of the Minister of Finance in building PSA membership. Building up PSA numbers is, I think, a good thing to do.

It is interesting hearing from a Leader of the Opposition who cannot tell the difference between a decile 1 and a decile 10 school, and I expect that reflects the kinds of dilemmas that the Labour members will have to deal with over the next few years as they try to decide who they are. Let us just—[Interruption] Well the public is not listening either, to be quite frank. I think that is the difference.

Let me make a couple of points clear. This is a different tax package from the previous Labour Government’s tax package. There has been ample opportunity over the last 12 months for everyone to poke and prod and discuss the details of it, and the public did that. Then there was a general election. The only reason we have this bill, with the National Party’s tax package in it, is that the public of New Zealand voted in a different Government. If the public wanted the former Labour Government’s tax package, they had the opportunity to vote for it, and they did not.

One of the reasons they did not is the spin and crocodile tears that the nasty, dirty previous Labour Government had got into the habit of using. Let us just look at some of the stories Labour members are telling. The member from Hutt South—I do not know how he managed to win the seat, actually—talked about taking cash out of people’s pockets.

That is actually just wrong. No one is going to be worse off as a result of our passing this legislation.

💬 Hon Darren Hughes: Oh yes, they are.

No, they are not. The Labour Party keeps putting up some cases where if Labour had been re-elected and if it had kept its promises about taxes, which it never did before, then some people would have got more. That is bound to be the case when this is a different tax package. The thresholds and rates are different. But let us talk about some of the people—

💬 Hon Darren Hughes: That’s intellectually dishonest and the member knows it.

Well, it is just a different tax package. I know the Labour members find it very difficult to understand that if one gets elected into Government, it is to execute one’s policy, and that when one gets thrown out of Government, it is because people did not want one’s policy.

💬 Hon Darren Hughes: Arrogant!

Well, no; that is what the voters think. I just accept their verdict.

Let us take some of the people whom Labour members say they are crying about—the 630,000 low-income New Zealanders who will get the independent earner rebate. They got nothing under Labour, in 9 years of low incomes in the best economic period of a generation, and they know that. Every person without children who was earning under $44,000 got nothing—nothing. Full-time earners earning $24,000 to $44,000 got zero. The reason families do not get a big benefit out of this package is that in the last 2 or 3 years they have had big benefits. Their after-tax incomes have gone up very substantially. National has locked in the Working for Families package in its entirety, and now it is the turn of the 630,000 people for whom those members now cry crocodile tears, but for whom, for a decade, they did nothing to help. Now it is their turn, and National is delivering a tax package that will give 630,000 low and middle income earners—yes; members of unions who voted for us because they thought Labour would give them something—some benefits.

Those people waited loyally for a decade and they got nothing, and Labour is telling us today that we are making a mistake in giving it to them. Well, that is what we will say, when we go back to our electorates, to people earning $35,000 who got nothing from Labour in 10 years. We will say that we promised them something and here it is, and that Phil Goff is trying to stop it—630,000 people. The Labour caucus thinks that Mr “Phil-in” is the answer. Well, the reason he is not the answer is that he has not understood that fundamental political problem for Labour.

These personal tax cuts deliver substantial weekly gains to the 630,000 people who were ignored by Labour, despite the fact that in three elections in a row, a good proportion of them voted Labour. That is why those Labour members are out of touch and out of Government. Those people got tired of being told that it was the students, it was the people with families, or it was the bureaucrats who would get the next $300 million, but those hard-working, battling Kiwis who do not happen to have children would get nothing.

This is a balanced package, because we are locking in the gains families made, which were considerable, and we are keeping them in their entirety—

💬 Hon Dr Michael Cullen: Oh, what a generous man.

—we cannot have everything, I say to Dr Cullen, as he used to tell everybody—and we have added to that a mechanism that provides increasing weekly incomes for 630,000 people who earn under $44,000. These are not the higher-income high fliers. These are Mr Cosgrove’s heartland voters, which is why he lost the party vote in his electorate. I ask when Labour members are going to figure that out, and when they are going to figure out that some people hearing the crocodile tears today from Labour just will not believe it, because they know it is wrong.

What about other people who earn under $20,000? Well, 300,000 of them are beneficiaries. I ask what the Labour Government did for those people through a decade of the best economic times we will see in a generation. Mr Goff did not mention them, but I bet he will now he is in Opposition. He will go on and on about what National is doing to beneficiaries, when he did nothing for them. When Labour members go on about who is affected by the changes in these tax rates, I say that a big part of that group under $20,000 are beneficiaries. The other group are superannuitants. Superannuitants are the biggest single group who earn under $20,000, and they are considerably better off as a result of these tax cuts. In our constituent clinics, we are going to say to them: “We promised you more super through lower taxes, and we have delivered you more super through lower taxes. It’s that simple.” They’ll go: “Well, that’s a fair cop. I didn’t vote for you, but next time I will, because you kept your word.” That is the other big group under $20,000.

The Labour Party will cry crocodile tears. There will be some people where the rates and thresholds mean that compared with what Labour would have done if it had been elected—

💬 Hon Dr Michael Cullen: No, it’s the current law.

Well, the 2005 “chewing gum tax cuts” were the law, and we remember what happened to that. Broken promises on tax cuts meant half the people did not believe Labour would keep its promises on these tax cuts.

💬 Hon Darren Hughes: That’s not true.

Well, I ask why Labour members are in Opposition if they had such a magnificent tax package. It has to be because people did not believe them, and they were right not to believe them, because the last time Labour made promises about tax cuts, it broke those promises.

This bill is a step in a direction of a broad based - low rate tax system. It delivers benefits for many people who missed out on the benefits of economic growth in the last 10 years, and we are very pleased to support it.

What a collection of blatherskite we have just heard from the Minister in the chair, the Minister of Finance!. He was trying to put the Tory spin on policy that is going to hurt the most vulnerable in our society. It does not matter how Mr English cuts up the Taxation (Urgent Measures and Annual Rates) Bill package here in this House: we know the truth about what is happening to vulnerable New Zealanders today.

He had the cheek to tell this House and New Zealanders listening that if we had wanted to discuss the National Party’s tax policy, we had had a whole year to do so. That is what he told us. Well, I have to say to Mr English that his nose grew an inch, because the National Party released its tax policy in October this year, and New Zealanders and this House had no opportunity to debate it. People on the hustings had to get what information they could from a website. They had to scrounge for information in order to be able to debate that policy. That is the truth of the matter. The National Party released its policy in October this year.

I ask why it would release it so late. It was because National did not want scrutiny of its tax policy. It did not want New Zealanders to know that it was going to pull the biggest Christmas hoax on New Zealanders that anyone has pulled since Ruth Richardson in 1991. That is what National was doing. Mr English backed up Ruth Richardson then, and he is doing it now. She was the mistress who taught him the tricks he is using now when he has the opportunity.

Mr English said this bill is going to help hard-working Kiwis who had got nothing under a Labour Government for 9 long years. He referred to people who did not have families. He said the Labour Government had looked after those with families. Of course, that was “communism by stealth” a few months ago, and National voted against it at the time; now it has adopted it. But he did say that we had looked after families. What National has bravely and courageously done is to look after people who have not got families—hard-working, poor New Zealanders. Mr Bennett is shaking his head. I hope he realises that hard-working, poor New Zealanders must have a net income of $24,000 before they can access National’s independent earner tax credit. So the lowest-paid New Zealanders who do not have children, the most vulnerable, who probably have a gross income of around, say, $30,000, do not get anything. I ask Mr English why they are not included. I ask why they do not get the tax credit, which he said was for the battlers, the hard-working Kiwis of New Zealand. They do not count. They do not count because they do not vote National. That is how cynical it is. This policy is not about giving something to those who have not got children; it was a smart little manoeuvre during an election campaign to try to garner a few more votes.

Perhaps Mr English will tell us what happens to the hard-working, battling Kiwi families who earn $23,500 net—the husband and wife both earning $23,500—and whether they get this tax credit. No, they do not qualify. They have a very low income, they are working hard, but they get diddly-squat. The words about caring about New Zealanders, the low paid, the vulnerable, and the underclass of New Zealand are nothing more than a hoax on the people of New Zealand. I ask why this tax credit does not cover all of those people, if caring about New Zealanders was the genuine intent of the National Party. We have seen through the tricks.

I just have been in a taxi. We all know that taxi drivers know everything. They are already starting to wonder what this is all about. National has been in this House for 3 days, and its first attacks are on the vulnerable New Zealanders. Its first attacks are on women, children, the low paid, and the people who do not have children—the very ones National said it was going to support. I can tell members that in my own constituency of Rongotai almost 30,000 people earn less than $40,000. In some way or other, they will be affected.

Thank you, Mr Chair, for the opportunity to speak on the Taxation (Urgent Measures and Annual Rates) Bill, Part 1, “Personal tax cuts”. It is absolutely extraordinary that the Opposition—

💬 Hon Dr Michael Cullen: Speak up for the common man.

I missed that. Would Dr Cullen like to say it again?

💬 Hon Dr Michael Cullen: Speak up for the common man.

Absolutely, because that is what Dr Cullen did not do back in 1999, when he said he would raise New Zealand to the top half of the OECD. I ask members what happened. We went down two slots, and that affected the common man very, very deeply.

Mr Chairman, I personally congratulate you on your appointment as Assistant Speaker. I am sure you will do an absolutely superb job.

What I think is extraordinary is that this tawdry Opposition has not made any mention of the fact that we are in urgency over this bill. It is absolutely right and proper that this is going through under urgency because, after all, it has taken 9 long years of a very tawdry Labour Government before, finally, the New Zealand people are going to receive this well-deserved tax break. It is also quite extraordinary and ironical that when the Labour Government came into power back in 1999, the very first thing it did was to raise personal tax from 33c to 39c, and that was very ably pointed out by the new ACT member John Boscawen an hour or two ago this morning.

The very thing they did was to curb personal freedom and to curb incentives and signals for thrift, enterprise, and reward for effort. And it is no wonder that record numbers—tens of thousands—of New Zealanders have left this country for Australia. They left because the Labour Government had no understanding of the fact that New Zealanders wanted to have incentives to ensure they were indeed rewarded for effort. In the last year, 80,000 people left. New Zealanders left in huge numbers because they realised that the Labour Government was mediocre and had already caused New Zealand to go down two places on the OECD ladder. That, of course, very much affects the common person and affects his or her standard of living.

After all, it was Dr Cullen who mentioned Labour’s legacy of 1990. Dr Cullen should remember that in 1990 New Zealand was technically bankrupt. Unemployment was at its highest level, inflation was about 7 percent, and interest rates were 22 percent. But let us shift on to 2008 after 9 years of Dr Cullen’s regime. His Government came into office with a growth rate of 4.6 percent, and ever since it has gone down and down. His Government came in with a growth rate in the last quarter of 4.6 percent, and ever since then it has gone down.

Look at it now. Look at the dire predictions of Treasury and the Pre-election Economic and Fiscal Update of 10 years of deficits. [Interruption] Well, I say to Dr Cullen that he is part of the fault; there is no doubt about that. That is the legacy left by Labour, and that indeed is part of the reason that so many New Zealanders have been leaving for Australia over the last 9 years.

The other point, of course, is that these personal tax cuts outlined in Part 1 are absolutely central to the concept of personal freedom and to the concept of reward for effort. This is something espoused by the National Party since 1936 as fundamental to getting an enterprise economy, and resisted year after year, Government after Government, by the Labour Party. That, I say to Dr Cullen, is why he is over there.

I think Treasury was quite clear on the platform that has been left by the well-managed Labour Government of the last 9 years. It has been quite specific about the performance and the free way forward for the Minister of Finance. The last speaker talked about 1990. I remind him about 1999, when, in relation to Māori people, the unemployment rate was tracking at 28 to 32 percent. When our term in Government finished it was tracking at 5 percent. At the end of the 9 years—during the last 3 years—Māori were going into the workforce at the rate of 4 to 1. That represents the very, very important effort that went not only into Māori but into all people in this country.

It was really interesting to hear Mr Bennett talk about redistribution. He was quite right: it is redistribution of money from the poor and those who need it to the wealthy. He is revelling in those who are milking the till in his dairy-sodden area of Hamilton. And it is important to understand what Mr Hayes was trying to say. The National members opposite are making sure they are making hay over there, but this budget hints at what is to come in their period in office. One does not need to be a rocket scientist to understand that this is one of the worst starts—one of the most overrated starts—by a financial manager in relation to a parliamentary session. This measure is disgraceful. It punishes the people who need the money, and it is being done with an attitude of arrogance. Mr Hayes will remember that in the time of the last National Government all the State houses in the Wairarapa were sold. A whole lot of hinting is going on by this Government’s financial manager. There are hints that no more State houses will be built, and that landlords will have the right to manage housing issues in this country.

This measure is about redistributing money that is not National’s—$3.5 billion out of KiwiSaver. That is outrageous. My plea to the Māori Party is not to support this bill, because it will hurt Māori people. It will hurt them badly. In terms of incomes of up to $40,000 a year, 73 percent of Māori will not get anything in this budget—

💬 David Bennett: Budget?

In this allocation. Last night Nick Smith said that this was the politics of envy. That was said in relation to the example we brought up of someone who was benefiting from Working for Families and KiwiSaver, and who has one child and earns $50,000 a year. He or she would lose $80 a week. What is the answer to that? It is outrageous. Bill English is pitching up the macro and making out that research and development funding is something this country does not need, when the unions, the Business Roundtable, and the Government agreed that would be the best injection to go forward on.

I ask the Māori Party what it is going to tell the 73 percent of our people who are working and who will get nothing in this budget. What are we going to do about that? Where is the improvement for our people that was promised by the National Party? Māori were hoodwinked going forward in relation to this financial statement. Mr English goes on about giving a fair go to earners who do not have children. It is fascinating when we line that up alongside the entry on KiwiSaver. He is going to take a fair bit out of research and development, but there is no mention of how much people will lose in relation to knocking KiwiSaver down.

This measure is a disgrace. This is one of the most hurting entries in a parliamentary session for our Māori people, and the Māori Party is going to vote for it. Hone Harawira knows it is wrong. The members of that party are going to vote for this measure. They are going to support something that undermines the rights of their people, and they want to talk about other issues. But in relation to income—[Interruption] What will they tell people in Flaxmere? What will Chris Tremain tell people when I see him wandering around there? What will he tell people in Camberley? He has nothing to tell them, and he knows that this issue is right on his doorstep. He knows that the people sitting in his electorate will be hard done by under this legislation. This bill is not fair, and the member knows that full well.

At the end of the day this measure is not an improvement. It is bad for Māori people, and the Māori Party should vote against it. It still has time to do that.

I move, That the question be now put.

I rise to speak to Part 1 in relation to the thresholds, and it is interesting that the Government moves so quickly to close the debate down. Again, I want to comment on a point made by Mr English. He made great play, when he got up to speak to Part 1, about the level these so-called tax cuts had dropped to. He alleged that the Labour Government had done nothing for low-income people. He talked about beneficiaries and said that the Labour Government had done nothing for these people. Of course the Labour Government did do a lot for beneficiaries. The primary thing it did was to give most of them a job. It created 350,000-plus jobs through its 9 years of Government.

But I just raise this point with Mr English, and I would be indebted if he would answer it. It is Mrs King’s point in relation to the thresholds abating at the lowest level and the independent earner tax credit. I think he quoted the fact that 600,000 low-income people were going to be helped by this tax package. But I again put this scenario to him, and I would be grateful to hear his answer. A person on $23,999—someone who does not breach the $24,000 threshold—gets nothing. So let us say that we have a person on one side of the fence who earns $23,999 and gets nothing, and has a neighbour on the other side of the fence who earns $24,000 and kicks in and gets the tax credit. Well, what is fair about that? The so-called low-income people that Mr English—late in life in his career in politics—says he has decided to actually think about, and maybe do something about, will get nothing from this package. I invite Mr English to deal with that point. We are debating the tax thresholds kicking in and abating, whereby if I am on $23,999, I get nothing, but my neighbour across the fence, once this kicks in at $24,000, will get something. I am addressing the Minister’s point in rebuttal, which is valid, because he got to his feet and raised that point.

I would like to know where that person will acquire the aspiration that National kept talking about during the election. How will that person choose a brighter future? Does a brighter future even exist for that person? Where would that person go hunting for it? That was the aspirational rhetoric used by Mr English during the campaign. One would think that everybody was sucking up aspiration through every pore. Well, a person on $23,000 who does not breach $24,000 ain’t getting a lot of aspiration, ain’t getting a lot of help, and ain’t getting any assistance at all. These single people with no kids, the quartile that Mr English says his Government will help, will get nothing.

National members did not campaign on this package, but Mr English says they went around the country, and line by line every person went through it with a microscope. He said they were all told exactly what they would get. Well, this huge group of people I referred to must have been told they would get nothing.

💬 John Hayes: No.

In fact, they were not told. It was never announced. There is a word for that behaviour. If members look at page 2 of the New Zealand Herald they will see that people earning less than 40K will get zip. That fact was never canvassed with the electorate at all. I invite Mr Hayes to go and find 10 or 20 of his constituents on $23,999, singles, and say to them: “You knew that we, the National Party in Government, were going to give you nothing.” I invite him to find five people, or even two people.

💬 Hon Annette King: Did he tell them that?

Did Mr Hayes tell that to his constituents? Oh, no. I bet he could not find one person. He should take out an advertisement in his local paper inviting all those people on $23,999, with no kids, who will get nothing from this package, to write to him and confirm that they knew all about this before they voted at the election. I doubt he would get one reply.

💬 John Hayes: 12.5 percent is just brilliant.

I put a question, through the Chair, to Mr Hayes: “Can you name a person in your electorate who knew about this? Did people know about this?”. I bet they did not say that to the Sir Les Patterson of this Parliament. They did not know about this, at all.

It is with great consideration that I move that the question be now put.

No, the member is out of order.

We have heard Government members extolling the affordability of these tax cuts, and then in the same breath saying that they have inherited a difficult set of financial cards from the Labour Government. I want to put on record the nonsense that has already been written into history by the previous National Government. It left the prior Labour Government with debt that was 35 percent of GDP.

💬 Hon Parekura Horomia: How much?

It was 35 percent of GDP. Not as bad as the National Government before that, which left the Labour Government with debt at 60 percent of GDP, but still too high. We inherited debt equal to 35 percent of GDP. We reduced it during the 9 years of wise stewardship under the Labour Government to 17 percent of GDP. The fiscal position of the Government is very, very good. We are hearing exaggerated rhetoric from the National-led Government that is now complaining that there are all sorts of hidden expenses. It is overstating things in respect of accident compensation. National members are saying that they have all sorts of problems and a difficult set of cards to play from here on. But the reality is that they have had a very good set of fiscal settings left to them—debt at 17 percent of GDP, and low unemployment, amongst the lowest unemployment in the world—and they still complain that they have a difficult set of cards. Over the next 3 years we will hear National members say they cannot do this, they cannot do that, and that it was the Labour Government’s fault.

But the reality is different. National has inherited an almost unparalleled position compared with most developed countries in the world. We are in a position to help people in New Zealand get through this recession, but this bill does not do it. It does not help the people who need it most. Low-income people do not get help under this bill. In fact, money comes out of their pockets, not just out of the pockets of those in KiwiSaver, although all of those in KiwiSaver are worse off no matter what their income is. All those who are on lower incomes, even if they are not in KiwiSaver, are worse off under Part 1 of this legislation. It is disgraceful. National is saying that Labour did not do enough for low-income people who did not have children. Yet this bill ignores the lowest-income group without children and does not give them any help. The National Government is set to increase New Zealand’s debt in a way that is unnecessary by giving greater tax cuts to those who are already well off, nothing to those who are worst off, and not changing the position of those families with children who have rising costs to meet and increasing debt. We will see increasing unemployment.

At the same time the Government is gutting the research and development effort that we need to fund our growing economy. Research and development expenditure in New Zealand is quite good at the Government level and it is poor at a private sector level. The research and development tax credit, which this part of the bill abolishes through the schedule, matches New Zealand’s position to Australia and, indeed, in some ways betters it. But this bill tears out that research and development tax credit in order to fund tax cuts for those who need those tax cuts less than the lowest-income people, who do not get anything under this legislation.

The other anomaly here is that we have had 3 years, preceded by 3 years, and preceded by 3 years before that, of the National Government saying that the threshold at which the highest marginal tax rate cut in was too low. It complained that the $69,000-income level at which the highest tax rate cut in was too low a threshold. The Labour Party, in its tax package, increased the threshold for the highest marginal tax rate to cut in at $80,000. What does this bill do? It does exactly the opposite of what the National Party said should happen. It actually drags back the threshold so that the highest tax rate cuts in at $70,000. That is the exact opposite of what National said for 9 long years in Opposition should be done. Nine years in planning what National should do with tax and it dishes up this irrational piece of legislation.

I move, That the question be now put.

The Māori Party members must be hanging their heads in shame on this bill right now. They must be shaking their heads, because I am absolutely sure that when they walked into their mana-enhancing relationship they did not realise they were delivering hardship to vulnerable families—or maybe they did realise that. At no point during the election campaign, when they were championing the rights of vulnerable people, of Māori families, of young people, of poor people, and of people without work, did they think that they would be supporting a measure like this, which delivers tax cuts to those who really do not need them, at the expense of the poor, the vulnerable, and the children in many of our communities. They must be hanging their heads down in shame.

We know that 74 percent of the people in Te Ururoa Flavell’s electorate of Waiariki earn less than $40,000. Yes, 74 percent of families in Waiariki earn less than $40,000. So when we look at who will really benefit from this measure we see that not many families in Waiariki will benefit. Clayton Cosgrove raised the point that people earning around $23,999 will get absolutely nothing. The Māori Party members must be hanging their heads in shame. They must be thinking again about the implications of a mana-enhancing relationship that puts at the centre-front of the stage a measure benefiting those who do not need it, at the expense of the vulnerable, the poor, children, and families in many communities around Aotearoa New Zealand. Let us see that one being explained to the Māori electorates. It is no wonder that the people in those electorates voted to have the Labour Government continue its policies; they knew that at least we do what we say we are going to do. We do not say one thing so that people will support us, then deliver something totally different.

As I said, that mana-enhancing relationship had better be explained very carefully to the 74 percent of Māori in Waiariki who earn less than $40,000, because they will be very concerned about what they are hearing today in this Chamber. They will be very concerned that the things they thought they were voting for in supporting members of the Māori Party are not being delivered. They have not been told about it. We are putting this legislation through in urgency. We are addressing the very issues that people really want to hear about, in urgency.

People have to ask themselves why, at a time of economic hardship, when there is a financial crisis, when many families just before Christmas are wondering how they are going to pull it all together over the next 2 years, the Government is doing that. What is the National Government—supported by ACT and the Māori Party—doing? It is delivering tax cuts at the expense of poor, vulnerable families in our community, and it needs to be accountable for that. That level of accountability has to ensure that people are not duped by the types of changes that will be bulldozed through the House over the next few days. People need to know about them. I can see Paul Hutchison looking at me quite carefully; the people of Tuakau, in his electorate, need to know the cost of this tax cut to those families in Tuakau, whom Mr Hutchison knows I represent, who will be negatively affected. They will not see a dime. They will not see any benefits from this policy. Mr Hutchison knows that and I know that. When we are at our next community meeting, I look forward to his explaining this policy to many members of my constituency.

Let us recap. At a time when the most vulnerable in our society need more support, not less, we have tax cuts that are not delivering to them, at all. People should be very concerned. Annette King, the previous Minister of Justice, raised very good points about the implications in terms of lifting about 220,000 children out of poverty. How will this measure benefit those families? There is no explanation from the other side of the Chamber. The Māori Party must be very, very concerned at this time. Those members should be hanging their heads in shame. As I said, 74 percent of the people in the Waiariki electorate earn less than $40,000, very few of whom will see any benefit from this measure today.

I move, That the question be now put.

The Hon Ruth Dyson.

I raise a point of order, Mr Chairperson. We have had 19 speeches on this part of the bill today. That is a significant number of speeches.

I am the sole arbiter of the time allowed for the debate. I call the Hon Ruth Dyson.

Mr Chairman, thank you for the opportunity to give my first contribution in this part of the debate. I am very keen to ask the Minister of Finance some questions, and I am even keener for him to answer them. That is because I have been watching his National colleagues respond to our contribution on this Taxation (Urgent Measures and Annual Rates) Bill, and it is very clear to me that National Party members, and in particular Chris Tremain and John Hayes, do not understand what is in the bill. Either they have not read it or had it explained to them, or the printed version is different from the draft they were given. We know that the taxation policy of the National Party was released in October. That was not very long ago. I would have thought that before a bill came before this Committee, the members of the party that is supporting it would have it explained to them.

First of all, I ask the Minister whether he has explained the bill to his colleagues. Do they know what is in it? Are they prepared to put their names to it, fully aware that they are increasing taxes for the lowest-paid and most vulnerable people in our community? [Interruption] The constituents of the Wairarapa should know that their member of Parliament, John Hayes, has confirmed that yes, he is prepared to put his name to a bill that increases the marginal tax rate for the lowest-income earners in our country.

I ask Mr English, as the Minister, to respond to this next question. Under existing law, what is the 2011 marginal tax rate for a person who is earning between $14,000 and $20,000 a year? Mr English does not know the answer to that, but the Hon Dr Michael Cullen has indicated he does, so if he interjects—

💬 Hon Dr Michael Cullen: 12.5 percent.

It is 12.5 percent. That is the answer to that question. That is currently the 2011 marginal tax rate in the existing law. Under the legislation that we are now debating in urgency, which is a matter of critical importance because it increases the tax rate for the lowest-income earners in our country, what will be the marginal tax rate for those same people? What—and it will be in force immediately upon the implementation of this legislation—is it proposed to be?

One would think that the proposed rate might be lower than 12.5 percent, because those people are the lowest-income earners in New Zealand. Well, the answer is 21 percent. The current law is for the 2011 marginal tax rate to be 12.5 percent, and the proposal is to put it up to 21 percent. I ask Mr Hayes, which is higher: 12.5 or 21? The answer is that Bill English is proposing to this Parliament that the marginal tax rate for the lowest-income earners in New Zealand be increased from 12.5 percent to 21 percent, and all the National Party backbench members should know that before they put their names to this legislation. ACT probably thinks that that rate is getting close to being about right.

The Māori Party should know that its most vulnerable constituents, the people who make the most effort to work fewer hours than the full-time cut-in for the amazing new independent earner tax credit, are going to be penalised so that the chief executive of Telecom and the Prime Minister of New Zealand can get a lofty great tax cut. What is fair about that? What is progressive about that? How does that help any single individual or family, let alone the New Zealand economy? The answer is that it does not. It takes us back to the division, the poverty, and the disempowerment that we saw Bill English preside over as chair of the Finance and Expenditure Committee during the bad old days, with Ruth Richardson as Minister of Finance. During the election campaign people up and down the country said that National had said it would not go back to those days, and it would not penalise the most vulnerable people in New Zealand. Less than 24 hours into the start of this Parliament, we see promise after promise being broken by the incoming National Government. The most vulnerable people in our country are paying for that, and we will make sure that they know exactly what the National members are doing.

I move, That the question be now put.

Thank you, Mr Chair, for recognising the importance of debating this horrible Taxation (Urgent Measures and Annual Rates) Bill. I think that this bill should be renamed the “Personal Interest Tax Cut Bill”. It is for the personal interest of the National Party, and its wealthy supporters who will benefit the most from this bill. It is the redistribution of wealth from the poor, the working families, and the modest-income earners in New Zealand to the wealthy. It is from a party that campaigned on a brighter future.

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

Debate interrupted.