Debate on Budget Policy Statement

I move, That the House take note of the report of the Finance and Expenditure Committee on the Budget Policy Statement 2009. The Finance and Expenditure Committee heard evidence on the Budget Policy Statement on 18 February. I would first like to acknowledge those who submitted on the Budget Policy Statement, particularly the Business Roundtable, Federated Farmers, chambers of commerce, and others. I do acknowledge the tight time frames that they had for submissions—the deadline was 18 February at 8.30 in the morning—and a lot had changed since the release of that particular Budget Policy Statement on 18 December 2008. Once again, I acknowledge and publicly record my thanks for the hard work and resources that those organisations put into preparing those statements and their submissions. They all go into the mix.

The statement is of the intentions for Budget 2009. It is quite simple: it outlines the Government’s intentions for Budget 2009. This coming Budget will take a responsible, reasonable, and fair approach to the position that we have inherited. I will speak to that a bit more in a moment. It will set out a credible plan for the medium to long term for New Zealand. This comes hot on the heels of the execution of National’s 100-day plan of action—of doing, not just talking, of passing legislation, and of doing the things that matter. I will contrast those announcements with what has already been achieved—what National said it would do before the election, what it placed before the public and was elected on, and then what it did post-election. I will then line that up with the various economic reports that have come through over that time. I will contrast that with the plan of Labour’s spokesperson on finance, David Cunliffe. He said that a plan would be released by his party some time before the next election. The election is still 3 years away, but I guess Labour has plenty of time on its hands. Perhaps he was talking about a mini-Budget, which that party had said it would release if—unfortunately—it won the previous election.

So what did the new incoming National Government inherit? Quite frankly, it inherited a total shambles. It inherited a set of books that are somewhat questionable, as shown by events that have unfolded. I will refer to the accident compensation scheme, I will refer to the rail purchase, and I will refer to the various contingent liabilities that were in the previous Budget.

This new Budget in May 2009 will be true, fair, and transparent. It will have the risks in it, and the contingent liabilities, wherever possible, will be qualified and quantified so that New Zealand will have a true and fair view of the state of this country’s accounts. It became very, very apparent as reports came out from Treasury and various organisations that what New Zealand was led to believe was the state of New Zealand’s fiscal accounts was, in fact, nothing like the reality. Dr Smith has told us a lot about what has happened with the accident compensation scheme, and I will come back to that in a minute.

What did the National Government inherit? Well, there had been mismanagement of our economy. If members want some evidence, they can see that some things have changed. There has been mismanagement of our economy through some of the best commodity priced economic times in living memory—the last 9 years, in particular. As a result of that mismanagement, Kiwis left New Zealand in droves. Just the other day we saw the latest statistics: Kiwis are coming home. Did Opposition members not notice that? I wonder what has changed.

💬 Hon Members: Ha, ha!

Opposition members do not like it, do they? They do not like the evidence. Things are starting to turn. I wonder what has changed. Perhaps there is a better outcome and a better outlook for New Zealand.

What else has happened? What else did the National Government inherit? The previous Labour Government talked about a mini-Budget. The Labour Government had announced some tax cuts, to be fair, but given its track record no one was particularly confident that it would follow through on them. We all still want to know what was in the mini-Budget that Labour Government members talked about. In that mini-Budget was the previous Minister of Finance going to declare the true state of the accident compensation scheme? Was the previous Minister of Finance going to declare the true cost of the rail purchase? Or was he simply going to cancel the tax cuts? Speech after speech from members on the other side of the House has tended to reveal the true colours the election result deniers are showing.

The May 2009 Budget will include all lines of funding—for example, the $26 million hole in the budget of the Ministry for the Environment, which no one was really told about because previous Budgets and accounts up to that time were full of smoke and mirrors. New Zealand was not shown the true state of our accounts. The May 2009 Budget will show the true state of the health budget. We inherited probably a $150 million deficit in the health budget. I note that the Labour finance spokesman, when he was the Minister of Health, sacked the Hawke’s Bay District Health Board for something like a $3 million deficit, and now across this country the deficit is $150 million. It raises some interesting questions, I guess.

The National Government inherited announcement after announcement after press release after press release, but without the lines of funding. There is $250 million of capital expenditure on district health boards that has to come due in the next year, and $400 million is coming up for next year. Where is the money? The money is not there at the moment, because the previous administration mismanaged the economy over the best period we have had for a long, long time.

Let us cast our minds back for a moment to the May 2008 Budget. The rot had set in perhaps 8 years prior to that, I guess, but we must note—because members opposite constantly talk about debt and constantly try to put this fear about State asset sales or something like that—that $6.4 billion of extra borrowing was announced in that particular Budget. At the time, gross sovereign-issued debt was about 18 percent, to be fair, but in that same Budget $6.4 billion of State financial asset sales were also announced. There was $13 billion of deterioration in the Government accounts at that moment. The clock starts ticking for this National Government when Budget 2009 is released in May. That is the start of the accounts, because that is when they will be true and fair and every line of funding that should have been in previous Budgets will be in there.

I spoke earlier about contingent liabilities. In the May 2008 Budget there was a contingent liability that alluded to the shambles of the buy-back of rail from Toll Holdings. The amount was something like $500 million, from memory, and there was a line that stated that this may have to be revalued up or down, depending on the valuation of this asset/liability. We have now learnt that only now are the accounts in a true state, with the purchase of assets/liabilities having been valued—only now. Scarily and sadly, we are finding, from the various press release announcements by the previous Government, that the commitments totalled something like $3 billion. It is $3 billion that is not there and has to be borrowed somehow if, in fact, that is followed through on. We have member after member on the other side of the House essentially asking where the money is: “Where’s the money? We want more money.”

The previous Minister the Hon Ruth Dyson was asking questions about hospital spending and health spending. How can those members look each other in the eye, when they have deliberately produced accounts after accounts that have not, in my opinion, shown the true and fair view of New Zealand’s economy? It started with May 2008, when we had the first deterioration.

In the May 2008 Budget there was $13 billion of net deterioration in the accounts. With the Pre-election Economic and Fiscal Update we started to get the decade of deficits. Do members remember that? That is when it first came out. In the decade of deficits we were getting about 30 percent of GDP borrowing at that time. Then we have the Budget Policy Statement right here, which the Finance and Expenditure Committee has examined. Sadly we started to have to put the sunlight on to the accounts, and the accident compensation fiasco and debacle was starting to be revealed. There is nothing like a bit of sunlight on to the accounts. Unfortunately, disgracefully, and sadly for our country and our economy, the previous administration made an awful mess of the accounts, which this new Government has inherited. We will be up front and honest, and outlay everything that should be outlaid.

I am looking forward to the Budget because it is the starting point and it is when the time starts ticking on how this National Government will be measured on its success. The success of this National Government will be measured after the May 2009 Budget. The clock did not start ticking at the May 2008 Budget. There has been a massive deterioration in the accounts and in the economy since that time, and the previous administration was in charge right through that period. Thank you, Mr Speaker.

The member who just resumed his seat, Craig Foss, clearly demonstrated why Paula Bennett, Anne Tolley, and even Nick Smith were preferred over him for ministerial appointments. That disgraceful speech bore very little recognition of reality.

It was a telling comment, was it not, from Therese Arseneau on Sunday on the Q+A programme when, having listened to John Key for quarter of an hour, she said she could not see whether National had any plan to bring New Zealand through the recession and to make it stronger coming out the other side. I think Therese Arseneau was absolutely right. The Government has done the exact opposite. The Government has not only taken steps to damage the poor and those most vulnerable to the recession in our community but also undermined the future ability of New Zealand to come out of this recession in a stronger state.

The member Craig Foss said nothing about cutting the research and development tax credit, but the information technology firms in his electorate will tell him about the damage that has done. He said nothing about abolishing Fast Forward, but every primary producer in his electorate will tell him that that was a key to innovation and creativity. The member said nothing about the fact that the National Government is sitting idle while we are suffering the loss of training opportunities. The number of apprenticeships is down by 15 percent. What will happen in 4 years’ time when this country is out of the recession? We will have a shortage of skilled labour, because of the lack of foresight of this pathetic National Government to do anything about it.

Therese Arseneau was right in saying that there was no plan to deal with the crisis. She might have also said that there is certainly a plan to exploit this crisis as a pretext for bringing in things that were not foreshadowed to the electorate during the campaign, such as slashing entitlements to accident compensation and undermining the New Zealand Superannuation Fund, meaning that the fund will not have the ability to meet entitlements in a few years’ time.

Although this Government has been given the benefit of the doubt during its honeymoon phase, increasingly, media commentators are making criticisms about it. Here is what Gordon Campbell had to say this week: “Plainly, the wheels are now falling off the government’s attempts to govern by tokenism and PR gimmicks.” Gordon Campbell is absolutely right.

The Government decided that it would have a Job Summit. I thought that was a good idea. I thought that showed a little bit of humility from a Government that had no plan to at least go out and listen to others who had ideas. I told John Key that members on this side of the House think that saving jobs is the most important thing. It is about people’s livelihoods. I said that we wanted to be constructive and to help, and that we would participate in good faith. What did John Key say? National was 2 months into Government and was already incredibly arrogant. John Key said no. He would not have the 40 percent of the electorate that voted for Labour or for the Greens represented at the Job Summit. So much for inclusiveness in Government! There is a double standard.

Even better was the wonderfully awful performance of Paula Bennett on Morning Report last Friday. What did Paula Bennett say? Apparently, we are now a one-party State. She said that people were expected to come along to the regional job summits, to listen, and to not contribute ideas. Her approach was to ask how the Labour Party dare come up with the constructive idea that we could introduce job-rich job-creation programmes by creating warmer, drier, healthier homes, and that it was outrageous that we had an idea that 99 percent of New Zealanders would support. What a fool she made of herself, showing her immaturity and arrogance so early in this term of Government.

We looked for initiatives from the Job Summit. The National Government came back and told us that there were two key initiatives. One was the 9-day working fortnight. I thought that, in certain circumstances, it could be a very good thing. I support today’s move to save 60 jobs at Fisher and Paykel Appliances, but I ask Mr English why the 60 workers who were laid off today at Solid Energy will not have the option of a 9-day working fortnight because State-owned enterprises are not included under the scheme. I want to know why 80 workers are being laid off at Summit Wool Spinners in Ōāmaru. Those 80 people being laid off will not have the option of a 9-day working fortnight, because they are in a business that employs fewer than 100 workers. Well, so are most New Zealanders. Most New Zealanders are excluded from the scheme.

I actually applauded the Government’s idea of having a 9-day working fortnight with the 10th day being used to provide job skills. We could use this opportunity to upgrade the skills of New Zealand workers, so that when we come out of this recession we are stronger. But what did John Key do? He removed entirely the component of funding the job-skill training. Even Roger Douglas asked yesterday in the House how it would help the productivity and the progression of New Zealand to pay people a meagre sum to do nothing on the 10th day. There we are; at least in one area there is a minimum of agreement.

Then there was the concept of creating a bicycle lane from Cape Reinga to the Bluff. Again, I was prepared to give John Key the benefit of the doubt. He is a financier after all, is he not? He is one of those money people. He said that he could create 4,000 jobs for $50 million. I gave up mathematics quite early in my school career, but I sat down and worked it out on the back of an envelope. That worked out to payments of just over $6,000 per worker per year. I thought: “That is funny; the minimum wage is four times that amount.” I ask what he will spend on the materials—the concrete and the gravel to make the cycleway. Of course, environmental engineers said this week that the cycleway would cost at least $300 million. That is six times the estimate made by the financial genius that the Prime Minister is. When I asked him today what estimates he had received, he did not answer. He did not even tell the House whether this concept is still a goer.

The two big schemes that people came up with at the Job Summit are both in real difficulty. I hoped that something could be made out of both of those schemes. I know that John Key boasted to the Job Summit that 100,000 jobs would be saved by the 9-day working fortnight—100,000 jobs. Today, which is the day before the scheme comes into operation, he came into the House and boasted that 60 jobs had been saved, and he exaggerated that. He said 350, and Fisher and Paykel Appliances said 60. I say to Mr Key that I am sorry, but I believe Fisher and Paykel Appliances. As 60 jobs were saved, what is the remainder? It is 99,940 jobs still to go. Well, I wish Mr Key luck on doing that.

What National members really could have done at their Job Summit was to make the decision that so many people told them to make. That was to give the tax cuts to those who needed it most, where the job stimulation would come from. National did not do that; it gave away the chance to preserve thousands of jobs and hundreds of businesses. It is absolute arrogance that John Key, in his financial position, stood up last week and told middle-income New Zealanders that they should give their tax cut to charity and should do what the Government has itself refused to do—that is, to give decent and reasonable tax cuts to people who are struggling to survive and who would have spent that money, created jobs, and sustained businesses.

This Government has been a failure. This Government has another agenda; it is a right-wing agenda. But it has no plan to look after the very most basic need of New Zealanders, which is the right to a livelihood.

I raise a point of order, Mr Speaker. I draw to your attention a breach of Speakers’ rulings 62/6, 63/1, 63/2, and 63/3 by Mr Quinn. I ask that you either stop him interjecting or return him to his own seat.

💬 Paul Quinn: Speaking to the point of order—

💬 Mr SPEAKER: No, I do not need to hear any more on this. The member has raised a perfectly proper point. The Speakers’ rulings are very clear that members should not move their seats in order to interject more effectively. The dilemma we have is that often in these debates members move so that they are in this part of the Chamber. I note that quite a few Labour members are not in their normal seats, and certainly quite a few National members are not, and it would be wrong to say that they could not interject. If I could pick up on the member’s point, I think that Mr Quinn should perhaps be a little more reasonable in his interjections. He has a very good baritone voice and it is quite loud. Rather than my banning injecting when a member moves seats, I ask him to please be a little more reasonable. I hope that is acceptable to the honourable member.

The previous speech shows why no one is listening to the Labour Party. Eventually, when those members have been in Opposition long enough, they will realise that it is not all about them; it is about what the country requires.

💬 Hon Members: Oh!

I am offering free advice based on experience. What is so striking about Labour Party members is that they are more arrogant in Opposition than they were in Government. They are still struggling with the reality that having run all their conspiracy theories for a whole year, backed by the whole machinery of Government, they quite decisively lost the election. I think it will take them some time yet to adapt to that reality. In the meantime, the rest of the country is getting to grips with one of the most—

💬 Hon Darren Hughes: This is so 2002.

💬 Hon Chris Carter: Yes—remember 2002?

I do, and that is why I am giving the advice. If they do not take it, they will repeat the same experience—that is the point. Labour will get rid of Phil Goff, and then there will be no leader until Andrew Little turns up—and, man, will they be fighting then! Who will keep order when Helen Clark and Dr Cullen are gone? Nobody. There is no one to keep order in the Labour Party once Helen Clark and Dr Cullen are gone.

💬 Hon Anne Tolley: Cunliffe.

Oh, the most popular member of the caucus, the Hon David Cunliffe! Yes, he will do it. In the meantime, the rest of the country is focusing on the very considerable economic challenges that New Zealand faces.

This debate is about the Budget Policy Statement. As we talk about the Budget Policy Statement, I want to take people back to the 2008 Budget. The 2008 Budget set down a foundation that made the Budget Policy Statement pretty difficult to put together. I remind the House about what happened in the 2008 Budget. It showed a couple of things. Firstly, the 2008 Budget was when New Zealand switched from surplus to deficit. In the 2008 Budget, the Government forecast $13.5 billion of cash deficits over the forecast period. That meant that the New Zealand Government would have to go out and raise $13.5 billion in debt.

The 2008 Budget also showed that the current account deficit was running at about 9 percent. As I noted in question time, this is one particular failure of the previous Government. Labour came into office in 1999 saying that the Budget deficit at the time—which was about 5 percent of GDP—was so bad. It indicated that the previous 15 years of economic policy had failed and that Labour would fix that. By the time the previous Government left, the deficit had doubled. Why does that matter? It means that of all the OECD countries apart from Iceland, New Zealand has more need to borrow money in overseas markets. Anyone who has been following any kind of media in the last 6 months knows that those overseas markets are volatile, unpredictable, and in a state of turmoil.

That is the main vulnerability of the New Zealand economy as we head through this recession. So that leaves New Zealand with two chronic deficits. One is the current account deficit, the other is a fiscal deficit, and I remind the House and the Opposition that these were as plain as day in the 2008 Budget. Then, when the global financial crisis turned up in September and October, the Labour Government had to put together a Budget Policy Statement against the background of that vulnerability. Along the way we had the pre-election fiscal update, which actually forecast a decade of deficits.

So as the previous Government left office, it did not leave the accounts in surplus, as it likes to claim. It left us with forecasts of 10 years of deficits, and we know from events since then that that decade of deficits did not include the $300 million of accident compensation liability that that Government had hidden from the New Zealand public. So the fiscal outlook has been deteriorating since the 2008 Budget, and I have to say that with the impacts of global recession, we are likely to see further deterioration in the fiscal outlook over the next few months. Those two things are signs of the major shift that the New Zealand economy has to make.

It is now apparent that the growth of the last decade has been to a large extent driven by debt, and that that debt has been used largely on consumption. The switch that the New Zealand economy has to make is a move away from debt-driven and consumption-driven growth. That option will not be available, so we need to move to export-driven and investment-driven growth.

💬 Hon David Cunliffe: Hear, hear!

The member who is saying “Hear, hear!” was part of a Government that made that problem worse, particularly with its strong uplifts in Government expenditure.

💬 Hon David Cunliffe: Rubbish!

If he does not believe that Government expenditure was getting out of control, I will give him a very simple fact. In the 2005 year the Government spent $44.8 billion, and by 2008 that had risen to $62.4 billion—in just over 3 years.

There is absolutely no choice for the current Government—we will not be able to increase spending at anything like that rate over the next 3 years. We have had debt-driven and consumption-driven growth and the expansion of Government, and now we are going through an adjustment process—largely forced on us by the rest of the world—where we have to move to growth that is based on savings, investment, and exports, and we have to do this at a time when international markets are particularly volatile.

So the Government has a two-pronged attack on this problem. The first prong is the one that seems to bother the Opposition particularly, and that is our commitment to protecting New Zealanders from the sharpest edge of recession. We do not believe that we can roll the recession back—we do not believe that the waves that are coming at us from the world in coordinated recession can be rolled back. That is why the Government has rolled out a series of measures, such as the ReStart programme for people who have been made redundant, the 9-day fortnight, the bringing forward of infrastructure spending, and the tax cuts on 1 April to help to protect people from the sharpest edges of recession in the short term.

Of course, what goes with those measures, and what goes with protecting entitlements, is a pretty rapid increase in public debt, and that is the measure of the extent to which the Government is committed to maintaining entitlements and protecting people from the sharpest edges of recession. We have to gear up now to start getting ready to pay back the debt that is being incurred as we speak. Public debt is likely to double in the next 3 years. Every dollar we are borrowing now will have to be repaid with interest, and that is why we have a longer-term plan to lift the productivity of the economy, and to get this economy into top gear as it comes out of recession.

We have announced, for instance, a significant programme of regulatory change, all of which are designed to lift business confidence, to give businesses the opportunity to invest, and, most important, to fulfil this Government’s ambition to replace every job that is lost. We cannot retain the jobs that are being lost now, but we can make every effort to replace those jobs as this economy comes out of recession.

When Bill English goes back to his office and looks at the replay of that speech, he will see that even the chairman of the Finance and Expenditure Committee was nodding off behind him, and that other members, like David Bennett, were bored stupid by a speech that proved why that member can never lead the National Party—

💬 Hon Darren Hughes: Again.

—again. I tell “Mr 2 Percent” that that was a 2 percent effort. Here is a message to Bill English: “You won. We lost. So grow up and govern!”. He should stop blaming Labour or the international recession for every problem National has on its plate. National should grow up and govern.

I tell my colleagues that he is a Minister whose tail is hanging between his legs because he was caught out at the Finance and Expenditure Committee telling porkies. He was caught out saying there were unfunded liabilities when quite clearly there were not, and he was forced to admit that National itself would use the same techniques in the Budget. He was caught out saying National would have no forecasts, when the very next week he came back with a new one. And he has been caught out trying to have it both ways, by saying the pre-election fiscal update sticks but that somehow Labour never really told him what it really had in the closet.

💬 Hon Ruth Dyson: He can’t have it both ways.

He cannot have it both ways. But he told us one very important thing in his speech. His own members were asleep and did not notice. He said the Government has a two-pronged strategy—and we agree that it does. The code “take the sharpest edges off the recession” means that National will send out John Key on a public relations offensive about cycleways and 9-day fortnights. That is pure flimflam that, at best, will save a handful of jobs but looks kind of soft, gentle, and centrist. In the second half of his speech he said National will position New Zealand for the rebound with a programme of regulatory reform. Oh yeah! We can bet it will. The Government does have an agenda, but it is a very bad agenda and an agenda that New Zealanders did not vote for, because they were not told about it before the election. Crosby/Textor, National’s spin-meister, said: “If you tell New Zealanders, they won’t vote for it.” New Zealanders threw out that man Roger Douglas when he tried that, they threw out Ruth Richardson when she tried that, and they will throw out that lot when they realise that is what has been done.

The Budget Policy Statement comes with the hard work of the all-powerful Finance and Expenditure Committee behind it. The report, which is before us in the House and that no one has yet mentioned, explodes some very important myths. It acknowledges in a bipartisan way—and the Minister acknowledged this to the committee—that the Government actually inherited low debt. Unlike most other OECD countries, which have between 40 and 50 percent of gross sovereign debt to GDP to contend with, this Government started out with 17 to 18 percent. That is in black and white, in the Minister’s own words.

💬 Hon Members: Why?

Because of the great Labour Government, which had 9 good years of governing for all New Zealanders. The second thing that is in black and white is that the Government inherited extremely low unemployment and that New Zealand is better able to cope with the recession.

💬 Hon Members: Why?

Because of the great Labour Government and 9 years of hard work by New Zealanders. The starting position in black and white is not what that Minister has claimed in the House; it is anything but. It is a damned good start, and all New Zealanders contributed to it.

The second myth that was exploded in this report is that of unfunded liabilities. National’s view is that if it cannot blame the economy, then it should blame the Labour Party and say that it hid a whole lot of bombs. The trouble is that it did not. The trouble is that every time the Minister mentioned an unfunded liability, with a bit of digging and a bit of analysis in this report, guess what was found? It was not really there. The accident compensation scheme was not an unfunded liability; it was the difference between an unrealised change in the capital value of its actuarial account and an interest rate cut that had loaded up the notional value of its future claims. That is not an unfunded liability.

An unspecified fiscal risk, as the Minister later admitted in the Chamber, is something he will be using in his May Budget for anything when he cannot tell us the exact amount of the debt. That is another myth that was exploded in this report.

The dilemma the Government has is either that it has no plan, which is what Gordon Campbell said when he said the wheels are coming off its key arguments, like the 9-day fortnight and the cycle track, or that it has a very dark plan, which is what Fran O’Sullivan was getting at in Saturday’s New Zealand Herald where she said that it is a very, very fine line between using the international recession to create the “ ‘burning deck’ to force radical change, and downright chicanery”. That is what Fran O’Sullivan said. She is not a journalist known for her sympathies to the Labour Party, but she is saying to the Government: “Just be careful, Mr Key. You’re looking a bit like a soft shoe shuffle. You’re being a little bit too clever by spinning too hard and leaving poor old ‘Mr 2 Percent’ to do all the hard work.” In fact, Bill English has been left carrying the baby. That is the truth of it. He has $1.75 billion to spend and way too much to do with it, and he is going to have a tough job. It will be a black day for New Zealand on Budget day, come the end of May, when people start counting the chickens that are coming home to roost.

Another great myth that was exploded in this report is that the fiscal stimulus that this Government has come up with is the fifth largest in the Western World. How many times has the Government trotted that one out? It cannot be, can it? Guess what! Of the $13 billion of stimulus, $12.5 billion came from the Labour Government, and half a billion came from the National Government. It is almost like National members have been asleep. National put Treasury to sleep the day it got elected. Of all that $13 billion of effort—anything designed to inflate the economy when New Zealanders are, quite rightly, contracting their own household balance sheets and businesses as they are trying to pay down their debt, and anything the Government can and should be doing to keep the wheels of industry turning and keep New Zealanders in jobs—$12.5 billion was from Labour Government policy. It was $12.5 billion from the previous Government, and half a billion in the 6 months since the National Government has been elected.

That is why, when the 100 days of action drew to its close, and the Crosby/Textor script ran out, we started to see more of the real plan that Mr English today has confirmed is “positioning New Zealand for growth through regulatory reform.” You bet! The privatisation of prisons is a start, and the accident compensation scheme is not far behind. The trouble was—[Interruption] Absolutely!

The first thing that Nick Smith exploded was his own temper. That was the problem. Imagine walking into a select committee and replacing the chairman of a delegated board. Does this man have the first clue about governance? He sacked the chair then he muzzled the chief executive.

Paula Bennett’s idea of being friendly, open, and centrist is to say that no idea that the Labour Party could contribute, even if was something as simple as warming our homes, could possibly be considered by a job summit. I think one journalist likened that to the situation in Zimbabwe. I thought that was a little bit cruel, but it certainly was not John Key on a good day, was it? No, it should be back to the Murray McCully finishing school for her.

This Government is running out of puff already. It is not exactly positioning itself for three terms; it is having trouble scrambling past 3 months. All joking aside, as much as we are enjoying this speech, I fear I have only another minute. The Budget Policy Statement is a very important document. It lays out the truth on some myths. Myth No. 1 is that the Government inherited a bad start. Governments around the world would have killed for 17 percent debt and 4 percent unemployment. That is the first point. Myth No. 2 is that the Budget 2008 was full of holes. That is absolute rubbish. The Minister had to admit he will have the same things in May’s Budget. Myth No. 3 is that the Government has a plan. It has a script, not a plan. It has a Crosby/Textor script, and it just ran out.

In conclusion, from page 1 of Bill English’s Budget speech, he may well say: “Look, I am going to solve world hunger. I am going to solve the economic crisis.” When he comes to page 2, it will be blank.

I speak to the Budget Policy Statement 2009, and I acknowledge Craig Foss as chair of the Finance and Expenditure Committee. In the Green Party’s opinion, this Government’s Budget Policy Statement lacks a vision and a plan for the way New Zealand can address the two crises facing our country and our planet—the economic crisis and the sustainability crisis. If we are to respond to these twin crises, we need to understand them. The economic crisis is the result of the conflation on the one hand of the global financial crisis, due to lack of regulation of the financial sector, especially the non-banking sector, and on the other hand there were spiking commodity prices, especially in oil, due to the limits of growth on a finite planet.

The first factor, the global financial crisis due to deregulation of the non-banking sector, cries out for stronger regulation. We need much stronger regulation of that sector. But I will leave it there. The second factor—spiking commodity prices—is directly linked to the sustainability crisis, which is the other problem we have. There is only so much oil, there is only so much nitrogen fertiliser made from natural gas, there is only so much phosphate that we can mine in Western Sahara and import into New Zealand, and there is only so much arable land on which we can grow food. The atmosphere has only so much capacity to absorb our greenhouse pollution, until the stable climate in which our civilisation evolved is seriously disrupted. There is only so much water under the Canterbury Plains, and the Waikato River has only finite capacity to absorb our waste before it becomes dangerous even for stock to drink from, as is now the case in 75 percent of the catchment.

These twin crises—the economic and the ecological—must be addressed together. But this Government, and sadly much like the previous Labour Government, still does not get it, as evidenced in this Budget Policy Statement. It is to address these twin crises that the Green Party has proposed a Green New Deal for New Zealand as an alternative to the Budget Policy Statement. If, as the Prime Minister states, we are to borrow $40 billion from our children—the ones who will have to pay it back—then we should invest wisely. We should invest wisely, with our faces looking towards the future that those children will inherit, rather than the past. The Greens believe that the economic stimulus should be invested in clean energy generation. We should look at smart meters combined with smart tariffs, research and development, more State housing, fixing up our cold damp houses, a modern public transport system, reafforestation, high-speed broadband, low-input sustainable agriculture, cleaning up rivers, education, and more. These initiatives would create jobs and start to make the transition to a sustainable economy and society. Our children will thank us for these investments and they will understand why we put them into debt. They will inherit green jobs in sustainable industries that will be profitable and export to the world. They will not be locked into a dinosaur economy of fossil fuels, greenhouse emissions, and putrid rivers and lakes.

One of the issues addressed in the Finance and Expenditure Committee report on the Budget Policy Statement is the issue of oil dependence. I think that this is important to address because it is a good example of one of the key problems with the Budget Policy Statement. The Minister of Transport, the Hon Steven Joyce, put up the argument that we currently travel to work by car, therefore the Government will borrow tens of billions of dollars to build more motorways. Now there is an element of honesty and clarity in this argument, and I appreciate that. But it does not mean that the argument is right. Just because we currently do things one way does not mean we will always do things that way. Once upon a time, the National Government passed the Building Act 1991, which resulted in the building of tens of thousands of houses that did not keep out the rain. That does not mean we should always build houses that do not keep out the rain. Just because we currently do something, does not mean we should keep doing it that way. So the main argument put forward by National is not right. Just because our current transport system is dependent on roads, cars, and oil does not mean that it should stay that way. We are human—we have the capacity to change direction if we see a good reason to do so.

So is there a good reason to change? I would argue that there is. Oil is a finite resource. It will get more expensive—just ask the International Energy Agency, which has been very clear about this. As the world economy recovers, oil costs will increase again. We spent $7.5 billion importing oil last year—$7.5 billion that we had to find from somewhere. It adds to our trade deficit and to our current account deficit, which is ballooning. It adds to the cost of congestion, which may be $750 million a year in Auckland alone. Of course, burning all this oil adds to the GDP and economic activity, but that does not make it good. This oil dependency is a major structural weakness in the New Zealand economy and it does not have to be so. We also have a major problem with greenhouse emissions, which have increased by 25 percent over 1990 levels. They increased under the former National Government and then increased dramatically under Labour. It is very expensive for us as a country to buy carbon credits—it may be half a billion dollars to cover this increase in emissions.

So we have three good reasons to question the wisdom of deepening the current transport model—congestion, oil import costs, and greenhouse emissions—and the costs of the three are both economic and human. Public transport, walking, and cycling all relieve congestion, reduce oil dependence, and reduce our greenhouse emissions. These are all of tremendous benefit to the New Zealand economy. So is it good enough for the Minister to say that this is the way we have always done things in transport and this is how the Government will keep doing them. Of course, it is not. The Government appears to be pragmatic but the reality is that it is the slave of a defunct 1950s theory about transport. It is a deeply unsustainable theory. The apparent pragmatism of this Government is one of its attractive elements. It has adopted some measures from the left that have wrong-footed some on the other side. But is it really pragmatic to throw all our precious borrowed money at new motorway projects across the country? Or is the Government in the thrall of the pro-road, pro-oil theorists but does not even realise it?

John Maynard Keynes—a man who is coming back into vogue in current times—had something very important to say about the issue of ideology and pragmatism. In 1935 he wrote: “Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”—so said Keynes. This Government, as seen in the Budget Policy Statement, remains in the thrall of the ideology of exponential growth—growth in the use of resources like oil, and growth in the production of pollution like greenhouse gases. It is hardly surprising that it remains in the thrall of the theory of the growth ideology; it has, after all, dominated our culture for two centuries or more. But the problem with this ideology is that we live on a finite planet. We simply cannot continue to indefinitely increase our use of resources on a finite planet. The growth ideology is the academic scribbler that stands behind this Government’s Budget Policy Statement. That is the ideology that this Government is a slave to. The growth ideology is the defunct economist to which this Government remains ideologically committed. It is not pragmatic; it is not wise; and it is not in our children’s interests.

It is time for a Green New Deal. It is not too late, there is still hope. Let me finish with a quote from one of New Zealand’s great ecologists, Geoff Park—a true patriot who had a message of hope for us, who died last week, and who wrote about the loss of our lowland forests and his hope that one day we will understand what we have lost. Geoff Park said: “The plains forests have come within the final few acres of vanishing—tragic in one sense, yet magic in another. We still have a chance. The last embers of the verdant country that drew our first comers ashore must lead us towards a concept of survival for ourselves: that we must live with the rest of nature or die with the rest of nature.” The Greens want a Budget Policy Statement that will let us live.

The 2009 Budget Policy Statement was prepared against the background of economic contraction since the March 2008 quarter. Stripped of any jargon, this means that we are poorer today than we were 15 months ago. New Zealand’s recession was caused by Labour Government policy that substantially reduced our economic growth. A Labour Government made us relatively poorer. We funded the difference between our actual wealth and our desired wealth by allowing private household debt to balloon and mushroom.

In the private sector, under Labour, labour productivity declined by 60 percent, multi-factor productivity declined by 65 percent, our relative labour costs rose by 60 percent, and our balance of payments went from 3 percent in deficit to about 9 percent in deficit. Unemployment is now rising dramatically, as is Government spending as a percentage of GDP. Under Labour, New Zealanders refused to save; instead they chose to amass large household debt.

The Government’s accounts have also been deteriorating. The only way to finance Labour’s irresponsible bribes and expenditure, which are becoming more and more costly, is through racking up a large amount of debt, and we see that the National Government is going to increase that debt by $40 billion. This will serve to further increase our current account deficit, and ultimately will require higher tax rates across the board.

Against this background, how does the 2009 Budget Policy Statement stack up? If we look at it holistically, we have to say that the National Government’s approach to the recession has tended to be in the right direction. National has, generally speaking, avoided acting on the calls to implement more irresponsible spending as a solution to a problem that was caused by irresponsible spending in the first place. National has moved, instead, to cut taxes, ensuring that struggling households can, at least, last out the recession.

National has also freed up investment rules. The cap on bureaucrats and the review of some areas of Government expenditure will see the public sector share some of the pain caused by the economic contraction, ensuring the pain does not fall only on the private sector. All of these actions are laudable, but they simply do not go far enough. Overall, National is more worried about the cents than it is about the dollars, given the level of Government waste that it inherited. Moreover, National is at risk of getting bogged down in minor matters, and increasingly responding to calls to do something, hence the 9-day working fortnight and the national cycleway.

It is, unfortunately, becoming clear that National lacks the courage and the vision to transform New Zealand into a prosperous country again. It seems unwilling to push forward measures that would result in temporary pain but would create a framework within which growth would flourish. In my view, there are three reasons why National is unable to do what is necessary. Firstly, National is locked into election promises that have proved to be unsustainable. National lacks the vision to rethink how we can better deliver social services in this country, and I am afraid that until we do that we are not going to prosper. Secondly, National is still wedded to the idea that politicians can somehow make the system work, despite all the evidence to the contrary—for example, Labour wanted increased spending to lead to much higher output in the health sector. But in fact it delivered a dramatic reduction to the rate of productivity in that sector. And, thirdly, National lacks the urgency to make the required changes. We are already seeing this with the lobbying of various unionists and other groups, such as the film industry. The tyranny of the status quo is a powerful force in politics and can be overcome only by rapid reform.

A deep-seated recession of the type we currently have requires three things of politicians. Firstly, politicians need to be able to make the hard decisions. That means we have to admit that we have been living beyond our means. Household debt cannot finance all our wants and desires as Labour seemed to wish it to do. Equally, Government spending and borrowing will not stop the pain; it will only prolong and slow down the correction that has to take place in this country. Secondly, we need to set a clear and measurable goal, which New Zealanders can get behind. We need to be bold and aim for a sustainable economic growth rate of between 4 and 5 percent. Every policy, new and existing, needs to be measured against that target. Does it help or hinder its achievement? Thirdly, politicians must set out to increase certainty amongst the public and within markets. If we do not do that, the recession will be much deeper than it needs to be. National’s rolling maul is just spin for ad hoc policy responses. Such policy responses will continue to undermine the certainty that the markets need. Talk of potential bail-outs and guarantees reduces the ability of toxic assets to reveal themselves and be liquidated. With a clear goal and path, everyone could start working together to restore the country to prosperity.

As a country, if we like, we do not have to aim at prosperity. It is not necessary. Nor do we have to undertake a programme of reform. We can continue to self-deceive and pretend that we are prosperous. We can continue, as Labour did, to blame our economic misfortune on other people and other countries. We can continue to choose short-term gain and ignore the effects that it has on long-term prosperity. This path will see ad hoc and occasional reform, which will take the sharp edges off the increasing poverty that will be the reality in this country. We will continue to struggle, but life will not be great. We will continue to get relatively poorer, if we go down that path. We will lose access to the kind of health care, education, and goods and services to which only those in the First World have access. We will continue to do what we have been doing since 1996, but we need to seriously question whether this is the future to which we aspire. I do not believe that the 2009 Budget Policy Statement answers that.

We need to get real about the options we face. National’s alternative of big government and low taxes does not exist. The only alternative to Labour’s high taxes and big government is low taxes and small government. However, small government does not have to mean that people cannot have access to the social services they need. In fact, the opposite is the case. A well-designed system would not only allow New Zealand to grow but also give people better access to health care, education, and social services.

I spent yesterday in Christchurch at a national conference on homelessness, learning about the challenges facing our night shelters and soup kitchens, the demand on emergency accommodation, and the situation for families experiencing financial crisis. It was, in many ways, a most appropriate context in which to consider the 2009 Budget Policy Statement. As a member of the Finance and Expenditure Committee I have been part of a discussion that has focused on the projected decline in the fiscal position. The committee has contrasted the fiscal stimulus with that of other OECD countries, debated the inflation indexing of benefits, and pondered the challenge of maintaining stability and liquidity in the banking system, but it was not until I sat listening to the call for a statutory safety net for all homeless people that the true impacts of the projected deteriorating fiscal position really hit home—excuse the pun. All the talk about export prices, declining asset values, and rising unemployment will have its inevitable effect on the numbers of New Zealanders who lack access to affordable housing. It will be seen in the faces of those who have to make income-related decisions about whether they can attend to the health needs of their children. It will be experienced by those whose quality of life is affected every day by the meagre scraps that constitute their income. It will be felt most deeply by those whose education fortunes will become defined by cash flow rather than talent or skill.

In the submissions received by the Finance and Expenditure Committee, a particularly strong call was made by the Public Health Association of New Zealand to highlight the close interrelationship between good health and New Zealand’s economic performance. The Public Health Association urged the Government to minimise the negative impact of the economic downturn on Māori, pointing out that tangata whenua tend to suffer more than the rest of the population in recession years. It is not, of course, as if Māori started off in an equitable position before the downfall of the New Zealand economy. We all know that although the average unemployment rate is sitting at 4.1 percent, it is twice that for Māori—they have an unemployment rate of 8 percent. Te Puni Kōkiri suggests that a likely scenario is that Māori unemployment will rise to 12 to 15 percent by the middle of next year. Initial signs of an economic slow-down in construction, tourism, and primary industries are of particular concern for Māori, who are strongly represented in each of these sectors, so it is with great anticipation that we look to the Government’s jobs and growth plan with a view to finding out how tangata whenua will be protected against the sharpest edges of recession.

But of course the jobs queue will not solve all of the issues that we expect to arise as the recession deepens. We are particularly conscious of the position of non-working families with children, many of which will include Māori parents. The Human Rights Review Tribunal found clear discrimination in the Working for Families package, with significant adverse effect on the living standards of around 200,000 children. Two hundred thousand children must not—cannot—be ignored, nor can our collective neglect of them be justified as a saving. It remains an absolute anachronism that the very poorest families miss out on at least $60 a week tax-free for their children, while that same $60 is available to working families, even to those earning over $100,000 a year with several children. Sixty dollars may not seem like much to some of us, but in real terms it equates to six packets of nappies, 15 loaves of bread, or 15 litres of milk, and that could make all the difference between survival and distress.

At this point I want to add another issue into the Budget policy agenda, for although we may all hold our breath and hope that the focus on longer-term productivity and on getting the economy ready for recovery will make life better for the great mass of New Zealanders, it might be timely to explore the wisdom of the notion that exponential growth is simply part of the status quo. All of the international evidence points to the fact that the global financial system is on the cusp of ultimate failure. A business-as-usual Budget that focuses on GDP growth stimulants will only ever come up short when it comes to confronting the risks of emergency pressures. I mean, how many times do we attempt to budget for something, only to find out that it all turns to custard down the track due to unforeseen circumstances? I know from painful personal experience that my own budgets never seem to add up, no matter how robust are the theories I have about them. We are not talking about day-to-day finances that we earmark for systems maintenance; I am talking about exponential GDP growth as opposed to risk management strategies for the future as we know it.

The enormity of this issue must not be trivialised. Given that the entire global financial system is predicated on growth, it can appear overwhelming. But this is the time when the value of the genuine progress index comes into its own, for it takes into account not just the bottom line on consumption but a broader view, including the implications of climate change and its consequences, the effects of the ongoing demand on our natural resources such as water and air, the impact on our ecosystems, and the overall challenge of how to create sustainable progress on a finite planet. Simply printing more money will serve only to exacerbate the problem that starts and ends with the thinking that the race is on to consume resources until they are all used up. Talking and projecting GDP growth stimulants is like taking medication to aid and abet our collective addiction. So although the Minister of Finance took the time in the select committee to describe three different risks—those of banking stability, export prices, and the combination of housing prices and rising unemployment—we in the Māori Party are also very concerned about the bigger picture, including the complex consequences that fall out of our high oil dependency.

There are many issues that we must take seriously if we are to plan responsibly for our future. The predictions are that poor health and poverty look set to increase as the gap between the rich and the poor continues to widen and population increases put strain on health resources. We know that life expectancy will increase, and the increasingly aged population will have significant implications for the cost and balance of health and social services. We are advised that those with solely Māori ethnicity are more likely to have poorer health, income, and education outcomes. Skill shortages will increase in some sectors. Low future growth in unskilled jobs will mean an increase in the number of the working poor, and Māori and Pasifika workers will be overrepresented in these areas. We know that a shortage of fresh water and the quality of water will become increasingly significant in the quest for economic growth. None of these issues are isolated incidents; they are all worthy of future exploration. None of us can continue with the insanity of business as usual when basic common sense tells us that we must look to all solutions to ensure the system is sustainable, and that the future we forecast is one we can all look forward to. Kia ora.

The Budget Policy Statement tells us today that New Zealand is a country with twin chronic deficits—twin chronic deficits that National inherited when it came into Government last November. The balance of payments has long been a problem for this country, and the balance of payments deficit for 2008 is 9 percent of GDP. The outlook has worsened from the pre-election update, but National is doing all it can to bring under control the loose and reckless spending of the previous Labour Government, which has led to the projected decade of fiscal deficits. The issue is not just a balance of payments deficit, and it is not just a decade of fiscal deficits; it is twin chronic deficits, and this Government will act to get that under control. There are a number of ways to do that, and all of them have been turned down by the Labour Opposition members because they are in fairyland. They were in fairyland before the election, and they are surely in fairyland now.

What does one do if one is faced with these problems? Well, one has to solve the big bogey that has been the problem for this country over the last 9 years, which is falling productivity per person. Productivity has not been growing. The reality is that in any organisation one cannot expect to improve people’s incomes unless one improves productivity. So how does one grow productivity? How does one get productivity to improve? Well, the first thing one has to do is to look around one’s organisation and ask which programmes or things it is doing do not make any sense, because they are not actually saving any money or making any money. Which are the programmes that one might do something about? Which low-quality programmes in the organisation might one try to sort out?

Well, according to those in fairyland, there are none. Every programme is sacred; every programme is absolutely essential! Members on the other side of the House spent the last 9 years adding programmes and refusing to reduce any of those programmes. Over 9 long years all they did was announce new programmes, and they never checked what was going on with the programmes that were already in place.

💬 Hon Darren Hughes: That’s rubbish.

Well, I think they had an expenditure control committee, which met probably two or three times and then gave up. We need to improve productivity, and that is why low-quality programmes in Government have to be curtailed.

Then we have to improve productivity in the public sector generally. How do we do that? We have to move people to front-line services. Apparently—according to the Labour Opposition, and particularly Mr Robertson—that is impossible and cannot be done. Not only is that the case, but it is an insult to try to do it! But we have to think of the people who are paying the bills, and we have to think of the people whose incomes are not growing. The only way to achieve a growth in income is to improve productivity. That means providing more front-line services, and that means really testing whether the people who are working here in Wellington in the back offices are all needed, or whether we need to move people to the front-line services.

💬 Hon Darren Hughes: Like press secretaries for Ministers!

Then we get on to the matter of Government infrastructure investments, and that is where—particularly—Mr Hughes is in absolute fairyland. This is the Hon Darren Hughes who, when he worked out that the Waterview Connection was going to cost $3 billion or thereabouts—$3.16 billion—said: “Oh, just get on and do it. It doesn’t matter what it costs. Just get on and do it. It’s not my money; I don’t care. We need to do it, and you are just a silly person for even considering for a moment that we should not get on and do it.”

Then there was the small matter of Transmission Gully, which again he thought should be done at any price whatsoever. It did not matter whether it was going to get any return; it had to happen immediately. Darren has no understanding of the value of a dollar. He would be—

💬 Hon Trevor Mallard: I raise a point of order, Mr Speaker. The member is a relatively new member, but I think even he should know now from the briefings that he has had how to address members in the House.

The ASSISTANT SPEAKER (Hon Rick Barker): The point is made that members should be addressed correctly. I call upon the Hon Steven Joyce to continue.

The Hon Darren Hughes would not have been out of place in the late, lamented social credit party, because he has no understanding of the value of a dollar whatsoever. He thinks that the solution is just to throw dollars like confetti in the general direction of a problem, and that there is no point worrying about annoying things like cost-benefit ratios, or value for money; they are just pesky things that get in the way, and we should just go away and spend—[Interruption] That is right. Of course, it is always unfortunate if a party makes those promises and then does not win at an election—that is unfortunate, as well.

The other thing a Government has to do is to think very carefully about the costs it is imposing on people around the country. For example, it would be high arrogance at this point in time to suggest that a 14c a litre tax on one-third of the country for petrol was a good idea at a time of recession. That would be a real, arrogant imposition on the economy. The Labour members said “But it’s only money. If we just hit them with it, it doesn’t really matter. We’ll just dive in, take the money, and pretend that it doesn’t hurt anybody. It’s simply free money for the Government and its friends to spend as they see fit.” The issue here is that the Opposition is in absolute fairyland when it comes to dealing with a very big world economic crisis. On this side of the House we understand what needs to be done. We will not be slashing and burning, despite Labour’s worst rumours. We will not pretend that problems do not exist, either. We will be responsible, we will take measures that will have an impact on the economy and that will help to grow productivity.

What are those measures? For a start, reducing taxes is helpful. That gives people incentives to work hard and get ahead. That encourages people to go out and work harder, because that is what we need. It will not make any difference whatsoever what we here in Wellington do in the Government sector; it is the private sector, the people working in businesses up and down the country over the next 2 years, that will determine how fast this country grows out of recession. That is why the tax reductions from 1 April this year are so crucially important.

Then there are the plans for small to medium sized enterprises, which are really important. The small to medium sized enterprise business package is crucially important, because small and medium sized businesses in this country over the last 9 years have struggled under the yoke of a Government that did not understand them. It professed that it understood, and it had a small business advisory forum, but then it did not actually do any of the things that it said it was going to do. Then it said it was too late. Labour had had only 9 years, and it did not have time to put in place things that would help small businesses, which was unfortunate! But anyway, we now have a Government that understands that it is the small and medium enterprise sector that is so crucial to the economy.

There are other things, such as the ReStart package, the Job Support Scheme, the 9-day fortnight, and investment in infrastructure across the country that make sense—not the things that the Hon Darren Hughes thinks should happen so he can get a quick headline in the newspaper. Those are the things that will make the difference. Those are the things that are improving productivity in this country and are actually growing the country and growing individual incomes, to help us to grow faster out of the recession and into the future. The reality is that we have two very big deficits and we have to grow much faster than we have been doing if we are to deal with those over the next 9 years. Thank you, Mr Assistant Speaker.

A large number of people around the country will be asking: “Who was that man?”, and the rest will be saying: “Who cares?”. But for those who did not know, the previous speaker was Steven Joyce; his next aim is to be the Minister of Finance. I ask Bill English, after his speech to the House during this debate and after Mr Joyce’s speech, whether we could please have a third alternative. In the remaining term of this Government, I think Mr Dunne is looking positively dynamic compared to those two.

That was a dreary speech from a dreary member, but the worst part about it was that it was full of inaccuracies. The themes of this Government have been built on myths. They are myths that are slowly being broken by people realising that what they have been told time after time—by the hacks in the media who are National supporters, by National MPs themselves, and by the tragic people who have nothing better to do than to repeat those myths on talkback—is not true. People who have been hearing the myths time after time are now saying to Labour that those things are not true. It is not true that this Government inherited a shattered economy. We had almost the lowest debt level as a percentage of GDP—17 percent—in the entire world. Other countries would be cutting their throats to get to that position, yet Bill English says that this is a terrible position for National to have inherited. For quarter after quarter after quarter we had the lowest unemployment rate in the OECD, and we did not get much above 4 percent towards the end of last year when we knew the economy was slowing down. With that low level of debt as a percentage of GDP and a fantastically low unemployment rate, how can the National - ACT Government say that it inherited a bad economy? It is just not true. Some members further display their ignorance, if it was not already obvious to everyone, by repeating that myth.

The second myth that is being absolutely shattered around the country is that Labour left a whole lot of holes in the financial reporting. Well, Bill English himself had to front up to that at the Finance and Expenditure Committee. He said that was not true, and it was exactly as National would have reported it. Government members know that the unfunded liability stories that they have been telling are not true. They know that everything on the public record is exactly as it was when they became the Government. There were no tricks, there were no holes, and they did not inherit a bad economy.

The third myth that has been absolutely exploded around the country is that John Key has a vision and a plan. Members might recall before the election—and subsequent to that, as well—that the current Prime Minister modestly compared himself to Barack Obama.

💬 Hon Darren Hughes: Yes, and Steven Joyce is Dick Cheney.

John Key often referred to “Barack and I”—as Steven was telling him to say—as if he was part of Barack Obama’s little fingernail. That is what we thought he was doing. We thought that was what he was saying about the incoming President of the US. It is clear now—if members want to be correct about the comparison—that John Key is like George Bush; there is no comparison between John Key and Barack Obama. Barack Obama had “Change You Can Believe In”. He is determined to support the citizens of his country, whereas John Key just likes the comparison and has no idea, no vision, and certainly no plan.

Nowhere is that more evident than in the health portfolio that I have been given responsibility for in the Labour Opposition. In the House this afternoon I asked the Minister of Health, Tony Ryall, about cuts to services that have come as a direct result of his letters of expectations to district health boards around our country. The Minister just shrugged it off. He just smiled and said “Well, that’s all your fault”. Actually, nobody on this side of the House wrote those letters of expectations. Tony Ryall’s signature is on the bottom of the letters; it is his words that have caused direct service cuts. Then he laughed when I asked about the women from Westport, Waimangaroa, and Karamea, who, instead of having a mobile breast-screening unit that could come almost literally to their very doors, now have to drive to Greymouth and back in order to get breast screenings. That situation was raised by Labour members when we were on the West Coast, and, as a result of those representations, the Minister has been forced to take action. Until Labour members raised it during our visit to the West Coast, nothing at all was being done. Worse than that, Tony Ryall laughed in the House. I do not think it is funny when women who were getting access to breast-screening clinics outside their doors are now forced to drive for over 2 hours to Greymouth in their own time and at their own expense. [Interruption] I ask Mr Joyce whether he thinks it is funny, too. On this side of the House, we do not think that people having their access to services cut is a funny thing or a good thing; nor is it something that can be shafted home to the previous Government, because that is just not true. Everyone in New Zealand knows exactly what the state of the public health system is. Continuing cuts and blaming it on Labour is just not a runner.

Service cuts have been predicted for Taranaki. I do not even know who the member of Parliament is for that area, but I know for certain that he has not raised a single issue with the Minister of Health in this House. So it is all right for the people in Taranaki to have health services cut and for the member of Parliament to say nothing. Harry Duynhoven, the previous member for New Plymouth, would have been in this House demanding answers from the Minister of Health if any cuts had been made to health services under his watch. In Tai Rāwhiti, 20 fewer staff members are to be employed. Has the current member for East Coast raised that issue at all in this House? No, there has been no representation from Anne Tolley, the member of Parliament responsible for that area. She has left it entirely up to Moana Mackey to work with the district health board and with the workforce to ensure that those jobs are protected. How will having 20 fewer staff in the Tairāwhiti District Health Board area improve access to health services for that population?

In Otago, people over 65 have had their access to home support services cut. What have any of the people in Otago done that is so bad that their measly hours of support—sometimes only 1, 2, or 3 hours—have been cut to nothing? Those hours are nothing at all; they are a drop in the bucket in the overall health budget. But for those elderly men and women sitting at home and knowing that they will get their laundry done, that they will get some support with meals, and that they might get their cleaning done, it is the difference between them having quality of life and living in their own home, or having to go into a rest home. That choice is being taken away from them by Tony Ryall, because his letter of expectations has forced the Otago District Health Board to cut home support services to some of the most vulnerable people in our community. I do not think that is a laughing matter either. The Minister of Health laughed at those over-65-year-olds, those elderly people who are often frail and who are just asking for 1 or 2 hours of home support to enable them to live in dignity, with some independence, in their own homes.

The people of the West Coast, as we know, have not only had the situation where the poor old Minister was caught on the back foot and did not know about the women from Karamea and Westport having to go right down to Greymouth for their breast screenings; they have also had significant cuts to their elective surgery—their orthopaedic surgery. They said, on public record, that it was solely as a result of the letter of expectations from the Minister of Health. Many, many people on the West Coast who are waiting for their hip replacements, or their knee replacements, have now had their surgery cancelled and have no idea when their surgery will be performed. Has the member of Parliament for West Coast - Tasman come into this House and raised a single issue with the Minister of Health? No, he has not. On every occasion, those members who paraded around those electorates prior to the election saying “I’ll be your voice in Wellington” have not been seen or heard of since, and, at exactly the same time, the services that their constituents have relied on year after year are just being whipped away from under their feet.

The Budget Policy Statement 2009 sets the framework for taking this nation forward through one of the toughest recessions we have had in two generations. It sets the framework for blunting the edges of this recession and providing a platform from which we can grow this nation and take ourselves out of this recession. I am proud to say that on the front cover of this Budget Policy Statement rests the name of our Minister of Finance, the fine Mr Bill English, who will set the platform, and deliver the Budget in May of this year, to take this nation out of this recession and to go forward.

This Budget Policy Statement is set in the context of a range of historical events and statistics that have set the basis of where we are at this point in time. I shall refer to a few points from the speech of the “myth-buster”, the Hon Ruth Dyson, who spoke about the myths that she thought needed to be busted for the New Zealand public. I will talk about some of those things myself, because we find ourselves in the context of a number of historical events, both positive and negative. I say to the member that we start from a position of low Government debt—18 percent of GDP. That is a good thing, and I acknowledge that. Let us look, for the benefit of New Zealanders, at how we arrived at that debt. If we go way, way back to 1984, we see that we had a debt to GDP ratio of 78 percent to 80 percent. In fact, we have reduced our debt as a percentage of GDP from 80 percent down to 18 percent, over a period of progressive governance.

💬 Hon David Parker: It was 60 percent—you’ve even got that wrong!

I say to Mr Parker that the biggest drop in the ratio of debt to GDP over that period was in the 1990s, so getting to a period of having one of the lowest debt to GDP ratios in our history has been a result of the work of a number of Governments, over time, with the biggest single drop in the debt to GDP ratio occurring in the 1990s. We are in a good, positive position, and it is the result of progressive government.

The second point, which is a positive point that we have reached, relates to unemployment. We have come from having low unemployment levels of 3.5 percent. Once again, we arrived at that position over a period of time through progressive government. Let us understand that through the 1999 to 2008 period we had one of the largest periods of economic growth in a generation—economic growth that was driven by businesses. The former Minister the Hon Ruth Dyson has the cheek to stand up and say that Labour drove unemployment down as a result of its policies. What a load of rubbish! It was businesses that employed people. It was businesses that did the hard yards, with owners who put their houses on the line to make sure they could employ people. It was businesses that took this country to the point of having the lowest unemployment. So we did start from a positive position.

The other thing in terms of the positive side is that we started with a fiscal stimulus package that has come ahead of those of other nations. We saw a huge spend in the 2008 Budget, and we saw tax cuts that were forced on to Labour in October of last year. Those tax cuts formed the basis of a strong fiscal stimulus package, now added to by this Government. So on 1 April 2009 we will see, very positively, one of the largest fiscal stimulus packages around the globe—among the top five nations. Once again, members opposite will say they did all of that. The guts of the matter is that we have a strong fiscal stimulus package going forward, which puts us in an excellent position.

We on this side of the House have been very prudent in the way we have gone forward. We have said “Actually, we are in a good position. We don’t want to engender huge levels of debt for future generations.” Members from the other side stand up and say we are not doing enough and that there is not enough going on. In fact, reports from the IMF state that we are in a good position going forward, we have structured our fiscal stimulus package well, and we are in a great position. There are some good positives there.

On the negative side, to counter the Hon Ruth Dyson’s point, we have weak projections going forward and we have inherited two chronic deficits. We have two huge deficits going forward. Firstly, we have the balance of payments deficit. As the Minister of Finance, Bill English, said, in 1999 we came in with a balance of payments deficit of 5 percent of GDP. That has grown to 9 percent of GDP over a 9-year period. It has been fuelled by debt, which has fuelled consumption-driven growth over that 9 years. That puts us in a very difficult position, and we need to address that. It is a tough place to come from.

Secondly, in the 2008 Budget we saw a turn-round—as Bill English said. It was the first time for a number of years that we moved from surpluses, to a period looking at deficits going forward. So we have inherited two chronic deficits: the balance of payments deficit and certainly the Budget deficit going forward. We have the positives and the negatives. But also going forward there are some other global trends we need to take account of, in terms of looking at where the Budget Policy Statement is going. There is definitely continued uncertainty out there and we are still not sure where the junk loans are going to end up and where all these other financial derivatives are going to drive us to. World growth projections are continuing to worsen, and our key trading partners are showing severe economic decline. As we have seen from the IMF, world exports have declined by 7 percent. These are tough economic times that will require a Government that is looking forward, considering our current situation, and putting forward sensible solutions.

That is what this Government has done. We have come in under the John Key - led Government. He has got to the plate quickly, put in his Cabinet, and had a 100-day plan, which included some key initiatives to drive our economy forward. Included in those initiatives was immediately getting that tax cut policy on the agenda. Opposition members say we should have pegged back the tax cut policy. In fact, we saw that policy as a key part of our agenda of giving people the incentive to get out there and to get ahead. So we will make sure that that tax cut policy continues.

We have driven other initiatives, such as the small and medium enterprises package. I have been fortunate to be on the Finance and Expenditure Committee, helping to steer that package of initiatives through the House. We have looked at the way we deal with provisional tax for small and medium enterprises, the thresholds for GST and legal fees, and fringe benefit tax thresholds. Again, they are all positive initiatives focused on the “engine room” of our economy: the small businesses that make up 95 percent of our businesses. We are focused on that and on taking that forward. So, all up, that is a $480 million package.

The Hon Paula Bennett came out with the ReStart package, immediately we got into Government. It is a package—she announced today—that 1,245 families are already benefiting from. Again, we are stopping the impact of the recession on those families, and helping them through it—1,245 people are benefiting from it. The job support scheme and the 9-day fortnight are also coming into play. The Prime Minister said here today that Fisher and Paykel Appliances have been able to take up that 9-day fortnight initiative. Three-hundred and twenty jobs have been protected by that initiative. Opposition members say it is disappointing that 100,000 people are not benefiting from it. Actually, we do not want people to use it if they do not have to; we want people to stay in employment. That is the guts of it. Opposition members do not get that. They actually want people to be unemployed; we do not. On this side of the House we want people to stay in employment. This initiative is a safety net that will be used only if it has to be. I can tell members that companies are not going to be racing to the trough to take it on. Companies will take it on only if they very much have to.

I will close my speech by talking about a range of other initiatives, particularly investment in infrastructure—$500 million was spent on transport, and $142.5 million on roads. It is great to see two roading projects in my own electorate within the Hawke’s Bay—the Matahōrua Gorge and the southern expressway extension—which, again, are providing local jobs and local incentives to help New Zealand get through this recession, to blunt the edges of this recession, and to provide a platform for us to grow, going forward. I am pleased to stand today with this Budget Policy Statement and to recommend it to the House. Thank you.

One issue that I agree with most members of the House on is that there is not much doubt that the world is experiencing the worst financial crisis that has been seen in more than one generation. Indeed, the level of financial turmoil in international financial markets is unprecedented during my lifetime and the worst since the 1930s. It differs from some of the other financial crises that have been seen in recent decades—the likes of the Asian financial crisis—in that it pervades the whole world, rather than just parts of the world. It truly is significant.

It is against that background that we are today considering the Budget Policy Statement. It really is true—as one commentator has said—that the tectonic plates of the world economy are moving. I think that is quite a powerful phrase—and it is true. It is at a time like this that Governments should be leading. Governments should be leading countries to position themselves to take advantage of the changes that come from movement in the tectonic plates of the world economy and to avoid the risks that open up through those changes.

This Government has unfortunately not yet moved from Opposition mode to Government mode. That is another statement that commentators have quite accurately made. They have pointed out that the National - Māori Party - ACT Government is still in an Opposition mind frame and has not yet taken on the mantle of leadership that is required of Government. It is not for Government members to take pot-shots at others at the moment; it is for them to take responsibility for governing the country and to position New Zealand as it ought to be positioned to take advantage of the changes in the world economy and to avoid the risks that await those who do not prepare or properly take account of those changes. What saddens me is that in official documents we have acknowledgments as to the soundness of the fiscal position the current Government inherited from the previous Government, but it is denied in the public utterances of the National Government members.

I will mention just two matters that are contained in the Finance and Expenditure Committee report on the Budget Policy Statement and will quote from it. Before that committee the Minister of Finance acknowledged “that the Government started with a relatively low level of debt at 17 to 18 percent of GDP, whereas some other countries started going into recession with gross debt at about 40 to 50 percent of GDP.” That is the first and the most fundamental difference between the position of New Zealand now and the position that New Zealand was in when Sir Roger Douglas and David Lange inherited the books from the Rt Hon Robert Muldoon’s National Government, which left the economy in tatters. Now we have low Government debt as a proportion of GDP; then it was very high. That is a benefit that the current National Government inherited.

The other benefit it inherited was one of the lowest rates of unemployment in the world. In recent years New Zealand’s rate of unemployment has been the lowest or second-lowest in the OECD. We have been flipping with South Korea for the honour of having the lowest unemployment rate in the OECD. Even at the end of last year unemployment in New Zealand was running at 4 percent when in most OECD countries it was a lot higher. Again, in the official document—the Finance and Expenditure Committee report on the Budget Policy Statement—National members acknowledge this. They do not acknowledge this benefit in public discourse when they try to say they have inherited a difficult set of events, but in the official document they are forced to acknowledge it. Again, I will quote from the report from the Finance and Expenditure Committee: “The Minister noted that the Government started from a position of low unemployment and that Government forecasts do not predict New Zealand reaching the same levels”—of employment, that is—“as the United Kingdom and the United States of America.”

One of the changes happening here is that we are seeing the relative wealth of nations change. Even if the National Government completely mucks it up, as it may well do, New Zealand will rise in the OECD rankings, because other OECD countries are on their way down the rankings and will pass us on their way to the bottom. The National Government cannot take credit for that. It will try to, but the reality is that over the next few years, even if the National Government does nothing, New Zealand’s ranking in the OECD will improve. Countries like Great Britain and many others in Europe, and the United States, which clearly has problems, are declining in their economies more than the New Zealand economy is suffering recession. Those countries already have high levels of Government debt. In some cases it is already at 50 percent of GDP. Huge deficits were being run at a time of plenty, and as we come into a recession deficits in those countries will be even more difficult to control.

When we listened to Bill English today, not once did we hear him remind the public that in recent years he was calling for tax cuts to fuel the very fires of debt-funded consumption that he now criticises. In recent years we heard a call from the National Party for “tax cuts, tax cuts, tax cuts”, at a time when Mr English knew those tax cuts would have been spent, and would have further inflated the property bubble, which would have further increased levels of private debt—which I acknowledge are a problem in New Zealand.

💬 Hon Dr Jonathan Coleman: Then in an election year, you guys did them too.

I beg your pardon, I say to Mr Coleman?

💬 Hon Dr Jonathan Coleman: In an election year, you guys decided you’d better do them as well. What was that about?

Yes, we did. That is right, I say to Mr Coleman. We agreed to tax cuts that were counter-cyclical. We did not agree to tax cuts at the time when the economy was booming. We agreed to tax cuts when the economy was coming into a slower patch. That is how tax cuts ought to be managed, not as that member’s party proposed in recent years.

Let us also look at where risks and opportunities lie, and at what the Government is doing. The Government says it is trying to position New Zealand for economic growth as we come out of this recession. What has it done? It has cut the research and development tax credit. We are one of the few OECD countries that do not have a research and development tax credit. The National Government cut that. The Government says we have a problem with too much private consumption, fed by increasing levels of debt. I agree that that is a problem. What is the appropriate response? It is to encourage people to save more and consume less. What has the National Government done? It has cut KiwiSaver tax credits so that it can redistribute tax cuts on another front, giving more money to the already wealthy at the cost of low and middle income people. The way the Government has distributed its tax cuts is, in itself, a bad thing. Perhaps, even more important, the Government cut the tax credit for KiwiSaver—so New Zealanders will not be saving as much. As a consequence, we will have more consumption, less saving, and fewer investment funds available for investment in productive enterprise.

What else has the Government done? It has been trying to spin this line that it inherited a very difficult financial position. I have already dealt with that, largely, but that does not stop National members turning up in this House and trying to blame previous Ministers for some cover-up that they assert has occurred in respect of the accident compensation scheme’s liabilities. The Government had a ministerial inquiry on that, but the inquiry did not prove the Government’s thesis. It did not even get to the point of having to interview the previous Ministers, the Hon Dr Michael Cullen or the Hon Maryan Street, because the inquiry found that there was no ministerial cover-up; it was a mistake by Treasury.

Even after that little fire that the Government tried to ignite was extinguished we then had Dr Nick Smith trying to invent another crisis, by exaggerating problems within the accident compensation scheme. He exaggerated them to such an extent that not just one columnist but the New Zealand Herald through Brian Fallow and John Armstrong, the Dominion Post through Vernon Small, the New Zealand Herald, again, through Fran O’Sullivan, and the Sunday Star-Times through Rod Oram all roundly criticised Dr Smith for trying to invent a catastrophe in order to justify his ends. Indeed, Fran O’Sullivan went so far as to say: “There is a fine line between leveraging the impact of the international recession on the financial health of the Government’s own assets to create what in management speak is often referred to as a ‘burning deck’ to force radical change, and downright chicanery.”

That is one of the things the Government is trying to do. It is trying to hide its own mismanagement of the economy. It is trying to say that it inherited a difficult set of affairs and therefore ought not to be held responsible for its own mismanagement. What else has the Government done? It has cut fledgling industries like the biofuels industry. It has taken steps that will increase New Zealand’s carbon emissions and make the environment worse. That has a fiscal as well as an environmental cost. What will the Government do next? Superannuation is next.

It is a pleasure to rise to talk about the Budget Policy Statement for 2009, because we are in extraordinary times. This is a country that is facing the greatest recession of our generation. It is a country that needs good leadership to get through these times of unprecedented economic turmoil. We have exactly that in the National Government and in our leadership from John Key. The National Government is not afraid to make the key decisions that are required to get this economy pumping and moving forward into the future, to save jobs in the immediate future, and to provide for all New Zealanders a future that is brighter than that provided by the previous Government before the last election.

When we look at the Opposition, we see that it started this debate today with Phil Goff. Phil was there, doing his leadership speech, and it was quite amazing to see that the rest of his team was very quiet. Those members were not very supportive, were they? They were just sitting there, watching and listening. They know that he is a lame duck who is sitting there and just waiting his time. They do not care. They are not supportive of Phil. They are not working hard to actually create any issues for the Government. They just want to be seen as being part of Phil’s team. [Interruption] Yeah, they are all waiting in the wings, just looking for the opportunities to take Phil out at the right time. I think that as a leader Phil would be disappointed in his team. He would be disappointed in the way that his team was not there to support him, just as he would be disappointed in the legacy that the previous Labour Government left this country.

The previous Labour Government left a legacy of deficits throughout this country: deficits in our balance of payments, and deficits in what the Government accounts will look like for the next decade or so. When Labour members talk about the deficits that the National Government will encounter trying to get this country through the economic turmoil, it is important to remember that before the election last year, before all the stuff that hit in the world economic crisis, the Labour Government was presenting deficit after deficit after deficit. It was not doing that to build a stronger economy; those deficits were not based on keeping people in work; those deficits were based on keeping the Labour Government in power. That is all they were—they were paying for the Labour Government’s social spending, promises, and agenda.

At least the National Government recognises that there are some issues that have to be dealt with. We recognise that the pain will be extreme in some cases. We recognise that the Government has to be there to deliver some support for people at their time of need. We will borrow to help our country get through this time, but we will not borrow for the wrong reasons. We will borrow so that we can build a stronger country in the end, and so that we can provide people with some kind of comfort as they go through the transition of this economic turmoil.

This country is situated in a pretty good position in comparison with some other countries. I think the reforms that led to that good position were probably encountered by this Parliament 20-odd years ago, when we dealt with some of the issues around our banking and industrial sectors that other modern economies are having to deal with now. New Zealand made those choices about the issues of trade protection, and about having an economy that is open, after the 1987 crash. We went through a long period of pain then, setting ourselves up so that we could get through a situation like the one we are in now. That contrasts with some of the other economies that are our traditional trading partners. They are now having to go through the pain that we went through 20 years ago, in very exaggerated circumstances.

I think that is the real reason why, leading into this crisis, New Zealand is in a better position than some other countries. We had our crisis 20 years ago, and we faced some of those issues about what we need to have a strong economy. To face those issues, we need a Government that will actually follow those issues through and make sure that we have prudent management. That is what was lacking in the last 9 years of the previous Labour Government. The opportunities that were there for the New Zealand economy to grow, prosper, and build itself stronger to take into account any possible decline that might come through an economic downturn were not taken advantage of by the previous Government.

Instead of building an economy that would have been strong enough and would have provided the economic vehicle to get through this downturn, the Labour Party continually borrowed for its own mantra and its own ambitions in election times. That has been the shame of the legacy of the Labour Party. It is a legacy of a party that could have kept New Zealand on that track to get through this situation, but it has created a number of problems that we now have to deal with in Government. When we look at things like the KiwiRail purchase, the unfunded promises, and the blowouts in the accident compensation scheme, we see that all those things are symptoms of a Labour Government that did not deliver what was needed for the New Zealand economy. We have to pick up those issues and, in some cases, we will have to borrow to deal with those issues going forward. That will create further stress on the economy.

The Labour Party left behind a country where exports were weak, household debt was high, and the current account deficit was extremely high. Labour had a number of imbalances in the economy that it supported through its economic management. Now is the time when those things are coming home to roost, and we have to make some constructive and solid decisions around them. That is why the National Party has brought together a fiscal stimulus package at the upper end of the international reaction to the current situation. We have one of the best responses to this economic crisis that we will see around the world. We have a very strong tax cut programme, we have a very strong infrastructure spending programme, and we also have very strong social spending; for example, our ReStart programme, which gives people time to adjust to the changing circumstances they may find in their personal lives as a result of the recession.

The National Party has made the right decisions to deal with this situation since it came into power. I feel that that is the difference between what we see under National and what we would see under Labour. Labour members would not be making the right decisions; they would not be investing in infrastructure, they would not be carrying through the tax cut programme, and they would not be looking after people who need their support to keep their jobs. They would not be doing those initiatives, and the fundamental problem is that that would accelerate the potential impact of the recession on the New Zealand economy. New Zealanders are lucky that they have good, prudent decision-making on a financial basis through the National Party. It will stand them in good stead to make the right actions to try to deliver an end result through the next couple of years. When we look at how households will benefit from the National Party and this Government, we already see lower taxes, lower interest rates, and some lower petrol prices. The National Party is delivering for households. We are making it as easy as possible for people to get through this situation.

💬 Hon Shane Jones: Long-term rates!

Mr Shane Jones would not take a call on this subject. Even though he was chairperson of the Finance and Expenditure Committee last term, he would not stand up to speak on this. He has deliberately not done anything to support Phil Goff in the last few months, because he is sitting there and waiting for Phil to make a mistake so that he can take over. But Shane’s problem is that David Cunliffe has the run on him. While Shane has been sitting there saying nothing, David has taken over and is building up his numbers in the Labour caucus. Shane will have to be careful, because if he does not watch it then David will get such a lead on him that he will not get the job he wants. When it comes to the fight in the Labour Party ranks after the next election, Phil will be sitting there, and then there will be Shane and David. Who will win? I tell Shane that he needs to do some work now, mate. He needs to get out there and put up his flag. He needs to stand up and talk about his economic vision, because we are not hearing about it. He says that he is part of the Labour Party and that he is following the Cullen-Clark vision. It did not work, and the National Party is making the right decisions for the circumstances now to deliver the future we need.