Taxation (Budget Tax Measures) Bill

This morning we are discussing Part 1 of the Taxation (Budget Tax Measures) Bill, as we were last night. Part 1 provides for the deferral of the tax cuts planned for 2010 and 2011. This Government does not want to have to do that, but we understand that when one makes decisions in Government, one has to make decisions—

💬 Hon Darren Hughes: When you started this speech last night you were proud!

—I am proud—based on what is best for New Zealand here and now. Let me tell members that right now New Zealanders need two things: security and a strong economy. This Budget gives them the beginnings of that. I can tell members that right now, if the choice is to have the tax cuts or to build our economy for a strong recovery, to create growth, to create jobs, to look to the future, and to keep an extra 1.5 percent off interest rates, the New Zealanders I have spoken to since the Budget was presented are all of the same view, and that view is that it would be irresponsible to give the tax cuts now, and irresponsible to let our debt balloon to 70 percent of GDP, which Labour would have us do, so that every family of four would have effectively a second mortgage of debt around their neck of $180,000 per family. That is what that party wants; that party wants New Zealand to have $180,000 of debt per family so that it can keep spending—never mind the consequences, chuck it on the plastic, and do not worry about the long term!

That party does not care about stability; it would not know how to build a strong economy. That is why in November last year the New Zealand public made its choice and chose John Key and Bill English to lead us through these hard times. The New Zealand public did that because they knew that Labour was incapable of getting New Zealand through this recession. They knew that it was very good at spending money—that is not hard—but when it came to making hard decisions in turbulent, ever-changing times, they put their faith in a National Government. Yesterday, with Bill English’s first Budget, and with the Taxation (Budget Tax Measures) Bill giving effect to the first part of that, we can see exactly why New Zealanders made that choice. We are not going to let debt cripple future generations of New Zealanders. I do not want my children growing up with a debt burden around their neck that is so massive that they have no chance of getting ahead and no chance of building a strong economy. This economy needs to have a minimum amount of debt.

On 8 October 2008 John Key delivered a speech. In that speech he said the following: “I am very conscious of the worsening international situation, which is evolving on a daily basis. Together with my colleagues, I have been closely monitoring the build-up in problems in the financial markets over the past several months, and particularly in recent weeks,”. This is the same speech in which Mr Key went on to say the following: “I will now turn to National’s tax plans in more detail. Following on from the tax cuts of 1 October 2008, National will be making further tax reductions on 1 April 2009, 1 April 2010 and 1 April 2011.” On 8 October 2008, the day the IMF released a report telling the world about the depth of the recession, John Key went to the New Zealand public and promised those tax cuts.

💬 Hon Dr Nick Smith: It’s got worse since then.

Yes, I say to Dr Smith, it did get worse. On 9 December we stood in this House under urgency—when I made one of my first speeches in this House—to put in place those tax cuts for 1 April 2010 and 1 April 2011. We listened to Chris Tremain, the junior Government whip, who told us that Kiwis knew National had a big agenda and were proud to see a Government standing up and delivering on that agenda. That is what happened on 9 December. Dr Smith is right that more information then came to light: the recession was deeper and worse. So what was the reaction of John Key and the National Government? It was to continue down the path of the tax cuts that we are now repealing in Part 1.

Labour, at that time, said those tax cuts were unaffordable and irresponsible. Our position has been consistent. We can support this legislation, because we are being consistent. The inconsistency comes from the other side of the House. Members opposite knew, when they put in place those tax cuts on 9 December, that they were irresponsible and unaffordable. In the end, going right back from 8 October to 9 December this was a cynical election bribe from the National Party. It knew it had to up the ante on tax cuts; it knew it had to raise the bar to try to convince the public of New Zealand to vote for them. It was a cynical election bribe. John Key knew the state of the world economy; he had the IMF report. But on 9 December National still wanted to get its 100-day agenda in, and it did not care what the real state of the economy was. This is a cynical election bribe. Here we are today repealing what we did under urgency in the first place.

When we debated the legislation on 9 December we heard David Bennett tell us that this bill was the first part of delivering a growth economy, and that through personal tax cuts the bill would give the impetus needed for the New Zealand economy to grow and be successful. Let us bear in mind that this was meant to be the stimulus package. This was meant to stimulate the economy. David Bennett went on to say that the package was about giving some stimulation to the economy—well, clearly not any more! Yesterday’s Budget gives about as much stimulus to the economy as a decaffeinated latte. That is the stimulus package we saw yesterday from the National Government.

We also need to remember that Mr Key, in his speech on 8 October, was very clear that these tax cuts could be paid for through changes to KiwiSaver and changes to research and development tax credits. Mr Key said: “Taken together, the removal of the R&D tax credits and the changes to KiwiSaver mean National will not have to borrow or cut public services to fund our personal tax cuts.” Well, what we have discovered today is that National is not doing the tax cuts, but it is cutting public services and it is borrowing. So there we go—it is a triple whammy: the public of New Zealand not only are not getting the tax cuts but also are getting cuts to public services and we are seeing potential cuts to superannuation. And we have it here: there are cuts everywhere, but not on taxes.

This is a Budget of broken promises, and this is the biggest broken promise of them all. This is not a stimulus Budget. This Budget could have been about creating jobs, this Budget could have been about protecting New Zealanders in work. But, instead, it is a return for National on the fact that it made a cynical election bribe.

I move, That the question be now put.

It is with pleasure that I stand and speak in the Committee stage on the first part of the Taxation (Budget Tax Measures) Bill, and I do support this bill. I support it because it removes a great inequity in New Zealand society. I am sure the people of Rotorua understand what the hell this Budget is about and what the tax cuts would have meant for them—absolutely nothing, for 75 percent of them.

I would like to talk about two things: clauses 3 and 4, which repeal National’s flagship tax policy, and broken promises. I keep hearing that this Budget is about what is best for New Zealand. But this bill is not about the Budget; this bill is about repealing a promise, I tell Ms Adams. Part 1 is about personal tax cuts and independent earner tax credits. We all know that these were the wonder measures that were going to stimulate the economy, and that swept National to victory in 2008. Tax cuts had been the National Party’s mantra since 2005, and were so in 2008 when, under urgency, National passed legislation to cut taxes, and held itself up as the Government of integrity. “Trust me”, said Mr Key: “I promise. I promise. I promise.” But I say “Rubbish! Rubbish! Rubbish!”. What has happened after delivering on the first promise? Under urgency we have received another bill, straight after Mr English’s Budget, that—wait for it—repeals the first promise. The shining light of the National Government’s legislative programme, which all New Zealanders have waited so long for, will be gone before Queen’s Birthday. What a great holiday present for the working Kiwis of this country!

It is actually quite religious. Tax cuts were here by Christmas, but like a bunch of turkeys New Zealanders have been tricked: they have found that their precious tax cuts delivered by wonderful “Santa Claus” Key have been stolen by the “Grinch”, Mr English, not 6 months later. Is that fair, I ask the Committee? Is that fair, I ask Mr Tremain? What do the 75 percent of the constituents of Napier who earn under $40,000 a year think? Considering they got nothing under National’s original tax cuts policy anyway, I think they probably feel pretty aggrieved, full stop. Not only has National alienated the 75 percent of people who got nothing under the tax cut in the original legislation but it has also probably annoyed the top 3 percent of earners who got 30 percent of the original tax cuts, anyway. No friends will be made with this legislation, I tell Mr Foss. I hate to think what the wonderful people of Tukituki are thinking right now. Actually, I do know what they are thinking. They are thinking that this is not what they voted for. This is not what they voted for, at all.

💬 Paul Quinn: At least he got in.

And they certainly did not vote for Mr Paul Quinn. Actually, we want Louisa Wall back; we want a real rugby player back. Labour delivered, Helen Clark and Michael Cullen delivered, and Phil Goff will deliver once again, because he is not a man who says one thing, gets elected, and then does not deliver to the people of New Zealand. Phil Goff is a man of principle. The vast majority of New Zealanders now say that they voted for tax cuts, but National has taken those tax cuts away, so they are asking how they can trust Mr Key. They know they can trust Mr Goff, because he has always delivered for New Zealanders, so it will be: “Dear John; goodbye.”

This bill repeals National’s flagship election promise. This bill represents—no, it epitomises—National’s broken promises. What am I talking about? Members know what I am talking about: the pledges made by Mr Key. What was one of those pledges? He said that by reducing personal tax cuts on 1 April 2009, 1 April 2010, and 1 April 2011, he would ensure that New Zealanders could get ahead on their own steam. I ask Amy Adams whether that is right. It was a nice tune, but now National members are singing out of key. It was a good tune, but now the Government is out of key. National promised and promised, but they delivered the bill that I am speaking to. Part 1 consists solely of the repeal of 18 sections of the Taxation (Urgent Measures and Annual Rates) Act 2008 and the repeal of three sections of the Taxation (Business Tax Measures) Act. There is nothing positive, nothing inspirational, and nothing at all except repeal, repeal, another repeal, and another repeal. Do members know what Part 1 repeals? It repeals all the tax cuts and the independent tax earner credits promised to the people of New Zealand.

I am pleased to take a call. It is interesting how we reflect in this Chamber the things we have been taught growing up. Certainly I was taught when growing up that when one makes a promise, when one gives an undertaking, one works really hard to deliver on it. If something happens and the promise cannot be kept, then there is a particular way in which one can go about putting that right. I ask why members opposite cannot be gracious in admitting their mistake on tax cuts. They cannot be gracious in saying that they were wrong and that they made a promise, but that something happened and they needed to change it.

Labour supports this part of the Taxation (Budget Tax Measures) Bill. But that is not the question; the question is what lies behind the bill. One can only think that it must have been a well-thought-out election campaign. One must think about the kinds of things people want, think about the promises one wants to make, and think about the things that one considers important. Then one must construct that into an election strategy and go to the people and promise them that when in Government one will deliver on those promises. That is fair enough. That is a reasonable way to go. But then what happens? More information becomes available during the currency of that set of ideas. While those promises were being made day by day on the election campaign, the world economic meltdown was occurring. The then Prime Minister was responsible, and Labour wound back many of the promises and began to talk responsibly about the things that would need to be done. But during the campaign, the National Party continued to make its promises. National continued to say, day by day and night after night—and it gave a cast-iron guarantee—what it would do.

New Zealanders are fair people. They actually fell for it. They understood that National would deliver on that promise when in Government. In its first sitting weeks, under urgency, National put its tax cuts in place. Now with its first Budget it has its first real chance to deliver. And what do we get? We get what we have seen from National on many, many occasions. Members opposite might care to reflect on some of those things. We remember very well what happened with superannuation. The link between that and what is happening here in Part 1 of this bill is that National has again changed its mind. Under trying conditions, people use those conditions as a smokescreen to push through their real agenda and their particular ideology. In this case the ideology is that brand of conservatism that comes from members opposite. Under the cloud of changed circumstances they are taking the licence to push their hidden agenda.

What do we see in this particular Budget? What do we see being unveiled for us now? There is no real overall plan. The commentators have said since the Budget was announced that there is no real passion, no real direction, no real overall plan, no investment in the future, no investment in skills or any of those kinds of things, and no investment in jobs.

💬 Hon Member: This is repetition.

Members might care to follow this—

💬 Hon Trevor Mallard: It’s true.

It is true. But what we do see is the one thing that National has always done: destroy the good things that Labour has put in place. Muldoon wrecked the superannuation scheme. Your then Prime Minister wrecked the superannuation scheme, and you are doing it again. You are doing it now.

The CHAIRPERSON (Eric Roy): Order!

My apologies, Mr Chairman; thank you. I say to members opposite that their party wrecked it, and they are doing it again. They are taking away the promises given. They are taking out 10 years of contributions and really destroying the Cullen fund. That is what the commentators are saying. I come back to the point I started with. We would have expected those members to say sorry. They should say very clearly and unequivocally that they made a mistake, do it without the shouting that we have heard, and do it honourably.

I move, That the question be now put.

Of all the lies in the Budget, Part 1 of the Taxation (Budget Tax Measures) Bill contains the biggest one, because Part 1 sets the tax rates for the forward period.

💬 Hon Member: How come they’re not taking points of order?

Because members opposite know exactly the extent to which the Budget contains a lie. It is made most clear in Part 1. Part 1 actually increases taxes for working people in New Zealand. Part 1 increases taxes from what they would be if Part 1 was not here. That is the essence of this part. It puts taxes up for people; it does not put taxes down. Members opposite ought to reflect on that. I ask how many of them went campaigning around New Zealand saying that within 6 months of getting into Parliament they would be supporting a bill in Parliament to raise taxes, because that is what they are doing.

Members opposite should also realise that Labour has maintained a consistent position on taxes. We maintained that position before the election, when we told National members that what they were promising could not be afforded. We said they would have to borrow for the tax cuts, but they said that they would not borrow for them, and that they would find a way of paying for them because they are so important to them. They went through the election campaign saying that. They got elected, and said in the Speech from the Throne that they would introduce tax cuts. They brought in a bill in December, ironically under urgency, without the Opposition having seen the bill before it was debated—exactly like this bill. We did not see this bill until we started to debate Part 1, just a few calls ago. Once again National members asserted that tax cuts were affordable. But here they are today, raising taxes for New Zealanders.

In particular, I want to focus on the independent earner tax credit, because that is covered in Part 1, as well. It increases the tax burden for working New Zealanders who do not receive Working for Families. We were told during the election campaign that tens of thousands of workers had missed out on assistance from the Labour Government, and that they needed a National Government in order to get a new category of relief called the independent earner tax credit. But the changes to it are being abolished in Part 1. Those working people will continue to miss out because of what National is doing.

I want to take up a point that Simon Power raised last night. He said that the Opposition should be opposing this bill simply because we are the Opposition. He said that we needed to learn a lesson about how to be an Opposition. Well, I think we have taught the Leader of the House many, many lessons about how to be an Opposition. I signal today that there are many, many more tutorials to come for that member in the 2½ years ahead.

💬 Hon Gerry Brownlee: I raise a point of order, Mr Chairperson. I think it is worth noting that those members are still in Opposition.

The CHAIRPERSON (Eric Roy): That is not a point of order.

I do not want to comment on the point of order, but it is a wonderful segue into my very next point.

The CHAIRPERSON (Eric Roy): The member will not comment on the point of order.

Gerry Brownlee’s comment is exactly the kind of arrogance from the Government that will cause those members so much trouble. If Simon Power wants to tell us about being an Opposition, let us teach those members a lesson about being a Government. They should tell the truth. They should campaign on something, and then deliver on what they campaign on. That is the lesson of being a Government. They cannot deliver a Budget that contains a lie, like Part 1 does. It contains a direct lie to the people of New Zealand.

I know that the brat pack runs this Government, and I know that they wanted to be so different from the last National Government, which broke all its promises within 6 weeks of taking office. So with the strategic genius of Gerry Brownlee, they have decided to wait 6 months before they break their promises to the people of this country! They campaigned on the decade of deficits, saying how terrible the books were under Labour, that there was a decade of deficits, and that—hint, hint, boys—things might not have been so good. But they still budgeted for their tax cuts, which have now been replaced with a decade of deferrals by way of contribution to the Cullen fund, which we will come to in Part 2.

Part 1 lifts taxes for working people. It takes away the independent earner tax credit that we were told just 6 months ago, under urgency, was such an important new feature of the tax system. They knew that this was the situation, and they campaigned on something they knew could not be delivered. What a surprise to see the media headlines this morning about the tax cuts! All those hundreds of thousands of people who switched their votes between 2002, when National did not offer tax cuts, and 2008, when it did offer them, have been ripped off badly. The New Zealand Herald has got it right. It writes about the IOU from Bill English, the man who campaigned on tax reductions but who now brings a bill before the Parliament that, in Part 1, lifts taxes for people in this country. That is the effect that this bill has.

The one thing I have always admired about the National Party is the ability of its members to stick to the party line. Whatever line they are given, whatever line they are fed, they use religiously. During the election campaign they said that tax cuts were needed. After the election they said they would stick to their word, but today they have broken their promise. Members opposite so smugly and arrogantly ask to be rewarded for the fact that the No. 1 promise on their pledge card has now been broken. It is a disgrace.

I move, That the question be now put.