Taxation (Annual Rates and Budget Measures) Bill

This is my first opportunity to participate in the Committee stage of the debate on the Taxation (Annual Rates and Budget Measures) Bill and we come now to Part 2. It is worth noting that the discussion we were just having on Part 1 often impacted on both the specific changes to Working for Families and to KiwiSaver. As we begin the discussion of these changes in Part 2 we need to look at the wider context in which they are set in this Budget. Essentially these are the big changes for National. The big vision for National in this Budget is to cut Working for Families and to cut KiwiSaver. That is it. There is no big vision about growing the economy. There is no big vision about innovation in our economy. There is no attempt to say how we will create the jobs that will keep New Zealanders in New Zealand rather than going to Australia. Instead Part 2 of this bill, which we debate under urgency, cuts in to low and middle income earners’ income; it takes out income from 1.7 million KiwiSavers. That is what Part 2 does because this Budget has no vision and no plan; it is a defensive Budget.

My colleagues on this side of the Chamber know that I am a fan of sport. For me this Budget, from the Government’s point of view, is all about the All Whites going out on the field to play a game of soccer and putting all of their players inside their own penalty area and having no one upfront trying to score any goals. That is what this Budget is about: it is a defensive Budget with no vision. We heard ambition for New Zealand a couple of years ago from John Key and Bill English. But, instead, as I sat and listened to the Budget speech yesterday I kept waiting for the plan, for the things the Government was going to do. Yes, there were going to be cuts. Yes, we are living in tight financial times. Then we expect to hear the plan. But, instead, the plan is the cuts—that is it. There is nothing else. There is no vision for the future. There is, as we see in Part 2 here, simply cuts to Working for Families and to KiwiSaver.

The promise that National delivered pre-Budget—and it is surprising that anyone would really believe promises that National delivers any longer, after it increased GST when it said it would not—is that it wanted to get at those people on Working for Families who are earning high income levels. It wanted to get at those people earning over $100,000, because they should not be on Working for Families. National says those people are on a kind of middle-class welfare that we do not need. But the reality of the changes in Part 2 is that it kicks in for people earning as little as $36,000 a year. It kicks in for the security guards who work around this building and other places. The level of pay they are getting means they are too rich to be supported. They are the people who do not deserve support for raising children. That is what this Budget says. That is what Part 2 says.

This is not about high-income earners; this is about people who are currently struggling to meet the cost of living, and they are being told that they are the people who have to bear the burden of the financial problems facing New Zealand. It is middle-income earners who have to bear that burden with the cuts to Working for Families. One of the things that are frustrating for people on this side of the House is that when Working for Families is presented, it is presented as being about somebody who is on an income of $70,000. Let us be absolutely clear—this is about family and household income. If a household has an income of $70,000, that can be two earners, each earning $35,000 a year. If they are raising two children in that environment, that is difficult at the moment. They are the people who are struggling to put healthy food on their table. They are the people who need support to ensure that those children get the kinds of opportunities in life that everyone in this House would want them to have.

In Part 2 of this bill, Working for Families has been cut for those people. It has been cut, so the opportunities are simply not there for those people in the future. The problem is that the whole Budget is based upon fiction, figment, and this notion that there will be 170,000 jobs. From where? From where will those jobs come? There are not 170,000 jobs in rebuilding Christchurch. There are some jobs in that, but there are not 170,000.

The Rugby World Cup gets a good play in the Budget, in terms of economic growth. I hate to tell Mr Key and Mr English but the Rugby World Cup finishes in October. It will not be there in the future. The Rugby World Cup ends in October and that is it. That is the end of the plan for the growing of jobs. It is a figment. What is more is that jobs and growth projections in this Budget are based on nothing. Not only do we think so but the Inland Revenue Department thinks so and the Ministry of Social Development thinks so. As my colleague Stuart Nash said in the Part 1 debate, there is a $4 billion gap between the forecast of what the people who actually collect the tax think they will get and Treasury, which is making these bold, heroic projections about growth. What is more, the Ministry of Social Development is projecting that it will be paying out more and more in benefits at exactly the same time as Treasury thinks the number of people employed will be going up. There is a problem there. If Treasury’s projections and forecasts were accepted across the Public Service, then the Ministry of Social Development would be forecasting the main benefit costs to go down. It is not forecasting that; it is forecasting benefit costs to go up.

We have the Inland Revenue Department and the Ministry of Social Development saying that Treasury’s forecasts do not stand up. They are a figment. They are not real jobs, because there is no plan to create those jobs in this Budget. There is nothing about skills, nothing about increased research and development, nothing about innovation, and nothing about supporting exporters. This Budget is built on a fallacy of hope that there will be jobs in the future, and no plan to get there.

When we get to Part 2 we see that the big plan is based on cuts. Here is a message for National: cuts do not amount to a plan for the economy. It is a defensive attitude and not one that will help grow the economy. Why is it that time and time again with this Government, when the belts have to be tightened, it is those at the low and middle-income end who have to do the tightening? In the end, that is about—and Part 2 is about—the fact that nothing has changed for National. It is still about trickle-down economics. It is amazing. The idea has been around for 30 years but it has not worked. It is not working, yet we have another Budget presented to this House that is about a belief and a faith in trickle-down economics, rather than a Government that will do something to help create jobs and to grow the economy.

Part 2 tells us that Working for Families needs to be adjusted because it is not affordable at the moment. I say to National that those people on those low and middle incomes are being affected—for example, the couple I was talking to last night. The husband is a security guard who works full time and the wife is an early childhood education teacher who works part time. They are trying to raise their children. They are losing as a result of these Working for Families changes. They are also KiwiSavers and they are losing out there, as well. They are being hit twice. Their incomes are being hit, while the people on the top tax rate continue to enjoy the benefits of tax cuts that were unaffordable, which is part of the reason we have the deficit in front of us today. Make no mistake; this deficit in this Budget is National’s deficit. It is a deficit that it has created by its lack of an ability to help grow this country and by its short-sighted policies that are not about the long-term future and innovation of the country and that are not about skills.

This Budget is based on a fallacy. It is based on a hope and a faith that jobs will be created. It is not based on a plan. In Part 2 the core of the Government’s policy is to cut Working for Families and KiwiSaver and to look tough. Where is the gain that goes with the pain? I do not see it. New Zealanders know we are in tight financial times. They all want to pull together and work, but New Zealanders also fundamentally believe in fairness. They believe in fairness and they believe that it is important that we look after each other in times of need. When people are trying to bring up children, who will be the future of this country, they deserve support for that. Instead, Part 2 of this bill delivers cuts to those very people in Working for Families and KiwiSaver. KiwiSaver is one of the things that we on this side of the House are proudest of, because it put in place a regime that got New Zealanders saving. That is compromised by Part 2 of this bill.

It is a pleasure to rise and give a contribution on Part 2 of the Taxation (Annual Rates and Budget Measures) Bill, which, as my colleague Grant Robertson has pointed out, focuses on the changes to Working for Families and KiwiSaver. I will home in specifically on KiwiSaver.

In light of the fact that members on both sides of House acknowledge that we have a significant issue when it comes to Kiwis’ own personal savings rates, it seems phenomenal to me that this is the third change I have seen in this House relating to superannuation schemes and our preparedness for future generations’ retirement. Members will remember that the first change was to the New Zealand Superannuation Fund. For my first Budget I sat in this Chamber and watched as the Government claimed that out of necessity it would suspend payments to the Superannuation Fund. Our preparation for my generation’s retirement would be suspended, not for 1 year or 2 years but for 10 years. For 10 years we were going to look entirely past the issue of our superannuation preparedness, despite knowing that we would be paying for the baby boomers in the very near future. Those on this side of the House have watched as there have been changes to the one thing in the Government books that looked quite good, which was the Superannuation Fund. Members will note that I am no longer calling it the Cullen fund. Michael Cullen has specifically requested that if the Government will not fulfil its obligations to pay into that fund, then it should hereby be known as the English fund. The Cullen fund was about being prepared; the English fund is about suspending responsibilities.

The second change we have seen to our preparedness for superannuation is a cut to KiwiSaver contributions. Members on this side of the Chamber will remember that Labour specifically legislated that contributions by members of KiwiSaver and by employers would sit at 4 percent. In its first Budget the National Government immediately slashed that to 2 percent, and we protested because we knew New Zealanders needed a high rate of savings if we were to be prepared for our retirement.

Now we come to the third set of changes. I do not know whether the Government thinks it is a sneaky change and perhaps the public will be duped by it, but almost in an attempt to cover up the fact that it has made changes to the Government contributions, the Government has now lifted employer and member contributions by 1 percent. They are now back at 3 percent, but that is still lower than it was when National was elected.

💬 Grant Robertson: A half-reversal.

That is absolutely right, I say to Grant Robertson. I know that New Zealanders will not be tricked by that. They are much smarter than that, and they will immediately see through it. Why has the Government lifted that rate again, despite saying in the beginning that it needed to be halved? Because it wants to place an extra burden on employers and individual members, in lieu of the Government picking up its responsibilities. That is exactly what has happened. In Part 2 the Government contributions have been halved. They have also been capped. The $1,042 Government contribution amount of the potential tax credit has been replaced by $521. Why does that matter? We know that the three factors we need most if we are to have a stable personal savings scheme for Kiwis are incentive, stability, and income. We have seen three changes from this Government. That is not stability.

💬 Craig Foss: There was a change every year under the Labour Government.

I will point out that KiwiSaver was created by a Labour Government, and it is one of the things we did that we are most proud of, I say to Mr Foss. Labour acknowledged that my generation was about to be left high and dry, and all the Government has done, I say to Mr Foss, is to prove that it has a short-term view when it comes to politics and electoral cycles. This measure is about the next election. It is not about my generation. If it was about my generation—

The CHAIRPERSON (H V Ross Robertson): I refer members of the Committee who do not have the call and are interjecting on each other to Speaker’s ruling 63/7.

Speaker’s ruling 63/7 is one of my personal favourites, so thank you, Mr Chairperson. I have already covered the incentive element. I will acknowledge that the Government has kept the $1,000 kick-start, and that was an important element of the scheme in terms of drawing people in to join KiwiSaver, as 1.7 million people have done. I will highlight one extra statistic that has not been shared much in this Chamber, and it is that 500,000 of those members are under-24-year-olds.

💬 Hon Ruth Dyson: 500,000?

Five hundred thousand—it is a significant amount. Whether some parents are enrolling their children very young is an interesting point, and we may need to look into that, but I applaud that figure. Ultimately, this scheme was about making sure that young people in this country are preparing for their retirement, so that incentive was important.

We have covered the stability issue, and the fact that there has been a real lack of acknowledgment on the other side of the Chamber of the importance of stability. I think members would be interested in an interview with a man who is an ex - All Black, I believe, and a national voter, from Eltham. I understand that he said on the radio this morning that in his view the contract he had signed with the Government when he gave his vote to National had been broken. It was his view that the agreement that had existed on what would happen with his superannuation fund, which he had signed up to because he believed that the Government would not honour its promise and ensure that a universal pension scheme would be available when he retired—so he had bought into KiwiSaver—had been broken. I would like to know how many other Kiwis feel exactly the same way. I wager that it will be many. The stability issue is a significant one, and that is, obviously, what we are addressing in Part 2.

But Part 2 specifically acknowledges the role of the employer’s superannuation cash contributions, so I will talk about the third element of importance to a savings scheme, and that is income. Of course, an individual having an income stream is, by default, one of the most important parts of being able to ensure that we have some personal savings. I am sure that all of us in this Committee would acknowledge that if someone is in a state of unemployment, even if they are drawing down Government support it is nigh on impossible to survive, let alone save for their retirement. So income is important. That means that Part 2 is directly affected by the wider stimulus plan that the Government has presented. I use that term loosely, because I am yet to see any wider stimulus package in this Budget, yet the Government has estimated—it has forecasted—that we will see 170,000 jobs as a consequence of this Budget.

I wanted to give the Government the benefit of the doubt, so I searched through the Budget documents, including the Economic and Fiscal Outlook, to try to find the source of those 170,000 jobs—a fair quest, I thought. I came across roughly three things. Higher growth in consumer spending was the first: “Higher growth in consumer spending is expected as households become more comfortable with the state of their own balance sheets …”. I would like to hear a little more background on that. I am not entirely sure how people will become more comfortable with the state of their balance sheets, because I do not hear a lot of comfort now. If we are talking about consumer spending as a proportion of a household’s income, that certainly is increasing as a percentage, because the cost of living is increasing at a ridiculous rate in this country. Beyond that I really have very little other explanation for how people will be finding that extra comfort.

Secondly, the Economic and Fiscal Outlook states that we will see a boost in export volumes, particularly service exports such as tourism. So the Rugby World Cup is one of the answers, but I would have to say that it is unfortunate that it finishes in October. I also point out that that event is in the low-wage sector. I would say that putting all the eggs in the low-wage sector basket again is ill-advised.

Then we come to what I think the Government is pinning all its hopes on, which is the growth coming out of the Christchurch earthquake. It states: “We have assumed nationwide employment is around 15,000 lower by mid-2011 as a result of the earthquake.” So 15,000 fewer people will be in work. How many jobs has the Government predicted we will see out of the residential rebuild?

💬 Grant Robertson: 12,500.

It has predicted 12,500, so we will not even come back to the point at which we have been left as a consequence of the earthquake. In fact, that is a deficit of around 500 jobs. I grant that that is only the residential rebuild. If we chuck on an extra couple of thousand jobs as a result of the wider rebuild, we still are left with, I predict, a 168,000 job deficit.

This is the first opportunity I have had to speak in this debate. Part 2 deals with KiwiSaver and savings. I point to the regulatory impact statement, where I believe a mistake has been made. It states: “The Government has signalled its desire to focus Budget 2011 on measures which will boost national savings …”. No, it should read: “measures which should boost saving National.”, because that is what the Budget is about.

National claims that this is a savings Budget. I ask what savings are being made. First, will this Budget save opportunities for adults who lost the opportunity to upskill, retrain, and get jobs? In the 2009 Budget the Government slashed adult and community education, and in this Budget it has chopped the opportunity for people aged over 55 to get a student loan. Has the Government saved opportunities for older people in retraining? I say no. Has the Government saved opportunities for middle-income New Zealanders to save with security? I say no, again. What it has done, like Rob Muldoon, is destroy the confidence of middle New Zealanders in the need to save for their retirement—absolutely destroyed it. No, it has not saved the opportunity for those people. Has this Budget saved the opportunity for young families to get affordable early childhood education? No, there are no savings there.

So where has National made savings? Well, the regulatory impact statement is incorrect—this is a “saving National Budget”. I asked where the Government saved. Does this Budget save the $1,000 a week tax cut that John Key got? It did, yes, so maybe that is the saving that National refers to. Did it save access to BMWs with heated seats? Yes, it did. This is the “savings Budget” that we are hearing about. Finally, is this “savings Budget” about whether we can save NZX and the stock market? Well, I say that the answer is yes, because that is about all it does. The sell off, or the mixed-ownership—or the mixed-up ownership—model that the Government proposes for State-owned enterprises is just outrageous. It is about savings; it is about saving the New Zealand Stock Exchange, which has been a poor performer. It is about saving opportunities for the people who got tax cuts in the first National Budget. It is about saving opportunities for them to invest and to make nice, healthy profits through the buy-up of State-owned enterprises. Those are the only savings we are dealing with in this Budget.

Part 2 changes KiwiSaver and undermines people’s security into the future, unless those people had a big tax cut in 2009. The people who got that saving will now have the opportunity to invest in blue-chip Kiwi investments that will deliver them a healthy dividend while the rest of the owners—the present owners, those on lower incomes—will lose ownership to those people. That is an outrage. I say it is immoral. This Budget should be totally rejected. Part 2 is a classic case of injustice, and savings for National, not the national savings that this country could enjoy. It is an outrage, and we should all vote down this bill.

I will do my very best to ensure that the savings we are trying to achieve, which Labour advocates for, are for the people who need them, not for the people who do not. This Budget is about saving National, it is not about saving the nation. That is a huge difference. As people go through the figures—try as the Government might to hide them in these lengthy documents—and as we investigate this Budget, more and more New Zealanders will work out that the regulatory impact statement is worded incorrectly and should read that the Government is determined to have a Budget that will save National.

I thought the previous speaker, Damien O’Connor, was going to speak on behalf of farmers about the proposed Labour turnover tax, his having a farming background, but I guess we will have to wait for another day.

I will make a couple of points in respect of Part 2, which addresses some changes and enhancements to KiwiSaver. I will note a fact that members may be interested in. There are about 1.7 million New Zealanders, I think, in KiwiSaver right now. It actually begs the question why every New Zealander is not in KiwiSaver, because of the $1,000 upfront signage fee. It is interesting that when KiwiSaver was first announced, the predictions were for about 500,000 to 600,000 sign-ups. It has been a roaring success; no one denies that, and it has been acknowledged that KiwiSaver was brought in by the previous administration, and good on it.

💬 Chris Hipkins: Well done, Michael Cullen.

I say to the younger member over there who was talking about it earlier—

💬 Hon Clayton Cosgrove: Oh, you old thing you—you old tumbleweed.

Well, I am feeling a bit like that at the moment. KiwiSaver has been changed in every single Budget—and probably in between Budgets, actually—under every Government since it was implemented. About half of those who are in KiwiSaver are locked into the 4 percent rate; half of them are locked into paying 4 percent. Even when the employer contribution went down to 2 percent, they stayed at 4 percent. If members opposite go to the data instead of starting down the conspiracy route, or something, they would note that not as many people may be impacted by this change as they fear. Those who are on 2 percent now will in about a year and a half’s time go up to “3 plus 3”, but those on 4 percent will not, I am quite sure, go down to 3 percent. When we start to look at the data we see that the numbers that members opposite are raising over there do not really stand the test of the true facts.

Let me talk about KiwiSaver and what some of these changes are all about, and, in fact, how they link into other changes in the Budget. Here is a very sad but quite brutal fact. Under the Labour administration, who could members of the public in KiwiSaver invest their long-term savings in? Where did their money go? It went to finance companies. It went to failed finance companies. Under Labour they could invest in now failed finance companies, and lose their capital. Under National, via KiwiSaver, they have the opportunity to invest in New Zealand infrastructure, New Zealand energy companies, and a further stake in Air New Zealand, which are solid, secure, and long-term investments.

💬 Hon Members: Good grief!

They do not like that. The mixed-ownership model is also addressed in the Budget, and it is all linked into changes in and around KiwiSaver. In fact, another fund that has not been mentioned on the other side of the Chamber that KiwiSaver funds will have access to is the Canterbury Earthquake Recovery Fund. Those members do not seem to be talking about that. Some of these changes will help enhance the ability of New Zealanders to invest in the reconstruction of Christchurch quite directly. I think members, on the whole, think that is a good thing, and I ask members on the other side of the Chamber to excuse me if I am misrepresenting them on that one—I certainly do not mean to. I look forward to their speeches on that during the debate on the Taxation (Canterbury Earthquake Measures) Bill, which is coming up next.

There is another way in which this Budget and this bill enhance New Zealanders’ savings. Inflation kills financial assets. Under this Government, and under this Budget, inflation has been well inside the Reserve Bank’s band, enhancing the real value of financial assets and savings. Actually, savings also face a 28 percent tax rate; it no longer is the 33 percent or 39 percent rate that there was under the previous administration. Under the previous administration inflation ran north of 5 percent, eroding and attacking the long-term superannuation savings of New Zealanders.

So I do not understand how members opposite can get up and talk about what their views on savings are, without addressing and acknowledging what this Budget does to improve, maintain, and enhance savings for retirement, and the general savings of all New Zealanders.

The member who has just resumed his seat is the chair of the all-powerful Finance and Expenditure Committee. He said that he is very proud because inflation is low. He also said that under the previous Government inflation ran north of 5 percent. Well, in which year—in which year, I ask the chairperson of the Finance and Expenditure Committee? The only year inflation has been at 5 percent is the year we are in now—under his Government. That is the truth of the matter. I could pick on any part of that member’s speech, but the last part of it will do. It was full of factual inaccuracies, as has been the case, commonly, in this debate.

This country went into deficit 3 years ago. On the change of Government 2½ years ago, the big deal, a few months later in April 2009, was tax cuts for the rich. Let me say that again: our nation, our official books, started running at a loss and the big public policy response was to cut tax for the rich—not smart. That is the first point. Therefore, we had to borrow more to pay for those tax cuts than we would have, had we not made those tax cuts. That is just arithmetic.

We are borrowing to pay for tax cuts for rich people. That is irresponsible, it is ideological, it is very expensive, and in Part 1 of the Taxation (Annual Rates and Budget Measures) Bill we had a chance to revisit it. We argued it for hours, but the Government said: “No, tax cuts for rich people will stay where they are, we are not going to reverse them.” Governments are reversing tax cuts in many other jurisdictions, but not here. The Government will not reverse tax cuts for the rich. So the Government will have to find money from somewhere else. Therefore, we go to Part 2 of this legislation and find that that money is coming out of Working for Families and we find that it is coming out of KiwiSaver.

Remember that the Government says that it does not like the idea of having to borrow to then put money into KiwiSaver accounts. I will quote the Minister of Finance from his speech. It is a very short quote: “it means the Government is borrowing … to contribute to private savings. This does not lift national savings.” That is what the finance Minister said, and he is correct. If the Government borrows a dollar from offshore and puts it into Clayton Cosgrove’s KiwiSaver account, the national savings are not improved. But nor are they worsened. However, if the Government borrows money and gives it to Clayton Cosgrove as a tax cut, dissaving gets worse. We have a Government whose members say they do not want to borrow to sustain KiwiSaver, in Part 2 of this legislation, but they are really happy to borrow until their eyes water to pay for tax cuts for rich people. That is not fair, that is not just, and that is not right. And I am angry about it.

I will tell members something about KiwiSaver. KiwiSaver is not the preserve of rich people; KiwiSaver is something that everyone uses. Labour members, when we got started, were surprised at how popular KiwiSaver was amongst low-income earners and middle-income earners, as well as high-income earners. I agree with Craig Foss when he says that it is not rational not to have a KiwiSaver account, because one gets a thousand bucks for nothing just to get started. I agree with that. So it stands to reason that KiwiSaver is something that can be found across all parts of society, yet all parts of society will now get it in the neck twice. Less money from the Government will go into KiwiSaver—because the Government cannot bear to borrow for that; it will borrow for tax cuts but it will not borrow for that—and then there will be a requirement for half of the contributors to KiwiSaver to lift their savings from 2 percent to 3 percent, because National members are concerned about savings.

If National members are so concerned about savings, the way to fix that is to lift the minimum contribution rate from 2 percent to 3 percent, or from 2 percent to 4 percent if they wish, and to retain the Government contribution and pay for that by reversing the tax cuts for the rich. It is easy. At that point two things would happen. Our savings would get even better—and, boy, do we know that our savings in this country need to get better, especially in the private sector; we know that. The second thing that would happen, the second leg of the double, is that if the tax cuts for the rich were reversed, the current account and the balance of payments would improve, because rich people spend disproportionately on imports. Why? Because they can—the classic example is an overseas trip.

So if we wanted to look at what this country needs most of all, we would see that, overall, it is to reduce our debt by improving our savings—savings not in the Government’s accounts but across the entire economy, so we can own more and more of our own country instead of less and less of it—and to improve our exports. Part 1 of this legislation, by not reversing tax cuts for the rich, therefore makes the current account worse. Part 2 of this legislation, by not backing Kiwis to save, makes our savings record worse. It is not OK to take a scheme as popular as KiwiSaver and make changes as large as these, twice in 2½ years. That destroys confidence. KiwiSaver is an opt-out scheme so that is a saving grace. It may be that people will just continue to fall into it. But, my goodness, this is an economically reckless Budget, for those reasons.

Let us leave aside the effect the Budget will have on an imagined family with so many kids on so many dollars and what will happen to the family’s amount of money per week. Leave aside all that and sticking only with macro-economics, only with what is good for the nation, I ask why we in this Chamber are under urgency deciding that we will not reverse tax cuts for rich people, thereby not improving our current account and further damaging our savings record, which is appalling. Why has this Government, when faced with the choices of needing to get money from somewhere—we earnestly agree with that; the deficit must come down—chosen that way to do it? What is good about it, apart from the fact that it is ideologically suitable for the Government?

It is ideologically suitable for the Government to use the sophistry that tax cuts are fine because they cause people to somehow create jobs instead of spending money on overseas trips—but who believes that—and that cutting the Crown’s contribution to KiwiSaver is also fine because it is mandated that everyone on a 2 percent contribution rate will lose 1 percent of their income because they will have to go to a 3 percent rate, because that is what the Government says. That is not very bright. It is not very fair—but that is another speech. It is economically dumb, and the Government needs to be told off roundly for its economic stupidity.

Let us have Government members get up and defend the Budget. Let us have them get up instead of lowering their heads—every one of them. Look at them. Not one of them is looking me in the eye. Oh, one or two of them are pretending to now. [Interruption] Well, they are now awakened. Even Rodney Hide is awake. Let one of them take the call now and refute my analysis that this country needs to save more, that this country needs to export more, and that both parts of this bill damage both of those goals. That is the essential thesis.

💬 Hon Tau Henare: I saw Clash of the Titans, and he looks like Hades.

I wonder whether Tau Henare would like to get up and refute my analysis. It would be an interesting bit of analysis, from him. Let us just hear what he has to say, or what Rodney Hide has to say—or what anyone else would have to say—about that analysis. It would be far better, given we have a $17 billion deficit, to pay attention to reversing the tax cuts and to retain attention on maintaining savings.

That superficially plausible analysis from the member who has just resumed his seat, Pete Hodgson, does not actually stack up when we start to look at it. I will go through the arguments that he raised.

Firstly, he said that we should reverse the tax cuts for the rich so that we can pay for what is effectively being reclaimed through KiwiSaver to reduce the deficit. It sounds good on the surface, but it does not work in practice, for this reason: the bulk of the tax cut package was delivered to those who were on the bottom two tax rates. So, in terms of the dollars spent, if his argument has credibility—that that money should not have been spent—in fact the people who would bear the brunt of his policy being implemented would be the very people he is seeking to protect, because in relation to income they benefited most from that tax package in terms of the level of expenditure. He also overlooked the fact that the tax package was revenue-neutral. It was funded by the increase in GST. There was an element between the period from October 2010 to April this year that was covered by some very short-term borrowing, but, fundamentally, it was a revenue-neutral package.

He then turned to KiwiSaver, and talked about—well, I do not think he used the word “destruction”, but that was the clear implication of what he said. Let me go through what the situation is prior to the passage of this Taxation (Annual Rates and Budget Measures) Bill, and what it will be after this bill is enacted. As of today, right now, someone joining KiwiSaver joins on the basis of a “2 plus 2” contribution rate—2 percent from the employee and 2 percent from the employer. They qualify for a $1,000 kick-start for their savings. They qualify for a member tax credit of $1,040 on an annual basis. There will be no tax on the employer’s contribution to that superannuation contribution. That is the status quo. The destruction that the member talks about sees the person who starts today still starting on “2 plus 2”. When that was brought in as the default position 2 years ago, the Opposition claimed that it was a cut because it should have stayed at “4 plus 4”. Well, we get the chance in 2013 when we go back to “3 plus 3”, and I do not think those members are really opposed to that. So the person who starts today still starts on “2 plus 2”, and still gets the $1,000 kick-start. That has not changed. The only thing that has changed in terms of the impact on the saver is the change to $521 per annum in the member tax credit. Taken over the life of a KiwiSaver contribution, that has minimal impact on their savings. They still get the same benefit at the point that they get their payout at the age of 65. They also will be satisfied, I think, with the fact that the employer will now be paying tax on the contributions they make.

So the point I am making in response to the member who has just resumed his seat, Pete Hodgson—and he normally is someone who gives considered analysis, and I respect him for that—is that his case is factually incorrect, for the reasons I have stated. What the Government is faced with—and I think it is the one point that everyone seems to agree on—is that a deficit of this size in the unusual circumstances we are in is too high. We need to bring it down. We need to look at introducing what the Leader of the Opposition said were “bold measures” to bring the deficit down. That is what this Budget seeks to do. We have not heard any “bold measures” from the Opposition, other than to raise taxes on the rich. But the point I make is that, given where the balance of the expenditure in the tax cut package last year went, if raising taxes on the rich was to be a “bold measure”, we would actually be raising taxes on everyone, and that is not what the Opposition seems to be arguing for. The KiwiSaver changes have a very small impact on the individual saver but taken collectively they save us about $2.6 billion, which is a significant contribution to reduction of the deficit.

If we look at the changes to Working for Families, we see that in fact the picture becomes even more obscure as far as the Opposition’s position is concerned. The changes in the threshold take 4 years to implement, at the rate of $450 of income per year. The changes in the abatement rate in some cases will take as long as 8 years to implement, and in most cases about 4 years. So these are very modest adjustments. There will still be provision for an increase in the rate of payment according to the existing formula, and that will take place next on 1 April next year.

But, overall, both these sets of changes secure these social policy initiatives for the future. I go back to the point that Jacinda Ardern made a little earlier—and I cannot remember whether it was during the debate on the previous part of the bill or on this part—about her generation. This bill is really about her generation, because one of the great tragedies is that New Zealand for so long has had very short-term, selfish thinking. What these measures are designed to do is protect and enhance KiwiSaver long into the future, and make sure that the basis of Working for Families remains and is beneficial to the families that need it. The tax package that, if you like, lies behind all of that is ensuring a fairer and better system. I come back to the point I made during the debate on Part 1. A situation where 75 percent of New Zealand taxpayers—about 2 million people—pay a top tax rate of just 17.5c in the dollar has got to be good. It is certainly the lowest tax rate paid by those households in the lifetime of anyone in this House, and that is something we should be celebrating, not criticising.

I start by complimenting the Minister in the chair, the Minister of Revenue, who has just resumed his seat, on the very polished way he seamlessly transitioned from defending a previous Labour Government to defending the current National Government. I think I will leave my comments simply at that.

However, I want to pick up a point made by Craig Foss. It was ironic for Craig Foss, a National member of Parliament, to stand up in this debate on Part 2 of the Taxation (Annual Rates and Budget Measures) Bill and talk about the failed finance companies and the people who have lost their savings, given that National has had 2½ years to do something about that and has done absolutely nothing. But then, that could have something to do with the fact that half of them used to work for the failed finance companies. It is a bit rich for National members to say they will deal with the failed finance companies by hocking off the State-owned enterprises—that is effectively what Craig Foss argued in this Chamber.

I want to pick up the issues around KiwiSaver, and in particular the changes to the member tax credit. This Government will be effectively cutting it in half. But before I do that I want to pick up a comment from the speech made by the Minister of Finance in the House yesterday. People will find the comment on page 27, in the Budget speech—and it also relates to KiwiSaver. He states: “The Government will require agencies to fund the cost of KiwiSaver, and some State sector retirement schemes for their employees. This will generate savings of $650 million.” We should think very carefully about what that actually means. It means that those State sector agencies that will have to pay their share of the cost of KiwiSaver are effectively having their funding cut by $650 million. So if somebody is working in a large social policy area where the salary costs are high—for example, education or health—their funding, in real terms, will be cut, because they will now have to meet the cost of the employer contribution to KiwiSaver. That is a real-terms funding cut. So when the Government talks about increasing funding for areas like health and education, I point out that a big chunk of it is already taken up by the other changes it is making in the area of superannuation, and it is not being upfront and transparent about that. It is a sort of a triple whammy.

I come back to the issue of the tax credit. Let us take the example of someone in the education field, a teacher, for example, who signed up for KiwiSaver. They will find that their member tax credit gets cut in half by the Government. Clause 7 addresses this issue. The tax credit will go down from $1,042.86 to $521.43. Basically, the member tax credit is cut in half. Then they find that the funding of the employer’s contribution means that other parts of their work are being cut—suddenly the money to fund the employer contribution has to be found from somewhere else because the Government has hacked away at that, as well. So they are getting a double whammy. If the Government is taking $650 million out of the employer side of the contributions to KiwiSaver, that has to come from somewhere else. I see the Minister of Revenue shaking his head. I simply turn his attention to the Budget statement on page 27 of the Budget documents. If I have interpreted that wrongly, I would welcome him standing up and clarifying it. I think that is the only way it can be clarified. If the Government is requiring agencies to fund the cost of KiwiSaver, saving $650 million, that money has to come from somewhere else, so that money has to be a cut in real terms. If I have interpreted it wrongly, I look forward to the Minister of Revenue’s clarification of it in his contribution to this debate.

National went into the last election promising New Zealanders that it could afford tax cuts and that nothing else would change. There would be no changes to KiwiSaver other than the changes National foreshadowed in its election manifesto. National said it would not cut Working for Families and it would not cut interest-free student loans. National has broken those promises in this year’s Budget. Here we go again, particularly when it comes to retirement savings. National has a very proud history of taking very good savings schemes introduced under a Labour Government and ripping the guts out of them. That is exactly what Rob Muldoon did in the 1970s after a very good savings scheme was put in place by the Norm Kirk Labour Government. Rob Muldoon bribed New Zealanders with their own money in order to win the 1975 election and sabotaged New Zealand’s savings for over two decades after that. The last Labour Government started to deal with that by introducing KiwiSaver, and, once again, we are seeing the National Government ripping the guts out of it. This is National’s pattern when it comes to savings.

It is a bit rich for Bill English to stand up in this House and bemoan our poor savings record when, as the Minister of Finance, he has consistently undermined it. The first thing he did was to cut the minimum contribution to KiwiSaver in half, from 4 percent to 2 percent. He cut funding for the New Zealand Superannuation Fund. He stopped putting away the funding to pay for the baby boomers’ retirement. Then he turned round and said we had a terrible record of saving for retirement. The Government is not leading by example—but then this Government never leads by example. It tells everybody else that they have to stomach cuts but it is never willing to cut the money it spends on itself. The Government is happy to have new BMWs, new carpet, and so on. The Government is not willing to lead by example, particularly when it comes to savings. The Labour Government led by example when it came to savings. We set up the KiwiSaver scheme and we put the member tax credits and the kickstart in it. We led by example when it came to savings by setting up the Cullen fund, the New Zealand Superannuation Fund, to pay for the baby boomers’ retirement. They are both things that this Government is kicking the guts out of and hacking into.

This Budget has no real vision for the future, and no real plan to get New Zealand moving. It has no real plan to make sure New Zealanders can live a comfortable and safe retirement. It is not there; I have read it. I spent the evening last night sitting in the Chamber reading through the documentation. There is no plan. This must be one of the blandest Budgets; all the Government is doing is cutting: cut here, cut there, cut here, cut there. There are lots of cuts and lots of pain but no real gain. New Zealanders at home will be asking about the gain and the plan. The Government is asking New Zealanders to stomach all these cuts, but New Zealanders are not seeing any light at the end of the tunnel. This Government has mismanaged the economy. It has taken it from a surplus of $5 billion to $7 billion every year to one of the biggest deficits ever recorded in New Zealand’s history. That is what we get with Bill English as the Minister of Finance. He failed when he was the Minister of Finance the first time round in the last National Government, and he has failed again in the tenure of this Government. That is one of the reasons why New Zealanders are going to vote out this Government at the coming election. I tell members that the feedback that has been coming overwhelmingly in the last couple of days is that people have changed their minds about National because of what it is doing to KiwiSaver. New Zealanders know how important KiwiSaver is to the future of this country, and this Government is kicking the guts out of it. This Government is kicking the guts out of KiwiSaver, and I think that is totally wrong. It is short-sighted, and that pretty much sums up the Government’s approach.

The Government is also getting into Working for Families. What was National’s promise before the last election? What was the absolute promise of John Key? He told New Zealanders that National would not touch Working for Families. Hang on a minute, I think there is even a pledge card with the promise on it not to touch Working for Families. It was on a pledge card, but it is not even worth the paper it was written on. It was headed up with the words “My key commitments to you”. I think that National, after this Budget, has broken just about every one of those promises. I do not think there is a single commitment left on that pledge card, with John Key’s signature on it, that he has not broken. He has broken almost every one of them, and I think that is absolutely outrageous. That is one of the things New Zealanders will be keeping in mind when it comes to voting at the next election. They can vote for Labour, which keeps its promises and makes promises we know we can afford, or they can vote for National, which promises before an election whatever it needs to in order to get elected, and then does whatever it wants once it gets the Treasury benches. Nothing sums that up more than the two major changes being made in this part of the bill. There are the cuts to KiwiSaver, which kick the guts out of the Government’s contribution to KiwiSaver. The Government says to New Zealanders that it wants them to save, but it is not willing to do its bit. And the Government is cutting Working for Families, even though it promised it would not do that. Working for Families was another initiative introduced during the term of the last Labour Government. That initiative lifted hundreds of thousands of New Zealand children out of poverty, which is something we on this side of the Chamber are incredibly proud of and will continue to defend right the way to the very bitter end. Working for Families is a good policy. It recognises the fact that those families raising kids face higher costs, and that we as a society should help with them.

The Taxation (Annual Rates and Budget Measures) Bill, which we have in front of us, and Part 2 in particular show just how much of a failure yesterday’s Budget was. We always expect to be debating taxation after a Budget, and this bill allows for that debate. But if yesterday’s Budget was a fair Budget, then we would be debating the $9.1 billion that was given away in tax cuts in the last Budget to the top 10 percent of wage earners in this country. I think everyone believes and knows that, yes, we are in tough fiscal times. The Government has not been able to grow the economy—it has not risen to that challenge—and we have very difficult fiscal times in New Zealand because of the economic mismanagement of the current Government. But we all accept that that is where we are. If that is the case and we all have to tighten our belts, then why is it that this bill asks only hard-working New Zealand families to tighten their belts while the top 10 percent of wage earners continue to have $9.1 billion worth of tax cuts untouched, even in these tough economic times.

That goes to the basic unfairness of what this Government is doing. It means that the Prime Minister, John Key, gets to keep the additional $1,000 a week that he got in last year’s tax cuts. That figure is more than some people earn a week, but that is how much extra he got in tax cuts from last year’s Budget. He gets to keep that, but hard-working New Zealanders get to pay for that Government’s folly by having their money for KiwiSaver cut in this Budget. Hard-working wage earners are the people who will suffer through this part of this bill, because this part attacks KiwiSaver and Working for Families.

It is absolutely clear by now that only a Labour-led Government can save KiwiSaver. This Government is not interested in saving KiwiSaver. Ever since this Government took office, it has diminished KiwiSaver from every single angle it possibly can. The Government started off diminishing KiwiSaver by cutting its contributions in half, from a 4 percent contribution down to a 2 percent contribution. Immediately on taking office, this Government cut KiwiSaver in half.

But not content with that, the very next thing the Government did, with regard to superannuation and the future of savings in this country, was to immediately suspend payments and contributions from the taxpayer into the New Zealand Superannuation Fund, which is the fund on which there was a multiparty agreement that we would continue to put money in, in order to make sure that when we, the baby boomers, got to the age of receiving superannuation, there would be enough money in the Government coffers to pay for that. Forward thinking by Michael Cullen had led to a multiparty accord to forward-fund the scheme, so that there would be money in the scheme for all of us, when, as baby boomers, we needed that money for superannuation. But this Government took the knife to that accord as soon as it took office. In respect of the multiparty agreement, the ink was hardly dry when the new Government came into place, and it broke that accord straight away.

The Government’s record on superannuation is terrible, and it continues with Part 2. The Government is saying that times are tough, that it has not been able to get its act together, that it has not been able to grow the economy, and that it does not have the lift it has been promising now for 2½ years. The lift in the economy is still not with us, so the Government has had to start taking the knife to Government spending.

Where are the areas that the Government has chosen to cut? They have not chosen the area of tax cuts for very, very high earners in this country—tax cuts for the wealthy. We will not hear any member of the Government, any member on that side of the Chamber, even mention the word. It is like not mentioning the war, when those members pretend that people did not get those huge tax cuts in the last Budget. Although the Government pretends that everyone has to tighten their belts, that certainly is not the case for all New Zealanders. For the vast majority, New Zealanders are finding the current economic situation very, very tough indeed.

I hope that I might get a chance later in this debate to talk about the Working for Families components of Part 2 of the Taxation (Annual Rates and Budget Measures) Bill.

💬 Hon Member: That’ll be a good call.

I hope so, too. I will focus my first comments on the changes to KiwiSaver. I note the press release from the Minister of Finance and the Minister in the chair, the Minister of Revenue, about how changes to KiwiSaver “will encourage a higher level of private savings.” That is the opening line of the media statement accompanying the Budget yesterday, but I will refer to the regulatory impact statement, prepared by Treasury and the Inland Revenue Department, that analyses this bill. I note this comment on the opening page of the regulatory impact statement: “Our analysis of the options is therefore dependent on behavioural assumptions, for which there is minimal empirical evidence, about individuals’ and employers’ responses to changes in saving incentives and other regulatory requirements.” In other words, Treasury and the Inland Revenue Department say there is no empirical evidence about the changes made in this bill, or the impact the bill will provide in terms of the overall savings of New Zealanders. I note further their comments that “KiwiSaver is less than five years old. Since its launch … there have been several significant changes to contribution requirements,”—and I tell members that most of them have been made by this Government—and KiwiSaver has not had the time or “any period of stability in which to establish its core products, and this uncertainty and unpredictability is not helpful to either the industry or savers.” That was Treasury and the Inland Revenue Department commenting on this bill, and officials never highlight their comments. They do not put them in strong language, but we can read the tone of those comments. They are saying that they have severe doubts about this bill and its impact on national savings.

I will quote further from the regulatory impact statement. On page 5 it is stated: “The objectives for any changes to KiwiSaver are: to help return the Crown to surplus sooner by reducing the fiscal costs of KiwiSaver, and; to continue to encourage increased levels of private household savings … Each of the options for change … was assessed against a matrix of criteria:”. But then the regulatory impact statement states: “In making this assessment, the strongest weight was given to measures which reduced fiscal costs,”. So the Government has really put to one side the questions about what impact the cuts to KiwiSaver will have both to KiwiSaver and to overall savings by New Zealanders—not the Crown’s savings, but the savings regime of New Zealanders.

Treasury and the Inland Revenue Department go further. They have analysed the impact of the halving of the minimum tax credit, which until next year New Zealanders enjoy under KiwiSaver. They say that it “Will make KiwiSaver less attractive,”. They say it “May mean fewer savings directed from other forms of savings,”. They say, in respect of increasing the employer contribution upwards to 3 percent, that an “Increase in employer costs [is] likely to lead to reduced business profitability in [the] short term, and lower wages over the longer term.”

If we want evidence of that, we should look at One News from last night. Alasdair Thompson from the Northern Employers and Manufacturers Association said that employees will meet that increase out of any wage increases. When employees are already facing 5 percent inflation at the moment, they are going to be told: “Sorry, the Government has told us that we have to contribute more to KiwiSaver. You are going to pay the cost.” What does that say to people who are living on the margins? What does that say to them about encouraging them to invest in their future by putting something aside? The whole damn basis of this Budget was supposed to be to stimulate savings, but Treasury and the Inland Revenue Department are saying that we will see that come only at the cost of lower wages. Where is the gain in that?

I will make a final comment from the regulatory impact statement. Treasury and the Inland Revenue Department say that the increase in employee contribution rates to 3 percent may make some people “stop contributing,”. That is Treasury’s and the Inland Revenue Department’s analysis of this bill. They say, in essence, that there are some high risks the bill will discourage people from saving. We know, and this Government puts at the centre—[Interruption]—Mr Chair, Mr Chair—

The CHAIRPERSON (Eric Roy): Look, do not yell at me. I am allowed to ponder to make sure I get it right.

Thank you, Mr Chair. I promise, Mr Chair, I will never shout at you again, because you are a Chair who makes excellent judgments—almost all of the time.

The CHAIRPERSON (Eric Roy): Careful!

I make reference to another aspect of this Budget. Supposedly, we are trying to get to a position of better national savings, but the Budget figures show that instead of seeing a decrease in the growth of national debt—that is, the money borrowed by New Zealanders overseas and repatriated by companies making investments here and repatriating profits—this Budget’s figures show an increase, from this year’s minus 78 percent of GDP to minus 85 percent of GDP in 2015. So where is the gain for us?

I note the comments of Ganesh Nana from Business and Economic Research Ltd this morning. He analysed the Budget. He looked at the fact that in its text there were 19 references to “debt” and 2 references to “exports”—19 references to “debt” and 2 references to “exports”. The whole focus of this Budget is on cutting, not growing. It is on cutting, not growing. I refer to the comments just received from the Manufacturers and Exporters Association: “The Budget has targeted balancing the books but missed out on balancing the economy by sparking growth in the tradables sector. The Budget focused on cutting costs through to cuts to KiwiSaver and Working for Families.” That is what the national organisation said; it is based in Christchurch but represents manufacturers and exporters nationally. It said there are cuts to the costs of KiwiSaver and Working for Families, but little detail on how to increase growth or shift the balance of the economy towards savings and exports, as the Government has talked about.

We are getting the rhetoric about growing the productive sector and growing the economy, but, in fact, the Government is coming back to the traditional Tory method of cutting, and cutting back on those who are least able to contribute. It is cutting back on working families, on people who have been encouraged, supported, and told they needed to save. They have been encouraged to do that through KiwiSaver, yet there is nothing in the Budget to encourage them; in fact, it is absolutely the opposite. We will see, I am sure, a downturn in people joining and contributing to KiwiSaver, which will be to our net cost as a nation.

I will comment further, and on the sale of State-owned enterprises. I say that not only do I believe that we will see asset sales of State-owned enterprises if a National Government is re-elected but also I note that in the Canterbury Earthquake Recovery Act there is a capacity for the sale of assets that are held currently by the Christchurch City Council. The issue has been aerated publicly over the last couple of weeks. Minister Brownlee confirmed that the capacity is there; it is included in the powers of that Act for the sale of Christchurch’s $2.2 billion worth of assets, including our power company, Orion, our port, and our airport. But I say to the Government that if it starts to look to those assets in terms of sales, it will be doing a disservice that will completely undermine the efforts made on the other side of the ledger in terms of the recovery of Christchurch.

We acknowledge that the Government has stepped up and is putting in place a regime to rebuild Christchurch. That is welcome. But I put this rider on it: if a re-elected National Government starts to use the powers in the Canterbury Earthquake Recovery Act to start selling off the assets of Christchurch, it will have a civil outbreak on its hands that it would not believe. The people of Christchurch know that those assets have delivered over the long term. One of them alone, Orion, has delivered $980 million in dividends—nearly $1 billion in dividends—to the ratepayers of Christchurch over the last 20 years. We know, through this Budget explicitly, that a National Government, if re-elected, will embark on an asset-sales programme next year. It is there in black and white. If members think it is bad enough putting into hock State-owned enterprises like Meridian Energy, Might River Power, and Genesis, they will see nothing in comparison, in terms of public revolt, if the Government tries to sell the assets of Christchurch.

It is a real privilege to speak on Part 2 of the Taxation (Annual Rates and Budget Measures) Bill. We have heard this morning from a number of contributors across the aisle. We have heard the type of negativity that pervades the Labour Party at the moment. We have heard speeches that have not set out any vision for this country, but speeches that appeal to the rabid left—anarchists, communists, socialists, and the lazy.

This Budget has confirmed the competent management that Bill English has displayed in the 2½ years since National took power. We know that the Budget is about setting a credible path to a surplus and helping to lift national savings. We have heard about the changes to KiwiSaver and how they will increase private savings through contributions that are, we might add, from employers and employees. What has not been mentioned by members opposite has been the context in which we find ourselves in May 2011. When we took power 2½ years ago there was a global economic recession. It has bitten many countries.

We heard from the Leader of the Opposition yesterday that this recession is over. Yet we look at countries like the United Kingdom that are going through massive changes and upheaval to their social services and their budgets, and we see that this Government has taken a very firm but very fair and balanced approach to our Budget. Although we hear complaints about the types of policies that aim at the fringes, what we really have is a Government committed to boosting investment in our health and education services. That is something we will not resile from.

We have heard questioning regarding facts. The Opposition continues to advocate taxation of revenue and sales, it advocates increasing taxes on high-income earners, and it seems to be focused on those who earn $1 million, but it has not presented any of the facts. The facts are that in the year to March 2009, only 597 people earned over $1 million—597. Labour members stand here whining and moaning about 597 people who earn over $1 million a year. Of those people, only 120 are salary and wage earners—120. There is all that energy over 120 people.

What Labour members do not realise is that there are people who earn high incomes who provide jobs and provide opportunities. Those people are entrepreneurs, who are investing in productive assets. Yes, it is about investing in the productive assets that will earn the export dollars that will push this economy forward. We have not heard anything from that party opposite, which governed during the best years of our economy, yet exports decreased for 5 consecutive years. We have not heard anyone from that party come up with any answers as to why that happened.

💬 Grant Robertson: Because it didn’t.

It did happen. The biggest business in town under the Labour Government was Government services—sad but true. Mr Hodgson, who spoke earlier this morning, asked where the innovation is. I am a little bit disappointed in Mr Hodgson, because when he was the Minister for Economic Development he was the biggest cheerleader for exporters, for productive businesses, and for innovators. Now he sits there and asks where the innovation is. I will tell members where it is. If any member opposite wants to see innovation, I ask them to come to Maungakiekie to visit some of the success stories. I ask them to please come and visit Rakon and Compac Sorting Equipment—businesses that are growing into export markets. Grant Robertson would not know that, because the biggest business in his electorate is what? It is Government services. That is right, it is Government services. When we went to the innovation awards with Mr Hodgson, what did we see? We saw the best in innovation from New Zealanders. We saw Phil Keoghan, of the creative industries. We saw Bruce Farr of Farr Yacht Design. We saw diabetes researchers.

Members opposite sit there and ask where the innovation is. I tell them it is out there. I encourage them to leave their electorate offices, visit some businesses and see what makes this economy really grow, see the people who hire others, and see where the jobs are. I encourage members opposite to get their facts straight and stop advocating taxing overseas trips, stop advocating the taxing of sales of businesses, stop advocating a capital gains tax, and actually present something with a vision. Thank you.

It is my pleasure to participate for the first time in this debate, in looking at Part 2 of the Taxation (Annual Rates and Budget Measures) Bill. There are a couple of points that I will make, but with reference to the member who has just resumed his seat, Peseta Sam Lotu-Iiga, and some of the other National members who spoke yesterday, I will just remind them that the 9 years of the Labour Government were spent in improving New Zealand’s export opportunities. I ask what those members call the Free Trade Agreement between the Government of New Zealand and the Government of the People’s Republic of China, an agreement that, although some members opposite wish to contest the fact, was signed by the Hon Phil Goff as Minister of Trade. The agreement has resulted, in its first year—no thanks to this Government—in a 62 percent increase in dairy exports alone, not to mention forestry as well. That member opposite needs to get some facts straight about who laid the groundwork for growth.

This Budget goes in exactly the opposite direction. This is a stifling Budget. It is a stifling Budget that does not promote growth. Members opposite had 9 long years in Opposition—9 long years, as they like to say—to come up with a plan for economic growth and for some new, fresh ideas about how to pull this country out of the financial crisis and into growth and recovery. But what did we get? We got the same tired old recipe that we got in the 1990s. We got asset sales and tax cuts. Those members have done the tax cuts, and now in this Budget they are promising to do the asset sales.

In this Budget, and in the part of the bill that is under consideration at the moment, we have the technical bits about cutting KiwiSaver and Working for Families. In 2008 John Key went around this country saying to the people of New Zealand: “You like KiwiSaver; we will keep KiwiSaver. You like Working for Families; we will keep Working for Families. You like New Zealand superannuation; we will keep New Zealand superannuation.” But what did the National Government do? From day one it began to gut all three of those great innovations of the previous Labour Government.

The talk about needing to change our culture to a savings culture, with this bill in front of us, is simply that—it is talk. The cuts to KiwiSaver provide disincentives for people to join the scheme, and disincentives for people to continue their savings. They do not create the kinds of growth and savings that are required if we are to have the investment in jobs and people that is sorely needed for the productive economy in New Zealand.

I will turn now to something to do with the context in which this bill is set. Towards the back of one of the documents we were issued yesterday, the one that contains the speech made by the Minister of Finance, there are assumptions that underpin his speech and this Budget. They are included in upside and downside scenarios. I would like to accentuate the positive and talk about the upside scenario, but draw to the Committee’s attention how deeply, deeply flawed that scenario is. If the upside scenario is flawed, what hope is there for anything good to be done by this Government for our economy? The upside scenario states that it “incorporates a stronger economic recovery led by domestic drivers … with commodity exporters anticipating permanently higher returns and households more confident in house price rises.” It goes on to state: “At the same time, house prices are slightly stronger, growing 5% by mid-2012, rather than 1.8% as in the main forecasts. Higher house prices in the near term reflect current low interest rates and developing housing …”—

The CHAIRPERSON (Eric Roy): I will give the member another call, but I just want to make a comment. Part 2 is about Working for Families and KiwiSaver, but each member has just got a little broader and a little broader again. Although it is very interesting, some of it does not have a lot to do with Part 2. I am not directing these comments specifically at the member who was speaking, although she is perpetrating that as much as some other members have done. I just caution the Committee that I think the debate should be crisply around those issues. Members can make their comparisons, but the issue is Working for Families and KiwiSaver.

Thank you, Mr Chair, and I intend absolutely to abide by your advice. The point about referring to this upside scenario is that it is to do with household income, and Working for Families and KiwiSaver are directly related to household incomes. Let me just make the point. The upside scenario states: “Higher house prices in the near term reflect current low interest rates and developing housing shortages, lifting household wealth.” Excuse me! Does anybody else here hear echoes of a couple of old names, like Fannie Mae or Freddie Mac? Does anybody else hear echoes of the 2000s when household wealth was predicated on the high value of houses, which in turn produced its own credit bubble, and which was then the precipitator of the global financial crisis? My point is that if this is the upside scenario, then God protect us from the downside one! This is going back to the future, and the way it relates to this bill is that for many people—and I think of many families in the Nelson electorate—household income has been dependent upon the supplement of Working for Families. When that is eroded, household income is eroded. The chance to buy the first home is whittled away even further, and escapes further from the grasp of first-home owners. So we have a Budget and a tax bill that are predicated on scenarios that are just not sustainable.

The other thing I want to say about Working for Families and KiwiSaver is that the cuts to the public sector that are represented in the Budget by KiwiSaver contributions having to be found out of baseline in the public service, represent for the foreseeable future no wage increase in the public sector. That pertains to household income. Not only will there be a reduction in household income because State sector bosses will have to find the KiwiSaver contribution from baseline and make $630 million - odd of savings but also there will be cuts to services in order to find the other $320 million—$330 million, or whatever it is—that makes up the nearly $1 billion worth of cuts. This is where KiwiSaver changes impact absolutely on household income. There will have to be trade-offs for no wage increases. If those savings are to be extracted—one might say extorted—from the public sector, then that will make a dramatic impact on what families can earn, and can expect to earn, in the near future.

This is a Budget, and this is a bill, that cuts at the heart of how people in New Zealand make ends meet. It cuts to the heart of family budgets. It cuts to the heart of services that families might legitimately expect in a country such as ours. One cannot pretend, by any stretch of the imagination, that this Budget and this bill represent a plan for growth or a plan for recovery. This is the same old tired stuff that National trawled out in the 1990s. It is doctored up, because there are some better programmes in place now than there were in the 1990s, but it has the same tired, old, failed policies. These cuts will not produce growth. These cuts will not do what that member opposite said was one of the aims—to stimulate the productive economy. Limiting KiwiSaver does not incentivise people to save. It does not provide us with the capital market and the investment potential that we so need to put into our productive enterprises in this country. This is a cutting Budget. It is not a plan for growth. Any plan for growth has completely escaped this Government.

I am pleased to speak on Part 2 of the Taxation (Annual Rates and Budget Measures) Bill, as it relates to the cuts to KiwiSaver and Working for Families. This Government makes stuff up, and that is what this Budget is based on. We have heard so much stuff that has been made up. In the time I have been sitting in the Chamber this morning I have heard a lot of it. Before the Budget was released, a few days ago a headline in one of the newspapers said this Budget would be about higher wages and more jobs. What a load of rubbish; absolutely. We have heard today that this Budget is about protecting the next generation. What a load of rubbish that is. Where are the jobs for that generation? Where are the decent wages? What is to stop them from going overseas? That is one of the major issues this Budget should have addressed. We have heard also from another member, who claims that there is so much innovation happening in New Zealand right now as a result of his Government. What a load of rubbish that is. There is nothing in this Budget that promotes innovation, will promote jobs, and will promote strong export-led industries, which is what this country needs. Instead, we have cuts to KiwiSaver and cuts to Working for Families, which is what Part 2 is about, instead of the Budget providing the things we need most. John Key was on Radio Dunedin this morning, just a few minutes before I was. He was asked where these 170,000 jobs would be coming from. He fudged it. He did not have an answer, because there is no answer from this Government in this Budget.

This Budget should have been about hope. It should have given people hope for the future that things will get better, that they will be able to pay their bills, that they are not going backwards, and, worse still, that they will not end up in financial strife. They should have been given hope that their kids will get jobs when they leave school, and that they will not go to Australia. Unfortunately, the Budget is about cuts—cuts to KiwiSaver. KiwiSaver is growing, and is actually giving people an incentive to save. It will provide certainty for people’s futures. But instead we are seeing cuts, we are seeing the burden placed on employees and employers, and we are not, as members have heard from previous speakers on this side of the Chamber, going to see wage growth. Government members are making stuff up. It is not too much to ask for a Budget to provide hope, for a Budget that gives us hope as nation. A Budget that will set a course for the future will show us where those jobs of the future will come from.

Peter Dunne earlier in this debate talked about equity. Equity for whom, I thought to myself—equity for whom? It is not equity for all those hundreds of thousands of families across the country who are struggling with their budgets every week—every week. The do not know whether they will be able to afford pay their bills: their telephone bills and electricity bills, their rent or mortgages—the bills they have to pay—let alone petrol and their food bills. They are not bills just for buying new clothes or going on a holiday but the bills they have to pay to get through the week, and through the month. Where does this Budget address that issue? Nowhere; instead it is a Budget that just makes stuff up. It forecast 170,000 jobs—170,000 jobs. Where will they come from? I heard what Stuart Nash said earlier on today about the forestry sector, and that jobs are going in that sector. We heard that John Key talked about commodity prices strengthening, and therefore jobs will come from that. Where will the jobs come from? They will not come from the manufacturing industry, let me tell members. If this Government actually invested some money instead of cutting KiwiSaver and cutting Working for Families, if this Government invested some money in this economy in a way that actually stimulated the economy and stimulated skills in the economy—

I am glad the member who has just resumed her seat, Clare Curran, talked about making up stuff, because there has been a lot of that going on from that side of the Chamber during this morning’s debate. Earlier we heard from Sue Moroney, who talked about reversing the $9.1 billion of tax cuts to top-income earners.

💬 Sue Moroney: That’s right.

She says that is right: $9.1 billion of tax cuts to top earners. Somehow, if we reverse that cut, we can pay off our $17 billion deficit. I was somewhat taken aback by her claims, because, having been intimately involved with the design of the tax package over the last couple of years, the $9.1 billion figure came as a considerable surprise to me. I had never heard it before, let alone in respect of high-income earners. I went back and checked with officials exactly what the cost would be of reversing the tax decrease for those high-income earners, because I thought I might find out where the $9.1 billion figure came from. If the member was right, then maybe there was merit in her argument. But I have to tell her she is slightly wrong. She is wrong by about 1,300 percent.

💬 Amy Adams: That’s quite a lot wrong.

It is a slight error, I know. It is within the margin of error, perhaps. But the fact is that contrary to her claim of $9.1 billion of tax cuts to the top 10 percent, the total cost is $725 million per annum for those people.

💬 Sue Moroney: Oh no, it’s not.

Yes, it is. The member talked about a $9.1 billion tax windfall for high-income earners, but it is $725 million. So when her colleague talks about making up stuff, I agree with her. That is the whole basis on which the Opposition’s case has been based this morning. We should roll over the top tax cuts, and therefore we would not need to make the changes to Working for Families or KiwiSaver. The only problem is that those members cannot add up. They are 1,300 percent out in their calculation. I worry what the state of a Budget might be, drawn up with that type of arithmetic. One of the members, I think Mr Hodgson, earlier on actually said it was just a case of plain arithmetic. It is pretty plain arithmetic if it is 1,300 percent out, at least. The member is still sticking to the claim of $9.1 billion. No one can find it.

💬 Sue Moroney: Over how many years?

Well, if we took it over something like 13 years, at least, she might be right. But that is not the context the member claimed it in. She talked about a $9.1 billion tax windfall for the top 10 percent.

💬 Sue Moroney: That’s right.

She still believes it, even though she is 1,300 percent out. When Opposition members want to talk about Part 2 and the changes it makes, they should get the basic facts right.

💬 Sue Moroney: Oh, we have.

She has, she says! If the claim is that Part 2 is required only because of the windfall tax gain by top-income earners, then the figures should at least match up. They should not be 1,300 percent out, as under the member’s claims, because that simply destroys any shred of credibility for her argument, and to the worthy cases mounted by all her colleagues this morning.

I thank Mr Chair for the opportunity to speak to Part 2 of the Taxation (Annual Rates and Budget Measures) Bill. This is my first contribution. Part 2 deals directly with the major changes the National Government is making to both Working for Families and KiwiSaver. Yesterday when John Key finished his Budget speech, and as the members on the opposite side of the House got up and followed the script, and started smiling and clapping—as opposed to smiling and waving—we could tell, we could guarantee, that a lot of them were doing it through gritted teeth, because they were worried. They were worried because they knew people at home were thinking: “Hang on a minute.” The 1.7 million Kiwis who have signed up to KiwiSaver were thinking: “Hang on a minute. That is not what I signed up to. Those are not the terms I signed up to. Hang on a minute. John Key said he wouldn’t touch KiwiSaver. What’s going on here? What is going on here with KiwiSaver? I thought this plan was solid. This was a plan to make sure we can save for our retirement, and make sure that people can afford their first homes. But what is going on here? We were told it was safe, and wouldn’t be touched. Hang on a minute. What about Working for Families? Hang on a minute. John Key wasn’t going to touch Working for Families. What is going on here?”.

Those are two pretty major broken promises in Part 2. A lot of lower and middle income Kiwis will be saying that in their homes. We have seen plenty in the Dominion Post today; I think pages 5 and 6 are dedicated to families who will be no better off from this Budget. We heard on Morning Report this morning an example, as Jacinda Ardern pointed out earlier, of a person who said that this was not what they signed up to with KiwiSaver. The last thing the Prime Minister said was that he would see us out on the hustings. I say to the Prime Minister to bring it on—bring it on. If members opposite want to go to the people and say they are cutting Working for Families and cutting KiwiSaver, then they can bring it on. I am looking forward to going to Cannons Creek and saying that this Government will cut KiwiSaver and cut Working for Families, but it will keep the 40 percent tax cut for the top 10 percent of tax earners. People in Cannons Creek will love it, and people in Waitangirua will love it. Do members know who else will love it? People in Papakowhai will love it, because they signed up to KiwiSaver. They think it is a great scheme. People in Papakowhai will love it, and they will say: “Hang on a minute. Hang on a minute, what is happening here? That is a tax credit I thought I would get from this Government.” But no, the Government is slashing it in half.

This is a Government that promised it would take the sharp edges off the recession. The only sharp edge we have is the one the Government is using to make cuts. That is all we have received from this Government. I am looking forward to going to some of the more marginal areas in my electorate and taking votes from National members, because of what they are doing in this Budget. They are taking money from hard-working families who are struggling to make ends meet. A lot of my colleagues have been talking about the cost of living, and how many families are struggling to make ends meet. With the changes this Government is making to Working for Families, I look forward to getting out on the hustings.

I tell Government members to bring it on, because many families in Mana are struggling to make ends meet. Just last week I went to the St Vincent de Paul food bank, and for the first time in 9 years Kerry, the lovely Australian lady who runs the shop there, said they have run out of food. Even the emergency cupboard is bare. For the first time in her 9 years she has been forced to put a sign on the front of the shop saying: “Can we please have food.”, because not only has the demand increased but the supply has run out. There is real hurt in this community, especially in Mana, and this Budget does nothing for people there. I say to members opposite to bring it on. If they want to take this to the people, they should bring it on. We are going to make 50 percent of the families who have signed up for Working for Families worse off, so bring it on. I am looking forward to getting out there and talking about what you are doing and how you are hurting Kiwi families—

💬 Craig Foss: I raise a point of order, Mr Chairperson. I do not think you are hurting Kiwi families. Members have been pulled up for bringing you into the discussions quite often during this debate—

The CHAIRPERSON (Lindsay Tisch): I thank the member. Do not bring the Chair into the debate.

—I should rephrase that—and how you are adversely affecting Kiwi families and making life harder for them. You are making life a lot harder—

The CHAIRPERSON (Lindsay Tisch): No, I am not.

I am sorry. Excuse me, Mr Chair. This Government is making life a lot harder for Kiwi families. I was straight on to it this morning. I was waving signs out on State Highway 1 saying “Save KiwiSaver”. There were plenty of beeps, so bring on the election campaign, because I know that the 1.7 million Kiwis who have signed up to KiwiSaver will not be happy with what the Government has done. We have had speeches from many members on the opposite side of the Chamber saying that this is a visionary Budget. I think they should go and get their eyes checked.

I move, That the question be now put.

I am pleased to take a call on what some of us are calling the “Ken Ring Budget” Part 2, because it is based on some fairly interesting random predictions on the future economy. The Government may need advice from Ken Ring. He makes a lot of mistakes but at least he is a colourful character.

I would like to talk about Part 2 of the Taxation (Annual Rates and Budget Measures) Bill. This morning some of us attended the Child Poverty Action Group breakfast, where the issues we are discussing in Part 2, “KiwiSaver and Working for Families”, were identified as worthy of key analysis in terms of who is ignored. There has been a consistent ability to ignore two crucial parts of our community, and Part 2 continues that trend.

One is beneficiaries. Beneficiaries are recognised in this Budget only as non-people—non-workers and their children who do not receive Working for Families now. As the Child Poverty Action Group pointed out this morning we have had increasing poverty for those families for more than two decades. Roger Douglas and the “mother of all Budgets” is when it started. We do not see that Part 2 does anything for those people.

I heard members of the Government say last week that they are a Government for the vulnerable. I think their definition of “vulnerable” is the 13 percent of people who got richer, but that is not my idea of the vulnerable. The vulnerable are people who are having trouble surviving right now. There was good discussion at the Child Poverty Action Group breakfast about the vulnerable and about Part 2. We are very concerned that, despite the Government trying to pitch this as not a serious attack on KiwiSaver, I have already in the last 24 hours met people who are saying they think they will pull out. These are people who have never ever saved before.

💬 Hon Member: Why?

Because they find that $500 is not enough. The Government’s $1,000 a year was an incredible incentive to save. But in hard times they might as well keep the money. They are struggling so hard with the basic costs that without that Government incentive it is just not worth it to them any more. I think that is tragic, but it tells us how many people are living in that space where the difference between $500 and $1,000 in terms of the Government contribution is critical to them. Now they are going to give up saving for their future. I think that is because they are forced into survival mode in a time when costs are increasing, by Part 2.

It is a shame about KiwiSaver, which has been one of the most breakthrough initiatives in this country for getting ordinary people who do not have the capacity to join fancy schemes, who do not have reliable employment, and who do not have a lot of money—some of them are on benefits—to start saving so they can have some self-sufficiency in old age. That is a really sad thing to hear and it is an indictment, because we actually believed the Government’s promise that it would not cut KiwiSaver.

I agree with the previous speaker, Kris Faafoi, that KiwiSaver will be an interesting issue during the election. KiwiSaver will be debated hotly. People are not stupid. They will do the maths and look at whether they are better off going into a scheme like KiwiSaver any more. I think that one media person called it paying more to stay the same. That is a really sad thing, because people who struggle to pay all their bills cannot afford to pay more to stay the same in terms of savings. They cannot afford to do that.

We are so buffered in this Chamber. We are so privileged by our own superannuation schemes, by our own protective devices to make sure we have a pleasant retirement, and we forget at our peril the really vulnerable people. The Budget is supposed to be about them, not us, the already insulated and protected well-off people sitting in this Chamber.

I return to Part 2 in terms of Working for Families. Reducing the abatement threshold down to $35,000 means that abatement applies to a two-parent family with one partner working full time at the minimum wage and the other working 12 hours a week at the minimum wage. Raising the abatement rate to 25c in the dollar results in an effective marginal tax rate of 58 percent. Losing almost three-fifths of any extra income in tax and in Working for Families abatement is far from an incentive for parents who are earning just around $35,000 or over to—to quote the Government—work harder to better themselves, which is what the Government says they should be doing.

We are very disappointed that Working for Families is being undermined at that level for those people who are in that marginal area and who really needed Working for Families to stay the same. I think it was Child Poverty Action Group members who said this morning that they do not have a problem with the richest people losing Working for Families because it was never intended for them anyway. It is actually quite appropriate that the Government should cut back on their access to that, but it is not appropriate to cut that down for the people earning about $35,000. It is not an appropriate thing to do. We think Part 2 is carefully calculated—

I move, That the question be now put.

I am happy to take a call on Part 2 of this Taxation (Annual Rates and Budget Measures) Bill. Part 2 is really about KiwiSaver and Working for Families—two of the most successful programmes around. They are two programmes where the majority of New Zealanders actually believe that whoever designed them—and of course, it was the last Government—actually did a good job. KiwiSaver has proved itself by the number of people taking it up. This was a huge surprise when it was first introduced. The belief was that few would take it up, but many, many have. It was a very highly successful programme. Working for Families is the other one. This is really a subsidy for workers provided by the State because we have a low-wage economy. It is another successful programme. So here we have two successful programmes and this bill is cutting them. This Government is a cut-and-hope Government. This is a cut-and-hope Budget. There is plenty of evidence. The papers are full of it today, and there is something about this part of the bill that demonstrates this Government’s real hate—if you like; it is probably not too strong a word—for those successful programmes developed and put in place by the last Government.

💬 Peseta Sam Lotu-Iiga: Which ones?

The two I have just mentioned, I say to Mr Lotu-Iiga. KiwiSaver and Working for Families are the most successful programmes. That member talks about the companies in Maungakiekie that are doing very well. I tell that member that those companies were there before. Those companies are doing very well under policies of the last 9 years of Labour, not ones that have been developed since that member took on responsibility for that particular electorate. It is all very well to say what the member is saying, but it is not consistent with what has happened. They were policies of the last Government.

This National Government is cutting very, very successful programmes, and the irony is this: National Governments of any hue have always destroyed good programmes. In 1972 there was the very successful national superannuation programme. Who cut that programme? Do members remember who cut that programme? A National Government came in and destroyed it overnight. There was the Cullen fund, designed to put national superannuation in place. After the Cullen fund started, what did the National Government do with it? Who played around with the Cullen fund? It was that particular Government; because the policy was successful, the National Government’s stock contribution was to play around with it. Again, now, KiwiSaver is a successful programme for savings for this country. Members on that side of the Chamber say they support savings, but they do everything to confound that and to cut back savings. And here we are again.

Then there is the little thing about keeping one’s word. The Prime Minister gave his word that this would not be cut and that this would not happen, and with this bill the Government is doing that. The Government has broken its promises at every step of the way. Why would anybody want to trust whatever it is that that Government brings out as policies? All it does is cut the successful programmes and promise something else. It is a matter of trust. When KiwiSaver is being changed in Part 2, it is a betrayal of trust given by the electorate at the last election. There is no way that members opposite cannot resile from that. It is a betrayal of trust.

National members now say that it is not a breach of trust, at all, because the cuts will not come in for some time yet. Why are we debating this bill now? We are debating a cut to KiwiSaver, and members on the other side said they would not do it. Therefore, it is a breach of trust. Let us not play with words here. Let us not make things up. We are discussing it now. It is the Government’s intention to do it. Where are the ethics in this? Where are the ethics of keeping one’s word? National members said they would not do something, then they come here, change it, and pretend they are not changing it. It continues in this Budget as well, which this part of the bill is trying to put into place. It is really about making it up. There is a huge dispute about the figures that this bill is predicated on.

I move, That the question be now put.