General Debate

I move, That the House take note of miscellaneous business. So we now have Labour’s grand plan to walk backwards into the future on the crutch of a new tax. Nothing has changed. They have not apologised. It is the same stuff as they got thrown out for—tax and spend. Nothing has changed. It is more spending that then needs more tax, which is bad for the economy and means less growth and lower incomes. Last time Labour was in Government it took until 2004, but it nailed it. After 2004 that is what happened. It was all set out in the Budget: more spending, more tax, slower growth, and lower incomes.

There will be a choice: National, which wants to grow the economy and lift incomes by selling more of our excellent and competitive products to the rest of the world, and Labour, which just wants more tax so it can grow the Government. We want to grow the economy and the country, and Labour wants to grow the Government, just like it did last time. Until Labour members apologise for that, New Zealand is not going to listen.

Let us go through the numbers. Labour has a very big fiscal hole to fill. What creates this huge hole is the tax-free zone, taking GST off fruit and vegetables, and having no mixed-ownership model. One can take a guess, but it is somewhere between $10 billion or $12 billion and $15 billion. Labour members say they will come back with the details, but it is somewhere between $10 billion and $15 billion, because they have also said they will reduce debt at the same rate as the 2011 Budget. So they have to find $10 billion to $15 billion to fill the hole, and they are arguing that Phil Goff’s capital gains tax will find $4 billion.

Well, let us go through the $4 billion figure first. It was from the Tax Working Group and was based on normal income tax rates. Labour is proposing 15 percent, so that cuts the revenue almost in half. It will not be taxed at 33c and 24c; it will be taxed at 15c. That drops the figure of $4 billion to almost half. Then, that figure was based on an accruals regime, where one pays as the asset’s capital value goes up—unrealised gains—not when one sells the asset. Labour will be forced to a realisation model because low-income owners cannot pay capital gains tax if they have no money. This applies particularly to older New Zealanders who invest in investment housing and who need the income to live on. Labour will be forced to a realisation model and that will cut the revenue even further. So Labour has got it from $4 billion down to $2 billion and we have not done the work on that yet in detail, but we will.

Then there is the very simple problem that the current Government’s property tax measures have been so effective that there is no capital gain in the housing market. So even if Labour could implement this tax, it is quite possible that because of the Government’s tax measures taken so far, which we talked about in detail in question time, and because the world has changed with regard to the availability of credit—that is, the ability to borrow to fuel a speculation bubble—there will be no capital gain in the next 5 years. Labour may have taken account of that, because the $4 billion figure actually takes 15 years to happen. Even if it is taxed at normal income rates on an accrual basis where people pay every year and there is a historical average increase in capital value, it would take 15 years to get to $4 billion.

So how will Labour fill the $12 billion hole? They say they will fill it with a tax on something that might not happen, and even if it did, it would take 15 years to get to $4 billion to fill next year’s $12 billion hole.

When Bill English became the Minister of Finance in 2008, he inherited 9 years of Budget surpluses from a Labour Government. He was so impressed that in his first speech, in December 2008, he admitted to the country that the country’s books were in reasonable shape. He said there was a global financial crisis but that this was the rainy day New Zealand had been preparing for. After three Budgets, each of which has run record deficits, today we had the new financial statement from the Government of New Zealand—the new financial statement. It is just a couple of months since the Budget. The Budget showed us that there would be a $16.8 billion deficit, and these financial statements tell us that the gross debt will get worse by over $3 billion, I say to Mr English. Gross debt is worse now since the Budget and it is going to be worse by a further $3 billion, and we know that the deficit will be $20 billion higher than at this time last year.

What frightens me, and any New Zealander who is interested and concerned about the future of his or her country, is that there is no plan to tackle that debt problem. Mr English is a Minister who borrows and hopes, because there is no plan, unless, of course, we count the flogging off of New Zealand assets overseas. That is really going to help! I looked at the Budget document, because I thought that if we were selling our most valuable assets, surely it would show that over time our debt problem would get better, not worse. What does this Budget statement, produced by Mr English, actually show the country? It shows the country that in 5 years’ time the trend of our debt is not to get better; our net debt will double over the next 5 years. In the next 5 years, Mr English’s achievement will be to double New Zealand’s debt.

Where is the plan? I am not the only one asking that question, because Jenni McManus, in one of the Saturday newspapers, wrote an article after interviewing the 40 top business leaders in this country—the natural constituency for the National Government, right of centre. What did they say? They said overwhelmingly that they had “no confidence that the Government had a clear economic strategy or vision to guide its policy-making.” That is the judgment of 40 top industry leaders. What else did they say? They said that this National Government has squandered its opportunities and that it has been “tinkering around the edges instead of tackling the big … issues”. I say to Mr English that when unemployment is at 40 percent among young Māori in Northland, he has no plan to tackle that. I say to him that when 10,000 houses need to be rebuilt in Christchurch, and the number of apprenticeships is going down, and the number of industry traineeships is going down, there is no plan to upskill New Zealand. I say that if we want to get out of the hole that New Zealand is in, by making a smart, innovative economy, then we increase research and development expenditure; we do not slash it like Mr Key and Mr English did in cutting the research and development tax credits that were so valuable for the future of this country.

Those industry leaders are right: there is no plan. It is not a plan when New Zealanders are faced with a rising cost of living to increase that further with a GST increase that the Government promised never to introduce, and then give tax cuts to the most wealthy people in this country, while low and middle income people did not get enough to meet the increased cost of living. That is not a plan to improve the situation of New Zealanders. It is not a plan to increase the well-being of our economy by selling off assets that are more valuable to keep in terms of their dividends for New Zealanders than they are to flog off to foreigners. It is not a plan, I say to Mr English, to sell off New Zealand farmland, increasingly, to overseas buyers. When we see another $33 million worth of land in Dipton being flogged off to German investors, I ask Mr English where his plan is for New Zealand to own its future.

That speech was from a member of the party that gave us the decade of deficits and from a member of the party that gave us a productive sector in recession for 5 years before it left office. Apparently, it is supposed to be seen as part of the solution at this point, but it is the problem. There is an interesting thing about the bit of paper that the Leader of the Opposition was waving around. He might have said that the article rated National five out of 10, but it also said that the Labour Party was a waste of space and irrelevant. I would not be getting up and quoting that article, if that was the big endorsement that the Labour Party was looking for.

We need a competitive economy to grow in this country, and that means a number of things. If the Opposition wants a plan, here is one: a competitive tax system. That would be a great thing, and that is what this Government has delivered. This Government has delivered more infrastructure for this country, which will help our growth and productivity. It has delivered better results from education, not just money being tipped in the front end. Actual accountability for that money is very important, and that is part of the plan. The plan includes more free trade, less red tape, and a much more productive public sector. That is what this Government is delivering, and Labour opposes pretty much all of it. Labour is against a competitive tax system, and that is even more obvious today. It is against infrastructure investment. Labour is interested in it in theory, but it opposes all of the moves that we are making in practice. Out the front of Parliament today, Labour MPs were once again opposing infrastructure development in New Zealand.

Labour opposes accountability in education. Labour wants to just tip more money into skills training and more money in the front end. It does not care about whether we get anything out of it. Labour members think that as long as they get a headline with their funding, then they are OK. Research and development tax credits actually do not achieve anything except to shift money from one side of a company’s accounts to another, but Labour members think that is a good idea because they feel good about it! Now, apparently, more tax is the answer. More tax is the answer from the Labour Party, and it is an appalling answer. Labour proposes a capital gains tax for New Zealand, and it quotes the Tax Working Group on that. That capital gains tax that the Tax Working Group proposed was 30 percent on capital gains, not just on investment houses, but also on commercial properties, on farms, on shares, and on investment properties. That is what the $4.5 billion—

💬 Hon David Parker: It was not 30 percent.

It was 30 percent on average across those—go back and read it, I tell Mr Parker. That is what it says, and that is an outrageous imposition. Labour says it wants a competitive economy, yet its solution is more tax on the productive sector. That is why those guys got thrown out. They got thrown out because they crippled the productive sector, and now they are saying “Elect us, and we’ll cripple you again!”. That is Labour’s solution; that is Labour’s answer.

The Labour Party is all about going backwards. It wants to go back to the heyday of tax and tax and tax and of crippling the productive sector, and it expects the public of New Zealand to trust it to get a productive economy and to increase competition so that we have a better result for this country. Nobody believes that. Nobody believes that Labour has the potential to do that, and today’s and yesterday’s little utterances prove that once again. It is all about increasing taxes, and it cannot even get its numbers to add up. It is exactly the same as the research and development tax credit: the numbers do not add up. Labour threw around the figure of $4.5 billion on the TV last night, and said it could do the capital gains tax at about 15 percent. It is all rubbish, and it will be unpicked over the next few days. It will be interesting to see when Labour finally makes its announcement, because I think the announcement is going backwards pretty fast at this point—it is going backwards. I am picking that the announcement will come forward a little from Thursday. Labour will have to get it out there because it is absolutely falling to bits. Labour members will be out there beavering away. David will be off with his calculator after this session, out the back to beaver away and to try to come up with another answer, because Labour needs one.

It is appalling what Labour is proposing. It is actually economic vandalism. It is what Labour did for 9 years in Government, and now it is on the other side it asks to have a crack again. It has no idea what to do. The solutions are a competitive tax system, more infrastructure, better results from education, more trade, less red tape, a much more productive public sector, and investment opportunities for New Zealanders. That is what this Government is delivering. That is the plan. It is the plan New Zealanders know about, and they are keen on the plan. On 26 November I am confident that we will get that endorsement.

Kia ora, Mr Speaker. I think it is fitting to follow the transport Minister, Steven Joyce, because I am talking about his handiwork on the Kapiti coast, where he is bulldozing a motorway through the community, and, just like in that last speech, he is making up for a lack of substance with volume. Today at Parliament hundreds of Kapiti coasters gathered to discuss his handiwork in the House. We heard speeches from councillors, tangata whenua, and locals all opposed to the expensive and uneconomic motorway that the transport Minister is ramming through.

The Minister is making a monument to the 1950s in concrete and asphalt, a monument to old-fashioned thinking, a colossus of roads—a scar on the Kapiti coast is what this Minister is doing. For every dollar we spend on all the walking, all the cycling, all the buses, all the trains, and all the coastal shipping, this transport Minister is borrowing to pour $7 on his roads of national significance. We are not talking about corridors of significance, or joined up thinking like that. No, we are looking at roads of national significance. I believe in smart transport investments that balance roads with sustainable transport modes like walking, cycling, buses, and trains, which will future-proof our transport system so that it is more affordable, efficient, versatile, and better for our economy. The Kapiti Expressway is one of seven roads of national significance. What I think we are actually talking about are motorways of significance to the National Government.

In a nutshell, the Kapiti Expressway is expensive, uneconomic, and not needed at all. It damages local communities and, looking towards the future, it is quite simply the wrong way to go. It is expensive. We are talking $500 million at a time when our country is borrowing hundreds of millions of dollars a week. It is uneconomic. Its benefit-cost ratio is just barely above 1. We have also seen the Minister play with the numbers. We have seen an independent estimate, the Saha report, come in with a much lower benefit-cost ratio.

I recently tabled an OECD report in this Parliament that showed there is no correlation in New Zealand between motorways and economic growth. We have seen in America that much greater numbers of jobs have been created in public transport or local roads production, not on expensive white-elephant motorways like this. Even Don Brash in his 2025 Taskforce had to say of the Wellington motorways that the projects would not provide a net benefit to the economy. It is not a smart way to build prosperity.

This motorway is not needed. The locals, including local member Nathan Guy in his election campaign, campaigned in support of the Western Link Road, which was a series of road upgrades and bridges that would have been cheaper and would achieve the safety objectives in a matter of years, not in more than a decade as this road does.

This road will see more people stuck on more congested roads. All around the world, when a road is built, more people use it. It is called induced traffic and it is kind of like dieting by extending the belt buckle. We will see negative impacts on public transport, which is growing at a small pace in Wellington, yet rocketing ahead in Auckland.

In our transport sector, our greenhouse gas emissions have increased by 70 percent since 1990. We are dismally failing our Kyoto Protocol obligation targets, yet this expressway treats the climate as if it was not of significance. On the back of the highest petrol prices ever in our country’s history, this motorway is dependent on a fuel of declining significance. Most important for the locals, I heard today that this motorway will split their community in two with a 100 kilometre, four-lane motorway. It treats the community as if it was not a community of national significance.

We have seen an absolutely shocking process by the Minister whereby the road was announced 9 months before any business case or economic analysis was released. We have seen a circumvention of the normal independent transport planning process. The locals wanted the Western Link Road, yet the Government has come on top of them and dictated this expressway. We have also seen blatant politicking with the facts and $16,000 wasted when the Government decided to play politics with the date of the announcement of the route because it was worried it would affect its chances in the Mana by-election.

The real impacts are on the 43 homes that will be demolished and on the 33 households that will be affected that were not expecting it. Over the decades people had planned for an upgrading of State Highway 1—those needed improvements—but instead the Government has come on with a grandiose white elephant, expensive, uneconomic motorway.

Why are we doing it? It is simply to benefit the trucking industry. This Government has a goal of increasing trucking freight by 75 percent by 2050, so this road of significance is a road of trucking significance based on a fuel of declining significance, as if the community was not of significance. It has to be stopped.

Congratulations must be due to Mr Norman and the Greens—congratulations because it now looks like they are writing the economic, taxation, and fiscal policies of the Labour Opposition. I disagree with their policies but at least they have been clear and certain about those policies for quite some time. I say well done and congratulations again to the Greens. Perhaps they have Mr Cunliffe’s spreadsheet—we will see how we go.

It is important to note in this debate that right now about 72 percent of New Zealanders face a highest marginal tax rate of no more than 17.5 percent. But Labour members are up to their old tricks. We last saw those tricks in 2008 and Labour is back to them: Labour taxes, Labour taxes, Labour taxes; Labour spends, Labour spends, Labour spends, Labour spends. Labour increases taxation, regardless of the impact on the economy. It taxes and spends, regardless of the impact on the economy.

Let us remember recent history. Labour put New Zealand into recession one full year before the rest of the world went into recession. Members should also note that the export sector, the tradable sector, under the economic mismanagement of the previous Government went into recession in 2004, early 2005. There was no real growth in the export sector, but there was phenomenal and scarily worrying growth in the public sector over that time. Those same policies created the decade of deficits. Members opposite are reinventing history, looking at Budget 2008 from then finance Minister Cullen. The one to look at is the pre-election update, which is independent and transparent.

Labour loves taxation. Labour members are now talking about a capital gains tax. What do they do in bed at night? They lie in bed at night and think of new things to tax and new ways to tax. Goodness gracious! What do they want to tax next? We know that they love selling assets and trade sales offshore. We learnt today that there was $9.6 billion in trade sales offshore, mostly by members of the current Labour front bench when they were in Cabinet.

We know Labour members love spending. We know they love spending those increased taxes. But we also know that the increases in their tax policies distort the economy and the property market—the same property market that they allege they are trying to address. Over the period of the Labour Government debt doubled and housing prices increased through the roof. Home affordability decreased and homes became less affordable.

The capital gains tax that Labour is now promoting is, essentially, double taxation. We already have a tax on intent. Taxpayers must declare a trading or capital account. The Opposition has actually supported legislation that has gone through, changing the rules on “associated persons” in taxation. It supported changes to loss attributing qualifying companies without a murmur. That was it. Labour members support GST without compensation. They love taxation, as we saw when Mr Goff was in Cabinet in the late 1980s. Labour would raise business taxes, as well. That hurts plumbers, that hurts builders, that hurts “subbies”, and that hurts apprentices. We know that Labour is looking to increase income taxes. To be fair, it has been quite public about that, but we are interested to know where that will kick in. If Labour increased income tax and brought in a capital gains tax without making some of the other changes, the property market distortions will be exactly where they were.

Labour cannot be trusted on taxes, though. It cannot be trusted on taxes. We can recall the last big tax promise that Labour made in Opposition. In 1999 when Labour promoted the increase in the top marginal tax rate from 33 percent to 39 percent, the then finance spokesperson, Mr Cullen, declared that only 5 percent of taxpayers would be in that top bracket. By the time that party left Government, over 20 percent were in that top marginal tax bracket. The resulting increase in extra taxation earned was $20 billion every year, and there was $20 billion of extra spending every year, which crowded out the export sector. That is the reality of Labour’s capital gains tax mismanagement and proposals.

A capital gains tax will result in higher rents. It will make homes less affordable to those who are trying to enter the home market for the first time. It is a tax on the aged, and it is a tax on those who have done the right thing in looking after their retirement by saving—be it through cash, bricks and mortar, homes, or whatever. It is a tax on those New Zealanders who have done the right thing over many years.

I love this House. One of the reasons I do is that we can feel the mood of the place change week by week. The mood of this House has changed this week because the National Government knows that it is game on. It is game on because New Zealanders have a choice. On the one hand they have a Government that wants to slash-and-burn services for New Zealanders, and sell off the family silver to cover 6 months of deficits based on tax cuts for people who did not need them. That is what National is offering. Labour is offering to pay down debt, to keep our assets, to grow our economy, and to get New Zealanders back to work so we own our future. We will own our future. Labour will govern for all New Zealanders, and it has a plan.

National has no plan, and that is why, under National, New Zealand has been going backwards. National does not have a plan to get the economy going. It is out of touch with ordinary New Zealanders. National is not working for Kiwi families, but for its big-bucks mates and the foreign interests that will clip the ticket on New Zealand’s family silver. Labour will give the country the start it needs. It will give everybody a fair go, with a tax plan and a growth plan that will get New Zealand back to work. It will make sure that everybody gets a fair chance, and make sure that everybody pays their fair share.

It was very interesting to hear Bill English, the man who said that Labour left the books in reasonable shape. That was an understatement, of course: 7.6 percent of GDP net credit was very reasonable in 2008. He has now presided over a $17 billion Budget hole, which will grow to $20 billion this year, yet he has the temerity to lecture us about fiscal prudence. He has the temerity, yet he does not have a plan of his own. His way is to slash-and-burn, flog the family silver, and run the country into the ground with tax cuts for the rich that New Zealand can never afford. On Labour’s side, we would pay down debt, keep our assets, grow the economy, and get New Zealanders back to work so we can own our future. We will do it with a plan that is fair to all, and to which everybody will contribute.

Steven Joyce tried to defend the competitive economy. Is that not the same Minister who has given sweet-heart deals to broadcasters in an election year, and given a new fibre monopoly to an incumbent telecommunications company that will drive competition out of the wholesale layer? He has as much right to lecture us on competition as Bill English does on fiscal management. He is railing against a straw man that National has created, and arguing that there will be a 30 percent capital gains tax. Well, who has ever said that? Labour has not made its announcements yet. We will make an announcement next week that will change the course of this country—not just this election, but this country—because it will set a pathway for a long-term future. It will be a future that New Zealanders can own and a future that New Zealanders can believe in, because it will show a clear pathway out of the hole we are in, a pathway that does not depend on the slash-and-burn of the State, or on the selling-off of the family silver.

New Zealanders do not want that—they do not want that. If those National members were listening to New Zealanders they would be very worried right now, because New Zealanders are getting the clear idea that they have a real choice. On 26 November they can vote for the short-term expediency of slash and sell, or the long-term wisdom of build and grow. New Zealanders want to build. They want a country that is going forwards, not backwards, and where we actually close the gap with our nearest neighbour, not widen it. They want a country where we get people back to work, not grow unemployment, and where we build for the future and not sell the future to pay the debt holes that have been created today. It will be an interesting week in politics.

You know, after sitting here over the last 2½ years I am starting to think that Labour members actually quite enjoy Opposition, because they can sit there and promise everything to everyone. They will be all things to all people. But suddenly, as we head into the election cycle, they have gone “Oh! We have got a $10 billion to $12 billion hole, and people are starting to ask how we will pay for that.” “Oh!”, they said; “We haven’t thought about that. Quick, let’s have a whip-round. I know—a capital gains tax. That will do it.” Those members heard somewhere that it would raise $4.5 billion for them, and they thought that would be good—that would work for them. With the detailed economic analysis of members over there, they took the figure of $4.5 billion and said “We’ll have that.”

But the problem with that is that Labour members are economically illiterate. They have not got an economic clue between them. They have not stopped to consider not only that it would take 15 years to get to the level of $4.5 billion—15 years, and they will also not be back in Government in anything like that time, if they make it back at all—but also that that sum is based on a 33 percent rate of tax when they are promising 15 percent. It is based on an accrual mode, and they are talking about a realisation mode, and it will not be there in time for them to fulfil their promises of doing everything that National is doing, and more and more spending. They will very quickly realise that it is like all their other plans: long on talk, short on delivery. This is another example of why Labour cannot be put in charge of the books of New Zealand, why Labour has no idea of how to run an economy, and why Labour was the Government that left us with a decade of deficits after the best economic conditions the world had ever seen. This plan of Labour’s, this grand scheme, at best would raise $700 million—at best. But here is another thought: if property prices are not going up, there is no gain. What will the plan make for Labour then? The big bagel! What is worse, if property prices go down, it will cost Labour money. It will cost it money as investors file their tax returns and claim for the multi-billion dollar losses on their property. Labour will find itself in a bigger hole.

If there is a capital gain, who will be hit the hardest by this tax? Let me tell members who will be hit hardest. It will be superannuitants, those on fixed incomes, and the people who create jobs. What Labour will do is tax superannuitants, and tax the wealth creators in this country. Why? It is so that Labour can build a bigger public sector, and so that it can have more policy analysts telling them what to think. That is Labour’s endgame. Labour will ask who in this country is successful. It will go out there, tax the bejesus out of them, hand out more welfare, grow the Government, and put more policy analysts around it. That is all that Labour will deliver. It has gone back to its core Labour beliefs. Labour members talk about being fair. What does “fair” mean to them? It means making everyone as poor as everyone else—making everyone equally poor. Labour’s fundamental principle is that equity is achieved when everyone is as poor as the lowest common denominator.

That is not what this Government stands for. This Government gets behind success, celebrates aspirational New Zealanders, and celebrates people who are putting their capital into the productive economy, creating wealth, raising incomes, and creating jobs. We do not go out there and penalise the successful; we celebrate winners, we reward winners, and we encourage productive growth in this economy. But let me tell members this—this is really interesting. Labour now is holding out this capital gains tax as a panacea for all ills. I just want to read this: “The Government is not interested in a capital gains tax, either in the short or the long term. Basically it is political suicide”. Who did that come from? Michael Cullen. He said it was political suicide, now or in the long term. Here is another quote I quite like: “[The New Zealand Labour Government] … agrees … that [New Zealand] would not be better off with a general capital gains tax …”.

💬 Dr Cam Calder: Who said that?

David Cunliffe. Is not that interesting?

💬 Dr Cam Calder: When was that?

That was in 2002, in Government. Have we not heard this before—that New Zealand would be worse off with a capital gains tax? I say to Mr Cunliffe that that is quite right. It is the most sensible thing I have heard that member say for a while.

💬 Dr Cam Calder: He must be in quite a big hole.

A big hole, I would have thought. Michael Cullen was reassuring us that Labour had no interest in a capital gains tax, in the short term or the long term, because it would be political suicide. Wise words. But what do we have now? We have an Opposition that has promised everything, knows it cannot deliver, and is desperate.

I want this afternoon to talk about Telecom’s new monopoly status, and what that will mean for the New Zealand economy. On 22 April 2008 John Key said that the ultra-fast broadband investment would be made “alongside additional private sector investment …”, and would be “making sure we do not end up lining the pockets of incumbent industry players.” Oh, yeah! If only.

Steven Joyce has said that it is a good deal for the country. In fact, it is the worst possible deal for the country. We have a Government investment of $929 million, which has a present-day net value of $140 million. The deal the Government has entered into with Telecom has been portrayed as a partnership. It is not a partnership. Telecom is risk-free; the Government has taken all the risk. Telecom will take all the profit, and the Government will take all the costs. The deal is portrayed as a Government investment. It is not an investment; it is a subsidy, a massive subsidy. The Government will get almost none of its money back. The deal perpetuates Telecom’s infrastructure monopoly for ever. It kills Telecom’s competitors, without compensation. There is no take-up target, which one would expect to be essential for an industry of this nature.

We have what I would call the Crown Fibre Holdings sham investment. The Crown investment will be made through an equal contribution of equity and debt—so-called. The equity and debt securities have no voting rights, no dividend payments will occur before 2025, and full dividends will be paid only after 2036. The debt securities are unsecured and non - interest bearing. Debt securities will be redeemed in tranches from 2025 to 2036. Chorus may elect to redeem the equity and debt at any time.

That outline comes straight from Telecom. The investment is a simple gift—a gift to Telecom. Crown Fibre Holdings pays for the entire $929 million of community infrastructure. The $464 million equity proportion has no rights to equity; it is actually a loan. Telecom has from 2025 to 2036 to repay, and Telecom has full use of the $929 million, interest-free, for 14½ years. It can pay it back at face value.

Telecom has no real costs until the customer connects. It gets an assured cash flow immediately. It pays out about $1,381 per connection—that is the company’s calculation—and it gets back a cash flow of $492 a year, a gross return of about 35 percent. The value to Telecom is simple to calculate: $929 million for 14½ years at, let us say, 7¾ percent. The commercial compound interest saving of that for Telecom is $1.8 billion—$1,800 million—or, to put it differently, the Government’s $930 million is on generous terms.

Well, what do we say? Generous? Yes. The net present-day value of Telecom’s repayment on this funding is $140 million. That is not my calculation; it is the calculation of a leading private wealth company, based on Telecom’s figures. An independent assessment says that the present-day value of the subsidy is $800 million—$800 million. My minority report on ultra-fast broadband investment proposals said that the investment, first of all, was not necessary, but if the Government were going to spend $1.5 billion, it should spend the extra $400 million and own the lot.

I thank Sir Roger Douglas for his contribution. It is good that it is on the record, and I would just add that in addition to that, Telecom received regulatory protection that we still have not been able to unpick, because the Government has not been transparent about what it has done.

I want to respond to the theme of National’s contributions today, which is to accuse Labour of tax and spend. National members say that whenever National changes a tax from one form to another, decreases income tax—weighted to those who are best off, admittedly—and then increases GST to pay for it, that is a tax switch, but if any other party changes the tax mix, that is spending. That is the essence of their argument in respect of any change to the tax system that Labour might propose. For us to change the tax system is tax and spend; for them it is a tax switch. Well, we deny that, and I am sure that the media will see through that. It is not true.

Anyone who knows Phil Goff knows that the allegation that is least likely to stick to Phil Goff is one of being profligate. He is not a tax-and-spend person. He is fiscally prudent, as was the last Labour Government, which reduced Government debt so that we had net positive assets in the Crown by the time we left office—so much so that when the Hon Bill English took office and when the global financial crisis hit, he said the Government books were in good order. That was the rainy day that the Government had been saving for. Of course, it was not his Government; it was the prior Labour Government. All of those Budget surpluses that we ran were opposed by National, which called for unaffordable tax cuts that would have further fuelled asset and price bubbles.

The National Government has wasted its political capital. We are increasingly hearing commentators saying that. Some Government members might ask why I say that. The reality is that we have a long-term problem in New Zealand of rising total debt. Only about 10 percent of it is Government debt; 90 percent of it is private. What does the Government’s Budget show? It shows that every year from here on it gets worse. We have a rising current account deficit. Even if we strip out the reinsurance proceeds coming into New Zealand from the insurers who insured against the Christchurch earthquake, we see that this year we have a current account deficit, despite flat domestic demand and record commodity prices internationally.

💬 David Bennett: Show us some passion.

Every year hereafter, I say to Mr Bennett, his Government’s projections show the current account deficit getting worse, blowing out to 6.9 percent of GDP by 2015. The net international investment position gets worse every year. That is the measure of how much New Zealand owes to the rest of the world, net of what we own in the rest of the world, and on that basis we are one of the most indebted countries in the world already. Every year from here on, under the settings of this National Government, New Zealand gets poorer. That is projected in this year’s Budget to go to negative 85 percent of GDP by 2015.

We have heard slogans from National members. They said that we would have a better future, that we would have a step change in the economy, that we would say goodbye to higher taxes rather than our loved ones, and that they would close the wage gap with Australia. The wage gap with Australia has become bigger and is getting bigger. The step change in the economy is not coming; that phrase has dropped from their language. The better future is no longer being promised. Their slogans did not work, and their policy proposals did not work either. They said mining in national parks would make the big difference, but they abandoned that. Then they said savings would be the centrepiece of the Budget this year, but what did they do? They cut KiwiSaver incentives and pretended that they would have higher rates of KiwiSaver participation as a consequence. No one believes that.

Now they are spinning what they think Labour will propose next week. They do not know what it is, but they pretend that if we made a change to the tax system, it would be tax and spend. We know that there needs to be a fundamental change to the settings of this economy in order to drive the export economy. We will deliver upon that promise.

I congratulate the previous speaker, David Parker, on showing that Labour members are wavering on their tax policy. It took them only 24 hours to realise that it was a dog and that people are not going to go for it, but we all wait for next week. I congratulate the Green Party, as well, because the Green Party is now the leader of the left wing in New Zealand. Its policy will determine what the left will campaign on. It is not Labour’s policy; it is Green Party policy being promoted by Labour now. The Green Party always wanted to have a capital gains tax and now Labour is doing it. Good on the Greens for at least standing up for it, and poor old Labour has to pick up Green Party policy.

A capital gains tax is a tax of envy. It is a tax that will not work. It will not work for a number of reasons. First of all, house prices are not going up, so there will be no return to the Government from this tax in its first few years. This tax will not work, because if Labour fully implemented the tax, it would have to do it across all assets, not just investment properties. If Labour implemented it on investment properties only, in 15 years’ time it might get $700 million. That would not be what we need to sustain this economy in the near future—$700 million in 15 years’ time. Labour should tell the people of Christchurch that it will rebuild their city with $700 million in 15 years’ time, and see how far it gets.

This tax will not work, because it will be complex. Those people out there who can afford to get around it will try to do so. This tax will not work, because it will not mean that there will be no increase in housing prices. We can look at the biggest property bubble going on at the moment, which is in Sydney, where they have had capital gains taxes. What has happened in Australia? House prices have still gone up. That would not change under this policy.

If we look at the policy, what would Labour members do with their capital gains tax? Would they stick it on the non - family home? Well, they may do that. Would they go to beach houses and those kinds of investments? Yeah, they probably would do that. Would they go to farms? Well of course they would do that, because they do not like farmers. Would they go to other businesses? They would have to. If they are going to the beach house, the second home, and the farm, they would have to go to businesses. Labour members should tell those employers out there—those electricians and plumbers—that they cannot take on apprentices now because they will be taxed on selling their business. There will be no incentive to build their businesses. Then Labour would have to tax other assets like shares and other forms of investment. When would it stop in that process, how would it deal with the corporate structures to avoid taxation in those areas, and how would it make that fair and equitable?

A capital gains tax would depress investment in this country and in the productive economy. Labour’s envy tax would have the opposite effect of what it wants it to do. That tax would actually depress economic growth in New Zealand and hurt this economy, because Labour would be taxing the productive sector, and a tax on the productive sector is the last thing the New Zealand economy needs.

The second part of Labour’s tax platform is to increase marginal tax rates on those who earn high incomes in New Zealand. Those are skilled people. They are the people we need to retain in New Zealand and attract back to New Zealand. How will Labour keep doctors in New Zealand if it taxes the guts out of them? They will go to Australia, where they can earn more money.

What will the Labour tax policy do? First of all, it will hurt businesses, it will hurt investment, and it will hurt economic growth. Second of all, it will tax those people whom we need to be working hard and building this country to be stronger. That tax policy will have a detrimental effect on this economy. It will put us in the decade of recessionary years that Labour planned. It will put us into the situation where we have a decade or two decades of deficits going forward. That tax policy has no economic justification, and that is why the Green Party set it up. The Green Party does not understand economics, and now this shows that Labour does not understand economics, either.

Let us look at the numbers. The numbers will be the big thing. I hope that Stuart Nash has done his numbers right, because next week, when he announces this policy, everybody will be looking at those numbers. With the way they stack up now the Labour Party has problems, because this tax policy will not be effective.

I must admit that I find it amusing that the member David Bennett, who is the chair of a select committee and is also on the Finance and Expenditure Committee, spent 5 minutes—spent his time in the general debate—talking about a Labour tax policy that has not been released. It has not been released; no one knows the details of it. We certainly have not confirmed that we are planning to introduce a capital gains tax. He spent 5 minutes talking about that. Do members know what that proves to me? Do members know what that proves to me? That just proves that the Government has absolutely no plan. I can tell members that if the Government had a plan, Mr Bennett would have spent 5 minutes talking about the plan. He would have spent 5 minutes talking about the plan, but he did not, because there is no plan—absolutely no plan. It actually does make me smile, and it makes me confident as we head into an election that the National Government can hang its hat on nothing except asset sales. That is its only policy: asset sales. It is not a positive policy, but it is the only policy.

I would like to play a little game of charades. I do not mean to hold this House in disrespect whatsoever, but it is a little game of charades. I play this with my children quite a bit. How it works is that I say something, and people have to guess who I am. It is a little bit like 7 Days or Back Benches. The first question is, who said this: “National will not increase GST”. Who said that?

💬 Hon Rick Barker: John Key.

John Key—that is dead right. John Key, as the Leader of the Opposition, said that to the people of New Zealand. He looked at the camera with those hollow eyes of his, and said to the people of New Zealand “National will not increase GST.” But he did—he did. After promising that he would not increase GST, he did.

But the issue is worse than that; it actually is worse than that. John Key increased GST for every single New Zealander, so that the few very wealthy people could get a great tax cut. That is what he did. Someone who earns a million dollars a year—a million dollars a year—receives a tax cut of $1,000 a week. The Inland Revenue Department tells us that the tax cut would be $1,000 a week. The Inland Revenue Department tells us that about 700 New Zealanders earn a million dollars a year. They had a tax cut of $1,000 a week. But do members know what? People who earn the median wage in Napier received about $10 a week—they received $10—100 times less than people who earn a million dollars a year did. The question I have to ask, and it is a pretty simple one, is whether that is fair. Is this a plan for economic growth? Is it equitable? Is it the sort of country that we as New Zealanders pride ourselves on? The very wealthy are becoming even wealthier on the back of the vast majority of good, hard-working New Zealanders, who are out there trying to make it happen.

💬 Paul Quinn: This is last year’s speech.

No, it is not.

Let me tell members a little about economic philosophy, because I think Mr Quinn has a couple of problems. The economic philosophy followed by the vast majority of Governments around the world is Keynesian economic theory. That works by saying that if we give money to those who need it, that will stimulate economic growth, but that if we give money to those at the very top, they will save it or retire debt. At a certain time in the economic cycle, that is actually not too bad. But when the country is in recession, the last thing that we would want to do is to have all the money that was given away as tax cuts have absolutely no effect on economic growth whatsoever. Treasury said that this is the case: tax cuts for the very wealthy have no impact whatsoever on the economic growth of this country.

I come back to the question of whether this situation is fair. I was asked to go to William Colenso College in Napier to talk about tax to third formers. I thought “Goodness me—talking about tax to third formers!”. What I did was to outline the National Government’s tax policy, whereby the very wealthy received $1,000 or more per week in tax cuts, and those on the median wage received $10 a week in tax cuts. Do members know what they said to me? They said “Oh, sir, that’s not fair.”—exactly.

Tēnā koe, Mr Speaker. Well, the beavers on the third floor of Parliament House have been very busy considering all of the possibilities that could possibly be sold to the voting public as semi-credible ways of paying for Labour’s big spending promises. Whoops! Did I say “semi-credible”? I think I meant incredible, or hardly credible, or not credible at all.

Let us reflect just on the big spending promises that Labour has already put on record. On an annual basis, Labour will need to find $1.5 billion a year to pay for the $5,000 tax-free threshold for everybody paying tax and the GST taken off fresh fruit and vegetables only. Add to that not implementing our KiwiSaver changes or our Working for Families changes—changes that would make those schemes sustainable, I might add—implementing a research and development tax credit, putting money into the superannuation fund, and not adopting the mixed-ownership model, and that will cost $4.5 billion each year. Boy, it is really easy to overspend when Labour wants to get back into Government, no matter what, at any cost, at all costs.

Do members know why Labour wants to be back in Government? Because its members believe that they know better how to spend taxpayers’ money than anybody else. New Zealanders are not stupid. They know that before one spends money, one has to earn it, borrow it, or take it off somebody else who has some. There are three choices. Labour has discarded option No. 1. Waiting until money is earned before spending it has never been Labour’s practice. Labour is galloping towards a socialist ideal of redistribution of wealth. Labour members have undertaken not to do the borrowing thing, mainly because they have painted themselves into a corner by accusing us of borrowing too much during the recession. So that leaves taking money off people who have some.

A capital gains tax seems to have been a winner in the raffle of options. I am sure that it looked like a good idea at first glance, because, after all, when we stoke up the fires of the politics of envy, anyone who can afford two properties or more than just a house when it comes to assets should have money taken off them. Under a capital gains tax, Labour wants a 15 percent tax on—well, actually, it will have to be on an accrual basis, but in fact Labour is talking about taking that off only when it is sold. Whoops! Somebody hit the wrong button on the calculator. To get to $4.5 billion, the capital gains tax will need to be 30 percent. Whoops again! It will need to be for all asset classes. Then, whoops again, it will not happen overnight, or in one, two, or three years; it will take 15 years.

Oh no! What will Labour do now? If it will take 15 years, then Labour is back to the drawing board. What? Oh no! Labour has already released the information—unofficially, of course. So what will Labour do now? Labour needs to accept that the financial gurus on the third floor—the Cunliffe, Parker, Goff, and Mallard team—have scored an own goal.

💬 Iain Lees-Galloway: Haven’t you got any policy of your own to talk about?

Yes, they have scored an own goal, and they did it before kick-off. That must be a record. Had they taken a few more moments before they leaked their mighty plan, they might have noticed that, actually, National has done some really good work in this area.

We have changed the policy settings on the poor policy that contributed to a housing and debt boom and unbalanced the economy. We have already moved to make rental properties less attractive as an investment and to make sure that property investors pay a fair share of tax. Back in Budget 2010 we tightened the settings considerably. Our finance Minister at question time today certainly outlined those. I tell any New Zealanders who own shares, a family farm, a bach, or an investment property to look out, because Labour thinks that they are the dream answer to Labour getting back on the Treasury benches. They should look out, because they are in Labour’s sights.

On 26 November New Zealanders will make that stark choice about looking forwards with National or backwards with Labour. It will be a competitive economy and a competitive tax structure that we will focus on. Our kids will want to stay in New Zealand. It is a plan that invites New Zealanders home, sees our economy grow, and sees everyone better off. That is a plan for New Zealand.

The debate having concluded, the motion lapsed.