Estimates Debate — Vote Finance

Thank you once again for the opportunity to speak in the Committee stage of the Appropriation (2011/12 Estimates) Bill.

💬 Hon Craig Foss: Give us the Audit speech, David.

Thank you, Mr Foss. It is an important debate, and I want to raise for the Committee and with the public the issue of the finance estimates. Encapsulated in those estimates is the fiscal strategy that this Government has embarked upon—one that will lead the country down a dead-end street.

The crossroads that the country faces are neatly summarised by the choice that has been put before us: on the one hand to sell down New Zealand’s precious State assets, and on the other hand to rebalance the tax system in favour of taxing capital, broadening the tax base, filling in an amazing loophole, and giving 98 percent of New Zealanders a net cut in income tax. We can do that under Labour’s plan while fully paying to keep New Zealand’s precious assets in public hands, paying fiscal debt down to zero earlier than under the Government’s Budget, and running a fiscal surplus in the same year as the Government.

This election is a choice between Labour’s fair tax policy, which will give every New Zealand family a tax cut of $1,000 a year and will close the gaping hole in our tax system, or National’s plan to sell off our profitable assets to foreigners. Labour has a credible, responsible, and bold plan for the economy, and that is in stark contrast with National’s agenda of privatisation and stagnation.

It is a wonder to me that the Minister in the chair, the Minister of Finance, after 9 years in Opposition, when faced with one of the most serious financial crises since the Second World War, in his first Budget managed to achieve precisely nothing other than to give a tax cut to the highest-income earners and to forestall contributions to New Zealand superannuation. In the second Budget, equally lacking in imagination, the lightning strike was to give an even bigger tax cut to upper-income earners, put up GST on everybody else, and do precisely nothing to address the underlying structural problems in the economy.

In this 2011-12 Budget we have the third opportunity for the Minister of Finance to actually show New Zealanders where the economic strategy lies—and what did we get? Again, we got a vacuum of ideas other than the tried and failed recipe of selling down New Zealand’s State assets as a short-term panacea to put some cash flow in the bank while they mortgage future generations. I say mortgage future generations because the numbers do not add up. The dividend yield on the energy assets is over 7 percent. The Crown cost of capital is only 6 percent. The total shareholder return on the package is 17 percent. Yet this Government proposes to sell them, transferring the future value of those dividend streams to what will inevitably be major foreign corporate buyers.

Some people will benefit—yes, some people do benefit. The investment bankers, the accountants, and the lawyers who put the deals together stand to pocket more than a year’s worth of dividends from the assets that are being sold down. Over $350 million, according to Treasury estimates, could be lost in terms of ticket clipping and middlemen as the birthright of mums and dads is sold down the river. You know, it is not just bad because it is bad policy; it is bad because it apparently represents the sum total of National’s thinking about how to guide this economy out of the difficult situation we find ourselves in because of the global financial crisis.

Debt is a problem. All New Zealanders understand that. Most understand that it is not just fiscal debt but private debt, as well. But they want to see fiscal debt—Government debt—responsibly managed. That is one reason why Labour’s plan for a capital gains tax has been so widely hailed by the commentators—because it achieves simultaneously a number of important objectives. It pays down our fiscal debt to zero faster than under the estimates being debated today. It allows us to fully pay for the assets to replace the dividends—

💬 Hon Bill English: That’s rubbish.

Yes, it does. I do not think that Mr English has yet seen a copy of the underlying spreadsheet, so he is in no position to tell us what is in it. I give the Committee my undertaking as an honourable member of this House that our Budget plan fully replaces the capital that will be drawn down by this Government from State-owned enterprise sales.

It does that while giving 98 percent of New Zealanders a tax cut on their income tax. Ninety-eight percent earn below $150,000, the inflation-indexed threshold for the new top tax rate of 39c, and 98 percent of New Zealanders will be net beneficiaries from the plan to make the first $5,000 of all earned income tax-free. The first $5,000 of all income will be tax-free. That is a very important measure at a time when New Zealand families are suffering, when food prices are rocketing up 7.1 percent, I think, across general food prices the last time I looked, and when wages are up 1.9 percent. But, of course, the rich list is up 20 percent in the last year. Does that not say it all?

Today in the House Mr Key leapt to his feet and wielded a social development report that said that inequality was getting smaller. What he forgot to mention was the conclusion that it was Labour’s policies of Working for Families that had started to turn that boat round. It was very nice of the Prime Minister to hail the success of Labour’s policies when last in Government. It was very kind of him, but it would have been a trifle more honest if he had said that, in fact, our policies, not the current Government’s, had led to that result.

So here we have it. On the one hand, there is a Government that is devoid of vision and devoid of strategy. It has fallen back on the old mantra of cutting one’s way out of a hole and selling the future of our children down the river to realise some cash and to pay the piper for the next 6 months or year. New Zealanders are not that stupid. They know that selling the family silver is a recipe for disaster, and that is why the polls show that an overwhelming majority prefer Labour’s capital gains tax plan to asset sales as a means of getting through these tough times.

💬 Hon Members: Oh!

They may not like it, but that is the truth—that is the truth. Present New Zealanders with a choice between asset sales and tax reform, and they will choose tax reform. They want to fill in the loophole that lets the rich list get a 20 percent income increase while the poor get a 1.9 percent increase. They do not think that is fair, and we do not think that is fair. We know the Government has no recipe for lifting this economy out of the doldrums.

Usually the member David Cunliffe says something I can agree with because it is correct, but in almost 10 minutes he actually did not say anything that was correct. The reason we know Labour’s numbers do not add up is that we have looked at Labour’s numbers. Actually, there is no such thing as a choice between capital gains and the proceeds of asset sales, because when we look at Labour’s published table, which it put together by itself, we see that all the capital gains revenue—if we were to believe it would collect any—is used up to pay for its other extravagant promises. That is not because we say so but because the table that Labour has published says so.

When we go through the booklet, we see that it does not show an offset to asset sales, at all. It leaves a $7 billion hole. So Labour has to explain how it will pay for new schools, because a capital gains tax is not there. It is being used—if it raises any revenue, and that is a different argument altogether—as part of a silly little tax package that achieves not much in spite of a lot of pain and effort. That is what it does. There is a $7 billion hole at least. If Labour claims that it will reduce debt at the speed these estimates show, then where will it get the money from to do that? It will not get the money from the capital gains tax; it will have to borrow more. I do not know if that is what Huey and Dewey have told Labour’s caucus, but that is the case. If there is a secret spreadsheet, then we had better see it, because it is not in the published numbers. The published numbers simply do not add up, because the capital gains tax revenue would be used to pay for the other extravagant promises.

But, of course, none of that matters, because no one is taking any notice. Most New Zealanders know what we know: if we want to grow this economy, we need controlled Government spending and sensible taxes that incentivise investment and exports, and we need less debt. The other package is higher Government spending, more new taxes, and a lot more debt. Well, that will grow something; it will grow the Government. That is what it will do—it will grow the Government. That is what Labour always does. That is what Labour did the whole time it was in Government. But, you see, the New Zealand public knows that that was the problem, not the solution. The solution to our economy is not a bigger Government taxing more, spending more, and borrowing more for the kind of useless projects that Labour specialised in. The solution is about the Government taxing less, spending less, borrowing less, and helping the rest of the country to grow the economy rather than using the rest of the country to grow the Government. Until Labour members get up and apologise to the public for those policies, and until they agree that the public was right to throw them out, no one will listen.

💬 Peseta Sam Lotu-Iiga: Shane agrees.

Shane agrees—of course he agrees! He is just waiting until the Labour front bench fails yet again to grasp the basic political truths that until Labour apologises, and until it figures out how to reconnect with the new, aspirational New Zealand and not an old, dependent New Zealand, then Labour will not get anywhere.

That is what is so sensible about these estimates. The Opposition might not understand what they are about, but New Zealand does. Rob Muldoon once said that New Zealanders would not understand a deficit if they tripped over it. He was wrong—and not just on that, I might say. He was wrong, because New Zealanders do understand what is needed in this economy, and they will get an opportunity in a few months to make a choice about whether to vote for the fact that they are right, or that they are wrong and the Opposition is right. I am picking that they will probably back themselves.

The Hon Bill English’s problem is that he has painted himself into a corner. He has ruled out a land tax and he has ruled out a capital gains tax, yet he has written a Budget that by his own projections has New Zealand returning to a current account deficit of over 6 percent, a current account deficit that grows every year from here on, and a current account deficit being funded by increasing foreign debt for New Zealand every year.

Mr English’s own Budget projection shows that if he and his allies in the National Party are re-elected for another term, then, at the end of 6 years of their Government, New Zealand gets poorer, then the next year New Zealand gets poorer, and then the next year after that New Zealanders get poorer still, because the structural problems that bedevil the New Zealand economy have not been solved by the Government’s tinkering. It has done nothing substantial. It has not pulled the levers that need to be pulled to redirect into the productive sector the precious investment capital that is currently going into the speculative sector at the expense of the productive export sector.

Craig Elliffe is a former partner of Chapman Tripp, a former tax partner of KPMG, and now an academic and a successful businessman in his own right. He says that we need a capital gains tax because “To the extent to which you have tax policies that are distortionary on the economic levers and contributors to society,” it is wrong. He asks “how sensible is it to have property investment four or five times the size of the sharemarket producing no tax revenue.” That is one of the comments.

We have had another comment from the Herald on Sunday, criticising National at the same time as saying that we were right to be looking at a capital gains tax. The editorial states: “apart from borrowing money and talking up a questionable programme of asset sales, National is showing no signs of a plan to get us out of the mess we’re in.” It is right. The Dominion Post has said something similar. The National Business Review has said that there is a need to have a tax on capital.

The Manufacturers and Exporters Association says “the eradication of the capital gains tax harbour will help to lift productive investment. A more balanced tax system will see investment flow to the most intrinsically profitable areas of the economy, rather than those that are tax advantaged.” The Productive Economy Council says something similar: “A Capital Gains Tax sends the right signals for investors and means those choosing to take the path of unproductive property investment will have to pay their fair share of tax. While fairness in tax is good the real long term benefit is the chance to get more of our limited capital invested in making New Zealand more, not less, competitive.”

We have heard others like Gareth Morgan say something similar. National is on the wrong side of this argument and it should admit it. The Government has $48 million in these estimates going towards policy advice from Treasury. What did Treasury say after the last time the Government spent $48 million? It said introduce a capital gains tax to make the economy stronger, as well as to make the tax system fairer.

I will deal with Mr English’s assertion of tax and spend. We always knew National members would come back to their original mantra. Tax and spend is the accusation they make against us. The problem is that they are wrong. It is not true. They say that our revenue projections are wrong. Well, our revenue projections are all out there, and the only one that has taken a flick at them other than Mr English is his colleague Mr Joyce, and it has not cut through because the biggest line item is the revenue from the capital gains tax.

Treasury’s estimate of the long-term revenue from a capital gains tax excluding the family home was $4.8 billion per annum. We remodelled that through our consultants, Business and Economic Research Ltd, and they cut that back by $2 billion per annum at the maturity of the scheme. So it is raising $2.8 billion per annum once it is a mature scheme, rather than $4.8 billion. The sensitivities in the Business and Economic Research Ltd analysis show that it could be $1 billion per annum more than that, but we have taken the conservative course and assumed the lower figure.

The new progressive top tax rate raises money; so does the loss ring-fencing; so do other anti-avoidance measures; so does a moderate amount of revenue from the agricultural sector from emission trading scheme revenues. This allows us to fund the tax-free zone that David Cunliffe has already indicated—the first $5,000 of income will be tax-free for every person. That is whether one is on a low income or a high income, and whether one is a superannuitant or someone in paid work. In addition, GST comes off fresh fruit and vegetables and there is a research and development tax credit that is funded.

These measures are all properly costed. The Government’s claims to the contrary are not credible. They are not credible. Over the period shown in our table—which has been publicly released, despite Mr English’s comments intended to misrepresent it—our package will reduce debt by $7.7 billion more than the Government would. In other words, our debt track is better than the Government’s debt track. Are people surprised by that? Well, they should not be. They should not be, because when we were last in Government we reduced Government debt.

When Labour was in Government we reduced net Government debt to zero. We reduced gross Government debt to 17 percent. We did it every time, with the National Opposition at the time opposing the Budget surpluses that did it. National members said: “Give tax cuts.” Well, we are now in a $16.7 billion deficit this year as a consequence, in part, of Mr English’s inability to properly cost his income tax package.

Mr English’s prior income tax cuts resulted in an increase of the New Zealand deficit of over $1 billion. Over $1 billion over that period was paid out over 4 years of tax cuts, in addition to the revenue that was collected from the switch. So he has created a fiscal hole. He has also done nothing to cure the underlying imbalances in our economy, which are caused, in part, by the signal that people get. They make additional returns from their rental investment because of the tax bias in favour of residential property. There is $200 billion of investment and very little tax is paid from that area. That is why Treasury favours this change, that is why the IMF favours it, that is why the OECD favours it, and that is why Australia has it.

The Prime Minister has said that a capital gains tax would put a dagger through the heart of the economy. Since the Australian economy has had a capital gains tax, the value of its sharemarket has increased seventeen-fold. Over the same period New Zealand’s sharemarket has increased in value three-fold.

Far from it putting a dagger through the heart of the economy, it is one of the things that we need in order to get that precious investment capital going into the right sectors of the economy, so that we can grow our exports. Instead of the parlous future that the National Government has planned for us—where our net investment position goes to negative 85 percent of GDP by about 2015, right down there towards Greece, Portugal, Hungary, and Iceland—New Zealand would go in the opposite direction, because we would have investment in jobs and investment in the productive export sector. We would start earning our way in the world. That is why the Government is on the wrong side of this debate.

Mr English should just accept that his Treasury officials are right and that his Reserve Bank officials are right. One of the reasons that they like it is that over time it leads to lower interest rates, to the benefit of not just the export sector but everyone in New Zealand who has a mortgage. They get lower interest rates if there is a capital gains tax. The Savings Working Group, which the Government set up, told it that half of the last property bubble would have been avoided if we had had a capital gains tax. It would have meant that the Reserve Bank did not have to pull as hard on the interest rate lever to curb inflation. We would have lower rates of inflation, there would be less pressure on the exchange rate, and therefore, again, our exporters would benefit, as would the people who work in those industries.

Instead we have Mr Foss and the other Neanderthals on the economic front in National saying that Labour is on the wrong side of this debate, when we are with every OECD country other than Turkey and Switzerland—Switzerland being a tax haven.

It is a great pleasure to take a call tonight on Vote Finance in this year’s estimates debate. I reflect on the fact that for the last couple of weeks now the world has been absolutely gripped watching what can happen when a country’s debt gets out of control. For the first time, the big-spending economy of the US has started to realise that if it just keeps spending and spending and having its cake and eating it too, eventually it has to pay the piper—eventually it has to pay the piper. The most important thing New Zealand has to do to guarantee our prosperity is to get our debt and our spending under control. We cannot afford to have the biggest chunk of hard-working New Zealand taxpayers’ money funding debt servicing to international money lenders. That would be the single biggest threat to the prosperity of every family in New Zealand. That is why this Government has spent the past 3 years getting rid of the economic chaos that the Labour Government left us.

Let us look at it. When Michael Cullen opened the books in 2008 he announced that his legacy to the people of New Zealand was never-ending deficits—never-ending deficits. The Labour Government put this country into effective recession 4 years before the rest of the world. It presided over the all but death of the manufacturing and export sector. The fact that that Government drove the real New Zealand economy to the brink of collapse means we are now in the position we are. They bloated the Public Service. The only thing they know how to do is to take money out of people’s pockets and spend it on growing Government, increasing handouts, and increasing welfare. Borrowing, spending; borrowing, spending—that is all they know. They have gone back to core principles.

But this Government understands that the best thing we can do is to get a handle on Government spending and support the real, productive tradable sector to lead New Zealand out of this mire. We are seeing that—we are seeing that. Over the last 3 years we have seen the plan of Minister English and Prime Minister Key lead this country back into growth. The economy, in the worst of times, is now showing real signs of recovery. We have growth forecasts of 3 percent per annum for the next 4 years, and 170,000 new jobs, thanks to the economic management of this Government. We are seeing that in the worst of economic times and amidst having to pay for the Christchurch earthquake—we are paying $8.8 billion for Christchurch; that money is in the bank, it is funded. We are growing the economy, we are getting better services out of our public sector, we are providing better outcomes for New Zealand, we are letting New Zealanders keep their money, and we are incentivising hard work. We are not incentivising people to sit with their hands out, and we are not incentivising the Government sector to grow. We are saying to people that if they are working, we are behind them; if they are aspirational for their future, we are backing them. We will encourage savings, we will encourage business, we will encourage growth, and we will get debt under control.

We have turned the never-ending deficits of Michael Cullen and the Labour Government into a return to surplus in 3 years—even after paying for Christchurch, and even after the worst economic conditions that the world has ever seen. Our tax changes were a significant part of that. We changed the incentive away from the debt-fuelled consumption orgy that Labour presided over and returned it to incentivising production, savings, and investment. In a very simple sense, that is why New Zealanders know that National is the party to manage the economy, that is why they are backing John Key, and that is why they do not want to hear a bar from Messrs Cunliffe, Parker, and Goff. They know that National is the party that will provide them with growth and prosperity, and that will build them a brighter future. They know that all they can expect from Labour is tax, borrow, and spend. I think Labour must be the only political party in the world that can come up with a whole new tax that puts us further in debt. How does one do that? How does one have a new tax that puts us more in debt? It is unbelievable.

The CHAIRPERSON (H V Ross Robertson): I am sorry to interrupt the honourable member. I say to members on my left that I refer to Speakers’ ruling 61/5 of Speaker Barnard and Speaker Statham. I say that Ms Adams is making a hard-hitting speech and some interjections can be expected, but not so many as to drown out a speaker. The Chairman will not allow that.

Thank you, Mr Chairman. Of course, the facts speak for themselves. The New Zealand public knows it has a choice between sensible, prudent economic management that will grow the productive sector, provide jobs, raise incomes, and give them the brighter future they deserve, and the tax and spend policies of Labour.

If there was ever an example of a situation where volume and mock rage were inversely related to content, we have seen it from that member from the South Island, Amy Adams. We had a contribution from someone who chaired the Finance and Expenditure Committee prior to joining the racing industry, where he has been gelded and is devoid now of intellectual content. I think that he ought to come back to the Finance and Expenditure Committee and improve the current quality of its chairperson’s skills, as revealed by what was a very tawdry speech.

What we are talking about here is an ideological tract. Come the end of the year Kiwis have a very clear choice: more poverty, more unemployment, ongoing suffering, wretched lifestyles, the urban poor and the rural poor, and a tidy, very handsome caste of economic beneficiaries, otherwise known as the confrères from overseas, the merchant banking community, who will be the primary beneficiaries of the asset privatisation exercise. The vast bulk of young New Zealand families are trying to go to Australia, because their circumstances are worsening day after day—ask the schoolteachers. Let National members ask Fonterra why it has to provide more and more food for free breakfasts in decile 1 schools, and then come back and tell this Committee and tell Kiwis that we are on the upward slope. No, that is not what the major corporates are saying. They are digging into their own pockets, and so they should; after all, they have been handsomely rewarded by the disproportionately unfair polices of the current Government to the vast majority of Kiwis. I tell Mr English to ask those Kiwis.

At the end of the year the asset sales give-away is a brilliant public policy debate for us to have. I accept that on the other side the National members genuinely believe that by privatising part of these assets, we will open up a new array of investment opportunities. But I ask who the beneficiaries of these investment opportunities will be. Those members are trying every trick in the book. Of course, Treasury has unravelled their key argument. Treasury has said there cannot be a successful privatisation unless there is substantial investment from overseas. Yet those members are going back into their own communities and quietly telling Kiwis that this is a good idea, and that they will enjoy some sort of Thatcher-like psychic experience—that we will suddenly become a prosperous shareholding democracy. The tiny number of Kiwis who will have that opportunity—once again, the disproportionate beneficiaries of the wretched tax give-away that Mr English introduced several years ago—just shows that Kiwis, as a consequence of the paucity of our own savings, do not want to acquiesce. They do not want to see the current Government preside over the dilution of the slender wealth that we still have left in our country. That is why that is a brilliant issue to fight this election on.

There is the predictable misinformation as to our tax reform policy. The key point is that the average Kiwi will be $100 better off per week as a consequence of these policies. Kiwis will respond to that type of incentive. They will not respond to the puffery. They will not respond to the rhetoric from the Prime Minister and his friends in their increasingly expensive cars when they drive past and see the bleak, broken windows in the tangata whenua part of town and in the Pasifika part of town, and see the vast majority of Kiwis who are heading towards “Strugglers’ Gully”. Somehow that statement of accuracy is regarded as non-aspirational and non-patriotic. There are members who are in charge of their offices and are close to the communities they purport to represent, but that does not, unfortunately, include Mr Bennett. He is where he belongs, but that is another matter. We knew at the beginning of this debate that we would come under some fairly significant attacks, but the facts are clear: as a consequence of this tax reform package, $100 per week and a host of other initiatives would go into the pockets of Kiwis. I desire to ensure that there is money available in the kitty for families to deal with the issues regarding their children.

But families are telling us that this Budget has failed the thousands of—and, indeed, in my case, 16,000—young Māori. Thirty percent of Māori between the ages of 15 and 25 are unemployed, with no opportunity to go on with any meaningful training. Those are the issues that will motivate Kiwis at the end of the year, not all the hollow, empty promises that will benefit a narrow caste of economic beneficiaries.

It is good to speak on Vote Finance. For those listening, that was Shane Jones. Shane is the Labour Party—

The CHAIRPERSON (H V Ross Robertson): The member will refer to the member by his full name or his title.

Mr Jones is the Labour spokesperson on finance at this point in time. When he gets into trouble he always goes on about the vulnerable people—that is Labour Party rhetoric. It tries to build fear into people. It will not actually give them inspiration, or give them aspiration; it tries to put people down and to create fear tactics. That is Labour Party policy, that is how it has always been, and that is how it always will be. The public have moved on from that; the public have moved on. They want aspiration, and they want to know what the future is. They do not want to be put down by the Labour Party, they do not want to be seen as being vulnerable, and the last thing they need is people like Shane Jones telling them what should be done for their lives going forward.

Let us look at what Labour did for this economy when it was in Government. Labour created a recession before the rest of the world; it put New Zealand into recession at that time. It put the wrong incentives into our economy. The tradable sector was not growing and the economy was going downhill big time. What did Labour also do? It made a variety of promises just to win votes, promises that were for policies that now New Zealanders are paying for—policies that did not deliver economic results and did not deliver the social cohesion and delivery of services that New Zealanders would have wanted. All Labour did was to create a situation of more debt, more Government, and less economic growth.

Let us compare that with what has happened under the National Government in just 2½ years. In the most difficult of times, in a recession, in a time when we have had to rebuild Christchurch, what have we delivered for this country? We have delivered low interest rates. Interest rates have been some of the lowest, so that people can go out there and make investment decisions, grow businesses, buy houses, and do what they need to do to have a home for their families. There are good growth rates coming through this year—growth rates in the first quarter are beyond expectation—and we are looking at good growth rates over the next few quarters going into next year. That is a very, very strong position for an economy in these most difficult of times.

We have balanced the need to have major infrastructural investment. We can see that in the broadband investment, the roading investment, and the Transpower investment. We are building the infrastructure of New Zealand so that we can grow the economy. We have rebuilt Christchurch with a plan that will go out there and deliver a stronger, more successful city going forward. We have changed the tax incentives so people know that they need to get a good education and work hard, and that they will get some rewards for that—and then they will invest that money through their savings in the economy, further grow the economy, and produce even more economic growth.

That is the game plan, and it is a game plan that has worked in 2½ years of the toughest economic times. It is a game plan that is ready to deliver New Zealanders strong economic growth going forward, and the future prosperity that they all deserve and seek. The public understand that game plan, and they support it. They want that game plan, and they will get it at the coming election. If we compare that with Labour’s game plan we see that Labour’s game plan is to borrow more money and put the country in more debt. Labour is not worried about repaying debt within a short period of time. It is not worried about getting the New Zealand economy in a position where it can grow and deliver things. It wants to borrow more and more and more. That is what the Labour Party wants to do. What does the Labour Party also want to do? Tax you more, tax you more, and tax you more.

The CHAIRPERSON (H V Ross Robertson): Order!

Labour wants to borrow more and tax more. That is its plan. It is a great plan, is it not? One can see how it will work. What will it do? Interest rates will go up. What will that do to economic growth? It will kill economic growth. What happens if we tax our people more, through higher tax rates, which is what Labour is looking at with the capital gains tax? It will kill economic growth. There is no incentive for New Zealanders to go out there and build a stronger economy.

Labour’s plan is to borrow more. That will lead to higher interest rates and less economic growth. Labour’s plan is to tax more, and that will lead to less growth and less potential for the New Zealand economy. What else does Labour want to do? It wants to have a bigger Government—a bigger Government that knows more and can spend more, and do it in a way that it agrees with.

We have just been lectured on debt and taxation by two South Island farmers and one Waikato dairy farmer. The farming sector of the National Party is running economic policy—the farming sector of the National Party is running economic policy—and, boy, do these guys know about debt. The farming sector has $40 billion worth of debt. The farming sector has about one-third of New Zealand’s total debt, and those members are lecturing us about debt. How rich is that?

Let us not talk about taxes; let us not talk about taxes. I say to Mr English, I say to Mrs Adams, and I say to Mr Bennett: get off the farm and go and talk to some real people. I tell them to go and talk to some real New Zealanders who do not have a farm that they can go back to. Mr English talked about numbers that did not add up. That is pretty rich from this finance Minister. When the Inland Revenue Department, the Government’s tax collecting agency, came in with figures that were $4 billion less than Treasury’s figures—$4 billion less in revenue than Treasury’s figures—who did he go with? He went with Treasury’s figures. But, then again, he did not go with Treasury advice when it wanted a capital gains tax—and he has the nerve to criticise.

This year the people of New Zealand have a very clear choice: they can sell State assets—assets built over generations of sweat, toil, tears, and taxpayer money—or they can have a reform of the tax system and keep our State assets. Mr Bennett, Mrs Adams, and Mr English are all farmers and do not want a reform of our tax system. They would rather sell State assets and keep a tax system that is unfair. All and sundry agree that tax reform is necessary; a tax reform that will bring us into alignment with 90 percent of countries in the OECD. This is tax reform for the sake of fairness, to reduce inequality.

I quote from an article by Anthony Hubbard in the Sunday Star-Times. He said: “The National-led government finds no great problem with inequality. If it did, its policies would be different.” A far better approach is that of Warren Buffett, the richest of them all. He asked to pay more taxes, not less. This is partly just a question of fairness—that word fairness. Warren Buffett, the second-richest man in the world, says “If you’re in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent.” It is also a matter of enlightened self-interest. He knew that in the long run he and his class would benefit from living in a fairer society. The rich do better when everyone does better.

There is no doubt that borrowing $380 million a week is not sustainable. A $17 billion Government deficit is not sustainable, but selling State assets is not a plan. Selling State assets is not the way forward. It will not allow us to own our own future. The only way forward is to have fair tax reform, where everyone pays their fair share, and where all New Zealanders get to keep their State assets.

This tax will affect only about 8 percent of New Zealanders, so 92 percent of New Zealanders, who are currently paying their fair share, will not be affected. They will not be affected, so why are there cries of inequality? Only 8 percent will be affected. This tax will be paid only on income—not on the family home, not on personal assets, but only on income. That is fair. Let me give an example. If someone earns a salary of $50,000 that person pays $8,000 in tax. But if the person has a capital gain of $50,000, they pay no tax.

Vote agreed to.

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