Taxation (Budget Measures) Bill

on behalf of the Minister of Finance: I move, That the Taxation (Budget Measures) Bill be now read a first time. The year 2012 is going to hold challenges, with economic uncertainty ahead, and the Budget announced this afternoon is one, therefore, aimed at returning the New Zealand economy to surplus. A key to that is getting the Government’s finances in order, getting debt under control, and reducing our overreliance on foreign debt. To continue to provide effective public services and functions, it is important that Government spending continues to be financed through efficient taxes that are as fair and efficient as possible. It is also important that the Government makes prudent choices about where and how it spends taxpayers’ funds. The measures contained in this bill, therefore, continue the Government’s focus on improving fairness in the tax system by ensuring that the tax burden is shared fairly, and on removing unjustifiable spending. This bill will repeal the tax credits for income under $9,880 and the tax credit for childcare and housekeeper expenditure. It will replace the tax credit for the active income of children with a limited tax exemption. It will legislate a change made in March this year to the livestock valuation election rules, and will repeal the student loan voluntary repayment bonus.

In Budget 2011 the Government announced its intention to review the rules for livestock valuation elections and the tax treatment of assets that are used for both business and private use. With regard to livestock valuations, the previous rules were too loose, and allowed some farmers switching between the two main livestock valuation methods to receive an unfair tax advantage over those farmers who applied the rules as they were intended. In March the Government moved to disallow elections to exit from the herd scheme except in narrow circumstances, effective to elections made from 18 August 2011. This bill will put that change into law, with the supporting detail to be included in legislation later this year.

This bill will also abolish three outdated tax credits that are expensive and, frankly, unjustifiable. These are the credit for income under $9,880, the tax credit for childcare and housekeeper expenditure, and the tax credit for the active income of children. The tax credit for the active income of children is being replaced with a limited tax exemption. That credit will ensure that children will not need to file a tax return if they have small amounts of income that are not taxed at source—for example, from mowing their neighbour’s lawn. Transitional rules have been developed for people who are claiming one of these tax credits in the current year through the PAYE system. The transitional rules will provide employers with time to update their payroll systems.

I described the tax credits as outdated; let me illustrate what I mean. When the tax credit for income under $9,880 was introduced it was aimed at people on a full-time salary of less than $10,000 per annum. Times and salaries have moved on significantly from that time, and the tax credit no longer applies to the group it was originally established to support. Similarly, the child tax credit was a transitional measure introduced by Sir Robert Muldoon in 1978, in an era when most employers did not deduct tax at source. Now they do, so that credit has similarly become outdated.

I mention also in this context the housekeeper tax credit, which dates from 1933, in a time of completely different social practices to those that prevail today. I also mentioned earlier the need to focus on prudent spending, and the Budget this afternoon contained measures that are designed to improve the quality of the Government’s investment in the student loan scheme. This bill will repeal the voluntary repayment bonus. The Government continues to focus on encouraging student loan borrowers to pay their loans back. However, the repayment bonus does not seem to be improving the value of the scheme, and it has failed to achieve the policy objective of encouraging repayment from borrowers who were slow to repay in the first instance. Instead it appears that what has been happening has been that the people claiming the bonus are borrowers already repaying their loans anyway. More alarmingly, there is evidence that the bonus was actually encouraging some students to borrow when they did not need to. In 2011 alone, some 2,611 borrowers repaid their loans in the same year that they borrowed them, receiving $1.8 million in bonuses from approximately $13 million of annual bonus payments. This has resulted in a cost to the Government, one which is clearly unnecessary. The $44.6 million being released by repealing the bonus will be able to be better used on other priorities.

Like the tax credits I have mentioned, the bonus scheme has also been overtaken by events, and the Government has since introduced a number of initiatives to increase student loan repayments. Overall, the measures that I have outlined so far will make the tax system fairer; they will also raise additional revenue. These measures and this bill are a measured and judicious response to the difficult challenges facing the country today. It is a prudent set of responses enabling us to move forward, and I commend the bill to the House.

This Budget has already been termed by some of the commentators as a drab Budget without any really pro-growth agenda. This Budget legislation, the first piece of Budget legislation that the Government is passing under urgency, is illustrative of how little of substance there is in this Budget. The Taxation (Budget Measures) Bill runs to nine pages. Although it is dropped on us under urgency without any forewarning, in the 5 minutes that I have had to study it, it is abundantly clear it is not a substantial piece of legislation that is going to affect the future growth prospects of our country, because it does not deal with the difficult issues.

There are three parts to this legislation. The first part deals with, as the Minister has said, removing some tax credits. I think we have already heard the phrase that this Budget picks the pockets of paper deliverers. It picks the pockets—

💬 Hon Trevor Mallard: Who said that?

I think it was Trevor Mallard who said that first. It was a very good characterisation of this Budget—picking the pockets of paper girls and paper boys up and down the country, and ignoring the big issues that this country faces.

Now why do I criticise the fact that the Taxation (Budget Measures) Bill does not have more substantial measures in it? Well, the reality is that the Government’s own forecasts show that under current settings it has had to downgrade its growth forecast. Not only have we already had the lowest growth under any Government in the last 50 years for the period that this Government has been in office so far but also for this coming year it has downgraded the growth forecast from 4 percent to 3 percent, and for the following year it has downgraded it even more, to 2.6 percent. We have got lower growth than was previously projected. We have got lower employment growth than was previously projected, which has gone down from 170,000 new jobs to 154,000 new jobs over a 4-year period. So the growth in our economy is not as good as was previously predicted.

In addition to that, we have got rising net international indebtedness, and the sorts of measures that are needed to address that are a lot more substantial than those that are in this taxation bill. The Government’s own Budget figures show that the current account balance gets worse every year from here. So under the current tax settings in this economy, our current account deficit goes from negative 3.6 percent of GDP this year to negative 6.7 percent of GDP in 2016, and it is negative every year in between. The current account deficit gets worse every year. What does that mean? That means that every year New Zealand has to sell more assets and borrow more money from overseas to bridge the gap. Even after the Government limps back into surplus in the Government’s books, it will not have dealt with the structural imbalances in our economy.

What does that mean in terms of New Zealand’s net investment liabilities in the world? What we owe to the rest of the world grows and our net investment position goes backwards, so that by 2016 New Zealand’s net international indebtedness, our net international liabilities, increase to 80 percent of GDP—80.1 percent. That totals an astounding $205 billion—$205 billion—of net international liabilities by then, which is up from where it is currently, this year, at $134 billion. That is just about all private debt; it is not Government debt. It is because we do not earn enough from our exports to pay for the cost of our imports and our interest. And what does this Budget show? It shows that getting worse, not better.

In terms of the pretty miserable GDP growth that we have got in this Budget, just about all of it comes from residential investment. The great majority of it comes from residential investment, rather than from investment in our export economy and growth in exports. In fact, our growth in exports is miserable. We heard the Prime Minister today reading a speech that had been prepared some days ago, saying that exports were up on the very day that Statistics New Zealand said that exports are down by about $700 million compared with last year. No wonder this bill from the Government is so narrow in its focus.

There are some measures in it that we agree with. In fact, I was one of the ones, with Stuart Nash, who called for overhauling the rort that we had in the agricultural system, whereby you could change from revenue account to capital account for your capital livestock. What farmers could do was—if dairy prices were going up and they had 1,000 cows, and those 1,000 cows were going to increase in value by $200 each, that would be a $200,000 increase in their assets. If it looked like the cows were going up in value, they could elect early enough to put it on capital account, and they would pay no tax on that increase in value. But if it was going the other way, and dairy prices were going down, there could be a $200,000 decrease in the value of their livestock. They could put it on revenue account, claim a tax deduction, and reduce their taxable income. That was a real rort. We called for its overhaul. We are glad to see that is being fixed up.

We also agree with changes to abolish the 10 percent bonus on early student loan repayments. We opposed that when it was brought in, because we knew it would not work. This is the Government reversing one of its own measures from one of its recent Budgets. The measure was so silly that 3 years or 2 years later the Government is having to repeal it, because it did not work. The Government created a 10 percent bonus for early repayments, and the only thing it found was that it was not getting any extra repayments. So it gave away the 10 percent voluntary repayment bonus for no increase in overall voluntary repayments. It is that sort of mismanagement of the economy that means that this Government is not growing the economy in the way it should. [Interruption] That is right. If we had performance pay in these ministries and on the part of the Government, then there would be a fair number of its Ministers who would be having a drop in salary. They would be earning less than backbenchers in Labour, because they are not as good as we are on this side. They will not do that for themselves, even though they are enforcing it upon the teaching profession.

This Budget is a “no-growth in exports” Budget. The export profile going forward is flat. As a consequence, the current account deficit goes up and the New Zealand deficit goes up. Debt goes up, and we have to sell more assets as well as borrow more money to meet that gap.

The fiddling around with the tax credits that were previously available to some low-income people is necessary, partly because the Government’s income tax cuts in prior Budgets spent $2.5 billion per annum in respect of income tax cuts to the top 10 percent of income earners. I think that 40 percent—was it, Mr Cunliffe—of the income tax cuts in that Budget went to the top 10 percent, and, as a consequence of the pressure that that has put on the Government’s finances, it is now having to take away the small amount of tax break that a person doing a paper round used to get.

This Taxation (Budget Measures) Bill will do nothing to stop the flow of people to Australia. Indeed, the Budget documents themselves show that New Zealand’s changes in population and labour force assume that a large number of people will continue to head to Australia for the next 2 or 3 years. They assume that we are going to be losing a large number of people. As David Shearer said today, it was somewhat ironic to have the Prime Minister, before he was elected, saying that if he was elected he was going to stop the equivalent of a Westpac Stadium crowd going to Australia every year. And now, of course, he would have to make that same speech and substitute Eden Park with some extra seats, because that is the number of people who are leaving. More than 1,000 a week are going to—

💬 Hon Trevor Mallard: The stands—the temporary stands.

What is that?

💬 Hon Trevor Mallard: You’d have to bring back the temporary stands.

Bring back the temporary stands—yeah, that is right. The ones that they had up at the Rugby World Cup would have to be rolled out so that the stadium in Auckland could fit in enough people to represent the number of people who are going to Australia in a year—now more than 1,000 people a week.

This Budget has lower growth forecasts, lower employment growth forecasts, higher external debt rising to over $200 billion, and a $70 billion increase in external liabilities—net international liabilities—over the next 5 years. This is a very, very narrow bill, which does not do anything to cure the fundamental problems in the New Zealand economy.

It is my honour and pleasure to stand and talk about this Taxation (Budget Measures) Bill. Today has been a historic day. It has been a historic day because we have seen clearly in this House the difference between true leadership, in John Key, the Prime Minister, and a make-believe pretender, in David Shearer. When the two leaders spoke today we saw the reactions from the respective benches. The reactions were of positivity, clapping, and handshakes from the National benches. We looked across at the Labour benches and we saw a lot of planning and backstabbing, because we do not know who the leader is today.

But it was about John Key’s leadership in managing the finances. This is a responsible Budget. It is a Budget that will put New Zealand back on the track to recovery. It is a Budget that will get us to surplus by 2014-15. It is also a Budget that smoothes out the rough edges of the recession, protecting the vulnerable by investing funds in both health and education, as well as in science spending. It is also about creating jobs, because the only way we will get out of the economic mess that we inherited from Labour is by creating jobs. There have been in the last 2 years 60,000 net new jobs, and we estimate that in the next 4 years 154,000 will be created.

I would like to also acknowledge the work of the Hon Bill English. Bill English has shown a plan in his fourth Budget. In his first Budget he spoke about the road to recovery. He spoke about the mess that we inherited from Labour and what we would do about it. In his second Budget he talked about building recovery. He talked about the tax switch, which was fairer to all New Zealanders, put more money into New Zealanders back pockets, and put a lot more trust and confidence into New Zealanders. Last year the Budget, despite it being an election year, was built on building our future, and it was a responsible, balanced Budget. But this year we talk about investing in our future. And what does investing in our future look like? Well, it looks like increasing spending on science and innovation, because we, the National Government, are about building a more productive and competitive economy.

The Prime Minister also talked about the Future Investment Fund and how those proceeds will go towards modernising schools and building roads of national significance—which I know that the Hon Gerry Brownlee will be happy about. It will also be about hospital redevelopments. The investment of $4.42 billion in new spending is focused on front-line public services. So we know that health and education will get more spending. We know that law and order is part of National’s focus in terms of getting the crime statistics down. I also know intimately, as chairman of the Social Services Committee, the welfare reforms that we are putting in place. And we cannot forget about rebuilding Christchurch. Christchurch may have the best rugby team in New Zealand, but it also requires assistance from the Government and from all New Zealanders.

What does the increase in the science and innovation fund look like? Well, it is $1.3 billion a year—[Interruption] That is right, Simon O’Connor, the member for Tāmaki; it is $1.3 billion every year right through to 2015-16. I acknowledge Minister Joyce for creating a superministry that will be the engine room and the catalyst for providing the framework and conditions for us to get out of our economic predicament. It is also about $166 million that will be put towards developing a new Advanced Technology Institute. But it is also about $100 million extra to increase the Performance-based Research Fund. I look at members across the aisle there. They do not believe in performance. They do not believe in performance in schools. They do not believe in performance in public services. They just do not care, because their idea of growth in this country is to tax more, to borrow more, to spend more, and to hope a lot more.

The Future Investment Fund is about ultra-fast broadband. We heard from the Hon Bill English that it is about planning for spending on 21st century schools. I know that this is exciting in my electorate of Maungakiekie—from Point England to Onehunga. Kids are thirsting for knowledge, they are thirsting for a breakthrough in technology, and they certainly will welcome the investment that we are going to put into broadband and into our schools.

We have also set some targets. We are the only Government of recent note to set targets: 85 percent of 18-year-olds to have National Certificate of Educational Achievement level 2 or equivalent by the year 2017. That is up from the current rate of 68 percent. Some would call it ambitious, but we would call it aspirational, because we are a Government that believes in aspiration, hope, and expectations. It will help Māori and Pacific audiences, because it is about lifting expectations, lifting achievement, and lifting the quality of teaching in our schools.

We will also be about reducing prisoner reoffending by 25 percent by the year 2017. That is right—25 percent. Recently I visited Pāremoremo jail to check on the programmes.

💬 Hon Trevor Mallard: And they let the member go?

The member for Hutt South might actually get to know Pāremoremo very well, given the court case currently facing him. He could get to know the boys at Parry very, very well—thank you very much, Mr Mallard.

I also want to acknowledge Minister Turia. She has put $6 million into a Pacific Innovation Fund. That will help with services across the various portfolios, whether it be education, health, or justice.

This Budget, as I said at the beginning, builds on the Budgets of 2009, 2010, and 2011. This is a Government with a plan for growth. This is a Government with a plan for employment and opportunities. And this is a Government that is responsibly looking after our finances. I commend this bill to the House. Thank you.

This is an interesting debate on the Taxation (Budget Measures) Bill. I think we have just had a leader—or someone who aspires to be the leader of a party—make a speech pretending that he was a leader speaking on the Appropriation Bill, which was the previous legislation, rather than on the bill that we are currently debating. The member has been here for 4 years now, and I would have thought that at some stage he would know that the leaders speak on the Budget and then we deal with other legislation. He totally missed—

💬 Hon Member: It’s called the Budget measures bill.

It might relate to Budget measures, but there is enough—

💬 Peseta Sam Lotu-Iiga: I’ll take a call.

Well, if the member wants to have a general, wide-ranging debate and keep it going for days, well then I am quite willing to do it. But I am telling the “member for Vodafone” that he should at least read the bill that is being debated, rather than having a very wide-ranging debate on things that do not even come close to it.

💬 Peseta Sam Lotu-Iiga: I raise a point of order, Mr Speaker.

I want to work backwards through the bill and start off with the student loan repeal—

💬 Mr DEPUTY SPEAKER: Order! A point of order has been raised.

💬 Peseta Sam Lotu-Iiga: I raise a point of order, Mr Speaker. I am happy to take that member’s call if he is—

💬 Mr DEPUTY SPEAKER: No, that is not a point of order. The member will sit down.

Thank you very much, Mr Deputy Speaker. I am not going to refer to a point of order, but I did notice that the member could not even get to the bill himself. He could not even get to the bill himself. Maybe Vodafone did not give him the notes. Maybe the deputy chair of the Commerce Committee at the time, who was dealing with regulatory matters, should have thought twice about accepting a trip from Vodafone. Absolutely—

💬 Maggie Barry: So says the scalper!

Sorry? He is a scumbag? I agree with the member.

💬 Maggie Barry: Scalper.

He is a scumbag, says Maggie Barry. I absolutely agree that that was a terrible thing to do, but I am surprised that Maggie Barry said it, to start with.

Let us go back to the repeal of the 10 percent voluntary repayment bonus in respect of student loans. We told the Government this was nuts. We told the Government that this scheme was a sign of absolute educational failure. Anyone who was not in the last 18 months of their repayment period, who did this, was nuts. It would have been an indication that the tertiary education system—at least in the numeracy and accounting area—had failed, because it was better to stick the money in the bank to collect the interest on the money, and to pay it back once someone got close to the end of the loan, rather than use the scheme. We told the Government that. Now, I am told, actually, that there were a few students who used it, and that is a bit sad. But it is an indication of the quality of our tertiary education system. I probably take some responsibility for that, over time. That is sad. But what is also not made clear now is that that actually was doing the Government good. The Government is claiming that it is saving money by abolishing this scheme. But that is actually not true. That is actually not true, because if people were paying the money back early, then in fact the bonus was going to the Government and not to the student. But it was nuts. It should not have been introduced, and Part 3 is something that we will support.

I think it is fair to say that Part 1 of the bill is a bit of a mixture. I think that David Parker made some comments about things that both you, Mr Deputy Speaker, and Mr Speaker, who comes down from up north, know pretty well, and that is that farmers are good at rorting the livestock system. They move their valuations around to take advantage of the tax loopholes that are available. I can see from the wry smile on the face of Mr Deputy Speaker he understands exactly what I mean. It is a loophole that David Parker called for to be closed, at one stage in the past. Members opposite said it was ridiculous at the time and we should not do it. But I am glad to see that someone has learnt something over the years about closing loopholes. On this particular occasion, it will not hurt for this rort to be closed, although there are plenty of others that farmers take advantage of that are still open.

The reason that the Labour Party is voting against this bill is the mean attack on the kids who deliver newspapers around New Zealand. It is a mean attack on the kids who earn under $45 a week, and previously got a tax credit—like a way of saving. Either they get it directly or they could leave it with the Inland Revenue Department and at the end of the year get a tax credit. For some of them it was $50 or $60 a year. Sometimes they got $50 or $60 a year back. That was a good thing and a fair thing. They got all of their tax back, if they earned under $45 a week and they were kids. I want to make it clear that that was earned income. It is not the farmers putting the assets in the kid’s name and the interest being paid to the kid as a way of minimising the parents’ tax. This is earned income. When it is earned income under $45 a week the kids used to get it back and that was fair. What has happened here? Bill English and John Key have put one hand each into the kids’ pockets and taken the money away. They have taken the money away.

The worst thing is they have done it retrospectively. We have had these kids, since 1 April this year, accumulating $1 or $1.50 a week with the Inland Revenue Department, as part of their tax credits, and what is happening? John Key is taking the money off them. That money is theirs and is sitting in the Inland Revenue Department, and this retrospective legislation is retrospectively picking the pockets of the kids who deliver papers. Is it the kids of the members opposite? No, it is the kids of the poorest New Zealanders, who need the money to survive. They thought they were saving up a bit of money with the Inland Revenue Department, but the Government has reached in there and taken that money from them. It is cruel, it is nasty, and it is typical of Tories to pick on poor kids—to pick on poor kids, who need the money. Some of them earn only 20 bucks a week. Their—

💬 Hon Chester Borrows: You’re a bloody bigot. You wouldn’t know what our kids did to earn pocket money.

Sorry?

💬 Hon Chester Borrows: You wouldn’t know what our kids did to earn pocket money. You’re just a bloody bigot.

Mr Deputy Speaker, I think you were just called a bloody bigot.

💬 Mr DEPUTY SPEAKER: Order! I was checking something out in the Standing Orders and I did not hear what was said or the context it was said in, but it certainly sounded unparliamentary. I just caution the House that we will desist from that.

💬 Andrew Williams: I raise a point of order, Mr Speaker. I clearly heard the statement from this point in the House. I was offended by it, and I would like that member to stand, apologise, and withdraw. I was offended by it.

Speaking to the point of order, just to make the Standing Orders clear to the member, the only person who could object to it was the Deputy Speaker, because he was the person who was described as a bloody bigot.

💬 Mr DEPUTY SPEAKER: Order! I have just said it is inappropriate. We will desist from it. As for the context in which it was said, I have to apologise to the House; my attention was somewhere else. Let us move on.

Thank you, Mr Deputy Speaker. I want to make it clear that the people who have little Tory pocket money schemes, where the parents slip their kids the cash, will not be taxed. So the people who go out to work and the kids who go out to work are the ones who will pay tax, and the ones whose parents can afford to give them their allowances will not be taxed.

💬 Andrew Little: It comes out of their trust fund.

It comes out of their trust funds. They do not care where it comes from. We are voting against this legislation because of one rotten area in it.

Speaking briefly to this bill, the Taxation (Budget Measures) Bill, because I do not think it is worth a very long speech, the Greens will also be opposing the bill, on the basis of the elements in it that are punishing hard-working children, which seems a very strange thing for the National Party to be doing, by introducing a scheme that makes it harder for children to go and earn a bit of pocket money. I would have thought that the National Party was of the view that we want to get people into the work ethic early on. So we want to encourage them, but then the Government is introducing a special piece of legislation to punish newspaper boys. It is having a special piece of legislation coming into the House, and there will be millions of dollars spent on it—because you have got all these people sitting around, and they are all going to discuss it—so that we can punish kids who are earning a little bit of pocket money. That seems a very strange thing for the National Party to bring to this House as part of its great tax reforms.

Of course, what is really needed in this bill, the missing pieces of this bill, are the structural transformations in the economy driven by the tax changes. Where is the thing in this bill about introducing a capital gains tax? Why is that not within this bill? If we were talking about making the structural changes in the New Zealand economy so that we can actually move capital into the productive sector, then we would have a bill in front of us, and part of the bill would be that it was introducing a capital gains tax. When you look at the projections that are in the Budget that was just put out, they are for the current account deficit to get worse. Let us be clear: the Budget papers put out today, which form the background to the bill in front of us, were for the current account deficit to get worse over time. The background to the bill that we have in front of us is the Government’s Budget analysis, and it says that as a result of what this Government is doing, the imbalances in our economy will get worse. If it was serious about dealing about the real imbalances in our economy, then surely it would deal with that, and that would be something that would be within this bill.

I mean, to look at it in a larger picture, when this Government came in during 2008, the real economy was in trouble. There was a very large current account deficit and large private sector debt, but the Government books were in excellent shape. During this period of economic crisis the Government has been able to use the fact that there has been a lot of leeway to borrow money on the Government account, so it has borrowed a lot of money on the Government books to buffer the situation we have been through. It had the advantage of that very low Government debt. However, when it is kicked out of office in 2014, we are going to have a situation where not only will the real economy still be in deep trouble—because its projections are that it will still be in deep trouble, with a large current account deficit and the net international investment position getting worse—and in a bad position like the one National inherited, but also there will be no opportunity to buffer it through Government borrowing, because National is borrowing $75 billion.

The big picture that sits behind this Budget is that National is ruining one of the good things it inherited from the Labour Government that came before it, which was that the Government’s debt was very, very low. That has given it the opportunity to buffer the situation that we are in. When National loses office in 2014, not only will the real economy still be in deep trouble because of the huge current account deficit, the huge imbalances in our economy, which Bill English quite rightly identified when he first became finance Minister but has done nothing to fix, according to his own projections in his own Budget. He has done nothing to fix it, but then by 2014 the big buffer that the Government had available to it, which was the ability to borrow money on the Government account, will be gone. Not only will we be left with very large levels of Government debt but also we will have an underperforming economy with huge imbalances. That will be the legacy, based on the projections in the Budget that was presented today, of this Government.

We have a bill in front of us to make some very small changes, in terms of “broadening the tax base”, as I believe Bill English described these things—putting a tax on newspaper deliverers is broadening the tax base these days—when the real thing that we should have been doing to broaden the tax base and to actually make structural reform within the New Zealand economy is not happening. That is the reality of what this Government has done. That is a terrible travesty; that is a missed opportunity. It had the opportunity to actually begin the rebalancing of the New Zealand economy, and it has failed to do it.

One of the things, of course, that the Government talks about a lot is Kiwi mums and dads. Well, I think in the context of this bill we should also talk about Kiwi mums, dads, and kids, because, you know, the Government is putting a tax on children. The Government constantly tells us that Kiwi mums and dads have all of this special cash out there, which they are going to be using to buy shares in the State-owned assets when they are privatised—and children perhaps, as well; I do not know—but the reality for actual, real New Zealand mums and dads is that they are struggling to pay the bills. The reality, because this Government is so wildly out of touch with the real world, is that real Kiwi mums and dads are struggling to pay the bills, so they do not have lots of cash out there that they can use to buy shares in these State-owned enterprises, which they currently own as taxpayers. They are actually struggling to pay the bills, because GST was put up by the Government in order to pay for tax cuts for upper income earners. The reality for real mums and dads is that they have to pay more for their food, because the Government increased GST. Why did it increase GST? In order to pay for tax cuts for the wealthy—for upper income earners. That is a ridiculous fiscal strategy, and it is an offensive fiscal strategy.

The Green Party will not be voting for the bill to tax hard-working kids. We think it is a ridiculous proposal. What we would like to see the Government bring to this House are some actual proposals that will rebalance the economy and make some real reforms, rather than this kind of legislation.

It is my pleasure to take a brief call on the first reading of the Taxation (Budget Measures) Bill. National is focused on building a more competitive and productive economy. This can be achieved only by lifting our economic performance, creating more jobs, boosting incomes of all New Zealanders, and improving living standards.

This bill deals with a very important aspect by removing three tax credits that no longer fit the purpose for which they were set up. First is the income under $9,980 tax credit, second is the childcare and housekeeping tax credit, and third is the tax credit for the active income of children, the latter of which will be replaced by a limited exemption. The changes will save $117 million over the next 4 years. These changes will help modernise the tax system and ensure tax deduction and tax credits are being targeted to the areas they are intended and needed for. I commend this bill to the House.

I rise on behalf of New Zealand First to oppose the Taxation (Budget Measures) Bill. It reminded me today, when I heard about the nickel-and-diming of our paperboys, of a song that was sung back when I was on the stage. I was the Artful Dodger and Fagin sang that famous song: “You’ve got to pick a pocket or two, You’ve got to pick a pocket or two, boys, You’ve got to pick a pocket or two.” I could recall being on the stage back then, and as a young person who delivered newspapers back then, who made money delivering newspapers and delivering the milk on a cold morning in Waipukurau, I could remember those words of Fagin’s. We are reminded of those words today by this incredibly, incredibly austere Budget, which ends up basically going after the young children of New Zealand, because they will not even get a tax credit for the small wages that they make. The babysitter who makes a few extra dollars will not get a tax credit for that.

This is appalling. This means that, basically, this Government has run out of ideas, so much so that it has to start going after the young children of this country who earn a pittance. Why did it not go after the likes of the people who sold TradeMe for $700 million and did not pay a dollar in tax? You can sell TradeMe for $700 million, but the Government does not go after you; it goes after the children of New Zealand.

Why does it look forward 3 years and suggest that it can make only a $197 million surplus in 2014-15, in 3 years? If that was a poll, that would be less than the margin of error. If the Government can come up with only a $197 million surplus in 2014-15 in its Budget, then, basically, it is working within the margin of error. We heard all the promises in 2009-10, we heard the promises in 2010-11, and they were repeated in the House today. All those promises of the two previous Budgets under the Minister of Finance, Bill English, have come to nothing. Most of the promises have been just absolutely not worth the huge piles of paper that they are written on. They are not worth the paper they are written on, because the promises of those last two Budgets have come to nothing. The promises of this Budget will be the same.

We heard today from the Rt Hon Winston Peters, who was in the House with a number of the members here when the “mother of all Budgets” was delivered by Ruth Richardson 20 years ago. The Rt Hon Winston Peters said that this Budget is a repeat all over again of failed measures by the National Government, failed policies going back 20 years. We could call this the “mini-me Budget”. This is the “mini-me Budget”. Bill English was a mini-me back then under Ruth Richardson, in those days. Now mini-me has grown up to be the big mini-me who is delivering the same Budget 20 years later, which basically is another failed Budget.

The Minister of Revenue is trying to net sprats instead of going after the sharks. This is a nickel-and-dime Budget. This is a pathetic Budget that really does bring New Zealand down to the lowest common denominator, maybe putting us just slightly above Greece in terms of our financial capabilities. Instead of this Government going after the big-picture stuff, it is going after the little sprats. I am not surprised to see today the headlines from the papers already, after this Budget. The headline in the online New Zealand Herald this afternoon was that this Budget is “A most forgettable (and dull) Budget”—a most forgettable and dull Budget. Imagine, the biggest newspaper in this country and that is how it describes this Budget. Further, the New Zealand Manufacturers and Exporters Association this afternoon has put out a statement saying that this Budget still needs step change to turn round the economy, and that the “fundamental problems, such as a lack of export growth, have once again gone ignored.” That is from our own New Zealand Manufacturers and Exporters Association. It says the fundamentals are being ignored and, once again, there will be a lack of export growth.

💬 Hon Gerry Brownlee: Who said that?

That is the chief executive of the New Zealand Manufacturers and Exporters Association.

💬 Hon Gerry Brownlee: What’s his name?

You should know his name. You should know his name.

💬 Hon Gerry Brownlee: What is his name?

I have got his name written down here, but I will not get into it. I will arrange an appointment for you to go and see him.

It gets worse. The overseas merchandise trade statistics were released today, and I wonder whether the Minister from Christchurch knows what the figures were that were released today. Does the Minister know?

💬 Hon Gerry Brownlee: They’re all good out of Christchurch.

They were not good. Today the overseas merchandise trade statistics show that exports are down 17 percent on April last year. They are down 17 percent on April last year. That is appalling. This country is dependent on trading our way out of the recession—which keeps getting referred to by the Government—and if we do not export more, this country will continue to slide. To have a 17 percent drop compared with 12 months ago means this Government is not performing. But it is not surprising, because the future growth that the Government sees is in the likes of a conference centre in Auckland—all looking inwards; not looking at the harbour and not looking at the beauty of Mount Eden or the beauty of the Waitematā, but looking inwards at its pokie machines, looking inwards at its 500 pokie machines. That is the Government’s vision for New Zealand—a conference centre. People fly from all over the world to come to beautiful New Zealand to see what is being provided by our Minister of Tourism. Who is he again? Who is our Minister of Tourism? Does anyone know who our Minister of Tourism is?

💬 Le’aufa’amulia Asenati Lole-Taylor: “Spray and Walk Away”.

Oh, “Mr Spray and Walk Away”. I had forgotten. That is right. “Mr Spray and Walk Away” is our Minister of Tourism. People come all the way here, and what do they get? Our economic development package for this country is 500 more pokie machines—500 more. Is it not ironic that those 500 pokie machines are going to be in the very same building that the National Party had its election night party in, the very same building that the National Party had its national conference in, and the very same building that it launched its 2011 election campaign and its 2008 election campaign in? They were launched in the very same building where there are going to be 500 more pokie machines. It is interesting, is it not, that National’s economic development seems to go hand in hand with where it has its conferences. It seems to go very much hand in hand with where it has its conferences. You do just wonder where the strategy is.

So when we see figures today and we are told today that the future hopes are out of Christchurch and it is all going to start, we ask when it is starting. We were down there last month, and it all seems to still be coming down. There is not a lot going up—not a lot going up. There seems to be an awful lot of tradesmen and an awful lot of builders heading off to Australia and other places where they can get work. There is not a lot happening down there—not a lot happening down there.

New Zealand First certainly does not support this Budget. We think this is, again, just like the “mother of all Budgets” in 1991. This is another absolutely hopeless Budget for the New Zealand economy. The New Zealand economy is not going to gain from this. This is not addressing issues such as where the New Zealand dollar is, what we are going to do about the New Zealand dollar being overinflated in terms of its value, how we are going to stimulate exports, how we are going to help grow the export sector, and how we are going to create jobs. This Budget is all about nickel-and-diming. This is all about taking money off the young people of New Zealand. This is about attacking middle-class and poor New Zealand families, and keeping the money in the hands of the rich and the wealthy—keeping the money in the hands of the mates of the National Party, basically. This Budget is about protecting National’s mates and keeping its mates in good pasture, particularly those who go to the likes of gambling halls, who can use the pokie machines, and who have disposable income to go and get involved in all that sort of thing.

What we need to do is have a rethink. We need to have a rethink. At the next election I am sure this country will elect a Government that will start to stimulate the economy, stimulate exports, get alongside the likes of the New Zealand Manufacturers and Exporters Association, and get this economy moving, not one that attacks the children of New Zealand to nickel-and-dime the Budget.

It is with great pleasure that I stand in support of the Taxation (Budget Measures) Bill. I would just like to say that as a 12-year-old I actually did have a paper run.

💬 Hon Simon Bridges: Don’t tell me you were paid under the table.

Well, I have to say that I cannot ever remember submitting a tax return as a 12-year-old paper boy. It never happened, and I cannot remember any of my mates rushing home to fill out their tax returns and get them in either.

This is an old piece of legislation. It is about time we cleaned it up, and we are cleaning it up. I watched something today in the House as a new member of Parliament that I really could not believe. I could not believe the fact that when the co-leader of the Green Party Russel Norman got up and made a speech I actually agreed with something he said.

💬 Hon Members: No!

Yes, I did—I did. When he came out—[Interruption] I know, I know. But when he came out he made a bold statement by saying that National inherited a mess in 2008—National inherited a mess. I looked down at the Labour benches and there was just stony-faced silence. But it was all too good to be true. Mr Norman just came back into the House, and I think the leader of the Labour Party, Mr Shearer, must have called him and said: “Russel, we’re putting strain on the bromance here. You’re going to have get back in there and correct this.” He came back into the House and I listened to him for 5 minutes trying to retract and trying to step away from what he said in his earlier speech.

💬 Catherine Delahunty: You don’t know Russel very well.

I know him well enough to see what I saw. Anyway, I am very happy to stand in support of this bill. It is time that we updated a lot of this old legislation, and this is a very good step in the right direction. Thank you.

This bill, the Taxation (Budget Measures) Bill, carries some real fish-hooks. It is a terrible shame and it is a waste of opportunity, as this whole Budget that we have witnessed today also is. We are spending a couple of million dollars’ worth of parliamentary time tinkering—tinkering—and it is a shocking waste of taxpayers’ money when we are picking the pockets of paper boys and girls around the country because there are no other bright ideas, it seems. This comes from a Government that has already delivered tax cuts, 44 percent of the value of which went to the top 10 percent, and just 2 percent of the value of which went to the bottom 20 percent. That was those 2010 tax cuts. The GST has been cutting in for those on low incomes as well, and we know there are a lot of people around this country who are hurting right now. This Budget brings them no hope—no hope whatsoever. It is tinkering.

We have in this bill the proposal to abolish three tax credits. It is a miserly proposal—a miserly proposal—picking the pockets of the paper boys and paper girls around the country. I too, like the last speaker, Mark Mitchell, was a paper boy in my younger years. I got paid, I think, $2.86 or $3.16 for my deliveries of my first paper, and that was on a contract. On my next delivery round I delivered the Auckland Star, and finally I was promoted to delivering the New Zealand Herald. Those little bits of money enabled me to appreciate the value of earning money, and like many members of this House I have enjoyed many, many jobs since. It also gave me pride in being able to earn that money. I know that National members do not think that is much, and they do not care particularly for the little bits of money that those paper boys and paper girls earn around the country. But to take from them the money that they were getting in a tax credit, that they looked forward to, seems to be nothing but miserly. There is no other word for it.

The next thing we see in this bill is the abolition of elections to leave a herd valuation scheme, and that is a sensible move. It was proposed by the Labour Party and it is delightful to see that it has been taken up. But again, that we need to go into urgency to achieve this change shows how limited the range of options for the Government is in terms of bills to debate.

The final part of that bill deals with punishing students who have worked hard to pay off their loans. The rebate—the encouragement to pay off their loans more quickly—has been removed from these students. We know that lots of students are struggling. I see them in Dunedin all the time. Those students work hard. They study hard. They are eating noodles from bowls. They are making ends meet, and they are doing their best. But this Government seems determined to make it harder for them, and it seems determined to shut more and more students out of education. The Government has frozen the level of the incomes that the parent threshold relates to in order to make sure that fewer and fewer students will qualify for student allowances. Many of these students also go out to work to support themselves through their studies, and they will have to work longer and harder under this Government and will have less time to work hard on their studies to ensure that they are good, contributing taxpayers in the future. This Government seems to have no vision for educating its citizens, for making sure they get the best skills, for encouraging them to do that, and for making sure they can make the most of their opportunities.

We will hear more about the way in which the years of allowance have been taken from these students so they cannot get the longer degrees, so they cannot add the value that they might add to this country. It is going to eliminate a group of students—those who are middle and low-income earners. It is not going to affect the really wealthy ones. It will affect only the low and middle-income earners. It is wasteful—it is wasteful of our talent. We have also seen that the real value of student support is going down. It has been going down. It has been trending down for a long time. The last thing we need is more punishment for students. But that is what we have got here in this bill—that is what we have got.

If I can return to the matter of—

💬 Andrew Little: The kids.

—the kids, that is right—the paper boys and girls. What we find when we look at the regulatory impact statement is something quite astonishing. This attempt to broaden the tax base of New Zealand through pinching money from the kids not only, perhaps, is a little bit of a strange idea to members on this side of the House but also we can see that it is an inefficient idea. I read from the regulatory impact statement: “Generally speaking, the proposed option should not impose any new compliance costs on business.” That is how these things regularly start. But wait. It says further: “However, businesses that employ only school children on very low wages (below $2,340 p.a.) may have to begin withholding PAYE from these employees from 1 April 2013.” This is increasing compliance so that we can take money from kids who earn under $3,000 a year. That is outrageous. If this is the Government’s big idea, it is embarrassing. This is a zero idea. Businesses employing schoolkids earning below $2,340 per annum, those very low wages, may have to begin withholding pay as you earn. That means increased compliance.

We can see that that is not going to be all. There will be other employers in the same situation. We will see it is not only schools that have to go through with this measure. We will find small delivery companies around the country, with other low-paid workers, that will have to ensure that those kids who are doing jobs for them go out there and pay as you earn, and get robbed of their little tax credit.

This is not base-broadening. This is certainly not visionary stuff. We have got an economy that is struggling. There is no doubt about that. We have been buying more than we sell for too long, and this Government seems to have no plan to address it. It is very focused on Government debt. That is a problem that we agree is not too difficult to solve. Labour would have got there in the same time the National Government is planning to get there. But there are bigger issues. We have got this issue with buying more than we are selling. Our exporters need support. We need pro-growth tax policies, not pinching money from paper boys and paper girls.

We have had the idea of pinching money from the paper boys and the paper girls. We have got this tinkering. It resembles the wider Government tax programme, which I am sure we will hear a little bit more of as the year goes through. It is very much in the same line. There is no attempt to wrestle with the bigger issues, such as the capital gains tax that would push money towards the productive sector and the monetary policy that would support our export businesses. If we do not change anything in this area of taxation, nothing will change. New Zealand will continue to limp along, 50,000 people a year will continue to leave for Australia, 50,000 more people a year will end up on the unemployment benefit, and 50,000 more people a year will end up out of work. This is not good enough; it is simply not good enough.

In some of the publicity put out with these changes regarding the tax credits, we see that the childcare and housekeeper tax credit is being removed also. The reason given is that it affects mainly high-decile people. That may be true, and if the data presented in the publicity material, which we have had a very short time to look over, is correct, then there may be some very good reason for amending that. But we also see that at least 20 percent—and, by the look of it, closer to 30 percent—of those families who receive this tax credit are actually from lower-income households. We are going to remove that tax credit from them because it is too hard to do anything different, it seems. It is all about making sure that things are simple, in one sense, yet we are going to increase compliance on schoolkids in the other sense. It makes no sense.

As I draw to a close I want to state again that if we do not change things greater than this in our tax system, we will continue to see those same trends that we have seen up until now. We will continue to see our country borrowing. We will continue to see private debt growing. We will continue to see our citizens buying more than our exporters sell, and we will continue to see exporters struggling in the face of unhelpful policies that the current Government is putting forward. Fifty thousand more people will end up going to Australia every year, 50,000 more people will end up unemployed, and 50,000 more people will end up on benefits. It is not good enough. We need bolder tax policy. This policy is not going to do it.

I rise to speak to the Taxation (Budget Measures) Bill, which is part of a Budget that I absolutely believe is the correct and right Budget for these times. It is our second zero Budget, and it is an effort to lift our economic performance, increase the amount of jobs, and grow this economy. This is something that we understand very well on this side of the House, but is something that does not seem to be at all appreciated by our opponents. The job growth, of course, will be occurring in a place like Christchurch. We have 17,000 alone that are needed quite soon. That is an excellent thing. Also, what is excellent about this bill is that Peter Dunne as the Minister of Revenue has meticulously, as is his wont, gone through all the obsolete, old legislation, looked at our tax carefully, and started to cull and prune to get rid of a whole lot of rubbish. We have heard a whole lot of rubbish from our opponents, who seem to be preoccupied with pick-pocketing, with the strange things—I seem to think that the man who burst into song from New Zealand First was actually admitting to petty larceny in his early days.

💬 Hon Gerry Brownlee: X Factor failure.

Yes, well, indeed, that too. They all seem to sing their way through life. But it is an unedifying spectacle to see this issue taken so lightly.

Much has been made of paper delivery. I myself was a paper delivery person, as was my colleague Mark Mitchell, and many others, including David Clark. Who amongst us ever filed a tax claim? Nobody—because it is not what kids do. So what the Government is doing is carefully looking at getting rid of the nonsense. We cannot get rid of all the nonsense, but what we can do is get rid of the obsolete, outrageous, and silly things so that our tax system becomes modernised and ensures that tax deductions, and tax credits for that matter, are being targeted at the areas where they are needed and intended. So that is something we are approaching with rigour.

Unlike the Opposition, we acknowledge that times have changed, and with those changes wider Government policies have also changed. So when we look at things like paper delivery boys, we look at the fact that the children will certainly not be able to claim that refund of tax that is already being correctly deducted and paid by an employer. So the claim is not needed. These tax credit changes will also be helping to make the Inland Revenue Department much more efficient. I think a lot of people are filing tax returns simply to get these outdated tax credits. This is not needed and is not necessary. Unlike the Opposition, we want to get rid of a lot of this chaff and nonsense, and concentrate on getting the economy back on track, where it belongs.

The student loan scheme is something that has been talked about quite a bit. By repealing the voluntary repayment bonus, we will be saving about $12 million a year. It is well known that we have one of the most generous student loan support systems in the world, and we are committed to interest-free student loans, but we are determined to reduce that write-off. Since we came into Government we have reduced it from 49c in each dollar down to 45c, and we do intend to get it down, over time, to 40c in the dollar. This Budget, the 2012 Budget, the right Budget for the times, will help in that goal.

We are going to require graduates and ex-students to pay off their student loans a little earlier. We are doing them a favour—“Get the monkey off your back early, before you get into mortgages, and kids, and all the rest of it.” We are encouraging them to do the right thing. That is what this Government does all the time, and that is what previous Governments have failed to do—absolutely woefully.

So I commend Peter Dunne for his meticulous work. There were a lot of obsolete elements. We are closing the loopholes regarding livestock. Even the farmers admit that they have been getting away with that one for a long time. So unlike the Opposition, we do understand that we need moderate growth in this economy and that we do need to reform the tax system, and this is an important part of it. Thank you.

The 11th call is a split call.

It is my pleasure to join the great tax debate of 2012, following the Budget. Are we here today to debate the re-gearing of the New Zealand economy, to turn it into a productive economy that will deliver jobs, growth, and a decent income for New Zealanders? No, we are not. Instead, we are here to literally raid the piggy banks of the nation’s youth. We have been told by members opposite that this is just petty cash. Well, this just shows that this is a Government that is out of touch and does not realise what this money means to these kids. The Government is closing the loopholes, and we have got the great euphemism in terms of it trying to crib back this $117 million—it is that the Government is “tightening these tax credits, including the active income from children.” I love the language. So here we have it: part 3 of the great economic strategy; the one that started with a cycleway, then moved on to the “Holiday Highway”, and part 3, ladies and gentlemen, is the paper route. Is this the brighter future that we were promised?

One can only imagine the policy discussion that took place: “It’s time to crack down on these little bludgers. They’re getting away with far too much. They’re not paying their fair share. Get more out of them!”. So there we have it—$117 million clawed back, pinched from the pockets of our kids. The Government needs the income, the members opposite tell us, and what do they need the income for? Well, it is our children who are being pick-pocketed to pay the $120 million tag of flogging off our assets. The Government is clawing back $117 million from the pockets of the children of our nation, but we could be saving that by simply not paying the bill to sell our assets.

Labour opposes this Taxation (Budget Measures) Bill because it is mean-spirited. We oppose it because it just shows that this is a Government that is out of ideas. It is a Government that has no plan to fix the economy. It has no plan to create jobs, and it has no plan to deliver higher incomes. Instead, what it is doing is targeting young people. The Budget is targeting young people, and it is disincentivising them from going on and achieving their potential in tertiary studies and post-graduate studies. The most mean-spirited part of it all is that it is taking back a little bit of an incentive for kids to work. These are the hard-working children of our nation, who are eventually going to get on a jet plane and leave our country, because we are not sending messages of hope, and we are not sending messages that there is a future in New Zealand.

This is a Government that is certainly not delivering a brighter future for any child in New Zealand. This pernicious piece of legislation, which has come before the House this afternoon, is showing the very little value that this Government puts on our nation’s youth. It is not a laughing matter. We have been accused by members opposite of not taking it seriously. We take the abandonment of the children of this nation by members opposite very seriously, and I am proud to stand here and oppose another part of the abandonment of the children of New Zealand in this legislation.

Kia ora, Mr Speaker. Ngā mihi nui ki a koutou. Kia ora. The Budget delivered today has been called all sorts of names: a zero Budget, the nickel-and-dime Budget, the “black” Budget, the boring Budget, and the tinkering Budget. What is clear is that in National’s Budget there is a clear deficit: we have over $8 billion of deficit. But, more important, this Budget has a deficit of vision, a deficit of compassion for our kids—those 200,000 kids growing up in poverty—and a deficit of ideas. I think you can most graphically see that deficit of ideas in the first Budget bill this Government has put to this House, to pass through all stages under urgency: the Taxation (Budget Measures) Bill. All the bill does is pinch the pockets of those hard-working kids, as Megan Woods put it, by removing the $240 tax credit. The bill also removes the failing 10 percent student loan repayment bonus. A deficit of ideas is exactly what we are seeing in this bill.

This country has a huge number of challenges, and many of them were elucidated by the Minister of Finance. We have an $8 billion deficit. We have $75 billion in foreign debt. We have the lowest growth in 50 years. We have huge structural problems, and we have concerning global economic conditions.

Sitting suspended from 6 p.m. to 7.30 p.m.

It is my pleasure to take a call on the Taxation (Budget Measures) Bill. We have had a lot of overblown rhetoric on the other side about what it will or will not do, but, really, it is more a sensible tidying up of the tax system. It is an omnibus bill that deals with three mains areas: the livestock valuation rules, three tax credits that are no longer fit for purpose—removing those—and cancelling the student loan repayment incentive. All up, we estimate that it could bring in an extra $300 million of revenue over 4 years, and that is not an inconsiderable sum. It is not going to change the world, but it will build on the important tax changes that were made in the 2010 Budget and that have formed a basis for a lot of the economic growth that we have had in the last while. It will build on the strong economic performances in the 2010 Budget.

It has been hard to figure out what the Opposition has been saying on this bill. First, we had Mr Mallard saying it would be crazy for people to pay back their loans, then we had David Clark saying we should be keeping this 10 percent student loan repayment incentive. I was not quite sure where we had got to there. It is worth thinking just quickly on this bill where we might have been if things had gone awry and Labour had control of the place. We would have been looking at a capital gains tax coming in. I just wonder how you tax your way to growth. How would New Zealand have been saved by Labour taxing every small business, every shareholder, and every farm? I do not know how that would have developed growth in this country.

We talk about vision. The only vision we seem to see on the other side of the House is one that is about expanding the size of the State and expanding the size of the tax system. Our vision is to set people free to be as enterprising as they desire, and that is what this Budget is all about. I am very pleased to speak in favour of this bill and I commend it to the House. Thank you very much.