Taxation (Budget Measures) Bill

It is my pleasure to stand and give a contribution during the Committee stage of the Taxation (Budget Measures) Bill. I do so with a strange sense of irony. I started this afternoon at a protest on the forecourt that was led by people who were protesting on behalf of children in New Zealand. At that time they were protesting on their behalf to try to keep those children’s assets. By “assets” at that point in time they of course meant a majority share in our power companies, probably not realising that actually the attack on their assets was a little more direct than that. In fact, it was going directly to their back pockets.

I want to explore that, because we are debating Part 1 of the Taxation (Budget Measures) Bill, which goes directly to the issue of exemptions that relate to minors, and, in fact, to slightly above minors. I want to discuss that in a little more detail also.

Part of me also wonders whether or not this is part of the Government’s attempt to try to educate children in the area of financial literacy, because any under-18-year-old is now going to need to be aware of where their earnings sit, to see whether or not they are eligible for exemptions. But let us get into that in a little more detail.

Part 1 relates to the children’s active income tax credit. I wonder whether most New Zealanders knew such a thing existed. The Government is stating in its general policy statement that these tax credits, along with others, which we will discuss with my other colleagues, are being abolished as “they are fiscally expensive but have long since ceased to have a strong policy justification.” It goes on to state that “a new exemption is created for children, using the same eligibility criteria as for the abolished credit.” I find that there is a slight contradiction in the general policy statement, because it goes on to state: “This new rule aligns more closely with the original objective of the children’s active income tax credit: reducing compliance costs for children by not forcing them to file income tax returns for small amounts of income.”

First of all, I would not mind the Minister in the chair, the Minister of Revenue, sharing with us how many tax returns are involved in this particular area. How many children are affected, who would have been filing these income tax credits for such small amounts of money? Secondly, if it really was about saving them compliance costs, why would this change alone be generating revenue for the Government of $14 million? This is not about trying to reduce bureaucracy for children. This is about trying to increase revenue for the Government from our most vulnerable—from our most vulnerable. This is truly a “paper boy Budget”, and it is an absolute disgrace that we have got to that level of desperation.

But let us dig into this a little bit more deeply, because I want to explore where the exemption level now lies, as set out in Part 1. Basically it says that a child earning over $2,340 of such income is required to pay tax on every dollar of that income. So $2,340—what does that mean if we were to distil it down for a paper run, for instance? I am sure the members on that side of the Chamber have not done this level of research in their break, so I am very happy to share this with you.

💬 Peseta Sam Lotu-Iiga: Share it.

Mr Lotu-Iiga, I can see you listening intently. From the brief research I have had an opportunity to conduct, I can tell you that one paper run for a child of, say, 100 houses will generate an income for that child of roughly $16 per week. If you increase that to delivering to, say, 300 houses for your poor paper-run boy or girl, you would immediately be over $45 a week, which is where the threshold the Government has now set for them lies. So basically if a paper boy or girl delivers to 300 houses or more, they are going to now be “required to pay tax on every dollar of that income”, and that is how this Government is generating $14 million in revenue in its desperate “paper boy Budget”. It is an absolute disgrace that this aspirational Government is digging—

I think it would be helpful at the outset just to go through what actually is happening here in Part 1 of the Taxation (Budget Measures) Bill. It is very simple and straightforward, and it does not necessitate the type of hype that is being generated on the other side. The tax credit for the active income of children was introduced, as I said earlier, in 1978, and it was done so to reduce the compliance costs of employing children on a part-time basis. What it meant then was that employers with low annual salaries did not need to withhold PAYE in respect of those children. The credit now serves that purpose very rarely, because most employers prefer to apply their normal payroll systems, including deducting PAYE, to all of their employees. The credit is now mostly claimed by a child who files a tax return at the end of the year, which means that because the original credit was designed to reduce compliance costs, it is no longer achieving that goal and it is actually adding to the compliance costs of those people because they are required to now file a return.

Let me go through the limited exemption that is being introduced in this particular provision. I want to say this very clearly to members because it is quite important and it is being misrepresented. Children do not need to pay tax on up to $2,340 of income that is not taxed at source. So that is money for mowing the neighbour’s lawns, babysitting, and those sorts of things. The tax exemption does not apply to income on which tax has already been paid, such as salary and wages or interest. Well, that is unlikely to be a major calculation in this respect. If the child earns more than $2,340 from income that is not taxed at source, then the exemption does not apply to any of the income because they would have to pay tax on the full amount. So we are dealing with a very specific issue here. It does not amount to taxing the paper boys. Previous speakers have raised the question of the 68,600 people, or children, really, who are allegedly affected. They are the people who are in the category of being able to make the claim. We do not have information on the actual numbers of people involved. We know that the average amount of the credit paid is $240.

Dr Clark earlier in the second reading debate quoted from the regulatory impact statement. Unfortunately, his quote was selective. He talked about—[Interruption] I think it was on page 3. He spoke about the fact that there could be compliance cost implications for a number of employers. But what he failed to point out was the following sentence, which is on page 1, the fifth paragraph: “We expect that very few employers would be in this situation,” So here is Dr Clark getting up and saying that this is an outrage because we are now going to have a number of employers having to deduct income from children working for them on very low wages, but he did not go on to read the next bit of the same statement: “We expect that very few employers would be in this situation,”.

What this measure is about, and the other measures in this part are about, is changing and getting rid of a number of small tax credits that have long outlived their usefulness. What members of the Opposition are really saying tonight in opposing this is that they actually think we should keep these things on the books, even if they are being misrepresented and distorted. If we are giving up around $350 million to $400 million in revenue over a 4-year period to do so, their attitude is “so be it”. What does it matter? It is only money. It comes and goes. It is on the tree that they have, the tree that they get it from. This is about responsible Government. It is about making the tax system work the way it was intended, and there should not be any more debate about it.

💬 Tracey Martin: Mr Chair—

Order! Members, I actually would like to hear the member calling, and I would like to hear what members are saying. So keep the interjections down, please. I am calling Tracey Martin.

Again, as with my learned colleague from the Green Party, this is my first Budget and I found it fascinating—fascinating for what is not in it; fascinating for how small it is and how little vision there is in this Budget. What an opportunity lost, is all I can say to those on the Government benches—what an opportunity lost. You had an opportunity to actually grow the pie.

But my main question here is for the Minister in the chair, the Minister of Revenue, and I wonder if you can clarify something for me. Nobody has mentioned it, and I can find no regulatory impact statement on the removal of the housekeeper tax credit. Again, if I had had this earlier I agree I would have been able to do further research on it. But can you clarify for us, please Minister, whether the removal of this tax credit has any effect at all, and whether anybody has gone to find out whether it has any effect at all on working women today who employ other women to do housekeeping for them. This is an income that some women use. So, again, I would be interested if the Minister could address that, because there is, as I say, no regulatory impact statement on it. It is almost as if the women whom this may or may not affect do not count. We have regulatory impact statements on animals. We have a regulatory impact statement on a few of the other small, little movements inside these taxation bills, but there is nothing here that could possibly give me, or any other woman here in New Zealand, a deeper understanding of how this might affect them. And that is unfortunate, Minister. So I do hope that once I have finished we can actually clear that up.

I do also think that it is a shame, Minister, that just because times have moved on, an Act must be dismissed because it does not serve the purpose of the 1960s and the reason the bill was originally put in place, without considering it carefully inside the values that we have here in the 21st century. I think that it is very interesting that the explanatory note of the bill says: “The present approach does not achieve this goal”—the goal of the 1960s, which was an administrative goal—“as many children file tax returns solely to gain access to the tax credit—”.

I noticed that my colleague Mark Mitchell said that he used to do a paper run but he never filed a tax credit. Well, that is fine for you, Mr Mitchell, and I appreciate that, but some of us actually have acumen in this sort of area. Some of us who did do these sorts of jobs went through that process and put in our own effort. There was no administrative cost for us, and we gained those tax credits. It was part of that understanding that I believe we are asking from our 21st century students around commerce. I believe that is what we are asking when we want our 21st century students to understand about working, about taxation, and about filling out these forms so that they can fully participate inside government and inside our society. So I think it is a shame that those young people who did go to effort of filing for tax credits—and I think the figure was $240 or something that you mentioned, Minister; that was often the return—will no longer get them, because, apparently, what it was set up for in the 1960s does not apply any more. That is it, and we will do away with it.

I also think that the lack of encouragement to earn over $2,340 is interesting. I think that is an interesting way to write it into the bill. I do appreciate that the Minister has addressed, to a certain extent, the reasons for that. But I thought that the National Government was actually about encouraging innovation, encouraging people to work, and encouraging them to raise their incomes. But if these children earn more than $2,340, a new step is suddenly put into place.

So I appreciate, Minister, that you have tried to give an explanation for that. I would appreciate an explanation around the housekeeping, and I do also appreciate the whip now providing me with the well-hidden regulatory impact statement. Thank you.

Part 1 is a very sad part of this bill, the Taxation (Budget Measures) Bill. What we now know is that the National Government, aided and abetted by the Minister in the chair, Mr Dunne, is going to raise revenue of approximately $14 million out of the pockets, out of the piggy banks, and out of the wallets of approximately 68,600 children, according to the regulatory impact statement—14 million bucks from 68,600 children. These are kids who are doing paper runs, and things like that—

💬 Hon Member: Cleaning.

—cleaning—and delivering the community papers. They will be delivering “Do not vote National” pamphlets at the next election, I am sure, in the back of the little—

💬 Hon Trevor Mallard: They will be volunteers.

They will be volunteers. And you know, I just wonder, for instance, whether Gerry Brownlee ever had a paper run. No, sorry; that would be an oxymoron. That would be completely absurd—a paper run! I am told, though, that Gerry Brownlee had a milk run, you know, back in the old days, when there was full-cream and double-cream milk. But I think very little actually ever got delivered to the front gate.

Maggie Barry talked about the fact that she believed in recycling. Well, I have got to say, if ever there was a member who has come into this House who has been recycled, with the odd scent of compost swirling around her, then, my word, it is that member. It is the member who sits in select committees and intimidates submitters by asking them how they voted. Well, I wonder whether Maggie Barry—

The CHAIRPERSON (Lindsay Tisch): Order! Pull it back. [Interruption] I was not a paper boy—we had courier pigeons. Come back to the bill.

I am sure, Mr Chair, that you aspired to the sort of pizza delivery type of deal, rather than a paper round.

I just say this to this Government. This is the big idea in the Budget. Take 14 million bucks off a bunch of kids. This is the big strategy lined up alongside flogging assets off, and National is trying to hoodwink people by saying, “Oh, if we buy non - revenue-generating assets, that is a good thing, is it not?”—until the money runs out, of course. So the big idea in the Budget is not to deal with the big issues of taxation. National fails to remind us that it is borrowing $300 million a week so that the top 5 or 10 percent can get the vast majority of the tax cuts. But it is awake enough to take 14 million bucks out of the piggy banks of 68,600 young people.

💬 Hon Trevor Mallard: Retrospectively.

Retrospectively. Well, I say that Mr Dunne is the man who will go down in history as the biggest auctioneer in our history, if he votes for asset sales—going, going, gone. He is now, of course, the “Uncle Scrooge” of the Parliament”—the “Uncle Scrooge” of the Parliament. What a great legacy Mr Dunne will deliver as he has flip-flopped from party to party. He is, as I think the record will show, the longest serving revenue Minister in the history of the parliamentary Commonwealth. He has been in more parties and in more coalitions that I have had hot dinners, and more than Gerry Brownlee has had hot dinners.

The CHAIRPERSON (Lindsay Tisch): Order!

No; sorry, that would be silly. But I say this. I ask Mr Dunne to reflect on the provision in Part 1. Does he really want to go down in history as the man who took 14 million bucks out of the piggy banks of 68,600 paper boys, delivery people, cleaners—

💬 Maggie Barry: More trivia.

—oh, sorry; there is one over there, the old turnip in the corner—and paper girls? Does he really want to go down in history—[Interruption] Go on gardening leave, I say to Ms Barry—go on gardening leave. You will be better at it. It is a better occupation for you, I think, than intimidating submitters to select committees.

So Mr Dunne will go down in history as a person who took the money out of the mouths of babes. That will be his legacy to the Parliament—that, and helping the Government flog off assets. What does Mr Dunne say to his grandkids? Has he had a conversation with his grandkids and said: “Sorry, guys. You know how you were going to do that after-school job? Sorry, I’m the revenue Minister, and I’m going to sneak around the back, and as you get your 45 bucks I’m going to whip out the tax from you before you can slip it into the piggy bank at home.”?

National is the party of aspiration. Was not this the party that was encouraging entrepreneurship? Well, should we not be doing that with our young people? Is it not Miss Bennett who says: “You should get off your backside and get a job.”, even though, of course, the unemployment rate has gone up by 50,000 under her wonderful legacy? So National is saying, on the one hand, “Get a job.” We have 68,600 young people working in jobs, and for many of them, I say in all seriousness, it is no longer an after-school job for a bit of pocket money. No—if you are out on Struggle Street, battling away, thanks to this mob, paying higher GST, paying the higher charges, having lost your job, and having been absolutely gutted as a family, then the paper boy’s or paper girl’s job, or the little bit of cleaning around at the butchers shop, is no longer about pocket money. It is actually about helping mum and dad try to make ends meet.

To the geniuses over there, one of whom has poddled off to the back of the vege patch in the garden, I say this. Forty-five bucks to some of those people over there may not be a big chunk of dough. Oh, no—not to some of them, of course.

💬 Andrew Williams: A bottle of wine.

Yes, a bottle of wine. Yes, and I think a few of them over there have been imbibing tonight. But to a child, earning 45 bucks—and every dollar they earn they will have to pay tax on—that is their contribution in many poor families to the family food budget, the power bill, the rates, the rent, and all those things. I wonder whether, in her sort of blasé way, Miss Bennett has actually considered that as she leaves a legacy of 50,000-plus people unemployed. How does she balance that against the call for aspiration? Oh, do not look at me with dagger eyes, Miss Bennett—I know it hurts, but they are the facts. There are 50,000 people unemployed, thanks to that Minister and her inaction. She says: “Get off your backside and get a job.” Of course, she has not provided any jobs. In fact, she has presided over an administration that has gutted jobs from this country—gutted them. Yet she is prepared to sit there—I do not think she is talking to herself. I presume that might be an unintelligible conversation. She talks to herself. I wonder if she will go out and talk to the young people in her electorate, and tell them why she is aiding and abetting this, and tell them why they should not believe what she said about aspiration, because, of course, she is going to take their dollars.

Oh, hang on: the balloon has burst. I say this: is she going to go out to her electorate and actually talk about that? Is she actually going to go and talk to her constituents and explain to their mothers and fathers why this is happening? Because, as Trevor Mallard said a little while ago, those 68,600 young people will not want to get paid to deliver pamphlets at the next election—they will volunteer. They will volunteer to deliver “Don’t vote for National” cards into every letterbox in this country. Of course, Paula Bennett tries every trick to divert us away from the fact that her legacy is 50,000 people on the scrap heap—the lost and lonely—and now you add to that a dash for cash for $14 million.

Well, I just say that she can squawk all she likes and talk about all sorts of things, but the problem Paula Bennett has is she cannot walk away from facts and history. She cannot walk away from her own legacy. She cannot walk away from 50,000 people on the scrap heap. I just wonder, as members go out this weekend to their constituencies in Whanganui and a few other places around there—I wonder if Mr Borrows will front up to the parents, whip down to the primary school and see the teachers, and tell the kids that their paper round is over and they may as well go home and sit on their backsides, because the Government is playing “Uncle Scrooge”.

Let us come back to it in context. This is not the biggest issue of moment for this economy; nor is it the biggest issue of moment that should be addressed in this Budget. We were looking for a strategy, for a plan, for anything, as are businesses in Auckland and Christchurch and other places. The best they could do in Canterbury—the best Budget announcement down there—is for Mr Brownlee to announce he has spent half the dough—

The CHAIRPERSON (Lindsay Tisch): We are on Part 1. It has got nothing to do with Canterbury.

Oh, yes it has. Oh, that is my next speech. Part 1 has a heck of a lot to do with Canterbury, because we do have young people down there who do after-school jobs. We do have young people down there who are scraping for it. We do have families down there who are destitute. I beg to differ, without challenging your ruling, that this has everything to do with Canterbury and the rest of New Zealand. It is a bill that has no ideas in it and no strategy in it. The whole Budget is encapsulated around the odd nickel-and-dime tweak and a bit of spin. It has everything, I say to you, Mr Chairperson—try visiting there sometime—to do with Canterbury. There are 10,000 families down there who will not have the means to carry on for much longer if this Government does not come up with some ideas on how to employ people, how to engage people, and how to support people, and ditch silly little mean-spirited ideas like this, in this bill. It is a mean-spirited bill from a mean-spirited Government, wrapping it up in austerity. No one believes it.

The last speaker in this debate, Clayton Cosgrove, used to be a man of vision. He used to have passion for New Zealanders. He wanted to do the right thing for New Zealanders. I would for a moment say, before I talk about Part 1 of the Taxation (Budget Measures) Bill and how concerned I am about that last speech, that in as far as Canterbury is concerned he has worked extremely hard over the years for Kate Wilkinson’s constituents to make sure that they have a better lifestyle down there. So what I would say to you is that—

💬 Hon Clayton Cosgrove: Is that the best you can do?

No, there is some more coming, Clayton—just wait. There is certainly some more coming. In 2008 he and his party opposite were out of touch and out of time. What has happened this year? They are still out of touch, but they have got all the time in the world. He has had lots of time this afternoon to read Part 1 of this bill, but that was all we got: the same old rhetoric that always comes from the Labour Party. New Zealanders were sick of it only 6 months ago, and, of course, 3 years before that, and it keeps on coming. Well, can I ask one thing of the members opposite: please keep it coming, because on this side of the House we want to get out there and talk about the issues that are important to New Zealanders.

So what is important to New Zealanders? Important to New Zealanders, and it is in Part 1 of this bill, is balancing the books, investing more in education, and making things fairer for all New Zealanders—not the things we have heard from members opposite.

I want to come to clause 5 in Part 1. I want to say to members opposite—only those in the Labour Party—do not be worried any more; this clause does not apply to you. There will be no restrictions on the use of the herd scheme when it comes to the way you get together and work out what it is that we must do for New Zealanders. This is about livestock, not members opposite in the Labour Party. The reason that that is important—[Interruption] What was that?

I am going to yield in a moment because I am keen to hear from the Minister in the chair, the Minister of Revenue, but I am keen to know, in terms of clause 5, which is restricting the use of the herd scheme, whether there are farmers who use this scheme who take a cow from one of their neighbours—maybe a neighbour gives them a cow—and decide to go on TradeMe and sell it to somebody else for more money than it was given to them for or they bought it for. Could this part of this bill be used to sell on TradeMe something that had been given to you, or maybe something that you had bought? Let us say you buy a cow from your neighbour for $500; could you go and sell it on TradeMe the next day for $1,000? Or if he gave it to you, could you sell it on TradeMe for an amount more than it is worth? I would be interested to hear from the Minister on that. I would hope no member on this side of the House would do that. What about tickets to go and view that cow singing or dancing? Could you sell them on TradeMe—tickets to see that cow—under this part of the bill? I think not.

I want, as all of my colleagues on this side of the House want, to get back to my electorate. Many of us are electorate MPs, and we want to talk to New Zealanders about the important parts of this Budget. This is an important bill and we must move forward with this. This is an important bill because it helps rebalance our economy, helps us focus on what is important for New Zealanders, and helps us spend money in areas where New Zealanders want us to spend it—to be more productive, and on education for our children.

As most people are watching television, I say to them that a Labour MP will get up in a moment. Do not adjust your TV. The sound you hear is meant to come from them; there is not a problem with your television. Thank you.

Yes, if people are still tuned in, that was the big idea brains trust from National about what will fix these economic woes that this country has: Todd McClay talking about cows on TradeMe. That is the big idea that they have! Part 1 of the Taxation (Budget Measures) Bill—

💬 David Bennett: You didn’t get the joke!

It was hard to understand what he said, but it was about cows on TradeMe. That is the big issue that is going to fix the economic woes of this country. Part 1, I think, shows how out of touch this Government is with the economic woes of this country and the issues faced by ordinary families in New Zealand. They have found in Part 1 the culprits to our economic woes. They have gone looking for them and they found them: the culprits are the paper boys and paper girls of this country not paying tax. That is what they are going to fix up to bring this country into economic growth. Well, that just goes to show how devoid of ideas and how devoid of an actual plan for the brighter future they promised this country that Government actually is. Part 1 of this bill says what we are going to do—and why we suspended the Budget debate to fix the economic woes and the absolute bottoming out of the economy in this country on that Government’s watch—is we are going to start taxing children who are doing paper rounds. They are children, in fact, who come from probably some of the poorest families in this country. They are the children who are out there earning more than $2,340 a year not because it is fun, not because they feel like doing it, but because that contributes to their family’s income. Those are the very families that that Government is going after. The Government is making them the culprits for its lack of having a plan, its lack of having any ambition of bringing this country out of the economic doldrums that it got us into.

I go on to also let people know about another part that goes after children, in Part 1. This Government, going after children all the time as it is, has taken away the tax credit for childcare. That is right. It has not been spoken about much, but it is saying that it does not want working families to be able to have a tax credit for the childcare payments that they pay. But it is about actually joining the dots together, because not only are they taking the tax credit away but they have frozen the subsidies to early childhood education in this Budget today. That means that fees are going to go up for parents. That will even further stretch the family budget that is already stretched to breaking point. That is how out of touch that Government is with working families, because it does not understand how bad their budgets are.

Part 1 actually makes it worse. Not only are fees going to go up for early childhood education but now they are taking away the tax credits that parents can currently claim for childcare expenses, and that is being done through Part 1 of this bill. It is a mean-spirited bill, because it does not fix any of the economic woes of this country. We are flatlining economically. We are in an economic rut thanks to that Government and its lack of any plan.

What is the Government doing to fix that? Well, it is pickpocketing the pocket money of our children and it is also saying that families can no longer claim a small, but important, tax credit for childcare expenses. This is on the back of delivering a Budget today that increases childcare expenses for all of those families, as well. That Government is showing, by Part 1 of the bill, that it is completely out of touch with the struggles that working families face. It is completely out of touch with that. Not only does the Government’s saying that it will put a financial veto against extending paid parental leave show how out of touch it is with the everyday struggles of working families but it is using Part 1 of this bill to attack working families all over again and to say that they can no longer claim a tax credit for childcare expenses.

Those childcare expenses are going to go up as a result of other measures that the Government has taken in the Budget today. This is just a double whammy for working families with young children. Is it not interesting that the Government wants us to think that it is interested in vulnerable children? Paula Bennett wants us to believe that, but here she is, in Part 1 of this bill, attacking those very children.

That contribution reminds me that I ought to reply to the New Zealand First member Tracey Martin who spoke earlier about the housekeeper and childcare rebate. For the benefit of the member in the Chamber—I gather she may now have the regulatory impact statement and will have read paragraphs 7, 8, and 9, which set out the background fairly clearly—can I simply say this. The rebate was first put in place in 1933 in quite different social circumstances from today. The average claim on that rebate is now $263 per annum, so it is not a huge money-spinner for the families who might have been making that claim. It is about $5 a week. The member who has just resumed her seat spoke about the cost of childcare. The $5-a-week subsidy has been in place in an environment where since 1933 a huge number of changes have been made with regard to the provision of childcare. For instance, we now have 20 hours free, we have $1.4 billion being expended in the childcare area by the Government each year. The rationale for the policy has long since ceased to be.

With regard to the housekeeper claim, it is worth making the point—for the benefit of the member—that there are a number of families with disabled children who currently use the housekeeper claim in respect of their circumstances. In fact, when you look at the range of disability support services currently provided and the money that is provided for in this Budget and last year’s Budget, when you also look at the Ministry of Social Development’s child disability allowance and the disability allowance generally, the rationale for then saying that on top of that you can claim a claim that has a maximum of $310 a year really ceases to be. What this particular provision is about, like the earlier provision we discussed regarding the child allowance and like the transitional allowance, is removing a provision that no longer serves the purpose for which it was established. We have a different way of dealing with these issues now.

At the time when this particular credit was established in 1933, there was certainly nothing like comprehensive childcare, there was certainly nothing like comprehensive funding or support for that childcare, and I doubt that there was care for those with disabilities in anything like the way we have today. The circumstances over the intervening just under 80 years have substantially changed. The Government’s view is that a credit of this nature, which ties up a fair amount of resource, is poorly targeted, is not even being claimed by significant numbers of the lowest-income groups in the group, and has outlived its usefulness. That is why, I say to the member, we are removing it.

I rise to take another call on behalf of New Zealand First in regard to what I call the “Fagin Budget”. We are very fortunate that it is after 8.30 at night now, because people who might be watching Parliament out there in New Zealand television land would not probably be able to conjure up the same images before 8.30, because it would almost have to be censored—the thoughts of Fagin from the famous movie Oliver. If you can imagine Fagin and what Fagin looked like, then put into your minds what Bill English and John Key look like, and then go back to what Fagin looked like, there is an incredibly close comparison of the three. They are all as miserable as sin.

The CHAIRPERSON (Lindsay Tisch): Order! Come back to Part 1.

When I look at this regulatory impact statement, all I can think of is that it is a “Faginistic” regulatory statement. When you read a sentence such as: “Generally speaking, the proposed option should not impose any new compliance costs on businesses. However,”—and this is the 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.” Is that not appalling? And you wonder how this all gets through the process. It is all done by smoke and mirrors by this Government. Further down, and this is written by the Inland Revenue Department, it states: “Due to the need for Budget secrecy”—this is the Budget secrecy around children’s pocket money—“and the short time frames involved, there was no opportunity to consult in the usual manner” with affected parties. There was no opportunity to consult in the usual manner with affected parties. “The Treasury and Inland Revenue were the only agencies involved in developing the proposals and carrying out the analysis.”

I am quite shocked by that and the fact that this will impact on over 56,000 young people in this country, who basically are going to have their pocket money robbed from them in terms of tax taken off from 1 April 2013. Employers will have to start deducting PAYE tax from a very small wage that each individual child might be receiving. It is appalling.

When I look over the page I can see the housekeeper and childcare tax credit. I can remember as a young father, with my wife and our family, when we needed after-school care for the children from time to time. I can recall, as a young earning family, that we greatly valued the fact that at the end of the year we did get some tax credits for getting childcare after school and things like that. You look at this now—a miserable $310 per year for young families needing after-school care, needing assistance to take care of children for maybe a couple of hours, who up until now could claim up to $310 to help pay for that after-school care and cannot get it any more. Is that not miserable? Is that not absolutely miserable? Is it not—

The CHAIRPERSON (Lindsay Tisch): Order! I sorry to interpret the member, but can I ask members to be a little bit more succinct with the interjections.

We have seen from this National Government tax rebates and tax deductions and reductions in tax for its wealthy mates for several billion dollars in the last year or two. We have seen several billion dollars of reduction in tax for its friends and its mates—high income earners. We have seen $1,000 a week for the Prime Minister—$1,000 a week less tax he pays, as the Prime Minister. But the same National Government, 2 years later, after giving all those tax cuts to its mates—

The CHAIRPERSON (Lindsay Tisch): Order! Part 1.

—will take it out on the poor young children of this country, the young families who might get a bit of a tax credit for their child-minding, the students who maybe were—

I am pleased to take a call, because I have been reading the regulatory impact statement that relates to Part 1 of the Taxation (Budget Measures) Bill and I was looking for something quite particular. I was looking to see whether or not the Inland Revenue Department, in particular, had done any costings around how much it would impact on the department for it to have to redo its communications, and in particular its website. Why, you might ask. Well, quite simply because the Inland Revenue Department’s website currently features what I would call a paper girl poster child. I am not sure whether you can see this, but currently on the Inland Revenue Department website you have got a child of probably, I would say, roughly the age of, what, 13 with the title above her of “Not sure how to go about your tax?”. I have to say to the Minister in the chair, Minister Dunne, that now, I guess, that child is no longer going—

💬 Todd McClay: I raise a point of order, Mr Chairperson. Could the member table that iPad? I would like to have a look at it.

If Todd McClay would like to see this online, it is on the Inland Revenue Department website, on its home page. That is the first thing that will come up when you go on to the website, if you would like to see that. But I could suggest, if the Minister would like to save some money, that you could keep this as is, leave the words “Not sure how to go about your tax?”, and just add “Now you don’t have to.” Or perhaps we could just leave it and have it say: “It doesn’t matter how old you are or where you are, we will find you.” That is essentially the change that we are seeing today.

In lieu of the regulatory impact statement featuring the changes that the Inland Revenue Department will, no doubt, have to add to its communications, I was interested to see that there were several options considered by the department in considering the changes to this particular tax credit. It is interesting that the first option was to replace the tax credit with a limited tax exemption, and that is essentially, obviously, what the Minister has opted for. But I wonder how much the exemptions, in his mind, are going to equate to. Of the $14 million we are going to save, does he have some kind of estimation as to what amount those exemptions will equate to of the $14 million the Government intends to save from making this change? And would the tax exemption apply to child modelling? I am just interested, as an aside.

Finally, paragraph 25 of the regulatory impact statement says: “The second option, repealing the credit with no replacement, would mean large numbers of children earning small amounts of income would be pulled into the tax system.” That is why I am interested in that question, Minister, because if we are actually still talking about large numbers of children being pulled into the tax system because not enough are exempt, then essentially you will not have achieved your intended outcome. I would be interested in the evidence that the Inland Revenue Department has generated for you on that.

I want to come back to Part 1 and, in particular, new section CW 55BB in clause 4(1), which sets out the age groups that this exemption applies to. Although, of course, we have been leaning back on the paper boy and paper girl, we are in fact talking about young people, younger than 15, who could be in full-time work. I know that we assume in this country that that should not be happening and that a child should be in school, but there are a significant number of 15-year-olds who get exemptions from secondary education and who are entering into work. Now, obviously, this will impact upon them. Of course, those younger than 18—not exactly the child tax credit we were thinking of—who are, in fact, impacted on by all of the Minister’s welfare reforms are in many ways, for all intents and purposes, often treated as adults in our system, rightly or wrongly. So if you are younger than 18 you are now also going to lose out on this tax credit.

I imagine that good, hard-working National members would at some point in their aspirational childhood careers have had at least one job, if not multiple jobs, and that they themselves have benefited from this provision previously. No doubt, as the good, taxpaying children that they would have been, I am sure they would have paid tax and filed their tax return, just like the child on the Inland Revenue Department home page, Mr McClay. So in that sense we are essentially seeing yet another change that this Government’s members themselves have directly benefited from.

How much are we saving per person in this? A couple of hundred dollars. But it is still amounting to $14 million for this Government, and that is what demonstrates that we are scraping the bottom of the barrel—

I want the Minister in the chair, the Minister of Revenue, to tell me what analysis of the long-term effects of undermining the work ethic of our youngest people as they first enter the workforce lay behind this measure. We are told by the National Party people that prices always matter, that the amount that people get paid in real terms is what matters. Whenever we remind Government members of the fact that it is having a larger and larger wage gap with Australia, they always say “Oh, it’s the after-tax number that matters.” But here, for the youngest people in society—for the youngest people in society—no, it is not. It is a different rule for them. It is not the after-tax amount that matters; it is the pre-tax amount. What is wrong with having young people a little bit more incentivised to work, by making sure that they do not have to pay as much tax as they will when they are older? What is wrong with that? What is wrong with that?

💬 Hon Member: When you’re earning under 45 bucks.

Yes, limited to $45 a week. I ask the Minister whether he is aware that his Government blocked measures to protect some of these very vulnerable young workers from being not paid not just a youth minimum wage, which is what the National Government wants to pay them, but the minimum wage. A lot of these people who work delivering pamphlets do not get the minimum wage. They do not even get the equivalent of a youth minimum wage. They get a contract rate that is so low that I am surprised that some of them are motivated enough to do the work, but they are—they are. We ought to be celebrating the fact that these people do it, despite the pittance that they get for delivering pamphlets. They do not even get the minimum wage, because the National Party would not back our legislation to extend the minimum wage to contract workers. And now the Government is saying that it is going—

💬 Mike Sabin: It’s a bit rich to be accusing people of not backing things. Do you vote for anything? No.

What was that? I did not hear that.

💬 Mike Sabin: No, I didn’t say anything.

Oh, OK, you did not say that. Actually—[Interruption] Thank you, thank you. I think the Hansard staff got that. “I did not say that.” he said, and acknowledged his own comment. We will look to see what Hansard caught of that. I did not catch it, but he is obviously embarrassed, because he would not repeat it.

This is short-sighted. This is mean-spirited. I thought Megan Woods’ contribution earlier was interesting: first we had the cycleways, then we had the motorways, and then they went after the paper round.

💬 Hon Trevor Mallard: Paper routes.

What was that?

💬 Hon Trevor Mallard: Paper routes.

The paper routes—that is right. She put it far better than I did. They were standing around the Cabinet table and they thought: “Who can we get? Who is not paying their fair share? Who is not paying their fair share?”. And who did they not look at? They did not look at the top 10 percent, who got 40 percent of the income tax cuts in the tax rounds; they went for the lowest paid, for people not even on the minimum wage and delivering pamphlets for, sometimes, $2 an hour. It really is sometimes $2 an hour. Now, not only will the employer be required to deduct income tax from that amount—compliance costs for the employer, compliance costs for the Inland Revenue Department—but the people who are being paid a miserly amount, and it is sometimes only $2 an hour, will not be able to get a tax refund. They will not be able to get a refund of the tax that they have paid. Some of these kids are poor. Some of them are not, but some of them are. This is the only money they have got, perhaps—

💬 Hon Trevor Mallard: Averages $5 a week.

The average is $5 a week. The average is $5 a week, and to some of these kids that $5 a week is the difference between their being able to occasionally go to a movie—

💬 Hon Trevor Mallard: Oh no, no. It’s half their school uniform.

I agree; I was going to come to that. For some of them it is actually what they get to go down to the op shop and buy a few clothes. You know, I think this is pretty mean-spirited. If there were not other things that the Government could have done, if this issue was the last bit that was going to tip this country over the edge, then, you know, maybe. But it is not. It had lots of choices other than this. I want the Minister to stand up and say why the Government picked this choice rather than other choices. Why is it undermining the work ethic of these kids, who are already working for, sometimes, a piddling $2 an hour? They are being taxed on it and they cannot get a break from the Government. It is being taken off them. I hope the Minister stands and takes a call.

I am pleased to take a call on this bill, the Taxation (Budget Measures) Bill. What we are seeing here today is that we are picking the pockets of our kids to fund an ideas deficit from the members opposite. They have delivered a Budget today that offers zero hope, zero ideas, and a zero future for young people in New Zealand.

Only 6 months after re-election this Government has completely given up on its brighter future. It is quietly slinking away from any idea of aspiration, and all it can do is tinker around the edges as it stumbles towards being thrown out of office in 2014. But all I can say to the members opposite is wait until the kids whose pockets you started picking today come of voting age. They are going to be angry, and we have got a sure source of voters there. This Government is spent. It is out of ideas and it knows that its 2010 tax switch was a failure. Now all it can do is tinker round the edges and try to fix things up, and this is just a straight-out revenue grab.

I talked in an earlier contribution on this bill about the stunning economic policy we are seeing from the National Government being rolled out in this term and in its previous term. David Parker mentioned this in his contribution tonight. It started with its cycleway. Failure—no jobs. Then there was the “Holiday Highway”. That stimulated the economy, but hang on. That is right: not all of the jobs that were promised in the last Budget eventuated. And then today we have this stunner—the third part in the trilogy—the paper route. This Government is taking it to the kids and taking the money off them.

These are not the taxation issues that we should be talking about tonight. We should be talking about taxation and about how that can be used to stimulate our economy. We are told by members opposite that they do not want to be talking about the things that are not important to our nation. Well, put something in the Budget that is, instead of taking money out of the pockets of our children. For 4 years Labour has been imploring National to put children at the centre of its policy and to do something about the 270,000 Kiwi kids who live in poverty. That is one in four, or 25 percent of them. But we did not mean this in terms of putting children at the centre of your policy. We did not mean for you to go away and come up with a taxation policy that seeks to put your hands into their pockets and take away their pocket money. We did not mean this.

As I have also talked about, one can only imagine the thinking that got the National Government and its coalition partners to here. They were thinking: “Fourteen million dollars—we really need $14 million. There are those bludging kids. We need to go after them again. For too long they have had it too easy. They don’t pay for their own accommodation. They are on the take. They are demanding an education, and do you know what? When they get a bit older, they might even want to go on and do postgraduate training. We cannot let that happen. So we need to make sure that they know they don’t have a future in this country.” What are those members thinking? That there are too many grubby little hands looking for a hand up?

National is the party that talks of aspiration, and this is a joke. These are just kids who are working hard, and what the members opposite do not understand is the income that these kids are receiving. It is being chortled about what a small pittance this money is, but this income is important to these kids, and it is important to their families. Frighteningly, increasingly, this money is becoming part of household budgets in this country and becoming an important part of household budgets in making ends meet. One of the things that I think is interesting in the regulatory impact statements is that we see that the credit is received by approximately 68,600 children, averaging $240. But the regulatory impact statements do not go on to note that the tax credit does not apply to income from interest or dividends—meaning a child must pay tax on the first dollar of income from these sources. So, for the members opposite, is this about equality? Is this about thinking working children are just getting a bit of a break and you need to bring them into line? This is just not fair.

I move, That the question be now put.

I want to begin by quoting a text that has been sent to me. It is a text that was sent to Peseta Sam Lotu-Iiga, and this mother has forwarded it on to me: “My son delivers a paper. He makes $5 a run that takes him about 1½ to 2 hours to do. How can your Government tax him on the pittance he makes? You should be encouraging kids to work hard. Shame on you.”

This mother is obviously listening to this debate and is saying to this Government: “Shame on you. Shame on you for trying to take money out of young kids who are trying to make ends meet.” I quote that because the people listening to this debate have children delivering papers, earning, as she says, a pittance, and this Government is now ready to put its hands in the pockets of those young kids. I do not think that this Government here understands the struggles of hard-working communities struggling to make ends meet. They will remember that the first Budget of this Government was mana-enhancing. Those were the words. Well, there was no mana-enhancing for the community. The second Budget, I understand, was “the road to recovery”—[Interruption]

The CHAIRPERSON (Lindsay Tisch): Order! The member cannot say “Tell the truth.” In future—

💬 Hon Member: Withdraw and apologise.

The CHAIRPERSON (Lindsay Tisch): I am ruling. I do not know where it came from, but whoever said it, you cannot say “Tell the truth.”

💬 Todd McClay: Tell another lie.

The CHAIRPERSON (Lindsay Tisch): Who said that? The member will stand and apologise for that comment.

💬 Todd McClay: I apologise.

That speaks loud, does it not?

The CHAIRPERSON (Lindsay Tisch): I have ruled and that is the end of the matter. Proceed with the debate.

So their first Budget was supposed to be mana-enhancing. There was no such mana-enhancing in working-class communities. Their second Budget was called “the road to recovery”. All we got to see was the dead-end. All we got to see was the dead-end, because what they did was they fixed the tax rate so those on the highest income got the biggest chunk of the tax cut, while the rest of working-class New Zealanders got GST increases. That is what we get from this Government.

We also heard last year about a brighter future. Where is the brighter future for 160,000 people unemployed? Where is the brighter future for people who are jobless and who would work—and I am referring to the changes in the Taxation (Budget Measures) Bill here in clause 3—where are the changes? Where is the brighter future for the people who are jobless, want to work, but cannot find a job? This Government says it is on the road to recovery. Well, the recovery continues. There is no such recovery for working communities who are struggling to make ends meet. The only recovery that many of the community are experiencing at the moment is coming from Australia—the 50,000 people who are going there, 1,000 every week, is what we are seeing.

The CHAIRPERSON (Lindsay Tisch): Part 1 is a very succinct part, and I bring the member back to it. Just concentrate on Part 1.

Part 1 amends the Income Tax Act. The 50,000 people travelling to Australia do not see a future, because this Government keeps taking from them the very little money they have. So there is no brighter future. When we read clause 4 in Part 1, “Amendment to Income Tax Act 2007”, what future is there for this mother who is saying that her young son is earning money, trying to scrape by and saving? Perhaps this money goes towards the cost of the uniform, but all they are hearing from this Government is that it will take away the very little money they are earning.

I do not think this Government has any understanding of the struggles that our communities are going through. I suppose it is because the Government does not understand that $3, $5, or $10 to a low-income family is worth so much more than it is to those who earn quite significant amounts of money. I suppose that Ministers, who earn over $200,000, probably have no idea of the struggles of a young boy who, in this case, is earning $5 a day on average. They do not understand what this young man is going through.

So I am saying to this Government that we should have been debating ways of ensuring that families who are struggling do get money in their pockets. Families having money in their pockets and being paid decent wages are the sorts of debates that we should have been having tonight. But, no, all we have is a Budget that does not provide any hope to young people who want to get an education. It does not provide any hope for people who are unemployed at the moment and who want to be able to find jobs. It does not provide hope to people who want to see New Zealand grow.