Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill

Part 2 of the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill relates to excluding price increases from required CPI indexation of, or related to, social assistance. I was not on the select committee that considered this bill, being a member of the Health Committee, not the Finance and Expenditure Committee, and I have to say it is a pity that the chair of the Health Committee used his call to take a closure motion, rather than to offer a substantive contribution to the debate on Part 1. Maybe he will offer more substance on Part 2.

What I understand the point of Part 2 to be is to ensure that the excise tax increases result in a significant real-term increase in the cost of tobacco for the people who receive income in any of the ways captured by Part 2 of this bill. The income that we are talking about here concerns people who receive income that is related to the Children, Young Persons, and Their Families Act or to the Education Act 1989, with that being student allowances; people who receive money through Working for Families; people who receive money through New Zealand superannuation and retirement income; people who receive social security money; and people who receive money through the War Pensions Act.

So what this aims to do is to ensure that the increase in the cost of tobacco is not factored into any increases in those benefits or allowances and thus will not offset the increase of the tobacco, so that in real terms the price of tobacco goes up. That is a perfectly fine concept except for the fact, as Treasury points out, that one of the unfortunate aspects of a tobacco tax increase is that it is regressive. It affects the people on the lowest incomes the most and, indeed, it will certainly affect the people who receive their income through any of these measures.

However, it will also affect people who receive their income through wages but who are also on low income. However, people who receive their income through wages will be able to argue that the increase in tobacco excise results in an increase in the Consumers Price Index, and they will be able to bargain for a wage rise as a result. It will certainly be factored into wage bargaining around the country. So what you get, in effect—

💬 Dr David Clark: Two tiers.

—is a two-tiered system. Exactly—thank you, Dr Clark; you knew what I was going to say. It is a two-tier system whereby people who receive an allowance or a benefit or a pension that is funded through taxes are going to have their ability to offset this increase in the cost of living reduced, or, in fact, negated, whereas those people who earn wages are not.

I guess it is similar, it is analogous, in a way to the way the Government is behaving around other people who receive a benefit. So, for instance, the Government has said that women who receive a benefit will be able to get free contraception. In fact, in an interesting act of eugenics, their daughters will also be able to get free contraception. But it is not all women on a low income, or, indeed, all women. It is singling out people who receive a benefit. Likewise, parents who receive a benefit will now be required to send their children to early childhood education. It is not everybody. It is not making early childhood education compulsory for everybody, but it is singling out for special treatment people who receive a benefit, and this is another instance of the Government doing that. It is singling out people who receive a benefit, stigmatising the fact that they receive a benefit by treating them differently from everybody else. It is unfortunate that this bill continues that theme that we have seen from this Government.

One thing that I find particularly interesting is the fact that this bill will pick on our veterans who receive a pension by way of the War Pensions Act. Interestingly, the Minister of Veterans’ Affairs is in the chair at the moment, and he might have some thoughts on this. This amendment to the War Pensions Act precedes much more significant amendments to the War Pensions Act that veterans have been calling for, for some years now. In fact, the Government has had a report in its hands for more than 2 years indicating how it could carry out the amendments to the War Pensions Act that are required in order to make it more equitable and fair on those veterans who served before 1974, when ACC was introduced. Those are the types of amendments that veterans want to see made to the War Pensions Act, not this amendment, which will curtail any increase that they might get to their pension to offset the increase in tobacco taxation—the increase in cost for their cigarettes.

I understand what this part is about, what it is trying to achieve. It is trying to ensure that these tax increases result in a real price increase. I appreciate that, but, once again, rather than ensuring that is the case for everybody, this Government is ensuring that it particularly picks on the people who receive a benefit—not just the people who receive an unemployment benefit or a sickness benefit or an invalids benefit but even the people who receive New Zealand superannuation, and even the veterans who have served our nation overseas, put themselves in harm’s way, and received injuries or illnesses as a result of serving our nation over many decades and in many conflicts around the world. This Government is going to pick on them by telling them it is going to make sure that their pension cannot be increased as a result of the Consumers Price Index indexing that would be linked to this bill. It comes as no surprise—no surprise—that once again this Government picks on anybody who receives their income in that way. It is stigmatising them and singling them out in the way that this Government knows how.

Although we understand the point behind this part, we have to point out the inadequacy of the way the Government has done it, and the fact that, once again, people who receive a benefit or Government assistance are being singled out by this National-led Government.

I want to start by labelling this part of the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill as what it is: it is a cynical political move. It is a very, very cynical political move. Part 2 of the bill is shameful. Government members should be embarrassed by this. We know they are embarrassed, because they have not taken any calls. We have not heard a word out of the Minister in the chair all evening. We have not heard a word about this part of the bill. We saw no one attempt to get up to speak to it from the Government benches. They know that this is simply cynical politics and that it is difficult to defend.

How do we know that it is cynical politics? Well, we need look no further than the regulatory impact statement, which was published in April 2012 in order for Ministers to consider this legislation. In April 2012 the advice was written, and the policy that the Cabinet considered appears to have no mention—no mention at all, as far as we can see—in the regulatory impact statement of this measure to target those who are dependent on welfare to feed their families and to go about their daily business. We know that this has been added on subsequently. It has been put in place to make sure that an extra kick is put in to distract from the wider impact of this bill.

This is not atypical of the Government. We know that this is a pattern. We have seen it happening. We know that whenever bad news comes around, there is more drug testing for beneficiaries, there is compulsory early childhood education, and there is a range of other measures, which the Government has subsequently admitted it cannot actually put into place but it uses as a distraction. Here, again, we have a targeting measure for beneficiaries, one that makes sure they will suffer the most. They will suffer the most. All of those who are smokers will suffer as a result of this legislation. All of them will face increased prices. But this Government is determined to make sure that those who are on hard times are kicked while they are down, because it believes that that is what is necessary in order to change the world.

Well, we disagree. We on this side of the Chamber have a more optimistic view of human nature. We think people actually want jobs, and if this Government had not lost so many jobs, if it was not sending 50,000 New Zealanders a year to Australia, then, actually, people would have jobs and they would not be affected by this Draconian measure, which will make it much harder for those on benefits than for anybody else to afford the substantial increases in tobacco prices that are proposed in this bill.

Treasury, in its regulatory impact statement, recommends the revenue grab of $528 million, which the Government conveniently wants to adopt because it is well aware that there is a hole in the books as a result of the worst economic record in 50 years, which this Government has perpetrated. The regulatory impact statement says that “The Treasury favours a sequence of regular modest, and well-signalled increases in tobacco excise. This is likely to contribute most to a long-term and sustainable strategy to reduce smoking rates.” There is a little bit of inconsistency with an earlier part of the advice, but for the greater part this is good Treasury advice. The regulatory impact statement does say that “In taxing a group of consumers that are addicted and disproportionately drawn from Maori and lower-socio economic communities, the Government should ensure that programmes to educate and support smokers to make successful quit attempts are adequately resourced, well implemented, and effectively designed and targeted to reach high-risk groups.”

That is not what we see here in this bill. We do not see anything here going towards meeting the needs of those most affected. In this bill, which is cynically targeted at those who are struggling the most, we do not see any additional measures signalled—none whatsoever—to make sure that those groups that are targeted are given assistance to give up smoking, which we all know and accept is so harmful. So that is why I say that this is a cynical political move. We have seen so much of it from this Government. It is very good at sideshows and distractions, because it is very nervous. It is very nervous about what the polls are showing. The polls are showing that its poor economic record, the scandals around the Dotcom affair, the scandals in the ACC system, the inability to tackle the big issues, and the focus on tinkering are doing it no good—doing the Government no good whatsoever. That is why it is coming back to these cynical strategies, which target and kick those who are down.

The Treasury advice was to put additional measures to support those—

Malo ni, Mr Chair. To use a word that David Clark used, Part 2 is a cynical and poor attempt by the Government to make it look like it is trying to do something for the public good in this bill, the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill, to stop New Zealanders smoking. It is a poor and cynical attempt at trying to make the Government look like it is trying to do something to cut down smoking within New Zealand.

It was an honour and a privilege to sit in the 49th Parliament on the Health Committee, chaired by Dr Paul Hutchison—I look around me and I see Iain Lees-Galloway, who was on that committee, and Kevin Hague, who was on that committee—and to take some real action against tobacco companies and actually remove tobacco displays from our shops. As you see, if you go to a service station or a dairy today, you will notice that there are no longer any displays for tobacco or for cigarettes. It was an absolute pleasure to be on that committee as we worked across this Parliament—apart from the exception of maybe a couple of ACT MPs who voted against that legislation—to take some real action to reduce the number of Kiwis starting to smoke and to make sure we get as many Kiwis quitting smoking as we possibly could.

But this bill, and especially Part 2 of it, is not motivated by trying to reduce the number of smokers or to stop people starting smoking. As a number of my colleagues have said, this is simply a cash grab. It was said that this Government is trying to get its mitts on $528 million over the next 4 years because of its failed economic policies, and the fact that it could not and has not raised enough money to come through with its policies. So that is what this part, Part 2, and what this bill is really about. Is it motivated by cash revenue, by trying to raise revenue, or is it motivated by trying to reduce the harm that smoking causes in our communities?

I want to take a quick look at the Pacific smoking numbers. As Iain Lees-Galloway said in Part 1 of the debate, just below one in five New Zealanders are smoking, and unfortunately for the Pacific community it is over-represented in the smoking statistics, because 27 percent of Pacific adults are smokers. Unfortunately for Pacific men, that number is 34.5 percent, so one-third of Pacific men smoke, and one in five—just over 20 percent—of Pacific women smoke. In terms of the revenue that is going to be gathered from this bill, it is surely the Pacific community by its over-representation in the numbers of smokers that is going to be over-represented in this. Every year 100 Pacific people die because of heart disease come about because of smoking in that community, 30 die of lung cancer because of their smoking, and 23 Pacific people die from strokes because of the fact that they have been smoking. So smoking does have a disproportionate effect on the Pacific community, and that is why we want this bill to actually take some strong measures, motivated by public good—public health good—to make sure it takes some swift action and decisive action to make sure, at least from the Pacific perspective, that those numbers could be reduced.

We could actually use some of the $528 million that is going to come via this bill by increasing the excise tax by 10 percent in those 4 years, and hypothecate it to make sure it is going into smoking cessation programmes and into preventing young Pacific Islanders taking up smoking. Those statistics that I pointed out before are just awful. Being a Tokelauan, it is the worst of all Pacific nations in terms of smoking, because 42 percent of the Tokelauan population are smokers. So as someone from that community, I think we really need to make sure we are targeting our Pacific people—a large and growing population in New Zealand—to make sure we are doing as much as we can to use some of this money that we are raising to target them to say “Don’t start smoking.”, or to take steps to reduce or stop smoking. I do not think that this bill is motivated by trying to decrease those numbers.

It is a great pleasure to have a short call on this Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill. I would think that every perceptive member of Parliament would be celebrating the quick passage of this bill, Parts 1 and 2, rather than being cynical about it.

I want to talk just on Part 2 for a moment. If one looks at the general policy statement, it says this: “Continuing these exclusions ensures that recipients of social assistance are not reimbursed for the increases in tobacco duties. Any reimbursement for those increases would contradict the reason for making them, which is to discourage smoking.” And we all know that an excise tax is probably the most effective measure in diminishing smoking in this country.

But I want to say a little bit more. This bill is just another step forward in many steps towards achieving a smoke-free New Zealand, and under National there have been some very significant steps. Firstly, there is the fact that we have made diminishing smoking one of the very successful health targets. This has had a huge impact over the last 2 to 3 years. Secondly, we have put more money into Quitline funding and counselling. Thirdly, as I speak, tobacco displays are disappearing throughout the shops and supermarkets of New Zealand. And fourthly, of course, we have backed that up with 4 years—one year after another—of 10 percent increases in the excise tax, which will be a hugely significant step towards diminishing smoking in this country.

This bill is not to be viewed cynically; it is to be celebrated as a great public health measure.

Part 2 of this Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill is what is currently under debate at the moment in this Chamber and I need to raise some questions about Part 2 because my colleagues have raised some significant points in previous contributions, but I am not sure that everybody watching this debate understands what the significance of Part 2 is.

Part 2 of this bill excludes the price increases on tobacco—these ones that happen, the 10 percent increase, on 1 January every year for the next 4 years. It excludes that price increase from the basket of goods that are considered when calculating the Consumers Price Index. When calculating how much the cost of everything has gone up this year, and therefore what the Consumers Price Index should be in order to bring up people who are on benefits, whose benefits are CPI indexed, people go out and they work out what people spend their money on. What do people spend most of their money on? Well, they might spend most of their money on food, they might spend some money on petrol, they might spend some money on childcare, they might spend some money on clothing, they might spend some money on alcohol, and they might spend some money on tobacco. And so in this legislation the basket of goods, whether it is fruit and vegetables, chicken or meat, or all those other things that are put together in order to calculate what the Consumers Price Index should be, will leave out the expenditure on tobacco. And who for? For people who are receiving payments under the Children, Young Persons, and Their Families Act—payments to the people or organisations that are providing care for children—so that is the caregivers. It will take out anybody who is on a student allowance. It will take out anybody who is getting Working for Families entitlements. It will take out anybody getting New Zealand superannuation. It will take out anybody who is receiving any of the main social security benefits. It will take out anybody in long-term residential care, and it will take out people whose income comes from veterans pensions.

So the point of this, if I understand it correctly—I am just looking in the direction of the officials for a moment—is that the CPI basket of goods that is assessed on what most people spend their money on, and how much that has gone up compared with last year, will exclude tobacco for people on benefits, those benefits I have outlined and those other payments and entitlements I have just described. In other words, if you spend a lot of money on tobacco, or if people generally spend a proportion of their income on tobacco, that will not be taken into account for the purposes of calculating the CPI and thereby raising people’s benefits.

This is a device. It is something that could be excused, that could even be justified, but my question to the Government is, where is the consistency? Where is the consistency? If tobacco is bad for people and this is a health measure, then why not exclude it from the CPI indexation across everything, not just the benefits that people are going to have to live on in order to survive?

The CPI is important for wage negotiations. Unions go into wage negotiations on behalf of their members, wanting to compensate for the Consumers Price Index and the increase in prices that have happened in the previous year, because unions do not want their members’ incomes—wages and salary—to fall behind prices. Therefore, the Consumers Price Index is important. It is important to wage and salary earners, as well. So why is this tobacco provision being applied to beneficiaries only? I ask the Minister in the chair, Anne Tolley, if it is a good thing to do, then is it not a good thing to do for everybody? If this is a health measure, would it not benefit everybody’s health?

I can understand the import of excluding it from the CPI calculation, but what I cannot understand is simply targeting benefits in that respect. That, to me, does not make sense. If any member opposite says that I am wrong about this, that I have got the wrong end of the stick, would they please get up and take a call because it needs explaining. I ask whether the Minister who moved this bill, Tariana Turia, could get up and make some explanation as to why only beneficiaries are going to have this item excluded from the basket of things that go into a CPI calculation—in other words, their benefit will go up by the CPI, but not by as much as it would if it were taking tobacco into account.

So I can see that the Government saves money in the process, but why is this being applied only to beneficiaries? This is the kind of discrimination that I thought we were not tolerating in this country, but now perhaps that the gap between the rich and the poor in New Zealand has become so pronounced, and the people on benefits are so much at the bottom of the heap these days, the Government has decided that it does not really matter how they are treated any longer. All we hear about is social obligation; all we hear is what people ought to be doing for themselves. When their lives hit some rough patches the Government’s expectation is that they will pull themselves up by their own bootstraps and correct their own circumstances, which is not always possible.

However, the Government is blind to that kind of consideration and simply makes this exclusion of the price increases from the required CPI indexation related to social assistance. In fact, those are the words on the page, “related to, social assistance”. If a member opposite can contradict that for me, please get up and tell me I have got it wrong, but that is what I read on the page. I see all the members opposite studiously looking down and busy doing work so that they do not have to look as if they are responding or listening. I would like somebody, a Minister, any Minister—

💬 Hon Judith Collins: Are you voting for or are you voting against it?

—Mrs Collins—any Minister, not just the Minister in the chair although I would welcome her participation, but also the Minister interjecting, I would welcome her clarification around this, as well. It seems to me that it is discriminatory. It is not fair. It is bashing the people at the bottom of the heap again, and somehow this Government is going to turn it into a health measure. When you are at the bottom of the heap and you are struggling to survive on care payments or benefits, then, quite frankly, the health inequalities that descend upon you are insurmountable and they become almost the last thing you are able to contend with as you are busy trying to make ends meet.

I would welcome the intervention of any National member here to correct me in this respect. If I am not wrong, then this is discriminatory. This is not reasonable, and it is simply another example of this bill being a tax grab and not a health measure. Thank you.

I just want to follow on, as I said in Part 1, from that great speech from Maryan Street by saying that this measure is more than cynical, it is one of the most outrageous alignments of officials under Ministers’ directions in not recognising that. I want to go with what I read out in debate on Part 1 in relation to this: “The analysis has not included a range of other issues due to time and resource constraints. Key gaps in the information include—overall economic and fiscal impacts on smoking (eg: health …”, and it goes down to “the fiscal costs of publicly funded health and disability services linked to smoking; or fiscal offsets such as reduced superannuation and aged-care expenditures due to the lower life expectancy of smokers)—impact on the economic welfare of smokers and their families;”.

As Maryan Street says and suggested, this is an incredible situation where beneficiaries are being more than bullied, they are being separated out. Why do we not do the same thing to the lawyers and accountants in this country? They all have lips and lungs that suck in the smoke. Why is it so different that it should be left to beneficiaries? In the sense of the redistribution, if you are going to hold $528 million, and the $170 million that the Minister in the chair, Anne Tolley, said in a speech today that she saved from building the big prison, where the hang are we going? That is nearly $700 million. Where is that going to? Is it going to fill up the potholes on the way to the golden mile above Auckland? Is it going to do other things? I join with Maryan Street and say that this is callous—

💬 Todd McClay: That’s not a picture I would like to see, Pare.

No, no, there are people in Rotorua who smoke and people down in Clendon who smoke. There are a lot of people there who are beneficiaries, and you have not done too well as—

The CHAIRPERSON (H V Ross Robertson): Order!

Those people there have not done very well. When you are running at an unemployment rate of 15 percent for Māori and Pasifika people, and 74 percent of them are smokers, where do you get the relief or the recognition in relation to ensuring that the tax grab is at least redistributed amongst some of those people?

💬 Hon Judith Collins: Are you for it or against it? Which one? I’m just checking.

That member over there can chortle and laugh and chatter and clatter, but at the end of the day this is outrageous. This is terrible.

I want just one of them, including the Minister, to take a call and tell me why—as Dr Hutchison will always suggest—beneficiaries and superannuitants are sorted out in isolation. Why not the other people? Why not the lawyers and accountants in Parnell? Why not the ones who live around Massey University, all those academics? Why not them? Why just the beneficiaries? Their life is so tortured anyway that they jump on the plane and they go to Australia. You just slip this through.

I want to mihi to the officials. They are hard-working people, but they are clearly under the Minister’s directions, because that is the same Minister who said that he did not support this—“Wīremu Pākehā”. That is what he said. He did not support the smoking issue when we were trying to put it through. I want to thank the past Labour Government for ensuring that all those people who puffed smoke around you in restaurants and bars had to comply, and we were bold and game enough to do it to everybody, not just the beneficiaries. We made sure that everybody who went in there had to comply, and it was recognised that this was everybody—as the great preacher says, all the sinners. So let us not deny it and say that some are and some are not. That is what is happening in this Part 2.

It is outrageous. Poor old beneficiaries, poor old solo mums, and poor old superannuitants. And then there is this callous statement that there could be some fiscal adjustments because of lower life expectancy. What the hang do you think, if you let people carry on smoking? You cannot have Quitline when you run around the country saying: “Yeah, we’ve got broadband in.”, but it cannot even pay for its phone bill. That is the free 0800 number that these people have. So I think Part 2 of this bill is one of the most—

💬 Todd McClay: Dastardly.

—interesting parts—advance your vocabulary, “Mr Dastardly”—in relation to setting to on those who have—

Kia ora, Mr Chairperson. Ka pai. It is an honour again to follow the Hon Parekura Horomia. I have certainly drawn the long straw tonight in getting to follow his fabulous speeches, which get to the nub of the matter and the discrimination that is being put forward in this particular part of the bill, the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill. Of course, we should not lose sight of the fact that this is actually a step in the right direction, in terms of the overall bill. But this part, for those who are listening at home, is a part of the bill that is aimed at targeting beneficiaries and making sure that life is tougher for them than for anybody else.

The overall bill, of course, attempts to make sure that the increases in tobacco pricing reduce the incidence of tobacco-related harm, and that is the good part of the bill. We know that National opposed such measures when it was in Opposition, so we are a little bit suspicious, of course, of the timing, now that it has a great big fat revenue hole that it is trying to fill. We have heard no word at all from the Minister in the chair through the whole debate, and we are beginning to wonder whether there is no response to the accusation that this is a revenue grab. It seems to be pretty jolly clear that it is, and I guess the Government is too embarrassed to even try to argue otherwise, and that is consistent with what this Government is doing.

We have heard about the tax on paper boys, the tax on cleaners in schools, and so on, which are the moves the Government has taken in order to make sure that it is grabbing taxes wherever it can, because it does not have a plan for the economy. The Government does not have pro-growth tax policy proposals. It is not proposing to put taxes in place that would support manufacturing industries and would support our exporters. Instead, the Government is determined to get tax where it can off the vulnerable and to run down our public services through a reduced tax take and ever-reducing budgets. We know that the Government has the worst economic record in 50 years, and so it is no surprise in some ways that this tinkering bill is a little bit cynical and nasty at points.

We know, also, and this is in some advice that we received in the Finance and Expenditure Committee, that the tobacco industry, of course, will find ways to mitigate the impact of tobacco tax increases. It will smooth the transition to higher prices, introduce lower price brands, and so on. It is documented behaviour that the researchers put in front of us in the select committee hearings. Unfortunately, those on the very lowest incomes, those who are beneficiaries, whom this part of the bill targets, will not have the luxury of riding out price increases in the same way. We know it is likely that some families will suffer. When we live in a situation where a large portion—25 percent—of the children in this country are living in poverty, it is disastrous that no commensurate measures are put in place to address this issue in the beneficiary population. The fact is that the budget will be tighter again for them, but no additional measures are put in place to ensure that they have the tools and support necessary to kick this damaging habit.

I want to put on record again that the Labour Party does support this bill overall because it is important that we reduce tobacco-related harm. We are glad that the scales have fallen from the Government’s eyes. It is a shame that it took a great big revenue hole to make that happen, but the scales fell from its eyes in order to see the need to increase the excise on tobacco, thereby reducing over time, as the research tells us, the incidence of tobacco-related harm. We know that where there are support measures in place, the public and those affected by this kind of legislation will support it. We know that the Government is choosing in Part 2 to put an additional burden on those who are struggling the most, but choosing not, at the same time, to put additional support measures in place. That is why this part of the bill is an embarrassment. We know it was a late political fix, a late political addition, because it is not spoken about in the regulatory impact statement that was considered by Cabinet. It is not considered in there. It is a cynical move to target the most vulnerable.

I would really like to hear some attempt at justification from the Minister in the chair. We have heard nothing all evening from the Minister in the chair about this measure. We have heard very little from the Minister in the chair indeed—

I move, That the question be now put.