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

I move, That the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill, the Children, Young Persons, and Their Families (Indexation—Budget Measures) Amendment Bill, the Education (Student Allowances Indexation—Budget Measures) Amendment Bill, the Income Tax (Working for Families Indexation—Budget Measures) Amendment Bill, the New Zealand Superannuation and Retirement Income (Indexation—Budget Measures) Amendment Bill, the Social Security (Indexation—Budget Measures) Amendment Bill, and the War Pensions (Indexation—Budget Measures) Amendment Bill be now read a third time. I am really pleased to be able to stand and talk about something that the whole of the House generally agrees on. First, I would like to thank my ministerial colleagues, particularly the Hon Chester Borrows, for their assistance in the second reading and Committee stage of this legislation, and I want to again mention the professional commitment and passion, way beyond the call of duty, of the health officials who championed tobacco reform.

There was a statement made to the Finance and Expenditure Committee by the coalition End Smoking NZ trust, which places this bill in a proper context. The trust saw this bill as a means to correct the market failure that has resulted in the death of some 200,000 New Zealanders since 1950. According to the trust, the high profits gained from the sale of the product, which continues to kill 5,000 New Zealanders every year, suggests that prices should be capped and profits recovered as excise. It was a message that in various forms was replicated through the submissions of the 94 interested groups and individuals who so generously contributed to the debate. In fact, the great majority of submissions—75 out of 94 received—recommended higher excise tax increases to reduce smoking even further. Repeatedly the committee was told that increasing tobacco tax is the single most effective measure to reduce tobacco consumption. In essence, that is why this legislation is so important and I hope it will receive the right support right across the House.

I am pleased that the speeches made by members throughout previous stages have been supportive of our goal to address the enormous harm that is caused by smoking, which is by far New Zealand’s leading avoidable cause of serious illness and premature death. I accept the healthy scrutiny that all parties take up in relation to discussions around revenue gathering as part of the core parliamentary debate. I want to give my solid assurance to this House and to the public that I have never considered tobacco reform to be important because of the revenue that is gained from higher excise. We should not play politics with such a serious issue. In actual fact, if our goal to make New Zealand smoke-free by 2025 is achieved, tobacco excise revenues will be significantly reduced over the longer term. There is only one universal goal in my mind and that is to reduce tobacco consumption, and in doing so we are literally saving lives. What greater goal can there be?

Modelling referred to by the New Zealand Medical Association suggests that if smoking was eradicated from our country, it would see an overall increase in the life expectancy of Māori and Pasifika by 5 years, and 3 years for others. Increasing tobacco excise is a critical lever to raise the retail price of tobacco products. This provides a strong signal and financial incentive to dissuade people from smoking. It is effective, it is immediate, and we know it works. Increasing tobacco excise definitely impacts on our young people who might be contemplating taking up smoking, because we know that they are very responsive to price.

Secondly, lifting the excise provides all smokers with another trigger to quit. Not only can they avoid the high risk of tragic health consequences from smoking, but they can save themselves sizable sums of money. I heard the most wonderful story from one of our Whānau Ora collectives, which described a w’ānau in Taumarunui who came together to chart out a plan for their future. They had an overwhelming desire to own their own home, but on their income projections that simply was not going to happen fast. So they looked around, and they realised that they were all sitting on a significant source of revenue: their cigarette addiction. They literally took the power into their own hands by improving their health while at the same time increasing their savings and their potential for buying their own home. They quit smoking, they joined their savings together, and they are well on the way to homeownership.

Thirdly, the rising cost and increasing unaffordability of smoking provides those who have quit or are struggling to stay quit with reinforcement to stay strong. The basic framework of this bill as announced in this year’s Budget is to provide for four 10 percent increases in tobacco excise, to come into effect on 1 January in each of the next 4 years. In practical terms, it means that an average pack of 20 cigarettes will cost over $20 in 2016. The mechanics spelt out in the legislation provide for these new annual increases in tobacco excise and excise-equivalent duties to be made in combination with the existing processes available to keep pace with inflation. This is an important mechanism to maintain the value of the tobacco increases and the unaffordability of tobacco products in real terms.

This bill will ensure that the financial incentive against smoking is not watered down through the cost indexation of social assistance payments. Exactly the same thing was done in April 2010, when the last excise increase went through under urgency, so I have to admit to some surprise at the arguments that have been raised by Mr Lees-Galloway during the debate. It makes no sense to raise tobacco prices on the one hand in order to reduce tobacco consumption, only to then factor the increase in tobacco prices back into the calculations used to keep social assistance payments in pace with inflation. Of course we are sensitive to the impact that tobacco excise increases will have on those who are unable or unwilling to quit, but what the proposal in the bill does is strike a balance that does not unduly punish low-income smokers or their families, while ensuring that there is a strong incentive for them to quit and thereby significantly boost their disposable income. The Government provides a range of services and subsidised treatments to help smokers quit, and I am very mindful that there is always more that we could do.

I have been very impressed by the bold steps that have been taken by the Queensland Government that make it illegal for people to smoke in cars where there are children. From 1 January 2010 anyone over in Queensland who smokes in a car with children has been liable to a $200 fine, the rationale being that the level of tobacco smoke inside a vehicle is very high and that young children involuntarily exposed to tobacco smoke in confined environments have significantly increased health risks, including bronchitis, pneumonia, asthma, ear infections, and sudden infant death syndrome. Queensland also has extensive smoking bans in outdoor areas, including beaches, sports facilities, and children’s playgrounds. So there are plenty of ideas for us to consider in our quest to be smoke-free by 2025.

Finally, I want to note two recommendations that the committee has made in its report on this bill—namely, to monitor closely the progress that will be made over the next few years towards the goal of a smoke-free New Zealand by 2025 and implement further excise tax increases after 2016 if its achievement is in doubt, and to undertake work to access the compatibility of New Zealand’s duty-free tobacco concession, with the goal of achieving a smoke-free New Zealand by 2025.

I absolutely believe that we must search far and wide for all the avenues that we can use to reduce tobacco consumption and exposure to tobacco. I am proud that this Parliament is having the courage to increase the price of tobacco as one of the key levers of our comprehensive tobacco control programme. Although the increases in tobacco excise in 2010, 2011, and 2012 have reduced consumption and prompted thousands of smokers to quit, we cannot and we must not rest there. That is why this bill is needed, to bring in a further series of annual 10 percent increases over the next 4 years, and that is why I commend this bill to the House.

I rise to support this legislation. I listened intently to the third reading speech of the Associate Minister of Health Tariana Turia. The Labour Party is wholeheartedly in favour of the bill that was Part 1 of the original Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill. We are less wholeheartedly in favour of the legislation that was Part 2. I want to elucidate that shortly. We will support Part 2. Certainly there is no argument from the Labour Party as far as Part 1 is concerned, where this excise is used to reduce tobacco consumption. It is one very valid way and one very effective way of reducing consumption, particularly to discourage new smokers—young people, in particular.

I want to use some reference from the regulatory impact statement from Treasury, when it was considering, and advising the Government on, this measure. Treasury said: “There are three broad reasons for taxing tobacco: raising revenue, addressing negative financial ‘externalities’ from smoking”—that is what Treasury calls it—“and discouraging tobacco use for social policy reasons”.

The bill that was Part 1 addresses quite properly the social policy reasons. There are very profound health reasons for increasing the cost of tobacco. In fact, Treasury says that there will have been a very substantial impact between the years ended June 2009 and June 2012 on tobacco volumes. They are forecast to have fallen in that period by 20 percent, which is a good thing, following a 38 percent increase in price. We in the Labour Party absolutely support this. This is a lethal drug. It is legal and it is lethal, and if there is anything we can do to discourage people, particularly young people, from taking it up, then it is incumbent on this Parliament, in my view, to do so. And so we have no issue at all in supporting the Minister entirely in her efforts for the social policy reasons.

The concerns I have around this are that it is going to generate additional revenue of some, I think, $528 million over 4 years—$528 million over 4 years—with the passing of this legislation. Treasury says: “At over $1.3 billion per year, tobacco excise revenues may already exceed the direct health system costs of smoking”. That is contested by one of the latest surveys—a recent Ministry of Health study, which Treasury refers to—which estimated the health costs of smoking at up to $1.9 billion a year, or some 15 percent of Vote Health, and that estimate used more detailed information than ever before. What I really hope the Minister is able to do and to impress upon her Cabinet colleagues is that this excise should be ploughed back into health. It should be ploughed back into addressing quitting smoking, making sure that there is as little access to it as possible, but mostly assisting people even more assiduously than we do now, paying more money into the assistance for those who wish to quit smoking.

But my suspicion is that this is not the aim of other members of this Government, and certainly not of members inside Cabinet. If it were a health measure entirely, this legislation would have come to the Health Committee. It did not. It went to the Finance and Expenditure Committee because it is a revenue-raising measure. I would like to see this revenue-raising measure tagged to the health budget as additional funding to assist people to quit smoking, and then I might take some of the Minister’s colleagues more seriously in their intent. The Minister proposing this legislation has outlined her absolute commitment to the reduction and eradication, eventually, of smoking in New Zealand, and I support that entirely and I do not doubt her motives, but I would like to see more teeth in this legislation, which would apply this additional revenue to health outcomes.

I need to talk for a moment about Part 2 of the original bill, which is the bit of the bill that divides the bill up into six additional bills. We expressed some concern in the Committee stage of the bill, and I was one who expressed some of those concerns. We will support these six bills, but they raise issues for us that I think are worthy of consideration. First of all, of course, the CPI measures the rate of the change in the price of goods and services purchased by New Zealand households. Statistics New Zealand visits 3,000 shops across New Zealand to collect prices for the CPI and to check product sizes and features in order to arrive at some understanding of how much the cost of goods and services to New Zealand households has increased over the previous year.

The import of the part of the bill with six additional bills in it is to take tobacco products out of the CPI basket of goods that applies to beneficiaries of all sorts—we are talking students, we are talking war veterans, we are talking superannuitants, and we are talking other beneficiaries—and what those families might spend their money on. So the CPI indexation drops for those people and those people only. This is a way for the Government to mitigate its costs. In other words, it is cheaper for the Government to take tobacco out of the CPI indexation for the appropriations for which it is directly responsible—in other words, benefits. So all of those benefits—war pensions and all of those things that I mentioned earlier—will be adjusted by a CPI that is lower. It is a CPI that is lower by a fraction, but it all adds up to Government expenditure lowered by a fraction for those people who are dependent upon the Government for their income.

This raises issues for us, and we in the Labour Party think that it is time perhaps to review how the CPI is arrived at. It might be a useful exercise to see whether or not it remains fair and non-discriminatory to apply a differential CPI to those who are dependent on the Government for their income. Of course, there are cost impacts for Government in this, but we think that it is time that the process around arriving at the CPI could be reviewed, particularly to see whether there are items that ought to be exempted and there are items that ought to be included in the CPI and whether or not a differential CPI rate is fair and equitable.

If this is about money then, certainly, this all works in the Government’s favour. Not only does the Government get additional excise but it also has to pay out less of a CPI increase to those for whose income it is responsible. We did not do this when we were in Government. We did not exempt tobacco products from the CPI for beneficiaries. This has been something that this Government has done. What I am saying is that we fully endorse the health objectives of these bills. We will support the other objectives entirely, we will support progress of the legislation that was Part 2 of the bill, but that is not without question marks, and not without the need for some future consideration and review.

It is a pleasure to rise and speak on the legislation arising from the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill, because they are extremely important pieces of legislation, and I am glad to hear that parties on all sides of the House will be supporting them. I am not going to take issue with any particular part that I may think could be made a little bit better. I am going to celebrate the great work that this Government has done under a very effective Minister over 4 years, and to look at what realistically these changes that have been brought through in this legislation will do.

I think it is clear to everybody in New Zealand—and if not, they are deniers—that smoking is the leading preventable cause of early death. We have groups within society that are affected to a much greater degree than some others. I particularly want to recognise the work that Minister Turia has put in to this House over the last 4 years to look at changing the disproportionate overrepresentation of Māori, and young Māori, in smoking statistics. That is harm that can be avoided, and all members of this House, rather than focusing on what else could be or should be done, or how they would do it if they were still in Government, should actually be focusing on the achievements that have been brought through in these pieces of legislation.

Very clearly, this legislation will do one thing and one thing alone: it will increase the cost of tobacco by 10 percent per year each year for 4 years. At the end of that period of time cigarettes will be close to $20 per packet. That is $1 per cigarette. For our young New Zealanders, I believe that this is one of the most important things that we can do to put smoking out of their reach. If we think about when some of us grew up, when the price was so much less, cigarettes would be shared freely around the place. I encourage you, Mr Speaker, or any other member of this House to go out to a school and walk around asking kids in the playground for $1—say “Can I have $1? Give me $1.”—and I guarantee you will not come away with very many dollars. But what this equates to was years ago “Can I have a cigarette?” was seen to be asking for something not of any value or any great cost. So I say to the Minister that these changes she is bringing into effect are going to have the biggest positive effect upon young people’s health by stopping them from starting smoking. I will come to what we are doing around helping people to stop, to support them, but stopping young people from starting smoking is the very best gift we can give them, in so far as these pieces of legislation are concerned.

Statistically, we know that a 10 percent increase in the price of tobacco equates to a 4 percent decrease in consumption, and therefore, with this legislation, over the next few years we estimate that there will be about a 16 percent decrease in consumption. What that means is fewer people smoking, so it is not just that some will smoke less, but fewer people will smoke. Fewer will start smoking, and many more people will give up.

It is important that in doing this we continue to support those who are challenged, who are addicted to this drug and the harm that it does them. The Government—I am very proud to say—in the Budget in 2012 put in $20 million extra to assist pathways towards a smoke-free New Zealand by 2025. This is on top of funding that was put in by previous Governments. Indeed, Mr Speaker, what I can say to you is that we are making these increases, but they are in addition to annual inflation-indexed increases in excise. They follow a 40 percent increase in the price of tobacco since 2010. So our record on this, when it comes to smoking, is clear.

Each year 4,500 to 5,000 New Zealanders die due to smoking or exposure to second-hand smoke, and that is 4,500 to 5,000 deaths that can be avoided, and I believe that this legislation will help in the future to reduce that number. About 650,000 New Zealanders smoke and we know, again through surveying, that the majority of people who smoke—the vast majority of people who smoke—wish they had never started and want to find a way to stop. I recognise that it is not easy, but it can be done, and there are many members of this House who are able to attest to that.

I want to just briefly touch on some of the things, as a Government, we have done previously to decrease smoking as it stands. There has been a 40 percent increase in the excise price since April 2010. We have adopted Better Help for Smokers to Quit, which is one of our six priorities in the health sector. We now know what has happened under Tony Ryall is that 89 percent of people who go to hospital or who visit their doctors are asked about giving up smoking and are offered support. That is up from 0 percent, because this was not a target and did not happen before. In the 2011 calendar year 129,000 patients received advice on how to quit and support from their general practitioners. One of the most important things that can happen is having your general practitioner or health professional ask you: “Do you know smoking is not good for you?”, and knowing how you can stop. We have increased fines for those who sell tobacco to minors, from $2,000 to $5,000 for an individual, and to $10,000 for a body corporate. We have banned smoking in prisons. A jump of 50 percent in calls to Quitline has resulted in significant increases in funding, from higher tobacco taxes. We have increased the uptake—82 percent in those 18 months—of people who are looking for nicotine replacement gums and patches. We have included tablets that you can take to help you reduce smoking. They are now freely available from the health service.

I want to finish here with one statistic that I think is fantastic. In 1999, 15.6 percent of school-age students smoked. That is not the fantastic part. In 2011 that number had dropped to 4.1 percent. That is a wonderful decrease. There are so many more young New Zealanders whose lives will be longer and healthier. But I set a challenge to this House: 4.1 percent of school-age children smoking is still far too high. We need to work collectively together to find ways to reduce that number and to support those who smoke to not smoke.

I commend the Minister for this legislation and I thank the Finance and Expenditure Committee for its work. I commend the legislation to the House. Thank you.

I rise to support this legislation arising from the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill. We wholeheartedly, as the Labour Party, support this legislation, recognising that smoking remains the single biggest cause of preventable morbidity and mortality in New Zealand. The previous speaker, Todd McClay, referenced the importance of being positive about this change, and, indeed, we do support it. We think that this is the way to address smoking. It is very clear that price levers are amongst the most effective tobacco control measures. They make it harder for young people to start smoking, and they make it more difficult for the tobacco industry to retain its clients in this industry, which currently affects about one in five adults in New Zealand.

It is interesting, of course, to note that historically the National Party, although it is calling for support now, opposed such measures. The previous member may not recall—there seems to be a little bit of that going around the National Party at the moment, that recollection loss—but the Hon Bill English said in 2000 that the reason the National Party voted against these kinds of measures was that “It is a tax on the poorest people in New Zealand, it is an increase that is far too large, and that is why we voted against it.” He said that not so very long ago in opposing such an excise tax message. Those members may have forgotten that they had a different stance. In this case we celebrate that lack of memory from the National Party. In other cases we have been a little more critical, where the private details of New Zealanders are concerned, but in this case it is a happy thing that National members have forgotten that they opposed this kind of increase on supposedly principled grounds.

I am a little bit suspicious that what really is going on here is a revenue grab. It is actually a naked revenue grab.

💬 Todd McClay: It’s not in your nature to be suspicious.

The chair of the Finance and Expenditure Committee tells me not to be suspicious in this regard, but I am afraid his body language is not convincing, and it is a little too late because we know that the Government has a significant revenue hole. This is excise legislation we are debating here in Parliament. The Government has had a revenue hole since revenues dropped by 4 percent under its watch. Its own officials say that 1.5 percent of that can be attributed to the global financial crisis, roughly in line with other countries around the world, but that 2.5 percent of that revenue drop is directly a response to Government policy changes.

The 2010 tax switch that this Government put through, we were assured, was going to grow the economy. Actually, what we have seen is the economy, in real terms, struggling, and the only reason we have had any growth figures whatsoever is due to population growth. Real wages for New Zealand workers have gone down. These 2010 tax measures, which switched around the way who got which tax cuts and how much of the value of the produce that New Zealand made went where, were not to the benefit of the majority of New Zealanders. Forty-four percent of the value of those tax cuts in 2010 went to the top 10 percent of earners; just 2 percent went to the bottom 20 percent of earners. That is hardly fair, but what we were told at the time was that this would grow the economy and that it was broadly fiscally neutral. If you can remember back that far, Mr Speaker—and I am sure you can—we were told that it was broadly fiscally neutral. The effect has been not broadly fiscally neutral, in my opinion, because what has happened is that those revenue drops have happened, the Government is now scrabbling around, and here we have a measure that looks more like something that is to do with expedience than something that is to do with principle, when we look back on National’s track record.

I am very proud to be a Labour member of Parliament, because Labour has taken a stance on this issue that is consistent over time, that is principled, and that is actually about reducing the harm that is linked to tobacco use. So National’s stance stands out starkly in contrast to that when we see a revenue hole emerging and a different stance being taken.

The Government has had various other measures that we have seen recently in this Parliament that are along a similar line and aim to fill this revenue hole. We have seen the car park tax recently announced. I am sure we will see legislation around that before too long. We had the paper boys and we had the cleaners, and now we have a tax increase in the tobacco area. What we also know is that those who will struggle the most with this, of course—the National Party had a good point, originally—are those who are the poorest, because they have the least room to move. It will affect people who are poor the most, and Labour has some sympathy about that. That is why we have said that we would like the Government to undertake a review of the CPI and of how it is used to index Government payments and revenue. At the moment it is used in an inconsistent and sometimes a discriminatory way. For example, the bills that we are looking at today ensure that CPI minus tobacco is used for benefits and superannuation, yet the full CPI is used for annual excise tax increases on petrol. The full CPI continues to be used for wage negotiations, aged-care subsidies, inflation-indexed bonds, and various long-term contracts in the public and private sector. So there is an inconsistency here that we think should be examined. We will be supporting the measure today because, as I say, we know that this is an effective way to curb tobacco use.

One of the things that is deliciously ironic about all of this, of course, is that National not so long ago was trumpeting the entry and the jobs created by the Imperial Tobacco Group’s expansion in Lower Hutt, not so far away. At the time, it was thought that there were going to be 50 new jobs created—and, goodness knows, we could do with jobs being created in this economy. There were many, many more applications lodged for those jobs than there were places available, I understand. So we have some job growth here. Ironically, the delicious irony here is, of course, that this industry will be one of the ones that will in very short order be hit by this measure. It shows how short-sighted National’s thinking is on this and other measures.

Of course, when it comes to manufacturing, the real story is that the sector is contracting outside the primary products sector. Simply transformed materials in the manufacturing sector have contracted by 15 percent since 2008, in 2008 dollars, looking at the figures—a full 15 percent contraction in that manufacturing sector for simply transformed products, and a 10 percent contraction in elaborately transformed areas. Perhaps tobacco products fit into the primary products process category. The statistics on overseas merchandise trade, which Statistics New Zealand puts out in its data series, suggest that primary products is one of the few areas in New Zealand where the manufacturing sector is surviving.

Of course, that story is about the way in which our dairying sector carries on. Those products still have to be processed regardless of the difficulties with the high dollar that that is creating for exporters. The processing in the primary sector continues, but it is the other sectors of our economy that are really struggling. One has to wonder whether manufacturing across the board will go down if the Government continues to take a short-term view in the way it does on many issues, where it switches from one position to another. Businesses like certainty, and this issue of customs excise on tobacco is, as I say, an ironic change given Bill English’s vehement opposition to a similar change under the Labour Government. It is also ironic given the touting of these few extra jobs, which, presumably, after the $45 million expansion of the plant in Lower Hutt, will now be less secure than they were before.

To conclude, I want to say that Labour will support this legislation because, on principle, we understand and appreciate the importance of raising the price of these dangerous drugs in a way that gives people the chance over time to quit the habit. We support the measures taken to support people quitting smoking, and we hope that the one in five New Zealanders who currently smoke will find their own way out of this habit, in part because of the measures proposed in this bill and the previous measures taken by the Labour Government in its principled view on this matter. Thank you.

This is now, at the third reading, no longer one bill but seven. Part 2 of the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill, which we have been debating over some months, is now divided into six bills around indexation of benefits, pensions, and allowances. The Green Party is going to continue to support the first bill, which, really, all of the debate has been about, until this stage today. But we will oppose the six indexation bills, and I will come to that shortly. We join others in thanking and praising the contribution of Minister Turia in bringing this to the House and steadfastly campaigning on these issues. Tobacco is, as others have said, the greatest preventable cause of harm in New Zealand. Price measures—measures that increase the price—are the most effective strategy for reducing consumption and, therefore, reducing harm. So the first bill here is an absolutely sensible measure. It is interesting—I make the comment in passing—that the same argument, in fact, applies to reducing alcohol-related harm, yet we saw the Prime Minister, in response to the Law Commission’s report, immediately ruling out using price as a mechanism to reduce that harm.

There have been concerns raised in previous stages of the bill, and, indeed, in the public debate, about these measures and about what the Government’s intent was. Minister Turia alluded to those in her contribution today, because academics from the University of Otago raised the suggestion that the Government could dispel speculation that its primary motivation was about revenue raising by adding into the bill a purpose that made it clear that this bill was, in fact, about improving the health of New Zealanders. The Government has declined to take up that suggestion, and I think that is unfortunate because that will ensure that there will continue to be a question mark not over Minister Turia’s motivation but over the motivation of the Government as a whole on this issue. That speculation has been fuelled by the fact that the particular option that was chosen by the Government from those that were offered by officials for how excise tax could be increased over time to reduce tobacco-related harm was the one that had the least positive impact on health. So it is natural for the community and, in particular, the health community to wonder about what the Government’s primary motivation is.

I also draw attention to the fact that this legislation will not keep tax increases to a rate that will reduce tobacco consumption to meet the Government’s goal of a smoke-free Aotearoa by 2025. So what that means is that the Government is planning to fail to meet its objective in 2025. It is good to see the comments from the Finance and Expenditure Committee. I think the select committee is concerned about those matters. It is good to see the comments about possible other steps that the Government might take to help achieve that goal, but the easiest step would have been to take the suggested excise tax increases that would have put this country on a path to achieving that goal, and it is unfortunate that the Government did not do that.

Treasury officials in their comments to the select committee said that the reason for choosing the excise tax increase regime of 10 percent by 10 percent by 10 percent instead of that proposed by health community groups and academics from around the country universally—of an immediate increase of 40 percent in the excise tax followed by smaller increases in future years—was that it was concerned about the impact that would have on low-income New Zealanders. I think we would all share a concern about a disproportionate impact on low-income New Zealanders. But when we asked Treasury officials about what modelling they had undertaken to support their conclusion on that, in fact there had not been any at all. This was just a supposition on their part. And when we asked the health groups who worked with those low-income New Zealanders or represented those low-income New Zealanders what they thought about the assumption Treasury had made, they all supported the more aggressive tax increases of an immediate 40 percent increase followed by the others. The reason they did that, they said, when we asked them about it, was that, yes, it was true that there is disproportionate cost on low-income New Zealanders but also there is a massively disproportionate benefit both in health and in the economic gains that came from that improved health. That is why they rejected the option that was chosen by the Government.

I want to come to the six indexing bills. It is certainly the case that making tobacco products more expensive reduces consumption, but the logic that the Minister has outlined in her contribution today around the justification for these six bills fails a basic mathematical test. She said it makes no sense to make tobacco products more expensive on the one hand by increasing the tax and then giving that money back by including tobacco in the indexation for those benefits and allowances and so on. Unfortunately that is not how the trade-off works. That is not the linkage between those two things. These six bills, which remove the increase in tobacco excise from the CPI for the purposes of indexation, effectively erode the incomes of all New Zealanders who receive those benefits or allowances or pensions—of all of those people regardless of whether those people are smokers or non-smokers. So it applies to all of those people in a completely non-targeted way, and it erodes their income. It is not specific to tobacco at all. What it does, instead, is to relatively increase the price of everything that they spend their money on. That is what it does. It is not a trade-off in the way that Minister Turia seems to imagine that it is. Therefore, these six bills are not measures that in anyway provide an incentive to reduce tobacco consumption. What they instead do is punish the poor, and that is not an objective that the Green Party can support. So we support the first bill and we reject the other six.

I am very happy to support this legislation, the purpose of which is to increase the excise tax to reduce smoking, to dissuade young people from being involved in smoking, and to improve the health of all New Zealanders.

I just want to touch on a couple of quick points. One area that the Finance and Expenditure Committee looked at was this whole question of duty-free tobacco sales, and the committee requested that the Government work to assess the compatibility of New Zealand’s duty-free tobacco concession with the goal of achieving smoke-free status by 2025. I did also want to note that the evidence we have had before the committee is that for every 10 percent increase in the price, tobacco consumption falls by about 4 percent. It is very interesting to me to see that the Greens and Labour very much understand that price measures are the most powerful and that taxes affect behaviour, and I do wish that they would extend that logic and abandon their constant desire to increase taxes on a whole heap of other things—work and savings—and follow that logic through to the rest of their political programme. But I support this legislation. I think it will make a great difference to the lives of many New Zealanders. Thank you.

I take a call on behalf of New Zealand First for the third reading of the seven bills arising from the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill. New Zealand First will support the first bill, the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill, but we oppose the six other bills in relation to indexation. In relation to this, perhaps we could just explain again for the benefit of the people out there who may be a little bit confused as to why there are seven bills wrapped into this. The other six bills basically serve to remove the CPI indexation from tobacco in terms of tobacco in relation to the CPI, so that those receiving increases in student allowances, those receiving increases in children, young persons, and their families support, those paying income tax on Working for Families support, New Zealand superannuitants, and also social security and war pensioners, who have the annual CPI adjustments, will find that they will not get the full CPI because the CPI will, under these bills, exclude tobacco from their CPI assessment.

In that respect, it is somewhat discriminatory that many, many New Zealanders—thousands of New Zealanders—who have nothing to do with smoking and are non-smokers, in a sense, will be receiving a small amount less in their pensions because of the fact that tobacco is going up by a significant amount—10 percent each year—but that is being removed from the equation when the CPI indexation is assessed. It is, in a sense, also penny-pinching in that this has not occurred in the past and it is most unusual for a Government to start actually pulling out and removing certain aspects of the economy in order to help balance its books. Therefore, it is being discriminatory and it is punishing many of those who can least afford even a small adjustment in the CPI indexation.

This week has been the national conference of the Royal New Zealand Returned and Services Association. It is very interesting that one of the major concerns of returned servicemen and servicewomen has been the aspect of their pensions. This Government this week has announced some measures to support the war pensions review being conducted by the Law Commission. So it is somewhat ironic that while on the one hand we are trying to assist the likes of the war pensioners, and, indeed, many other pensioners, on the other hand we are penny-pinching by making a small adjustment to their CPI because of the fact of cigarettes going up in price by 10 percent per year for the next 4 years. That is somewhat disappointing, and I think was unnecessary.

It perhaps reflects on a Government that at the moment is having to look at every last cent to balance its books, which included, as we have referred to before, taking something like $14 million from the paper girls and paper boys of this country in a new taxation regime this year. Again, it does get back to the whole concept of the “Fagin Budget”. When you start to actually attack those who are most at risk and those who are most vulnerable and cannot really stand up for themselves, such as the young children of this country, such as the pensioners, such as the war pensioners of this country, then it is a sad day.

Perhaps this would have not been necessary and these penny-pinching measures would not have been necessary had the Government not given the significant tax cuts to the very wealthy people of New Zealand 2 or 3 years ago, when several billions of dollars in taxes were returned to those who could certainly afford to pay their taxes, and as a result we are having to put up with these penny-pinching policies now. Certainly the head of Telecom did not need a $5,000 a week reduction in his tax, the Prime Minister did not need a $1,000 per week reduction in his tax, and many other very wealthy New Zealanders did not require those. So, in a sense, I am certainly somewhat disappointed in the country of New Zealand, where we have been known to be a world leader in our social welfare, and where we have been a pioneer in providing a good, healthy social welfare State and supporting those in need and giving them a hand up, not just a handout. But it is disappointing to see these six other aspects of this combined legislation, which is just basically attacking those in need who can least afford it.

But getting back on to the actual tobacco excise side of it, New Zealand First has supported the increase of the tobacco tax, but with reservations. We have said in this House before that we hope that the $528 million that is taken over the next 4 years with the annual 10 percent increase in the excise tax is not just again put into the general big black hole, the big Treasury coffers, to try to balance the books, but that in actual fact this has been taken for the purpose of trying to reduce the levels of smoking, and trying to help people with addictions in smoking, and certainly to also assist with our health aspects in terms of those affected by smoking. In that respect, we have said in this House before and we have put it to the National benches that we in New Zealand First certainly will be monitoring it to ensure that programmes are followed through, and we certainly hope that the associate health Minister Tariana Turia will ensure that funding is put into the programmes to support all those in need of support who are afflicted by smoking. That includes education and it includes resources to help with smoking cessation programmes. It includes having innovative ideas to try to curtail the level of smoking. It also means that we will have greater education, hopefully, out of some of this funding to stop young people getting into smoking in the first place.

We also want to ensure that there are other measures taken in terms of smoking, and it is interesting that there are still many areas within the smoking situation that are not being addressed—and it was raised by the select committee—such as the anomalies with duty-free cigarettes being so very cheap, and people are encouraged to bring them in. We heard stories of places, particularly the Pacific Islands and Asia, from where people are encouraged on arrival in New Zealand to buy large volumes of cigarettes for family and friends. Again, that sends the wrong message. Surely in this country, if we are trying to reduce smoking and this measure is trying to reduce the levels of addiction, then why are we not also looking at the duty-free side, which Australia, across the Tasman, has done?

Therefore, I hope the Government is not just glossing over this and is not just looking at this as one more way to make money, to make tax, out of those who can least afford it, and that it is genuinely taking this as a disincentive for people to take up or continue smoking and that it is genuinely interested in the health aspects. But we do have our doubts, and we do wonder whether the health aspects have at any stage taken any priority in all this, and whether in fact much of that $528 million will see the light of day, in terms of positive things from some of those funds. So New Zealand First will support the first bill, but will be voting against the other six bills.

It has been really an effort, because this bill, the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill, is being directed at trying to improve the atmosphere around that member’s environment—Andrew Williams, who has just resumed his seat—by pricing tobacco off his leader’s budget and thereby reducing the amount of smoke that that member has to inhale by association. I think he must be impacted by too much cigarette smoke, because it is impacting on his ability to think clearly and logically.

If the Government raises $528 million by increasing the excise tax—which I doubt very much because the whole idea is to drop that amount; we want to stop collecting excise tax on that by cutting out smoking—that money does not go into a big black hole, Mr Williams. That money goes into providing health care for the people who are damaged by smoking. If he actually studied this issue before he got up in the House and fired off cliché after cliché after cliché, he would discover that in the 1920s the connection between cigarette smoking and life expectancy was beginning to be drawn. It was only around 1932 that statistical evidence began to be collected on relating smoking to lung cancer.

The second error of that member’s logic is to assume that increasing the excise tax is always going to go into just the Government’s budget. That is not the case at all, because the Government has said: “OK, we’re going to collect more money. We want people to stop smoking. We’re going to put $20 million over 4 years into smoking cessation and helping people to stop smoking.” I think that the policies are working very well. I pick up the point that my colleague the chair of the Finance and Expenditure Committee, Todd McClay, mentioned, which is the really significant drop in young people smoking—from 15.6 percent smoking every day in 1999, down to 4 percent in 2011.

I would like to make just one point to the House as I conclude my support for this legislation. Recently I was watching some basketball players at the ASB Sports Centre at the bottom of Cobham Drive, and I heard the young people calling out the term of derision “smoker” to their colleagues who muffed calls in the game. It was really fascinating for me to listen to these young people abusing their colleagues, using this foul word.

I have no hesitation in supporting this bill. As an ex-smoker and sometime smoker myself I know how hard it is to give up. But those people across in the Labour Party know about this business of raising excise taxes. I can remember one Arnold Nordmeyer, who had his famous Black Budget. The next day my father stopped smoking, because of that tax grab. This is not a tax grab. This is an inducement to the community to stop smoking by 2025. Thank you.

It is my pleasure to rise and speak to the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill and six other bills. We will be supporting these bills. I think it is important to point out the overall ambition of these bills, and that is ultimately smoking cessation, as we understand it. It is an increase in excise that is intended ultimately to have some public health good. There is an estimate, though, that this legislation will raise an additional, as I understand it, $528 million—

💬 Andrew Little: Over 4 years.

—over 4 years. But I think it is important to clarify that at least on this side of the House it is the public health measures—the public good that is done by trying to reduce smoking amongst our communities—that drive our support ultimately for this bill and the other bills. But is that what is driving the National Government, when it comes to its support of this legislation? I think probably the easiest way to give us some sense of what is motivating the Government and driving it on these matters is voting record. That usually is indicative of where a political party’s ideological views, you could say, or you could say values, stand on these matters.

When we look at Labour’s history and record when it comes to smoking and smoking cessation, I think it is a record that we can certainly stand on with some pride. That is, of course, because not only did we focus on excise as a way to address the issue but also we looked at how you create culture change. I think that one of the most significant moves in that regard was the legislation that was pursued and defended and rigorously developed by Steve Chadwick. That was, I remember at the time, extraordinarily controversial—the idea of removing the ability to smoke in bars and restaurants. It certainly came under heavy scrutiny externally from those in industry obviously, but also from some in the hospitality industry. There was a view that it would bring down tourism, hospitality—all sorts of messages were thrown around. But because our main driver was the public good and the public health good of these measures, we pursued them with vigour. Obviously there is always risk attached when you do pursue such matters in that way, but it was the right thing to do and I do believe it has made a significant difference. I have got nothing more than my anecdotal experience to say that I think it has made one of the most significant differences in recent times to shifting our culture, to shifting the amount certainly that people are smoking, but overall to try to move us closer to a smoke-free New Zealand.

It is estimated that half of all long-term smokers die of a smoking-related illness, and about 5,000 deaths each year in New Zealand are directly attributable to smoking or second-hand smoke. It is unlike any other substance almost that we regulate in New Zealand, because we know of its dire consequences. That does give it a slight difference than alcohol. But I will come back to that point.

But let us look at National’s record on these matters when we took extraordinary urgency to increase the excise on tobacco in May 2000. Bill English—well, the National Party—voted against those measures. But Bill English specifically said, when defending his reasoning for not having voted for those measures: “The reason we voted against this measure was that the Government did not ever say that it would do it, and that is the measure it set—not us. The Government did not say before the election that it would do it—that is the Government’s standard, not ours. It is a tax increase. It is a tax on the poorest people in New Zealand, it is an increase that is far too large, and that is why we voted against it.” I want to try a little experiment here. Let us pretend that instead of this being a quote about an excise tax increase on cigarettes, and instead of this being a quote given by a National member, let us turn it into a quote about GST increases, and let us turn it into something said potentially by a member of the Opposition. I think you would find that it probably would hold: “The Government did not say before the election that it would do it. It is a tax increase. It is a tax on the poorest people in New Zealand. It is an increase that is far too large.” I think that would be a much more fitting quote for the National Government’s increase in GST than it would be for an increase on excise around tobacco.

And when it comes to increases in excise, here is an interesting point. Are those things that one campaigns on? Well, there is a reason why excise in many forms is often debated under urgency—you know, last year’s sherry taxes, alcohol taxes. There is a reason: you try not to encourage the enormous uptake of purchasing before you move an excise in a particular direction. It is a really practical reason. It is interesting, I think, that Bill English has, though, exposed at that time, and perhaps even now, where the National Government sits on these issues. Is it a tax grab? I would like to be slightly more generous than that. One thing I do know is that I have absolutely no doubt that the Māori Party has made a significant difference to the National Government’s positioning on smoking. It absolutely has, and credit where credit is due. If Tariana Turia in particular was not driving this agenda on that side of the House, I doubt we would have seen the measures that we have seen. Certainly, plain packaging of cigarettes is an issue that Tony Ryall was very dismissive of—very dismissive. And, I think, when you pull out the record of the Government on issues like that, it certainly exposes not only the Government’s lack of commitment overall but also the difference that a coalition partner has made.

One of the questions I want to ask is this: if we know that higher prices are one of the most effective tobacco control measures that we have, can we transfer that reasoning and rationale to the debate around alcohol? Both substances are associated with known harms. Obviously, in cigarettes from the first smoke to the 10th smoke there is harm, whereas with alcohol we are debating questions often of moderation, but you could argue there is immediate harm depending on your age and your station and so on, depending on who is consuming. Why, then, are we not having the same discussion around the difference that price points make for alcohol? Well, there is only one reason why we are not having that debate. It is that the Government does not want us to have that debate, and we should be having it. If the alcohol legislation that the Government is bringing before this House is the substantive opportunity that we have in this lifetime to change this nation’s culture around alcohol, as with smoking, price should at least have been part of the discussion. It should have at least been debated. The idea that we need to collect more data, I am afraid, just does not hold.

But I want to acknowledge how far we have moved in this debate—how far even in my generation. I recall when I was at school, for instance, that my basketball coach—I did at some point engage in team sports, which is something that would be known to be unusual, if anyone knows me—told me that at one period during his life his doctor had prescribed him cigarette smoking as a way to deal with anxiety issues. He had prescribed cigarette smoking! That was my high school teacher. We have moved, and we have come a long way, but we must make sure that we do not lose our drive around dealing with this significant issue.

The one final thing I wish to say is that we are dealing with CPI adjustment in this bill in a piecemeal way. Labour believes that the Government needs to undertake a review of the CPI and how it is used to index Government payments and revenue, rather than fiddle with it in an ad hoc and potentially discriminatory way. I am pleased to be seeing a little more proactivity at this point, and I hope we will be seeing a lot more.

The Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill is a good bill. It is important that we see the other parties vote for it. I was very disappointed to see their speeches though, like that last speech, which try to condemn the theory behind what has been happening in this area. But it is something that all New Zealanders wish to see, that we look after the health of our fellow citizens. This mechanism of using the customs and excise on tobacco products is a means to send the right signals out there and, hopefully, encourage people to not engage in this activity going forward.

It is easier said than done. There are a lot of cultural and historical factors and advertising that go into these products, which set people on that course. But as a Government we are making endeavours to try to challenge those behaviours in the best interests of the individuals and also of our country going forward. This is good legislation, and we thank all those people who have been involved in getting it to this stage. Thank you.

Any further speakers? The question is that the motion—[Interruption] I call Andrew Little. It is a split call—5 minutes.

This is just a brief contribution to the debate on the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill, and the associated legislation. As my colleagues have said, Labour supports this legislation on the grounds of the contribution it will make to health and to public health.

Labour has always been at the forefront of measures to improve health through reductions and disincentives for smoking. We led the way, for example, with the smoke-free workplaces legislation back in 1990, and then with the extension of that to virtually every other public place, or place where the public gathers, with the smoke-free environments legislation in the 2000s. They were very important measures.

They were difficult measures because, certainly for a lot of working people, having a smoke was seen as a reasonably cheap way of doing something that was pleasurable and luxurious, and as somewhat of an acceptable vice. But the truth is that, as we know, smoking has made an enormous contribution to negative health effects across New Zealand. Smoking was the source, or the cause, of cancers, of throat cancers, of lung cancers and many others, of hypertension, and of a range of other medical conditions. So those measures were necessary. If we wanted to address those health issues, we had to do something about smoking.

The reality is, we now know, that when it comes to activities that come with a patina of social acceptability—like smoking—if you increase the price of them, you reduce the level to which the activity is subscribed to, and there are improved health effects. That is why, as some of my colleagues have raised too, it is so disappointing that this Government can see the implications and the benefits from increasing the price of a social activity that has negative effects like smoking, but it will not do the same thing when it comes to the social activity, or at least the social drug, of alcohol.

We know that alcohol has extraordinarily negative health effects. We know that price will have an impact. We know what the research says and what the Law Commission tells us, but there is no corresponding gesture from the Government when it comes to addressing those health issues through legislating for minimum pricing on alcohol. That is just an inconsistency that we are going to have to grapple with, and deal with, as a House. The citizenry of New Zealand look to this House for leadership. They see leadership on the smoking issue and on the measures that we take to reduce smoking and improve our health performance. They see us taking leadership here today with this legislation. What a pity they have not so far seen us taking it on the measures to do with alcohol, but that debate is yet to be concluded, and maybe—and we live in hope—there will be change in that regard as well.

As I said, Labour has always been ahead on smoking issues. I remember when the smoke-free workplaces legislation was first introduced. It caused issues for employers and for their workforces, and they had to negotiate their way to manage that. I remember representing many airport workers at Auckland Airport back in the 1990s when they were prohibited from smoking in the workplace. They had to duck out the back, as so many did, for a quick shoofty in the dark, dim, cold, barren places, corners that most employers had in their workplaces. What they found at Auckland Airport, of course, was that travelling passengers, particularly those from Asian origins, who had flown for 11 or 12 hours across the continent and into New Zealand were desperate for a smoke, and special provision was made to have a special smoking room in the Auckland International Airport. Great problems were caused when the great clouds of smoke went up in the international terminal. All the workers there who were hanging out, frankly, for their smoke could not partake of it even though the passengers travelling through the airport could. It is interesting to see now that that smoking room has gone.

That was one measure that was taken, but the reality is that the underlying health problems that we still have with smoking have needed the last hurdle to be leapt, and that is the price hurdle. This legislation will do that. It will have a significant impact on reducing smoking and improving health effects. We will have to nurse those remaining dedicated, committed, and, some would say, of course, addicted smokers through it, because they will have a negative response, but the long-term effect will be good. It will be good for the youngsters in our community and for the diehards who will have to work their way through.

Other Government members have detailed the excellent measures within the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill, and I commend the Associate Minster of Health Tariana Turia for her excellent work in this area. I commend too the chair of the Finance and Expenditure Committee, Todd McClay, who has done an outstanding job of shepherding through some of the people who, for example, think that smoking is good for you and say that they enjoy it. There is one in particular on the Finance and Expenditure Committee who has taken a fairly mischievous outlook on this all the way through, but let us not relitigate all of that.

I think that this bill in its third reading actually does all that it sets out to do. [Interruption] OK, two of them smoke; that is true. This is an excellent bill. We know that 80 percent of people who smoke wish they had never begun. Once people are addicted, once they begin the process, it is a very, very difficult thing to give up. As W C Fields said: “Smoking is easy to give up. I’ve done it thousands of times.” It is a difficult process, but we in this Government are unashamedly encouraging smokers to quit. For every 10 percent increase in the price, tobacco consumption falls by 4 percent. That is good enough for me. I commend this bill to the House. Thank you.

Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill read a third time.