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

I move, That the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill be now read a first time. Each day in New Zealand, 12 people die prematurely from smoking-related illnesses—12 people. Each year smoking kills between 4,500 and 5,000 people prematurely; that is the population of a town like Foxton wiped out, off the map, gone prematurely every year. They die from lung cancer, from heart disease, and from strokes. They die from emphysema, from chronic bronchitis, and from cancers of the mouth, pharynx, and oesophagus. This relentless killer takes too many of our loved ones too soon. So the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill is about saving lives. It is as simple as that. Our family, our friends, and our whānau are dying from a habit that we can do something about in this House today. This bill raises the tobacco excise duty by 10 percent each year for 4 consecutive years from 1 January 2017. Raising the excise duty on tobacco is one of the most effective measures that Governments can take to reduce the harm caused by smoking. This bill will save lives and protect our future generations. It will help New Zealand become smoke-free by 2025.

The bill technically amends the Customs and Excise Act and also amends or affects the Children, Young Persons, and Their Families Act, the Education Act 1989, the Income Tax Act, the New Zealand Superannuation and Retirement Income Act, the Social Security Act, and the Veterans’ Support Act. The amendments contained in the bill amend the Customs and Excise Act by continuing increases in excise and excise-equivalent duty on tobacco products. This Government has already raised the tax on tobacco for 6 successive years, and, when passed, this bill will lead to a decade of 10 percent increases in tax.

So what has that meant for price? Well, 6 years ago a packet of 20 cigarettes was around $10. Today it is around $23, and by 2020 it will be around $32. What, you may ask, is the impact of that price increase? For example, what has been the effect on the consumption of cigarettes? We know that in the last 5 years consumption has declined 25 percent. Critically, it has meant our daily smoking rates have declined consistently over time, to where it now stands at 15 percent of adults, or about 550,000 people. For every 1 percent decrease in smoking rates, we see over 35,000 smokers stop smoking. That is good for the lives of those New Zealanders, it is good for their families, and it is good for our communities who live with this burden. I am particularly pleased that the price increases have had a huge effect on the uptake of smoking by children. The smoking rate for the 15- to 19-year-old age group is now under 9 percent, and for year 10 students, that smoking rate is now well under 3 percent. The increases in price have had a dramatic effect on those young people taking up smoking. So the cost to individuals and families is huge.

I spoke to a friend recently who spoke about the death of her father due to lung cancer after a lifetime of smoking. It was a slow death over 3 years, and watching him turn from a rugged South Island farmer to someone who was, basically, having the air sucked out of him by lung cancer was disturbing for this friend of mine. And those are the sorts of social impacts that smoking has, not just on the person who smokes but certainly on family members and the wider community. Over half of all long-term smokers will die of a smoking-related illness, and those who die will lose, on average, at least 12 years of their life. Those who die in middle age will lose, on average, 23 years of their lives. The benefits of quitting smoking are quite clear. For example, if you quit before the age of 40, the risk of dying of a smoke-related disease is reduced by 90 percent—90 percent. The personal cost to every individual smoker, if you smoke a pack per day, is approximately $7,300 in one year.

But the tangible costs of smoking to our country are also huge. The costs include lost workforce production and absenteeism. It costs our country about $2.5 billion just because of smoking alone. This is small in comparison with the intangible costs, which can be up to $11 billion and include lost years of life, loss of quality of life, and the effect on those relationships that I spoke about.

I want to remind New Zealanders that smoking remains the country’s single biggest health issue. It is the biggest cause of premature deaths in this country every year, and we here, as lawmakers in the House of Representatives, can make a difference to the lives of New Zealanders. This bill goes a long way to addressing this chronic health issue. Price increases through tax remains the most effective tool to address the chronic, social, and economic costs of smoking tobacco. I urge all members of this House to do the right thing for New Zealanders today and support this bill.

I stand in support of the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill, as will my Labour colleagues. But the first thing we want to ask the Associate Minister of Health for, and what we want him to put on record, is a cast-iron guarantee to New Zealanders that this is not just another tax grab. We want to know that the money from this bill—the $425 million over 4 years—will be put into public health. That is what we on this side of the House want to be assured of—that it is not just another convenient way for the National Government to achieve a constructed surplus so that it can hang tax cuts out as a carrot at the next election, that it actually cares about this issue, and that it wants to achieve this smoke-free target.

The Associate Minister has put some words forward around achieving that target. He has talked about the progress made so far, and we do want to support the Associate Minister in that. We want to support the progress that has been made, and we do support this measure to further reduce smoking, which kills so many New Zealanders unnecessarily. But we want a guarantee—a cast-iron guarantee today—that this money will not go into the consolidated account as just another source of revenue. We want to know where this $425 million is going. We want to see it help Kiwis face up to the challenge of smoking. We want to see it support Kiwis in public health and in the areas of smoking, obesity, diabetes, mental health, addictions, and so forth—those things that would make such a difference over time to New Zealand society.

This money must not go into the consolidated account; it must address public health issues, and we seek that assurance from the Associate Minister. We will seek, in his future speeches in the House, a reassurance that that is the case. When it goes into the consolidated account, we know that it disappears on pet projects. There will be some, what Mr Seymour likes to call, “corporate welfare”, where money gets dished out to the Government’s favourite causes. It might be charter schools—one of the prime forces in the area of corporate welfare in this country—where the Government’s mates are handed out some extra money to do a job that would otherwise be done in a public system, where kids would get educated if we funded them properly. But, no, the Government funds them at a higher rate, because that is one of the pet projects of that member across there, because he is in to corporate welfare like no other in this House.

He would probably see the money go into the Skycity deal, an over-the-top deal of money going out hand-over-fist. He does not even approve of this measure, he said in his press release last night, but he will be supporting it in the House. There is a member, you do not quite know where he stands on most things—well, he stands in several places, he tells us. But corporate welfare is one thing he seems determined to support. And this is another measure that it appears he is willing to support in order to get the money out that he wants for his mates. He will have also, no doubt, support for the flag referendum, for the Saudi sheep scandal, and for various other deals the Government has done that it uses money from the consolidated account for; to fund those kinds of things that are not public health measures. But here we have some more money going into the coffers. It will probably go on similar projects—things that middle New Zealand does not like but that are this Government’s pet projects.

So we will seek that assurance from the Associate Minister as this bill goes through the House—that this money really will go towards those causes: addressing smoking, addressing obesity, addressing diabetes, addressing mental health and addictions; those public health issues that would make such a difference to New Zealand’s long-term future. We will seek assurance that it will not be dangled in front of Kiwis later on as a tax-cut bribe from a Government that is more concerned with dishing out money to a very few privileged people at the top and defending the interests of those named in the Panama Papers than the interests of most New Zealanders—most New Zealanders.

So Labour will remain concerned too about the overall health picture. This is one part of it. In the Budget, we heard that the Government has continued to fund Health at below the rate of inflation and cost increases—$50 million short this year. We already know that it was $1.7 billion—$1.7 billion—short in funding over the last 6 years. That means ordinary Kiwis, middle New Zealanders, are missing out on surgeries they need; and middle New Zealand is missing out on the health services that we all ought to enjoy regardless of whether we are super-wealthy or not. This is a Government that is seeking to undermine middle New Zealand, and here we have an example where it is doing a good thing, but we wonder where the money is going—we wonder where the money is going—and we hope that the Associate Minister will be able to assure us that it will actually go into achieving the targets that the Government has set itself.

In primary health care, in this area, $14 million has been funded by the Government over the next 4 years. Here we have an example, right? It is taking over $400 million away; it is putting $14 million back into the area, we have been told. That is well short of the $20 million to $26 million that General Practice New Zealand said was necessary in order to address Government underfunding associated with inflation in this Budget. The Government is simply not allocating adequate resource in this area. The science is very clear that that would make a huge difference to the overall burden of health cost for our country. It would be the kind of investment that would see middle New Zealand benefit, not those very privileged few at the top that this Government seems so intent on supporting these days.

An excise tax is the best means of stopping smoking, and that is why we will be supporting this bill. But we do need a comprehensive plan to get to a smoke-free Aotearoa by 2025, and the experts say that we are not on track to do that, and that should be of concern to every member of this House—every member of this House. Seventeen percent of adults in 2014-15 smoked at least monthly, and 15 percent of adults in New Zealand smoked daily in 2014-15. We are not on track to achieve that smoke-free target by 2025. That is what the experts say. Government members, no doubt, will say something different in their speeches, but that is what the experts say, and we on this side of the House, we like to listen to what the people in their field—the experts—say. We do not think we know better; we actually understand that public health is a genuine issue and needs to be tackled genuinely, not just with kind words.

We want the assurances, as I said at the outset, that this money will be invested in anti-smoking programmes, obesity programmes, and programmes that improve New Zealanders’ overall health. Unfortunately, with that cut across the sector of $1.7 billion, we know that some of these services have been stopped. In my area, mental health funding has been squeezed. We know that all the NGO providers in Dunedin, for example, have been asked to take a 5 percent cut in the last year—regardless of performance, regardless of whether they are doing a good job or not. The NGO providers have all been asked to take a cut. That is what this Government is doing to the health system; it is squeezing it until there is nothing left.

What we also know is that smoking rates among Māori in particular are too high, at 38 percent, and among Pasifika, it is at 25 percent. Those are Ministry of Health statistics. Adults living in the most deprived areas in New Zealand are three times as likely to have a smoking addiction as those in the least deprived areas. This affects people across New Zealand’s spectrum. But, of course, this price hike will not affect those at the very top. They know this; they know that, for them, it can be a luxury good. But middle New Zealand is the group that will continue to suffer, because this Government does not have a real plan to achieve that smoke-free target by 2025.

We are still waiting for other measures from this Government—for example, to ban non-plain packaging—but this Government just does not seem to have the courage to move forward the bill that it has put before the House on plain packaging. It does not seem really ready to do anything about this issue. It is all window dressing; it is a measure, as far as we know, to get $425 million into the coffers to construct a surplus that it can use for its corporate welfare bribes, to try to get members of Parliament who do not even agree with the bill onside and to try to get them to vote for it, because those members know they will get something out at the other end.

💬 David Seymour: He ran out of ideas 5 minutes ago—5 minutes ago. He ran out of time.

Mr Seymour knows this is true. He will get up and speak shortly. I look forward to his tortured denial on this issue, but I also look forward more to the Associate Minister giving us an assurance that this money will genuinely be used for the public health good of New Zealanders. This Government needs to front up to the fact that it is not on track to achieve that goal that it should be achieving, of making New Zealand smoke-free by 2025.

Of course, the cuts that we have seen in this Budget will cost Kiwis’ lives. We know that in the health area. The medical practitioners tell us that. Across the medical sector, we know that this Government has made cuts that will cost lives. Pharmac, for example, got less than the $103 million that was needed. Health needed $635 million in this Budget just to keep up with population and inflation costs. [Interruption] Those members do not like it; they do not like it when the truth is spoken in this House—they do not like it at all. They are uncomfortable with the fact that they have been cutting and squeezing across the public health sector, and they cannot give an assurance that this money will actually go to public health and the public good in the long term. I look forward to hearing some kind of response from the Government on this issue.

The previous speaker, David Clark, has either no capacity himself or no research support with a capacity to read a Budget and understand what is in it. Those claims about health cuts are utter rubbish and completely wrong. This year the Budget provided an extra $1.6 billion—$1,600 million extra—for district health boards.

To suggest that this proposal is all about taking extra tax for all the things that the Labour Party does not like is completely disingenuous. The reality is that the member himself agreed that price is one of the best ways to deter people from smoking cigarettes. That is why this Government, unlike any other before, has been prepared to go out and put up the price of tobacco repeatedly, year after year after year. The Māori Party is to be commended for the way in which it has held the Government to that over that period of time. It gets our full support in doing that.

This proposal will see the price of cigarettes rise not to $30, as TV ONE reported last night, but to almost $37 over the next couple of years. That will be a serious, serious deterrent. To suggest that, somehow, the Labour Party is going to vote for this bill only if it gets an iron-clad guarantee that all the tax that comes off that will be used on these various programmes put together by their friends, the lefty experts who think they are so important in all this stuff, is utter rubbish. This Budget has, over 4 years, more than $2 billion additional funding going to health. Public health is a big winner in that. I would also point out that those experts will have no job when we reach the target of total cessation, or near enough, by 2025. So one thing I would say to the Labour Party is: be very careful about the vested interests you listen to.

My final comment is that that particular group of people has one lobby group, Action on Smoking and Health, whose staff I have found, in my time in Parliament, to be the most rude people who have ever come into my office—and they never will again. But it has not changed my view that we should end smoking as a habit in this country. I support this bill.

Before I start, what I would like to say is a big hello to my son, Charlie Nash, who is in hospital at the moment recovering. I will see you this evening, my son.

Mr Brownlee said that this Government is the only Government to increase tobacco tax. Sam, you want bold? You want bold—in 1958 Nordmeyer increased the excise tax on tobacco by 100 percent. Now, that is bold. Mind you, it did not end too well for him, but it was certainly bold.

Let us get to the facts. First and foremost, we are debating a bill under urgency to increase tax on 1 January. It has been the tradition in this House when we are going to increase the excise tax on something like tobacco, to announce it at about 2 p.m. and then get it straight through the House that evening so there is no ability to go out and hoard. Here, we are signalling 3 years in advance what is going to happen to the price of tobacco.

The other thing that was interesting was when Mr Brownlee said how much the price of tobacco is going to increase. What that is predicated on is, in fact, that the tobacco companies are going to pass that price increase on. That is not necessarily the case. In one of the University of Otago’s major studies on this, it said: “If you do it in this way”—if you announce excise tax increases in the way we have—“then what it does allow tobacco companies to do is plan.” What it also says it allows them to do is to absorb some of that cost, because these tobacco companies make a significant amount of money. What the University of Otago said—and let us take an evidence-based approach on this—is that a 10 percent increase will not end up creating a smoke-free New Zealand by 2025. What it recommended was a 20 percent increase—or a sort of ambush 40 percent increase—so people just do not have the ability to plan, to hoard, or to engage in other sorts of behaviours that will negate some of these bills. But do not get me wrong; I support this. I would be a mug not to support this.

But let us get the facts: 550,000 Kiwis smoke, and, as has been alluded to, smoking accounts for 10 percent of all health deaths in this country. This is wrong, and we need to do something about it. I would echo Dr Clark’s comments and also, again, the recommendations from the University of Otago. What it has recommended is, in fact, that these taxes become hypothecated taxes. For those who do not know what that means, what we do is we take the $425 million this will raise and we actually earmark it for research in areas that would affect smoking. So what we do is we say: “OK, of this money—it is going to go into the health budget. Some will go to Quitline, some will go to research that looks at lung cancer, and some will go into research that looks at how to mitigate the risks or the impacts of health-related diseases.” I just think that is the best way to do things, because it is an evidence-based approach; it is saying: “Hey, we understand we have a major issue here. This is a major health issue, so let’s deal with the money we raise from this and put it directly into something that we know will be good for this.”

Let me say one thing: I am 90 percent for this—I am 90 percent for this bill. I am 10 percent concerned, and that is because smoking is addictive. We know this is a fact. It is more addictive, I understand, than heroin. What we absolutely need to do—what we absolutely need to do—is ensure that when we increase the price of tobacco, we put programmes in place that are fully funded and are proactive, so people who want to break their addiction to nicotine actually have the ability and the support to do so. These programmes must be free. They must be free, because breaking the addiction to nicotine is hellishly hard, and so we must ensure we put programmes in place for that.

The other thing, also—like I said, I am 10 percent concerned—90 percent is enough for me to absolutely support it. We are all in this House, we are raging against the negative impacts of tobacco, we are raging against the negative health impacts of tobacco, and yet, we in this House all enjoy alcohol. We will all go home tonight and we will probably have a glass of wine or a beer with our mates over the weekend while watching rugby. We will also drink alcohol. And what we also must take into account is that this weekend there will be a number of deaths, there will be a number of domestic violence incidents, and there will be a number of pub brawls as a result of alcohol. So let us not kid ourselves and say that smoking is the only legal drug that causes harm to our society, because it is not. It is not. Let us recognise, also, the harm caused by that other legal drug in our society: alcohol.

As alluded to, and as all the speakers in the Labour Party will allude to, we will support this bill wholeheartedly, but we must recognise—and I will reiterate this because I cannot do so enough—we must recognise that we must put programmes in place. We must ramp up the programmes that allow people to come off their addiction to nicotine.

I would just like to finish by outlining the four recommendations that were actually put forward by researchers from the University of Otago in its drive to see a smoke-free New Zealand by 2025. I think, when we are looking at polices—certainly this sort of policy—it is very wise to take an evidence-based approach and certainly to listen to the research undertaken by those who are experts in the field.

Its first recommendation was that the increase in excise tax needs to be larger than 10 percent. What it said is it actually has to be 20 percent or more, because it thinks that this would mitigate the cross-subsidisation between brands that tobacco companies engage in.

Its second recommendation was that there should be a one-off surprise increase of around about 40 percent. What this would do, it said, was ambush tobacco companies. It would mean that they could not plan, and it would have the desired effect.

The third recommendation—and I have already alluded to this—was the hypothecation of taxes collected, because it believes this would greatly expand the cessation support currently available.

The fourth one—and this is quite important—is that additional policy measures could limit tobacco companies’ ability to circumvent tax increases. We know tobacco companies make a lot of money on cigarettes. It is a fact. So, by signalling this so far out, what they might do is they might scale back the margin they make, knowing they still will make a significant profit, and not pass on the increases to the consumer—certainly if it gets to the point when they see demand falling faster than supply. So we just need to be aware of this.

The one last point I will make is that I do note that in the bill this piece of legislation removes tobacco price increases from the Consumers Price Index (CPI). I think that is cherry-picking. It is like we have removed the capital increase in house prices. The Government cannot continue to remove a key product from the CPI in an effort to keep inflation down, because I would argue that is artificially impacting on inflation figures. If we put house prices in there, which we know are a major spend, and if we put tobacco in there, which we know is a significant spend, then at least we get a fair and reasonable indication of what inflation is like. We cannot cherry-pick.

Having said that, I do support this legislation, but let us make sure that we put in place the services required for people to break that nicotine addiction. Thank you very much.

Tēnā koe, e Te Mana Whakawā. Ā, tēnā koutou e Te Whare. I ngā pō rā i te māuiui kaha nei tēnei nā, koinei te take kua whango kaha rawa nei (katia ō koutou waha), ā, hoi anō rā, kai te tū ake au ki te tuku whakaaro e pā ana ki tēnei nā te excise tax.

[Acknowledgments to you, the House. I have been quite ill these past nights and this is the reason why I am really hoarse (shut your mouths), but despite that I rise to express an opinion on this excise tax.]

I am proud to support this bill. We know we need to do things to reduce the number of people in this country who are dying from tobacco-related illnesses. I can point to at least five members of my immediate family who have lost their lives early to smoking-related illnesses. It is not something we ever want to see. We do not want to leave children without parents. We do not want to leave grandchildren without grandparents. Smoking-related illnesses are killing our people in hugely disproportionate numbers compared with non-Māori, so of course we are going to support this.

It is something that we have championed as the Māori Party—to reach the 2025 goal of a smoke-free Aotearoa. But does it go far enough? Many would say it absolutely does not. In fact, I was lambasted last night—is that the word? I am not even sure—on Twitter because this seems like a tax on the poor. Again, the people who are smoking come largely from one socio-economic area of our society, and they seem to be ingrained in poverty, so people are saying that this is a tax, again, on the poor. Well, you know what? If it is going to save lives and keep families together, then I do not have an issue with that, as long as we put in place a number of other things to ensure that we support them.

When I ask the members of my community—and wherever I go on hui Māori and I go outside and ask, why are you guys still smoking?—they say one thing: “It is stress.” If I ask “why are you going back to smoking—you gave up years ago?”, they say the same thing: “It is stress.” If we are not doing anything to support people while they go through giving up cigarette smoking, through the cessation programmes or in a holistic way to address the underlying issues of why they smoke in the first place, then we are not going to achieve our goal. We need to put in a suite of supports so that these people can have a better outlook on life—not just because they give up smoking, but because they alleviate the underlying causes.

What else would we do? This is just one measure. We would like to see plain packaging, and we are waiting for the legislation to come. When is that going to happen? We would like to see smoke-free cars for children. Lots of people say: “Oh my goodness, now you are going to fine mothers and fathers who already don’t have enough money?”. Well, actually, if you are locked in a car with no choice and no way to get out from somebody else’s smoking, then you are sucking in somebody else’s blinking poisonous air that they are emitting into the car. Actually, a child has no choice in that situation, so we would like to see that initiative come into place. We would like to see support for voluntary smoke-free communities—that would be a good thing.

We had a whole lot of people last night on Twitter saying: “Marama, why are you giving in to these statistics rolled out by Pākehā?”. And I was thinking: “Seriously? Does it actually matter who brought the statistics up?”. Well, apparently, in this country it does.

Here is the thing: I have a community group from Wainuiōmata coming to see me, called the Hashtags—young Māori at high school—who are saying: “We do not want this in our future. We would like to support our community to become a smoke-free community. We would like to have smoke-free cars. We want every school in our little community to commit, and all the parents to commit, to being smoke-free. We want to get rid of those shops that are selling single cigarettes illegally. We want to get rid of the sale of tobacco in our entire community.” Those are young Māori rangatahi. How do you turn round to them and say: “No. Please, smoke some more.” That is just ridiculous, and so we need to support them.

Who else comes to us? The Northland community who brought its petition for smoke-free cars for children does. Is that a Pākehā community that dreamt up this “white man’s magic”—these statistics? Of course it is not. That is a ridiculous statement.

💬 David Seymour: To be fair, they invented Twitter.

Well, actually, to be fair, they invented Twitter. But, in Northland, this Māori community got a petition together that involved just about their entire town—5,000 people.

The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! I am just going to interrupt the member. She started the debate quite well because she was referring to the bill and what is in it. There is an opportunity for making passing reference to alternatives to the bill, and as much as I like her reference to the rangatahi of my community, the debate cannot be based around the alternatives.

Thank you, Mr Assistant Speaker. I will bring it back to the excise tax. If we cannot talk about all the alternatives we would like to see, here is a start—here is a start. [Interruption] I am pretty sure that there were a few alternatives being voiced over there on the Labour benches, but we will let that go.

We come back to the excise tax because the No. 1 incentive for giving up cigarette smoking, apparently, is the cost at point of sale—and thank you very much to the lovely Mr Seymour for the water. Excise tax is a start. We would have liked to see it higher. In fact, we were lobbied to take it to 40 percent because it is like the frog in the pot—when you put it up $1 a year, $1 a year, $1 a year, everyone is going “I can do one more dollar, one more dollar.” But if you automatically put up 40 percent and have to jump $10, people start to think. By 2030, the cost will go to approximately $30 for a pack of 20 cigarettes. If that is going to be what it takes to make people think again before they put a stick of poison between their lips and potentially lessen their lifetime with their own children, their own family, and their own grandchildren, then we are happy to do it. So, despite all the alternatives we would like, I commend this bill to the House.

The Green Party will be supporting this bill, as we have supported the Government’s other measures it has taken towards smoke-free Aotearoa—though they are few in number. I do want to begin this contribution by particularly praising the contribution of the Māori Party, because the Māori Party has consistently now, for a considerable period of time, provided leadership in this area of progress towards smoke-free Aotearoa. That inquiry of the Māori Affairs Committee, which produced a suite of recommendations, including increases in excise taxes such as this one, was a very substantial step forward, and its goal—the goal set out in the report of that inquiry into a smoke-free Aotearoa by 2025—has been an important and galvanising goal for this Parliament and for the community seeking that end. However, we are on track to achieve a smoke-free Aotearoa goal for middle-class Pākehā New Zealanders; we are not on track to achieve that goal for Māori, for Pasifika, for low socio-economic status Pākehā New Zealanders, and for others, and it seems to me that unequal achievement of that goal would be an unacceptable outcome.

What we know about what actually changes health behaviour is that giving people information is not enough. There is the model of “Homo economicus”, where people are rational decision-makers, and so if you just give them the information about the pros and cons of differing possible courses of action, that will be sufficient. They will weigh those up, they will make the rational choice, and their behaviour will change. Very clearly, that is not the case with smoking. Very clearly, it is not the case in many other areas of life. What we know actually works is changing the public policy that creates the environment around those groups. We know that what actually works is empowering the communities who are most affected by an issue. Environment and empowerment—that is the idea of health promotion.

One of the factors that can be used as a tool in changing the environment is the price of a product. This is basic microeconomic theory: if one raises the price of a product, demand for it will fall. It would be great, would it not, if the Government understood this in other areas, and not just in the area of tobacco and alcohol. So a tax on sugar-sweetened beverages, for example, would be something that we could consider—in another debate, because it does not relate to the excise tax on tobacco.

The Green Party supports this bill. We ask, as Marama Fox has just asked, why this tax increase is not larger. As Stuart Nash indicated earlier, there is considerable research to the effect that a larger tax increase—a bigger jolt in the excise tax—would achieve a disproportionately greater effect. If that is the case, and there is no evidence to contest that, why would we not do it? We would support a more ambitious bill.

The issue of hypothecation has also been raised, and I was concerned to hear on the television news last night speculation that the revenue that the Government received from this increase in the excise tax over the next several years would form part of the war chest that it would later use for tax cuts and the lolly-scramble Budget that I am sure we all anticipate for 2017. That is not the way to proceed. The evidence is strong, in fact, that the effect of this excise tax increase will be felt mostly by the poorest New Zealanders. That effect is of two sorts. It is the effect of increasing the price of a product on an already strained budget, and so is an impact, potentially, on the affordability of other products, and we are all concerned about that. But there is also a disproportionate benefit achieved by those New Zealanders. They stand to gain the most. They are also the most price-sensitive consumers of tobacco products. So these excise tax increases will produce disproportionate gain, as well as an impact on affordability of other products.

The way to actually assuage the problem of increased cost impacting on the affordability of other costs like food or housing is, indeed, to ensure that the revenue from this excise tax is recycled into further programmes to assist those New Zealanders to quit—more quit programmes, more health promotion activities. That means social marketing campaigns that might be driven from Māori and Pasifika communities, for example. It means empowerment programmes for those communities that are most affected. That is how we should be using the $425 million. That is how we should be using it, not recycling it into Government coffers. With that comment, I will bring this contribution to a close. I will add some more comments in the second reading, but, indeed, the Green Party will be supporting this bill.

I do not think that anyone in this House will dispute the evils of smoking and the effect that it has on the lives of people—[Interruption]—and on families around—[Interruption]

The ASSISTANT SPEAKER (Hon Trevor Mallard): Order!

It is an insidious problem that affects all of New Zealand society and, in fact, societies around the world. As I said, it is hard on our families, and I have personally been affected by it. That is what makes the contributions from the rest of the House seem so callous and empty and disingenuous. A tax—especially this tax at this rate—will, debatably, prevent people from taking up smoking at a tiny, tiny, tiny rate. [Interruption] The decrease in smoking will be tiny—absolutely tiny—[Interruption]

The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! I ask the member to resume his seat. Can I ask the two members to respect the ruling that was made yesterday. It is OK to interject back and forth on the person who is speaking, but to have a third- and fourth-party conversation across the House is something that is not appropriate. I think there was actually a pretty severe warning made by one of my colleagues about this yesterday. I just want to say to Mr Seymour that he is testing me.

I actually just want to comment that I think it was the New Zealand Herald or the Newshub group that went out to New Zealanders last night and this morning and asked: “What do you think of this new tax?”. And actually more than two-thirds of New Zealanders said that it was a cynical tax grab by this Government that will have no effect on the rates of smoking by New Zealanders. I would like to spend the next few minutes of this contribution outlining why I completely agree with the majority of New Zealanders in this case.

I want to empathise with the member from the Māori Party, and I acknowledge the contribution from the Minister. In fact, the Māori Party member could not speak much to this bill because I think, in her heart of hearts, she knew that it would not achieve what she hoped it would. So she actually spent the majority of her contribution saying what else we could do and what else we should be doing. And so I have huge empathy with her, because I agree.

But this excise tax on smokers will not work. The Minister talked about the 12 people lost to us each day, and I agree that that is terribly wrong. But “What is this Government doing about it?” is the actual question. It is not spending a dollar more on cessation programmes. There is not a dollar more specifically assigned in this Budget to help people to stop. No, the solution from this Government is a tax, and not only that, it has been acknowledged by everybody who has spoken before, a tax that will affect mainly the poorest New Zealanders in our society.

The only Budget strategy that this Government has is to tax the poor. It makes the Minister’s words and supposed passion and concern empty and farcical, in my opinion. He puts the decrease in smoking rates down to price increases over the last few years. I call that stance misleading. I suggest that many would say it was naive. There were huge mass media campaigns, cessation programmes, and fully funded Quitline programmes, for example. Not only are the Minister’s price increases not the most effective tool but also I put it to this House that, actually, the efficacy of these excise taxes have passed their use-by date and will achieve nothing. So I put it to the Government: you have increased taxes, and that is all you will achieve—an increase in taxes. Those who are addicted to smoking will continue to smoke and will continue to feed their addiction, at the cost of the essentials of life.

Let us face reality: it is still a legal product. The Government is not willing to go that far, and yet it is being more nanny State than Labour could ever dream of being. Food kills people. Sugar kills people. Obesity is the biggest killer in modern society. Let us take the logic that this Government is using in the House today and apply it to those items. That is not unreasonable. It makes perfect, logical sense, given the negative externalities of consumption of any and all of those goods, to say: “Let’s disincentivise it, let’s internalise the cost of it, and put a tax on its consumption.” [Interruption] Sorry, “Let’s tax it, and it will stop people consuming it.” For example, obesity—let us put a tax on it. Given basic theory, obesity rates will decrease and we will have less obesity and fewer costs in our hospitals. That is the logic that this Government is using.

We know that this measure will affect 15 percent of the New Zealand population but, unfortunately, the rate increase will affect 35 percent of the Māori population and 22 percent of the Pacific population, and approximately 550,000 New Zealanders in total. So although I think the Māori Party’s intentions are good, I think this excise tax is misguided and will achieve the exact opposite that it hopes for, because, disproportionately, poor people will pay.

Here are some statistics: because of the difference in smoking prevalence, people from the bottom third in household incomes spend nearly 20 times more on cigarettes as a proportion of their income than those from the top third. As many commentators noted yesterday, this was one of the more contentious parts of the Budget contribution. They came out and blatantly said that this will take food from the tables of children, because those who are addicted will not stop because of a tax hike; they will simply compromise what little money they have and what they can do for their families. We say that this legislation will make it harder for the poorest, for Māori, for Pasifika, and for New Zealand children, and that is unacceptable.

Let us just rephrase what the Government has been saying. It is saying that a cigarette tax will get people to stop smoking and will increase public revenue. Minister Lotu-Iiga said that a tobacco tax is the most powerful tool to bring down the rates of smoking. I would actually, I suggest, agree with him mainly, but not now. In the past we saw the statistics, and we saw that, yes, price did have the impact that we hoped it would have. But what we are seeing now from economists around the world is that recent price hikes are not actually having the impact that we assume they will have on the consumption of cigarettes. They suggest that the majority of people who would give up smoking because of price have actually already done so. But still the Government persists in using ill-considered increases in the level of taxes, generating even more revenue from the poor.

So let us also put this into perspective, because it will be revenue from the poor: of those who earn over $100,000, it is suggested that only one in 10 are smokers, and of those who earn under $35,000, though, the number rises incredibly to one in three. Continuing to raise taxes on poor smokers who are unwilling or unable to quit will be ineffective and unjust. This nanny State must be reminded that tobacco is still a legal product. This tax will have no effect. The desired effect that the Government is seeking to implement will not come about because of this tax rate. Thank you.

I am very pleased in this matter of urgency to discuss the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill. This is an excellent bill. In fact, I think, listening to all the contributions that have been occurring in the House, that that is, ultimately, the theme. There are a whole lot of distractions, conspiracies, and otherwise to try to take away from that, but this is actually an incredibly good bill. I want to acknowledge Minister Sam Lotu-Iiga along with Marama Fox from the Māori Party for their work on this bill, but particularly Sam, who has shown, I think, very strong leadership in this space as we, as a New Zealand Parliament and the New Zealand public, move towards New Zealand being smoke-free by 2025.

I have been disappointed by, effectively, the bluster and conspiracy from the other side, particularly in two areas, which I want to debunk. The first is this whole element of “Well, smoking is legal, therefore it is right.”—that is a very false point of thinking.

💬 Stuart Nash: No one said that at all.

No, actually, we just heard that from the last speaker, Fletcher Tabuteau, who was saying: “Look, this is legal; it is nanny Statism.” We have actually heard it, and we are going to hear it, I suspect, from our more libertarian friend afterwards. Just because something is legal does not make it right, and, therefore, I think it is quite appropriate for the Government to actually—

💬 Iain Lees-Galloway: Tax dodging.

Tax dodging? Once again we see the absolute lack of thinking and rigour from the other side. There is never an idea that they have been able to comprehend that they could not sort of try to comprehend.

💬 David Seymour: The Labour Party is legal, but it’s not right.

So look—that is right. Absolutely. Actually, the best example has just been given: the Labour Party is legal, but it does not make it right. That is actually the second element that comes up.

💬 Tim Macindoe: Nor was the pledge card.

That is right. So, first and foremost, just because something is legal, it does not make it right. Coming out of that then was the suggestion that this is a tax that, therefore, the poor will pay. First, I do not think there is much, or direct, evidence of that. Second, the whole point of this excise tax is to encourage people to not smoke, OK? So if people stop smoking through measures such as this, they cannot, ipso facto, be paying the tax—sorry, I was just throwing a bit of Latin in there.

The next element, of course—and we have been hearing it from, I think, Stuart Nash in particular—is about all these other harms in society. He was talking about sugar, and, in fact, we have heard about it from others. I should not pick on just Stuart Nash, but he was saying that alcohol is harmful. He did not actually quite get to coffee being harmful, but we heard that sugar is harmful. I think members who go down that line—particularly in this context of us putting an excise tax on tobacco—forget that tobacco is, by its very nature, harmful, OK? Sugar is not harmful by its nature. Coffee is not harmful by its nature. Alcohol, in fact, by its nature, is not harmful, there can be harm associated with it; but we are talking about something fundamentally different here when it comes to tobacco. [Interruption] I hear chortling from members on the other side, but then again they do not understand science. It is actually very interesting.

So this is, actually, in context an incredibly good bill: to put a tax on, a compounding tax, starting from January this year to encourage people to not smoke. I think what is going to be quite interesting, and I am conscious that we go through all parts today, is that we will be able to raise some other elements, particularly what the Government is doing in the health space. I think I will address that in other readings, around how this tax will be actually targeted to health, and I will also be able to raise more points around what the Government is doing, quite rightly, beyond the excise tax to support the cessation of smoking. So I commend this bill in its first reading.

I rise on behalf of the ACT Party in support of this bill although, I have to say, somewhat regrettably. If there was a bit more talent on the other side of the House, I would probably cross the floor and join them, but, sadly, that is not the case right now.

I am voting for this bill because it is a Budget measure. But let us be very clear that it is another public policy abomination. If you want to analyse a policy, here are three questions that you might ask: what is the intent of the policy—what is it supposed to do; will it be effective and what evidence do we have that it might be effective; and what might be the unintended consequences of the policy?

Well, the intention of the policy is to stop other people smoking. It is not a case of alleviating the harm done by one citizen to another, because smoking, by and large, harms only the person affected—the person who does it. This policy is about trying to stop other people doing something that they would like to do, because we do not like it.

The objective is to reduce the number of people smoking. We might ask ourselves whether it will be effective. Well, if we pick up the regulatory impact statement, the evidence is, supposedly, that every 10 percent increase in the price of cigarettes will lead to a 2.5 percent decrease in the number of people who smoke. One might just ask oneself how effective this policy has been for the last 5 years, because we have actually raised the tax on tobacco by 10 percent in every one of the last 5 years. So did we get a 2.5 percent reduction in smoking for every one of the last 5 years? No, we did not. Five years ago the rate was 16.3 percent; it is now 15 percent. If we had had a 2.5 percent reduction in smoking for every 10 percent increase, it would now be around about 14 percent. So it has not worked, even by the standards that the regulatory impact statement sets out.

So it will not be effective in achieving its goal, but what about the third question? What about the side effects? The biggest side effect is that we now take an additional half a billion dollars a year in excise tax, and I can understand why the Minister of Finance does not mind this policy so much. We take it, overwhelmingly, from the poorest people in New Zealand. You are 3.38 times more likely to be from the poorest decile than the highest decile of income amongst New Zealanders if you are a smoker. We are taking half a billion dollars, or 2,600 bucks from the average smoker who smokes 10.6 cigarettes a day. That is one of the unintended consequences of the tax to date.

When we pass this bill, when it becomes law, the tax will go up another $1,200. That is $3,800 out of some of the poorest households in New Zealand, to achieve a piddling reduction in smoking rates that is lower than the regulatory impact statement accompanying the bill predicted. What a disaster.

What about some of the other unintended consequences? A brick of 10 packets of cigarettes will now be worth over $300 at the end of this policy, and how much—how much—more worthwhile is it going to be for people to steal, perhaps in an aggravated fashion, a brick of cigarettes worth $300? Go and tell the petrol station owners; go and tell the dairy owners that every one of those bricks is worth $300. There are going to be people getting hurt, because, inevitably, when you drive something underground, you create a black market. If you doubt that, go and ask the people in central Canada; go and ask the people in Australia. That is what you do when you have an excessive excise tax; you create a black market.

In summary, this is a public policy with no justification and with a shonky regulatory impact statement. It is a policy that has not achieved what it is supposed to achieve, demonstrably over the last 5 years. This is a policy that will have unintended consequences, such as impoverishing the people in New Zealand, who need help the most, by an additional $1,200 a year by 2020.

The Associate Minister of Health sits there. He knows it is a joke. He cannot justify his policy, but he has had to do it for a coalition deal, which is much the same reason why I am voting for it, and the only one, I can assure you.

It is a pleasure to take a short call on the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill. What I really want to say today is that the previous speaker, David Seymour, said, in talking about the intent of this bill, that we are doing this because people are doing something we do not like. It is actually not about not liking it; it is a matter of doing it because smoking kills people. It is a life and death situation. It has actually been a long-time proven that it kills people.

This excise tax is a powerful tool, as we have seen in the past. I know that as we get harder and harder into the people who have been smoking for a long time, it gets a bit harder to make an impact, but this is one of the tools—and one of the effective tools—that we can use to make a difference. It is only one tool, and this is why we have had a question today about where the money will be spent, and whether it is a tax take. Actually, this has been debated by the Health Committee, because this is about the health of people. This excise tax is only one in a number of tools. We have adopted the Better Help for Smokers to Quit programme. Actually, 95 percent of people who now visit a hospital have a conversation with their doctor or with their health professional about smoking. Over 470,000 people of about 550,000 people who smoke have received at least some minimum advice from their health professional. So this is all part of the programme.

The other thing that this Government has done is it has increased the fines from $2,000 maximum to $5,000 maximum for those people who are selling cigarettes to minors. That was an extremely good move as well, because the last thing we want is for people to start this habit young. We all know it is addictive, and if they start young, the potential for them to smoke for a very long time is huge, so the sooner we can cut that out, the better. As the Associate Minister of Health, the Hon Peseta Sam Lotu-Iiga, said before—and I want to give credit to the Minister and also to the Māori Party for bringing this piece of legislation forward—12 people a day are dying a premature death from smoking. This really is a health issue, and if this is one tool in our tool box that we can use to help smoking cessation, then we should be looking at doing that.

The other thing that this National Government has done is ban smoking in prisons. There are a whole lot of moves as part of this tool box that we are actually doing. Over half of all long-term smokers will die of a smoking-related illness. It kills people. But quitting smoking by the age of 40 actually reduces the risk of dying from smoking-related diseases by about 90 percent, so it is my pleasure today to support this piece of legislation and commend it to the House. Thank you.

Talofa lava. It is my pleasure to speak on this, the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill.

I actually want to start with a quote. It is from a submission from the Cancer Society Social and Behavioural Research Unit at the University of Otago to the Finance and Expenditure Committee on the Budget Policy Statement 2016. I read: “Evidence for the effectiveness of tobacco excise tax and price policies is overwhelming; increased costs of tobacco to consumers are strongly associated with declining smoking prevalence and reduced tobacco consumption. Young people tend to be more price sensitive compared with adults,”. It goes on to say: “Lower socioeconomic groups and Māori have disproportionately higher smoking rates in NZ, and have shown less rapid declines in smoking prevalence than other population groups. There is strong evidence that low-income groups within high-income countries show greater price sensitivity. Recent evidence suggests that smokers from Māori and Pacific Island communities are more responsive to tax increases than smokers of other ethnicities. This suggests that further tobacco excise tax increases could continue to reduce health inequalities in NZ.” The reason I read that out is that actually that is why this legislation is being proposed today.

I would also like to highlight the relevance to young people, and particularly to young Māori and young Māori women. I have the Māori Smoking and Tobacco Use 2011 summary from the Ministry of Health, and in the 15- to 19-year-old age group, there is a 14.4 percent rate of smoking for non-Māori males; for Māori males it is 29.2 percent. For non-Māori females, the rate is 13.1 percent; for Māori females it is 47.1 percent. In the 20- to 24-year-old age group, the rate for non-Māori males is 24.7 percent; for Māori males it is 57.3 percent. For non-Māori females it is 24.5 percent, but for Māori females the smoking rate is 60.8 percent. So the relevance of this particular legislation to our Māori communities is incredible.

I also want to highlight that Māori women—this is from the report that the Māori Affairs Committee prepared, Inquiry into the tobacco industry in Aotearoa and the consequences of tobacco use for Māori—“suffer significantly from smoking, as is evidenced by their having one of the highest mortality rates for lung cancer in the world, and distressingly high levels of other diseases associated with smoking such as diabetes complications, cardiovascular disease, breast cancer, and cervical cancer. We are even more concerned about this demographic because of the significant impact of smoking on unborn and young children. While it is not the only cause, we were told that up to 46 percent of Sudden Unexplained Death in Infancy is attributable to smoking,”. In New Zealand 40 babies die every year. So 46 percent of those babies are Māori babies. For our communities out there who question why this piece of legislation is going through the House, that is why—the statistics, the evidence, speaks for itself.

I would like to highlight, however, that there are other implications for Māori of the proposed legislation. It was really interesting to read the Minister’s press release because what he does articulate is that 15 percent of New Zealanders smoke. That is 550,000 people. But for Māori and Pacific people, those rates are a lot higher: 35 percent of Māori smoke and 22.4 percent of Pacific people smoke. If you break that down even more, of the 550,000 people who smoke, that is 155,000 Māori who smoke and 55,000 Pacific people who smoke. I think the relevance to our communities, for me, is also in the amount of tax that will be collected through this proposed legislation. We are anticipating that $425 million will result from this increased tax over this 4-year period. So my proposition to the Minister and to the House is that if that is the case, $119 million of that tax intake should be used explicitly on Māori programmes, and $42.5 million should be used on Pacific programmes.

I think it is relevant, again, to bring up the Māori Affairs Committee report, because recommendation No. 26 of that report was really clear, and I will read it: “that the Wai 844 claim lodged with the Waitangi Tribunal, which asks for ‘funding for Māori health initiatives to eliminate or reduce smoking among Māori’ be progressed as soon as practicable.” I have actually written to the Waitangi Tribunal and asked it for the status of that Wai claim, because in the Government’s response, this Wai claim has not been referred to the Government, and it cannot be referred to the Government until the Waitangi Tribunal actually goes through the process of hearing submissions. But it is my contention that if Māori are so detrimentally affected, that if we are really clear about our rates of smoking and the anticipated amount of money coming out of our communities—we know that it is going to be $425 million—then I restate again: $119 million of that tax revenue should be used to fulfil the recommendation by the Māori Affairs Committee.

I would also like to highlight another issue from that inquiry by the Māori Affairs Committee, and it is about plain packaging. The relevance of plain packaging speaks to our commitment to reducing the smoking rates of young people, because I have looked at the evidence for plain packaging, and it was actually overwhelming. Cancer Council Australia provided the most succinct evidence, because, as we all know, Australia remains the only country in the world that has plain packaging legislation and that has implemented that legislation. This is why it did that: because plain packaging provides an important role in discouraging young people from trying cigarettes in the first place.

What a lot of people do not know is that 66 percent of young people in New Zealand try tobacco—and I put my hand up; I have smoked once in my life, and it was through peer pressure—66 percent of young New Zealanders try tobacco. So anything that will reduce the numbers even attempting tobacco use needs to be promoted, because what we do know is that 50 percent of those young people who try tobacco or smoke will smoke for 40 years. They become addicted to it almost immediately. In our Māori communities, I think that more like 100 percent of us try, which is why, for Māori women, our rates of smoking are over 50 percent. We are the perfect statistical example of that phenomenon.

The other reason plain packaging needs to be brought in is that throughout the evidence young people said themselves that plain packaging creates negative perceptions and feelings about smoking. They actually want to hide those packets and they smoke less around others, and it increases their ability to think about quitting; that was in 50 percent of the participants. For Māori, that would be incredibly relevant, because if 100 percent of us try and 50 percent of us then smoke, but if plain packaging can then reduce our consumption by another 25 percent, then I think that it is worth the Government looking at plain packaging as another part of this progressive piece of legislation that actually does want to meet the 2025 target, which is to ensure that, right across the board, our different groups of New Zealanders—Pākehā, Māori, Pacific, Asian—less than 5 percent of our population smokes. I think that is the challenge as we move into the future, but this is a fantastic start.

I commend the Minister, I commend Action on Smoking and Health, and I commend all those groups out there that are advocating for us to address this issue, because it cannot be tolerated any more. Five thousand of us dying is unacceptable, and it is preventable. Thank you.

It is a pleasure to take the last call on this bill, and I want to lead with the statement that tobacco tax increases are the most effective way to reduce tobacco consumption.

I think, if we briefly look back through history as to how we have come to this excise tax discussion today, we can see that the tobacco control programmes initiated by Government first started in 1984. The 1986 Budget was the first to raise taxes, and between 1990 and 1998 the tobacco tax was adjusted for inflation. In 2003 New Zealand signed the Framework Convention on Tobacco Control (FCTC) and the World Health Organization (WHO) convention, which was ratified in 2004 by New Zealand and came into force in 2005. In April 2010 the Excise and Excise-Equivalent Duties Table (Tobacco Products) Amendment Act enacted a 10 percent increase in tobacco tax annually—2010, 2011, 2012—very much like what we are doing here.

In November 2010 the Māori Affairs Committee reported back to the House on the inquiry into the tobacco industry in Aotearoa and the consequences of tobacco use by Māori. This was a very important piece of work. It was chaired by Tau Henare, and current members in the House who were there at that time include Simon Bridges, Kelvin Davis, Metiria Turei, and Iain Lees-Galloway.

The select committee heard 96 oral submissions, and their recommendations unanimously included, firstly, a smoke-free New Zealand by 2025 and, secondly, tax increases: “We commend the Government on the enactment of the excise and excise Act, which has increased the tax on all tobacco products by 10 percent. We recommend that the Government legislate for further incremental tax increases over and above the rate of inflation.”

In 2011 the Government then adopted the 2025 smoke-free recommendation, and in 2012 we got back to saying: “Well, what does the increase look like from here?”. I think the regulatory impact statement for the 2012 increase is really telling because it outlines the rationale for a tobacco tax, and it is underpinned by three arguments. The first is social policy objectives, the second is revenue generation, and the third is correcting negative financial externalities—that is, the cost of smoking to Government and society should be borne by those who cause the harm, especially health care costs. But I just want to reflect for a moment: we are all focusing on health care costs; let us not forget the costs of fire, and let us not forget loss of productivity—labour productivity—due to smoking, as well.

I think it has been commented on that this is a revenue-generating mechanism—yes, it is. That is one of the consequences. I turn our attention to the guiding principles of article 6 of the WHO FCTC, which clearly says: “Effective tobacco taxes are an important source of revenue.” The framework that we have ratified, and that we are a part of, clearly says yes—that that is part of an excise tax. The three objectives for raising tobacco taxes, which were included in the 2012 regulatory impact statement, still hold today: social policy objectives, correcting negative financial externalities, and revenue generation. With that, I commend this bill to the House.