Taxation (Budget Measures: Family Incomes Package) Bill

It is a pleasure to take the first of several calls that I am going to be taking on this bill and, indeed, looking at this specific part. What I want to focus my first call on is indeed the tax cut changes that are put in place by this particular part of the bill, and they are the reason that the Labour Party is opposing this piece of legislation.

This piece of legislation, if we look at the 2018-19 year in purely dollar terms, creates nearly $2 billion worth of tax cuts—$1.9 billion—and it provides around $371 million for Working for Families. The Labour Party has done a pretty simple calculation here. We obviously think there does need to be more money for Working for Families. There are parts of the way the Working for Families package is structured here that we do not like—and we will go on to talk about that—but, by and large, we all agree that that is the way that we can get more money into the pockets of the people who need it. However, the calculation of $1.9 billion versus $371 million of that is pretty simple. The $1.9 billion worth of tax cuts here is poorly targeted, unfocused, irresponsible, and unfair, and I am going to work through all of those things in this call.

I think in these situations it is sometimes easier to visualise what people get. So let us take the example of some of the people who will be affected by these tax cuts. Firstly, let us take the example of the great person who cleans my office here in Parliament. He is a single man and he gets paid just over the minimum wage. He would have been entitled to the independent earner tax credit. That would have been worth $10, and that has been taken off him. He gets $11 from the tax cuts, minus the $10 from the independent earner tax credit, and so each week he gets one tin of Home Brand Corn Kernels. That is it. That is what this person gets. So that is the cleaner in the office—that is their benefit.

The National Government might say: “Oh, but it’s not just about single people. It’s about families, as well.” So, according to its own fact sheet on the tax cuts part of this package, a family earning under $24,000 will be getting $5.13 a week—$5.13 a week. It is worth these two packets of soup mix—that is it. Two packets of soup mix for a family earning $24,000 a week. So we have got one tin of corn for the cleaner, and two packets of soup mix for that family.

Then we come to people like Steven Joyce and me, who are going to get $20 a week each out of this. So what would that get us? Well, that would get me not one lovely, pre-prepared meal of butter chicken, not two of your beef stroganoffs, but, in fact, three pre-prepared meals. That is what somebody earning $200,000 a year can get out of this, versus the cleaner in our office, who gets one tin of corn a week out of this Government.

That is the point—these tax cuts are unfair. They are weighted towards the wrong people, and the legislation we are debating today is instituting unfair, irresponsible tax cuts. Why are they irresponsible? They are irresponsible because the Government has choices about what it does with the revenue it gets. It has a choice about how to spend the best part of $2 billion.

So who is paying for these tax cuts that are being legislated for here? The people who are really paying for them are the parents who will be dipping into their pockets, once again, to pay higher early childhood education fees because the funding for early childhood education has, once again, been frozen by this Government. Yesterday, the Early Childhood Council said 150 bucks per child, per year has been taken out of early childhood education by this Government, so that is who is paying for me to get my three pre-prepared meals a week. That is who is paying for it—the parents who end up with higher early childhood education fees.

Who else is paying for it? Any New Zealander who goes to the GP next year—any New Zealander—because in the Budget there is $1.9 billion for tax cuts and $9 million for primary healthcare. That is who is paying for it. So when New Zealanders go to the doctor and they discover that the whole value of their tax cut has been whacked out because the cost of a GP visit has gone up, they will know who is paying for the tax cut. It is them. That is the priority for the National Government.

So if you look at the homeless New Zealanders, they are paying for it as well, because this Government is not building the emergency housing that we need. So homeless New Zealanders are paying for me to be able to get my three pre-prepared, packaged meals.

These are irresponsible tax cuts. They are irresponsible, because this Government has a duty to New Zealanders to rebuild the social foundations that are in front of us, to rebuild our health system with $1.7 billion taken out of it over 6 years, and to ensure that our schools get more than just a 1.3 percent increase in operational funding, which is not even enough to be able to pay the increased power bill that those schools have had over the last few years. So these tax cuts are not only unfair; they are also irresponsible, and they are unfocused, because the reality is that if this Government had wanted low income New Zealanders to get money out of this, this is not the package it would have put up.

There are 500,000 New Zealanders who are losing the independent earner tax credit, which is repealed in the clauses in this bill—500,000. Half a million New Zealanders are having that $10 taken off them, and that is why the cleaner in my office ends up being able to afford one of these packets of soup mix a week. That is unfocused.

Eight hundred thousand New Zealanders earn less than $14,000 a year. They get nothing—they get absolutely nothing—from these tax cuts.

💬 Hon Nicky Wagner: That’s not true.

It is completely true. Minister Nicky Wagner does not even know what is in her package. We are talking about the tax cuts here. We are talking about the tax cuts, and the tax cuts do not deliver.

I refer Nicky Wagner, if she has not read it yet, to page 3 of fact sheet one of the Family Incomes Package, table No. 1, which shows that a family in the lowest quintile gets $5.13 a week and a family in the highest quintile gets $34.65. That is it—that is the priority for this Government. That is what it has decided to put before the House, to put before New Zealanders—no plan, no vision, no creation of jobs. No, just an election-year Budget, 9 years in, from the campaign manager / finance Minister, Steven Joyce—$35 a week. This is not me saying this; this is the Government’s fact sheet. This is what it is putting out in front of New Zealanders. Low income New Zealanders do deserve more, but it is not the tax package in this part of the bill.

We have been very clear that Working for Families—there are parts that we do agree with and there are parts of that we do not agree with in this bill, but, overall, we are proud of that package, and it is ridiculous to hear people like Alastair Scott say the Labour Party opposes Working for Families. I was here. John Key called it communism by stealth—that is what John Key called it—and what we have got today is a partial package to give some relief to families, dressed up with $1.9 billion worth of tax cuts. So we are not going to take that from the other side.

What we are saying over here—and there is an amendment that is on the Table from the Labour Party that says let us take the Working for Families elements and put them out to one side. We will vote for that amendment—it is our amendment. I invite all parties in the Committee, if they believe that the answer here is Working for Families increases, to support our amendment. But we cannot support the parts of this bill that create an unfair tax cut package.

This is not about bracket creep. This is not about inflation adjustments. This is a straight-out election-year bribe. It is a straight-out election-year bribe—

💬 Brett Hudson: Says the man who is behind interest-free loans.

—an irresponsible one, an unfair one, and one that greatly benefits people like me to buy my pre-prepared meals. It does not benefit a family who gets two packets of soup mix, and it certainly does not benefit the cleaners, who work so hard in this Parliament for just over the minimum wage. And if they are a single person, the independent earner tax credit is gone. Eleven dollars a week—11 minus 10, Mr Hudson, is one. One dollar a week—a “One Dollar Bill Budget”—which is so unfair and so ridiculous. New Zealanders can do a lot better than this, and we will talk about that in the coming calls.

I would like to rise and support the Labour Party’s amendment that it is tabling, because I think it is a very helpful contribution to this debate. Listening to the first and second reading debates last night, it is pretty clear that there is consensus right across the House that there are changes to Working for Families that would benefit the people whom this package is designed for. But one thing that we on this side of the House are very uncomfortable with is the changes to the tax thresholds, which go well beyond what would have changed if they had just simply kept in line with inflation. If the tax thresholds that were outlined—if those changes—had changed just in line with inflation, the quantum of that would come to about $900 million. But, in fact, there is actually an additional billion dollars on top of that, which would have been much better spent not on tax cuts but, actually, on supporting the Working for Families changes, because the quantum of support for people on low incomes—through Working for Families, the income tax credit, and so on—is so small, as Mr Robertson has just pointed out, that, actually, for a lot of people it makes very, very little difference at all.

So that billion dollars on the additional tax cut that the Government is proposing here is actually largely wasted, because so much of it is going to families who are on high incomes rather than on low incomes. It would be much better if we could actually separate out the Working for Families portion of this bill from the tax rates thresholds portion of the bill, and to debate those two things separately, and to amend the tax section so that it actually, simply, keeps in line with inflation and retains that additional revenue that is lost through that portion of the existing bill and ploughs that money back into support for those on Working for Families.

I am going to go one step further with that, because, as has been noted in previous portions, when we come to the portions of the bill that are the Working for Families section—which is, of course, clause 6, “Calculation of family tax credit”, and so on—because it is, essentially, a wage subsidy, it does not apply to people who are on the unemployment benefit. And, unfortunately, those people, by definition, are actually the worst-off people in our society—the people who are most excluded by economic circumstance. The bill as presented has absolutely nothing to support those families, so we are going to get a huge portion of people there who get next to nothing, other than a tiny increase in the accommodation allowance, which does not even keep up with house-price and rental inflation over the course of the last few years.

Coming back to clause 6, this bill is barely playing catch-up at all, so the idea that it is somehow this great advance that is going to miraculously lift thousands and thousands of people out of poverty is a fallacy. In 2013 Working for Families support peaked and has actually been declining, and the amount of money that the Government has, by stealth, withdrawn from Working for Families since 2013 is greater than the quantum of support that is made available in this bill. When people on this side of the House say that the Government gives with one hand and takes away with the other, in this case, when it comes to the Working for Families calculations here, these do not even cover what has been taken away over the course of the last 8 years. It is an absolutely tiny amount of support. It does not go nearly far enough, and it is 8 years too late for very many people.

I do support the amendment that the Labour Party is going to be introducing. I do think it would be helpful if we were able to separate out those portions of the bill—the Working for Families portions of the bill—from the tax thresholds portion of the bill and be able to debate those separately, because that is the crux of the argument of this bill, which is, essentially, that this includes tax cuts for people at the top end who do not need them, do not want them, and think that that money would be better spent supporting those who are being left behind by the changes in the economy over the last 8 years under this National Government.

I guess we have got to the fascinating and technical part of the debate on this bill. I just want to say, first off—partly in answer, I guess, to my colleague James Shaw—that New Zealand First will not be supporting the amendments in the name of Jacinda Ardern, essentially because we have said that we are supporting the bill and for the reasons that we are doing so, although we oppose the Budget. This bill does bring about changes in taxation and accommodation allowances that will benefit those parts of society at which they are aimed. And this amendment, essentially, takes the guts out of it. It would, essentially, make the bill at nullity in terms of what it is intended to do, its stated intention, and how it will go about achieving that. So, for those reasons, we will not be supporting this particular amendment.

We do, however, have a late-minute addition to the process ourselves. There is an amendment in my name, No. 00, and the purpose of it is to ensure that tax and associated rates are adjusted automatically for inflation, using the New Zealand Consumers Price Index (CPI) metrics already in the bill. So, essentially, what it does is amend clause 15, schedule 1; clause 17, schedule 6; clause 18, schedule 31; clause 20, section 24B; clause 21, section 33AA; and clause 22, section 33C to bring about an automatic change in rates when there has been, from the date of 1 April 2018, a total movement in the Consumers Price Index of 5 percent.

As I say, this mechanism already exists in the principal Act, primarily with regard to the family tax credit. Making changes of this type now, at this stage of the bill, will help bring about an end to fiscal drag and will help, we believe, to ensure—with the measures undertaken as a result of this bill and Act that it will become after progressing—that New Zealanders will pay the right amount of tax, as opposed to having overpaid by, we are told, something like $800 million to date. I would be interested in hearing from members on the Government side—the Minister, perhaps—as to what the National Government’s approach and attitude is to having a look at this amendment in a way that we believe can improve the bill.

As I say again, we are supporting it anyway because of the stated aims and intention, although we oppose the Budget of which it is part. But we do believe that an amendment of this nature will make the bill functionally better, and it will expedite any alterations that may need to be made to it further down the track. If the ability to adjust the rates in line with the CPI is inherent in the bill as it goes through, the Parliament is not likely to find itself in a position in a number of years’ time of having to go back and debate the entire bill to make changes then. For those reasons, I would ask the Government and other members to consider this amendment and we continue to support the bill. Thank you.

I rise to cover a number of clauses in Part 1—clause 6, for instance, which is to make an amendment “to increase the family tax credit, and to align the family tax credit rates for younger children with the higher older children rates.” Of course, one of the very important measures in this package is supporting New Zealand families by increasing the Working for Families allowances for families, for children—in fact, supporting families who are larger, who have more children. So we will see the changes in this package—I think it is a little over $9 a week for the family with one child. The second child might be around an additional $17 a week, and, with larger families, that can be up to $27 for those subsequent children—each of those subsequent children—per week.

What we are doing here is also seeking to—there used to be a distinction between the ages of the children, so for a younger child the family would receive less of a payment for them than for an older child. One of the things we have determined in terms of simplicity, but also to respect that there are pressures for families across the range of their children whether they are younger or older, is that it would be a much better regime simply to have fewer rates. That clause, in particular, will help to bring that about.

There are other clauses, for instance, in this part that make consequential amendments resulting from the decision to change the tax thresholds, or bands, for the taxation rates that apply. Particularly, for instance, clauses 11, 12, 15, 16, and 17 make consequential amendments because we have taken a very clear measure to say we can best help low and middle income earners by adjusting the thresholds that affect every dollar that they earn. In fact, I will also bring the Committee’s attention to clause 18 in a few moments, because that actually shows even more that this is a set of measures that is targeting low income earners and not the wealthy, as some members opposite have chosen to define anyone who earns $52,000 or more.

So the tax thresholds are going to see, at least at a minimum, an extra $11 a week in the hand of low income earners, and an extra $20 a week in the hands of people earning $52,000 or more. Members opposite, particularly the leaders yesterday, made a comment that because at $52,000 you get $20 a week, it is simply subsidising the wealthy. Dr Cullen—Michael Cullen, Sir Michael Cullen—made a change in the year 2000 that income rates of $60,000 or more would have a higher tax rate. He called people in those rates rich. He called them something a bit stronger than that, but he called them rich. Now, $60,000 today would be the equivalent of $86,600—in fact, more—but yesterday, the leaders of the Labour Party and the Green Party redefined what they considered rich, what they called wealthy. They dragged it down from what would be, in effect, $86,000 to $52,000.

They are saying that if you earn $52,000 a year, you are wealthy. These people are on more than $200,000 a year themselves. Even backbenchers, when you take their pay, their entitlements, their expense allowances, and all the things they get, they get more than $200,000 value a year, and they have the absolute gall to say to someone who is earning $52,000 a year: “You’re rich.” That is absolutely disgraceful.

Clause 18, which I will finish on in this call, makes some consequential amendments in respect of the abatement rates that we are changing for Working for Families. What that means is that, if you are earning a bit more, the abatement rate for Working for Families is going to kick in sooner. But as Max Rashbrooke pointed out yesterday—I saw this on Twitter, and Max is no fan of this National Party or the National-led Government, but he pointed this out on Twitter yesterday, because he was going through the detail of this package very quickly on its release. He actually pointed to that specific change: the change about abatements for Working for Families. Max said that shows that the actual target for this Budget is lower income earners. That is a change he absolutely supports because he knows the effect that it has is to make sure that more assistance goes to, and is more targeted toward, those lower income earners.

So I am looking forward to the debate here in the Committee stage because this is an extremely good set of measures and it is actually very, very well targeted. It is the sort thing—it shows a Government that understands and cares about the pressures on Kiwis, particularly lower income earners and middle income earners and the pressure on their families, and it shows that we back them. We back them to succeed and we back them with the support of Government. I look forward to more calls.

Budgets are, in the words of American theologian Jim Wallis, moral documents. That is because they are about the choices that we make with the resources that we have to tackle the problems that we have and to unlock the opportunities that exist within our people. The problem with this bill—and I am going to go into some detail on this—is that when you actually get into the detail of it, this Budget fails on all of those fronts in terms of making the right choices for New Zealanders, given the issues that people in our country face today.

One of the things we have heard a lot of from the Government benches over the course of this debate, often with chests puffed out, is that this is a package that supposedly really targets resources to those New Zealanders who need it most. We have heard that word over and over again—this is about targeting those New Zealand families who are doing it tough, who have needs, and who really need some additional assistance. What I want to do is go through the bill and look at just how closely this bill actually does target the limited resources we have, and to test it—to then test it to see: does it actually meet the needs that we have, does it actually resolve the problems we have, and does it unlock opportunities for New Zealanders or not?

Of course, the answer is that it does not. There is a very simple statistic that demonstrates that. If we look at the mix of this package, five-sevenths of it goes to the tax cuts, which, by definition, are untargeted, because every dollar of tax that you cut, even if you cut at the bottom band, goes to every single New Zealander in this country. Every single Government member sitting on those benches and every single Opposition member sitting on these benches benefits from those tax cuts. Can any member stand up in this Committee and tell me that that is a good example of targeting? Will anyone do it? I challenge any of the Government members to stand up in this Committee and tell me that it is a good example of targeting to give you a tax cut. Five-sevenths of this $2 billion - plus package go into the tax cut mix.

We have heard a lot about Working for Families. We have heard a lot about the accommodation supplement changes. One-seventh of the changes in this bill go into Working for Families, which is targeted, and we support that part of the bill. That is why I am standing in support of Jacinda Ardern’s tabled amendments. That actually enables us to target in the resourcing. That is why the last Labour Government set up Working for Families. We set up Working for Families, which members on that side of the House, and David Seymour yesterday, called “communism by stealth”. It is a good way of targeting limited resources, because it goes just to the people that you want it to go to, unlike the tax cuts that are in this bill.

Let us talk about the accommodation supplement changes as well—about $361 million going there. Of course that is welcome—of course that is welcome—but here are the facts. Back in 2007, which is when the accommodation supplement thresholds were last changed, one person in Auckland would have received $145. These changes bring that up to $165. That is good, but if you adjusted just for house price inflation, they should be receiving $222. When the Government stands up and boasts about helping New Zealanders—and I note the member opposite talked about Max Rashbrooke’s comments. Well, if he read further into Max Rashbrooke’s comments, he would have seen that that is exactly what Max was saying: that this Government, which has ignored the needs of New Zealanders over the last 9 years, is now coming back in this Budget package and partly filling the pot up. It is not even adjusting for the real increases in costs that New Zealanders have faced, and it is now asking to be treated with garlands and flowers, and for people to be grateful for that. That is simply ridiculous.

A three-person household in Auckland receiving $225 in accommodation supplement, under the best set of circumstances, will now receive $305; to cover just the increase in housing costs, that should be $344 a week—that is just using the Reserve Bank’s inflation calculator. So the Government has not even covered the increases in accommodation costs under its own watch. That is not meeting the needs of New Zealanders.

I want to talk a bit about the independent earner tax credit, which is, of course, done away with in clause 5 of the bill. I have got a question for the Minister in the chair, Tim Macindoe, about this, actually—I posed it in my speech yesterday. It is actually a really important one, because if we go to the bill itself—and we go to the notes that support the bill and this major, major change, which takes away an important tax credit for about 500,000 New Zealanders—it tells us that 80 percent of those eligible claim the tax credit. It sort of justifies it by saying that 20 percent of the people who are eligible do not even claim it, and that is one of the reasons that we are given for getting rid of this tax credit. Yet in the Minister of Finance’s speech yesterday, he said that only 30 percent of people claim it. When the Prime Minister then stood up, he said that 33 percent of people claim it. And when he interjected yesterday in the middle of my speech, Mr Bishop said that 32 percent of people claim it.

I think that before members of this Committee vote on abolishing a tax credit that goes to 500,000 New Zealanders, and that, as Mr Robertson said before, will take the net benefit of any tax gains for the lowest income New Zealanders down to $1 per week—before members of this Committee vote on it, we should hear from the Government about whether it is 80 percent of people who claim it, 33 percent of people who claim it, 30 percent of people who claim it, or 32 percent of people who claim it. I have now heard four answers from the Government, and they are vastly different. In the bill, again, it says that 80 percent of people claim it; in speeches, Government members have said around about 30 percent of people claim it. When we get a chance, I would really appreciate hearing from the Minister in the chair what the correct number actually is. That is important information that members in this House need before they vote on this bill.

As I said at the beginning of my comments, this comes down to choices. Tax bills are always about choices. We all understand that we have limited resources, and when we go back and look at that tax package, it is very clear that in the use of the limited resources that we have, this Government and this bill fail that test of using those resources wisely. I have already explained how five-sevenths of the package is about the tax cuts. Let us delve further into that when we actually look at the bill, because that breaks down in a way that shows that the choices that the Government is making in this bill are inequitable in themselves.

Here is a very simple statistic: if you add up the tax gain for the top 10 percent of New Zealanders in this bill—the total tax gain—it is about $373 million; if you add up the tax gain for the bottom 50 percent of earners in New Zealand, it is about $380 million—basically the same. In other words, under the provisions of this bill, the top 10 percent of earners get five times the benefit, per person, of the bottom 50 percent of earners. Let us go back to that word “targeting” that we have heard time and again from the Government benches, and no doubt will hear in the contributions that are to come. How is that a good example of targeting the needs of low income New Zealanders, when you are giving the same total tax gain of precious, limited Government resources to the top 10 percent of earners that you are giving to the bottom 50 percent of earners—that you are giving the bottom 50 percent of earners?

These are the choices that define Governments. If you want to define this Government, it has made the wrong choices. It has made choices to spend resources, to take this package, which we could be doing so much good with, and to target it that poorly. Seventy-five percent of the total benefit goes to the top 50 percent of earners. This is not a good example of targeting.

If we are talking about tax—this is actually very important—we heard yesterday, in the Minister of Finance’s speech, that the Government is booking $250 million of additional tax revenue from multinationals. Yet here we have got the tax bill in front of us and there is absolutely nothing to say how we are actually going to do that. You cannot book a quarter of a billion dollars of revenue and not actually say where it is coming from. Yet in this tax bill, we are making choices to significantly advantage—in that $1.9 billion package—the top 10 percent of income earners, while doing nothing about the multinationals, which the Government concedes are ripping New Zealanders off to the tune of $300 million per year.

There is a better choice. The better choice that is before all members today is to support Jacinda Ardern’s amendment. It would mean that we can get the benefits that families need through the Working for Families package, and then we could look at the resources that we collectively hold and are responsible for in this House, and look at how we really allocate them to deliver fairness and opportunity in this country. A Labour Government would target them so that those families have more resources, so that they have a decent and affordable house over their heads, and so that they do not pay more for health and education. That is what we stand for, and we reject this bill.

I welcome the critique from Labour of the tax package that is in this bill, because I think that is quite right. It is a regressive tax package; most of the benefits go to those who are at the higher incomes rather than at the lower. It does make positive changes, this bill, to those who are on those lowest tax brackets, but it is true that most of the benefit goes elsewhere. The reason why the Green Party is prepared to support this bill—and not the whole Budget, I might add; just this bill—is that those tax thresholds at the very bottom do move, and we think that is the right thing to do, and particularly because the family tax credit changes are in this part as well.

From our point of view there have been a number of gaps in the Working for Families approach that have tended to discriminate against those who are beneficiaries, for example. It has been incredibly complicated and difficult for families to navigate, and it creates far too many gaps for families to fall through, especially as their circumstances change. For many families in insecure work and on those low incomes, their circumstances are constantly changing, so they are in constant flux around what kind of income they are going to get, when they are going to get it, and what it means. So it is very difficult for those at the bottom end to navigate this.

There is a small step forward in this bill that we are prepared to support, and that is a better aligning of the payments for the eldest dependent child and for subsequent children in the family tax credit. The family tax credit is also one of the few parts of Working for Families that is accessible for those on benefits, on superannuation. A great deal of Working for Families as originally designed leaves out beneficiary families, and that is completely unacceptable because those families are the ones who need the most support. So we are prepared to accept that small—small in terms of this legislation, but significant in terms of those families—shift in the family tax credit and the thresholds.

I do just want to note that this is a Government that is very good at sleight of hand. In this bill—

💬 Chris Bishop: Oh!

Well, you can see it right here; it is in black and white. In clause 6 in Part 1, which we are discussing, there is the provision for a slight increase in the family tax credit. In clause 7 there is the taking away of what has just been delivered, more or less, for a large number of families, because in clause 7 we have the changes in the abatement rates. So National is increasing the amount of money for the family tax credit—good. On the other hand, those who are earning $35,000 or more are going to lose more of that in abatement. So the abatement threshold—income threshold—is coming down, so more families will lose money, and the abatement rate is going up, which means that more families are going to lose more money. That is after—immediately after—increasing the family tax credit.

This is a Government that has no capacity to deliver to families in a real way. It will do a small thing over here, and it will reap it back over here wherever it can. There is no doubt that most families will still benefit to some extent, but why is it that National cannot bring itself to make sure that every family is going to do well? Why is it that National is so obsessed with this intense targeting that it is happy that families will fall through the cracks? Because that is what these two provisions—clause 6 and clause 7—do. National has been doing this now for the last 8 years, and so this is why the value of Working for Families has been in constant decline. It is why we are seeing cuts in the health services and cuts in education being paraded as increases—because of this intellectual “pretzelism” that National suffers from, in being unable to take a family and their needs and deliver for that family.

So we really need to just be really clear about this, because I would like some answers from the Minister in the chair, Tim Macindoe—should he be so inclined to stand up and respond—as to why it was that it was so necessary to change the abatement rates for this. I have a Supplementary Order Paper (SOP)—[Bell rung] Thank you, Mr Chair. I would like the Minister to stand up and explain why it was necessary that National should give with one hand and take with the other, because that is what this abatement change does. I have a Supplementary Order Paper—it is either on the Table now or will be soon—that changes this provision, increases the threshold to $50,000 and decreases the abatement rate to 5c. It is a means to demonstrate how ridiculous it is to have financial systems in place that take money from families when they need it the most. An income of $35,000 a year is a meagre income for a family—it is meagre. It is around about the minimum wage. It is absolutely—it is appalling.

So why would any Government choose to attack the potential for stable income, the potential for certainty, for those who are on the lowest incomes in this country? Only National could do that. I have watched a Labour Government in my last 15 years—I have seen most of a Labour Government; I have seen all of a National Government in my 15 years, and it is really clear to me that National has been incapable of being generous enough with the country’s resources to make sure that families have got what they need, and this is a classic example in this bill, because in clause 6 it gives and in clause 7 it takes away.

So what is the justification for it? Because we have heard, also, for example, in respect of the accommodation supplement—which has been one of the arguments for some of the changes in this bill—that there are going to be increases in the accommodation supplement. We also know that, as a result of that, $100 million over 4 years will be taken from families who will get that increase, because they will lose access to other support.

So why—why in this bill give with one hand and take with the other? Why, when it comes to accommodation supplement, give with one hand and take with the other? When National and all of us here in this Chamber and the whole country know that families are suffering—beneficiary families, working families, middle-class families are all suffering from increased housing costs, increased cost of living, difficulty paying their power bill over this coming winter, difficulty getting access to the health and education services that they deserve. Why is it that even in an election year Budget, National cannot bring itself to actually be genuinely generous to the families and the New Zealanders who are citizens of this country, who are responsible, who make their contribution, who pay their taxes—including beneficiaries, I might add—who contribute to the well-being of our nation? But this Government, this National Government, cannot bring itself to be genuinely generous to those families when they need it the most.

This is bitter-sweet, but I would like to see the explanation from the Minister as to why the changes in the abatement rates were necessary, when it could have been possible to simply improve the family tax credit—as is, needed to be done and as is, very good; it is a very good change to be made and families will benefit from it. But why was it necessary, then, to take from a number of those families some of that benefit? They did not deserve to have money taken off them. They deserve to be treated with fairness and decency. Thank you.

The Opposition members, particularly Mr Wood, have requested more and more and more. That is the thing. He wants to take and spend more and more and more of taxpayers’ money. He calls it Government money. He calls it Government money but it is actually taxpayers’ money. They have earned it, the Government has facilitated and used it effectively and efficiently, and now—due to the surpluses, due to the strong economy—we are able to return what is taxpayers’ money.

💬 Brett Hudson: It’s a dividend.

It is a dividend of success.

The theme of the Labour Party members, particularly, is that they think, they believe, that those on higher incomes—apparently more than $52,000 is a high income now—are earning or receiving too much dividend, too much of their own money by way of this bill. We can only assume that they would like and would demand higher tax rates for those earning $52,000—or let us even give them some benefit of the doubt; let us say $70,000. There or even below the average wage, they want to increase taxes because they think they are better at spending taxpayers’ money—a patronising, sanctimonious attitude that continues to come from the Labour Party members.

In this bill the clauses relating to the thresholds and the clauses that relate to Working for Families are very targeted—are very targeted. That is why we have almost unanimous support around the Chamber for this bill—almost unanimous support; quite unusual. The only party that is not supporting it is the Labour Party. Its members are the only ones who do not care about the people who are going to receive these targeted tax incentives. That is very unfortunate, because they claim to be supporting those who are least well off. We know that 50,000 kids, one-third of those who are in families who earn less than half of the median wage, will now be pulled out of that category that is defined as one measure of child poverty. One-third of those kids—that is a significant effect, a significant difference, that this bill will make. That is why we have heard from across the Chamber why those other parties are supporting the National Government in caring for those families.

It is another unfortunate part of the Labour Party members’ contribution, given that they decry the least-aspiring party in this House, given that they want to increase taxes on those who work harder and earn more. So the plumber, the sparky, the guy who is doing well in the Wairarapa, under the Labour Government will face higher taxes—will face higher taxes; there can be no doubt. They want to decrease debt. They have got a plan for decreasing debt but at a slower rate than this Government because they want to spend more of the taxpayers’ money. They are not interested in repaying debt as quickly as we do. They do not want to repay and give the dividend of success back to the taxpayer.

They think they can spend taxpayer money better, on behalf of the rest of us. Well, that is the fundamental difference—the sanctimonious, patronising attitude from that side, contrary to two-thirds, or three-quarters, of this House. They are a lone voice when it comes to this bill. They are a lone voice when it comes to helping those who are the least well off. They are a lone voice when it comes to supporting those who want to work harder and support their families and communities. They are a lone voice when it comes to targeting those who struggle with housing and who would appreciate an increase in the housing allowance. They are a lone voice when it comes to supporting those people on lower tax thresholds.

It is disappointing. I would love those members to support the bill, so that it could be unanimous, but, unfortunately, as I say, they have isolated themselves. They are out of touch, and the general public can see straight through their excessive and expensive policies.

It is my pleasure to take a call in the Committee stage so that we can get into some of the detail of this bill and examine what is actually in here. In particular, I want to speak to my colleague Jacinda Ardern’s amendment and the changes that that amendment proposes to bring to the legislation.

Let us look at what is actually happening in this bill. There are three things that this Budget is proposing to do. There is the increase in the accommodation supplement, which does not require legislation because that can happen by Order in Council, and that is something that Labour accepts needs to happen. We do not think it is a long-term solution. We think that the reason we have got ourselves into this situation is that we have a Government that has failed to address a housing crisis, so now we are forced to simply do a stopgap, band-aid measure of putting up the accommodation supplement. But we accept that there are people who are struggling to get by and pay their rent, and so that is something that we support.

In terms of the second measure—one that is covered in this legislation—it is the Working for Families package. We have been quite clear throughout this debate that we support the general direction of the changes to the Working for Families package. Working for Families was—we will remind those members over on the other side of the Chamber who seem to have historical amnesia this morning—a Labour initiative, because we recognised that Working for Families was a much more precise instrument for getting extra money to those who most needed it, rather than the very blunt instrument of the taxation system. So we accept the general direction of this measure, and what my colleague’s amendment does is proposes to separate out this measure from the changes to taxation.

Let us actually look at the taxation measures in there. Brett Hudson, the member opposite, seems to have become an overnight disciple of Max Rashbrooke, but if he actually went and read what Max Rashbrooke is saying, what he is saying is that most of the benefit is being delivered to low and middle income families through the Working for Families package, through the increase to the accommodation supplement, and not through the changes to the taxation system.

The first two measures are measures that Labour will support. Why we will not support this legislation is that for the 50 percent of people who earn the lowest incomes in this country, they receive 20 percent of the benefit of the tax measures in this legislation. Let us flip that around the other way. The 50 percent of New Zealanders who earn the highest incomes receive 80 percent of the benefits of the taxation measures in this legislation. That is not something that we see as being the way to target the people who are struggling the most and who need the support. That is a blunt instrument. This is—let us make no bones about it—a regressive taxation package that a progressive party such as Labour could never support.

What we want to see is that we would address the deficits in our country. We would address the fact that that plumber or that sparky whom Alastair Scott, the member who just sat down, was talking about probably cannot get on a waiting list in the health system because this is a Government that has taken $1.7 billion out of our health system over the last 8 years. The child of that plumber or that sparky is probably in an overcrowded classroom because this is a Government that has failed to address the infrastructural needs of our educational system. That plumber or that sparky could well be struggling to find a house that they can afford to buy because this Government has given up on the dream of homeownership for middle New Zealand. It is not something that those members think that ordinary New Zealanders should have access to. It is something that only the very wealthy can aspire to, under this Government’s thinking, and that is not something that a Labour Government sees as being a good use of $1.9 billion worth of spending—giving 80 percent of the benefit to the top 50 percent of income earners in this country.

We recognise that there are many people in those middle income brackets who are struggling to buy a house, and we want to support those people. One of the things that these changes to taxation do nothing to address is the fact that people need to live in warm, dry homes. So, rather than having a spend-up of $1.9 billion, with 80 percent of the benefit going to the top 50 percent of income earners in this country, Labour has a different proposal. What we want to do is help those people who have bought their first house, or even their second or third house, if that house is not insulated, is not warm, is not dry, and does not have a good heating source. This Government has cut any kind of support for families that own their own home because it seems to think that people who own their own home do not deserve any help to ensure their home is warm and dry. It has cut that assistance, but Labour will put that back. That is a much better use of the $1.9 billion that is outlined in this bill.

So what we are asking the Government members opposite to do is support Jacinda Ardern’s amendment to split out the measures and split out the changes to the Working for Families package because, despite the rhetoric that you are hearing from the other side, these are measures that, by and large, with some changes, Labour does support. We recognise that that is a way of delivering benefit to families—something that we have always believed from the time that we invented that scheme and put it in place. We are asking members to support Jacinda Ardern’s amendment so that we can examine the tax measures and the changes to Working for Families as separate initiatives, because that is what they should be.

If this Government was genuine about actually wanting to deliver to the most in need, it would not try to hide its tax cuts, where 80 percent of the benefit goes to the top 50 percent of income earners, behind the smokescreen of making a change to the Working for Families package. It would section out those clauses and it would allow them to be debated and decided as two separate packages.

Let us be very clear about the quantum of money that we are speaking about here. Let us imagine this is a cake—the package that is being put into place. One-seventh of that cake is going towards changes to the accommodation supplement, one-seventh of that cake is going towards changes to the Working for Families package, and five-sevenths of it is going towards spending on tax cuts—tax cuts where 80 percent of the benefit goes to the top 50 percent of income earners. So when we hear the rhetoric from members opposite about how they are trying to help low income earners, that is not the case. That is not something that the tax changes are doing.

The Working for Families change is fine. But support my colleague’s amendment to this bill and allow those two measures to be drawn out separately, in order for us to have a real discussion about taxation and Working for Families as two separate measures, which they should be.

A couple of members have asked some questions, and so I would just try to give an answer to those. Michael Woods commented on what he saw as some inconsistencies—

💬 Dr Megan Woods: Wood. No “s”. No “s”. No “s”. No. I’m Woods.

💬 Iain Lees-Galloway: Plural. Singular.

Woods? I beg your pardon—I beg your pardon—Michael Wood. He commented on the independent earner tax credit (IETC)—

💬 Hon David Parker: Can’t see the wood for the trees.

Ha, ha! Oh, but I am sure he will get there eventually, Mr Parker. The point is that the IETC is relatively poorly targeted. Only 32 percent of eligible individuals claim it during the actual year of their eligibility. The important thing to note is that they are compensated in this particular Budget measure by the $14,000 threshold increase. I am advised that 645,000 people were eligible in 2015, 80 percent did claim eventually, but only 32 percent claim during the year—that was 204,000 people. So the rest either claimed after the tax year or not at all. So clearly it was not having the impact that would have been anticipated at the time that was introduced.

Metiria Turei added to that particular point and added some more comments on the tax threshold changes in Working for Families. The tax threshold changes at $14,000 will undoubtedly help lower income families. Not only is that helping those at the bottom end; it has got to be seen in the context of a much more significant families package in this Budget, which is a very substantial package indeed. That includes the accommodation supplement changes, which will benefit 136,000 families by an average of $36 a week; 75,000 beneficiary families will gain, on average, $30, so that will definitely be welcome and very helpful to them.

Working for Families payments are being increased by considerably more than is currently scheduled in the inflation indexation, by between 10 percent and, in some cases, as much as 42 percent. Around 310,000 families will benefit from those changes. Working for Families payments are a very targeted measure to increase incomes to families with young children. It is important to note that that is where the focus is. Changes to the abatement settings will help to target that assistance to relatively low income families. I would have thought that the Labour Party would warmly welcome that and would be supporting those changes.

The Hon Tim Macindoe, can I say, is one of the people who I think is very honest and straight in this Parliament. We have just heard from him that the statements that the Government had about the independent earner tax credit are different from those that we have got in the publicity materials from the Government and from the Minister of Finance in his speech yesterday. The Minister, in the speech yesterday, used this as a cover, or an excuse, for taking away from people on the minimum wage the tax break that they get from the tax margin changes. They virtually lose it all because the independent earner tax credit goes away. So someone on the minimum wage gets about only $10 a week out of the tax package anyway, and all but $1 a year—is it a year or a month? A month, is it not? Whatever it is—$1 a week. It is just about in the unmeasurables—

💬 Hon Members: A buck a week.

It is a buck a week that they are left with, because the Government has taken away the independent earner tax credit. And its excuse—I have got the speech from Mr Joyce, because they must have known this was a weakness—was: “It is only claimed by about one third of eligible recipients during the tax year.” That is what he said in his speech. That is a direct quote. He said nothing else about it. And what is in the glossy pamphlet—the one that the journalists and all of us pore over? The excuse for this—the same wording: “Only 32 percent of eligible recipients claim it during the year they are eligible.”

So the Government is saying it is ineffective, and therefore, recipients are not losing anything if it takes it off them. That is the implication that it is saying. But it turns out that 80 percent of people are getting it—80 percent of people are getting it. And that is what the Hon Tim Macindoe has just admitted, in response to my colleague Mr Wood’s—apostrophe “s”—question. Ha, ha!

💬 Michael Wood: We’re multiplying.

Ha, ha! This is now shown for the scam that the language—the master of spin, the Hon Steven Joyce, was trying to say yesterday: “Oh, look, but, really, not that many people are losing it, because only 32 percent claim it.” But we did not think that “during the year” was so significant, because they did not explain it until forced to under questioning in the Committee stage—when, in actual fact, we know that 80 percent get it.

So this exposes, again, how poorly targeted this tax package is. That is why Jacinda Ardern’s tabled amendment is dead on—separate the tax from the Working for Families. I do not want to overstate the generosity of the Working for Families changes, given that the Government stripped out $500 million in an earlier Budget. But we support the changes to Working for Families. What we do not support are these poorly targeted tax changes. They could be so much better.

I want the Minister in the chair, Mr David Bennett, to say why, in this speech yesterday, when the Budget was launched, and why in all of the publicity materials, none of this was disclosed. The Government knows that it is exposed at the poor targeting here. It knows that it cannot defend the fact that a multimillionaire gets—what is it—20 bucks a week, and someone on the minimum wage, if they have not got kids, gets $1 a week. It is not fair. Is this the sort of country that we have become—truly? Is this really the sort of country that we want to live in, where we have got these raging gaps in income, and asset inequality? And this Budget makes it worse—this Budget makes it worse. The people on the other side might say: “Oh, 20 bucks for the millionaire. That’s not worth that much.”

💬 Iain Lees-Galloway: It’s $35—$35.

It is $35 a week, is it, for the millionaire? Well, I tell you what, it would make a lot of difference for the people who are on the minimum wage. They do not get it, and they are the people who are the most needy in our society.

I do not know what other people see in their electorate offices. We actually get young men and women, and middle-aged men and women, coming into our electorate offices who look poor. Some of the poorest people in society now are our young people and middle-aged people, who are single-income people. They have not got a spouse. They have not got kids. They have got the cost of living. They come into our offices, and they look poor because they are poor.

This Budget was an opportunity for the Government to do a little bit of social justice for them and get the distribution of this tax policy right, by ensuring that the people on the minimum wage got something. And what did they get? They got given a tax break and then they got it taken away, because the independent earner tax credit was taken off them. The Government knew that—it knew that. There is no way that you can explain this tricky wording in the Budget speech and in these documents in any other way. During the first day of this Budget, when the media goes out, the Government was trying to hide behind the fact that it said only 32 percent of eligible recipients claim it during the tax year, which is what was said in the Budget speech and in the materials.

I want to return, in the time that I have got available, to this other myth—this other myth—about the millionaires not getting the accommodation supplement. They are the ones who do get it. If you have got multiple houses in Auckland that you are renting out, you are a multimillionaire. You are the one who gets the accommodation supplement. It passes through the hands of the person struggling to pay their rent, but they do not keep it. Every cent of it goes to the landlord. Not 98c in the dollar, not 50c in the dollar—100c in the dollar of the accommodation supplement passes through the hands of the tenant, who is paying it to the landlord. Otherwise they are not allowed to get it. It is all going to the landlords. It is bidding up rents. It is holding up house prices, to the detriment of first-home buyers, and it is a disgraceful illustration of an abysmal housing policy for 9 years by the Government.

It is absolute proof that the Government’s poor housing policies have these distributional effects on income as well, because the rich, with all their assets, are now getting more income through the increase in the accommodation supplement. That is why we have said that we reluctantly support it in the short term, but, by God, we are not going to support the funding of this in the long term, because it is wrong and there are better remedies.

We know that under the term of this Government the amount that has been spent on this class of welfare payment, which goes, every cent of it, to the landlord—every cent of it—has gone up from $890 million in 2008 to, after this Budget comes in, $1.5 billion in the next year or two. That is an increase from $890 million to $1.5 billion in this class of welfare payment, and it is all going to the landlords. None of it stays in the pockets of the people who are so poor they cannot afford to pay the rent—or not even poor; middle-class people are caught up in this now.

I used to hear about the Government railing against middle-class welfare. I am ashamed that I now live in a country where we have got welfare for the millionaires, because that is what this is, and it has gone up from $890 million in 2008 to, after these changes, $1.5 billion a year. What terrible management of the economy leads to that? This is just further evidence of the widening gap between the haves and the have-nots.

💬 Hon Damien O’Connor: Subsidy for landlords.

A subsidy for landlords—you are quite right.

💬 Alastair Scott: It goes to the tenant.

There we go again. They still do not get it. The tenant gets it only if he pays it across to the landlord. I always hear from the other side: “Oh, we do not want top-down approaches for these things. We want bottom-up.” That is their line—bottom-up, when they try to take our language. The trouble with top-down over there is there is a block to the electrical signals, because there is so much bone. How can you explain that response from Alastair Scott, a decent man, saying that this goes to the tenant, not the landlord? They get it only if their rent is so high that they cannot afford their rent and they need more money from the Government to pay the rent to the landlord. So who is it going to? It is going to the landlord.

I want to hear a counter view to that from Minister Bennett, because I want him to defend this increase in the accommodation supplement from $890 million a year to $1.5 billion a year under the Government’s watch.

I want to take a moment to address the tabled amendments placed by the Greens’ Metiria Turei and Marama Davidson, but before I do that, that was a very passionate speech from Mr Parker, and I want to make a comment on that, because, in actual fact, Mr Parker’s view and that of the Government are both right. They are both correct in that the accommodation supplement is a subsidy for landlords, but it does go into the pocket of the tenant who is having trouble paying their rent.

It is not, as Mr Parker quite rightly points out, a good way of managing the fact that housing is prohibitively expensive. It does not address the fact that too many landlords do have this whip hand over the rental market, that they are able to buy houses when other people are not. There is this under-competitive, overpriced housing and rental market in this country, and a lot of that is to do with offshore owners and so forth. So Mr Parker is quite correct in saying that this increase in the accommodation supplement from $800 million and something to $1.5 billion does go into the pocket of the landlords.

However, the reality for the people on the ground who are renting is that if you are faced with a hundred-dollar hole in your weekly budget that is currently going on rent, which has to be filled from somewhere, be that the power bill, the grocery bill, or new shoes for the kids or whatever, then that is a real hundred-dollar hole, and if this increase in the supplement can help fill that hole, then that is money in the pocket of, again, the people who need it most. I am not pretending that it is anything more than paint over the rust, as I commented yesterday, but it does address the issue in the short term, as it needs to be addressed.

Turning to the amendment tabled by Marama Davidson first, the amendment changing the date of commencement for the calculation of the family tax credit from 1 April 2018 to 1 July 2017—New Zealand First will be supporting this amendment. We do think that it is a way of showing whether or not the Government is prepared to put our money where its mouth is, because effectively, being that far on the other side of the coming election, this entire bill and the Budget measures that depend on it are almost virtual. They are almost pretend. Everything could change come September, and certainly come April everything could be very different. So I would ask the Government to look at this proposal quite seriously. If it is genuine about the intent of what it claims that this Family Incomes Package and the related taxation bill to do with it are meant to achieve, then I do not see that it will have any problem in changing that commencement date. So we will be supporting that one.

Turning to the amendment in the name of Metiria Turei—there are two parts to this, obviously. Changing the family income threshold above which the tax credit is abated by increasing it from $36,500 to $50,000—this, we do think, is a good move, and will put even more money in the pockets of those who are most in need of it. However, when we turn to the second part—decreasing that abatement rate from the current 22.5c in the dollar to 5c—we do have some concerns about that. I am wondering whether Metiria Turei or somebody else from the Greens would mind rising and taking a call to explain, perhaps, some of the costings behind this suggestion, because it seems to us that it is likely to be prohibitive. I do not imagine the Government will support it, on that basis. It is certainly an area that could be improved, and perhaps a lesser movement might be acceptable to the Government. I imagine that Mr Joyce has done his sums and there is not space for a movement of this type.

I understand that this, again, could be something that could be seen, if the Government were to support it, as addressing concerns that have been raised, particularly by members from the Labour quadrant, that in their view too many of these proposed changes are aimed at higher earners, as opposed to lower earners. It might be a way of offsetting that, but I think going from the one figure of 22.5c to 5c probably alters it too much. There are, obviously, ways in which the inequality, as it has been stated, can be addressed. This may be one way of doing it, but I do not believe that, proportionately, it is the correct thing to do, and for that reason, because these two measures are in the same amendment, we find ourselves unable to support that one. So we will be supporting Marama Davidson’s amendment, but we will not be supporting Metiria Turei’s amendment.

One of the talking points that the National Party’s minions out there on Facebook are using to defend the fact that the richest get $35 a week out of the tax changes and the poorest get $5 a week if they are lucky, or $1 once they have had the clawback from the removal of the tax credit, is that in percentage terms $35 is not a very large percent return to those who are the richest. Well, you cannot go to the supermarket and buy groceries with a percent. You actually need dollars at the supermarket, and it is the people who are at the lowest end, who are earning the least, who need those dollars more than anybody else. But this is a classic National Party tax package, which gives the most to those who have the most, and gives crumbs to those who have the least.

Let us talk about what tax is actually for, because you get the impression by the way the Government members have been speaking today that tax is just a punishment for working. Well, tax is actually the way we all contribute to the services that we all need in a functioning society. Tax is how we make sure we have enough police officers to keep our communities safe. Tax is how we pay our doctors and our nurses and our care assistants to make sure that we get the healthcare that we need. Tax is how we pay our teachers and our teacher-aides, so that our children get the education that they need. And all this bill is doing is reducing the money that we have to do all of those things in order to put more money in the back pockets of people who are already doing the best. That is what this bill does.

At a time when it is nearly impossible for people to get on a waiting list to go to the hospital, at a time when, for adults, going to the GP is more expensive than it has ever been before—and I guarantee that every single one of us who is an electorate MP has had constituents come to talk to them about the price of going to the GP and how they have actually delayed going or not gone to see their doctor because of the price of it—at a time when that is a critical issue, this Government thinks that we should have less revenue to pay for those things to put more money in the back pockets of people who are already doing well.

At a time when the rates of burglaries and violent crimes are climbing, against decade-long trends of falling crime rates; when we are suddenly seeing crime on the rise again; when we need more police officers; and when we need to give them the resources to actually do good old-fashioned community policing and for it to be embedded in our communities—not just to respond to crime, but to prevent it—this Government is cutting taxes, giving them less revenue to provide the resources that our police officers need and to provide enough police officers to keep our communities safe.

At a time when our schools are bursting at the seams because of the astonishing rate of population growth that this country is currently experiencing; at a time when teacher-aides are struggling because of their low pay and the few hours that they actually get per week and the money that they get to make ends meet; and at a time when parents are paying more in so-called donations than ever before, rather than putting money into the education system so that the next generation get a world-class education and are fit and ready to participate in 21st century society, this Government thinks that it is the time to cut taxes and put money in the pockets of people who have the most. Well, I say that that is wrong.

The families who get the least out of this need a decent health system that is affordable. They need an education system that is affordable. They need to know that their communities are safe and that there are police officers out there keeping their communities safe. That is what we use our taxes for. Cutting taxes to make the rich richer and make the poor struggle even more is entirely the wrong thing to do but it is exactly what you would expect from a National Government.

It is my pleasure to take a call on Part 1 of this Taxation (Budget Measures: Family Incomes Package) Bill. Anyone who has been watching the National Budgets for the last 8 or 9 years will know that National takes a giveth and taketh approach—it gives with one hand and takes with another. Another example of that has been, I think it was in 2013, where on the one hand it threw out the lollies and on the other hand we had larger class sizes. It is not until 2 or 3 days, or 4 days, after the Budget is announced that you find out what the real cost of the Budget sweetener is.

This is another one of those pieces of legislation that giveth and taketh. I do want to stick to the rules of the Committee stage—I think it is clause 5 that is one of the taketh clauses in this bill because it gets rid of the independent earner tax credit. So, the reality of that is—we have got some legislative jargon here—someone who is single and is on the minimum wage apparently under this Government gets $11 of a tax cut or tax break. But clause 5 of this bill will mean that the reality for their entire pay packet is that they will lose the independent earner tax credit of $10. So I am sure there is a bunch of Einsteins over there who can figure that out—that if you give someone $11 and take away $10, you have actually given them only $1. So for someone who is on the lowest income, living by themselves, and doing some of these jobs like cleaning the likes of Parliament, in and around our country, the big win for them in this Budget and in this bill with clause 5 is, let us wait for it, $1.

I do not need $1,000 a year—I do not need it. But that is what will happen for someone like me when this piece of legislation comes in. The best that this Government can do for someone who is single and earning the minimum wage is $1. So that pretty much sums up, in my books, what the priorities of this Government are in this Budget: it is not focused on those earning the least, but focused on those earning the most.

The Government has also said, in the spin around this Budget: “We’re making sure we’re looking after low and middle income earners.” Someone earning $52,000 is not rich—let us make an absolute fact of that—and they will get some help, but those who are earning under that are getting very little. Someone who is in the lowest quintile—and I want to get it right; I am taking it from the Government’s own documents—will get a $5 tax credit. Five dollars a week, I think—yes, that is right. Someone in the top quintile will get $35 a week. I reiterate my point here: the Government spun its backside off yesterday, saying that this piece of legislation arising from this Budget was for those on low and middle incomes. But those on the lowest of incomes get a $5 tax break and those on the highest incomes get seven times more, at $35.

💬 Alastair Scott: Increase taxes then. Increase taxes for those in the higher bracket. Say it!

Another out-of-touch member from the other side of the Chamber—another out-of-touch member from the other side of the Chamber. It would be nice if he went and spoke to the people of Masterton about this, when he gets in his car and travels over there. So that is what I have got to say to that member representing Masterton. He is out of touch with his own community—allegedly his own community.

This Budget does not look after the people whom yesterday the Government said it does, because that is the way this Government works. On the night it will say one thing, but 2 or 3 days later the truth comes out. And that is what is happening now. Yesterday, it was “We are looking after low and middle income earners.”, when the Government’s own figures show that is not the truth. The Government is looking after the people whom it has traditionally looked after the most: those who earn the most.

At the same time, schools, housing, and education are suffering in our community. Housing, schools, and education are suffering in our community. We are struggling to be able to get a full roster of doctors at the 24-hour, after-hours surgery at Kenepuru Hospital in my electorate. If we put the $1.7 billion back into the health budget we would not struggle to do that anymore. So the people of that man’s alleged electorate and the people of my electorate on the Kāpiti coast would be able to go to the doctor after hours, for their children, without having to worry whether or not it will be open or staffed properly. That is the alternative that we have got here.

I want to, if I can, speak to my amendment, which is on the Table, just to be really clear about what it is that Labour intends to do with the Taxation (Budget Measures: Family Incomes Package) Bill. What our amendment essentially does is it acknowledges the elements of the bill that we do think are tightly targeted and will make a significant difference to those families and working people who absolutely need it, without the trade-off of pouring $1.9 billion into tax cuts for those who do not—for people like ourselves. So that is what our amendment does. It supports the good and it cuts out the bad. So I want to run through what those elements are because a lot of them significantly affect Part 1 of the bill.

We are obviously keeping those parts that are relevant to making a bill work: the title and commencement. But clause 4 and clause 5 both go. Clause 6 remains, because clause 6, of course, is the element of the bill that adjusts the payment rate and makes the current payment rate of Working for Families the equivalent of that for children aged 16 and 17. It spreads that higher rate across younger children. That means that the eldest dependent child will have a $5,303 rate. So for those families that does lead to the equivalent of a lift of about $9 a week. Then for each dependent child there is a higher rate again: $4,745 across a year. That works out to a varying rate depending on how many dependants a family might have. All in all, our view was that those elements of the bill should stay. They will make a difference for working families. We acknowledge that; we think it is important they remain.

However, we do not agree, then, with the next clause down, clause 7, because, again, it is a demonstration that the National Government continues to give with one hand and take with the other. Those are the clauses that replace our existing threshold and abatement rates. At the moment, abatement kicks in at a threshold of $36,350. National has decided it wants abatement to now kick in at $35,000. That actually, functionally means that with this bill and that clause, some families with one child will be worse off as a consequence of this bill than they currently are and by quite a substantial amount. Our view is that those families should get the boost of these changes, without the removal of their eligibility, which is what these threshold changes mean.

National is also increasing the rate of abatement at the moment, from 22.5c in the dollar, to 25c in the dollar. So, sharp cutting out of those tax credits. We do not agree with that, so we are removing that via our amendment as well.

We have kept in the inflation adjustments that the Government has. Without going into it, some of those were already scheduled to occur. These clauses alter it, based on the fact that this package brings forward some extra benefits for those eligible. And then, basically, we cut the remainder of the bill because the remainder of the bill will see an untargeted $1.9 billion worth of tax bracket changes. Our view is that what happened with the Working for Families changes shows what a difference you can really make for those who genuinely need it, without their being a kind of flow-on effect for earners like us who do not need that extra boost. So $373 million is well spent on the Working for Families changes, and $1.9 billion is wasted on untargeted spending.

We might have been having a very different debate if the Government had chosen to use the family tax credit as its way of delivering to those families who need it the most, without doing what it has done in this bill. So I think our amendment really does a great job of taking the good, acknowledging the good, and giving an indication of what we would have liked to see more of, whilst cutting out that which we did not think was useful.

I want to speak specifically though, now, to clause 6 of the bill. Clause 6 is where we see that different rate change for the first child. I want to speak a little bit to the origins of that. It has not come from nowhere. I acknowledge that the Government obviously did look at some elements of the recommendations from the Children’s Commissioner’s expert advisory group’s report, which was put out some years ago now but still has some excellent work in it.

Under one of the chapters, on tax credits, the expert advisory group made it very clear that “The immediate cause of child material deprivation is low family income. Family income is usually low due to low employment income.” It is a very important point, and one that goes unaddressed in this Budget.

But it goes on, further in, to say that “Around 60 percent of children in poverty … are in beneficiary households, and most of these are sole-parent households. Sole-parents face considerable challenges in supporting their children through paid employment and meeting their childcare needs. Any system changes need to be sensitive to these challenges.” It goes on: “The system needs to take account of the fact that children have different care needs at different ages …”.

But it also then makes a very specific recommendation: “We recommend that, in the short-term”—because I think they were acknowledging that a lot of what we are trying to repair is a low-wage economy—“the government increase the Family Tax Credit by: initially raising the maximum rates for all children aged below 16 years to equality with the rate of a first child aged 16 years and over.” So that was an explicit recommendation by the expert advisory group, and that is something the Government has picked up. It was, however, only one of three recommendations in that one section alone. One of the extra recommendations was “subsequently and incrementally, raising the rates further for children aged 0 to 5 years …”.

So what the Children’s Commissioner report said was that initially, yes, we do need to get those children under 16 at the same rate as those in the last 2 years of that payment. Good, because, actually, we just need a higher rate generally.

But then they said to let us not be under any impression that means that children cost the same amount or have the same needs through every stage of growth, and, in fact, if you are going to target anywhere, target under-fives. That is what the expert advisory group said. Labour listened to that advice, and that was why we produced an alternative in the form of Working for Families.

The Government has given an extra $9 here, to every child under the age of 16—the first child. Our argument was that from zero to 3, a child is not only in their most important developmental years, but, actually, the parents’ options for work are limited—which is why 60 percent of our families living in poverty are those who are sole parents and on benefits, because the options for work when you have got a child aged zero to 3 are incredibly difficult because of the costs of childcare. It is very simple. That is why so many of our sole parents move off benefits after their children are the age of 3.

It all makes sense. That is why we targeted that support from zero to 3. That is what Best Start was about. What I would implore the Government—you have taken one small element of a really comprehensive set of recommendations, and you have taken that one element and you have implemented it. Good; we acknowledge that with our Supplementary Order Paper. But do not forget the rest of what was recommended. When you look at the relative focus and the relative priority that the Government has placed on that recommendation—$373 million versus the $1.9 billion; what is that a ratio of—that has gone into the tax bracket changes, it shows that you just did not get the priorities right.

We could have been debating here a package that would have been much more comprehensive and would have been able—because I can tell you; I have costed the Best Start package. It is even cheaper than what the Government has done with—

💬 Chris Bishop: Oh, you’ve costed it?

Oh, absolutely we costed it. It is part of our policy. It is cheaper than the $373 million that went into the age-range change. So I would really implore the Government—if you are serious about some of these recommendations, then the Best Start package would have been the way to tick off not one but two of the recommendations from the expert advisory group. It was at a much higher rate because it acknowledged where the harshest penalties and those harshest levels of poverty were.

I implore members of the Committee to look at our amendment—the fact that it acknowledges where there is good in this Budget, but acknowledges that $1.9 billion is a poorly targeted spend in the rest of that bill.

Thank you, members of the Committee, for your discussion this morning. I just want to clarify a few points that have been discussed by members of the Committee.

💬 Grant Robertson: I’ve got my pen ready.

Yes, Mr Robertson. The first point is around the accommodation supplement. Many speakers have mentioned that today, and have argued that it is a subsidy for landlords, and that is what the argument has been. The accommodation supplement changes are not proposed as part of this bill.

The CHAIRPERSON (Hon Trevor Mallard): And that is just exactly what I was about to point out to the member. So he is not going to talk about them.

No, I am just making sure that other members do not either.

The CHAIRPERSON (Hon Trevor Mallard): That is my responsibility, Mr Bennett.

Yes, so they are done by Order in Council. What is in this bill, though, are the personal income tax threshold changes. If we look at those changes, currently the thresholds include the $1 to $14,000 range, and that now becomes the $1 to $22,000 tax bracket, at the rate of 10.5 percent.

The advantage of that is it is nearly a doubling of the lower current bracket, to $22,000, which is to the advantage of all taxpayers but especially those in the middle of the taxpaying base, because they have the most to gain. Middle income earners actually have the biggest gain as a percentage.

If you look at the next stage of the tax bracket, where we are looking at $22,000—previously it was $14,000 to $48,000. Now it is $22,000 to $52,000, and that is at 17.5 percent, so that is another gain for middle income taxpayers in New Zealand. The real heart of this Budget is the gain for middle income taxpayers in New Zealand.

💬 Grant Robertson: I thought it was low income people.

It is middle and low income, but middle income taxpayers benefit very much from this Budget, and that is something that many New Zealanders have been looking forward to as well.

The CHAIRPERSON (Hon Trevor Mallard): The Minister will sit down, just because you did not sit down last time when I stood up. I have been listening to this debate for some time from my room. I have been in here now for a relatively short time. We have had one speech that was completely on the topic—that is, whether this particular change meets the objectives agreed to in the second reading of the bill, or addressing the amendments. This is not a debate about the Budget, who wins, who it is aimed at, or at the politics. It is a technical debate now, and the Minister will remember that, as will other members who are coming afterwards.

💬 Chris Hipkins: I raise a point of order, Mr Chairperson. I would just like to draw your attention to previous debates under urgency following Budgets, in which members have been given some latitude in bills that have been progressed under urgency after a Budget to give some reference to the Budget. That has always been the practice of the House. This is the ninth Budget that I have been here for and this the ninth set of urgency where members have been given latitude to discuss other aspects of the Budget.

The CHAIRPERSON (Hon Trevor Mallard): Thank you, Mr Hipkins. Members have been given latitude for an hour and a half so far on this part.

💬 Aupito William Sio: I raise a point of order, Mr Chairperson. I just listened to your ruling, and in light of that can I ask you to consider, based on Standing Order 376, that the regulatory impact statement for this bill has not been tabled. I think, under that ruling, that statement should be tabled given that we are in urgency and given that we do not have the benefit of having this bill being considered by the general public. So in order for us to be able to use information and to specifically refer to clauses, based on your ruling, I would ask that that regulatory impact statement be tabled unless it is a secret.

The CHAIRPERSON (Hon Trevor Mallard): Can I just check the Standing Order that the member was referring to? I think the member said 376, which was “Documents quoted by Minister”. I have got in my hand a disclosure statement and regulatory impact statement for the bill, which the Clerk has just given me from the Table. So I am not quite sure what I am meant to rule on.

💬 Aupito William Sio: The regulatory impact statement. We just looked earlier and there were no copies of that available for us.

The CHAIRPERSON (Hon Trevor Mallard): Well, I am sure, having seen members look, the very efficient staff of the place have replenished the supplies. Clearly it is a document in lots of demand.

💬 Grant Robertson: Currently there is now none because you have got the only one.

The CHAIRPERSON (Hon Trevor Mallard): If anyone really wants it, they can have this one. I would tend to say from the—no, I am not going to put a value statement on it. Right, back to David Bennett.

Just in summary, since the Chair has made it clear that we are not talking about the accommodation supplement or the wider aspects of this Budget, but looking at taxation in this area we see that this Budget has a lot of strength for our communities going forward.

I would like to speak to a couple of the amendments—first of all, the amendment in Marama Davidson’s name, which would bring forward to 1 July this year the effect of the Working for Families changes. I just wanted to say why we feel that is necessary—and I just wanted to acknowledge and appreciate the support for that amendment from New Zealand First. The reason is that what we are trying to do is to ensure that families who have missed out on the gains of productivity and economic development over the course of the last 8 years receive that support as fast as is possible. It is in line with the amendment from Jacinda Ardern to distinguish between the Working for Families reforms in this bill and the tax amendments in this bill as well.

I think one of the scepticisms on this side of the Chamber is that this entire package is really designed by someone who is both the Minister of Finance but also the campaign manager for the National Party’s re-election campaign. So this package has been designed, really, for political purposes rather than to support families who are really doing it tough in New Zealand. So Marama Davidson’s amendment here would ensure that the benefits to those families that this package is at least theoretically designed to support actually do start to support them before the election happens rather than afterwards, when as we know anything could happen.

I just wanted to table that amendment, and then turn back to Jacinda Ardern’s amendment on separating out the Working for Families components from the taxation components of the bill. I wanted to pick up on some comments by Alastair Scott, who spoke earlier about the taxation components and the thresholds there. I think he revealed, really, what the National Government’s motivation is here, because the majority of his comments spoke to why it is that people should get a tax cut rather than focus on whether or not the package, as designed in this bill, is actually going to support families who need it most, which is the stated intention of the bill—whereas the comments that I heard were saying: “Well, actually, if you ignore what the actual bill says its intention is, then actually the real intention is to offer a tax cut.”

The Government’s own fact sheet that was distributed yesterday, which this bill gives effect to, has been quoted a couple of times, and I think a few people have sort of lost the thread on this. If you look at the tax component, which is why that needs to be separated out, then it is actually a regressive tax package. If you look at families who are earning $24,000 a year or less, when you take the tax component and the removal of the independent earner tax credit (IETC), then those families receive $5.34. That is their average change, as marked out in the Government’s information sheet. For families that are on $127,000 or more, the benefit from the tax package and the IETC change actually means that they are $33.22 better off every week. So as a result of this they are actually six times more well-off than families who are earning $24,000 a year or less. That is why we are so concerned that, yes, while obviously it is good that families on those very low incomes will receive $6.10 more in Working for Families that they do not currently get, and that is obviously very helpful, they will also get an additional $3.81 from the accommodation supplement, and that is very helpful. But the combined effect of all of those things is that families on $24,000 a year or less will receive $15.11 as a result of the changes in this bill, whilst families who are on $127,000 a year or more will receive more than twice that, $33.22 a week in the hand. I believe that is why the Committee should support Jacinda Ardern’s amendment to separate those two things out because what we want to do is we want to make sure that those people who are up for increases in Working for Families support and the accommodation supplement support actually do receive those. That is critically important, and it is critically important that they receive those as soon as possible, which is why Marama Davidson’s amendment is also important, whilst we can then separately debate how you design a tax package that is actually progressive rather than regressive.

Just returning to Marama Davidson’s amendments, some people will ask: “Why 1 July rather than say today?”. That is simply a pragmatic measure. The problem that we have got, of course, with the IETC, the tax system, Working for Families, the accommodation supplement, and so on is that it is a mind-bogglingly complex tax and welfare system that we have created over the course of the last two to three decades in this country, really, since the Bolger Government introduced the IETC back in the 1990s. It actually takes quite a long time for the Inland Revenue Department and the accounting profession to get their heads around these kinds of changes, as demonstrated by the A1 sheet of paper that the Government distributed yesterday that had the combined effect of all of these changes.

So we felt that while we wanted to make sure that families did start to receive their Working for Families benefits before the election, it would actually make sense to give the IRD, essentially, you know, a month or two to adjust to that. But the point about the complexity is that there is an argument, again, for why it is that the Government needs to go back to first principles, particularly on the tax component of this, because it has created such a complex system, with people who are falling through the cracks—and I know that we have referred earlier in the debate to families who do not have even one parent who is in any form of work, and thus are really falling through the cracks as well. There is an argument there for a more universal, much simpler to administer, and much cheaper to administer system.

So I would like to ask the Minister whether he would be prepared to bring forward the start date to ensure that, you know, the families who are really doing it tough actually start to receive the additions that are outlined in clause 6 of the bill, and also whether he can speak to why it is that the threshold changes have been designed in such a way as to deliver the greatest benefit to those families with more than $127,000 a year of family income, rather than those who are on $24,000 or less.

In relation to that, there have been some comments made by Government members earlier about comments made on this side of the House referring to those on incomes of more than $50,000 a year as wealthy. I mean, I do not think anybody here is claiming that. That is simply the median income. But if you are referring to a family that is earning $127,000 a year or more, then, yes, that is starting to creep into the higher-income brackets. It is hard to justify, in my mind, why it is that families that are earning more than that number would be receiving $33.22 benefit out of this, rather than families who are on $24,000 a year or less, who are receiving only $15 in total, and in fact only $5.34 from the tax changes that are being debated in the bill. With that, I would just like to support both of those amendments and ask for the support of the House to bring both those amendments through.

I recall the Minister in the chair, the Hon David Bennett, boasting in the House back in 2009 about how a party cannot promise tax cuts before an election and then not deliver them after the election. That is quite interesting, because if we refer to clause 33 of the regulatory impact statement, which talks about reprioritising the independent earner tax credit, it actually repeals one of the few elements of the National Government’s 2009 tax cuts that actually survived. The vast bulk of the tax cuts it promised people before the election and then delivered after the election were subsequently repealed. One of the things that survived was the independent earner tax credit, which they are now repealing in order to pay for a different tax cut.

So it is worth looking at who is affected by the repeal of the independent earner tax credit, because it is around $520 per annum that goes to around half a million New Zealanders who qualify for it. Those are individuals earning between $24,000 and $48,000 a year, and do not receive a benefit or Working for Families or superannuation. They are the people to whom the Government is giving with one hand and taking with another.

So it is worth remembering what the justification the National Government put forward in 2009 was for introducing the independent earner tax credit in the first place. Its argument at the time was that the previous Labour Government—the “nanny State”—had given all of the money to families and not enough to people without children and, therefore, they were justified in giving money to people who did not have dependent children, who were independent workers, who were on relatively modest incomes, and who were not benefiting from things like Working for Families or who would not be well recompensed through the Government’s across-the-board tax cuts that it was introducing at the time. It used that as justification for establishing the independent earner tax credit.

So we come to today and to the justification that the Government has put forward for repealing it, and whether that squares up with its justification for introducing it. So let us look at the minimum-wage worker—say, a hospitality worker, someone waitressing in a restaurant, a cleaner working overnight, or a packer in a warehouse who is earning a minimum wage; they will get from the Government $11 a week in a tax cut, as a result of other changes in the Budget. But then they will have $10 of that $11 taken away from them in the repeal of the independent earner tax credit. So, if the Government’s goal back in 2009 was to say to single people, or people without families and without children, that they were going to be important to the Government and that they were worthy of some financial relief and some financial reward as a result of the Government’s package, what has changed between now and then?

What the Government is actually doing is leaving those people worse off, effectively, than they would have been if it had stuck with its 2009 policy. So I would like some explanation from the Government about that, because I could go back into the Hansard in the corridors and I could find all of the things that it said back in 2009 about why the independent earner tax credit was the only fair way to deliver to those people who fell into that category: that across-the-board tax cuts would not target them sufficiently and that Working for Families ignored them. These were all comments made by then National Government Ministers and MPs, including the Minister in the chair, who is on record as saying some quite inflammatory things at the time about the need—

💬 Grant Robertson: No!

No, I know. It is hard to believe, I know. It is also hard to believe the Government has left him in charge of passaging this legislation through the Committee, but that is an issue for another day. But the Government members are on record as saying that this was the only fair way of targeting those independent earners, and so why is it that they are now doing away with it?

In the regulatory impact statement—I go back to that—it says here that one of the justifications that they use for removing this tax credit is that a significant number, “nearly two-thirds of recipients receive the credit as a lump sum”—[Interruption]

The CHAIRPERSON (Hon Trevor Mallard): The member will take a seat. I am now going to formally reprimand the Minister in the chair for comments that he is making to the Chair as to what the Chair should and should not be doing. If he does it again, I am warning the Government, it will have to find another Minister to sit in the chair.

One of the justifications that the Government has put forward in the regulatory impact statement for repealing the independent earner tax credit is that nearly two-thirds of the recipients of that tax credit receive that money as a lump sum, “indicating a low degree of recipient hardship”. [Interruption] Mr Chair, I should get my 30 seconds back—

The CHAIRPERSON (Hon Trevor Mallard): I will run it a bit longer, because—

I should get my 30 seconds back. If the Government is going to apply that, is it going to apply that to all of the other tax advantages that people get as a lump sum? For example, for people who own rental properties who claim all of that money back as a lump sum, are they going to be repealed as well? The fact that someone claims their money as a lump sum does not mean they do not need the money. So if that is the only justification the Government can come up with for repealing the independent earner tax credit, why is it not going to apply that standard across the board? Why only to low income earners, in a Budget which this Government says is supposed to target low and middle income earners?

I do want to pick up where my colleague Chris Hipkins left off, and talk about the repeal of the independent earner tax credit, which is a critical element in this part of the bill. I want to start doing that by making sure that everybody understands what it is. It is very easy, in these debates, to be talking about a technical name like the independent earner tax credit and not giving people a full understanding of it. It is a $520 per annum maximum payment that goes to around half a million individuals earning between $24,000 and $48,000 a year, if they do not receive a benefit, Working for Families, or superannuation.

If you boil that down, what that was really about—when we go back to 2009—was, as my colleague Chris Hipkins has said, how do we do something for single people? But it had quite a specific purpose. It was actually a continuation of the idea that there were costs associated with going to work. That is actually what it was about.

It is a modest payment, at 10 bucks a week. It is a modest payment, but it recognised that, you know, it is a contribution to a bus fare or a contribution to some of your petrol costs. That is what it is saying. It is saying: “You’re in work, and we want to make sure being in work has some additional value to you.” That is where it came about.

So the Government’s logic today—and it is very confused. I mean, we still have not really gotten to the bottom of this. We have got the Minister’s speech that says that this independent earner tax credit is claimed by only about one third of eligible recipients; we have got the Family Incomes Package at a Glance document, which says it is 32 percent; and then we have got the regulatory impact statement, which says that it was claimed that around 80 percent of those eligible for the tax credit claim it—highly confused positioning here by the Government.

Actually, it was trying to downplay in the Budget speech the importance of this tax credit to a number of people. That downplaying carries on in the regulatory impact statement, on page 23, when it does its analysis of what it calls “reprioritising” the independent earner tax credit. It has its objectives—is it going to improve work incentives? Yes. Is it going to improve incomes for those in financial hardship? The Government say yes, and that is technically true. It is technically true, by one dollar. It is technically true, by one dollar, because that is the impact that it has had by making other changes to tax rates in this part of the bill. That is $10; it gives $11—one dollar better off. I think this is actually not very accurate, what is here. Marginal—one dollar wiped out under any circumstances whatsoever.

I have not heard a justification from the Minister in the chair, David Bennett, or from any Government member today for why they are getting rid of this. Why are they getting rid of something that they brought in in 2009 that recognised the costs of going to work? Those things have not gone away. Those things are still there, and yet that benefit has been taken away.

So I would like a member of the Government to get up on their feet and tell us why this is consistent with the objectives that they have said they have got within the regulatory impact statement. If that is the justification, that by one dollar they have improved those outcomes, well, I think that is pretty misleading. I do not think that is what most New Zealanders would believe was improving those outcomes.

It is sending extremely confused signals to New Zealanders about what this National Government values. Does it value people being in work? Does it value giving a contribution to the costs of being in work? It seems from this that it does not. It seems from this that it would rather say: “No, we’re going to take that money off you. We’re not going to give that as a recognition.”

I know a lot of New Zealanders, single people, who did not get any benefit from Working for Families and they have started to get pretty annoyed about that, because they have costs too—not as big as for people who have children, absolutely; but they have costs as well—and now the Government comes in and says “You know what? We’re just going to get rid of it.” A bit of shuffling money around, and a claim that it is actually going to reduce hardship, when in fact it is not.

So it is time for the Government to get up and explain to New Zealanders why that part of this bill is a good idea, because, otherwise, New Zealanders who are in work are going to feel cheated by this—and rightly so. Their costs have not changed, yet the Government has decided that it is going to pull the plug on it. I have not heard a case made by any member of the National Government today on this. It is about time they got up and said why they defended this. Otherwise, this is just an exercise in the Government saying “Trust us; we know what we’re doing.”, and we know that is not possible.

I move, That the question be now put.

No, this is a major piece of the bill—a lot of money involved.

I want to pick up and develop some of the points that have been made around the independent earner tax credit by some of the previous speakers, and then speak to some of the tabled amendments. The reason I think we deserve some real scrutiny over the independent earner tax credit at this Committee stage of the debate—and, of course, this refers to the changes in clause 5 of the bill—is that it is actually one of the hidden secrets of this Budget. It is not a small thing—it is not a small thing. This is a tax credit that goes to 500,000 New Zealanders. It is worth $220 million a year, and it is being stripped out of the Budget by this bill. The other reason it is important is because of the people whom it actually affects.

Let us talk about who those people are. It is in the information that the Government has taken out. The people whom this affects are the battlers. They are the battlers whom the Labour Party represents, and has always represented. The Government claims to represent them, but it is kicking them in the teeth right now. It is people in that income band—the second quintile—between $24,000 and $51,000, and if you look at the Government’s own information, these are the people who are most impacted by the removal of the independent earner tax credit. They are people who are going out there, working in jobs that do not pay them too much, often struggling to get by but doing their very, very best. This is one of the small things that we did—that the Government did—back in 2009, as my colleague Grant Robertson said. We said to those people that we are on their side, and we are going to help them with some of those small expenses.

If we actually look at the distributional gains, as are affected by this tax package, those are the people who are most heavily impacted. Those people in that $24,000 to $51,000 range once you take out the accommodation supplement—as, Mr Chair, you have said we should not be considering it in this debate—are $12 a week better off as a result of this package. People in the top quintile are $33 a week better off. So people in the top quintile are three times better off under this package than those battlers earning between $24,000 and $51,000 per year. Yet we have heard from the National Government that supposedly this is a good way of targeting the Government’s resources to help those who need it most. Actually, the benefit is targeted at those who need it the least.

Moving on, there are some interesting things that come up in the regulatory impact statement, and it would actually be good to hear from the Minister in the chair, Scott Simpson. One of the slightly surprising things, and it is really dissonant with what we have heard from other Government speeches, is that as a result of these changes—and I am looking at page 31 of the regulatory impact statement—“Hours worked are estimated to reduce in total.” The actual analysis that has been done by officials says that the impact of taking away the independent earner tax credit, for those who receive it in full, is a work disincentive. It is pretty obvious, when you think about it, why that is. It is because people who are in work get the independent earner tax credit—it is there in the name. When you remove it, it is not a big disincentive, but it is some disincentive to work. That is completely contradictory from everything else that we have heard from the Government.

The other useful bit of analysis in the regulatory impact statement is actually in the modelling—the modelling that has actually been done of this package. Let me just read it out. It is very direct. It says that “Around 85 percent … of families benefit from the tax, IETC and FTC changes.”—and, of course, that benefit varies from quite a lot to not very much at all, as we have heard from Grant Robertson. “The average gain is $26 per week. Around 65 percent … of families with … income less than $48k gain, and all families with income above $48k gain.” So I would like to hear from the Minister how he explains that this is a targeted package, when 35 percent of people below $48,000 get nothing and everyone above $48,000 benefits from this package.

Further to that, what the regulatory impact statement tells us—and this is on page 32—is that, actually, there are around 3,000 families who lose financially out of this package. Funnily enough, in Mr Joyce’s speech and all of the National Government speeches we have heard over the course of this debate, we have heard nothing about the 3,000 families who actually lose money out of this package. This is not the Labour Party position; it is here in the regulatory impact statement. The losses are not likely to be large, I will concede that. But, combined with the fact that we know that we have got many, many people who, as a result of the loss of that independent earner tax credit, get a tiny, tiny benefit—maybe a dollar a week—plus at least 3,000 families who are worse off, I would like to hear from the Minister, once again, how he justifies that as an example of targeting resources to those who need it the most.

Finishing off, I am obviously supportive of Jacinda Ardern’s tabled amendment, and also Marama Davidson’s, which will bring forward the one useful thing in this package—the family tax credit—to 1 July. Thank you.

I would like to talk about Part 1, clause 8(5). This is “How movement in CPI determined”. Now, the reason I have some concerns about that is that the Consumers Price Index (CPI) is obviously a very important part of determining what happens with a whole lot of indices and where they go in dollar terms, etc. But when I read this, it says the number that “For the purposes of subsections”—blah, blah, blah—“a movement in New Zealand Consumers Price Index over a period is determined by comparing the following numbers:”. What it does is it talks about the CPI, for example, “the number that, when … started, was the most recent quarterly index number of the New Zealand [Government] Price Index all groups …”.

But what it does is exclude cigarettes and other tobacco products. The thing I do not understand is that if we are going to have a CPI that excludes certain items, then why would we actually just confine that to tobacco and cigarette products? I doubt it is because we have got a whole spate of robberies in South Auckland at the moment that are caused, some say, by tobacco and cigarette products. But if we look at various sectors of our economy, then I would have thought that what you would also do in this, if we do not want to queer the proverbial pitch—why would you not exclude house prices, for example? House prices are all over the place. We have had house-price inflation that has been as high as 20 percent in some areas, and now we are here—it is flattening out. You could argue that in the CPI calculation here that house prices do not actually mirror what is going on in the general economy in a way that even tobacco prices do.

It may be—and I am not too sure why, and the Minister in the chair, Scott Simpson, is a very intelligent man and he could probably elaborate on this, because I am a little lost on this. Why would we exclude just cigarettes? It could be because Parliament actually has the ability to regulate, at any point in time, on cigarette prices. We have done this. I think the last time we had urgency or we actually went into—is it called “super urgency”, the really high form of urgency?

💬 Chris Bishop: Extraordinary.

Extraordinary. Thank you very much, Mr Bishop. It is where we just ram it through straight away because we know that if we do not there could be some gaming going on or some leveraging going on or arbitrage. So we knock it through before anyone knows what has happened.

I wonder whether tobacco is excluded because Parliament has the ability to do that, or I wonder whether it is excluded because the Government actually is thinking about doing this again and it knows that an increase in tobacco is not because of what is happening in the general economy, it is actually because the Government has decided to push through legislation. It can do that of course when the economy is booming and the CPI is rising, or when the economy is on a downer and CPI is dropping. But, in fact, what happens with tobacco is that it increases against all the trends. So I am not too sure whether that is the reason or not.

But if that is the reason, then I think what you could argue is that anything that the Government has the ability to regulate—i.e., increase prices on—you would exclude. We could do this with petrol pricing, for example—petrol prices or alcohol is another one. There is a call at the moment from some quarters to increase excise tax on alcohol, which being from Hawke’s Bay—wine country—I would hate to see. But why would we not exclude something like alcohol? Why would we only exclude tobacco? It could be that that is a historic thing and it is there because way back in 1957 when Nordmeyer included the price of tobacco and alcohol, they said: “OK. When we’re doing the CPI in legislation, we must exclude tobacco.” I am not too sure, but because it is in the legislation there will be a good reason, and we know that. But I am just not too sure what it is. So perhaps the Minister could let us know why the Government has excluded tobacco and other products and whether it is simply because of that ability to legislate the price up and down, and it usually is up. Or is it because we want to discourage people from buying tobacco and so a lot of programmes in place may, in fact, again distort the cost of tobacco from the CPI?

I must admit, it does seem strange. When we are talking about general indices through any legislation, let alone this piece, I cannot remember another time when we have actually excluded something as overtly as this. We often do have debates in the Finance and Expenditure Committee about whether house prices should be excluded, because they do make up such a big part of CPI and household pay. The CPI is, of course, the Consumers Price Index. Housing can have quite a distortionary impact on the economy. But it is a good question that I would not mind having answered.

Thank you very much, Mr Chair, for giving me another chance to speak to Part 1 of the Taxation (Budget Measures: Family Incomes Package) Bill. In an earlier contribution I did start talking about clause 5 but after a gentle breeze of barracking from the other side of the Chamber I was distracted and went on to other issues and was suitably sat down. So I want to get back to clause 5, which, in essence, gets rid of the independent earner tax credit (IETC). I want to ask a question of the Minister in the chair, Scott Simpson, around this clause, as to the words spoken by the finance Minister in his speech.

I want to know why the Minister of Finance said in his speech yesterday afternoon that the independent earner tax credit is claimed by only about one-third of eligible recipients during the tax year. I am not saying that that is factually incorrect, but the Minister of Finance chose expressly to use those words, instead of the wider fact that is revealed in the regulatory impact statement from our officials around the independent earner tax credit. It says that it is estimated that around 80 percent of those eligible for the tax credit actually claim it, and, of those, 60 percent claim it after the end of the tax year. The words that the Minister of Finance chose to use yesterday—and I am trying to answer the Minister’s question for him—were chosen specifically, I think, to minimise the impact of removing the tax credit, which is, effectively, done in clause 5.

I think we have to ask the question: why did the Minister of Finance try to minimise the effect of that? When you put that into the context of some of the other tax changes that were made in the Budget—as has been mentioned a couple of times already in this debate—someone who is single and on the minimum wage will get about $11 of tax benefit from the Budget. But, in essence, because clause 5 has been put in by the Government, the benefit of the $10 a week that that person would have got under the independent earner tax credit has gone.

We may be talking about the independent earner tax credit here in the Committee, but those who are listening or watching at home might not know a lot about it. So, helpfully, the officials have put a little synopsis together on page 3 of the regulatory impact statement. The IETC is available to those individuals who earn between $24,000 and $48,000, as an incentive to work. So I think that would put that range around about low to middle income. The Minister of Finance chose to minimise the real benefit of the IETC because the removal of it, in clause 5, really does hit low to middle income earners. So my question to the Minister in the chair at the moment is—and we have had a bit of confusion as to what the right figure is; the Minister of Finance said 32, the officials say 80—why did the Minister of Finance choose to say those words yesterday, and try to minimise the effect of removing the independent earner tax credit?

Someone at home who is getting the independent earner tax credit might have thought that the $11 that they get through the tax cuts is $11 on top of what they are getting through the independent earner tax credit, therefore thinking: “Hey, that’s not so bad.” But the actual effect of the entirety of clause 5 and whatever else is included in this Budget is that that person is actually only $1 better off. I think I may have done a favour for the Minister in the chair as to why the Minister of Finance yesterday used the words that only 32 percent of eligible people who could get the IETC claim it in that year. It is clear from the regulatory impact statement that 60 percent of people who are eligible actually claim after the tax year. So it is actually something that is used quite extensively by people with low to middle incomes—that bracket between $24,000 and $48,000 a year.

The officials tell us that the cost of it is $220 million per annum. So when the Minister says “Oh, it’s only a third of people who claim it.”, he is trying to say that it is really not a significant issue for low to middle income earners. But at a cost of $220 million a year—a benefit of $220 million a year to those people—removing the independent earner tax credit—

I move, That the question be now put.

I will call Grant Robertson. I warn members that we are getting very close to the end. There was nothing novel in the last speech.

Well, the last speech was non-fiction rather than fiction—I will give you that. Mr Chair, this is my fourth contribution on Part 1, which means you will not give me any more, regardless of whether or not it is novel, new, different, or anything else. I want to take this opportunity to speak about something I have not spoken about in my previous three calls, which is the tabled amendment in the name of my colleague Jacinda Ardern.

This amendment, effectively, creates a Working for Families package that I think has support across the Committee. It is very important that people watching and listening to this debate understand the impact of the amendment that Jacinda Ardern is putting forward. All New Zealanders understand that people on modest incomes with one, two, three, four children are doing it tough at the moment. They have seen their rents go up. They have seen their cost of living go up—be it petrol, be it groceries. They are finding it hard to make ends meet, and we, as a Parliament, at a time when the Government is running large surpluses, should be doing something about that. A portion of what is in this bill today does that—only a small portion, only one-seventh of the whole of the Government’s package actually goes towards Working for Families, another seventh for the accommodation supplement, and five-sevenths for these unfocused tax cuts. What Jacinda Ardern is attempting to do here is to actually make sure that we do simplify Working for Families—we support that—and also improve the amount of money people are getting through the tax credit.

What her amendment also does is remove the clauses that change the abatement rates and the abatement thresholds for Working for Families. I know this, again, is quite a complex technical area for people to be able to understand. Essentially, what the Government has done in this bill is said: “When you’re earning income, we’re going to reduce the point at which you start losing your Working for Families entitlement.” Up until now, if you have been earning up to $36,350, you are cruising along fine and you get your full entitlement to Working for Families. The moment you cross that threshold of $36,350, it starts reducing. What the Government is saying today is: “Well, we don’t want so many people to get Working for Families, so we’re going to reduce that threshold to $35,000, and then, just in case we haven’t reduced and constricted Working for Families quite enough, we’re going to increase the rate at which you start losing your entitlement.” That has, up to now, been 22.5 percent, and it will go up to 25 percent. Essentially, the impact of that change in this bill is to say you are going to lose more money faster in Working for Families.

That plays out when you look at the Budget across the out-years: $373 million on Working for Families in 2018-19; $318 million a year for Working for Families in 2019-20; and $310 million dollars in 2020-21. It is going down. The amount of money the Government is putting into Working for Families—the very thing it said this Budget was about—goes down because the Government is changing the abatement rates and the threshold at which it starts abating. We do not support that bit of the Working for Families package, and Jacinda Ardern’s amendment specifically deals with that by saying: “Let’s not make those abatement changes.”

The effect of this amendment is to say that, yes, we should simplify the categories within Working for Families. There are too many of them, and it is quite complex when people move in and out of different income levels. Yes, we should recognise that there are greater costs at different age groups. I heard Jacinda Ardern earlier today reference the independent panel that the Children’s Commissioner put together—good on the Government for picking that up. Well done. But doing that and then taking away with the other hand, via these abatement changes, is simply not fair. I am urging all members of the Committee to support Jacinda Ardern’s amendment. It will create a fair Working for Families package. Not a sufficient one—I want to make that very clear. The Labour Party would be focusing our resources more on getting support to those families. But at least that would be something the House could walk away from this urgency debate saying we all agree on.

However, if the amendment does not pass, we will, in effect, be reducing the entitlement to Working for Families across the years. Unfortunately, that is the record of this National Government. It is what it did in 2011, and it is doing it again now. Government members want to dress it up as supporting working families. The reality is that they are not, but if they do support Jacinda Ardern’s amendment, then they would at least have gone some way towards supporting working families.

I move, That the question be now put.

Is anyone else going for the call?

The question was put that the following amendment in the name of Jacinda Ardern to delete clauses 4 and 5 be agreed to:

to delete clauses 4 and 5.