Taxation (Budget Measures: Family Incomes Package) Bill

It is my real pleasure to stand and give an address on the title and commencement date for this bill. I think we have argued fairly consistently, despite the title of the Taxation (Budget Measures: Family Incomes Package) Bill, that actually if you take some elements of this bill and analyse them independently, it is very, very clear that there are winners and losers as a consequence of the amendments that the Government has tried to make today. It is very clear that those on the minimum wage who do not have dependants lose out from this package. Look, perhaps the emphasis on families is something that the Government has been very deliberate about, and I will come to whether all families are covered by this package, but it is very clear that there is a group of New Zealanders who are increasingly left out by this Government. It is those who are on low wages who do not have dependants—that will often mean that they are young people in minimum wage jobs—who will really be struggling and will continue to struggle after this legislation passes. In fact, I can see over here that a dollar sits—

💬 Grant Robertson: Oh, there it is. We were looking for that.

Ha, ha! We have been looking for that. A dollar is sitting by Andrew Little’s chair, and that is because yesterday he placed emphasis on the fact that someone who is in a minimum wage job—as Grant Robertson has pointed out, perhaps the cleaner in his office—who is earning a small wage will lose the independent earner tax credit that exists currently, because of these changes, and the small $11 increase they receive will, therefore, diminish down to just $1. So this package, very clearly, is not about those income earners in New Zealand. Those are the people who lose out.

Equally, though, I would not want there to be an assessment because this bill is called the “Family Incomes Package” bill that all families end up winning out of this bill. In fact, I would suggest that a more accurate name for the title of the bill would have been the “Taxation (Budget Measures: Some Families’ Incomes Package) Bill”, because those families who have one child and who earn even less than the median income—from memory, from about the $45,000 mark you end up being worse off as a consequence of this package. In fact, the Government is determined that abatement should kick in at $35,000. Families living on $35,000 with kids do not feel wealthy in New Zealand, and yet that is the message that this bill sends. Clearly, it is the “Some Family Incomes Package”; it is the “Less-than-median-income Incomes Package”—wordy, I know, but more accurate—“for Families”.

I think probably, also, it would be fair to acknowledge in this bill—the Minister in the chair, Paul Goldsmith, got caught out when trying to rebut Grant Robertson, because, of course, he was trying to argue who was better off overall, whereas it is very, very clear that you do have to take into account the context and the vibe of the thing to really assess who is going to be better off.

💬 Kris Faafoi: Context and the vibe.

Ha, ha! The context and the vibe—because, actually, taken as individual entities in this bill, there are distinct losers and distinct winners. It has simply been our argument that we could have done better if we really wanted to target that support.

I would argue that the bill should also, in the title, capture the trade-offs that are made in the way the Government has pitched its spending. We have reiterated this many times: $1.9 billion of spending does come at a cost elsewhere. It seems timely to me that I just had someone from my electorate contact me today to say that they had just sat through a day of workshops on fundraising for their local school—a day of workshops on fundraising to provide basic needs for their local school. That individual in question might get 20 bucks out of this Budget, but you can bet your bottom dollar that that 20 bucks will go into the next school fair, or go to the next gala day, or go to the next set of raffles in order to support schools whose operational funding has been frozen for too long. This bill should be titled the “Budget Trade-offs Bill”, the “Pay with One Hand, Receive with the Other Bill”, because disproportionately we have affected those who do not need it and we are taking from those who do.

On the title and commencement—oh, but wait, there is more, Grant Robertson—if the Government really meant it, it would bring it in earlier. It would bring it in earlier. New Zealanders will be waiting until well after an election cycle, in which case Labour will be in office and we need not worry. So all will be well—that will be a Government that will spend wisely.

I am going to call—

💬 Grant Robertson: What’s-his-name.

The CHAIRPERSON (Lindsay Tisch): James—James Shaw.

Why, thank you very much, Mr Chair!

The CHAIRPERSON (Lindsay Tisch): I am giving you a platform.

I am glad that my previous contributions have been so memorable. I would like to continue where my colleague Jacinda Ardern was leaving off there, to do with the commencement date that is outlined in the clauses here. This is a piece of legislation that drops in, literally, only 120 days before the election day itself, and so it is entirely probable that there will be a change of Government before the commencement date that is outlined here in this legislation.

As this whole package, to which this bill gives effect, was drafted by someone who wears a number of hats—one of which is Minister of Finance, another of which is campaign director for the National Party—it is a highly political and politicised document. If we wanted to actually ensure that the bill does what it says it is intended to do earlier on in the objectives, which is to support families and family incomes, then we would ensure that its start date would be before the election and not to take place after the election.

I would propose that the commencement date—rather than being on 1 April 2018 as outlined in clause 2(2), (3), and (4), with section 24 coming in May 2016 and clauses 2(2) and (3) being 1 April 2018—changes to 1 July 2017. That would ensure two things: it would ensure that the families who absolutely need the support that is available—paltry though it is through this bill—would actually start to receive it before the election. But the other thing is that by having it be on 1 July, it would give the Inland Revenue Department and the tax and accounting profession in New Zealand time to adjust their own systems in what is, frankly, a fairly mind-bogglingly complex set of interrelated tax and benefit systems here.

I know that that is a tight deadline for both Inland Revenue and for private and public sector organisations to adjust, but I think that just over 2 months should suffice. I think it is important that we send a very clear signal that, actually, we should take what it says in the bill as being the primary purpose and actually give effect to it as fast as possible, if the Government is absolutely honest that the intention here is to ensure that families who are really doing it tough in New Zealand and primarily receive the benefit of those changes to Working for Families, then actually start to receive that boost to their income as fast as possible, because they have waited for 8 years for anything.

In fact, in 2013 Working for Families expenditure peaked and has been steadily declining since, because families have been slowly moved off the Working for Families system by this Government since 2013, but are not out of hardship. They are actually in increased hardship as a result of actions that this Government has taken over the course of the last few years.

I think if the Government is sincere—and it keeps telling us in this debate that it is sincere—that the intention here is that those families receive that benefit and that it is designed to lift New Zealand’s hardest-up children out of poverty, then it should act on it as fast as possible and not wait to kick it off until well after the election—in fact, over a year down the track. So it is on the commencement date that I propose that we make an immediate change.

It is the usual practice when tax changes are brought in that they start on 1 April the following year, and that is the process that we are following this time. I will just comment on the statement that the member James Shaw made that it was highly probable there would be a change in Government. I reject that assertion. I think it is very unlikely, because this Government is one that is delivering for all New Zealanders.

That is an interesting matter—an interesting matter was introduced to the debate there by the Minister in the chair, Paul Goldsmith. I do not know. I am backing the overwhelming logic of James Shaw’s contribution there that, actually, a change of Government is extremely likely. Mr Goldsmith at that point will have to consider his future. Perhaps he should run a little bit harder in Epsom—you know, really try to become an MP. He might actually enjoy that.

I am rising, actually, in support of the amendment in the name of Marama Davidson, who is attempting here to change—sorry, I will just get the right bits of paper—clause 2 and bring into force the clauses of the bill that deal with the calculation of the family tax credit from 1 July 2017 rather than 1 April 2018. I understand the point that the Minister has made that there is a process, a sort of regular turnover of when tax changes are made. That is fine, but the reality is that if the Government is serious about supporting working families, that support does not start next year. It should start right now. Here is the last chance for the Government in this debate to show that this package is not a straight-out election-year bribe. Here is the chance, because if it was not, the Government could say: “You know what? We agree. Working families deserve that now. We are going to legislate it. We are going to do it now.” But it is not. That is one of the many reasons that the Labour Party is opposing this legislation.

It is not a real commitment to supporting families, and so Marama Davidson has an amendment that says: “Let’s do it from 1 July. That gives the Government a couple of months to get things sorted, to make sure that it has got all the systems in place, so let’s push the button and give working families something.” This would be the opportunity for the Government to do that, but it is not doing it. It is not interested because it is not about working families; it is about an election. It is about a Government with so few ideas about how it can improve the country that it has got this one, and it is going to push it out to 1 April 2018 and say to New Zealanders: “You only get this if you vote for us.” Well, that is not true. There will be support for working families in New Zealand from a different Government, from a Labour-led Government. I am sure the Greens, and New Zealand First, even, would support getting that money to the families who need it now—getting it to the 800,000 New Zealanders who earn below $14,000 a year, who get nothing out of this package.

The Working for Families changes here are modest. They are extremely modest, and, in fact, in some senses they restrict the way that Working for Families works. But the actual increases to tax credits, which is what is dealt with in terms of the amendment that Marama Davidson has put up, are ones that we do agree with. We do support those, so let us do it now. Let us actually show our commitment as a Parliament to saying that working people deserve a fairer share in the prosperity of New Zealand. But the National Government is not going to do it, because it does not actually believe that. It does not actually believe in giving people a fair go and a fair share in the lower and bottom end of our income scale, because that is not what it is about.

This is a package that is firmly and squarely directed at playing clever politics. Is it clever politics? I do not actually know that it is. I think, when I go around New Zealand, that what most New Zealanders say is that they want to see a housing market where people get a fair go, where first-home buyers can buy their property, and where we do not have people who are homeless. I think they want a health system where they actually can get the care they need, and I see this morning GPs are saying prices are going to go up because of this Budget, because not enough has been invested in health. That is what people want. And they want to make sure we have got an education system that is a truly free education system for our school students and that provides support for students to be able to be part of a new economy.

💬 Simon O’Connor: I don’t think that member understands capitation in health.

That is what New Zealanders want, and yes, they will accept that there should be some family income support. Well, do it now. Simon O’Connor seemed to have a bit to say there. Get up, Simon O’Connor, and tell me why working people do not deserve these changes to come in from 1 July this year. If you do not, you are showing once and for all that this is an election-year Budget. It is not a Budget that is about what is best for New Zealand; it is a Budget where Steven Joyce is trying to work out what is best for him in his role as campaign manager. We are not going to be part of that on this side of the Chamber. What we want to do is actually improve the lives of working New Zealanders. If National wanted to do that as well, here is its final chance on this bill: vote for the amendment.

Clauses 1 and 2 are always the title and commencement. It is an opportunity where we get to offer some alternative titles for the bill. The bill as it stands is called the Taxation (Budget Measures: Family Incomes Package) Bill, which I think is entirely inaccurate. I think we should consider changing the name of the bill to “Taxation (Budget Band-aid Measures) Bill”, because that is all that is offered within this piece of legislation. To some degree the band-aid is also very old and very septic, because if you look at it for those who are the most in need, who are in the most pain, there is little, if anything, available to them in this “band-aid Budget”. There is nothing in the short term that is going to help them in any way—to help them in their plight—and if you look at what it offers to those on the highest incomes, there is five times more for them in this Budget.

We have talked about the independent earner tax credit. That was another measure that this Government put in, again as a band-aid, but in this piece of legislation it is removing that band-aid—a very important band-aid for those people who are independent and earning between $24,000 and $48,000, giving them access to $10 a week. The Government has removed that and tried to convince those people who have got that tax credit that they are much better off because the Government is giving them $11 but taking away $10. That is a pretty poor band-aid for people who are earning the lowest incomes in New Zealand.

Then we have a look at the tax changes within this bill. The lowest quintile—the lowest 20 percent of earners in the country—will get about $5 a week under the Government’s changes. That is not anything to sniff at for people, but when you look at the context, as the Minister said earlier, the top quintile—those earning the most—will get $35 a week. That is five times more than the people who are at the bottom end of the income-earning bracket, who are struggling to make ends meet, who are struggling to even dream of owning a home, and who are probably on a Housing New Zealand waiting list. They get $5, and those people who earn at the other end of the spectrum get $35 a week.

So this is not a “Budget Measures: Family Incomes Package”. It is a band-aid, because the Government is trying to appease people who are hurting now and is not addressing the fundamental reasons why they are hurting. This Government has not done that for the last 8½ years. It has not addressed incomes, and it has not addressed the three most important issues that New Zealanders are most worried about, around health, housing, and education. There is nothing in this Budget to make it any easier for a low-income family or a middle-income family to be able to buy a house—nothing in these Budget measures whatsoever.

The CHAIRPERSON (Lindsay Tisch): Come back to the bill.

That is right, because this is a band-aid bill. It is not dealing with the fundamental issue here. There is serious pain and ailment with families, and this Government has delivered this Budget, which is a band-aid. It is doing nothing fundamental to deal with the issues that affect families around housing, around health, and around education.

The CHAIRPERSON (Lindsay Tisch): Come back to the bill.

That is why this is a band-aid bill: because nothing has been done in those areas. We get a little bit of tax change. We get a little bit of “giveth”, a little bit of “taketh”, and some good work under Working for Families, but we get nothing fundamental in this bill to help the families whom it claims to help. How can it, when the bottom 20 percent of earners get $5 a week and the top get $35 a week? Yesterday at 2 o’clock in this Chamber the Minister of Finance stood up and said that this is a Budget about low and middle income earners. Well, that is a facade, and every other Budget that this Government has delivered has been a facade. The Government is offering tax cuts to those who earn a lot, and failing to recognise that there is serious need in the areas of housing, health, and education—

The CHAIRPERSON (Lindsay Tisch): Come back to the bill.

—and that is why this bill fails to address those issues. The title of this bill should be “Band-aid”, because it is a short-term measure to try to address some fundamental issues that this country faces. This bill fails to address them and because of that this Budget has failed, this Government will fail, and on 23 September there will be a change.

I have been thinking about the title of this bill, and I think that instead of titling this bill the Taxation (Budget Measures: Family Incomes Package) Bill, it would be more accurate to title it the “Taxation (Missed Opportunities) Bill”, because what we faced this year coming into this Budget was a real opportunity.

New Zealanders have worked hard; New Zealanders have sucked up a lot of downward pressure on their incomes over the last 9 years, and here was an opportunity for this Government to actually do something about the problems that we face in our country and to do something to realise the opportunities that we have. The thing is, you can do that through the tax system. The tax system is absolutely integral to people’s incomes; it is absolutely integral to the economic signals that we send; it is absolutely integral to the way that people invest in our economy and behave. But this bill—and it is becoming typical of this Government—simply fiddles around the edges. So what are the problems that we face and how has this bill addressed them?

Well, let us look at some of the family income changes that are proposed in this bill. If we look at the core changes around the tax system, this is where the rubber really hits the road: $1.9 billion of income tax changes in this package. It is five-sevenths of the total amount of money that has been reallocated within this package. But do you know what? For 35 percent of wage and salary earners earning under $48,000, it delivers nothing. It gives something to every single wage and salary earner over $48,000, but for those under $48,000, 35 percent of them receive absolutely no benefit from this. That is a missed opportunity because, by the Government’s own account, those are the people who need support and who need a bit of backing, but they are getting nothing. Worse than that, we have got 3,000 families—and this is in regulatory impact statement—who are actually worse off as a result of these changes. Well, surely that is a missed opportunity as well, given the surpluses that this Government has got to do something good with.

In these changes we could have had a real focus on people’s housing needs—a real focus on them. Instead, we got a bit more money going into the accommodation supplement. But, actually, that does not even go near to making up for the fact that the accommodation supplement has been frozen for the 9 years of this Government. So the increases that the National Government is crowing about only go part way to filling up the fact that people have been receiving less of an accommodation supplement than they did 9 years ago. Nine years ago the average rent was $450; it is $690 now. None of these changes, even combined in the best-case scenario, go any way towards meeting that.

As my colleague Kris Faafoi mentioned before, there are huge missed opportunities in terms of looking at a fair distribution within our tax system in this bill. We know that there are inequities at the moment, but what does this bill do? It actually makes them worse. Of that 1.9 billion—it is a lot of money—how much of it goes to people in the bottom half of income earners? It is the same amount as goes to the top 10 percent of income earners. That is the way that we are distributing income in this tax bill, and that speaks to a massive missed opportunity to help those who really need it.

Finally, I turn to the commencement date. I really want to pick up on this because I have heard time and time again from the National speakers in this debate about what an important set of changes this is and how much difference it will make in people’s lives. I can guarantee you that I can go back through Budget speeches and Budget bills year in and year out when this House has voted to bring changes in before the first of April next year. We heard from the Minister in the chair, Paul Goldsmith: “Oh that is just the way that we normally do things.” If this is so important, and if you have got such a competent revenue Minister in Mrs Collins, surely she could crack the whip and get IRD to take out the Working for Families family tax credit changes in here—which are good and are helpful, with a few issues around abatement rates—and bring them in earlier as per Marama Davidson’s amendment. That is one good and useful thing we could do, and we have heard no explanation whatsoever from this Government about why those people have to wait a whole other year past the next election to get any relief from this bill. Thank you.

I just wanted to pick up on what Michael Wood was saying then about comments that Minister Goldsmith had made earlier that the convention in tax law is for it to take effect on 1 April the following year. He did not actually provide any reason logistically why you could not vary that. The excise tax on tobacco, for example, can kick in immediately, and we know that the convention there is that when you do things like increase excise taxes and so on, you do that immediately after the Budget so as to try to avoid people modifying their behaviour in advance of it coming in. With the inverse—which is what you have got here, and essentially it is a reduction in income taxes—the only logistical reason why you cannot bring that in any earlier is the amount of time it takes for the Inland Revenue Department and for different organisations to work those changes through their payroll systems and so on, which is why Marama Davidson’s amendment to the clause is that the date of commencement should come forward to 1 July.

We are not suggesting that it comes forward immediately. That would be impractical, simply because the Inland Revenue Department and different organisations would not be able to adjust their systems in time to deal with it, but we think that just over 2 months is actually not an unreasonable period of time. It is tight, but it is doable. So I would like the Minister to address not what the convention is but why there is a logistical reason why we cannot bring this forward and make sure that the families whom this bill says it intends to reach and intends to support start receiving that support as soon as is practically possible, rather than waiting more than a full year for the introduction of this—and waiting for the election. This really does speak to the sincerity of the Government in its intention when it comes to the purpose of the bill. The commencement clause actually is relevant to the actual purpose of the bill here, and I do think that the Minister needs to address why it is that he thinks that it is not actually practical to do it any sooner. Simply relying on or hiding behind convention does not cut it.