English Bill: Taxation (Venture Capital and Miscellaneous Provisions) Bill Taxation (Annual Rates of Income Tax 2004-05) Bill — Third Readings 
Text is incorporated into the Bound Volume 
English Bill: Taxation (Venture Capital and Miscellaneous Provisions) Bill Taxation (Annual Rates of Income Tax 2004-05) Bill — Third Readings 
[Sitting date: 14 December 2004. Volume:622;Page:17827. Text is incorporated into the Bound Volume.] 
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 This debate has broadened into a wider debate about taxation and spending. We now have the benefit of the Government’s Budget Policy Statement and the December Economic and Fiscal Update that was published yesterday. This official Government document reinforces many times over the arguments that were made throughout the debate on this legislation about the levels of taxation and spending. I might say at this stage that there are a number of detailed changes in this legislation related to taxation policy and in so far as any members of this Chamber understand them there seems to be broad agreement on them. However the part of the legislation that sets our tax rates and threshold has been substantively debated particularly today since the December Economic and Fiscal Update came out. 
United Future proposed some amendments relating to shifting tax thresholds. It is our view that the Government should have proposed its own amendments. I will give one piece of information as to why. There is a table on page 42 of the December Economic and Fiscal Update that shows the change in tax revenue since the Budget back in May. The change in tax revenue since the Budget for the year ending 2005 is $1.5 billion and for the year ending 2006 it is $1.7 billion. That is how much extra tax the Government now believes it will collect compared with 6 months ago. That in itself is a good enough reason why this legislation should have and could have included changes in the tax thresholds. That is income the Government did not expect to get as recently as 6 months ago. Now sure as anything it will get it. It is coming from households whose net incomes are not rising anything like as fast as Government tax revenue is. It is extra tax revenue coming to a Government that is having real trouble spending the money effectively that it already gets. 
We are not talking about a few hundred million dollars that could disappear in the rounding or that might blow away in some little economic wind that crops up in the next few months. We are talking about $1.5 billion and $1.7 billion. That is of course going to be spent. 
One of the reasons this Government ought to have changed the taxation rates and thresholds and it is the same reason that United Future ought to take itself seriously for a change—because then other people might—and vote to change these thresholds is that a good proportion of that money will simply be wasted. 
I want to give the House one small example of very large numbers that no one has paid any attention to but that show where this Government’s spending track is going. In this year’s Budget the Government had a forecast of how much it would be spending in next year’s Budget. That is part of what is required by our legislation. In the 2004 Budget the Government forecast that in the next Budget it would spend $1.6 billion extra in 2005 and that money of course is being spent in subsequent years as well. The document that turned up yesterday has a new spending forecast for the 2005 Budget being election year. 
We all thought that $1.6 billion was a lolly scramble. Here was a Government desperate to try to win a third term with a lot of money in the bank going into an election year Budget with an enormous amount of cash to spend. Yesterday the Government cranked that up by another half a billion dollars. So the forecast spend for the election year Budget has gone from $1.6 billion to $2.1 billion—$500 million just like that. 
And it gets worse. The previous forecast said $1.6 billion per year and the new forecast starts at $2.1 billion and rises to $2.8 billion over the next 3 or 4 years. The Government will be spending an enormous amount more money in the next Budget than we thought just 6 months ago. So there is absolutely no doubt about the Government’s fiscal strategy which is to get in all the tax it can possibly get away with and then find as many ways as possible to spend it. 
Why is it doing that? I had a look through the fiscal outlook document and I have to say I am greatly concerned about the quality of Treasury’s production of this document. Page 46 has fiscal indicators and the use of the operating surplus. Treasury has produced an interesting graph; it just does not have any dates on it. So that is what I call a moving feast. It has these nice little waves of shortfalls and operating balance including revaluations and accounting changes which are all calculated on the year ended 30 June. We have no idea just what year it is. 
Craig McNair 
: It looks smart. 
Hon BILL ENGLISH 
: It looks good and no doubt Dr Cullen will produce it any year that he feels like because it has no dates on it at all. I wonder who produced this graph. But it does ask the right question on this page. It asks: “Why does Government run an operating surplus? Why is it not ‘available’ for more spending or tax cuts?”. I say to Treasury that if it thinks the Government does not regard this extra tax revenue as available for spending then it is wrong. I have just shown how the forecast for the next Budget has gone up half a billion dollars. So it is absolutely incorrect for Treasury to imply that it is not available for spending. Its own document shows that it is. And it is absolutely incorrect for Dr Cullen to say that he is some kind of fiscal conservative; everyone else wants to spend spend spend; he did not put out a press release telling the country that he is increasing Government spending in the next Budget for 2005 by half a billion dollars. That is what I call spend spend spend. 
Treasury asks why it is not available and then comes up with the right answer: the answer to these questions is the Government’s fiscal strategy. So the truth is we are collecting a lot more tax than the Government needs because the Government wants to. It is the Government’s fiscal strategy. It is not some natural product of the global economic system that it cannot help. It is because in this legislation today the Government chooses to collect that much tax just as it chooses to waste large amounts of money in its spending. 
The Government’s judgment on spending has to be questioned because even if we think it should spend a lot how is it that we end up with our schools selling raffle tickets to employ teachers and schools and communities raising half a billion dollars per year over and above what the Government gives them to operate our schools— 
Brent Catchpole 
: And that doesn’t include volunteers either. 
Hon BILL ENGLISH 
: —and that does not include voluntary time—at the same time even just within education as the Government is hosing away hundreds of millions of dollars on courses that no one wants and no one is finishing? In the end fiscal policy is about judgment it is not about some automatic machine that forces one to do everything and there are no choices. This Government has made choices and that is to fatten its own waist at the expense of the working families of New Zealand and then to try to fatten its own voting catch by spending that money in as many unwise and ill-judged ways that it can think of in the next 8 months before an election.