Graham Kennedy: Debate on Budget Policy Statement 
Graham Kennedy: Debate on Budget Policy Statement 
[Volume:670;Page:17057] 
Dr KENNEDY GRAHAM (Green) 
: 
 As noted by the chair of the Finance and Expenditure Committee in opening this debate this year the Budget has been eclipsed by the Christchurch earthquake. Previously the Green Party has criticised this Government for not putting the environment at the heart of its economic management and that criticism remains. The Green Party has also proposed solutions to the growing levels of inequality in our society. This disaster will only exacerbate those trends. But today we also question the Government’s fiscal responsibility in its response to the earthquake. We do so on four grounds: first the failure to consider raising revenue; second the risk of taking on more and more debt; third the threat of reductions in social expenditure; and fourth the failure to reprioritise infrastructure spending on roads. Let me address each one. 
The first is the failure to consider raising revenue. This Government has decided to take a one-sided approach to responding to the Christchurch earthquake. It has decided to take on more debt and enact spending cuts that will hurt the most vulnerable in New Zealand. Instead of living within our means the Government has decided that future generations will pay for this disaster. This chosen course will expose us to more risk and weaken our ability to respond to further possible shocks in the near to medium term. 
We believe the responsible and smart response to the Christchurch earthquake would take three forms: first to raise some revenue from those most able to pay; second to borrow a little in order to share some of the costs of the rebuild with future generations; and third to reprioritise infrastructure spending but not to cut other forms of Government expenditure. 
Failing to consider new sources of Government revenue to pay for the rebuilding of Christchurch is simply not a smart way to run this economy. The commentators agree on that. Let me cite just one of them. Fran O’Sullivan has come out in support of a levy arguing that by setting the levy at a high threshold the additional tax is unlikely to affect economic growth as high-income earners are currently using their wealth to retire debt not to consume. A temporary levy set at a low rate on high-income earners is unlikely to affect economic growth and could raise up to $1 billion per annum making a meaningful contribution to the reconstruction effort—an effort now estimated by Treasury to be in the vicinity of $5 billion of uninsured cost to the Government. A temporary levy as set out by the Green Party coupled with leaving the corporate tax rate unchanged at 30 percent would raise just over $1 billion per annum. We should share the cost across those who can most afford to pay. A levy is the fairest way to pay for the earthquake and we believe serious investigation of this option should be undertaken. 
Let me address the risk of taking on more debt. Before the earthquake the Government was adverse to increasing debt. This Government rejected a meaningful economic stimulus as a response to the recession due to a fear of a downgrade of our credit rating. Before the earthquake this Government used reducing debt as the rationale for selling State assets. Greater Government debt means higher borrowing costs for all. It also means we face the very real possibility of a near-term credit downgrade the results of which will mean we all pay more for the money we borrow thereby suppressing growth and sending precious resources offshore simply to service the higher cost of risk of lending to “New Zealand Inc.” Fitch Ratings and Standard and Poor’s have put us on a negative credit watch. A credit downgrade means most households will pay for the rebuilding of Christchurch. However none of the additional money that households will pay will go to Christchurch; it will go offshore to international financiers. A levy by comparison will limit the risk of a credit downgrade and ensure all money levied will go directly to pay for the earthquake. Therefore taking on additional debt should be a last resort used only to make up any difference between raising additional revenue and reprioritising infrastructure spending. 
Let me address the reductions in social spending. The Government has indicated that it will cut social spending and use the earthquake as a justification for imposing National’s policy on welfare reform. Rather than asking those most able to afford it to contribute to the cost of the rebuild the Government has proposed cuts to those on Working for Families benefits and cuts to entitlements to students who require student loans to enable them to get an education. The Government is sending a perverse message that students and those with families will have to pay for the rebuilding of Christchurch while those on higher incomes and those without children to support will not. This is not smart economics; neither is it fair. Welfare cuts of the size needed to pay for the likely damage will need to be significant and will affect some of the most vulnerable. The Green Party supports a fair and equitable approach to pay for the rebuilding of Christchurch. 
Fourthly I turn to the failure to reprioritise infrastructure spending on roads. As part of a responsible smart and balanced response to the Christchurch earthquake this Government can reprioritise its current infrastructure spend. It can suspend its massive expansion of motorways—a capital investment programme of $9.6 billion. To date the Government has failed to reconsider its commitment to spend $9 billion on roads outside Christchurch when roads inside Christchurch are twisted broken and impassable. I was on them today. 
By postponing indefinitely the Wellington Northern Corridor project up to $2.4 billion in funds could be redirected into critical infrastructure spending in Christchurch. Transmission Gully is a new motorway project to be built on an active earthquake fault and it has a cost-benefit ratio of 0.36 to 0.5. That means that for every dollar that the Government pours into that motorway 36c to 50c of benefit will result. Such low-quality spending of public funds must now be placed in doubt when our second-largest city has been destroyed. The same can be said for another road of national folly: the $1.7 billion Puhoi to Wellsford motorway extension. As if the current high oil prices are not reminder enough these projects represent an extremely poor quality of public expenditure. The significant amounts of money involved—close to $9 billion in all—need to be redirected to meet critical infrastructure needs in Christchurch. The amount that John Key’s Government wants to spend on motorways alone could rebuild most of my city’s destroyed and uninsured infrastructure twice over. 
Let me turn those four criticisms into four constructive principles. We can call them the principles of earthquake recovery. First the Budget should include a levy. Second the rebuild should be sustainable and the Budget should allocate funding for an environmental clean-up as a result of the earthquake. Third those most able to pay should help the most. Fourth infrastructure spending should be reprioritised. 
The Leader of the Opposition spoke this morning about spending time in Christchurch. He spent 2 hours there this morning and I know he has spent time there on previous days. I have spent almost every day in the field in the suburbs in eastern Christchurch and downtown in the inner city. I know what it is like there. 
The Green Party supported the extension of the state of emergency for Christchurch. The earthquake is a tragedy and we all need to do whatever we can to help the people of Christchurch. There is a lot of work to be done. People need food power toilets and a place to sleep. There is a looming crisis in the east of Christchurch and we must address this as a priority. It does not help that winter is approaching. As we move forward together we must find ways to ensure that the voices of the people are listened to. I have been through most of the city. I have been in the central business district and I visited my office two doors away from the Methodist Mission Church which lies in rubble. I have been up the hills to the south where new homes lie awkwardly broken in two. I have taken Green Party volunteers into the eastern suburbs shovelling the liquefaction doorknocking and delivering food and counselling. 
We know what we must do. Yet that is for the future. For now for the present for this moment we shall remain one in this House. Thank you.