Cullen Michael: Taxation (Annual Rates of income Tax 2005-06) Bill Taxation (Urgent Measures) Bill Student Loan Scheme Amendment Bill — Third Readings 
Cullen Michael: Taxation (Annual Rates of income Tax 2005-06) Bill Taxation (Urgent Measures) Bill Student Loan Scheme Amendment Bill — Third Readings 
[Volume:628;Page:787] 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I move  
That the Taxation (Annual Rates of Income Tax 2005-06) Bill the Taxation (Urgent Measures) Bill and the Student Loan Scheme Amendment Bill be now read a third time 
. The Taxation (Urgent Measures) Bill and the Student Loan Scheme Amendment Bill deliver on key Labour election pledges aimed at improving the lives of a very large number of New Zealanders. They reflect our commitment to a fair and an inclusive society that offers its young people the opportunity to achieve their full potential. The new legislation will also make a real difference to the income of many thousands of working families with children. To be precise some 160000 working families will be better off as a result of this legislation. One hundred thousand families already entitled to family support and targeted tax assistance from 1 April next year will receive increased assistance and some 60000 additional families will also qualify for that targeted assistance. 
Much has been made during the debate in the Committee stage of the marginal tax rates. All that this legislation does in that respect is to lower the marginal tax rate for 100000 families but increase it for 60000 families. The other matters referred to by Dr Lockwood Smith have I am afraid been par for the system for many years. If he wants to go off on the lonely road of trying to solve the problem of high effective marginal tax rates on beneficiaries as they move into employment he will join the large group of bleached bones that lies within that desert marked as the tax benefit interface. 
I see that my old colleague the member for Clutha-Southland is smiling at that because he has no doubt been down the same track as others in the past of looking at the various papers on that particular issue. [ 
Interruption 
] No. I am saying that everybody faces that problem or otherwise people on very high incomes would still get partial unemployment benefits partial domestic purposes benefits or partial whatever else their benefit was. At some point the benefit system has to be exited from in terms of the domestic purposes benefit or the unemployment benefit and therefore that means very high effective marginal tax rates across a range of incomes. I say to Dr Lockwood Smith that nobody has solved that problem in New Zealand although many people have tried to solve it. The most stupid example of trying to solve it was that of my former colleague the Hon Roger Douglas who ended up with 100 percent effective marginal tax rates for everybody on low incomes. 
Hon Bill English 
: It was lagged. 
Hon Dr MICHAEL CULLEN 
: Exactly—it was lagged. The member knows precisely what I am referring to and that was done to try to solve the problem. It was the worst possible solution to come up with. 
The change in student loans will encourage our graduates to stay in New Zealand because the loans are interest-free if they stay here. Graduates will pay interest if they go overseas. They will stay here to invest their skills and New Zealanders will be attracted back here from overseas. Of course the main opponent of this legislation in the debate has been the Hon Dr Lockwood Smith—or as he prefers to call himself Dr the Hon Lockwood Smith—who in 1990 said that he would abolish the fees that Labour had put in place for tertiary education and that those toll gates on knowledge would go. Ever since then and ever since National was elected in the 1990s he has never even been back to a university campus to explain why he did not abolish those toll gates on knowledge but instead built them about three times higher and then saw them go up 10 to 15 percent every year that National was in power. That is why although some day later on the member may crawl back to a campus he will certainly not go back there in coming elections—unless he has all the windows and doors checked to make sure he can get out in a hurry should he need to do so. 
The other element in this bill of course is the confirmation of the annual rates of taxation. We have had the usual whinge of the wealthy come from the National members that unless God help them their tax rate is cut they will not work another day. They have said they will not get out of bed in the morning but will lie there because they would rather live there in poverty than go to work in mere affluence. That is what those in the National Party say. 
My goodness me since the year 2000 we have seen that National has been on strike. Since its members have had to pay 39c in the dollar on income above $60000 a year not a finger has been lifted by those in National. Occasionally two fingers have been lifted in this House but the National members have never lifted one finger in terms of doing work because we know they cannot possibly work if they will keep only 61c in the dollar of their income. 
Katherine Rich 
: You make lawyers and accountants happy. 
Hon Dr MICHAEL CULLEN 
: Even Katherine Rich—the eponymous Katherine Rich—has joined in the debate on this matter. [ 
Interruption 
] I said “eponymous”. If you had borrowed a decent amount of money and had a decent education you would know what it means Jacqui Dean I think the name is from Aoraki or one of those sorts of places. No you are from Otago; you are that particular woman. And soon she will get to Middlemarch as well proudly boasting that she had been to Cromwell and Palmerston in the Otago electorate— 
Hon Bill English 
: I raise a point of order Mr Speaker. That member has been in the House for some time and should know that he cannot use the second person unless he is addressing the Speaker. 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Yes I am aware of that. I thank the member. 
Hon Dr MICHAEL CULLEN 
: Absolutely right! 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Mr English is absolutely right. Dr Cullen will come to order. 
Hon Dr MICHAEL CULLEN 
: As the Irish would say I must keep myself to the third person in these matters as we move on. So Jacqui Dean will visit Middlemarch at some future point—which she still thinks is simply the title of a George Eliot novel but she will find out soon that it is actually within her electorate. 
On the Government side of the House we know that since we changed the tax rates we have achieved the highest participation rate in the labour force of any developed country in the world. We have achieved the lowest unemployment rate of any developed country in the world. We have grown faster than the developed world’s average for every year that we have been in power—but apparently none of that can happen. National members say that although that may work in practice they know it does not work in theory. According to National we have to stop doing the practical things that are working and encourage the wealthy by making their tax rates lower—and as we know at the same time making sure that the poor are worse off. 
We always know the fundamental Tory philosophy: the poor will work harder if they are poorer the rich will work harder if they are richer and the middle class will take their chances on the boundaries. That is National’s philosophy in those matters. We wish it well. It is why in the end the National members lost the election and it is why they will stagger on for another 3 years in bitterness and hatred and in the end lose the next one as well.