Clark David: Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill — In Committee 
Text is incorporated into the Bound Volume 
Clark David: Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill — In Committee 
[Sitting date: 26 September 2012. Volume:684;Page:5714. Text is incorporated into the Bound Volume.] 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 It is a delight to follow my colleague the Hon Parekura Horomia who has put his finger on a number of important issues addressed in the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill. He has really brought home some of the issues that continue to affect many members of our population and he has drawn attention to the need to have those issues addressed more seriously than in the kind of haphazard way that the National Party has sought to address them over the years—or not address them. I remind us all that it is not so long ago that Bill English himself opposed such a revenue increase by the then Labour Government saying that “the Government did not ever say it would do it … that is the Government’s standard not ours.” He washed his hands of it. He labelled it a tax increase and said that “It is a tax on the poorest people of New Zealand it is an increase that is far too large and that is why we voted against it.” So the finance Minister not so long ago was voting against this kind of measure. There is a certain irony in his supporting it now. 
We see it for what it is: it is a cynical tax grab—$528 million over the next 4 years Treasury says will go into the Treasury coffers. We know that is why the Government is doing it. We know it is concerned about the revenue hole left by the 4 percent revenue drop during its term in office which is largely due to economic conditions being poor. This Government has the worst economic record of any Government in 50 years. It had hoped for better. It described its 2010 package as broadly fiscally neutral and it has proven to be anything but unless one uses the term “broad” in the broadest sense. 
We know that smoking remains the single biggest cause of preventable morbidity and mortality in New Zealand. Around one in five adults currently smoke. The Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill directly affects a significant portion of our population. It is an issue that needs to be tackled. Labour will be supporting the bill because this is a measure in the right direction. We have had a principled stance on this right the way through. It is not about a tax grab as far as we are concerned; it is actually about addressing the health issue that lies behind it. 
Maggie Barry 
: Holier than thou. 
Dr DAVID CLARK 
: Labour continues to support this we continue to be consistent in this regard and Maggie Barry will acknowledge that this is the right thing to do. I do not think she would say it is the wrong thing to do. Her Government is now supporting this measure. 
What we see is that equally in the papers that we have had before us in the Finance and Expenditure Committee the regulatory impact statement from Treasury explains the effect of this legislation on smokers. In 2010 Cabinet favoured the sequence of three 10 percent steps rather than a one-off 30 percent increase because it considered that it would offer a repeated set of messages to smokers. That is what is contained in the regulatory impact statement. It goes on to say that “The Treasury does not have any evidence available to support one approach over the other as being more likely to be effective in prompting sustained reductions in smoking.” I think that what sits behind this particular choice is that this Government does not want to deal with it on multiple occasions. It wants to get this dirty Act over with. It wants to get the revenue banked in the coffers. It does not want to address the health issue too many times so that is why it has chosen the 30 percent over the 10 percent when it has had direct advice from Treasury that it makes no difference whatsoever. 
The effect on smokers of course is significant. An average smoker smokes 12 cigarettes a day we are told. Assuming a current price of $16 for a packet of 20 that amounts to $3500 per year. Continuing to smoke those 12 cigarettes per day we are told will cost the average smoker an additional $1130 more per year. This is a significant measure. It will affect behaviour. It will make a difference because we know that price and marketing is the most effective way of dealing with addictions. We know that from the alcohol sphere. We see the Government avoiding those measures in the alcohol sphere currently but to its credit it is taking on the price issue here albeit for perhaps the wrong reasons. 
Certainly the University of Otago presenters who came to our select committee identified that. They portrayed this bill although in more polite and academic terms as a naked revenue grab. They advocated for some changes in the bill. The first was to clearly establish that the purpose of the bill is to save lives rather than to increase Government revenue—to make the purpose absolutely clear. Secondly they advocated for clearly establishing the bill as part of the Government’s plans for a smoke-free nation in 2025. That is an interesting point that I will come back to because if it were adopted as part of the Government’s plan for a smoke-free nation in 2025 we might see some additional measures because Treasury also tells us that this measure alone is unlikely to achieve that goal. They also advocate for increasing the tax rises to 40 percent in the first instance and at least 20 percent in subsequent rises. 
The researchers from the University of Otago—whose specialist topic this is who have done the research who understand what would make a change and who are people based and educated largely in New Zealand’s finest city—would recommend that we also reduce duty-free allowances for tobacco products to one pack of 20 cigarettes or the equivalent. They would also urgently investigate establishing a minimum price for tobacco. These are measures that the select committee did not decide to adopt. They would further suggest that we ensure tax increases are implemented with co-interventions and they outline a series of ways in which that could be done effectively hypothecating the additional tax take. Perhaps it is a dirty word to Treasury—the “h” bomb hypothecation—but it is actually a way of having the changes accepted by the public. We know that the public will accept positive changes and particularly smokers in the general public when they know that they will be provided with assistance to help break the habit as a part of that package. These researchers note that the overwhelming evidence is that tax increases are one of the most effective means to reduce smoking prevalence. They cite the modelling work carried out by the New Zealand Institute of Economic Research for the Ministry of Health that demonstrated that substantial tax increases would be an important component of achieving the 2025 smoke-free goal. Treasury advises that the increases proposed will not be sufficient to achieve that goal on their own. 
We note that there is a paucity of other policy being brought forward by the Government and all of that of course highlights the fact that as far as the Government is concerned this is an attempt to fill its revenue hole the 4 percent loss of revenue in the Government books—1.5 percent of which is attributed by the Inland Revenue Department to the global financial crisis but 2.5 percent of which is attributed directly to Government policy changes. This is an attempt to begin to fill that revenue hole because the economy has not grown. The policies the Government has adopted the tax policies we are discussing here and other policies the Government has adopted have not grown the economy sufficiently that the revenue is there to afford the public services that we all value. We see this bill as a tax grab. Unfortunately it is not achieving the 2025 goal that we would hope it would. 
We also note that Treasury’s advice is that the social policy objectives will not be met because excise increases should be considered as part of a broader package. They also note that the stock of current smokers will still be the majority of smokers in 2025. Even aggressive increases in tobacco excise rates alone are unlikely to be sufficient to achieve the smoke-free goal in this time frame. I put it to you that this is clearly a measure that is a tax grab. It is going to achieve positive results so we will support it. We do wish the Government would go further and I look forward to hearing from the next member who will speak and I hope it is Maggie Barry. I hope she will enlighten us as to the wider Government policy on this issue and not just tell us about the naked tax grab which this current bill represents. Thank you.