Brash Don: Budget Debate 
Brash Don: Budget Debate 
[Volume:625;Page:20750] 
Dr DON BRASH (Leader of the Opposition) 
: 
 This is a Budget about lost opportunity. I move  
That all the words after “That” be omitted and the following inserted: “this House has no confidence in this Labour-led Government which lacks the vision to lead New Zealand to a high growth high income future which will cause growing numbers of our children and grandchildren to seek better opportunities abroad and which having overtaxed hardworking New Zealanders for five long years insults their intelligence with election year fiddling while our future burns.” 
 Over the last 10 years the New Zealand economy has grown at an average rate of 3.7 percent annually substantially better growth than over the previous two decades. The astonishing thing is that in the second half of that period coinciding with this Government’s term of office when there was no drought and no Asian crisis when the exchange rate reached its lowest level in history when world interest rates reached the lowest point in decades thus provoking a worldwide boom in property prices when we have enjoyed the best prices for meat and dairy exports for a generation and when we have enjoyed a boom in the construction industry caused by people flooding in after September 11 despite all those positive influences growth was no faster in the second 5 years than in the first 5 years. 
Even worse despite that good growth there was no increase in average after-tax after-inflation household income over the last 5 years. Yes average household incomes before tax went up but after income tax they went up by slightly less than prices went up over the same period. So there has been no increase in average household incomes after taking into account tax and inflation over the last 5 years. It is no wonder industrial stoppages are breaking out all over the country. It is no wonder ordinary hard-working New Zealanders feel that this Government simply does not care about them. It is no wonder 600 New Zealanders are queuing up to leave this country for Australia every week. Average after-tax wages in New Zealand were about $5000 per year below average after-tax wages in Australia in 1999. By last year the gap was not $5000 but almost $9000 per year. That is the background to this debate. 
What has today’s Budget done to reverse the dismal legacy of the last 5 years? Almost nothing. There have been trivial changes in the tax thresholds to leave a little more in the hands of taxpayers—but not until 2008. We have waited for 6 years for the Government to recognise the need to adjust the tax thresholds and now we must wait for another 3 years before the adjustments actually take place. Before the Budget and following Peter Costello’s Budget in Australia last week all New Zealanders who earn less than $100000 per year paid more income tax than Australians on the same income. Today’s Budget will make little difference to that. Before today’s Budget thousands of Kiwi families on middle incomes faced the loss of 64c in the dollar when they earned additional money and in some cases they lost 90c from each extra dollar earned leaving them with little incentive to get more qualifications work harder or take a business risk. This Budget barely changes that appalling situation. Hard-working New Zealanders are still paying too much in tax and only a National Government will change that. Yes the Minister has made a few minor adjustments in the depreciation rates. However those are not tax concessions as he suggests but simply a reflection of economic reality. Yes the Minister has made a few other tax reductions but for the most part they are sufficient only to offset the additional burden imposed by the carbon tax that this Government announced a few days ago. The Budget proposes a continued big increase in Government spending—an increase made at the expense of providing meaningful tax relief to hard-working New Zealanders. 
But surely the Government’s supporters will say the proposal to encourage more savings will do something to encourage growth. Actually no. There is no evidence that saving more would by itself encourage growth or deliver higher living standards. Some of the countries with the highest savings records in the world such as Japan and Switzerland have the lowest rates of economic growth at the moment while some of the countries with a very poor savings record like Australia and the United States have much better growth rates. Yes it would be a good thing if New Zealanders saved a bit more. That would make us a bit less dependent on the savings of other countries. But there is no evidence that schemes like the one proposed will make any material difference to our savings behaviour. That is well illustrated by the failure of a similar scheme in the UK to generate any appreciable increase in savings. 
What we need to do to encourage more savings is to enable New Zealanders to earn higher incomes. This Budget does nothing to achieve that. It does nothing to drive improvements in future growth and nothing to narrow the gap in living standards between New Zealand and Australia. Growth in productivity here is assumed to average 1.5 percent a year. In Australia it has recently been 2.5 percent a year. But even using the lower figure of 1.75 percent a year which is currently assumed by the Australian Treasury New Zealand living standards will never catch up with those in Australia unless we up our game. Indeed we may not even average 1.5 percent in productivity growth. Last year productivity growth per hour worked looks to have fallen—to have been negative—with output growth less than the increase in hours worked. The Budget is an opportunity lost in terms of encouraging improved living standards. 
Of course Budgets are also about allocating resources in the here and now to deal with current problems. How well does the Budget measure up in those terms? One of the most fundamental responsibilities of any Government is to protect the community from internal and external threats. The Government has recently been failing miserably in that regard. We have had the report on the 111 emergency call system. We have had mayors from all over the country calling out for more police. We have had evidence that the community has lost confidence in the police who seem to be more preoccupied with revenue gathering than with crime fighting. The upgrade of the Orions has been deferred for nearly 6 years. The upgrade of the Hercules fleet has been deferred for nearly 6 years. We have seen a substantial failure in the biosecurity area to act on the conclusions of the 2002 reports which pointed out the need to improve our defence against biosecurity risks. Looking forward there will be a little more money for the police but not much and there is no evidence that the Government is getting to the core of the problem. The spending on defence and biosecurity is barely changing at all and is certainly not going up as fast as GDP. 
But the Government will protest we should look at how much extra spending is going into health. Yes there is extra spending there and yes we must have a well-funded health system that meets the needs of our people. The National Party strongly agrees with that. But what has all the extra money actually bought? The latest figures we have for the year 2002-03 show that the number of taxpayer-funded surgical inpatient operations actually declined over the first 3 years of the Labour Government from over 160000 in its first full year to fewer than 158000 in 2002-03. We know that waiting lists for surgery have continued to be far too long with thousands of people waiting in pain and often in fear for operations that they should be able to have. We know that people have been removed from waiting lists by district health boards all over the country. Two thousand people were removed from the Counties-Manukau District Health Board waiting list and almost 600 were removed from the Tairawhiti District Health Board waiting list—all no doubt because the Minister is keen to window dress the numbers in advance of this year’s election. We know that there has been a huge increase in spending on the health bureaucracy with 21 district health boards 78 primary health organisations and an enormous increase in the Ministry of Health’s staff. We know that facilities for the very old for those with dementia or Alzheimer’s disease have been starved of resources to the point where 37 facilities have closed in the last 3 years alone. It seems clear that very little has been bought for the huge increase in Government spending on health—an increase that even the Minister of Finance concedes has been at a rate that simply cannot continue into the future. 
The same is true in education. There has been a vast increase in Government spending on education and only a shambles to show for it. National supports a well-funded education system that delivers high-quality education to all our children and to older New Zealanders who need to improve their skills. But what has this Government actually delivered? It has delivered a totally dysfunctional National Certificate of Educational Achievement system which pupils do not understand which parents do not understand and which employers certainly do not understand. The chairman of the New Zealand Qualifications Authority has gone and the chief executive officer of the authority has gone but where is the ministerial responsibility? 
What about tertiary education? The Government has showered it with money but the waste has been enormous. Let us think about the wananga. Let us think about courses in homeopathy for pets. Let us think about the COOL IT course at the Christchurch Polytechnic. Let us think about courses in twilight golf or the Maori singalong courses. Let us think about the $40 million a year spent on the Tertiary Education Commission bureaucracy. Hundreds of millions of dollars have been squandered on courses where 70 percent of those who enrol do not complete the course. What has happened is a huge increase in Government spending with little of value to show for it. 
There has been a complete collapse in productivity in the public sector. Treasury itself has concluded that the core public sector has expanded in a way that is totally unsustainable. The number employed in the core public sector has gone up by some 28 percent in the last 5 years. Treasury advises: “The available data suggests that the agencies that have experienced the most growth [in employment] are not necessarily those working in areas that closely align with the Government’s priorities.” That of course is bureaucratese for saying “Employment growth in the core public sector is completely out of control and bears no resemblance to what the Government should be doing.” 
What a huge opportunity has been lost! The economic conditions are the best they have been for a generation yet nothing has been achieved in terms of faster growth or increased productivity. Nothing has been achieved to encourage the 600 Kiwis who are leaving each week for Australia to stay in New Zealand and to devote their skills and energy to building New Zealand’s future. This is a complacent Government that is riding a wave created by earlier Governments and by international conditions for which it can take none of the credit. Yes this Government has increased its spending on health and education and those are priorities for National also. But the way that Labour has spent the money has delivered very few benefits. There is a vast increase in bureaucracy leading to a vast increase in compliance costs and a more intrusive State. Waiting lists are far too long with thousands of people waiting anxiously. There is no measurable improvement in literacy or numeracy in our children. We have a totally shambolic secondary school education qualification and vast waste in the tertiary education sector. The 111 emergency call system is completely dysfunctional leading to a serious loss of public confidence in the police. This Budget like all Dr Cullen’s previous Budgets simply declines to compete with the rest of the world. This Budget embraces mediocrity. This Budget states to all parents and grandparents in New Zealand that their children and grandchildren will probably end up living overseas—and that that is OK. 
Well it is not OK! We do not have to accept mediocrity. We do not have to put up with a Government that treats New Zealanders’ incomes as its income and that then squanders it on more mindless bureaucracy leading to more mindless regulation and ever-more burdensome compliance costs. We do not have to put up with the destruction of educational standards. We do not have to put up with a health system that generates inflation but not operations. We do not have to put up with intergenerational welfare dependency at a time of strong international growth or with a rising tax burden. We do not have to put up with a Government that has no idea what the word accountability means or with a Government full of accident-prone Ministers and ex-Ministers—a ministerial “hall of fame” that is added to every few months. We are having the lifeblood drained out of our country yet all we get is more money thrown at problems. That money represents the high tax burden that middle-income New Zealanders have had to shoulder as they fund everybody else. The steady outflow of New Zealanders shows one simple thing: Kiwis are choosing to sidestep that tax burden and the rampant political correctness of a Government whose values are wildly out of step with those of mainstream New Zealand. 
Well we do not have to put up with that much longer. Within months New Zealanders will have an opportunity to put an end to that nonsense. They can elect a Government that will put the priorities of mainstream New Zealanders at the centre of its policies by providing tax relief to all hard-working New Zealanders ensuring every child gets an education that is relevant and a qualification that is comprehensible ending intergenerational welfare interdependency treating all New Zealanders as equal before the law and protecting our families and communities from those who would endanger us. New Zealanders will have an opportunity to elect a National Government.