English Bill: Debate on Prime Minister’s Statement 
English Bill: Debate on Prime Minister’s Statement 
[Volume:660;Page:8770] 
Hon BILL ENGLISH (Deputy Prime Minister) 
: 
 I welcome the contribution from the co-leader of the Greens Metiria Turei but I must say I disagree with a number of her statements. Just to take for example the housing issue I say the Government is doing a tremendous amount of work on how to make better use of a $15 billion asset owned by the New Zealand taxpayer. The Government has found that all the performance measures that the previous Government had been using focused on the houses and not on the people. There are 10000 people on the waiting lists. Some of them do have quite serious housing needs and we need to make better use of what is the taxpayer’s largest single asset. The member will be able to watch that process unfold over the next few months. 
Ms Turei also raised the issue of welfare reform. I think there are a number of aspects of this issue on which we could agree. Despite New Zealand having experienced 8 or 9 years of pretty strong economic growth and strong growth in jobs 250000 New Zealanders are currently on so-called long-term benefits; that is the sickness invalids and domestic purposes benefits. That is a quarter of a million people and I have to say the system does not pay a great deal of attention to them. Their capacities are unknown and their potential is untested. It is a significant human waste which the Prime Minister referred to yesterday in his statement. The Prime Minister signalled in his statement that for the current Government that is not good enough. There is a lot of unrealised potential among those 250000 people and there is a very large long-term fiscal cost. One of the things the Government can do to deal with the long-term fiscal issues in New Zealand is to have a pretty hard look at how we deal with the large group of people who are on long-term benefits. 
Those things were covered yesterday by the Prime Minister in his statement. They are part of a comprehensive agenda that the Government has laid out and it includes significant reform of our social services. The reasons for those significant reforms are pretty straightforward. After large increases in spending on housing health and education New Zealanders are not convinced that they have the outcomes that they hope for when they hand over their tax every week. In addition to that we also have constrained fiscal circumstances looking ahead. Regardless of whoever is in Government the reality is that the Government’s books because of the recession are not in good order. We will have small growth in expenditure over the next 4 or 5 years. That means the Government needs to rethink how it delivers front-line services because it is critical that New Zealanders enjoy good front-line services despite the fact that the Government’s books are not in very good order. That is just one example of the reasons why the Government is focusing strongly on economic growth. 
If we want to have better public services have new jobs created and have higher incomes that can happen only if we have a sound economy where businesses have the confidence to invest employ people and make enough profits to pay tax. Those are the raw facts of it. We cannot do that in the same way as was done in the last decade. A fair chunk of the growth in this economy in the last decade was growth in the Government sector. In fact Government expenditure grew at about twice the rate of the economy between 2003 and 2008. Because we have significant deficits and are having to go to world markets to borrow large amounts of money—I think in total we are borrowing about $240 million a week—the Government does not have the opportunity to drive the growth of the economy over the next 10 years. Growth needs to come from the private sector and particularly from our export sector. Those are the terms that the Prime Minister outlined in his speech yesterday. 
The results of the boom times of the early 2000s followed by the New Zealand recession that began in late 2007 and early 2008 followed by the global recession that turned up in October 2008 have left us with an economy that is out of balance. Essentially we spend more than we earn. We became pretty good in the last 10 years at spending both in the Government and in households. Households have ended up with significant debt and the Government is growing its debt quite rapidly. We owe the world $160 billion; the world has lent us $160 billion. We have to service that debt which will continue to grow. So it is important that we now focus on the earning side of the economy. The Prime Minister laid out a range of measures that are designed to boost the earning side of the economy. Among those were a number of sectoral measures that he outlined in respect of water storage aquaculture mining and the tax system. 
There will be plenty of ongoing debate about the contribution that changes in the tax system can make but the motivation behind them is straightforward. Tax is a pervasive incentive in the economy. Everyone makes decisions based on the taxes that they face. The Tax Working Group pointed out a number of weaknesses in our tax system. In respect of people on higher incomes it is inequitable. For instance a survey of the top 100 asset-owners by the Inland Revenue Department showed that only half of the wealthiest 100 people in New Zealand were actually paying the top tax rate. The opportunities for structuring to avoid taxes are too great and that is eroding our tax base. I think there is another aspect of that too and that is New Zealand’s skill base. The fact is we have next door in Australia an economy that can compete for our skilled people and does so vigorously and we need to create every advantage that we can for ourselves. 
So the context in which the Government and the Prime Minister are considering tax changes is the need to create the right incentives in the economy so that we have the incentive to invest to save and to export. In the last 10 years we have had too much consumption and borrowing. We have had too much of spending more than we earn. Our political opponents may regard that as sustainable; we do not. The reason is not ideological; it is straightforward. We cannot keep doing it because people will not keep lending us money and more important than that it means that by the time we get through this cycle we will be leaving for the next generation of workers about twice as much public debt as the Government currently holds. That is simply not good enough for future generations of New Zealanders because it means that we are using their earning capacity to meet our needs now. That means they will have less of that earning capacity to meet their own needs. I know the co-leader of the Green Party Jeanette Fitzsimons will refer to sustainability a word that can have many meanings. But one thing that is not sustainable is policy that leaves the bills for our consumption to the next generation. 
I just finish my time by acknowledging the role that that co-leader of the Green Party has played in the last 13 years in this Parliament. I know the Greens will feel her loss but I think Parliament will certainly feel her loss. I share with Jeanette Fitzsimons the regret that she did not have the opportunity to be a Minister in previous Governments an opportunity that had her political allies offered it to her she would have taken. She would have been an excellent Minister. I acknowledge from a political point of view her expertise and professionalism and her ability to get her message across. There are very few politicians who display total coherence in what they themselves believe how they represent that and how they articulate it. In my view Jeanette Fitzsimons was one of the few in the time that I have been here who represented that total integrity of message. It was not always a message I agreed with but that is the business. I think it is something that the whole Parliament has respected. I do not want to take away Jeanette Fitzsimons’ opportunity to speak—she has her valedictory statement coming up now—but I just offer those words of respect. Thank you.