Norman Russel: Oral Questions — Questions to MinistersText is incorporated into the Bound VolumeNorman Russel: Oral Questions — Questions to Ministers[Sitting date: 10 December 2014. Volume:702;Page:1319. Text is incorporated into the Bound Volume.]1.Dr RUSSEL NORMAN (Co-Leader—Green)to the Prime Minister: Does he agree with the OECD that “when income inequality rises economic growth falls”?Rt Hon JOHN KEY (Prime Minister):No it is not that simple because there are a number of factors that contribute to economic growth.Dr Russel Norman: Is the Prime Minister saying that the OECD Secretary-General Angel Gurria got it wrong when he said yesterday that “addressing high and growing inequality is critical to promote strong and sustained growth”?Rt Hon JOHN KEY: No I think that that helps. That is one of the reasons why the Government is proud of its record as defined by the OECD in a table that it put out last night. It showed that between 2007 and 2011 income inequality has actually narrowed under this Government. The great tragedy is that it also put out a report last night that showed that between 1985 and 2005 when a Labour Government was in office for a reasonable period of time income inequality got worse. Shame on Labour—Mr SPEAKER: Order!Dr Russel Norman: Why does the Prime Minister continue to defend a failed right-wing ideology—trickle-down economics which the OECD has now rejected—when this economic ideology has fuelled the biggest rise in inequality amongst OECD countries and has knocked 10 percentage points off NewRt Hon JOHN KEY: That is not right. All I can say is that under a National-led Government income inequality has actually narrowed as defined by the OECD between 2007 and 2011. Interestingly enough if the member is quoting the OECD as the oracle of all good information when it comes to growth and issues of inequality maybe he would like to follow this comment from the OECD. It said in 2010 in its report: “A growth-orientated tax reform would improve the design of tax regimes by broadening the base and lowering the tax rates of New Zealand.”Dr Russel Norman: With regard to tax rates does the Prime Minister believe that when he cut taxes for the top 10 percent of income earners in the middle of the global financial crisis in 2010 it reduced inequality?Rt Hon JOHN KEY: As Treasury noted at the time and as has proven to be correct actually the changes to the tax system that were made by the National-led Government in 2010 were distributionally neutral. Actually as time has gone on it has been proven that higher-income taxpayers have paid more as a result of those tax changes. That is because the Government changed the rules around depreciation of rental properties the bulk of which are owned by better-off New Zealanders and it is because even though there was an increase in GST a large amount of nominal GST is of course paid by higher-income taxpayers. They were very good tax changes and that is why New Zealanders voted for them in an overwhelming way and why they rejected the Green Party policies and delivered what was—Mr SPEAKER: Order!Dr Russel Norman: Will he now revisit his policy of keeping benefits low as “an incentive to work” in light of the OECD finding that the resulting inequality is bad for people and bad for the economy?Rt Hon JOHN KEY: Inequality is narrowing under a National-led Government. I am proud of that record as confirmed by the OECD last night in its report. Secondly the Government is not keeping benefits low. In fact this is a Government that has legislated to ensure that there are increases in benefits in line with the CPI. The most important thing we can do for beneficiaries—where possible for the bulk of them; clearly not all of them—is to find them work. That is why a strong economy that delivers job opportunities and lifts people out of the welfare trap into work is one of the most beneficial things we can do for low-income families in New Zealand.Dr Russel Norman: Does he accept the finding of the OECD that the increase in inequality in New Zealand one of the largest increases in the developed world resulted in a 10 percent reduction in the size of the New Zealand economy?Rt Hon JOHN KEY: Well I do not accept all elements of the report but I do say this. It was a report that took place on statistical data between 1985 and 2005. In the period between 1999 and 2005 if my memory serves me correctly the then Labour Government did that with support in various forms from the Green Party. So I say to Russel Norman that yes he should apologise to New Zealanders—Mr SPEAKER: Order!David Seymour: Would the Prime Minister agree that what the report really found was that growth is driven by the quality of investment in human capital across all income levels; if so could he share any initiatives that this Government is taking to improve the quality of investment in human capital across lower-income New Zealanders?Rt Hon JOHN KEY: Yes I would and I would say that the OECD actually made a very interesting point when it said that redistribution policies that are poorly targeted and do not focus on the most effective tools can lead to a waste of resources and general inefficiencies. One of the ways I know to do that when it comes to human capital—Hon Member: What about charter schools?Rt Hon JOHN KEY: —is to make sure they get access to a world-class education. That was the point I was actually going to come to. I myself with the member visited Vanguard Military School and saw the great young New Zealanders who are coming out into employment. I must say how proud I was to be part of a Government that is championing those partnership schools that are making a difference to those young New Zealanders.Dr Russel Norman: Why can the Prime Minister not see this OECD report as an opportunity to move away from failed trickle-down economics towards a form of economic policy that is both good for people and good for the economy and has a win-win solution for poor children and for the broader economy?Rt Hon JOHN KEY: If the member wants to talk about failed policies he should read the Green Party manifesto as it was so utterly rejected by New Zealanders. I remember that member parading before the cameras a couple of days before the election telling New Zealanders that the Green Party would be polling a massive number—basically throwing the Labour Party overboard because the Greens did not want to be part of it and in the end they polled 10-odd percent. It was a terrible result. Bad policies are the Green Party’s policies. This Government is delivering for New Zealanders.