Donald Rod: Third Readings 
Donald Rod: Third Readings 
[Volume:613;Page:10167] 
ROD DONALD (Co-Leader—Green) 
: 
New Zealand is in the midst of a debt crisis. Total overseas debt is growing and household debt is equally out of control. The financial liabilities of New Zealanders have increased from 49 percent of their personal disposable income in 1978 to 130 percent in 2002. In 25 years New Zealanders have gone from owing half their annual personal disposable income to owing 1.3 times their income. In that time household financial liabilities have increased from $5 billion to $91 billion. Of course total household financial assets have also grown but here is the rub: household net financial wealth has actually shrunk—yes shrunk—in the last decade. Ten years ago we were collectively worth $55 billion but by 2002 our net financial wealth had dropped 33 percent to $37 billion. 
What has changed? Clearly our financial liabilities have increased; in fact they have increased by 146 percent in that 10-year period from $37 billion to $91 billion. Why? Because Kiwis are spending more than they are earning and they are saving less as a result. According to the Reserve Bank household savings as a percentage of disposable income were minus 4.25 percent for the year ended March. If members think that is bad the Reserve Bank predicts that savings will be minus 7 percent this year minus 6 percent next year and minus 5.5 percent in the 2005-06 year. The Green Party’s concern for New Zealanders’ negative savings rates for New Zealand’s crippling dependence on foreign capital for the almost certain failure of Dr Cullen’s Superannuation Fund and that New Zealanders will therefore need to save for their own retirement sum up our reasons for supporting today’s tax legislation. 
While this legislation contains a number of measures the ones we are most pleased with are the small positive steps the Government has taken to help working people in employer-subsidised superannuation schemes to save for their retirement and the encouragement that this should give employers who do not currently provide subsidised superannuation to reward their loyal staff by offering them the chance to put some money aside for their retirement. What the Government has done is remove the tax penalty that has been in place for a very long time on employer-subsidised superannuation. Until now employees receiving subsidised superannuation have been watching the contributions of their employers be taxed at 33 percent when if the employees’ income is between $9500 and $38000 their own marginal rate of tax is only 21 percent and if their income is below $9500 their marginal tax rate is only 15 percent. So they have been watching the Government clip the ticket and take money that really belongs to them because there has not been a flexible specified superannuation contribution withholding tax regime in place. 
The problem was exacerbated when the Labour Government increased the top tax rate on those earning more than $60000 and at the same time left the superannuation withholding rate at 33 percent. In other words what happened a couple of years ago was that the Labour Government introduced a 6 percent tax incentive for well-off salary and wage earners in this country while maintaining a tax penalty for those low and middle income earners who have been struggling to save for their retirement—the very people whom the Labour Government relies on to get elected. 
So today’s legislation takes us one step in the right direction. One could say the cup is now half full because the penalty has been removed but it is an indictment on this Labour Government that it is not prepared to fill that cup especially in the lead-up to Christmas and provide all New Zealand workers with a tax incentive to save for their retirement. I would challenge members on the other side of the House to reflect on the Scrooge mentality of this Government—especially as it is running a massive Budget surplus—when it comes to giving good hard-working New Zealanders an incentive to save for their retirement and to giving their employers a decent incentive to offer subsidised superannuation. I would however concede that there are other measures on the way that will help employers to do the right thing and that some of the measures in the Business Law Reform Bill will reduce compliance costs for employers. 
I would also congratulate the Government on bringing in a public service superannuation scheme. It is a shadow of the former Government Superannuation Fund which was closed off by the National Government in 1992 but at least it is another small step in the right direction. That is the real problem with this Labour Government; it makes small steps in the right direction but it never goes as far as it should from either a financial or a moral point of view. That public service scheme will offer a mere 1.5 percent subsidy in its first year 3 percent in its second and there is talk of it getting up to 6 percent. Well I do not see why it cannot start at 6 percent because this Government—a Government that claims it cares for the workers that says it is committed to pay equity and that wants to encourage people to save for their retirement—should be taking a lead by offering public servants a decent subsidy for their superannuation savings. Until that happens it is not in a position to put pressure on the private sector to match that which means the private sector can get away with a very low expectation and I think that is unfortunate. If the Government moved straight to a 6 percent subsidy for public servants and introduced a 6 percent tax concession for all employer-subsidised superannuation it would send the right signals to employers in this country to value their staff by offering them a financial incentive to save for their retirement. 
Having said that the other big problem that many people face which was highlighted in the negative savings figures I referred to earlier is that far too many New Zealanders are not in a position to save for their retirement even though they desperately want to simply because their income is inadequate. That is why we moved amendments to the annual rates to bring in a tax break for all income earners in this country by making the first $5000 of income tax-free. 
I know that some of my colleagues on the right of this House are surprised that we wanted to do that because they have said to me they are already very well off thank you very much. May I say to those people listening that I have assured the likes of John Key that it is not through generosity on our part that we would bring in a policy that the first $5000 of income be tax-free because we would also be looking forward to clawing that back through a capital gains tax and through a suite of eco-taxes on the likes of carbon diesel resource rentals waste and pollution. So at the very least our tax measures would be revenue neutral but what they would do is shift taxation away from penalising work and enterprise and on to making sure that people and businesses are paying their fair share of the costs when it comes to looking after the environment and looking after society because too often in this country the business sector has been able to externalise its costs on to the rest of the community while making massive profits along the way. Right at the moment there is far too much capital going into speculative investment instead of productive investment and a capital gains tax would tackle that particular problem. 
I am disappointed that the Minister of Revenue vetoed both the amendments we put up—the 6 percent concession for savings and the income tax amendment—because I was looking forward to seeing which parties in this House would support such family-friendly moves. I know for example that at the Finance and Expenditure Committee the National Party supported our amendment to the superannuation savings rate and I am grateful for that but I am equally ungrateful to the ACT party New Zealand First and United Future for not helping New Zealanders to save for their retirement. I think it is an indictment on those parties. But it is an even bigger indictment on the Labour Government which is running a $5.6 billion surplus that it is not offering working people in this country some genuine serious direct encouragement to save for their retirement. 
Finally I would like to thank the Inland Revenue Department again for helping me prepare my tax amendments. If nothing else they were at least acknowledged by the Minister as being robust.