Smith Lockwood: Debate on Budget Policy Statement 
Smith Lockwood: Debate on Budget Policy Statement 
[Volume:629;Page:1607] 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 On 15 February the Finance and Expenditure Committee heard evidence from the public on the Budget Policy Statement. Among members of the public were groups from the business world including the Business Roundtable Business New Zealand and Federated Farmers. The Business Roundtable admittedly does not have a huge number of members but it has very significant members. Many of our major corporates are members of the Business Roundtable. Business New Zealand has among its members a huge cross-section of New Zealand business. Federated Farmers represents a large chunk of the primary sector. I guess that with those three organisations we had a large chunk of New Zealand’s productive sector making submissions to the select committee. 
Their submissions were almost identical. They all pointed out to the select committee that the Government sector has been growing too rapidly at the expense of the private sector. They pointed out that if that continues there is no way the objectives in the Government’s Budget Policy Statement can be achieved. There is no way that productivity in this economy will be lifted to match that of other countries in the developed world such as Australia that we have to compete with. There is no way we will see an economic transformation in this country if the growth in Government spending carries on in the way it has been going. 
One of those submitters pointed out that if we look at employment in agriculture fisheries and manufacturing—again a significant chunk of our productive sector—we see that employment in that part of our economy over the last 5 years has actually fallen by 5 percent while employment over the same time period in the Government sector the State sector has grown by 17.5 percent. How does one expect the economy to be transformed into a highly productive dynamic economy when employment in the productive sector is going down and employment in the State sector is mushrooming? 
But of course Dr Cullen knows better. A large chunk of the productive sector of this economy is saying to him: “This is all wrong and you won’t get the productivity growth you’re seeking while this goes on.” but Dr Cullen and this Labour Government know better. They know better than most of the businesses in New Zealand. That shows the arrogance of this Labour Government now after 6 years in office. It is the arrogance that sees Dr Cullen telling the business world: “You guys don’t know what the hell you’re talking about. I know far better than you do.” Dr Cullen is saying that the Government should carry on and increase the size of the Government sector—which is what the Budget Policy Statement shows will happen—and shrink the private sector. 
That is the same kind of arrogance we are seeing from the Prime Minister. Today she said it was acceptable for one of her Ministers David Benson-Pope to have used his power—and I use that word advisedly—as a teacher. There is a huge imbalance of power between a teacher in his position and a student in a classroom a dormitory or a shower. For a teacher to abuse that position of power in the way David Benson-Pope did over some years in that school he taught at and for Helen Clark to think it was acceptable for a teacher to abuse that difference in power between a teacher and a student in the way David Benson-Pope did—to think that his judgment in abusing that power was all OK—shows the arrogance of this Government and how that arrogance has seeped right through it. 
Helen Clark thinks that is OK. Dr Michael Cullen thinks he knows better than the entire business sector in this country. That is why this Government is starting to get the odour of decay around it. Its judgment is being shown to be falling to bits. 
 Let us look at what is happening now that this Government has increased its expenditure so much in the last 5 years. Government revenue as a percentage of this economy has climbed in that period from just under 38 percent to 45 percent of GDP—that is almost half our economy is now represented by Government revenue. Part of the reason although not all of it is that this Government is allowing New Zealanders to pay more and more tax. As New Zealanders’ incomes go up—which happens over time with inflation plus increases in pay—they go into higher tax brackets and pay more and more tax. That is one of the reasons why the average after-tax income of New Zealanders has not gone up or even stayed the same relative to the average after-tax income of Australians. Their average after-tax income has climbed much more than that and the gap between the two has gone from 20 percent 5 years ago to 33 percent now—partly because this Labour Government is allowing New Zealanders to pay more and more tax. 
We know that New Zealand First and United Future want to change that. We know that Peter Dunne wants to have tax thresholds indexed so that that does not happen and so that over time New Zealanders can keep more of their pay and not pay more and more tax as they go into higher and higher tax brackets. We heard Gordon Copeland talk about that today. But I have to tell this House that at the select committee today I asked Michael Cullen point-blank who the public should believe in terms of adjusting the tax brackets—him or Peter Dunne. Dr Cullen said that they should listen to him. He said: “The buck stops with me; I make the decisions.” All I can say to Peter Dunne is that I am sorry about that. It will not be him making the decisions over those tax thresholds. Peter Dunne told Parliament on 22 February that he was working on the legislation for that but I have news for him. Michael Cullen is deciding whether that legislation is going ahead; that is what he told the select committee today. 
It is important because the migration statistics of New Zealanders over the last 3 years show a massive net outflow of New Zealanders leaving New Zealand on a permanent basis. Just 3 years ago 11200 New Zealanders net left New Zealand on a long-term basis. The year after that 2 years ago that figure had jumped 7000 in a year to 18100. Last year the figure jumped another 7000 to 25000 New Zealanders. The number of New Zealanders leaving New Zealand on a permanent basis and going overseas has more than doubled in 3 years. 
One of the reasons—not the only reason—is that of course in New Zealand they have no hope. They cannot get ahead; as their pay goes up and as they get more and more senior positions in their work they go to higher tax brackets and pay more tax to this rapacious Labour Government that believes it knows best. It is fascinating to look at a recent report out of Ohio University in America on the impact of taxes on the migration of people between states in the United States of America. It is fascinating to see that in recent years—between 2000 and 2004—1.3 million Americans left states with high income tax levels to go to states with low income tax levels. In fact a commentator on the Ohio University research stated: “It’s a stealth migration and it’s one of the biggest most significant yet least recognized movements of the population in American history … People are voting with their feet to say that taxes do matter.” 
How high are our taxes here in New Zealand? People would be shocked to learn what most families face. Ninety percent of New Zealand families are now involved with the Working for Families package. Once that package which this Budget Policy Statement will put in place is rolled out 90 percent of New Zealand families with dependent children will be involved. Tax research shows that marginal tax rates affect people most because those rates affect the tax they pay on their next dollar. For hard-working families in New Zealand who try to get off benefits and move up into self reliance the marginal tax rates they face are appalling. The Government’s own Inland Revenue Department data shows that once a family with three children earns $10000 a year trying to get off the domestic purposes benefit on the next dollar that family earns it will pay 92 percent tax. It does not get better. As that family with three children gets up to $50000 in income it will pay over half its next dollar in tax and so it goes on. That family does not get below paying 59 percent tax on its next dollar until it is earning $100000 of income. Then it gets down to paying 39 percent tax. No wonder people are leaving New Zealand in droves under this Labour Government.