English Bill: Taxation (Annual Rates and Urgent Measures) Bill — First Reading Instruction to Finance and Expenditure Committee 
English Bill: Taxation (Annual Rates and Urgent Measures) Bill — First Reading Instruction to Finance and Expenditure Committee 
[Volume:628;Page:208] 
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 One does wonder what the question was that Helen Clark was asking herself when she came up with an answer that was to put Steve Maharey on the front bench and back into education. I think it must have been: “How can I destroy any possibility that he will become leader of the Labour Party?”. And she got the right answer. The most incompetent education Minister the country has seen in my lifetime was sacked from that portfolio then put back 12 months later. I note that she said he was there because of his marketing skills. I hope on behalf of hundreds of thousands of children in New Zealand it means he will not actually be allowed to do anything because he will be busy marketing. I hope that is the case. 
I remind Mr Maharey who in the fashion of left is totally rewriting history that the in-work payment was invented by National. It was called the child tax credit and he said that it was a right-wing conspiracy against fair pay for the workers. Now he calls it the in-work payment and says it is the best thing in 30 years. The childcare subsidy has been there for a very long time it was not invented by the Labour Party and this false and new interest in families from Steve Maharey and the Labour Party is just about more than I can sit here and listen to. These are what are called his marketing skills! 
I want to give Mr Maharey one simple fact out of one of his own Government publications. He says that Working for Families is the biggest redistribution of income in 30 years. Well he is wrong about that. The tax packages of 1996 and 1997 were a much much larger redistribution and he should be smart enough to know that but he wants to rewrite history. I had a look at the social indicators report. After 6 years of Labour being in Government income inequality in New Zealand is worse than it has ever been. 
Lindsay Tisch 
: What? 
Hon BILL ENGLISH 
: It has been getting worse. After listening to Steve Maharey’s speech one would think that it was really bad before and that now he is doing all these things that will fix it—but he is not. Income inequality in New Zealand is worse now than it has ever been. I invite members to look at the social indicators report that the Government puts out if they do not believe me. Labour members are intellectually unable—their brain cells will not let them—to understand or absorb that information because it runs totally counter to everything they believe they are doing but it is the truth. 
The other truth about this bill is that we have not yet talked about the elephant in the lounge behind this bill. 
Lindsay Tisch 
: How does that work? 
Hon BILL ENGLISH 
: Well it is not in the bill. The elephant in this lounge is Government spending. Why are these tax rates being set where they are? It is because Dr Cullen is going to spend every last dollar of it and he has those plans well in train. He is not going to make the mistake he made at the last election which was to have a surplus that could have rightfully fairly and economically been successfully returned to the people who paid it—that is the taxpayers. No no he will not let that happen again. 
John Key 
: Once bitten twice shy. 
Hon BILL ENGLISH 
: Once bitten twice shy—very very shy. Government spending has been increasing at about 6 or 7 percent in nominal dollars every year. The economy has been growing at about 5 or 6 percent in nominal terms every year. What is about to happen is that we are going to see the wave of Government spending breaking over a beached economy. Nominal growth in the economy will slow down. It could slow down to 4 percent maybe 3 percent. Inflation is quite high and that helps a bit with the numbers but the growth in Government spending will not slow down. What is driving the 6 or 7 percent growth is principally a startling figure that Treasury has produced. The State sector pay bill over the next three or four Budgets will grow at $1 billion per year year on year. That is why Dr Cullen needs to collect every dollar of tax. 
I invite the Labour Party to think about what it will feel like out in the suburbs. The first thing is that those middle-income families will be facing marginal tax rates of 50 or 60 percent. They will now be facing a future with no tax cuts. They were looking for those tax cuts. Dr Cullen can argue that they make stupid decisions about housing investment and saving and he will continue to do that—I hope that he does because I do not think they are stupid people; I think he is the stupid one—but those people were looking for tax cuts and they will not get them. It is only just starting to sink in out in the suburbs that there will be no tax cuts. 
But secondly they will be facing higher interest rates. Their floating mortgage rates are now getting well up over 9 percent. With a couple more official cash rate moves they will be 10 percent. We will have double-digit interest rates and who will people blame? Do members think they will take Dr Cullen’s theory which is “Blame yourself. You’re the problem.”? No they will get a grip on reality and they will blame Dr Cullen. 
John Key 
: And rightfully so. 
Hon BILL ENGLISH 
: And I will tell members why. Here is another silly question that Helen Clark asked herself: “Who can I get to go out there and jawbone interest rates down because we know it will eat into our support? I know let’s get the person who is doing the most to push them up.” and that is Dr Cullen. His spending programme is becoming the biggest single influence on pushing interest rates up. That is the elephant in the lounge. That is the bit the Governor of the Reserve Bank kind of had to sit on in the run-up to the election—and funnily enough he is now coming out with three official cash rate increases in rapid succession. It is a typical example of the contradictory policy that the Government is presenting to New Zealanders and this is where as the economy slows down the economic credibility is going to corrode. 
In relation to the student loan issue we have had “he said she said” and now we have a number that is so small that we cannot really believe it. The important point about the student loan debacle is this: the Government is pushing our young people further and further into a culture of debt and it is doing it by telling them the story that they will have less. Do members know what is happening with student support? The number of students on student allowances is dropping quite fast because of means testing and because they do not bother applying for small amounts. In the Speech from the Throne the Prime Minister said that there were more students on student support. Well there are not there are fewer and the number has been dropping for at least 12 months. The most recent reports tell us that it is dropping further. The Government will save money it will not be paying out as much student allowance as it said. What is happening is that students are getting less student allowance so there is more need to borrow. They are now being encouraged to borrow as well as the fact that they have more need to borrow. 
 I just cannot see where the Government is going to go next. The $150 a week borrowing for living costs is not sustainable. It will just have to lift that. The dropping numbers of student allowances are not sustainable either. But what the Government has done is make one of the biggest single fiscal decisions of its last term in office. It has committed a billion dollars to interest-free student loans. No attention has been given to the quality of education that those students are getting. The Government has forgone every opportunity to do something significant about literacy and numeracy rates in our primary schools. The reality is that in education the commitment to interest-free student loans is giving the most money to the group who need it the least. Of course they want it! Who would not? But the Government has no sense of priority and as the economy slows as its tax take slows and as its spending explodes it will be forced to make some very very hard decisions. Now I look forward to debating those decisions over the next couple of years in this House. The public could have had 85 percent of New Zealanders on a 19c marginal tax rate under National’s plan. 
Lindsay Tisch 
: A great policy that! 
Hon BILL ENGLISH 
: That is an absolutely outstanding policy the one opportunity in 30 years that New Zealand had to secure it and that is my biggest regret about losing the election because we could have had that. Instead we will have what Steve Maharey calls investment and everyone else calls over-taxing wasting and exploding Government spending. The wave of Government spending will break over a beached economy in the next 2 or 3 years and the Government will be back within this term looking to increase these tax rates.