Smith Lockwood: Taxation (Personal Tax Cuts Annual Rates and Remedial Matters) Bill — In Committee Third Reading 
Smith Lockwood: Taxation (Personal Tax Cuts Annual Rates and Remedial Matters) Bill — In Committee Third Reading 
[Volume:647;Page:16307] 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 Indeed—and I did that when I opened the debate this morning. All we got from the Minister of Finance was just a political rant in response to the serious questions I asked. That shows with what little seriousness he takes his own tax law. 
I would like to come back to Part 1 and ask some questions of the Government again. The Budget speech said that Working for Families would be indexed. I accept now and we have established it in the legislation that certain components of Working for Families have to be indexed. Other components of Working for Families can be indexed via Orders in Council. OK let us now ask the Government clearly what is to happen from here. The Government said that Working for Families will be indexed. This bill provides for just the family support bit which is about only a third of the payments or fewer of the Working for Families payments and that one-third is to be indexed by this legislation. Clause 5 does that and clause 6 indexes the abatement. 
The Government should make it very clear to hard-working New Zealand families what it is doing about the in-work payment and the parental tax credit. They can be indexed by Order in Council but will they be? I tell the Minister in the chair Mr Mallard that I am prepared to take my seat again if he is prepared to tell New Zealanders whether the Government’s statement in the Budget speech that Working for Families—as distinct from family support—is to be indexed because this legislation deals with family support. This legislation which amends sections MD 3 and MD 13 of the Income Tax Act 2007 deals with family support and its abatement. Sections MD 4 and MD 11 deal with parental tax credits. This bill does not deal with them. We have established why. It is because they can be done by Order in Council; I accept that. The Government though in the Budget speech made a promise that Working for Families would be indexed. People think that that means adjusted for inflation but the Budget speech did not say “family support”; the Budget speech said “Working for Families”. Working for Families includes in-work payments and parental tax credits and nothing in this legislation alters those. Yet they are a significant part of the whole Working for Families package. 
Some of my colleagues have criticised quite rightly the Working for Families package. There are all sorts of problems with it and I agree with that criticism. There are some dreadful problems with it—high effective marginal tax rates the locking of people into poverty and all that kind of thing. But for this Part 1 that we are focused on right now I believe that New Zealanders have a right to know whether Dr Michael Cullen meant what he said in the Budget speech. Will the Government adjust those other components of Working for Families? It can be done by Order in Council—I accept that absolutely—under section MD 10 of the Income Tax Act 2007. Orders in Council can provide for in-work payments to be increased and likewise under section MD 11 the parental tax credits can be increased. Let us hear whether the Government will do that. 
Hon Trevor Mallard 
: Those matters are the subject of a report back to Cabinet by the end of June and a decision will be made at that time around the use of Orders in Council. 
Dr the Hon LOCKWOOD SMITH 
: I thank the Minister for the clarification that these matters will now be dealt with by a further report to Cabinet. I appreciate that; New Zealanders at least now know that much. The timing was towards June? 
Hon Trevor Mallard 
: End of June. 
Dr the Hon LOCKWOOD SMITH 
: OK. I want now to pursue that what we have established the Minister of Finance said in the Budget speech was not factually correct; it was not factually correct. The Government so far has announced that it will index family support not Working for Families. The full Working for Families indexation issue is to be addressed by Cabinet later on. We have established that bit and that is a significant bit of the Budget speech because so much of the Budget focused on tax. It focused also on the Working for Families package but there we have found that Michael Cullen was not actually correct in what he said. How much of the rest of what Michael Cullen said in the Budget speech was not strictly correct? I think we need to dig quite deeply into some of the things surrounding this Budget to see what else is not actually correct and upfront in what he said. I will quote him. Dr Cullen said “a bringing forward of indexation of Working for Families and a forecast second round of such indexation.” If he were being upfront and honest that should have read as “an indexation of family support” because that is what he is doing here. That seems to be the only decision and where that is misleading is in the fact that the Government has not even decided whether it will index the in-work payments and the parental tax credits. I do not think it is good enough for the Minister of Finance to make statements in the Budget speech that are not correct. Whatever way one looks at that that is simply not correct. 
Hon Trevor Mallard 
: The member does not understand. I am happy to further clarify. 
Dr the Hon LOCKWOOD SMITH 
: If the Minister is happy to clarify it further I will give him the opportunity. 
Hon Trevor Mallard 
: Just to make it absolutely clear to the member I tell him that in the Budget and in the bill we are dealing with now the Budget indexed the family tax credit and the abatement threshold. That brought forward something that was due to happen on 1 April; it will now happen on 1 October. The minimum family tax credit is reviewed annually. It was last reviewed late last year. And the third and fourth components—the in-work payment and the parental tax credit—are reviewed periodically. The first review is due to be done by 1 June this year. That will be reported to Cabinet during June and dealt with then. 
The CHAIRPERSON (Hon Marian Hobbs) 
: Dr the Hon Lockwood Smith before you resume your call I tell you that I will regard that last intervention as your having yielded so you have 3 minutes left. 
Dr the Hon LOCKWOOD SMITH 
: I appreciate that Madam Chair; I realise that I was running a risk of that not being accepted. 
I ask the Minister one further thing. He has made it clear that there are still two components of Working for Families—that is the in-work payment and the parental tax credit—that are not dealt with in this legislation. The Budget speech said they would be indexed so I ask the Minister right now whether the fiscal figures in the Budget provide for any significant increase in those payments. They could amount to quite a lot of money. If the Government is going to index the in-work payments and the parental tax credits that could amount to quite a significant sum of money. Do the figures in the Budget allow for that or has the Government made no provision for that at all? If no provision has been made for it then the honest thing to tell the people of New Zealand is that the Government does not intend— 
Hon Trevor Mallard 
: The Government hasn’t received the review. It’s not due to receive it till 30 June and it takes decisions after that. 
Dr the Hon LOCKWOOD SMITH 
: I tell the Minister that this Budget goes from 1 July through to 30 June next year. 
Hon Trevor Mallard 
: But how can you adjust something for results you haven’t got? 
Dr the Hon LOCKWOOD SMITH 
: Well in preparing a Budget where Working for Families is one of the Government’s big claims—that the Budget is addressing Working for Families and indexing Working for Families—I am asking the Minister now whether the fiscal projections in the Budget include an increase in the in-work payments and the parental tax credits. I accept that the Government may not have received— 
Hon Trevor Mallard 
: Page 144. 
Dr the Hon LOCKWOOD SMITH 
: And what does it say I ask the Minister? 
John Carter 
: He’s yielded again. 
The CHAIRPERSON (Hon Marian Hobbs) 
: Are you yielding again with another 1½ minutes left after this? 
Hon Trevor Mallard 
: It gets a little sad when someone has a PhD and the Budget has to be read to that person. But he has asked me to— 
John Carter 
: Stop being a dork and get on with it. 
Hon Trevor Mallard 
: Does the member want me to or not? 
John Carter 
: Yes—get on with it. Stop being a dork. Come on. 
The CHAIRPERSON (Hon Marian Hobbs) 
: Please go on. 
Hon Trevor Mallard 
: Well Madam Chair is that appropriate language? I do object. 
The CHAIRPERSON (Hon Marian Hobbs) 
: I ask— 
John Carter 
: I withdraw and apologise. 
Hon Trevor Mallard 
: I turn to page 144 of the Statement of Fiscal Risks in the Budget and the section headed “Revenue—Working for Families Review of Rates (unchanged unquantified risk)”. So the risk is the same as it was last time. It states: Working for Families legislation requires a review of the amounts of the In-Work Tax Credit and Parental Tax Credits to be undertaken no later than June 2008. This review is to assess whether the current rates still meet the policy objectives behind Working for Families. This policy cannot be quantified until the review is completed.” That statement was in the half-year update; it is also here and it is unchanged. That member probably has about the same number of years’ experience in the House as I have yet he cannot read a Budget despite having been an Associate Minister of Finance. That is a very very sad situation. 
The CHAIRPERSON (Hon Marian Hobbs) 
: Dr the Hon Lockwood Smith you have 1 minute and 37 seconds left. 
Dr the Hon LOCKWOOD SMITH 
: Let me make it clear why I asked the question. Last time that member was a Minister in a Labour Government that was on its way out—in 1989—we had a Budget like this and there were issues like these tax credits that were not covered in the Budget. The Budget was false and when National came in as a Government it had to make legal some of the illegal spending of those Ministers—like Phil Goff and Michael Cullen—prior to the 1990 election. The Minister in the chair Trevor Mallard was part of that Government that provided in supplementary estimates for expenditure that it far exceeded in the run-up to the election. He knows it and the Labour members who were there when that Labour Government was on its way out know it. They spent money that was not in the Budget and the incoming Government had to make it legal. 
Part 1 agreed to.