Parker David: Taxation (Budget Measures) Bill — First Reading Second Reading In Committee 
Parker David: Taxation (Budget Measures) Bill — First Reading Second Reading In Committee 
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Hon DAVID PARKER (Labour) 
: 
 How one values this Budget depends on how much one values one’s word. On this side of the House members value their word but this Budget has been built on three broken promises which the National Party cannot deny. The first promise was that National would not increase GST. John Key was on camera immediately before the election promising that there would be no increase in GST. That is the first broken promise of this Budget. How does one value that? Well National does not put much value on its word. It lacks integrity. It lacks integrity— 
Craig Foss 
: I raise a point of order Mr Speaker. I believe that under the Standing Orders a member cannot question the integrity of other members in the House. As well as that I take offence at the accusation made by the member opposite. 
Mr DEPUTY SPEAKER 
: The Speakers’ rulings are quite clear that one cannot challenge members’ integrity. I am sure that the member will be able to use some other phrase and I ask him to continue. 
Hon Clayton Cosgrove 
: I raise a point of order Mr Speaker. This is not to challenge your ruling but as I understand it Mr Parker was talking about the National Party— 
Mr DEPUTY SPEAKER 
: I have already ruled and I invite the member to continue. 
Hon DAVID PARKER 
: How does one value one’s word? I value my word highly. National obviously does not value its word. It promised before the election that it would not increase GST but this Budget increases GST. 
National’s second promise was that it would not increase borrowing for tax cuts. That promise has been broken. The Government’s borrowing has increased as a consequence of the tax cuts in this Budget. That is the second broken promise. 
The third broken promise is that National would not cut public services. In particular it promised explicitly that it would not cut early childhood education—in fact it would have made it free. What did National do in this Budget? Audrey Young picked up on this issue in her column today. She stated that it will “save about $400 million over four years in abolishing the top two funding rates for early childhood centres”. That means in those cases a decrease in the subsidy that parents get for their children of about $25 per child per week—$25 per child per week. That is the third broken promise. 
Amy Adams 
: No it’s not. 
Hon DAVID PARKER 
: Amy Adams says that that is not a broken promise. She does not know what a promise is. 
The other thing that needs to be said in respect of the changes to income tax is that we know the projection of the rate of inflation as a consequence of these changes is that next year inflation will be 5.9 percent. As for the income tax cuts that people will get to compensate them for the increase in GST all but the most wealthy people will have them eaten up as a consequence of the increase in the prices they will pay when they go to the supermarket. Rather than being some great boon to people the money will be gobbled up by an increase in their cost of living. Their rents will go up their supermarket costs will go up all of their costs will go up. 
We heard Amy Adams say that the income tax cuts are being fairly distributed but 41 percent of the income tax benefits will go to the top 10 percent of income earners—41 percent goes to the people who already earn the most. New Zealand already has low income tax rates for high earners. That is set out in the Tax Working Group paper that was produced on behalf of the Government. It stated: “The current New Zealand top personal tax rate at 38% is not especially high by OECD standards”. It was already low by OECD standards and this Government is cutting it further for the top 10 percent of income earners. The top 10 percent of income earners will pick up 41 percent of the decrease in income tax. That is just not fair. 
I will say something about the rebalancing of the economy. The Government said that this Budget is all about rebalancing the economy. The Tax Working Group stated that we needed to rebalance the economy away from speculative investment in housing towards the productive sector. Labour agrees with that as an ambition. Until today we were all expecting that there would be ring-fencing of losses so that people would not be able to buy some residential property and offset the interest costs on the loss they make on that rental property in order to decrease their personal income overall. What has the Government done? It has backed away from that. One of the disappointments that Bernard Hickey has with this Budget—and he is right—is it does not properly rebalance the economy away from speculative investment in the housing sector. People can still make those investments in the residential property sector incur a big mortgage cost and offset that against their personal income tax. Rather than closing that loophole the Government has gone a little bit of the way and said that people cannot deduct depreciation costs on buildings that will last for more than 50 years. That is a fair enough step and I do not criticise that but the Government has not taken the more important step of ring-fencing those losses. 
What has the Government done about catching up with Australia? Well the answer is nothing. The growth rates in New Zealand projected for the years out are lower than the growth rates predicted in Australia so the gap continues to grow between New Zealand and Australia. The wage gap between New Zealand and Australia will continue to grow ever bigger and this Budget does absolutely nothing to reverse that trend. 
What has the Government done in terms of encouraging smart business? It has cut the depreciation rates that businesses can claim for investments in high-tech plant and equipment. It has cut depreciation rates so it is going in exactly the opposite way there. 
Fran O’Sullivan wrote a very good column in the  
New Zealand Herald 
 a couple of weeks ago I thought or it might be about a month ago now. She stated that given the high rates of youth unemployment in New Zealand and given our experience last time we had high rates of youth unemployment particularly Maori and Pacific Island unemployment—and the last time we had that in New Zealand was in the 1990s under the Bolger Government and then the Shipley Government—a big mistake made then was that we did not spend enough on training and the people who were on the dole queue ended that period of unemployment without further skills and had got into the habit of sitting on their bums at home. They did not have a work habit. She said that this Budget needed to be judged in terms of what it would do for the training of the large cohort of young people in New Zealand who are currently unemployed. What this Budget does about that is just about nothing. Rather than increasing the amount of funding that is going into training the Government is setting quotas on the number of people who can go to university. People are being excluded from university and we do not have an increase in funding for training for those people who because of the state of the economy and through no fault of their own are stuck on the dole. 
What does this Budget do in terms of debt? It stated that the amount that will be spent on the interest on Government debt goes from $2.5 billion per annum to $5.5 billion per annum. That is a big increase in the amount of our taxes that is being spent on interest. 
What it does in terms of the current account deficit is woeful. We heard the Government say that it will rebalance the economy towards exports. What does this Budget show? It shows the current account deficit going up every year from now on—the current account deficit goes up to 7 percent of GDP. How is that proof of rebalancing the economy? It is not. It is proof of a return to a deficit-based economy so much weighted towards the property sector with not enough exporting. This Budget does not solve that problem. The effect is that by 2014 New Zealand’s total net assets as a country including both Government and private debt will rise to negative 100 percent of GDP—100 percent of GDP. Rather than going in the right direction the deficits from the Government and the lack of movement of the economy towards the productive sector and exports will mean that total net assets will go to negative 100 percent of GDP. 
Lastly I will mention the fact that the position of the Government and the country would have been even worse were it not for the fact that the previous Government reduced debt. Bill English and John Key every time said the previous Government should have had tax cuts not surpluses but that would have led to more inflation. It would have to led to higher interest rates and to a higher level of debt than the current Government has inherited. New Zealand would have been closer to the position that Greece and Great Britain are in and closer to the position that the National Government under Muldoon left the country in with debt at 80 percent of GDP. Instead we reduced gross debt to 17 percent of GDP and reduced net debt to 0 percent of GDP. This Government has got it going in the other direction. 
The Government has not rebalanced the economy. The tax cuts will be eaten up for all but the most wealthy people in the extra costs that people face in rent and in inflation on their food costs. But overall the worst thing about this Budget is that it breaks three promises.