Foss Craig: Budget Debate 
Foss Craig: Budget Debate 
[Volume:664;Page:11680] 
CRAIG FOSS (National—Tukituki) 
: 
 Less than 1 month ago on 20 May the Minister of Finance Bill English read a Budget that brought the most fundamental change—a step up a step forward for New Zealand—that has been seen in many many years particularly in the period between 2000 and 2008. The changes in this Budget deliver what is probably the biggest reform of the tax system in nearly 25 years. The Budget aims to deliver a fairer tax system bringing fairness and equity back into our tax system. It will encourage savings and productive investment keep skilled Kiwis in New Zealand and help families get ahead. 
The Budget itself covers just under $70 billion of spending which is a huge amount in anyone’s terms. But what is most important is not the total but how it is managed: whether the management is prudent prioritised and transparent and whether it has accountability all the way through every single line of the Budget. In fact a line-by-line review has produced the numbers that are in the Budget document we have before us and in the Appropriation (2010/11 Estimates) Bill that is lying on the table. 
It is a Budget for our times. It is a Budget for a much much brighter future for New Zealand. It also acknowledges the changes that were necessary as most members in the House including those from the previous Government acknowledged; the difference is that this Government is doing something about it. The problems which are fundamental to our economy are all about the imbalances between an increasing total debt in New Zealand—private sector debt—and unfocused Government spending. Basically there have been out-of-control increases in State-sector spending over many many years and we have a private sector that has been squeezed out by the State over the 9 years from 2000 to 2008. 
There are two main features of this Budget. One is quite simply to bring fairness and equity back into our tax system switching our taxes around to try to encourage taxpayers to move away from consumption and into savings. I noted in an earlier speech on the Taxation (Budget Measures) Bill which pertained to this Budget—and this still surprises me—that the Greens still do not support the increase in consumption tax. They are on record—as are many members in the House including the previous Minister of Finance who is no longer here—as pointing to New Zealand’s problem being a lack of savings a lack of financial assets an overemphasis on debt and the debt-fuelled housing boom. There was a need not to eat our equity on flat-screen TVs etc. but rather to build up our financial assets or at least not increase our debt. 
In the current conditions around the globe the whole world is looking at every country and every set of sovereign accounts. This is a very timely Budget because the other feature of it is the prudent management of the Crown’s accounts or as I always like to put it a much more prudent fair and transparent management of the taxpayer’s balance sheet because actually at the end of the day it is not the Government’s at all—it belongs to the taxpayers. That is where the funds come from in the first instance and we should do all that we can to guarantee taxpayers the most efficient fair and transparent spending of the money that has been taken from them in the first place. 
If there are opportunities for the Crown to save funds or not need to take so much in tax in the first place so be it. We trust families and we trust taxpayers to make the best and wisest decisions for their circumstances at their time of life. That is what this Budget starts to put in place. It addresses changes such as the arbitrage that happened between the top personal marginal tax rates on PAYE which we moved from 39c to 38c and then to 33c; the trust rate which is at 33c; and the corporate rate and the portfolio investment entity rate which are at 30c. We are starting to rebalance and we have made changes in the depreciation schedules—the way depreciation can be applied to property—to at least try to address and change some of the incentives so that decisions and investment decisions are made on a cash-flow basis on a fair return as opposed to some perceived or otherwise tax advantage. 
There have been many discussions in this House during question time and at other times about how many folk were able to minimise their PAYE obligations. In fact 50 of the top 100 wealthiest people in New Zealand according to the  
National Business Review 
’s list were not even paying the highest marginal tax rate. That gave us a clue that the tax system was broken and not working—and those are the words of the Tax Working Group. 
There is a global crisis going on and sovereign debt in particular is one of the key elements that institutions around the world and other countries are focusing on. Budget 2009 and this Budget in 2010 are setting New Zealand up to do very very well compared with countries that are unfortunately suffering crises at the moment and as my colleague just noted some have been downgraded. Some people out there might think those big credit-rating companies do not play any significant role. People might ask who they are to affect our future. Like it or not New Zealand owes $200 billion to the rest of the world so when New Zealand does have to borrow those funds I for one would like to at least try to make them as cheap as possible. That is what a better credit rating is all about. 
This Budget also caps new spending at $1.1 billion. That is unheard of after the previous administration. It is basically discipline of spending and spending growth. It is capped at $1.1 billion. 
John Boscawen 
: The price of the ETS. 
CRAIG FOSS 
: No capped at $1.1 billion. We are talking about spending I say to the colleague over there on my extreme right. I recall an Opposition member who interjected when I was talking about this in another debate. He did not think we could stay within the cap but actually we have achieved that already in these Estimates of Appropriations. We are well within it. Surprisingly—and this is where the Opposition does not get it—even though we are being disciplined about spending and we are refocusing we have found $4 billion - odd of spending over the last 2 years that can be reprioritised and that is why there is more elective surgery going on in New Zealand than ever before particularly more than under the previous administration. 
I will touch on a couple of points that have been raised in previous speeches. I am very very disappointed because I have just learnt that Labour will not be endorsing Transmission Gully. I am particularly saddened about that. As people driving home listen to the radio tonight stuck in a traffic jam somewhere going up round the coast they will note that I now understand that Labour is opposed to Transmission Gully. That is very very sad news to me and it is very very sad news to people up and down the coast. 
I will also pick up a point that an Opposition speaker was talking about. That speaker spent a bit of time on early childhood education. Members should just note—because this is where the discipline comes in again about fiscal spending and prudent management—that the total spend on early childhood education about 5 years ago was about $435 million and it is now $1.3 billion. Have we had three times the improvement? Members should remember we are borrowing $240 million per week as a country simply to keep the lights on and to keep early childhood education funding. 
I also note that we are paying about 5.5 percent interest on that $240 million. About 5.5 percent interest is being paid at a cost to the taxpayer on new debt of about $10 billion or $11 billion a year. So when we wander through the balance sheet and the appropriations it is a very very fair and prudent question to ask and address whether we are getting at least that return from the spending that the Government makes in various votes. I am not talking about just the social spending—let us put that aside. Anywhere where the Government is involved in financial assets or financial investment are we in fact getting more than 5.5 percent? Because if we are not that is a direct loss to the taxpayer. I note that the Opposition continues its spend debt and borrow theme. Members will note on page 136 of the Estimates of Appropriations which are on the table in front of us there is an increase of $3 billion in interest payments this year—over $3 billion of payment of interest and other costs relating to the Crown debt. So as an investment now and in our children’s future we should be doing all we can to minimise that because for every single dollar that is borrowed and paid in interest that is one less dollar available to fulfil some of the aspirations of all parties in the House. If you ain’t got the money you cannot spend it. 
I make one final point. A lot of noise has been made about GST. Nominal wage growth over this forecast period will actually increase more than inflation as forecast in the Budget. In fact if we look at the consumer price index—I just cannot believe some of the lines of the members opposite—we see that real wage growth after the forecast period will be well ahead of inflation. Thank you. 
The ASSISTANT SPEAKER (Eric Roy) 
: I understand this is to be a split call. There will be a bell at 4 minutes; there are two 5-minute calls.