Goldsmith Paul: Public Finance (Fiscal Responsibility) Amendment Bill — First Reading 
Text is incorporated into the Bound Volume 
Goldsmith Paul: Public Finance (Fiscal Responsibility) Amendment Bill — First Reading 
[Sitting date: 04 December 2012. Volume:686;Page:7050. Text is incorporated into the Bound Volume.] 
PAUL GOLDSMITH (National) 
: 
 It is my pleasure to speak on this the Public Finance (Fiscal Responsibility) Amendment Bill. I am very pleased to hear the support of the Labour Party for this legislation and I would like to pass my congratulations to the Minister of Finance on introducing it to the House. There is no question that the public reporting and transparency provisions of the Public Finance Act have served New Zealanders well for more than two decades in keeping the focus on maintaining low Government debt levels. New Zealanders can quickly forget the horrors of the past when after each election the true state of affairs was revealed— 
Hon Clayton Cosgrove 
: Remember Muldoon? 
PAUL GOLDSMITH 
: 1984. Yes indeed in 1984 and 1990 the situation was ugly. The Fiscal Responsibility Act 1994 which was subsequently folded into the Public Finance Act was one of Ruth Richardson’s great achievements. New Zealand’s reputation changed from the late 1980s to the 1990s from being a basket case to a country of quality public policy of a robust and disciplined Government. Successive Governments have focused on maintaining low or prudent public debt putting New Zealand in a relatively strong position going into the international financial crisis of 2008 and 2009. 
 It was interesting to hear Mr Parker talk up the record of the Labour Government during that decade and it should be commended for the surpluses that it brought through in the middle of the decade. But I am bound to say that he did forget about the fact that the decisions that were made in the third term left Government books pregnant with debt for a decade to come. That was the problem that it left us. So it may have been quite good in the first two terms but certainly not in the third. 
There is scope to make further improvements as we learn lessons from the crisis. This bill as the previous two speakers have talked about strengthens the principles of responsible fiscal management as listed in section 26G of the Public Finance Act. I will focus on what is in the bill rather than what is not in the bill. We have talked about the three additions the first principle being that Government should formulate fiscal strategy with regard to its interaction with monetary policy. That makes good sense. The second one is Governments should formulate fiscal strategy with regard to its impact on future generations. The third principle is that Governments should ensure that the Crown’s resources are managed effectively and efficiently. These are not motherhood and apple pie. They are actually very tough disciplines. I have no doubt that the Government in New Zealand will be the stronger for it. Why is fiscal responsibility important? Because quality public policy and practice and sound financial management bring confidence and confidence for the private sector to invest and to create jobs. Conversely the absence of fiscal responsibility leads to a lack of confidence and we see evidence of that all around the world today. 
There are a couple of other important aspects to the bill but I want to briefly focus on the revenue strategy in the Fiscal Strategy Report which will have to include the Government’s objectives for the tax system and tax policy. We have mentioned that this idea of formulating its revenue strategy with regard to efficiency and fairness goes some way to addressing the 13th recommendation of the recent Tax Working Group report. I will be very interested in the select committee consideration in drilling down to the detail on these two very important concepts efficiency and fairness. Efficiency talks about having taxes that are the least distortionary and introduce the fewest dead-weight costs to the economy. This bill will not stop future Governments bringing in silly taxes but it will force them to explain themselves to a greater degree. I would imagine if you were going to open up a gap between the top income tax rate and the trust rate you would have to explain how that was going to promote an efficient tax system. If you were going to start fiddling around with the GST explaining how that is efficient would be an interesting way to deal with that question. On fairness I prefer probably the concept of horizontal and vertical equity but again these are two important concepts to introduce into the tax policy and I am sure that they will encourage Governments to articulate the basis for their tax policies in future years. 
On the basis of that I think this is a very interesting bill and will make a great difference over the period of the next few decades. I commend this bill to the House. Thank you very much.