Parker David: Budget Debate 
Parker David: Budget Debate 
[Volume:647;Page:16485] 
Hon DAVID PARKER (Minister of State Services) 
: 
 I thank the previous member Tariana Turia for that considered contribution. In contrast I refer to the prior contribution from Mr Finlayson who accused the Labour Party of being involved in spin and said that the Budget was not grounded in reality. The reality is of course different. New Zealand has great transparency laws around its public accounts. It is actually probably the only decent thing that Ruth Richardson did when she was here—she brought forward good public finance laws that ensure that we have transparency in respect of the Crown accounts before every Budget. That of course was necessary because of the former excesses of the Muldoon National Government when it left the accounts of this country in such a terrible state and when Government debt was 60 percent of GDP and $1 in $5 of tax was spent on interest. 
The reality is that the Government accounts now show that New Zealand has had a sustained period of growth which is amongst the highest in the world since 1999. It is just a little bit higher than Australia quite a bit higher than Japan quite a bit higher than Great Britain quite a bit higher than the European Union and quite a bit higher than the United States. We also have achieved something that I am particularly proud of because it is so important to the well-being of New Zealanders and that is we have higher rates of employment and lower rates of unemployment. Unemployment under Labour has been lower than 4 percent for 4 years in a row. This is amongst the best in the world and is one of the reasons why the Government’s financial accounts are in such good shape. During that same period average household incomes have increased by 25 percent in real terms. Now as a consequence of this the Government’s books are in good shape. Government debt is now 20 percent of GDP. Gross debt is 20 percent of GDP down from over 30 percent of GDP when we took over from the previous National Government. 
There have already been substantial tax cuts and other forms of tax relief in prior Budgets—these total $4.6 billion per annum. They are made up roughly of a third from Working for Families which helps families with children through very significant tax relief—often putting $100 a week into their pockets—that provides assistance for so many New Zealanders. More than half a million New Zealanders are already on KiwiSaver and they get tax relief and other assistance from the Government and that is substantial. Then another third comes from the business tax package in the last Budget which amongst other things dropped the corporate tax rate because we all know that we need to have a strong economy. We dropped the corporate tax rate we increased the tax incentives for research and development and of course National voted against that as well. 
As a consequence of maintaining debt at prudent levels at a time when the rest of the world has economies that are tanking—many parts of the world are in trouble particularly the United States—New Zealand is in a position to have affordable tax cuts without increasing Government debt or at least without increasing Government debt under a Labour Government. Debt stays constant at around 20 percent of GDP. It increases in nominal terms because the economy of course grows every year but the percentage of debt stays constant at 20 percent of GDP.  
The tax relief including tax relief from Working for Families for a two-income family with two children at home earning say $65000 which is a moderate income is worth $42.76 per week from 1 October this year. We hear the National members say that this is a block of cheese. Well it is just nonsense to suggest that that is a block of cheese. The reality is that that is someone’s power bill. For most families one of the most substantial bills they receive every month is their power bill. Now that family will be $42.76 better off in their pocket from 1 October 2008. And it gets even better—by 2011 that amount rises to $84 per week. This is in addition to of course improvement to their circumstances through the years as they get normal wage increases. 
Superannuitants are another group who do well under this Budget. Married superannuitants will be $45 per fortnight better off from 1 October. Again this for many people is close to their total power bill. It is not a block of cheese; it is close to their total power bill. It has been described in derisory terms by some people in National who obviously go out and buy giant blocks of camembert or something because they have champagne tastes and incomes to afford that. But for most superannuitants $45 per fortnight is a lot. It gets even better from 1 April next year because superannuitants will be better off by $75 per fortnight. We have been very careful stewards of the economy. 
Despite that these tax cuts do come at a cost. The Government has less money as a consequence and our forward spending plans are fewer than they have been in recent Budgets. This will put pressure on us to reprioritise within existing spending and that is a good thing—I approve of that. We ought not to forget though that $750 million each year is the additional money that the health system needs to effectively stay still—to buy a few more of the modern drugs that come through not too many but some to take advantage of some of the new medical technologies not all of them but some and to maintain the same level of services for the increasing numbers of people who need services as New Zealand’s population ages. It costs $750 million per annum for the health system to be topped up for extra spending. If the Government did not do that health services would go backwards relative to those that we enjoy today. It is true that there will be some pressure on the reprioritisation of expenditure but we will still be able to afford those increases for health and for the core increases needed for education. 
I turn now to what would happen if New Zealand had a different Government that was going to cut taxes more. That Government could cut taxes in only three ways. It could flog off the family silver effectively sell some of the State-owned electricity companies which are the most valuable of the State-owned enterprises that are already owned by New Zealand increase Government debt above 20 percent of GDP or substantially cut services—not mere reprioritisation but substantial cuts to core services in expensive areas like health or education. 
I turn briefly to one of the other issues raised by the Budget: the emissions trading scheme. Until 2 weeks ago the emissions trading scheme was backed by National. National members said in the first reading debate and they had consistently said so until 2 weeks ago that they accepted that the scheme was a good way to respond to the challenge of climate change. Climate change is a challenge for the world. The world has agreed it is real even though there are a few sceptics around. The world has come to an agreement on how we share the burden of reducing emissions and that burden is set out in the Kyoto Protocol. The Kyoto Protocol has been agreed to by virtually every party in this Parliament. It implies an obligation to take responsibility for increases in emissions. Those are the things that create some cost to the economy—not a huge cost but some cost to the economy. The emissions trading scheme was a way of minimising that cost. It does not create any cost for the economy; it minimises the cost to the economy because it gives the right signal to the economy to encourage people to decrease emissions and to discourage them from increasing emissions. It really is as simple as that. It does not create a cost; it minimises the cost because it gives the right economic signal to the economy. 
Two weeks ago National came out and said that it had had a road to Damascus experience and that all of a sudden the emissions trading scheme was bad policy. All of a sudden National said there were six key principles—that is the phrase used—that it wanted us to address in order for it to back the emissions trading scheme. You know none of those six principles were show-stoppers. The Government showed within a day that none of those principles were show-stoppers. So what have National members said as a consequence? Well in the last day the Hon Dr Nick Smith has come out in  
Carbon News 
 and said that even if those six principles were dealt with in the legislation National would not back it. It is all hot air on that side of the House. It is worse than Russian hot air; it is National hot air. National was never going to do what it said. It cannot be trusted on these issues. Instead of six key principles there are actually six key excuses from Mr Key and really they ought to be pilloried as they are by various newspapers from the  
New Zealand Herald  
to the  
Sunday Star-Times 
. These newspapers are saying that the emissions trading scheme is good policy and that National should back it. I look forward to dealing with smaller parties on the issue.