Volume 628 Week 5 - Tuesday 13 December 2005 
Volume 628 Week 5 - Tuesday 13 December 2005 
[Volume:628;Page:731] 
Tuesday 13 December 2005 
Madam Speaker 
 took the Chair at 2 p.m. 
Prayers 
. 
Points of Order 
Party Votes—Proxy 
LINDSAY TISCH (Senior Whip—National) 
: 
 I raise a point of order Madam Speaker. In view of the disruption to air travel I seek leave that all members be deemed to be present within the parliamentary precincts for the purposes of party voting until the House rises this evening. 
Madam SPEAKER 
: Leave is sought. Is there any objection? There is no objection. 
Obituaries 
Most Reverend Max TakuiraMariu 
TARIANA TURIA (Co-Leader—Maori Party) 
: 
 I move  
That this House express its deep sadness on the death of the Most Reverend Max TakuiraMariu the first Maori Catholic Bishop.  
I express our sincere condolences to te HahiKatorika ki Aotearoa and to the Mariuwhanau and to all those who are feeling a profound sense of loss and sorrow at this time. 
Hon PAREKURA HOROMIA (Minister of Maori Affairs) 
: 
 E tautokotiaakeano te tu o te whaea Tariana Turia mo te tumokemoke o te koroua ra te pihopa. Tangi hoki te ngakau o tatou katoa mai i te motu. 
[An interpretation in English was given to the House.] 
Again I endorse Tariana Turia rising for the forlorn figure of the bishop that elder. All of us in the House and indeed throughout the land grieve too. 
] 
Hon GEORGINA TE HEUHEU (National) 
: 
 On behalf of the National Party I would like to register this party’s grief at the passing of Bishop Max TakuiraMariu and say only that during his time in the priesthood and certainly in his time as bishop he worked hard not just in the service of the Catholic Church but indeed in the service of all New Zealand and New Zealanders. As a relative of his I am very pleased to be able to add my comments to those that have been made already and I am very grateful that the House reserves this time to pay him the tribute that he deserves. Kia ora. 
Motion agreed to. 
Questions to Ministers 
Ministers—Confidence 
1. Dr DON BRASH (Leader of the Opposition) 
 to the  
Prime Minister 
: Does she have confidence in all her Ministers; if not why not? 
Hon Dr MICHAEL CULLEN (Acting Prime Minister) 
: Yes. 
Dr Don Brash 
: Is she satisfied that Mr Benson-Pope has not misled the House the media or the public by releasing the highly selective analysis of his police file and refusing to reconcile conflicting statements about it; if so is she concerned that public opinion and newspaper editorials continue to call for his resignation? 
Hon Dr MICHAEL CULLEN 
: That question raises issues that have already been dealt with in the House. The Government of course considers very carefully newspaper editorials but does not always follow them slavishly. 
Dr Don Brash 
: Why has she continued to have confidence in her Minister of Education Steve Maharey given numerous claims from New Zealand Qualifications Authority markers that they are being forced secretly to re-mark National Certificate of Educational Achievement exams and push students up to pass grades in order to come up with results that the New Zealand Qualifications Authority finds politically palatable? 
Hon Dr MICHAEL CULLEN 
: Because the processes being followed are the standard processes outlined including check marking and no amount of repetition of a small number of complaints from Mr English will change the facts of the case. 
Dr Don Brash 
: Does she have confidence in the Minister of Foreign Affairs Mr Winston Peters who first called the  
New Zealand Herald  
“treasonous” for daring to disagree with him— 
Madam SPEAKER 
: Who called out please? 
Rt Hon Winston Peters 
: I raise a point of order Madam Speaker. I did not say anything other than that they were telling straight bare lies as they did again in this morning’s paper. 
Madam SPEAKER 
: I am sorry but that is not a point of order. I will remind members once in this sitting and for the last time because more than one voice called out then that when members are asking questions or raising points of order they are to be heard in silence. That is the final warning. 
Dr Don Brash 
: Does she have confidence in the Minister of Foreign Affairs Mr Winston Peters who first called the  
New Zealand Herald 
 “treasonous” for daring to disagree with him— 
Ron Mark 
: I raise a point of order Madam Speaker. Could you remind the member that the honourable member’s title is the Rt Hon Winston Peters and that he should be addressed appropriately? 
Madam SPEAKER 
: I thank the member for that comment. 
Dr Don Brash 
: Does the Prime Minister have confidence in the Minister of Foreign Affairs the Rt Hon Winston Peters who first called the  
New Zealand Herald  
“treasonous” for daring to disagree with him and then after quite specifically being told by the Prime Minister to get over it continued to attack the  
New Zealand Herald’s  
political editor stating that her comments in an article were “baseless false and without any merit whatsoever”; if so why? 
Hon Dr MICHAEL CULLEN 
: Because if Ministers or indeed members were to have to resign because they described some comments in some media as baseless and false not many of us would last more than about a day or two in this place. 
Dr Don Brash 
: Why does the Prime Minister have confidence in her Minister of Health the Hon Pete Hodgson who has demonstrated to this House several times in the past month that he does not have a grasp on the major public health issue which is the looming avian flu epidemic? 
Hon Dr MICHAEL CULLEN 
: The member must have an extraordinarily excellent crystal ball if he knows what nobody else does which is that we are actually going to have a flu pandemic. Possibly the Exclusive Brethren included it with his special issue of their election propaganda. However unlike members opposite the Minister of Health has not made the mistake of thinking Tamiflu is a vaccine that will prevent the avian flu from occurring. 
Rt Hon Winston Peters 
: Does the Prime Minister think it is reasonable to express a significant degree of frustration at a columnist who claimed that there was virtually a bilateral meeting with Condoleezza Rice the US Secretary of State when it did not happen—and four witnesses told her it did not—and then just yesterday described a meeting— 
Gerry Brownlee 
: I raise a point of order Madam Speaker. 
Rt Hon Winston Peters 
: Sit down sunshine—I am talking.  
Madam SPEAKER 
: Would both members please sit down. The matter raised by the member in his supplementary question was out of order. The question must relate to the primary question. 
Rt Hon Winston Peters 
: In relation to the primary question of confidence in one’s Ministers does the Prime Minister regard it is a matter of significant frustration when a journalist knowingly reports information that did not happen claiming it to be information because she is some sort of expert; describes a meeting that did not take place as being virtually an attempt to persuade some country on a trade issue; then states in yesterday’s paper that two things happened: first an attempt to diffuse tensions which did not happen at all and second that I described myself as the “new boy on the block” which I demonstrably palpably am not as she would know if she looked at the Foreign Minister of Japan? It is that sort of nonsense that causes me to ask why she bothers to report. 
Hon Dr MICHAEL CULLEN 
: Although I accept that the member might look like the new boy on the block in fact he is almost the same age as I am and certainly is not. 
Dr Don Brash 
: Does the Prime Minister continue to have confidence in the Minister of Finance the Hon Dr Michael Cullen whose big-spending Budgets have according to the OECD Treasury and the Reserve Bank helped to push up inflation in the economy thereby contributing to nine successive interest rate increases since the beginning of last year? 
Hon Dr MICHAEL CULLEN 
: If the member reads Reserve Bank publications as carelessly as he has obviously read the latest one I hate to think how carelessly he wrote the ones he was responsible for. 
Dr Don Brash 
: I seek leave to table the latest Monetary Policy Statement from the Reserve Bank which highlights the nine successive increases in interest rates that have occurred since the beginning of last year which have taken the official cash rate to its highest level on record. 
Madam SPEAKER 
: Leave is sought to table that document. Is there any objection? There is. 
New Zealand Qualifications Authority—Acting Chief Executive 
2.  
Hon MARIAN HOBBS (Labour—Wellington Central) 
 to the  
Minister of Education 
: Does he have confidence in the acting chief executive of NZQA? 
Hon STEVE MAHAREY (Minister of Education) 
: 
 Yes. Karen Sewell was seconded to the organisation for the express purpose of ensuring that we have an open and a transparent exam process that New Zealanders can have confidence in. She has openly requested that any marker who has any concerns phone her directly so that issues can be fixed if they exist. Ms Sewell has more than 30 years’ experience in education and is widely respected. She has been a secondary school teacher a principal the president of the Auckland Secondary Schools Association and the chairperson of the Principals Council and she was appointed as chief executive of the Education Review Office in 2001. 
Hon Marian Hobbs 
: What advice has the Minister received about the level of openness and transparency in National Certificate of Educational Achievement (NCEA) exams? 
Hon STEVE MAHAREY 
: It is clear from the volume and nature of the information that the New Zealand Qualifications Authority is releasing that it is running an open and a transparent process. That is in contrast to what amounts to three anonymous people emailing the Opposition spokesperson whose open hostility to the NCEA makes it difficult to believe that he is doing anything other than seeking to destroy the assessment system. Karen Sewell has openly requested that any marker who has any concerns should phone her directly so that issues can be fixed—if they exist. 
Hon Bill English 
: Can the Minister tell the House why any marker would come forward when the Post Primary Teachers Association has circularised all its members and told them that if they break the confidentiality agreement they have with the New Zealand Qualifications Authority they may not be paid for the work they have done and the authority could sue them for damages; and is he aware that the markers consider there is presumably—and I will quote from an email—“nothing to be gained by approaching Ms Sewell” because “she must know about the sheer scale of re-marking”. 
Hon STEVE MAHAREY 
: I think that markers understand that Karen Sewell has repeatedly and publicly said that they can approach her. That is the right thing to do; that is the channel that is available. She has said that she will fix any problem. 
Hon Marian Hobbs 
: What reports has the Minister seen about the views of markers on the exam process this year? 
Hon STEVE MAHAREY 
: I have heard one report from Radio New Zealand’s education correspondent Gail Woods who said that she has spoken to markers who view the system quite differently from the two or three anonymous people who have sent emails to Bill English. She says: “ They said it’s a quite straightforward process because they say that this year’s system of re-checking is a very good approach.” Someone described it to me as an unbelievably good system and they have also made the point that marking schedules have always been subject to change under School Certificate particularly in the days when that examination was not scaled. 
Inflation—Wage Growth 
3.  
Hon BILL ENGLISH (National—Clutha-Southland 
) on behalf of 
JOHN KEY (National—Helensville) 
 to the  
Minister of Finance 
: Does he consider that wage growth over and above growth in labour productivity has been a key driver of inflation; if not why not? 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 No I agree with the Governor of the Reserve Bank who stated last week that “the main driver of the strong demand is household spending linked to a still buoyant housing market.” 
Hon Bill English 
: Is the Minister concerned at all that the latest figures from Statistics New Zealand show that core central government wage and salary rates excluding those of teachers and nurses rose by 1.8 percent in the September quarter—the highest quarterly rise since the labour cost index was begun? 
Hon Dr MICHAEL CULLEN 
: Obviously the Government will keep a close eye on movements in public sector wages. It is hard to argue that the movement in public sector wages in that quarter is the cause of an inflationary pressure that has been developing for some time particularly given the previous comments of the member’s leader in quoting Milton Friedman that inflation is always and everywhere a monetary phenomenon. 
Hon Bill English 
: Is the Minister at all concerned that in the light of the biggest ever quarterly increase in central government wage and salary rates the same index shows that the increase in private sector wage and salary rates is less than half of the increase in the Government rates; and can he explain why New Zealanders should think they are getting value for money when Treasury has told him there is no indication of better services or better results from the big increase in expenditure on Government services? 
Hon Dr MICHAEL CULLEN 
: I think that the last part is a highly contestable conclusion given the large increase in the number of surgical procedures that have been carried out and the increased number of staff in areas such as corrections police and so on. Private sector and public sector wages do not always move exactly in harmony over the short term. But I contest the original claim by the member which sounds as if it came from one of his secret National Certificate of Educational Achievement markers. If he thinks that a 1.8 percent movement in a quarter is higher than public sector wage rate movements either in the early 1970s or from about 1984 to 1985 he has a very short memory. 
Hon Bill English 
: Does the Minister agree with the Council of Trade Unions’ secret post-election briefing which states: “We have been concerned that many workers now believe that the fiscal surplus is larger than it needs to be and this has given impetus to the case for tax cuts.” or does he consider that that is just another ideological burp? 
Hon Dr MICHAEL CULLEN 
: I thought that was an extraordinarily well-digested comment because the Council of Trade Unions was saying that thanks to the propaganda put out by both the National Party and the Exclusive Brethren on its behalf people have come to misunderstand what the operating surplus is. Of course one cannot have it both ways. One cannot say that the Government has a large operating surplus and at the same time say that it has been spending far too much. 
Heather Roy 
: Does he consider the interest write-off for student loan borrowers will be inflationary; if not why not? 
Hon Dr MICHAEL CULLEN 
: No I do not consider it is likely to be inflationary given the relatively small impact overall within the economy. It is much less so for example than if the Minister of Transport was to reply “Yes” to question No. 8 then in the short term push a huge amount of extra money into the National Land Transport Fund—as the National Party is asking for today. 
Hon Bill English 
: Does the Minister agree with this statement from the same briefing made to him by the Council of Trade Unions: “We also believe that it makes sense to bring forward the first inflation adjustment to tax brackets from 2008 to 2006.” and does this statement confirm he is coming under pressure even from his own party to make tax cuts? 
Hon Dr MICHAEL CULLEN 
: I am sorry to disappoint the member but the Council of Trade Unions is not a member of nor affiliated to the Labour Party. But I have to say that after all this time since May it is nice to find somebody who liked the indexation proposal. 
Television New Zealand—Charter 
4.  
SUE KEDGLEY (Green) 
 to the  
Minister of Broadcasting 
: Is he satisfied with the way TVNZ is giving effect to its charter; if so why? 
Hon STEVE MAHAREY (Minister of Broadcasting) 
: 
 I am satisfied that TVNZ is making progress in the transition towards the charter. It has made reasonable steps over the last 2½ years in that direction. That is not much longer than the average time it takes to go from an idea to putting that idea to screen. 
Sue Kedgley 
: When did he see or become aware of the memorandum from the former chief executive of TVNZ Ian Fraser to the October 2005 TVNZ board and does he agree with Mr Fraser’s assessment that TVNZ has become virtually indistinguishable from other commercial channels that it carries levels of advertising that are higher than any other public service broadcaster in the world and that its current programming is “profoundly incompatible with any recognisable model of public broadcasting”; if not why not? 
Hon STEVE MAHAREY 
: I have not read the paper because its contents in full are something I have been made aware of only today and I will try to have a proper read of it when I have time. The board of course was the recipient of that paper. I understand that it was prepared for board members during one of their planning sessions as something from the chief executive for them to think about. I am aware that the advertising levels are higher than any other public service broadcaster and that is no surprise; TVNZ has to earn more commercial revenue than any other public broadcaster. I am aware that there is a need for changes in the programming. That is what a transition is about. It has been going for 2 years and I think as we move forward we will see more changes. [ 
Interruption 
] Eight years is short to us. 
Maryan 
 Street 
: Can the Minister give examples of how TVNZ is making the transition to a charter organisation? 
Hon STEVE MAHAREY 
: I will give three broad examples. Television New Zealand has implemented a number of charter-focused activities like the Talk Television programme where TVNZ moves around the country and talks directly to communities works with independent production associations to ensure they have a better relationship with the producers of programmes and it has had more Pacific Island programming on its channels. Secondly we might look at the area of the quality and variety of New Zealand programmes: programmes like  
Frontier of Dreams 
  
Holly’s Heroes 
  
Artsville 
 and  
Revealing Gallipoli— 
all very good programmes; and thirdly we might look at the area of continuing purchase of the range of the best overseas programmes that come from companies like Warners and Granada. 
Hon Georgina te Heuheu 
: How can the Minister have any confidence in TVNZ’s charter performance when departing chief executive Ian Fraser was moved to write in his memo in October this year that: “We have not yet measured any significant increase in viewer satisfaction nor any marked public conviction after more than 2½ years’ experience with the charter that we are more of a public broadcaster than we were before it was introduced.”; and when will the Minister admit that his current public broadcasting model is doomed to failure? 
Hon STEVE MAHAREY 
: As I said I have not read the paper yet so I cannot comment on what Mr Fraser may or may not have said. But I will go back to my first answer to the first question. This is an organisation that has to carry quite a large commercial burden compared with other public broadcasters around the world. It is in a period of transition. That will take some time given the amount of money that goes into the public part of the organisation but the transition is working well and I hope it will continue that way. 
Hone Harawira 
: E tikaana te korero kei Te MangaiPaho te putea hei utu inga kaupapa whakapahoMaorii Te Reo Tataki a kahore Te Reo Tataki e rarauakeitonaakeputea? 
[An interpretation in English was given to the House.] 
Is it true that Television New Zealand relies on Te MangaiPaho funding to resource its Maori programming rather than accessing its own budget? 
]  
Hon STEVE MAHAREY 
: For Maori broadcasters I would imagine the question was referring to. The answer therefore is yes. 
Te Ururoa Flavell 
: I raise a point of order Madam Speaker. By way of assistance to our interpreter if I could give our translation of the supplementary question: is it true that Television New Zealand relies on Te MangaiPaho for funding to resource its Maori programming rather than accessing its own budget? 
Madam SPEAKER 
: So that is a supplementary question? 
Te Ururoa Flavell 
: That was Mr Harawira’s question which the interpretation did not really get to the gist of. 
Madam SPEAKER 
: I will let it go this time but would the member please intervene at the appropriate time. 
Hon STEVE MAHAREY 
: No. 
Sue Kedgley 
: How can he seriously claim that a channel where advertising uses up a quarter of every hour and breaks up its programmes every 6 to 8 minutes where local content will next year shrink to 36 percent the same level it was at before the charter was introduced and where charter programmes that do not maximise ratings are to be scrapped or scheduled at odd hours is in any way a success story or meeting charter objectives? 
Hon STEVE MAHAREY 
: Until the Minister of Finance decides to give me a bucket of more money to put into public television there will be advertisements on the public broadcaster. The prediction of 36 percent of broadcasting of course is not something that has yet been put in place. For example last year with the windfall money that it received back the $11.4 million it has commissioned a wide range of New Zealand programmes that are not yet on air. In relation to the ratings for this organisation of course the ratings are very good with an average of 86 percent of New Zealanders watching each week. 
Heather Roy 
: Does the Minister agree with Television New Zealand’s claims that it would be inappropriate for Bill Ralston to appear before the Finance and Expenditure Committee inquiry into recent events at Television New Zealand and about potential conflict between commercial and charter objectives particularly given that Mr Ralston always has such a lot to say in the media and he himself is keen to appear? 
Hon STEVE MAHAREY 
: That of course is a matter for the board to decide not me. 
Heather Roy 
: I raise a point of order Madam Speaker. My question specifically asked whether he agreed with Television New Zealand’s claim; not whether he thought it was appropriate. 
Madam SPEAKER 
: No that is not a point of order. The Minister addressed the question; he does not have to give an opinion. 
Sue Kedgley 
: Is he concerned that next year Television New Zealand will be placing a much higher priority on commissioning charter programmes that maximise ratings and either canning charter programmes that do not maximise ratings or consigning them to inhospitable places on the schedule unless they are sure bets; and is that another example of the successful transition to implementing charter objectives? 
Hon STEVE MAHAREY 
: It is for Television New Zealand to decide how it spends its money but in principle I would say that we have asked it to be a mainstream—if I can use that word—television broadcaster reflecting the needs in broadcasting of all New Zealanders. Therefore the majority of its programmes will be targeted at a large audience. 
Sue Kedgley 
: Is the Government committed to providing a strong and sustainable public broadcasting environment for New Zealand that meets the obligations of the Television New Zealand charter; if so when will he admit that the hybrid model is failing to deliver and seriously investigate the three options proposed by Mr Ian Fraser in his memorandum to the board—namely turning Television One into a non-commercial channel or making it semi-commercial or developing several digital public service broadcasting channels? 
Hon STEVE MAHAREY 
: Yes the Government is committed to a strong sustainable public broadcaster. There will be changes in the future of course such as the introduction of digital television. That will contain changes in all sorts of content because there will be specialist channels under that kind of regime. So yes a lot of changes are before the television broadcaster and we are looking forward to them. They will all be consistent with public broadcasting. 
National Certificate of Educational Achievement—Assessments 
5.  
Hon BILL ENGLISH (National—Clutha-Southland) 
 to the  
Minister of Education 
: Have NCEA check markers been given expected profiles of performance for NCEA standards containing bands of expected numbers of Achieved Merit and Excellence in each standard; if so why? 
Hon STEVE MAHAREY (Minister of Education) 
: 
 Only those check markers who are also panel leaders receive profiles. Profiles of expected performance are a monitoring tool that provides a forecast based on previous years’ results. They are guidelines that provide a trigger to investigate the marking when initial results indicate that students are not achieving consistently with what was expected when the exam was set. The development of these profiles is one of the key improvements to avoid a repeat of the variability experienced in last year’s exams. As Karen Sewell has noted markers do not work to the profile. They are not set in stone. Markers still need to apply their experience and professional judgment to the student’s work. 
Hon Bill English 
: Is the Minister aware that in addition to the issues raised in the House a school principal was asked on National Radio this morning whether he believed that markers were being asked to mark to predetermined pass rates and he said: “Markers tell me that.” and is the Minister going to continue to say that the talk of informal and unofficial re-marking is simply a conspiracy cooked up by one critic? 
Hon STEVE MAHAREY 
: I did not hear the interview but I do understand that the three principals interviewed agreed at the end of the interview that as long as the exams were fair and consistent they would support them—and that is what they will be. Do I believe there is a lone critic? Yes I do; I think he is called Bill English. 
Dianne Yates 
: Has he been advised of any marking schedules that have been revised as a result of the monitoring process? 
Hon STEVE MAHAREY 
: Yes I have. I am advised that the marking schedules for 14—or around 4 percent—out of the 335 standards have been revised as a result of the monitoring process. For example in level 1 Japanese and economics standards students wrote answers that the marking schedules did not anticipate but that demonstrated that the students had met the standards. The scope of the marking schedules for both those standards was extended to recognise that achievement. These provisions of the marking schedule as Graham Young from the Secondary Principals Association said today “are actually addressing concerns of the public around variability through this process and Bill English is simply mischief-making”. 
Hon Bill English 
: Given that the Minister is aware that the principal of Christchurch Boys High School said this morning on National Radio that markers had told him that they were marking to predetermined pass rates is he now telling the House that that principal was lying or does he accept that people other than myself hold the view that there is widespread unofficial re-marking? 
Hon STEVE MAHAREY 
: I said before that I did not hear the interview. 
Dianne Yates 
: What advice has the Minister seen that New Zealanders can have full confidence in the exam system? 
Hon STEVE MAHAREY 
: NCEA has received endorsement from the Post Primary Teachers Association the Secondary Principals Association Business New Zealand and many principals teachers markers and students around the country. The acting chief executive of the New Zealand Qualifications Authority has said repeatedly that we have “an open and transparent process to ensure the results are consistent and fair.” Those who set sit mark and administer the exams are confident the process is working. The only people who disagree are Bill English and the two people who wrote the anonymous emails to him. He has effectively called a respected senior public servant a liar and would prefer to take the advice of anonymous people who send him emails. 
Hon Bill English 
: What does the Minister say to a person who is another marker of another exam that is not on his list and says: “I am currently marking one of the achievement standards for the second year in a row. We have been asked by the facilitator to adjust things so that there are more Achieved and Merit passes. What is annoying is that we are forced to push through students who have not achieved into the Achieved category who clearly have no knowledge of the subject at this level.” or does he think this person is making it up as well? 
Hon STEVE MAHAREY 
: I would say to that person that he now has taken Bill English’s emails to three and I would recommend that those three people do what the acting chief executive has asked them to do: ring her directly and she will fix any problems they may have. 
Hon Bill English 
: What does the Minister say to a person who is another marker of another exam that is not on his official schedule who says: “In response to Karen Sewell’s letter yesterday I think what she is trying to say is that it’s not scaling even though we as markers smile and know the truth.” and who also says: “There are some terrible questions and some too easy that have gone through that have made it difficult to get the required distribution of grades.” or is that another marker who alongside the principal of Christchurch Boys High School is making it up? 
Hon STEVE MAHAREY 
: I do not know what the member has got to say because I do not know the person who has written to him but let me just go to the heart of the principle of what is being outlined here and that is whether we are scaling. Can I say yet again that—[ 
Interruption 
] 
Madam SPEAKER 
: Would the person with the cellphone on please turn it off. 
Hon STEVE MAHAREY 
: —it is impossible to scale until all marks are in. We are in the process of marking now. Scaling takes place after all the marks are in. That is not part of this system. 
Hon Bill English 
: Does the Minister recall that earlier this year in the House the Minister of Education and outside the House the Qualifications Authority denied that there was any problem with variability at all and can he confirm that he and the authority are now using the same tactic as they did earlier in the year—deny the problem attack the critics hope it goes away and when the subsequent inquiry confirms the truth change tack and say that they knew all along that was what was happening? 
Hon STEVE MAHAREY 
: The acting chief executive of the Qualifications Authority has announced every problem herself. Yes we are determined to attack Bill English and we do invite any of the people around the place who are having issues with NCEA to ring the acting chief executive. 
Hon Bill English 
: Can the Minister confirm that in fact the New Zealand Qualifications Authority did not volunteer to announce re-marking but was forced to do so after a report in a Sunday newspaper a week ago outlining the problems with the biology exam—that it was in response to those revelations that the authority explained that it was re-marking—and why does he not just be honest about it? 
Hon STEVE MAHAREY 
: The Qualifications Authority has had a revision under the aegis of the State Services Commission all year. It always planned to be open and transparent and that is what it is doing. 
Kyoto Protocol—Montreal Negotiations 
6.  
Dr ASHRAF CHOUDHARY (Labour) 
 to the  
Minister responsible for Climate Change Issues 
: What reports has he received on the outcomes of the Montreal negotiations on the United Nations Framework Convention on Climate Change (UNFCCC) and under the Kyoto Protocol? 
Hon DAVID PARKER (Minister responsible for Climate Change Issues) 
: 
 The Montreal negotiations achieved three significant advances. First there was unanimous agreement that human-induced climate change is accelerating and is a very serious problem. Second all United Nations Framework Convention on Climate Change signatories including the USA agreed unanimously to work together on further climate change responses. Third progress was made on implementing the Kyoto Protocol which is at present the most important and effective instrument to tackle greenhouse gas emissions. 
Dr Ashraf Choudhary 
: What risks to New Zealand’s interests were avoided in relation to Kyoto Protocol carbon credits for exotic forests? 
Hon DAVID PARKER 
: There was a potentially disastrous proposal that would have prevented New Zealand from counting pine forests as carbon sinks. Due to the good work of the New Zealand negotiators this proposal was rejected. 
Social Development and Employment Minister—Police Decision 
7.  
JUDITH COLLINS (National—Clevedon) 
 to the  
Minister for Social Development and Employment 
: Is he satisfied with the way in which he and his office have handled the release of parts of his police file? 
Hon DAVID BENSON-POPE (Minister for Social Development and Employment) 
: 
 As I have said previously I authorised the release of information to a Sunday newspaper to provide balance to the misinformation provided to the House in the previous week by Rodney Hide. No constraint was placed on me with regard to the files in my possession although in hindsight I recognise that releasing details was not the wisest course of action. 
Judith Collins 
: I think the answer to that is yes. When he authorised— 
Madam SPEAKER 
: The Minister answered the question. Would the member please ask a supplementary question—no editorialising thank you. 
Judith Collins 
: When he authorised a staff member to release selected parts of the police report to a Sunday newspaper did he also authorise that staff member to say that the Minister was unavailable for an interview and had no comment to make and does he agree that that is very deceptive conduct? 
Hon DAVID BENSON-POPE 
: Yes and no. 
Judith Collins 
: If it was for the “police to release the report” as the Minister has publicly maintained why did he decide to leak selective parts of the report in advance and does he agree that it was a deceptive attempt to manipulate public opinion and erode the credibility of witnesses? 
Hon DAVID BENSON-POPE 
: As I answered previously I authorised the release of information to the Sunday newspaper to provide balance to the misinformation provided to the House in the previous week by Rodney Hide. No constraint was placed on me with regard to files in my possession although in hindsight I recognise that my action was not appropriate. 
Judith Collins 
: Does the Minister stand by his statement to the House last Thursday when he said: “The material that was released was not selective. Also as I said previously it contained comment quite critical of myself.”—that is of course referring to the Minister—and if so which particular parts of that material does he consider to be quite critical of himself? 
Hon DAVID BENSON-POPE 
: Yes I consider the material that was released was balanced. 
Judith Collins 
: I raise a point of order Madam Speaker. I do not believe that the Minister addressed that question. I asked him which particular parts of the material he considered to be quite critical of himself. His answer was about being fair it was not about which material was quite critical. 
Madam SPEAKER 
: The Minister addressed the question. 
Judith Collins 
: Has the Minister since spoken to or briefed in advance the Prime Minister or any caucus colleagues about the handling of the police report; if so what was the nature of the advice that they gave to him? 
Hon DAVID BENSON-POPE 
: I have had no conversation with the Prime Minister over those matters. 
Land Transport—Funding 
8. LINDSAY TISCH (National—Piako) 
 on behalf of  
Hon MAURICE WILLIAMSON (National—Pakuranga) 
 to the  
Minister of Transport 
: Will he be seeking a one-off substantial injection of funding into the National Land Transport Fund to ensure that a number of roading projects can be completed within a realistic time frame? 
Hon DAVID PARKER (Minister of Transport) 
: 
 The Government has already made substantial one-off payments as well as significant extra ongoing funding commitments for land transport. 
Lindsay Tisch 
: Does the Minister agree with Transit’s assessment of the Mangatawhiri deviation project on State Highway 2 that: “The final cost of the project is likely to exceed the funding allocated by Land Transport New Zealand.”; if so what does he plan to do about getting this lifesaving project under way? 
Hon DAVID PARKER 
: I agree that Land Transport New Zealand has to make rationing decisions and I stand by its decisions. 
Martin Gallagher 
: Can the Minister state very clearly and concisely to this House what extra funding the Government has made available to land transport since being elected in the year 1999? 
Hon DAVID PARKER 
: The Government is spending $22.3 billion on land transport over 10 years. This includes substantial one-off payments of $900 million extra for Auckland $885 million extra for Wellington as well as substantial increases in provincial areas. 
Hon Peter Dunne 
: Does the Minister consider that an announcement prospectively by the Wellington Regional Council chair that if the current consultation process on northern access ways to Wellington comes up favouring a staged approach to Transmission Gully as the preferred option the council would then embark upon another round of consultation being consistent with the realistic time frame provisions of the current legislation? 
Hon DAVID PARKER 
: The Government looks forward to the councils coming to the Government with a unified position which we will then consider. 
Tariana Turia 
: Using Land Transport New Zealand’s value of statistical life calculation what is the economic and non-economic loss to the nation of Maori lives lost to road accidents? 
Hon DAVID PARKER 
: I cannot make that calculation here on the hoof but suffice it to say it would be substantial. 
Lindsay Tisch 
: Will the Minister assure the House that there will be adequate funding made available for roading infrastructure to adequately cope with the increased traffic volumes that will be generated by the Rugby World Cup in 2011? 
Hon DAVID PARKER 
: If the member is in effect suggesting that $22.3 billion over 10 years is insufficient then I would say that of course the only reason can be substantial underfunding in the prior decade? 
Peter Brown 
: Does the Minister accept that roading in New Zealand was considerably underfunded when the National Party was last in power and has he read the Allen report commissioned by the Automobile Association that clearly indicates there are huge economic and social gains by investing in roading and will the Minister follow the recommendations of the Allen report? 
Hon DAVID PARKER 
: Yes I certainly agree that there was substantial underfunding and perhaps the easiest way to assess that is to compare the level of money that was being spent on highways some 10 years ago and to relate that to the amount that is currently being spent which is approximately 10 times as much. 
Rt Hon Winston Peters 
: I raise a point of order Madam Speaker. During the time my colleague was answering that very sensible question there were groans of admission and guilt from National members and all sorts of comments. I do not suggest that they should be thrown out but to be fair and even-handed you surely should have looked at those members and admonished them for their ill manners and bad behaviour. 
Madam SPEAKER 
: I thank the member. I do remind members—I had not heard any specific interjections—the level of chatter and giggling that goes on is now reaching an unacceptable level so would they please keep it down. 
Hon Dr Michael Cullen 
: In his Budget bilateral meeting early next year with the Minister of Finance will the Minister be reminding him of the calls by Mr Williamson for a substantial injection of more public spending on roads or reminding him of the calls by the Leader of the Opposition and the Opposition finance spokesperson for a cut in public spending? 
Hon DAVID PARKER 
: I will be taking a moderate route through the middle. 
Lindsay Tisch 
: Given that Transit currently estimates the start date of the Newmarket viaduct improvement project as 2008–09 will the Minister commit to accelerated funding and resource mechanisms to ensure that this project will be completed by the time of the Rugby World Cup in 2011? 
Hon DAVID PARKER 
: While the Government is committed to improving roading infrastructure and public transport infrastructure in the run-up to the Rugby World Cup it would be wrong to say that we would be markedly changing the State highway spending plans in order to deal with an event of some weeks or 1 or 2 months. 
Lindsay Tisch 
: Given that Transit currently estimates the completion date of the State Highway 20 Mount Roskill extension as 2010 will the Minister assure the House that the extension will not face the same delays as faced by other roading projects around the country and be completed in time for the Rugby World Cup in 2011? 
Hon DAVID PARKER 
: I can assure the House that there are significant and very expensive—multiples of hundreds of millions of dollars—roading projects already being carried out in Auckland including on the western ring route. 
Superannuation—Overseas Pensions 
9.  
PETER BROWN (Deputy Leader—NZ First) 
 to the  
Minister for Social Development and Employment 
: What progress if any has been made on the investigation into improving options for senior citizens eligible for overseas pensions as well as New Zealand superannuation? 
Hon DAVID BENSON-POPE (Minister for Social Development and Employment) 
: 
 On 24 November this year officials provided a report to the Minister of Finance and myself on a range of 15 options to modernise the direct deduction policy where a superannuitant has an overseas pension similar to New Zealand superannuation and to address issues associated with the payment of New Zealand superannuation overseas. The Minister of Finance and I met on 1 December and directed officials to report further to us by the end of February 2006 on a subset of options presented in the November report. I intend to bring proposals to Cabinet in the first half of 2006. 
Peter Brown 
: Does the Minister accept that this is a very important issue to many overseas people now resident in this country and can he foreshadow any of the likely changes that will be made in the report when it is finally announced? 
Hon DAVID BENSON-POPE 
: I do accept that and I can confirm that nine of the 15 options presented in the November report concern the direct deduction policy and six options concern the portability of New Zealand superannuation overseas. I intend to bring concrete proposals to Cabinet in the first half of the new year. 
Immigration Service—Official Advice 
10.  
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
 to the  
Minister of Immigration 
: Is he satisfied with the work carried out by his department and in particular the advice he receives from his officials; if not why not? 
Hon DAVID CUNLIFFE (Minister of Immigration) 
: 
 Since becoming Minister of Immigration I have generally been happy with the advice that I have received. 
Dr the Hon Lockwood Smith 
: Can the Minister confirm that his department raised concerns about the honourable Taito Phillip Field’s immigration representations prior to a visit by a group of Ministers to the honourable Taito Phillip Field’s house in Samoa in March 2005; if so what was the nature of those concerns? 
Hon DAVID CUNLIFFE 
: I have been advised by the Deputy Secretary of Labour that she did not raise any specific cases relating to ministerial representations with the former Minister of Immigration. She has advised that long before the visit to Samoa she raised general issues around perceptions of some MPs’ advocacy of immigration cases. 
H V Ross Robertson 
: Can the Minister tell the House what advice he has received from his officials on how immigration is helping to meet New Zealand’s skill shortages? 
Hon DAVID CUNLIFFE 
: I have recently received advice on immigration decision numbers for the month of November 2005. I was interested to read that over 10000 work visa and permit decisions were made in that month. Those represent a significant input of much-needed labour to help meet New Zealand’s pressing skills and labour shortages. 
Dr the Hon Lockwood Smith 
: Which advice is Parliament now expected to believe: the advice the Minister has given the House just now which is that no specific concerns were raised by his department prior to a group of Ministers visiting the honourable Taito Phillip Field’s house in Samoa in March this year or the advice Ms Mary Anne Thompson gave to a parliamentary select committee on Thursday morning last week in which she very specifically told the parliamentary select committee in public that she had raised issues with the Hon Paul Swain around the honourable Taito Phillip Field’s activities; which is the truth? 
Hon DAVID CUNLIFFE 
: There is absolutely no conflict between my previous statement to the House and the statements made by the Deputy Secretary of Labour to that select committee. 
Dr the Hon Lockwood Smith 
: How can the Minister tell this House there is no conflict—I have my notes from that meeting right here and as that Minister knows I take careful notes at those select committee hearings—when Mary Anne Thompson told the select committee in public that concerns were raised with Minister Swain by herself over this issue and now the Minister tells this House that specific issues were not raised? There is clearly a conflict there; who is telling the truth? 
Hon DAVID CUNLIFFE 
: Far be it from me to quibble with the meticulousness of the member’s note taking but I reaffirm to this House that the Deputy Secretary of Labour has advised that she did not raise with the former Minister of Immigration specific matters to do with any individual ministerial representation cases. 
Dr the Hon Lockwood Smith 
: Did his department alert Ministers following the Hon Damien O’Connor’s reported statement on 14 September that he was “unaware of Mr Siriwan’s employment or activity in Samoa” that the department had actually raised concerns with Ministers at least 6 months earlier? 
Hon DAVID CUNLIFFE 
: I am advised by the deputy secretary that any concerns she raised with the former Minister of Immigration were of a general nature and did not relate to that particular case. I do not know how many times I have to assure the member of that. 
Dr the Hon Lockwood Smith 
: Is the Minister briefed on the progress of the inquiry by Dr Noel Ingram QC and if so has he been advised that a number of the key people involved in the honourable Taito Phillip Field’s highly questionable immigration activities are refusing to be interviewed by the inquiry; if he has not been briefed why is he not insisting that he be kept informed of the significant inquiry into the activities of his department and of Labour Government Ministers both current and former? 
Hon DAVID CUNLIFFE 
: No because it would be improper for me to interfere in the progress of a ministerial inquiry. 
Smoke-free Environments Amendment Act—Public Response 
11.  
STEVE CHADWICK (Labour—Rotorua) 
 to the  
Associate Minister of Health 
: What reports has he received about the public’s response to the introduction of the Smoke-free Environments Amendment Act 2003? 
Hon DAMIEN O'CONNOR (Associate Minister of Health) 
: 
 I am delighted that the Ministry of Health has recently released a report entitled  
The Smoke is Clearing: Anniversary Report 2005 
 which supports the significant health benefits for bar and restaurant workers and customers arising from and confirms strong public support for the legislation. The report also found no overall downturn in bar and retail sales tourism or employment. 
Steve Chadwick 
: Has he seen any further reports on the Smoke-free Environments Amendment Act 2003? 
Hon DAMIEN O'CONNOR 
: Yes a survey from the Asthma and Respiratory Foundation shows 67 percent public support for the Act. I have also seen a report stating that the law goes too far and is an example of a nanny State and yet another stating that the law should not be scrapped. The first report came from the PC eradicator Dr Wayne Mapp and the second from Dr Don Brash. 
Foreign Policy—Confidence 
12. GERRY BROWNLEE (Deputy Leader—National) 
 on behalf of the  
Hon MURRAY McCULLY (National—East Coast Bays) 
 to the  
Minister of Foreign Affairs 
: Does he have confidence in all of the foreign policies of the Government? 
Rt Hon WINSTON PETERS (Minister of Foreign Affairs) 
: 
 The answer is yes. Not only is that a condition of the supply and confidence agreement with the Government but I have successfully represented this country and the Government at several international meetings over the last month. By my actions I have demonstrated our commitment. 
Gerry Brownlee 
: What negotiating stance will New Zealand be taking in relation to the Convention on Biological Diversity with regard to trade in genetic resources and how does that stance relate to the development of New Zealand’s domestic law in that area? 
Rt Hon WINSTON PETERS 
: That issue is at a putative stage and is in the hands of one of my colleagues the name of whom the member should know if he is going to be a foreign affairs spokesperson. 
Gerry Brownlee 
: Why does it appear that the Minister is not aware that the briefing to the incoming Minister of Foreign Affairs states specifically on page 49 that officials still require decisions on New Zealand’s position in respect of those negotiations and raises concerns that international negotiations may get ahead of New Zealand’s domestic policy; is he unaware because he has not actually read the ministerial briefing papers or can he answer the question? 
Rt Hon WINSTON PETERS 
: I think I answered the question by saying that this issue was at its putative stages and of course one has to understand what the word “putative” means and that is where I lost the member—all of which characteristics are in the emails I have regarding the National Party’s internal workings. 
Madam SPEAKER 
: The last part of the answer was not relevant. 
Te Ururoa Flavell 
: He aha te tunga o Aotearoa mo te ahua tino rangatiratanga o ngatangata whenua o te ao a ikorero Te Manatu Aorere o Aotearoa ki a wai? 
[An interpretation in English was given to the House.] 
[ 
What is New Zealand’s position towards indigenous peoples of the world and their right to self-determination and who did the Ministry of Foreign Affairs of New Zealand consult? 
]  
Rt Hon WINSTON PETERS 
: I tell my learned colleague the questioner that there is a tremendous number of issues on which the Government has to consult in respect of indigenous people around the world. Whenever and however the Government is to be able to do it in the end those matters will go to Cabinet and there will be Maori affairs input if it is appropriate. But perhaps the best answer is this: in consulting the indigenous people the Government appointed one as the Minister of Foreign Affairs. 
Gerry Brownlee 
: Did the Minister tell the  
South China Morning Post 
 that in carrying out New Zealand’s foreign policy he was able to rely on his reservoir of personal contacts in Asia including the Prime Minister of Singapore who retired 15 years ago; that Prime Minister’s successor whose name the Minister could not recall; leading members of the Government of the Philippines whom the Minister described to the paper as “Filipinos I have met”; members of the Malaysian Government whose names he could not recall; and his very very good friend the former chief executive of Hong Kong of whom the Minister said to the newspaper: “His name just temporarily escapes me.”? 
Rt Hon WINSTON PETERS 
: I have no difficulty in demonstrating the duplicity and deceit in that article. Firstly there have been two successors to former Prime Minister Lee Kuan Yew—that is the first fact that that correspondent got wrong. Secondly TungChee-hwa was not the chief executive at the time that article was written—another baseless deceit on that newspaper’s part. If the newspaper wants to engage in that sort of chronological nonsense then no doubt it will keep referring such matters to the National Party. 
Gerry Brownlee 
: Should New Zealanders be concerned that not only our domestic media but now it would seem the international media have it in for this Minister? 
Rt Hon WINSTON PETERS 
: The fact is that what we saw post the decision to appoint a new Minister of Foreign Affairs was New Zealand journalists frequently appearing in overseas magazines then their editors back here saying: “Wow this is terrible; look at what they’re saying in overseas magazines!”—all those articles having been written by the meerkats of the press gallery. 
Peter Brown 
: Noting the House’s interest in the Minister’s portfolio and indeed in the Minister himself will he enlighten the House as to whether the reports in the  
New Zealand Herald  
written by its correspondent accurately reflect the Minister’s meetings at APEC in Korea and the East Asia Summit in Malaysia; if not how do they not? 
Rt Hon WINSTON PETERS 
: That is a very good case in point. The  
New Zealand Herald  
correspondent at no time was at any meeting about which she wrote. Even though she was told the story was a fabrication or bovine scatology she stood by “her sources”. Then she repeated the fabrication yesterday in the  
New Zealand Herald  
by saying two things in the article—that Mr Peters had sought to defuse tensions when no such thing occurred at all and that I had described myself there as the “new boy on the block” which I demonstrably was not because that was Taro Aso the Foreign Minister of Japan who was appointed after me. But right there are three demonstrable examples of an experienced journalist making it up as she goes along then having her colleagues defend what is a tissue of lies. 
Gerry Brownlee 
: Why does the Minister think this particular journalist has it in for him? 
Madam SPEAKER 
: We are getting a bit broad of the primary question. 
Gerry Brownlee 
: I raise a point of order Madam Speaker. I asked a question like that because you had allowed that ridiculous question from Peter Brown and you got the ravings of the Minister. Surely we can now just find out what it is and if it is personal we can leave it at that. 
Madam SPEAKER 
: No. I allowed that question because in the supplementary questions issues had been raised about articles; that is why that question was permitted. But I will ask the Minister to reply as members seem to wish to hear the answer. 
Rt Hon WINSTON PETERS 
: The answer to that question is to be found in 3 years of emails of the National Party’s internal workings where the  
New Zealand Herald 
 is concerned. [ 
Interruption 
] Oh I know what those members are thinking: they are wondering whether I have one telephone book full of those emails or 10. Well I have to tell those members that in all this excitement I myself clean forgot to count them. But given that this is the most damaging information seen in the Western World and could blow their political heads clean off they have to ask themselves this question: “Do you feel lucky?”. Well do ya punks? 
Gerry Brownlee 
: We have no objection to the Minister tabling that material—but of course we do not expect ever to see it. Can the Minister confirm that following his public offer to the National Party of a briefing on foreign affairs matters made some 2 months ago and subsequent letters and phone calls to his office requesting such a briefing he has not made a time for such a briefing because he himself has not read the briefing papers to the incoming Minister? 
Rt Hon WINSTON PETERS 
: I hasten to defend my ministry by saying that the fact is its officials are waiting to set a time with Mr McCully when he will turn up at Parliament instead of spending all his time writing on his website about the Minister of Foreign Affairs travelling first-class which I never have and do not now. In contrast when he was the Minister of Tourism he travelled nothing but first-class. 
Gerry Brownlee 
: I raise a point of order Madam Speaker. The question should be answered. The Minister can address questions as he will—I accept that—but for goodness’ sake all we are asking him is how soon will he know enough about foreign affairs to be able to give us a briefing. 
Rt Hon WINSTON PETERS 
: The point is my ministry awaits a time and destination to fully apprise Mr McCully. But I have told officials that that might take 6 months of intense work 8 hours a day so they are looking for a time of suitable mutual engagement. 
Madam SPEAKER 
: I think the Minister addressed the question. 
Urgency 
Hon Dr MICHAEL CULLEN (Leader of the House) 
: 
 I move  
That urgency be accorded the passing through their remaining stages of the Taxation (Annual Rates and Urgent Measures) Bill and the Hazardous Substances and New Organisms (Approvals and Enforcement) Amendment Bill and of any bills into which those bills may be divided; the introduction and passing of the Biosecurity (Status of Specified Ports) Amendment Bill; the passing through their remaining stages of the Subordinate Legislation (Confirmation and Validation) Bill and the Veterinarians Bill; and the first readings of the Sports Anti-Doping Bill the Immigration Advisers Licensing Bill the Standards and Conformance Bill the Geographical Indications (Wine and Spirits) Registration Bill the Housing Restructuring and Tenancy Matters (Information Matching) Amendment Bill and the Unsolicited Electronic Messages Bill. 
 This motion is moved in order that a number of bills can be completed for legal or administrative reasons before the House rises for the Christmas adjournment; also in order that a number of other bills can be referred to select committees. 
LINDSAY TISCH (Senior Whip—National) 
: 
 I raise a point of order Madam Speaker. When will the Biosecurity (Status of Specified Ports) Amendment Bill be made available to the House? 
Hon Dr MICHAEL CULLEN (Leader of the House) 
: 
 That bill will be made available not long before we get to its introduction and first reading. I will be happy to arrange if need be for copies to be made available to the various party spokespeople and for them to talk to officials about the bill. 
GERRY BROWNLEE (Deputy Leader—National) 
: 
 I raise a point of order Madam Speaker. This is a technical matter that you might be able to instruct us on. We understand that a decision is pending on the Tauranga case—relating to the electoral petition there—that would be reported to the House. Does the taking of urgency today prevent the House from receiving that information? 
Madam SPEAKER 
: I thank the member for that point. The decision could be tabled but only with the leave of the House. Certainly I would seek the leave of the House to do that if it becomes available but obviously I do not know when that will be. Did Mr Tisch have another point of order? I think that the Minister in his reply relating to the Biosecurity (Status of Specified Ports) Amendment Bill said that it must be tabled before its first reading. 
A party vote was called for on the question  
That urgency be accorded. 
Ayes 61 
New Zealand Labour 50; New Zealand First 7; United Future 3; Progressive 1. 
Noes 60 
New Zealand National 48; Green Party 6; Maori Party 4; ACT New Zealand 2. 
Motion agreed to. 
Taxation (Annual Rates and Urgent Measures) Bill 
In Committee 
Part 1 Annual rates of income tax for 2005-06 tax year 
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 This part sets the tax rates for the 2005-06 year. Dr Cullen will no doubt be reflecting deeply through the debate on this part because in it is the very small piece of policy that almost cost him the Government. But for the student loan bribe—as he explained to the vice-chancellors the other day—he probably would have lost the election. I do not think there is much doubt about that. 
The problem for the Committee is that it needs the opportunity to consider other points of view about the tax rates for this tax year. I would like the Minister in the chair Dr Michael Cullen to give us a considered opinion on what the Council of Trade Unions had to say about what tax rates he should be setting. In its post-election briefing to the incoming Minister the Council of Trade Unions stated: “We have been concerned that many workers now believe that the fiscal surplus is larger than it needs to be and this has given impetus to the case for tax cuts.” Well I am sure it has. I would be keen for the Minister to tell us how he will respond to the Council of Trade Unions which to be fair has not put the case aggressively in its briefing but does I think represent the views of many workers fairly. Every time workers see the fiscal surplus reported they think the Government has too much money and every time they look at their monthly overdraft they think they have too little money. Of course Dr Cullen will explain that the fiscal surplus is not really the fiscal surplus. That is one of his interesting little games for now but I can assure him that it amounts to a fiscal dead end to try to shift the goalposts right over to the side of the paddock instead of leaving them where everyone knows they have always been. 
So I would be interested in what Dr Cullen’s reaction is to that information from the Council of Trade Unions. When Treasury said something similar he christened its considerations as an ideological burp. Well I would ask what this one is. Is it an ideological reflux or an ideological cough? Is it a malapropism—something the Council of Trade Unions should not have actually said but did? The Council of Trade Unions then went on to be more specific. It did not lay out a particular set of tax scales that its members would be interested in but it did focus on Dr Cullen’s own proposal which was that the tax brackets be inflation-adjusted. It said that the first inflation adjustment of tax brackets should be moved forward from 2008 to 2006. 
I have gone back and looked at the fiscal situation when Dr Cullen proposed that inflation adjustment and I found that the surplus being projected then was much smaller—significantly smaller—than the surplus being projected now. If Dr Cullen is denying that I would be happy to hear from him on it. In my view and in the view of the National Party there absolutely is room on the books for him to bring forward the adjustment as the Council of Trade Unions believes he should. I do not think it is saying that for ideological reasons; I think it is saying it for political reasons. The reason is that when its workers look at where interest rates are going they know they will be significantly worse off under a re-elected Labour Government. Workers having voted Labour in have figured out in the last couple of weeks that because Labour policies are pushing up interest rates they will end up being worse off. Many of those who have benefited from campaigns like the “5 in 05” campaign run by the New Zealand Amalgamated Engineering Printing and Manufacturing Union will be no better off. They are starting to signal that to their elders and betters in the union movement who have been brave enough to put a specific proposal to Dr Cullen in their post-election briefing. 
If Dr Cullen expects this Committee to support Part 1 then he should give members an explanation as to why he cannot bring forward that inflation adjustment. He needs to explain that move to the Council of Trade Unions to the Committee and to United Future. 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I think one of the problems Mr English always gets himself into is that he cannot read documents properly. Of course the Council of Trade Unions did not say that the surplus is too large. 
Hon Bill English 
: I said the workers think it is. 
Hon Dr MICHAEL CULLEN 
: Ah he said the workers think it is—precisely! The Council of Trade Unions is not arguing—[ 
Interruption 
] But the member was inferring from that statement that therefore there was room for tax cuts. Mr English said that because people wrongly believe the surplus is too large we should therefore respond to their wrong belief and have a tax cut. 
Hon Bill English 
: That’s right. 
Hon Dr MICHAEL CULLEN 
: That is right—that is Mr English’s economic policy. That is why Mr Key has replaced him as the Opposition spokesperson on finance. What Treasury said what the Reserve Bank said and what the OECD said was not what National thinks they said. They all said that the surplus should be kept at its current level and that there should not be any further fiscal easing. Mr English’s problem—and for all that Southland country bumpkin thing he is actually a first-class honours English graduate from the University of Otago—is that he knows these things. He knows that in fact giving a tax cut is the same as having an increase in spending in terms of fiscal easing. It goes the same way. It both lowers the operating surplus and therefore increases and stimulates demand and therefore inflationary pressures. 
That is why if the National Party wants to give $2 billion of tax cuts from 1 April next year and it swallows its pride and reads the Treasury papers properly it will find out that Treasury says first its policy was all wrong—it was the wrong tax cuts—and second that to pay for them it has to cut spending by that amount. What Treasury actually said was that if we scrimp and save and take about $300 million off the growth in spending each year—and it cannot come up with any significant ways of doing it other than all the usual things such as to increase the age for superannuation and better target support for childcare that is more income testing etc.—then we will have little tax cuts year by year by year. But it has never argued that we can afford large tax cuts absent a large decrease in spending. That is the Treasury position; that is the OECD position. Indeed if we take Treasury at its face value and it cost $300 million a year we could afford $900 million which is less than half of the first round of what National is proposing for 2006. 
Mr English before the election was admitting privately up and down the country that the policy did not make sense. He was going to go quiet on it and hope National did not win because then he could become the leader after the election and reverse that silly policy. We know that Mr English on that front bench was the only one who actually understood that the policy did not make sense and that was why he dissociated himself from that policy in any number of private meetings up and down the country before the election. I got plenty of reports back about that. 
So all this part does is confirm the current tax rates. The challenge for members opposite is very simple: if they want to lower tax rates tell us where the corresponding spending cuts will come from. What will get hatcheted? Mr Borrows wants more police. Mr Williamson wants more money for roads. Mr Finlayson probably wants more judges or at least more money to be paid to judges. He certainly wants more QCs that is for sure and that ups their fees when we have to pay for them to represent the Crown. I have yet to hear from a single Opposition spokesperson who does not want more money spent in his or her area both geographically and in policy terms—and that member is the worst. 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 I suspect that history will not treat this Minister of Finance well. This former history lecturer argues that one of the reasons Government spending is clearly not burgeoning out of control is that the Government is running a big surplus. He argues continuously that quite clearly Government spending is not burgeoning out of control because we have got a big surplus so that cannot be. Then on the other hand he argues that in fact the Government does not have a big surplus. That is what he has been arguing just now. I say to the Minister that he actually needs to get his mind focused a little better around some of these economic issues. He has a capable mind and he should focus it a little better. 
As we debate Part 1 the question is whether we should now be confirming the current tax rates. I would like the Minister to answer a couple of questions. When he became Treasurer and Minister of Finance and raised the top tax rate to 39c which is reconfirmed today what percentage of taxpayers did he say would be affected by that and what percentage of taxpayers will pay that top tax rate next year once we confirm these tax rates for next year? I remember when the Government raised those tax rates back in early 2000. The Minister said that not many New Zealanders would be affected by this it would be only a very small percentage of New Zealand taxpayers. I do not know how many New Zealand taxpayers will be paying that top tax rate next year once we confirm them. The second question is whether it is correct that last year OECD data indicated that ordinary New Zealand workers—I think the OECD calls them production workers—faced the biggest increase in tax payments or the second biggest in the entire OECD. Is it possible that one of the reasons is that the average New Zealand production worker as the OECD calls them was at that $38000 threshold of annual income from where they go on to a higher tax rate? If that is the case why will this Minister not listen even to the Council of Trade Unions? Almost every economist other than the most left wing argues there should be some tax easing. Even the Council of Trade Unions argues that there should be some tax easing. Why does the Minister not bring forward as the Council of Trade Unions argues the inflation adjustments for those thresholds? Unless there is an inflation adjustment clearly increasing numbers of New Zealanders will be paying higher taxes. 
This is where I come back to my first point. How can the Government argue that its spending is prudent when it is collecting hugely increasing levels of taxation because of fiscal drag when there are huge increases in the number of New Zealanders paying higher tax rates when the Government is raking in massive increases in revenue and this Minister is presiding over a 40 percent increase in Government spending just since he has been Minister? This is the problem we have. We are confirming these tax rates locking in the massive increase in tax revenue that this Minister has been dragging in and consequently the Minister claims that the big fiscal surpluses as a result mean that he is not allowing Government spending to burgeon out of control. Treasury says that Government spending is out of control. The Reserve Bank has made it very clear that Government spending is a serious problem as it seeks to control inflation. 
The Minister does not seem to understand that the difference between Government spending and tax cuts is significant. Both obviously put inflationary pressure in the system but the difference is that all Government spending puts inflationary pressure into the system. Tax cuts mean that some money is saved. Some people save money and history shows us that. If Treasury is questioned on this matter if the Reserve Bank is questioned on this matter—as they were at the select committee the other day—they would confirm that tax cuts are less inflationary than Government spending because some tax cuts are saved by certain taxpayers. 
Hon Dr Michael Cullen 
: In New Zealand? 
Dr the Hon LOCKWOOD SMITH 
: Indeed they are. Some tax cuts are saved; all Government spending is spent. If we are concerned about interest rates and the future of this economy we should not be confirming these tax rates. 
Hon CLAYTON COSGROVE (Associate Minister of Finance) 
: 
 I want to respond briefly to that traditional vein-popping speech made by Dr Lockwood Smith. He talked about the Treasurer’s place in history as we address the setting of the tax rates. Well I just remind Dr Smith that he was one of the three who auditioned for the National Party spokespersonship on finance but did not make it then lost the foreign affairs spokesmanship and then Tim Groser came along and stole the ball gown from him and took trade. 
I say to him that these tax rates today set the platform for our policies which this Government won an election on. I note that Dr Smith did not answer the challenge that Dr Cullen put to him—where would the cuts have been made by a National Government? How many schools would it have closed and how many nurses would it have disposed of? During the election campaign members opposite went around the country saying that Labour had taken on all these policy wonks and consultants and that they would be gutting the public service yet they knew deep down—and as Dr Cullen pointed out Bill English knew this—that the vast majority of public servants under this Government are front line such as police and nurses and others in jobs that help the country’s infrastructure. So where would National have made the cuts? If it was not going to make cuts then is it today surrendering and backing off on its spending promises? 
Dr Smith talked about prudent fiscal management when it was Dr Smith’s party that went into an election promising to spend billions of dollars and based in large part on borrowing. Even the National candidate in my electorate would not admit it when confronted by John Key’s own words poll-driven and said all around the country that it was based on borrowing. No one in the National Party would admit it. So I ask the House and the people of New Zealand to reflect on the legacy of fiscal management and the integrity around Dr Smith’s statements. 
These tax rates build on Labour’s commitments and this Government unlike that mob opposite has a habit of keeping its promises and has a habit of delivering to the people when it fronts up to an election and beyond. So I ask people to judge. When we are talking about a place in history I will be proud to stand up as an Associate Minister of Finance alongside Dr Cullen and say that we delivered on what we said we would do and that we were fiscally prudent. I said about two Budgets ago when Bill English attacked the Labour Party—I am a little bit of a scholar of history—for being too tight I never thought in my wildest dreams I would hear Bill English a National Party front-bench spokesperson or anyone from the National Party attack a Labour Government for being too fiscally tight. Traditionally National tries to say that Labour blows the lot. 
Dr the Hon Lockwood Smith 
: Spending has been massive. 
Hon CLAYTON COSGROVE 
: I invite the member to have a look at his own party’s manifesto. I invite him to get to his feet again and tell us what he would cut out of his manifesto the manifesto that he took to the people of Waimakariri and others right around the country and said: “This is what we will do. This is how much we will spend on defence on prisons on education.” although they were a bit short on education. When people asked what National’s education policy was the candidate would stand and say: “We are for high standards.” and sit down. The candidate in my electorate used to do that regularly. She used to say: “We are for excellence in education.” and then sit down. She would never tell us where the dollars were coming from. In the last election National told us how much it would spend on defence prisons and education but then said it would gut the public service which in code meant gut teachers. National cannot have it both ways. It cannot say it wants excellence in education cut taxes— 
Darren Hughes 
: And nurses. 
Hon CLAYTON COSGROVE 
: —and nurses and then say it would borrow a heap of dough to pay for its election promises and then like some sort of road to Damascus experience say that the National Party that Dr Smith represents is somehow fiscally prudent. Give me a break! 
The problem with that arrogant crew opposite is that they think people are silly they think communities cannot see through them or add up. I recall one time when I was on the radio with National’s deputy leader and he made the inappropriate comment that New Zealanders do not understand Budgets or how the economy works or a set of Government books. I said to Mr Brownlee that Kiwis who can balance their own wage book their own housekeeping money and buy their groceries understand how the economy works. What an arrogant statement from the deputy leader. When we went around the country during the election campaign we knew that people understood that if we spend the lot and if we cut taxes and have less revenue we would have to cut Government services. That crew opposite could not con the people of New Zealand. 
JUDITH COLLINS (National—Clevedon) 
: 
 The member who has just resumed his seat would never let the truth get in the way of a good rant and that is what we have just had. One of the things that he said is that people should be able to keep their own money. That is what he said in his great ranting. He said that if people are clever enough to balance their own cheque books and their budgets they are clever enough to understand these economic issues. Well yes they are and I wish he would speak very carefully to the Minister in the chair the Hon Dr Cullen because— 
Darren Hughes 
: That’s why the people voted for Labour. 
JUDITH COLLINS 
: We hear the member for Otaki the man with the smallest majority in Parliament. Poor Mr Hughes! 
Mr Cosgrove should talk to the Minister of Finance about how clever people are and that they can balance their own budgets and should be able to keep their own money. That is what the National Party believes in. 
I know it might be different in Dr Cullen’s situation but a lot of New Zealanders have a huge amount of debt. Many people spend more than they earn and one of the problems is that they are borrowing and borrowing. It is all very well for the Reserve Bank to say that it will put up the interest rates. In fact there have been nine increases in the last 2 years. [ 
Interruption 
] If the member opposite would like to repeat that statement outside the House I would be very happy to sue him and I suggest he do exactly that. 
Darren Hughes 
: That touched a wee nerve. 
JUDITH COLLINS 
: No no. Some people actually have standards and I know that member does not. 
In terms of this hardship that New Zealanders are facing at the moment they are facing very high interest rates which this Government does not care about but encourages. It is all very well to say that that will stop them from borrowing more money. It does not help them with the debt they currently have. People were feeling quite good before because their interest rates were a bit lower but the values of their properties were going up. That was being driven by immigration. What we have at the moment are people who are very much hurting from the interest rate increases and they are hurting from the credit cards they have spent up on. I know it is something that the Prime Minister might not know about but most people are finding there are sales everywhere in the shops—they are not post-Christmas sales—because shopkeepers are starting to find it very hard. There is not enough cash to keep the economy going; there is not enough interest there. 
Dr Cullen’s excuse is that he will hold all the money for us and he will dish it out occasionally for little pet projects. He thinks he is the only one who is clever enough to use the money except it is not his money; it is the people’s money. Why can people not keep their own money? He says that National would cut all these services. There is a massive surplus that keeps on growing as he keeps on overtaxing people. What he should be thinking is that he should not be taking so much money from the pockets of hard-working New Zealanders and that maybe he should not be saying to people who are struggling on one income with a couple of kids to look after: “I Michael Cullen know best and I’ll dole out something to my favourite pet projects. And if you want your childcare I’ll say you can have 20 hours free childcare in a kindergarten.” The only trouble is the kindergarten teachers go on strike all the time because they do not trust this Government either. That is what they did. 
Of course what the Government does not want is for people to make their own choices about where their children go to school or whether they have childcare. The Government wants none of that. Of course we know why. This Government does not trust people. It tells everyone to be frightened and that although they might be good at being in charge of their own money they cannot trust themselves. Yet we have heard Mr Cosgrove today telling everyone how clever people are in their households. It is a shame that Mr Cullen cannot actually understand that people want their own money back. His reason for saying that is that he wants to dole it out. 
So we will have householders who at the moment are having to pay very high interest rates on their home loans and credit card debts and at the same time their teenage children will be getting absolutely interest-free money to spend pretty much as they want on anything they want. Now how is it going to be for the 40-year-olds and the 50-year-olds who have children in that age group who are trying to pay off their mortgages while their kids are living at home and getting interest-free money to have whatever tertiary education they want? 
R DOUG WOOLERTON (NZ First) 
: 
 I am not a student of history. I have not taught history. I do not even have a good mind for history and everybody knows that. But I will tell the House one thing. I was in the National Party for a number of years and it has gone to the pack since then. 
I was sitting here listening to the speeches from the National Party members and I was trying to think—students of history may be able to tell me—of the last time that National cut taxes. I was trying to think of how many National Governments in the past 50 years or whatever have cut taxes. I remember working as a party volunteer for many many years and I remember getting a really hard time many times—not just once but many times—when National put taxes up but I cannot remember when it put them down. 
New Zealand First is happy to support this tax amendment bill because like most other New Zealanders we looked at tax cuts and that sort of thing and we decided and have it as a policy that there should be tax cuts for exporters. We believe there should be incentives for people to export out of this country. The people who send our goods overseas should be encouraged and should have tax breaks so they can reinvest and be better able to do those things. But no no National members were not talking about that. They were talking about tax cuts across the board. It has not worked for President Bush I might tell members but nevertheless National members think that that is the way to go. 
The thing that we in New Zealand First could not get around and the thing that worried us most of all is the thing that has been spoken about by Labour Party members this afternoon and that is the question of where the money was going to come from. We believe we know where the money was going to come from. It was going to come very definitely from cuts in Government services—there is no question about that—and it was going to come from an area that we thought even National had learnt a lesson in and that is the business of asset sales. National was going to get back into the business of asset sales. They were going to get back into the business of selling off key assets in this country probably to the same people or associates of the same people they sold assets to some time before. I will not go down the list. I will not talk about all those things that were supposed to have worked more efficiently and better and provide better services under the free-enterprise system in the hands of private owners because we all know the history of Air New Zealand rail and all those sorts of things. 
Mr Clayton Cosgrove talked about borrowing for the tax cuts which was mooted at the recent election and National members say that that is not correct. But I can tell members though that they did not deny that very strenuously at the time. 
Hon Clayton Cosgrove 
: John Key is on the record as saying they will borrow. 
R DOUG WOOLERTON 
: He said they would borrow? Well speaking of John Key I can tell members that I was in this House last week when this bill was being debated—Mr Cosgrove will not believe this; he was not here probably—and John Key gave a big speech about the bill but did not mention tax cuts. He did not even mention tax cuts. National’s finance spokesperson did not mention tax cuts. He was in the Chamber ranting and raving going on about everything under the sun but he did not mention tax cuts which is a key policy. In fact I believe it is the only policy that was part of the National Party election campaign. The policy did not do it for them. 
Hon Clayton Cosgrove 
: Oh no—that is because he is on 7 percent. 
R DOUG WOOLERTON 
: Well it is an interesting team over here. Mr English is coming up. Dr Cullen with due respect to him is a smart man but he asked: “Why is Bill English saying these things?”. He knows. He is being cute. He knows that this is not about the tax bill. This is not about any of this. They were pre-election speeches. What election? We have just had one. It is a leadership election. That is what it is about and that is why we have the team over here. I am going to watch very carefully. 
KATHERINE RICH (National) 
: 
 As I rise to speak on the Taxation (Annual Rates and Urgent Measures) Bill I have to make a comment about the wonderful piece of nostalgia that that speech was. Mr Woolerton has given me the opportunity to have an appreciation of what the National Party must have been like 30 years ago when I was a child. 
Kiwis doing their pre-Christmas light reading who cast an eye over this bill will be extremely disappointed. Those hard-working Kiwis who are looking for a bit extra in their pockets before Christmas will be very disappointed. Part 1 confirms the tax rates as they stand. It confirms that there will be no additional relief for those Kiwis who have worked all year and made a huge difference to this country. They have got up every morning and done the right thing—they have gone to work paid their bills and paid for extras for their kids—but there is nothing extra in this bill for them. 
I want to talk about middle-income New Zealanders—who are somewhat amorphously called “middle New Zealand”. Those are the Kiwis who pay for everything. They pay for their medical bills. They pay a lot of education fees. They pay for everything. They do not get any handouts from Work and Income they do not get any extras and they are currently struggling to pay their bills. There is nothing in this bill for them. There is nothing for the hard-working electricians plumbers and gasfitters who have been coming to talk to our select committee week after week. [ 
Interruption 
] “The Grinch Who Stole Waimakariri” is sitting over there. He should be wanting to play Santa to some of his hard-working constituents. There is nothing in this bill for those Kiwis—nothing at all. 
I take issue once again with Mr Woolerton. I cannot believe that John Key would stand in this House speak to this bill and not mention tax cuts. That member has lived and breathed that policy for the last 6 months. 
That policy I think shows a fundamental difference between the parties. National believes that New Zealanders deserve to keep more of their own money in their pockets. Labour believes that it is best to take that money out of their pockets then to hand it back and it expects those who do get something back to be gracious for that support. We believe that New Zealanders can make up their minds about how they spend their money. We trust them to spend their money in the ways they see fit and we do not make any judgments about who deserves tax relief more than anybody else. One of the things we find with some of the tax plans put forward by Labour is that they are very selective indeed. There will be nothing for a person who happens to be a single worker without children. There will be nothing for a person who happens not to be a student with a student loan. 
One of the things we will find when the Government starts to dabble with the present tax system is there will end up being distortions. Already we are seeing some students saying they will take out a greater loan because it is free—they are actually financially motivated to do so. Labour does not think that will happen but there is not one single person who understands the way financial markets and financial incentives work who would say that students will not be encouraged to take out additional funding and invest it if they are able to do so. 
We have seen some interesting comments about inflation. I wonder why Dr Cullen thinks that if New Zealanders spend their own money it is inflationary but if the Government cranks up the amount it spends it is not inflationary. I would have thought that a dollar was a dollar no matter how it was spent. So that is an interesting selective view of economics. 
One of the things National believes in is a move towards flattening the tax rates. It is not just National that is saying that; Treasury is also saying it. We need to simplify the tax system we currently have yet every single idea put forward by Labour will just add a greater amount of complexity to the current tax rates and will not introduce any greater amount of simplicity at all and that will make administration costs a lot higher. I would like to hear Dr Cullen talk about what the cost will be of the implementation of the Working for Families package—a churning process that will take money from New Zealanders only to hand it back with the Government expecting them to be gracious for the donation. 
CHRISTOPHER FINLAYSON (National) 
: 
 The antiseptic language of Part 1 covers up and camouflages the fact that this is a foolish economic policy. But having heard the outstanding contribution made by my friend Ms Rich just a few seconds ago— 
Darren Hughes 
: Kiss of death for Katherine! 
CHRISTOPHER FINLAYSON 
: —I have decided that rather than yell and scream like the boy wonder from Otaki who is busily talking himself out of a seat— 
Darren Hughes 
: How did this guy do? He got beaten up in Mana. 
CHRISTOPHER FINLAYSON 
: I did not even seek the electorate vote. What is the definition of a marginal seat? It is a safe seat held by Darren Hughes. If we give him a little more time he will not even be here. So my advice to the member for Otaki is sit still wait for a few minutes and listen to my appeal to—I was going to say sweet reason but in the case of the Minister of Finance it would be malignant reason. 
The tax rates are a major reason why the economy is not as productive as it should be why opportunities are constantly being lost to New Zealand why 650 people per week move to Australia and why New Zealand is slipping down the rank of OECD nations. Dr Cullen is a historian. I suggest that he reads—I may even buy him a copy—a very good  
Economist 
 publication  
The World in 2006 
. The first time I bought such a publication was in 1988. Then New Zealand in terms of its standard of living was ahead of Spain and Ireland and was also miles ahead of Portugal. If we look at it today obviously we see we are behind Ireland very much behind Spain and just marginally ahead of Portugal. One of the key reasons for that is New Zealand’s mediocre economic performance and a major reason for that mediocrity is the tax rates. 
Tax is too high in this country. The rates in schedule 1 are impeding growth destroying self-reliance and forcing people to go overseas to Australia where the standard of living is 20 percent better than ours. The rates reflect the Government’s know-all approach to the governance of its citizens. It thinks it knows best so it can take our money and spend it for us. It is not surprising that the Prime Minister’s favourite model for the way to organise a country is the Scandinavian approach of bloated bureaucracy and high tax rates. 
But as Mr English said the Government should not just take our money from us. The same litany is repeated by Business New Zealand the Council of Trade Unions and Treasury the Minister’s own department. We are all singing the same song. Tax cuts are necessary to strengthen the economy and to provide the incentives required to keep New Zealanders at home. We will shortly debate the student loan bribe introduced at the 11th hour by the Labour Party. The detail of that proposal can be debated then but if we put money into tax cuts and divert it away from that suicidal scheme that would be one obvious example that would answer the Minister’s question as to how we in the National Party would fund tax cuts. 
What surprises me and the member for Otaki should listen very carefully to this is that even the Australian Labor Party favours tax cuts in the Australian economy. The only question is as to the size the scope and so on. [ 
Interruption 
] Why can the New Zealand Labour Party—[ 
Interruption 
] The member should be quiet. Why can the New Zealand Labour Party not listen to its labour cousins? The New Zealand Labour Party is stuck in the era of the first Labour Government whereas the Australian Labor Party has moved on. Labour should get off its high horse put aside its pathetic “soak the rich” attitude to life listen to what the independent commentators are saying and move towards tax cuts. I strongly advise the Minister that that is the correct approach and that even at this late hour in his ministerial career he can revise upward what the historians will say about him in 15 years’ time. Rather than being seen as the man who presided over the locust economy he could be seen as the man who at the 11th hour saw that his previous 6 years had been a foolhardy administration of the economy and decided he would do something about it. 
It is not just the National Party that says that. The Maori Party says the same thing. United Future secretly agrees which is why it is such a shame that it entered into that Faustian bargain with the Labour Party. ACT agrees and I am sure that New Zealand First secretly agrees. 
CRAIG FOSS (National—Tukituki) 
: 
 I am opposed and my party is opposed to this bill. I want to concentrate on a few points—why the bill is being dealt with under urgency the “wet” the Working for Families package student loans and party votes—and I have only 5 minutes! I also want to note who are supporting this bill and why they are doing so. 
Why does this bill require urgency? I ask why we are in urgency right now when more cash is being siphoned from hard-working businesses that are now taking an extra 7 days to pay their bills—45 days as opposed to 35½ days in the last quarter. There is a surplus that was charging towards $8 billion at last look. Why is the Government so keen to take a $2 billion hit on New Zealand’s balance sheet my balance sheet and my family’s balance sheet? The future of my country is about to take a hit of $2 billion because of the write-off of interest on student loans. This bill will be voted on under a party vote but I suggest that all those members opposite intending to vote for it should examine their consciences. How on earth could New Zealand First members United Future members and in particular the Maori Party members vote for this bill? How can they play politics with the future of New Zealand by racing through this bill? The funds are not required right now. 
I would like to touch on the “wet”—the wine equalisation tax—particularly as I represent the best wine-growing area in New Zealand. I want to express one point of caution with the wine equalisation tax—that is New Zealand is starting to accommodate Australian tax law. Of course this is a good measure for the winegrowers of New Zealand— 
The CHAIRPERSON (Hon Clem Simich) 
: The member will come to Part 1 please. 
CRAIG FOSS 
: I apologise Mr Chairperson. I will move on to the Working for Families package. 
The CHAIRPERSON (Hon Clem Simich) 
: No Part 1 only. 
CRAIG FOSS 
: Income tax rates—OK sure. Income tax rates need to be cut and they should be cut. Treasury has more than enough money to allow for the cuts. We have a crisis coming in New Zealand. Our exchange rate is fluctuating and it is about to plummet. Interest rates are going up every day. The official rates have gone up nine times in the last year. Mr Bollard recently suggested that we should have room for tax cuts because New Zealanders are essentially rational investors. Mr Cosgrove recently accused the National Party of treating taxpayers as silly. I suggest to Mr Cosgrove that they are rational investors because Mr Bollard is increasing interest rates to stop people from borrowing to help slow down the economy which has been pumped along by the public sector. As we have seen in the recent Reserve Bank policy announcement public expenditure public GDP growth is about to stay constant at about 5.5 percent for the next few years. Private growth is plummeting to negative in 2007-08. We need room for tax cuts. Locking New Zealand in at rates of 33 percent and 39 percent with the difference between the income rates for trusts and personal income tax and of course for corporate tax needs to be readdressed. 
I again suggest that members examine their consciences. Can they look taxpayers in the eye and say that this is good legislation and this is a good bill? Can they seriously look them in the eye? They should stop playing politics with New Zealand’s future and take only as much as they need to run the country in the best and most proficient way and let those who earn the funds in the first place look after their future and make their decisions. If they were brave enough and progressive enough to cut people’s taxes and leave extra money in their pockets they might be surprised to find that people start paying off their mortgages. 
 If these rates are stuck in stone and if this bill does go through New Zealand will become the land that time forgot because all the decent earners are whipping across to Australia. We have the dinosaurs: the “Cullenosaurus” taking taxes from all over the country a front bench full of “MPosauruses” and a party that promotes only “policyosauruses”—a party with a policy of tax structures tax rates and fiscal policies that are backward-looking not forward-looking and not investments in New Zealand’s future; they are only constant references to the past. If we do not restructure and if we do not examine and do what is fair with these tax rates New Zealand will be stuck at the very best right where it is right now and many other countries will race right past us. 
DARREN HUGHES (Junior Whip—Labour) 
: 
 I move  
That the question be now put 
. 
PAULA BENNETT (National) 
: 
 As someone who is a new member of Parliament I was initially astounded then quite simply appalled at the inside information on how democracy works for this Government. Forgive me my naivety but the way I understand it the House is in urgency this week so that the Government can quickly push through legislation that affects all New Zealanders’ lives. It is pushing it through so quickly that there is no time for public submissions so the public does not get to have a say in the direction that the country is heading. But I gather that that is the way that New Zealand works under a Labour - New Zealand First Government. It seems appalling that the Government works in that way. It is a busy time for everyone with Christmas looming and the Government chooses to try to push through a very flawed piece of legislation that turns earners of the average wage into beneficiaries and discriminates against all New Zealanders. 
It is about equality for all New Zealanders. It is about putting more money into the pockets of more New Zealanders. What the Government does not seem to understand is that it is the people’s money. These people are working hard in their jobs and deserve to have across-the-board tax cuts not this sort of flawed bill that gives something to minorities and individuals whom the Government deems to be worthy of its tax relief. 
Moana Mackey 
: For families. 
PAULA BENNETT 
: Well let us define families a little bit. Under a Labour Government families seem to be defined as those with dependent children and the Working for Families bill most certainly does that. What New Zealanders deserve though is across-the-board tax cuts. Under a National Government those earning between $38000 and $50000 would have got tax relief—down to 19 percent. Being taxed at 19 percent would have put more money back into the hands of everyone. 
It is about self-determination. Let New Zealanders decide how they want to spend their money. The arrogance and the hypocrisy of the Government in taking that money from them to spend it in the way that it deems best is purely that—arrogance. What do people expect from a Government? They expect an education system that supports them a health system that is available to them in their times of need and retirement income that sees them living the sort of life that people in New Zealand so deserve. Instead though the Government takes that money off them and does not utilise it properly. It does not identify that it is all New Zealanders who deserve to have a tax cut—not just some individuals. It seems to me that people deserve some understanding. It is about them and their working lives—working hard to have the means to get on and do what they determine to be best. Instead we have a Labour Government that decides that it knows what is best for everyone and just picks out individual people within the community whether they be students or those with dependent children whom it deems to be worthy of a tax cut. 
I oppose obviously this piece of legislation. I find it absolutely astonishing that we are here under urgency pushing through something that does not allow all New Zealanders to have a say in what exactly is happening. All New Zealanders deserve the right to say what happens to their money but it seems that instead we have a Government that puts things through under the reign of urgency and does not support everyone as it should. 
MOANA MACKEY (Labour) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 71 
New Zealand Labour 50; New Zealand First 7; Green Party 6; Maori Party 4; United Future 3; Progressive 1. 
Noes 50 
New Zealand National 48; ACT New Zealand 2. 
Motion agreed to. 
Part 2 Amendments to Income Tax Act 2004 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I just want briefly to thank all parties for their granting of leave for this part of the bill to be included. It deals with the equalisation of wine tax. Everyone of course realised that the Australian tax came as a bit of a shock to the New Zealand wine industry when it was announced in the Australian Budget some time ago. We have an agreement with the Australian Government and we need the legislative means in New Zealand to implement that agreement which is incorporated in this part. Again I thank members for their support on that matter. 
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 I thank the Minister for that acknowledgment which meant that he did not have to talk about the bit in this part that really matters which is in clause 5: the change in the thresholds and abatement regimes for the child tax credit. There is an interesting history to that. I am sure I cannot recall every twist and turn but clause 5 should really be called the “Michael Cullen Back-down Clause”. As the Committee will remember Dr Cullen announced the Working for Families package under a certain set of fiscal conditions and then he was forced at a later time—not long after the Budget actually in 2005—to announce a much more generous Working for Families package. The fiscal conditions had not changed dramatically or even significantly but the political conditions actually had. 
This is how it went. Dr Cullen announced in his 2005 Budget what he believed to be clearly an important and a large-scale family tax package. It was greeted with derision—there is really no other word for it—around the country. I think the  
Dominion Post  
headlined it— 
Darren Hughes 
: The original one? 
Hon BILL ENGLISH 
: —sorry it was not the original one; it was after the 2005 Budget—as “Is that it?”. I take the member’s correction; Working for Families was announced the year before that. But in 2005 when there was an expectation that many more people would benefit from it no one did. Instead they were given the “chewing gum” tax cut. So the provision in clause 5 of this bill came along after Dr Cullen had realised just how badly he had miscalculated in a political sense. 
I would like Dr Cullen to explain given that he had put so much emphasis on the surplus and the fiscal conditions how he could suddenly afford a much more generous family tax package not long after the Budget that he could not afford at the time of the Budget. What had changed? I think if Dr Cullen explained that we would see at least some of his fiscal argument for what it is. Dr Cullen has calculated that he can defend the surplus which enables him to have enough expenditure to keep the Labour Party’s various constituencies happy. He will probably be reluctant to say that he misjudged the Budget that the whole Labour caucus and the Prime Minister came down on him pretty hard and that in the run-up to the election he was therefore forced to increase the thresholds for abatement forced to increase the child tax credit as he has done here and just as important forced to drop the 30c abatement rate down to a 20c abatement rate. 
The simple reason for that is that a large chunk of middle New Zealand income earners with children were going to be faced with very substantial marginal tax rates that gave them the feeling—and I have to say the reality—that it was not worth trying to get ahead. That of course is one of the fundamental problems with regard to the way Dr Cullen thinks about these issues. He is a Minister of Finance who believes incentives do not matter and who believes that people do not really respond to them when it does not suit him. Well of course they do respond to incentives. But if the marginal tax rate is high and the net gain from an extra hour of work is minimal people will not go out and do that work. 
Dr Cullen may also like to explain to us just how he intends to maintain the complexity of the package Labour now has in place of which this tax credit is part. When one looks at the accommodation supplement the family tax system and the fast-growing complexity of support for children in early childhood education one sees it will be impossible for a Kiwi family to understand what benefit there is to it from doing an extra hour of work. There is now a plethora of different thresholds different abatement rates and accumulating marginal tax rates that are hard enough even for a bureaucrat to understand. A Ministry of Education bureaucrat will have real trouble understanding how the 20 hours’ free support— 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 Firstly on the last point could I tell the member that he is factually wrong. We have not introduced any new complexity in the system. The only structural change that has been introduced since 1999 which comes into force in April next year is to replace the child tax credit introduced by National with the in-work payment which is actually significantly simpler because for the vast majority of families there is no relationship to family size. Whereas under the child tax credit of course it was more whether families had three children or two children or one. Whether families have one two or three children makes no difference to the size of the in-work payments. It is a great deal simpler. 
The rest of the structure is exactly the same. The abatement levels the thresholds and the levels of payment are all that have changed. The levels of payment have been substantially increased the thresholds have been raised and the abatement rate has been lowered. That does not make it more complex at all. It means that more people are entitled to targeted tax assistance; it does not make the system more complex in that regard. 
The choice to pay all these payments universally as the member will know is vastly expensive. We could not possibly afford to pay a fully universal tax rebate for children at the level of the family support payments—that would run into some billions of dollars of additional expenditure. 
I come to the issue of why the change. I indicated immediately after the 2004 Budget when we announced the Working for Families package—in response to questions and in response to some issues raised particularly by United Future—that I would at the earliest opportunity address the issue of abatement rates and seek to lower the 30 percent single level of abatement rate that was being introduced as part of the Working for Families package. Again we simplified it from two thresholds to one single abatement rate and a single threshold. We actually simplified the system compared with the system that National had in place during the 1990s. The Pre-election Fiscal Update indicated a growth in revenue that had not been anticipated at Budget time. That was exactly the amount that was therefore translated into the two things in this legislation. 
 Firstly lifting the threshold from $27500 to $35000 means that for a lot of families on lower incomes there is no abatement at all. Secondly lowering the abatement rate from 30 percent to 20 percent is a significant reduction for quite a large number of families of the effective marginal tax rate—some 100000 families having a lower effective marginal tax rate. Of course 60000 families have a higher marginal tax rate because they now qualify for family support targeted assistance which they did not previously qualify for. 
This bill helps a lot of New Zealand families with children particularly low to middle income families. We make no apology for that at all. Fiscally the result has come out at almost the same as the Budget night fiscal forecast in terms of the operating surplus and the fiscal stimulus over the next 2 to 3 years. Beyond that of course it does represent some further fiscal loosening by about year 4 of the forecast period. 
It is a simplified package compared with the package we inherited. There is a single abatement rate a single threshold and for most families there is no longer a two-tier system with the in-work payment not related to size of family. 
Finally of course in terms of childcare the 20-hours-free policy will take a lot of people out of the targeted assistance. It will reduce for a large number of families the level of targeted assistance which they were previously dependent upon. Also as the member might be aware we changed the accommodation supplement rules so that there is not a doubling-up of the abatement regimes around some aspects of that. 
Does this work? Yes it does. Look at the result. We have the highest labour-force participation rate in the developed world—not just the lowest unemployment rate but the highest labour-force participation rate. Have people stopped working because of the 39c rate? No they have not. Has the economy stopped growing? No it has not. Have the participation rates gone up? Yes they have. Has growth been good? Yes it has. The National Party argument is just wrong on the facts. It is not what has happened. Did the National Party stop working after 1999 because the top tax rate went up? Yes it did. Did it affect those members’ incomes? No because they are on a salary. Did it affect the election outcome subsequently? Possibly because they lost both the subsequent elections. They in their own private little world may have demonstrated their own theory but the rest of New Zealand carried on working carried on earning carried on getting better off and feels very good about the results. 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 Part 2 which implements the Government’s expanded Working for Families package deserves real scrutiny. This expanded Working for Families package will bring 60000 more New Zealand families into a policy that I would call instead of Working for Families “Working for Government”. Let me explain why I would call this package “Working for Government”. 
Let us take the example of—once this package is implemented—people who are on the domestic purposes benefit but seeking to get off it through working more and more hours to earn more of their own keep and their families’ keep. Once a person on the domestic purposes benefit with three children earns a wage or salary to the tune of $10000 a year from there to $25000 a year he or she pays tax of 92.2c in the dollar on every extra $1 he or she earns. I will repeat that: 92.2c in the dollar. I see the Minister of Finance shaking his head. I am quoting Inland Revenue Department figures. I have the department’s official tables right here. The tax rate for a single adult with children who is moving off the domestic purposes benefit— 
Hon Dr Michael Cullen 
: That was the case when you were the Government. 
Dr the Hon LOCKWOOD SMITH 
: These are the latest figures provided by the Inland Revenue Department in the last couple of weeks. Once this package is fully implemented for income earned from $10000 to $25000 a woman with three children who is trying to earn a bit more money to help her family pays Dr Cullen 92.2c out of every $1. Why does he hate women with children so much? Why does he destroy their hope? Where is the hope? I see that little fellow over there Darren Hughes laughing. Does he understand how many extra hours of work that is for a woman on the minimum wage? How many extra hours of work a week will it take before she gets off that 92.2c tax rate? It will take 30 hours of extra work a week at $10 an hour. 
I want to know how the Minister justifies that. It is the same for a family trying to move off the unemployment benefit. In fact a woman who is trying to move off the domestic purposes benefit does not keep more than half what she earns until her salary is over $100000 a year. Then finally if that woman has three children her marginal tax rate comes down to 39c in the dollar. Until that point she pays 60c or 54c except for a wee window at $30000 of income when she pays a 22c marginal tax rate. Apart from that her marginal tax rate for income from $10000 onwards is 92.2 percent for a $15000 range of income. For 30 hours extra work a week at $10 an hour she keeps out of every extra dollar she earns 7.8c. 
Darren Hughes 
: Would the member answer a question? 
Dr the Hon LOCKWOOD SMITH 
: I want Darren Hughes to tell this Committee why Labour thinks a woman with three children two children or one child should when she is trying to earn more money for her family give him and Dr Cullen 92.2c out of every extra dollar she earns so that she keeps just 7.8c out of every dollar. 
Darren Hughes 
: Does the member need a tax cut? 
Dr the Hon LOCKWOOD SMITH 
: I want Darren Hughes to explain why if that woman is independent of the benefit system—not on a benefit but on a similar income range—and she earns an extra dollar she has to give Dr Cullen the lot. Someone who is independent of the benefit system under this Working for Families package—and I say “Working for Government”—gives him the lot. In fact 3500 more families will come into this regime now according to Dr Cullen’s officials. One thousand families are caught in it this year; once Working for Families is fully implemented 4600 families that are independent of the benefit system will find that for every extra dollar they earn in the income range from $10000 to $20000 they give Dr Cullen the lot. Their marginal tax rate will be 101.2 percent. If they earn another dollar they will give all of it to Dr Cullen. 
These are our lowest-income families. I do not blame Dr Cullen for having established this regime—actually it was established when he was in Government in the late-1980s—but it is time to do something about it and this “Working for Government” package should relieve those low-income people of that burden. 
R DOUG WOOLERTON (NZ First) 
: 
 Dr Lockwood Smith goes on about this topic ad nauseam in the Finance and Expenditure Committee. If a householder had tuned into the radio while Dr Smith was giving his speech he or she may well have wondered what was happening in the world and may be seeking out Dr Cullen and wanting to put him in jail for stealing money from families. But in fact if any rational person chose to check the situation out that person would find out that this has always been the case and that at the margins these sorts of things always happen in a taxation system because there has to be a cut-off point. At that cut-off point at the margin there is always a problem of this nature. Dr Lockwood Smith knows that but he does not tell people that. In saner moments in the Finance and Expenditure Committee he acknowledges that and furthermore he acknowledges that he does not know what to do about it either as I am sure people would realise. 
The fact of the matter is that New Zealand First supports this part of the bill. The next question is why we support it. We do so because it helps people at the lower end of the economic tier. 
Dr the Hon Lockwood Smith 
: How does paying 101.2 percent in tax help people? 
R DOUG WOOLERTON 
: It does help people. Dr the Hon Lockwood Smith knows that and he chooses not to say that which is not a good thing for him to do. There may be a technical issue but the question is whether the measure helps lower-income people. Yes it does. Would we prefer to see these things have some universality or should they be targeted? Of course everyone would love these things to have universality but they cannot. They must be targeted and that is where this problem comes in. 
We have a clash of ideologies here. To argue ad infinitum that this measure hurts families and that that is something that should not be gone into is simply not sustainable and I do not think the National Party should perpetuate that myth. 
DAVID BENNETT (National—Hamilton East) 
: 
 That was a very impressive speech from Lockwood Smith our member from Rodney who gave a very impressive outline. It was followed by a speech from a member of New Zealand First who just came in behind saying the Government spiel. It was quite interesting to see what New Zealand First was like during the campaign. It was quite a different story. Now that it is in Government it is backing Labour to the hilt. I say to Doug Woolerton that it is amazing how things have changed. 
I think taxation is the key thing because that was Dr Cullen’s biggest weakness during the election campaign. National was given a chance thanks to Dr Cullen’s Budget which just did not deliver on taxation. Everybody in the country had built up expectations that there would be tax cuts and they did not come. People out there wanted tax cuts. 
This policy sends three signals to people. First it sends the signal that for people on things like the unemployment benefit there is not much incentive to go to work. Secondly the policy shows that if people are on the Working for Families package there is no incentive to do overtime or anything like that because they will lose some of their hard-earned money. Thirdly the policy means that people will be reluctant to take promotions and pay rises and reluctant to get that education and do that training in order to get better incomes and jobs. Those are the wrong signals but they are the signals that this Government intends to send to hard-working New Zealanders through this legislation. 
So National members cannot support this bill. It sends the wrong signals and provides the wrong incentives to hard-working New Zealanders. 
PAULA BENNETT (National) 
: 
 I want to talk about the Working for Families part of the Taxation (Annual Rates and Urgent Measures) Bill and I admit to having some real problems with it. My predominant concern is that it is Labour’s interpretation of what it means to be a family. How does the New Zealand public feel about the description of “working families” that Labour has termed under this bill? 
The bill states that tax relief will be delivered to working families via enhancements to the Working for Families package. Labour has stated that it has targeted tax relief to 160000 working families. But they can be called families only if they have dependent children of a certain age and if they fit certain criteria. And yes those criteria are set by the Labour Government which defines what “family” means and decides who gets to have the targeted tax relief. In order to receive this benefit one needs to have dependent children. That is an insult to all working people without dependent children. What about young people who are trying to save in order to establish themselves financially before establishing a family? What about single people without children? What about those whose children have grown up and who are now saving for their retirement? All working New Zealanders deserve to have tax relief. 
Let us look at an example of how discriminatory this bill is. The example is that of an average company in Auckland where there is a small team of employees who do pretty much the same job and produce the same level of outputs and results for that company but who have very different personal circumstances. One employee has two children aged 7 and 10 and both she and her husband are on average incomes. One employee has been working for 30 years and has three adult children. That couple has had the good times and the struggles and is now at the stage of saving for retirement. The other employee is in a same-sex relationship has never had children and intends to never have children. Who is being discriminated against? This Government which purports to ensure that there is equality and spouts on about equality for all is blatantly discriminating against those who do not have dependent children. That is wrong. 
 This tax relief makes beneficiaries out of normal everyday working New Zealanders who are trying to get ahead and just want to be given a fair deal. It blatantly ignores those without dependent children who are working equally hard and just want to get ahead. We received many letters during the campaign period from people who supported our across-the-board tax cuts. Those people stated they would sit next to someone in their working environment who would be doing the same job with the same effort and through the Working for Families targeted tax relief each person would receive extremely different levels of income in his or her pocket. That is what targeted relief does. It discriminates against those without dependent children. It is not fair and not equal. Universal tax cuts across the board are the only way to support the New Zealand public and incentivise people to get ahead. 
This bitsy legislation which caters only to a minority of New Zealanders is simply not fair. The only way to deal with people fairly is by lowering taxes across the board. For example a tax rate of 19 percent for people who earn between $38000 and $50000 would incentivise those people to work harder and move ahead and would put more money into their pockets so that they could choose how to spend it. 
CRAIG FOSS (National—Tukituki) 
: 
 Thank you Mr Chairman for earlier guidance—I note that the wine equalisation tax provisions that I mentioned are in Part 2 as opposed to Part 1. 
First of all as a member of the Finance and Expenditure Committee I thank the committee for its work and note the almost unanimous support its members gave to the wine equalisation tax provisions. They put New Zealand growers into pretty much the same position as Australian growers—essentially they bring Australian tax law into New Zealand. I raise a caution there. I wonder whether in fact that is the thin edge of a wedge because the Australianisation of all things New Zealand—regulation law and statute—is something that I think Parliament needs to address in the coming years. 
One of the great things about the bill is that it transfers all risk foreign exchange cash flow and interest rates etc. to the Australian distributor or importer of New Zealand wine. Being the MP for one of New Zealand’s greatest wine-producing regions I am very happy to support that area and I am sure that the various ratepayers of Napier have done a good job. I also note that the change has come about after pressure from our wine industry. Politicians from the National Party forced a change. Well done I say. Sadly I note that New Zealand apples are still not allowed into Australia even though we have made just as much noise on that issue. 
I move to the Working for Families package. During the election campaign somebody said that the package was a form of tax relief. Well goodness gracious who does that tax relief come from? It comes from those who have imposed too much tax in the first instance. As I keep saying the Government should not take any more than it needs. Essentially the Working for Families package is a way of controlling the net wage of New Zealanders regardless of what their gross income is. There is no clearer evidence of that than the effect of some of the rebates which have a marginal tax rate of 102 percent. When a person earns $1 Dr Cullen receives $1.02. Why would one bother? Why would a person get out of bed to try to get ahead? I would like someone to tell me how that will affect aspirations to break out of the welfare cycle and dependency of so many families—particularly Maori families whose income in the Hawke’s Bay is $3000 per annum less than non-Maori households. How will a marginal tax rate of 102 percent help those families to break out? 
So many members get up in this Chamber and rave on about breaking the dependency cycle etc. etc. We should be brave be staunch and take a stand. Pita Sharples also noted that point the other day but he still reluctantly gave his party’s support to this bill. That is not good enough. It is a trade-off that sacrifices the future the incentives and the aspirations of so many New Zealanders for the sake of small-time political gain. That is why so many politicians have such a bad name. Who else supports this bill? I note that Mr Woolerton— 
Hon Member 
: As part of the Labour Party. 
CRAIG FOSS 
:—as part of the Government said in response to my good colleague Lockwood Smith’s speech that this has always been the case. Well yes. Is that a reason not to challenge it? Is that a reason not to address it? If you have always worn the same Y-fronts then get into some briefs. You must challenge the status quo. 
The CHAIRPERSON (H V Ross Robertson) 
: You must not bring the Chairperson into the debate. 
CRAIG FOSS 
: I apologise. I move back to Working for Families. An earlier speaker in relation to the Working for Families provisions supported this bill because that member said it would help people at the lower end. Why not then give those people a million bucks? This bill will not help the people at the lower end of the spectrum. It will help their net income in the short term but it will cap their future and lock them into exactly where they are right now. It sends a message to them not to bother to get out of bed—not to even try to break out of the cycle. I do not understand how so many members of this Parliament can give rhetoric about breaking out of the dependency cycle etc. and can go forth and vote for this bill. I really do not understand how they can look themselves in the eye. 
DARIEN FENTON (Labour) 
: 
 I move  
That the question be now put 
. 
CHRISTOPHER FINLAYSON (National) 
: 
 There are two issues in Part 2. I will deal briefly with the proposals in relation to the wine industry then turn my mind to the Working for Families package which is of course another example of economic insanity. First of all let us look at the Australian wine producer rebate. I basically endorse what my friend the member for Tukituki said. It is a scheme that is probably well overdue. New Zealand can be very proud of its wine industry. One can think back to the earliest days in for example Marlborough now represented by Mr King the MP for Kaikoura. From a very low base in 1973 the New Zealand wine industry has built up magnificently. The industry exports products to some of the finest destinations in the world and New Zealand can be very proud of what has been done. People like Peter Hubscher who did such a great job to build up Montana Wines and George Fistonich who built up Villa Maria are great New Zealanders who deserve all the support they can get. 
I endorse however the comments made by the member for Tukituki about the gradual integration of New Zealand into the Australian regulatory regime. I wonder whether that sort of thing should be done in an episodic way or whether we need to have a general national discussion about it. We have in this bill the integration of the New Zealand tax regime into the Australian tax regime and I wonder whether it is a foretaste of what is to come with other statutes such as for example the Securities Act and the Commerce Act. But that can wait for another debate. With that caveat I endorse what the member for Tukituki said. 
As for the Working for Families package much has been said before particularly by Ms Bennett. It is a system that destroys incentives and worse than that creates a super-class of beneficiaries that in the worst possible way creates middle-class welfare. I ask the Minister in the chair the Hon Pete Hodgson whether he is aware of any other country in the Western World where citizens can be earning over $100000 yet still be on some form of welfare. It is simply an absurd way to organise an economic system. That coupled with the student loan scheme and the holding of tax rates at the current level is really very distortionary and very harmful to the New Zealand economy. 
Ms Bennett raised a number of very important matters and I hope the Minister will comment on them—not simply address them as he does when purporting to answer questions but actually get down to the nitty-gritty because these are very important points. I would like him—[ 
Interruption 
] I would like the member for Otaki for once in his life to be quiet. I would also like the Minister— 
Hon Member 
: Who’s being very sensitive? 
CHRISTOPHER FINLAYSON 
: I am not a sensitive member; I am just a member who has some very cogent and compelling points to make and who wants the member for Otaki to do something in his life that he has probably never done before—that is to learn something. If the member for Dunedin South were here I would ask him to do something with one of his tennis balls. 
The essential point that I want the Minister to address is the unfairness of this scheme for single people. What is his answer to that unfairness? I do not want some kind of half-baked half-pie call that it is good for the country in general but I ask what it does for single people. What does it do for couples who do not have a child—perhaps because they cannot? What does it do for couples with one child? This is discriminatory legislation; it is unfair to large sections of New Zealanders—and for other New Zealanders it is legislation that enslaves them in middle-class welfare. So let us try to have an answer that is not parroting platitudes. 
Hon Damien O'Connor 
: You don’t believe that. 
CHRISTOPHER FINLAYSON 
: I do believe that the member for West Coast - Tasman is a sensible person from a sensible family and I am sure that he believes the same thing. The legislation destroys incentives and I would really like the Minister to address in a fairly rational way the points we have been raising because they are very important points. Unless we get it right we will inhibit growth in this country and cause fundamental damage to the New Zealand economy. 
So I appeal to the Labour Government to take a good hard look at this and try to get away from the point where it is Dr Cullen contra mundum because Dr Cullen knows best. The Government should answer the questions that Ms Bennett has asked through the Chair of the Minister look at the essential unfairness that happens when a superclass of beneficiaries is created that covers some sections of the community but not others and ask what it does for single people. The Government should answer that. 
DARREN HUGHES (Junior Whip—Labour) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 71 
New Zealand Labour 50; New Zealand First 7; Green Party 6; Maori Party 4; United Future 3; Progressive 1. 
Noes 50 
New Zealand National 48; ACT New Zealand 2. 
Motion agreed to. 
The question was put that the amendments set out on Supplementary Order Paper 7 in the name of the Hon Dr Michael Cullen to Part 2 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to 
Ayes 71 
New Zealand Labour 50; New Zealand First 7; Green Party 6; Maori Party 4; United Future 3; Progressive 1. 
Noes 50 
New Zealand National 48; ACT New Zealand 2. 
Amendments agreed to. 
A party vote was called for on the question  
That Part 2 as amended be agreed to. 
Ayes 71 
New Zealand Labour 50; New Zealand First 7; Green Party 6; Maori Party 4; United Future 3; Progressive 1. 
Noes 50 
New Zealand National 48; ACT New Zealand 2. 
Part 2 as amended agreed to. 
Part 3 Amendments to Student Loan Scheme Act 1992 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 I raise a point of order Mr Chairperson. Could I seek your clarification as to where the Committee has got to because as I heard your call—and I may have heard it incorrectly—Supplementary Order Paper 7 was just passed as part of Part 2 but according to the explanatory note most of the changes proposed by that Supplementary Order Paper concern Part 3. So I wonder whether your question concerned those parts of it relating to Part 2 or whether it concerned the entire Supplementary Order Paper 7. Forgive me if I misheard you but much of that Supplementary Order Paper appears according to the paper itself to relate to Part 3. 
The CHAIRPERSON (H V Ross Robertson) 
: As I understand it Dr Smith the Minister’s amendments on the Supplementary Order Paper apply to clause 4B of Part 2. In terms of Part 3 the Supplementary Order Paper applies to clause 12. 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 I raise a point of order Mr Chairperson. My point of order was to ask whether we had passed all of Supplementary Order Paper 7. I may have misheard; I thought it was the whole of Supplementary Order Paper 7 that we voted on just then. Most of the changes proposed by that Supplementary Order Paper concern Part 3 which we have not yet debated. 
The CHAIRPERSON (H V Ross Robertson) 
: My understanding Dr Smith is that we have actually passed only those amendments related to Part 2. Because Part 2 was the main part being debated the amendments voted on related to Part 2. 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 I raise a point of order Mr Chairperson. I thought I did hear your question but I do not recollect hearing you say those parts of Supplementary Order Paper 7 relating to Part 2. But I may have misheard. 
The CHAIRPERSON (H V Ross Robertson) 
: No you did not mishear. That is standard practice as to how it is actually done. 
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 I raise a point of order Mr Chairperson. Does that mean we will pass another question when we have debated Part 3 in order to pass the rest of those amendments? 
The CHAIRPERSON (H V Ross Robertson) 
: It does and it will relate purely to Part 3. 
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 This part of the bill relates to student loans. As Dr Cullen said to the vice-chancellors when he met them last week if it had not been for this promise they would have had a National Minister of Education sitting in front of them. He may well be right but of course the electoral success of the promise of interest-free student loans does not guarantee that it is sensible policy. 
In particular one issue we have struggled with is to understand the costings. The Minister in the chair Pete Hodgson being a key Cabinet Minister may be able to explain them to us. Can he explain what happened after the initial Treasury costing which was that the effect on the operating balance would be $302 million in 2008-09 with a rising profile after that? How does he reconcile that with the most recent costing published by Treasury which states that it will now cost $202 million with a flat profile over time? 
I am looking forward to the Minister’s explanation of that difference because as he will recall the costing of this policy was controversial. It was controversial because in the first place the Government would not release it and in the second place estimates made by private sector bankers were very large and the Government disputed them. Then in the last week of the election the Ombudsman forced the Government to release the costings—the $302 million I have referred to—and since the election there has been a greatly reduced costing of $202 million. I suspect that part of the difference is that the Government will have in the Pre-election Fiscal and Economic Update a large one-off write-off to the extent of a couple of billion dollars because the Government has to look at the fair value of the loans with interest as they are on the books and compare that value with the fair value of the loans without interest. The Government will no doubt take that hit upfront. I would be interested if the Minister could enlighten us as to whether that will be the case. 
That move is of course politically very attractive because the Government has now managed to make an expensive policy with very bad incentives look like a cheap policy with incentives that do not matter. That is hidden by the complexity of the accounting around how the Government handles a diminution in the valuation of the loan portfolio at the same time as it accounts for interest that it would not have received anyway. 
I shall use an example of some of the effects that just cannot be accounted for in the costings. The parents of a student going off to university under the existing regime with interest would have been looking to support that student at university. That support does not appear yet because the student has not gone to university yet. But because the loans now are interest-free what will happen is parents will tell their children who intend to study that they will not support them and that they must borrow the money instead. That is probably the effect that will have the single biggest impact on the cost of this policy. The Government denies any of those incentive effects but what sense does it make to parents to fund their children on overdraft interest rates when those children can fund themselves on a zero interest rate? It makes no sense. 
The Government defends the policy by saying that students will not be so smart as to borrow the money then put it on deposit somewhere because they will need it while they study. Actually many students will but probably the larger effect will be the substitution effect—that is substituting interest-free student loans for what would otherwise be private support. I would like the Minister to explain why the Government thinks none of that matters because of course it does. 
So those are some questions for the Minister. I want him to explain the difference in the two costings that Treasury gave us because there is a difference of 35 percent—$300 million cut down to $200 million—and to explain just how the Government will account for the impact of the policy on the operating balance. 
KATHERINE RICH (National) 
: 
 As I follow on from my learned colleague Bill English I think he raised a very important point. It seems that Labour does not understand or does not want to believe that some New Zealanders will change their behaviour as a result of this policy. Labour seems to believe that students and their parents will not look at the changes in this scheme and that students will not take out more money now that the loans are to become totally interest-free. 
I say to the Minister in the chair the Hon Pete Hodgson that parents with half a brain will now tell their children who are approaching university age to take out the loans they have available to them to the maximum and that if they are able to put whatever funding they have into an interest-bearing account they will find themselves better off. Already I have spoken to some students who have worked out that if they do that and put their money into either a bank account or some kind of investment be it their own student flat or another kind of investment that will earn them an income they will be better off at the end of their degrees and in the years to come. I think it is quite naive to suggest that Kiwis will not change their behaviour. Of course they will. Where money is free and there is no cost associated with taking out a loan anybody who has other financial loans will maximise the amount they have interest-free and use that to offset other loans that they have elsewhere or will put money into an account where they can earn income. That is just common sense. It is less than economics 101; kids learn that sort of thing in maths at secondary school. 
One of the things that does concern me though is the sort of incentive system that this policy continues to put in place in this country. It tells those parents who want to assist their own kids that they will be worse off and that there is now a disincentive to do that. As Bill English has pointed out we will now see some of that private support crowded out by the Government’s becoming involved and saying that it knows best and that this system is being put in place to support students. 
It was interesting to hear Dr Cullen talk about tax bribes. Well what is this policy? It was the greatest bribe of the last election. Although Labour pretended that the costings had been done it did not have a blind clue as to what the actual cost of this policy would be. The Prime Minister stood in the Chamber and said that Treasury had not done a costing because it did not cost Labour Party policy. We found out that that was not correct; Treasury had done the maths on it and the maths did not look great. If Labour was not trying to be deceitful why did it take the Ombudsman’s decision that it was in the public interest for the information to be released and that it had to be released prior to the election before it was released and we could see the workings had been done? Once those workings were released it became quite clear that the political rhetoric leading up to the election and the workings on the policy that had been done showed quite different stories. 
The interest-free student loan policy was quite clearly one of the biggest election bribes. In this case—sadly—it worked for Labour but I think what has been done is a great disservice for this country. Not only will we crowd out private family support for students as they undertake their tertiary study but we will now move to a situation whereby we actually force money on to young people and make them more indebted at the very beginning of their lives. One of the things that strikes me when I talk to students who have left university and gone on to work is that they did not understand what they were letting themselves in for when they cranked up their loans to buy a myriad of things. Money particularly when it is interest-free is easy to take on and it is not until some years later that students fully understand that ultimately the money does have to be paid back. We will see a huge increase in the number of loans taken out by students and a huge decrease in repayments. 
R DOUG WOOLERTON (NZ First) 
: 
 On the previous part the member Katherine Rich was accusing me of going back 30 years into the dim past of the National Party and all the rest of it—years that National Party members would sooner forget I might tell people—but I am going to do it again. I remember saying to one Dr the Hon Lockwood Smith when he brought in the student loan scheme that it would be bad for the young people of New Zealand because it would get them into the business of borrowing money for education and we believed and all good sensible people of New Zealand believed they should work for it and the parts they did not work for should be put up by the State. Some people still hold to that policy. New Zealand First believes there should be universality when it comes to living allowances. We have moved as far as that. But we accept that the market should reign when it comes to what courses students take and we accept that that will largely be judged by the person on the fact that they will earn more income when they leave university. 
However we had a situation at the last election and I agree with Dr Cullen: I believe that this policy won the Labour Party the election. But National members do not say too much about the fact that the only thing that happened was they were trumped on this. They said: “We are going to lower the tax on student loans and we are wonderful people.” They said nothing about how they could afford it on top of tax cuts. They said nothing about any of that. On top of tax cuts for everybody they promised a reduction in the interest on student loans. 
Hon Damien O'Connor 
: They weren’t going to do it. 
R DOUG WOOLERTON 
: Mr Damien O’Connor is close to the action and he tells me they were not going to do it. I suspect he is probably right. I was taking the National Party at face value which I probably should learn not to do. I am naive and innocent. Even as I approach my more interesting years I am still naive. 
The Labour Party came in and said there would be no interest on student loans and it won the election. Now we have a situation where National is saying that the world is going to be turned on its head because students are actually going to do what the Government said they should do and borrow for their education. Duh! I think Labour probably understands that. 
But it is a matter of wanting better education for our young people—and we all in this Chamber want that I hope. We want a better-educated workforce and we want New Zealand to be the most enlightened best-educated country in the world. New Zealand First is supporting the bill which incorporates this change to the regime of taxing students because we uphold the principle of wanting better education for everybody in this country. We would do it in a slightly different way. We would do it in a different way from what the National Party proposed but we would not be dogs in the manger and say that it should not happen because we want our young people to succeed. We want a country where we can hold our heads up high and say: “We are the best in the world.” I remember my colleague Peter Brown who is sitting beside me at this point saying to me that he came to this country in the 1960s because he believed it to be an enlightened country. He believed that his children could be brought up better here have a better future and all of those things. He supports this bill because it is fulfilling those things that he came to this country for and New Zealand First is proud to support him in that. 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 On listening this afternoon to Mr Woolerton the former president of New Zealand First one realises how interwoven New Zealand First has become in the Clark-Peters Labour Government. New Zealand First is now totally in the pocket of Labour and I guess that is kind of sad for New Zealand in some ways. But Mr Woolerton was quite right. He said one thing I do agree with: I did design the student loan scheme as Minister of Education in 1991. It achieved a great deal for New Zealand by taking it from the bottom of the OECD in terms of tertiary participation to the top. In just 6 years we went from the bottom to the top. That was a very carefully designed student loan scheme with appropriate write-off provisions to make sure that no loan could escalate. 
We are now seeing that carefully designed student loan scheme being destroyed in an election promise that I have to say was the most breathtaking I have seen in all my time in this place. It was breathtaking for several reasons. One is that when Labour made that election bribe it had no idea of how much it would cost. It had no idea of the impact on the Crown balance sheet. 
Darren Hughes 
: That’s wrong. 
Dr the Hon LOCKWOOD SMITH 
: Darren Hughes says that that is wrong. On 23 November I asked the officials at the select committee for the full costs to the balance sheet of the policies in this bill. Their answer was that they did not know. That was from Treasury and Inland Revenue Department officials on 23 November well after the election. I asked the officials the full costs to the balance sheet of the polices in this bill. Their answer was that they did not know that. 
Darren Hughes 
: It must be a mistake in the member’s notes. 
Dr the Hon LOCKWOOD SMITH 
: They told us they did not know so I say to Mr Hughes he should not mislead this Committee by claiming that Labour knew the cost of this policy prior to the election. 
Darren Hughes should remember that Helen Clark the Prime Minister told Parliament that Treasury had not costed the policy. She sat in the seat in front of the junior Government whip and told this Parliament a lie. 
Darren Hughes 
: You can’t say that. 
Dr the Hon LOCKWOOD SMITH 
: Well what was it? 
The CHAIRPERSON (H V Ross Robertson) 
: The member has been in Parliament for a long time. He knows that he cannot use the word he used. I ask him to withdraw and apologise. 
Dr the Hon LOCKWOOD SMITH 
: I withdraw and apologise. I am not sure how to describe what the Prime Minister said. She told this Parliament that Treasury had not costed it point-blank. That proved not to be correct because we revealed only a couple of weeks later that Treasury had costed it. Mind you when we consider she is someone who signed paintings that she did not paint someone who knifed a former police commissioner in the back to the media and denied it and someone who claimed she had no idea how fast she was being driven across half of the South Island I guess we should not be surprised at that. The integrity level of the leader of the Labour Party New Zealand’s Prime Minister is such that she would tell this Parliament that Treasury had not costed Part 3 when Treasury had costed it and there was no way Helen Clark could not have known that. She must have known that when she stood up from her seat in front of Darren Hughes and told this Parliament point-blank that Treasury had not costed it when Treasury had. We should not be surprised that a Labour Party led by someone with as little integrity as Helen Clark has members like David Benson-Pope who has no integrity whatsoever. 
I want to come back to Part 3 because this part was breathtaking for these reasons. Not only does it involve a massive hit to the Crown balance sheet but it is also a massive con job. Students who voted for Labour as a consequence of this policy thought they would get cash in their hands. In fact students will see nothing out of this provision until through the taxation system they have paid back their entire student loan and then through the taxation system they will not have to pay any interest. Students were conned. They did not realise that. When I have talked to students since the election they have asked me what I meant when I explained that. They were conned. There has been a massive hit to the Crown balance sheet and Labour has conned thousands of students. 
DARREN HUGHES (Labour—Otaki) 
: 
 Unless one is a student and a scholar of ancient political history one would not know that that was Dr the Hon Lockwood Smith. From the way he was describing Part 3 he had never been in a Government before. He used words like “breathtaking promise” a “con job” and said that people had to remember what had been promised. 
 I wondered whether that could be the same man who went up and down New Zealand to different university campuses signing pledges promising that if student fees were not abolished he would resign. “Honest Lockwood Smith” went up and down the country a decade and a half ago saying that. We have the documentation which has been tabled in the Parliament of New Zealand showing that Lockwood Smith went around the place— 
Dr the Hon Lockwood Smith 
: I raise a point of order Mr Chairperson. I am not allowed to say that member is lying. I have through previous points of order and a personal explanation explained to people like Darren Hughes who do not know the facts and the truth that the only pledges I signed promised to abolish Labour’s Government-imposed $1250 student fee. I never ever signed a pledge that there would be no fees. 
The CHAIRPERSON (H V Ross Robertson) 
: That is a debating point and the member can take a call. 
Dr the Hon Lockwood Smith 
: I raise a point of order Mr Chairperson. When a member makes a personal explanation as I have in the past about that issue it is no longer a debating point. The Committee must take my word for it and I can prove it because I have copies of those pledges. It is not a debating point. I would appreciate your correcting that ruling. 
The CHAIRPERSON (H V Ross Robertson) 
: The member has taken exception under Standing Order 116 “Personal reflections”. The member will withdraw and apologise. 
DARREN HUGHES 
: I am happy to withdraw. What we now know is that Lockwood Smith went around the country talking to angry crowds of students saying: “I will abolish Labour’s tertiary fee of $1250. That’s the good news; the bad news is that I’ve got a $3000 Tory fee on the way. I’m ‘Honest Lockwood Smith’. I’ll resign unless I can make sure your fees are more than $1200.” What a farce! 
The last National Party member who should have been allowed on his feet in this debate this afternoon is a relic from the 1990s like Lockwood Smith. Most Ministers of Education in New Zealand visit campuses; that is part of the job. That man when he arrives on a campus has police protection. When he leaves he does not leave by the door—oh no he is far too important. He leaves by the bathroom window! So loved were his policies so respected was his integrity so visionary was his approach to the student loan scheme that he left via a toilet window. So we will not hear any more from Lockwood Smith. I want the National Party to continue to— 
Dr the Hon Lockwood Smith 
: I raise a point of order Mr Chairperson. That junior Labour member should know that a member cannot tell lies to this Parliament. What he is telling the Parliament are simply lies. I have never ever left a university campus by the bathroom window or any other window. 
The CHAIRPERSON (H V Ross Robertson) 
: Can I just point the member—[ 
Interruption 
] Members know that when a point of order is on the floor there is to be no sound whatsoever. That is disorderly conduct. I refer the member to Speaker’s ruling 127/4: “As long as the member who made a personal statement remains a member of the House the member’s personal explanation may not be debated or otherwise challenged even where it was given in a previous Parliament.”—Mr Speaker Hunt 2000. 
DARREN HUGHES 
: I raise a point of order Mr Chairperson. Does that mean that the member has made a personal explanation about what type of window he did climb out when he was being harassed? 
The CHAIRPERSON (H V Ross Robertson) 
: No— 
DARREN HUGHES 
: I am seeking clarification. Footage on the television news showed that former Minister of Education having to climb out a window away from students whom he could not explain his policies to. [ 
Interruption 
] 
The CHAIRPERSON (H V Ross Robertson) 
: The member will not trifle with the Chair. 
DARREN HUGHES 
: This policy is a fantastic policy. Part 3 is good Labour policy and I am delighted the National Party keeps opposing it. I was very interested to hear Katherine Rich confess that she thought the Labour Party might have clinched the election on the basis of that policy. The bitterness in her voice was clear because as one of the National Party’s centrists she knows that this is a good policy. The problem for National members is that they are obsessed about the transitional provisions obsessed about what might happen between now and April. The point they keep missing is that all that this policy says is that students have to pay back what they borrow from the Crown. Rather than paying that back with interest we are asking students simply to pay back their student loans—the amount they borrowed. 
But National members are saying that students will refuse to pay it back. What they do not know because so few of them had student loans is that people repay the loan via the Inland Revenue Department system through PAYE whereby 10 percent of every dollar earned over a certain amount is deducted from source. There is no choice in this; it is part of one’s taxation requirements. Therefore when people apply for things like a mortgage hire purchase or to buy a new car and they have to list all their debts they have to include their student loan. So that has an impact on their ability to borrow in the market place which supposedly is an area the National Party knows a lot about. So it is in a student’s interest to retire that debt as quickly as possible and the fastest way to do that is to pay back only the amount borrowed. 
This is good sensible Labour policy and I hope National keeps opposing it. National is going down the drain. 
CHRISTOPHER FINLAYSON (National) 
: 
 What a juvenile contribution from the member for Otaki! Mind you when he reaches puberty he will be devastating! 
I want to concentrate rather than on personalities on the issues. Part 3 introduces a scheme that is unworkable and unprincipled. It is very much unprincipled. It was not carefully thought out as Mr English said nor was it reached as a result of policy discussion within the Labour Party nor was it costed by reputable economists. It was a rushed response to poll results indicating the election was slipping away from the Labour Party. It was a hastily devised bribe whose principal architect the member for Hutt South may have some skills when it comes to 5-minute horizons but cannot think long term. And one does not have to be someone who thinks only medium term to know that before the 3-year period is out this bill will be back before the House for further amendments. It was the worst sort of policy devised in the heat of the campaign and Treasury would say “amen” to that. 
The second point—and I would really like the Minister in the chair the member for Dunedin North to wake from his slumber and answer this hypothetical example—is that this policy discriminates against tradespeople. What about the tradesman who wants to set up business as say a plumber or an electrician? He or she has to go to the bank to obtain appropriate loan finance and has to pay that loan back with interest. That is quite frankly as it should be. Any person setting out to build a business who takes out a loan in the expectation that over 20 or 30 years he or she is going to make a lot of money should pay back that loan with interest at commercial terms. Compare that with a student—say one in the position of the member for Otaki—who leaves secondary school at the age of 17 or 18 and not knowing what he or she wants to do goes to university to study some useless subject like peace studies the sort of subject that equips one well for a career in the Labour Party; that person can obtain an interest-free loan study that politically correct rubbish—which my friend the member for North Shore is going to dispose of—then drift off into the workforce. Of the two hypotheticals I have mentioned who actually contributes to the New Zealand economy? Obviously it is the electrician or the plumber. These are the people who grow the economy these are the people who provide useful services but there is nothing for them in this scheme. 
Quite apart from discriminating against tradespeople setting out to build their businesses this legislation also discriminates against hard-working families who send their children to universities. The parents are the ones who should be obtaining tax relief. They are the ones who have nurtured their children raised them and got them to the point where they can go to university and provided that they study the right subjects get ahead. 
The third point I wish to make is that the legislation is unreal. The Deputy Prime Minister said that one aim of the policy was to encourage skilled New Zealanders to invest their skills in the New Zealand economy but it will not achieve that end. New Zealanders will invariably travel overseas for their OE and very little can be done about that and that has been the case for years. One hopes that young people will come back to New Zealand to invest in their country but that is no reason to give them interest-free loans. They will come back if they know they can get ahead in this country and that means our ensuring that for example taxes are not as punitive as they are now. 
I remember well the legal services market having practised in the law for 25 years; the pattern was that lawyers would go overseas spend a few years in a large law firm and come back to New Zealand. The reality is that because of the state of the New Zealand economy because of punitive taxation they now go overseas at the commencement of their career to Australia more likely than not or to England and they never come home. Our not getting the tax rates right will keep New Zealand students overseas. One need mention only the legal services market but it applies to medical students accountants engineers and other graduates of our universities. So students will not necessarily be attracted by this scheme to stay in New Zealand. They will be attracted back to New Zealand only if—[ 
Interruption 
] I do wish the member for Otaki would listen. They will come back to New Zealand only if they can contribute to an economy that has low taxes. So my advice to the member for Otaki is to vote against this part because New Zealanders will not come back if they are going to be saddled with this insane scheme. 
MOANA MACKEY (Labour) 
: 
 I am very happy to rise to support Part 3 which deals with the amendments to the student loan scheme. Are not all the arguments we have heard very familiar? As I sit here listening to National Party members rise to their feet and say that this measure will mean doom and gloom for the country that young people will be ripping off Treasury to the tune of billions and billions of dollars and that it will send us right down the gurgler I am thinking: where have I heard all this before? I heard all this before when in 1999 Labour said it would abolish interest on student loans while students were studying. We heard all this before and did students act like the National Party members would? Did parents tell their children to go out and rort the scheme like all the National Party members would tell their children? No they did not. It is nice to know that the National members have so little faith in the future of this country that they think that whenever students see an opportunity to take out money to pay for their education their instant thoughts will be about how they can rort this scheme. 
I do not think that National members know anything about the incentives of paying back a student loan. I wonder how many in the National Party currently have a student loan or have had a loan of say $20000 or $25000 that they have had to pay back. I wonder how many of them have found—as I did and as my colleague Darren Hughes does as we both still have student loans although my student loan will be gone by the time this policy comes into place—that the biggest disincentive to repaying a student loan was the interest charged on it. When I left university my student loan was much much higher than the amount I had borrowed because of the interest while I was studying. Dr Smith was very very proud of that policy—so proud that he did not turn up to our university to talk to students about it when he was invited to. 
Darren Hughes 
: The window wasn’t big enough. 
MOANA MACKEY 
: Exactly. This measure in this bill provides a real incentive because the biggest incentive to getting rid of one’s student loan and to be able to plan for the future buy a home and have a family is to see a light at the end of the tunnel for a debt that one has carried on one’s shoulders for a long time. 
Students do not have any choice about paying their loans back. It is not as though they can suddenly finish university get a job and think: “Well I’m not being charged any interest so I’m not going to pay anything back.” They are compulsorily paying back at the rate of 10c in every dollar they earn. So since I started working in 1996 when I left university I have been paying 10c more in every dollar than every other member in this House and I can tell members that it is a huge huge incentive to pay off my student loan and see that go. 
I do not think we will see the incredible rort that the National Party members think we will see. Of course they will go out there and try to convince students to rort it. They will be on the campuses with their National Party and their “Young Nationals—Blumsky’s Team” T-shirts and saying: “Come on rort it rort it rort it.” But I do not think students will do that because when I went around campuses during the campaign students were actually really grateful for this policy. They were sick of politicians like Dr the Hon Lockwood Smith who went around signing pledges that he was going to get rid of a $1200 tertiary tuition fee then got into Government and said: “Well I did but I replaced it with a $3000 one.” Students are sick of those kinds of politicians and sick of being the political football that they have been for a very long time. 
We need to do something bold with student debt. Student debt is a huge problem. We all know that. We can all pretend that it is not a problem. We can all pretend that grandparents and parents are not worried or concerned about their children’s student debt. Parents will still be worried when their children graduate from university with a $20000 student loan even though it is interest-free. They will still be concerned about the fact that their son or their daughter owes $20000 and will have to put on hold a lot of decisions they would otherwise have been able to make a lot more easily if they did not have a debt to repay first. 
We would not even be having this huge debate if the National Party were not incredibly worried about this policy. National members know how much this appeals to students parents and grandparents who have seen the real effects and to families who have not been able to afford to put their kids through university. They have seen the effects—the way it drives people overseas the way they have not made the repayments while they are over there and the fact that they have decided not to come back. Members should go overseas and ask anybody over there with a student loan: “What is the No. 1 issue you consider when you consider returning to New Zealand?”. 
Hon Members 
: Tax! 
MOANA MACKEY 
: Come on! Oh please! The No. 1 issue is student loans every single time. This is why National members are still sitting on the Opposition benches—they have never understood what matters to the young people of this country—and they will continue to stay there as long as they continue to be as arrogant as they have been about this policy. 
MARK BLUMSKY (National) 
: 
 It is wonderful is it not that so many Kiwis start up small businesses and luckily stay in them because they become the lifeblood of New Zealand. People start on the road to building their futures as a part of the university of life—the “university of small business’’ trying to make some money. A guy for example goes to a bank and says he is about to start a small business and he asks for a loan. The bank manager says: “Of course you can have a loan. I need your house. I’d like your house as collateral for the loan.” Well ouch that hurts but nevertheless the man says: “OK that’s fine. But if I’m giving you my house Mr Bank Manager can I please have that loan interest-free?”. The bank manager says: “You’ve got to be joking! Do you think I’m stupid? That is totally irresponsible because that is not the way the big world operates. There is no such thing as free money Mr Small-businessman because you’ll go broke.” 
So let us look at Part 3 of this bill. What signals are we sending these students about the way the big wide world operates? Dr Cullen wants to give students in New Zealand free money. There is no such thing as free money. Students need to learn that they do not get it easy in the big wide world. They will not get things like interest-free loans. Dr Cullen is misguided on this one. We can help these students by letting them learn the real lessons of life. Dr Cullen should tell students that if they want to pay their loans off they should go and get a part-time job and he should change the tax levels on the money they will earn in that part-time job. He should make it so that they are not paying secondary tax of 33 percent. Let us have a rate of 19 percent as John Key indicated quite recently. 
Why I ask the Minister do we not teach students that there is no such thing as free money and that there is in fact a big upside to life if they do in fact pull their finger if they have aspiration and ambition? It is not fair I say to Dr Cullen that a very large section of our community a group called small-business owners is getting whacked around the head by his tax burden by his compliance costs and by high interest charges when it is those people those small-business owners who pay him the very high taxes he will then give away to another group called students who will receive a very unfair privilege from his very big-spending Government in the form of an interest-free loan. 
I want to know what the Minister will say to those small-business owners who go to the “university of small business” trying to make some money. What will he say about Part 3 when he goes to those small businesses and says: “I’ve given free money to students but you will have to continue to pay those very very high taxes.”? Those small businesses are the lifeblood of New Zealand but Dr Cullen will cripple them in order to give students free money. 
ERIC ROY (National—Invercargill) 
: 
 For the benefit of those who may be just now tuning in to this debate on their radios I point out that we are debating the Taxation (Annual Rates and Urgent Measures) Bill. We are now on Part 3 which relates to the amendments to the student loan scheme to give interest-free loans to students. 
I am hugely concerned about the provisions of this part. I have had those concerns increased by listening to Moana Mackey say that no one is massaging this change to his or her own advantage. Let me just say to her that I have a number of examples but I have enough time to give only one. When this proposal came out the principal of a high school who I do not think would have ever voted National in his life said that as soon as the interest rates came off while students were studying he gave one very clear instruction to his kids. He had three kids in tertiary education and he said they should draw down every single dollar that they could draw down. He said that his oldest daughter who was finishing a double degree after 5 years had a student debt of $71000 but she had an investment account with $41000 in it. So for the Government to say that no one is making use of interest-free money shows its limitations. 
If Government members wish to cast aspersions upon the intellect or thought processes of National members then perhaps it is time for them to reflect entirely upon whether they have understood the complexities of this situation. For example Dr Bollard is hugely concerned about New Zealanders borrowing money so what does he do? He has put up interest rates nine times in a row as a disincentive to borrowing. But suddenly we have interest rates being lifted off student loans. What will happen? In one part of the economy interest rates are going up and up as a disincentive to borrowing but in another part students will have to pay absolutely no interest. What will they do? It is absolutely clear that this measure will increase borrowing. Without a doubt that reaction will follow. I suggest that any students who do not participate in that neither deserve nor are they likely to get their qualifications because of their limitations in understanding the first principle of borrowing. There is absolutely no incentive for any student whatsoever to get involved in repaying his or her loan any faster than the prescription for paying the minimal amount extracted through tax payments. 
I have some understanding of the implications of tertiary education costs. At one stage my wife and I had four kids all drawing down on student loans in the same year. Our kids have now pretty much paid back all of their student loans because they got in rolled up their sleeves and did that. The repercussions from doing that now that they are in their 20s are that they own their own homes. They know about borrowing and the responsibilities of paying back loans. It is a gross naivety on the part of the Government to presume that the impact of this measure will not increase student debt. It will have an impact on the responsibility for clearing that debt because without interest no disincentive whatsoever is applied against borrowing. 
I am appalled that we are doing this to an economy that needs to instil responsibility and create an environment where there is some equity between students and the rest of the community. Mr Bollard in order to create a disincentive against borrowing is continuing to increase interest rates. What conclusion do we draw from that? Does the Government not accept or believe that Mr Bollard’s actions are the appropriate ones to stop us from borrowing? Does it not accept that that reaction has come from us over-borrowing as a country and will that not happen to students? Clearly it will. The disciplines of having a loan understanding the responsibilities of a loan— 
Simon Power 
: It’s not easy. 
ERIC ROY 
: Exactly; it is not easy. But that discipline is completely gone now. National absolutely believes that education— 
Hon MARK GOSCHE (Labour—Maungakiekie) 
: 
 I move  
That the question be now put 
. 
COLIN KING (National—Kaikoura) 
: 
 I commend the members of my caucus around me who have spoken so wisely and fully about the bribe of the election loan. I also take the opportunity to point out to members opposite that I do not recognise too many of them as being representative of the people I come from—that is the people who roll up their sleeves take their towel to work and earn a living having made a decision to back themselves when it comes to earning a living. From that point of view I take this opportunity to say quite frankly that the university of life is where we get our best value. This interest-free loan stuff devalues the workplace as a learning place. What I am increasingly hearing from employers is that we are breeding a generation of people who are not aware of what a full day’s work is. 
My view is exactly as other National Party members have said—that the cost of a tertiary education is an investment in a person’s future income potential. That makes sense to me and to an enormous number of New Zealanders. On that basis it appals me and I find it quite repugnant to see policy being pushed through—solely for the purpose of winning an election—that disenfranchises the majority of New Zealanders. I endorse and highly value education but what I see here is a very warm fuzzy policy that denies what New Zealand was in the past and what it should be in the future. Courage and enterprise are what made New Zealand great. 
I am concerned that as Dr Cullen steps forward into the tertiary education scene to ensure that we have value and high-quality education he actually spawns through free student loans another wave of people becoming students. I am totally opposed to this policy. Quite frankly the best means to address this issue was tax relief. If former students had had that money left in their pockets they could have shown a bit of prudence and paid their loans off sooner. 
Hon DAMIEN O'CONNOR (Minister of Corrections) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 71 
New Zealand Labour 50; New Zealand First 7; Green Party 6; Maori Party 4; United Future 3; Progressive 1. 
Noes 50 
New Zealand National 48; ACT New Zealand 2. 
Motion agreed to. 
The question was put that the amendments set out on Supplementary Order Paper 7 in the name of the Hon Dr Michael Cullen to Part 3 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 71 
New Zealand Labour 50; New Zealand First 7; Green Party 6; Maori Party 4; United Future 3; Progressive 1. 
Noes 50 
New Zealand National 48; ACT New Zealand 2. 
Amendments agreed to. 
A party vote was called for on the question  
That Part 3 as amended be agreed to. 
Ayes 64 
New Zealand Labour 50; Green Party 6; Maori Party 4; United Future 3; Progressive 1. 
Noes 57 
New Zealand National 48; New Zealand First 7; ACT New Zealand 2. 
Part 3 as amended agreed to. 
Part 4 Amendments to Tax Administration Act 1994 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 All of this part relates to the wine equalisation tax issue. I just want to repeat again my earlier thanks to all parties—and all members of the House individually indeed—for allowing by leave these matters to be inserted in the bill because it is of course controversial in its other parts. I think we can take some pride in the fact we can actually work sensibly recognising that it is very important to get this particular part of the bill through in order that our wine producers are not penalised by the wine equalisation tax that the Australians introduced in their Budget. 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 In legislation such as this I guess there has always got to be one bit that the Opposition or at least the National Party can support and indeed we do support Part 4. As the Minister of Finance has just explained this part provides for the implementation of the policy to enable New Zealand wine producers to claim back the wine producers’ rebate that is paid to Australian wine producers and so put New Zealand wine producers on the same footing as their Australian counterparts. I must make it very clear that we oppose every other part and every other measure in this bill but it is important that everyone here understands that National supports this part. 
I think it is quite important that members understand exactly what is being done here with this provision. It is an unusual provision one must say. What happens is that if a New Zealand wine producer sells wine to Australia the Australian wine importer has to pay a wine equalisation tax on it. It is not the New Zealand wine producer who pays it the Australian wine importer has to pay this “wet” tax as they call it. It is a 29 percent tax so it is a significant tax. 
One of the concerns if this measure had not been put in place was that over time the Australian wine importers would start to screw back the price they were prepared to pay for New Zealand wine because they would need to be able to cover this tax one way or another and Australian wine producers would be at a competitive advantage because they were able to claim back a rebate for this tax. So over time wine wholesalers in Australia could start to get a more competitive position out of Australian wines. So it is really important that this issue is dealt with. Because the way it works is that a New Zealand wine exporter sells wine to Australia—the importer in Australia has to pay this 29 percent tax but then interestingly it is the wine producer here in New Zealand who under this provision claims back the rebate. It is not the wine importer in Australia it is the wine producer in New Zealand who claims back the rebate. 
The officials kindly provided figures to the Finance and Expenditure Committee to make sure people understood the measure being implemented. If a New Zealand wine producer sells $1000 worth of wine to an Australian wine importer the Australian wine importer has to pay 29 percent tax on that say $290. The New Zealand wine producer under this measure can claim back a rebate for that A$290 which is what the Australian wine producers have been able to do. In Australia where that wine equalisation tax is being paid the wine producers could claim that back so this measure does put New Zealand wine producers on the same footing as Australian wine producers. 
It is an unusual measure and Part 4 provides for the necessary administrative requirements. Members will note that the amendments in Part 4 are amendments to our Tax Administration Act to enable New Zealand and Australian authorities to communicate effectively to allow this rebate. The rebate has to be paid back by Australia of course to New Zealand wine producers so it requires the exchange of information and this part provides the necessary exchange of information. Members will note the disclosure of information in new section 85J in clause 20 that will be inserted into the principal Act—the Tax Administration Act. 
It is important because without this New Zealand wine producers would be at a real disadvantage. It took the Government a little while to provide for it. It should have happened almost immediately under the CER provisions. The Australian Government should not have been able to provide for Australian producers to be under any more favourable terms and conditions in the Australian market than the New Zealand exporters to that same market. 
So it should have been dealt with pretty quickly. It took a while. The Government in my view took too long to get this sorted out but I acknowledge that at least the Government has got it sorted out now and this part implements the necessary provisions to enable quite an unusual provision in our tax law to be implemented. National certainly supports that and we will be voting in favour of just this part of the bill. 
CRAIG FOSS (National—Tukituki) 
: 
 I will take a short call to pick up on Minister Cullen’s point. I also extend my congratulations to all members supporting this part of the bill and also members of the Finance and Expenditure Committee who saw the absolute common-sense of pushing and assisting this part of the bill in the best way possible. Congratulations must also go to the New Zealand Grape Growers Council which lobbied very hard very quickly and went straight to the top and managed to make some material change to a proposal from Australia that would essentially have seen many New Zealand wine producers actually go out of business. 
But the interesting point to note as I pointed out earlier is that so many of those New Zealand producers are already partially or majority owned by Australian winemakers anyway. So there is a bit of a circular argument going on here. It is great for wine growing in New Zealand. It is great for my province the glorious Hawke’s Bay. I thank everyone who is supporting this part of the bill and I fully endorse our support of it. 
One more quick point though: as I referenced before I am constantly concerned about the Australianisation of New Zealand—of many things New Zealand be it food safety be it banking regulation or be it tax law such as this and I do wonder whether we are taking on board some Australian tax laws and tax policy etc. I note that Mr Howard recently pointed out that Australians will be enjoying the benefits of tax cuts forthcoming so I look forward to New Zealand adopting some of those parts of Australian fiscal policy as well. 
As I said it was only a quick call and congratulations to those assisting with this part of the bill. 
COLIN KING (National—Kaikoura) 
: 
 Like my Hawke’s Bay colleague and being from Marlborough myself as the member for Kaikoura may I thank those who worked long and hard. We must not forget about our sauvignon blanc which of course is a very fresh beautiful lemony-tasting wine that is very enjoyable and I have great pleasure in referring to that. We should bear in mind that at the moment in Australia there is still a lot of pressure upon the wine industry; a lot of vines are being pulled out and there will be ongoing pressure; so I say in congratulating the committees and the Government that have worked hard on this legislation that it will be appreciated by the winegrowers in Marlborough. However we should not forget that we must keep scanning the horizons for any Government that does try to impose embargoes and obstructions to the importation of our products. So I am also very pleased on behalf of all the winegrowers in Marlborough Hawke’s Bay and elsewhere in New Zealand to say “thank you” for this and we will be supporting this legislation when it comes to the vote. 
Part 4 agreed to. 
Schedule agreed to.  
Clauses 1 and 2 
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 It is probably a fitting way for the Government to end its legislative year virtually by passing the Taxation (Annual Rates and Urgent Measures) Bill. I get the feeling that when Parliament meets again next year it will not be quite so much the taxation that is controversial as the spending. Government members have pointed out that as is often the case people pay the tax. They do not like it and National members oppose this legislation because the tax rates do not need to be this high. They absolutely do not. 
The public are very much focused on how the money is being spent. We saw today one way in which Labour is spending this money that shows that the tax rates in this legislation are not justified. I have a little graph here of the Labour Cost Index since it began in 1992. [ 
Interruption 
] Yes that one. I know the Minister in the Chair Dr Cullen will not like it because it shows as a fact what he regards as ideological burping. It shows that up to December 1998 the private sector wage rates grew faster or at about the same rate as the public sector wage rates. Since December 1999 the two lines head in different directions. Without fail the public sector has grown consistently faster than the private since December 1999 and the rate of difference is growing. The public sector is now growing faster; for December 2003 and 2004 it just about goes off the end of the graph. The gap between the two is opening. 
So when Dr Cullen wonders why people are worried about their tax rates he needs to think about the way he is spending the money. His own department has said there is pretty much no evidence to believe that public sector productivity reflects the growth in public sector pay. The index excludes teachers and nurses so the Minister should not stand up and say he wants to cut the pay for teachers and nurses and sack a whole lot of them. That is not the point. What is happening here is that Labour’s interest groups in the public sector are being over-rewarded. They are getting more than their fair share of the growth dividend. 
Of course the spending pattern within which this is all happening is putting pressure on interest rates. As my colleagues have pointed out to the Minister there have been nine increases in interest rates in the time that he has been the Minister of Finance. They keep going up and the New Zealand Council of Trade Unions membership is starting to feel the pressure of it so they will be trying to bring pressure to bear on the Minister to do something about tax rates. He did not answer the question that the Council of Trade Unions I think quite reasonably asked. Why cannot the Minister bring forward the inflation adjustment in the tax rates which he himself proposed? I do sympathise with the Minister in that he has found it very hard to find anyone who thought it was a good idea. Now the Council of Trade Unions and its membership have figured out that it is the only option on the table for reducing taxes—and bringing some discipline to Government spending because that is the other benefit of lower taxes—they want to know why they have to wait until 2008. The Minister has the opportunity to get up and explain that to us. 
I cannot see why they should wait until 2008. They are facing higher interest rates driven by low-quality Government spending. They see in the newspaper every day examples of wasteful Government spending. They are going to hear about the Labour Cost Index which shows that public sector wages are going up a lot faster than theirs. The members of the Council of Trade Unions are not public sector employees; they are private sector employees. They are out there in the nasty real world. Their wages are not going up as fast as public sector wages. They think quite reasonably that the Government should act sooner than is proposed in order to transfer some of that excess surplus from the pockets of civil servants who do not need it to their pockets. 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I am not quite sure whether that was a waving of the white flag or simply another leadership bid from the member. He said the most important thing right at the start of his speech: next year taxation will not be as big an issue as it was this year. That sounds awfully like waving the white flag. It is only in an election year that taxation is a big issue for the National Party . The party does not like to talk about bribes of course but one can afford billions of dollars worth of tax cuts at no cost. 
Mr English said that taxation will be off the agenda next year; it will be much less important than it has been. Why? Because Mr English never supported the National Party’s tax programme. He knew and said this privately that it did not add up. He knew it did not add up because he has been a Minister of Finance. He knew the programme would not work and that all National’s candidates up and down the country were being fed a whole load of bovine something or other. They were feeding it out to the people paid for by the Exclusive Brethren who I hope pay their taxes even if they do not vote—although our check of the rolls shows that the men vote but the women do not which is very interesting. All of that was leading to the conclusion that somehow or other a cornucopia of riches would flow forth in terms of tax cuts without impacting upon anybody. 
Then Mr English told us that the issue will always come down to where the money is spent. Well indeed it will. But I have to tell him that Treasury has not come up with any great ways of saving money. Treasury’s ways of saving money if we are looking seriously at doing that come down to all the usual things such as lifting the age at which one receives New Zealand superannuation and “targeting childcare more precisely” or roughly those words—that is more income testing for middle-income people who are trying to access childcare and hence more of the effective marginal tax rates that the National Party so objects to time after time. They come down to targeting heath assistance particularly in terms of primary health care—in other words raising the cost of going to the doctor or the cost of prescriptions for the great mass of middle-income New Zealanders. Those are where the savings can be made. 
I invite Mr English to signal that his programme as the next National Party leader if he gets the job is to raise those costs of the middle class and give them back the money by way of tax cuts that they otherwise would have got the benefit of through services. Of course he will not say that. Mr English is an old-fashioned interventionist who always says that the Government should do something. He says the Government should do something whenever there is any problem in New Zealand. 
Hon Bill English 
: I don’t. 
Hon Dr MICHAEL CULLEN 
: Did anybody else recognise me then? Did it not sound familiar? Mr English says the Government should do something. He does not say what it should do; as long as it does something it will be all right. Deep inside Mr English a real old-fashioned Muldoon tries to come out whenever there is any kind of problem in running the country. Mr English is not like Mr Key of course who wants to give everybody back their own money by way of tax cuts. 
Sitting suspended from 6 p.m. to 7.30 p.m. 
JACQUI DEAN (National—Otago) 
: 
 I rise to speak to the Taxation (Annual Rates and Urgent Measures) Bill which is quite a surprising title because it seems to me that the bill is all about middle-class welfare and student loans and I do not actually see that mentioned in the title of the bill. However I will continue. 
This bill encapsulates just some of the things that are wrong with this Labour Government. It will entrench middle-class welfare; it says to the people of New Zealand: “It’s OK. You don’t have to strive because we will top up your wages—that is as long as you have children.” The bill says: “It’s OK. We may be overtaxing you but we know better than you how to spend your hard-earned wages. So now under this piece of legislation you can stand in a line. You can stand in a line mum with all your children. You can stand in a line and fill out forms. How exciting! You can fill out forms so that some young office worker can scrutinise your private affairs. After that you may be eligible for a benefit.” 
I ask members to picture how good this will be for a young mother who has say three children under 3 years old. Let us say she has twins of 5 months old and a 2-year-old. Heaven forbid but it does happen. I ask members to imagine the process that this young mother will have to go through in order to access the Working for Families package. I remember that when my children were little it used to take me a long time to get them dressed get them clean get them ready to go out then to walk along the road and have to stand in line to fill out forms. 
But tonight I want to focus on the uncosted interest-free loans which is Part 3 of the Taxation (Annual Rates and Urgent Measures) Bill. I wonder what message we are sending to our young people and students. I suggest that under this Labour Government the message is: “It’s OK because under a Labour Government you get a free ride.” I go back in time a wee bit to when the interest-free student loans policy was announced by the Government during the campaign—that uncosted election promise that we had. I was on the road at the time. We had a fabulous tax policy that we were on the road with. I went out and started talking to people. They were very interested in this interest-free loan of Labour’s. 
In Palmerston which is a wonderful part of the Otago electorate I talked to a pensioner. This elderly gentleman had fought in the war and he had paid tax all his life because he had worked all his life. Borrowing was the last thing that this elderly gentleman would contemplate doing because when he was growing up one actually paid for what one wanted. So it was really hard to explain to him—and he could not understand—why this generation should get a free ride. Then on another occasion because I was a particularly hard-working candidate I was in Cromwell— 
Lindsay Tisch 
: That’s why you won. 
JACQUI DEAN 
: Thank you Mr Whip. I was talking to a worker in Cromwell who had a student loan. He had been to university had got a degree and he had a student loan. It was really interesting because I thought: “Here we go here’s a guy who’s going to say: ‘Yay! Interest-free student loans!’ ”. But he did not. He said—and I think he is absolutely right—that from his point of view this policy sends all the wrong messages to the people of New Zealand. He said: “Everyone else has to pay interest on loans when they go borrowing from the bank so why shouldn’t students?”. 
KATE WILKINSON (National) 
: 
 I take issue with even the title of this bill. It is very unwisely called the Taxation (Annual Rates and Urgent Measures) Bill. That is deceptive; it should actually be called the “Taxation (Hide the Bad Parts Amongst the Good Parts) Bill”. Like most wine that part of the content is certainly palatable. As a parochial Cantabrian I give my support to it on behalf of the winegrowers in our province who include the makers of superb pinot noir such as Muddy Water which is the literal translation of Waipara—although some may have thought it referred to the Minister for Social Development and Employment. In our area we have the makers of wonderful cool-climate riesling and chardonnay among others. So I support my colleagues in their support of their Hawke’s Bay and Marlborough wines. 
But unlike the Labour Government we also support the Gisborne growers—not just the winegrowers but the squash growers and the tomato growers. Those poor Gisborne growers have endured two civil defence events and they have been promised absolutely nothing in relief aid. That is like the rest of the bill. It is discriminatory it is poorly targeted and it is very very bad decision-making. 
This bill discriminates against so many working families for whom Working for Families just does not work. Under this Government a person is not even in a family if he or she has only one child. Under this Government a person is not in a family at all if he or she has no children or sadly cannot have children. How discriminatory is that? A parallel can be drawn with the student loan package which also discriminates. It discriminates against those such as plumbers who borrow to buy their tools of trade. They take the risk they borrow the money and they pay the interest. Why should students who are also purchasing their tools of trade—their education—not pay interest when the plumbers do? That is unfair it is bad decision-making and it discriminates. The student loan policy discriminates against those who have scrimped and saved and got rid of their student debt. 
I am appalled with the student loan policy the unashamedly—and admittedly bold—vote-buying and bribery the knee-jerk panic reaction. Where are the costings? Where is the fiscal responsibility the calculations or the budget? What is worse is that we have a lack of fiscal responsibility in the bill. How on earth can we expect our students to be responsible when the Government cannot be responsible as shown by it bringing forward such a reckless irresponsible bill? 
It is also unrealistic to suggest that students will not change their spending habits. That is naive. Labour members should tell that to the student who has just bought a $400 pair of sunglasses and I know one. 
Hon Marian Hobbs 
: You can’t do that on your student loan. 
KATE WILKINSON 
: This student did and similarly like the bloated education bureaucracy the Working for Families package increases its own bureaucracy. It is plain and simple redistribution. The Government takes the money in higher than necessary taxes and processes it through an expensive bureaucracy. Then if people are lucky and ask nicely some may get it back. But some may not get it back. 
We do not think that is fair we do not think that is reasonable and we do not think that is sensible. We want to encourage responsibility not discourage it as my learned colleague says—and I have a lot of learned colleagues on this side of the Chamber. We want to send the right message to New Zealanders not the wrong messages. We want to give New Zealanders incentives for hard work not to turn them into super-beneficiaries. We need to make working and working harder more rewarding than not working. 
DIANNE YATES (Labour) 
: 
 I move  
That the question be now put 
. 
CRAIG FOSS (National—Tukituki) 
: 
 In speaking to the title of this bill I suggest that the title should be changed to “Abandonment of the Kiwi Go-ahead Look After Yourself Ethic Bill”. It is absolutely outrageous. 
This bill has three parts. I find it very interesting that although the members of New Zealand First talked in support of Part 3 they actually voted against it. I say to them “Well done!”. 
I note that the student loan provisions will strike $2 billion off the balance sheet of New Zealand. I also note that when this policy was introduced the Green Party was running at about 9 percent in the polls. After its policy was taken from it it just snuck in at about 6 percent or thereabouts. I also note that this policy was alleged to be an attack on the Maori Party vote but in that sphere it failed. 
I wonder whether there is a dark secret behind this bill. It is my recollection that the Minister sponsoring this bill the Hon Dr Michael Cullen has never had any involvement in an education portfolio in the past. With the shenanigans surrounding the tertiary education sector and the interest-free student loans legislation and with that Minister being in charge of the purse strings I think there is something untoward here. I think we should watch this space. 
I also note that the publicity surrounding this issue said it was aimed at hauling New Zealanders back from overseas. Well quite frankly if the average student loan is about $14000 which is about 4000 quid and if someone is earning about another £30000 or £40000 in the UK there is still no incentive whatsoever for that person to come home even with the interest knocked off. 
I believe that New Zealanders are rational investors. They are rational economic beings; they are good people; they are sensible. Mr Bollard from the Reserve Bank agrees having recently hiked interest rates for the ninth time to discourage New Zealanders from borrowing. The Inland Revenue Department also has penalty rates of about 26 percent to discourage people from extending their borrowing. 
But I issue a challenge to every single member of any party that votes for this bill. It is very simple. Those members should give me for 5 or 10 years—they can choose—$1000. I will borrow it off them at zero percent interest. I will pop it in the bank and at the end of that time I will donate the entire proceeds from interest to a charity of their choice and I will give the principal back to them. Is that a good policy? I issue that challenge to them. I look forward to all comers taking me up on that bet. If every member on the other side of the Chamber gave me that money—the ones I presume will vote for this bill—I could put about 60 grand on deposit. 
This bill also does not quite address some of the key operational issues. A few clauses are about borrowers having to advise the Commissioner of Inland Revenue of their absence from New Zealand the discretionary power of the commissioner etc. Nowhere does it address how what the process is when and what the rules are. This will turn into a shambles. If members think the National Certificate of Educational Achievement is a shambles they should wait until our smart and rationally investing students start to see what is in front of them. Those students will play games; they will send excuses to the commissioner to try to make use of the discretion to be considered outside the 183-odd days. They will play the system quite frankly. I say again that they are rational human beings. 
I suggest also that this entire bill is a contradiction in terms of incentives. In respect of Working for Families what incentive is there to get out of bed? What incentive is there to get ahead? In respect of the student loan provisions what incentive is there to get out of bed to earn some money to pay off one’s loan? There is none zero—funnily enough that is the same as the rate of interest. 
Some people call this a student loan scheme. For me with my banking background a loan tends to have some kind of return. A zero percent loan is no longer an asset. That is why $2 billion will get knocked off the New Zealand balance sheet. New Zealand has a massive private debt problem. What will happen to New Zealand’s private debt ratios once that sum comes off? Again we will have an injection of dependency more debt and more control by this Government which is absolutely hooked on control by various means. 
My good colleague Chris Finlayson mentioned tradespeople. They invest in their future income; they invest in their brains. So why are they not included in this bill? There are so many contradictions. I would be interested to hear the Minister of Revenue take a call on in particular the provisions regarding a zero return on a taxpayer asset. I suggest he would say he was quite opposed to that if he were to take a call. 
TIM BARNETT (Senior Whip—Labour) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put.  
Ayes 71 
New Zealand Labour 50; New Zealand First 7; Green Party 6; Maori Party 4; United Future 3; Progressive 1. 
Noes 50 
New Zealand National 48; ACT New Zealand 2. 
Motion agreed to. 
A party vote was called for on the question  
That clause 1 be agreed to. 
Ayes 71 
New Zealand Labour 50; New Zealand First 7; Green Party 6; Maori Party 4; United Future 3; Progressive 1. 
Noes 50 
New Zealand National 48; ACT New Zealand 2. 
Clause 1 agreed to. 
The question was put that the amendment set out on Supplementary Order Paper 7 in the name of the Hon Dr Michael Cullen to clause 2 be agreed to. 
A party vote was called for on the question  
That clause 2 as amended be agreed to. 
Ayes 71 
New Zealand Labour 50; New Zealand First 7; Green Party 6; Maori Party 4; United Future 3; Progressive 1. 
Noes 50 
New Zealand National 48; ACT New Zealand 2. 
Clause 2 as amended agreed to. 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I move  
That the Committee divide the bill into the Taxation (Annual Rates of Income Tax 2005-06) Bill the Taxation (Urgent Measures) Bill and the Student Loan Scheme Amendment Bill  
divided into Taxation (Annual Rates of Income Tax 2005-06) Bill Taxation (Urgent Measures) Bill Student Loan Scheme Amendment Bill 
 pursuant to Supplementary Order Paper 6 
. 
A party vote was called for on the question  
That the motion be agreed to. 
Ayes 71 
New Zealand Labour 50; New Zealand First 7; Green Party 6; Maori Party 4; United Future 3; Progressive 1. 
Noes 50 
New Zealand National 48; ACT New Zealand 2. 
Motion agreed to. 
Taxation (Annual Rates of income Tax 2005-06) Bill 
Taxation (Urgent Measures) Bill 
Student Loan Scheme Amendment Bill 
Third Readings 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I move  
That the Taxation (Annual Rates of Income Tax 2005-06) Bill the Taxation (Urgent Measures) Bill and the Student Loan Scheme Amendment Bill be now read a third time 
. The Taxation (Urgent Measures) Bill and the Student Loan Scheme Amendment Bill deliver on key Labour election pledges aimed at improving the lives of a very large number of New Zealanders. They reflect our commitment to a fair and an inclusive society that offers its young people the opportunity to achieve their full potential. The new legislation will also make a real difference to the income of many thousands of working families with children. To be precise some 160000 working families will be better off as a result of this legislation. One hundred thousand families already entitled to family support and targeted tax assistance from 1 April next year will receive increased assistance and some 60000 additional families will also qualify for that targeted assistance. 
Much has been made during the debate in the Committee stage of the marginal tax rates. All that this legislation does in that respect is to lower the marginal tax rate for 100000 families but increase it for 60000 families. The other matters referred to by Dr Lockwood Smith have I am afraid been par for the system for many years. If he wants to go off on the lonely road of trying to solve the problem of high effective marginal tax rates on beneficiaries as they move into employment he will join the large group of bleached bones that lies within that desert marked as the tax benefit interface. 
I see that my old colleague the member for Clutha-Southland is smiling at that because he has no doubt been down the same track as others in the past of looking at the various papers on that particular issue. [ 
Interruption 
] No. I am saying that everybody faces that problem or otherwise people on very high incomes would still get partial unemployment benefits partial domestic purposes benefits or partial whatever else their benefit was. At some point the benefit system has to be exited from in terms of the domestic purposes benefit or the unemployment benefit and therefore that means very high effective marginal tax rates across a range of incomes. I say to Dr Lockwood Smith that nobody has solved that problem in New Zealand although many people have tried to solve it. The most stupid example of trying to solve it was that of my former colleague the Hon Roger Douglas who ended up with 100 percent effective marginal tax rates for everybody on low incomes. 
Hon Bill English 
: It was lagged. 
Hon Dr MICHAEL CULLEN 
: Exactly—it was lagged. The member knows precisely what I am referring to and that was done to try to solve the problem. It was the worst possible solution to come up with. 
The change in student loans will encourage our graduates to stay in New Zealand because the loans are interest-free if they stay here. Graduates will pay interest if they go overseas. They will stay here to invest their skills and New Zealanders will be attracted back here from overseas. Of course the main opponent of this legislation in the debate has been the Hon Dr Lockwood Smith—or as he prefers to call himself Dr the Hon Lockwood Smith—who in 1990 said that he would abolish the fees that Labour had put in place for tertiary education and that those toll gates on knowledge would go. Ever since then and ever since National was elected in the 1990s he has never even been back to a university campus to explain why he did not abolish those toll gates on knowledge but instead built them about three times higher and then saw them go up 10 to 15 percent every year that National was in power. That is why although some day later on the member may crawl back to a campus he will certainly not go back there in coming elections—unless he has all the windows and doors checked to make sure he can get out in a hurry should he need to do so. 
The other element in this bill of course is the confirmation of the annual rates of taxation. We have had the usual whinge of the wealthy come from the National members that unless God help them their tax rate is cut they will not work another day. They have said they will not get out of bed in the morning but will lie there because they would rather live there in poverty than go to work in mere affluence. That is what those in the National Party say. 
My goodness me since the year 2000 we have seen that National has been on strike. Since its members have had to pay 39c in the dollar on income above $60000 a year not a finger has been lifted by those in National. Occasionally two fingers have been lifted in this House but the National members have never lifted one finger in terms of doing work because we know they cannot possibly work if they will keep only 61c in the dollar of their income. 
Katherine Rich 
: You make lawyers and accountants happy. 
Hon Dr MICHAEL CULLEN 
: Even Katherine Rich—the eponymous Katherine Rich—has joined in the debate on this matter. [ 
Interruption 
] I said “eponymous”. If you had borrowed a decent amount of money and had a decent education you would know what it means Jacqui Dean I think the name is from Aoraki or one of those sorts of places. No you are from Otago; you are that particular woman. And soon she will get to Middlemarch as well proudly boasting that she had been to Cromwell and Palmerston in the Otago electorate— 
Hon Bill English 
: I raise a point of order Mr Speaker. That member has been in the House for some time and should know that he cannot use the second person unless he is addressing the Speaker. 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Yes I am aware of that. I thank the member. 
Hon Dr MICHAEL CULLEN 
: Absolutely right! 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Mr English is absolutely right. Dr Cullen will come to order. 
Hon Dr MICHAEL CULLEN 
: As the Irish would say I must keep myself to the third person in these matters as we move on. So Jacqui Dean will visit Middlemarch at some future point—which she still thinks is simply the title of a George Eliot novel but she will find out soon that it is actually within her electorate. 
On the Government side of the House we know that since we changed the tax rates we have achieved the highest participation rate in the labour force of any developed country in the world. We have achieved the lowest unemployment rate of any developed country in the world. We have grown faster than the developed world’s average for every year that we have been in power—but apparently none of that can happen. National members say that although that may work in practice they know it does not work in theory. According to National we have to stop doing the practical things that are working and encourage the wealthy by making their tax rates lower—and as we know at the same time making sure that the poor are worse off. 
We always know the fundamental Tory philosophy: the poor will work harder if they are poorer the rich will work harder if they are richer and the middle class will take their chances on the boundaries. That is National’s philosophy in those matters. We wish it well. It is why in the end the National members lost the election and it is why they will stagger on for another 3 years in bitterness and hatred and in the end lose the next one as well. 
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 When it comes to political parties staggering that member should look along his front bench. 
Judith Collins 
: They’re not there. 
Hon BILL ENGLISH 
: That is right. Actually the taxpayer’s dollar is much safer when they are not here than when they are. 
One has only to look at the issues this Parliament has been dealing with in the last few weeks to see why taxpayers are so resistant to the level of taxation that Labour is reaffirming in this legislation. I will come back to that. You see the tragedy of today—and it is a tragedy of a lost election from our point of view—is what this Parliament could be passing as a tax bill. We could have been passing legislation by which 85 percent of wage and salary earners in New Zealand faced a tax rate of 19c in the dollar. That is what we could have had—85 percent of them facing 19c in a dollar. 
We could have done that with the support of parties that are actually supporting this legislation by which I mean United Future New Zealand First—at a bit of a stretch—and maybe even the Maori Party too. They have a much better understanding of how New Zealanders want to get ahead and what they need to do to get ahead then the Labour Party ever does. If it were not for the accident of those parties promising to support after the election the party that got the most number of seats they could be supporting tax legislation today—as they are supporting this legislation—where 85 percent of New Zealanders faced a statutory tax rate of 19c in the dollar. What better incentive would there be to get ahead not only for all those people Dr Cullen says he cares about but also for all the ones that he does not care about? 
Actually he summed it up in his argument about participation rates and employment rates. The Government is priding itself on economic growth that was essentially built on increased employment. So more New Zealanders now work. We have more workers. I agree with that; growth has flowed from it and people getting jobs has been a good thing but it is no credit to the Government because it has done nothing to contribute to it. But that is not the point now. The point now is not more workers but better workers— 
Dr the Hon Lockwood Smith 
: More productivity. 
Hon BILL ENGLISH 
: —and productivity. Is it not typical of Dr Cullen to be spending tens of millions of taxpayers’ money on seminars workshops advisory groups and industry advisory business council consulting strategic groups talking about productivity when he does not believe a word of it himself? Productivity needs workers with strong incentives to lift their skills and their levels of education to be more productive. The days of easy economic growth are gone which is a truth the Labour Government will find out to its political cost over the next couple of years. That is why National’s tax policy is the one that should be being passed by this Parliament. It would give all workers in New Zealand the incentive to get ahead because we can all contribute. 
But that is not what the Government thinks. One reason it needs to confirm the current tax rates is that it needs to pay the burgeoning State sector wage bill. From looking at the figures one would think—and Government members somehow think in so far as they have paid any attention to productivity—that the most productive people in New Zealand were in the public sector. When we look at the Labour Cost Index we see that every single day this Government has been in power public sector wages have gone up faster than private sector wages. In the last 12 months the difference has accelerated. 
Hon Marian Hobbs 
: Nurses! 
Hon BILL ENGLISH 
: That is excluding nurses and teachers. When we include them it is more but when we exclude them it is still faster. 
It is no wonder that private enterprises are struggling hard to get labour because the Government is out there outbidding them. Why is the Government outbidding them? It is not because civil servants are more productive. It is not paying more to the civil service because it is more productive. That is clear in Treasury’s briefing paper to the incoming Minister which states that there is no evidence that for the much greater expenditure on public services taxpayers are receiving better services or a better deal. So private enterprises are out there trying to get skilled people and what is outbidding them? It is the Government. The public sector wage bill will rise by $1 billion per Budget for the rest of the life of this Government and everything New Zealand First wants to get is in hock to that first billion dollars in public sector wages. That is why New Zealanders are resistant to paying the amount of tax that Dr Cullen wants them to pay. 
Is it just National Party voters MPs or ACT supporters who are saying that? No it is not. It is the membership of the Council of Trade Unions. In its brief to the incoming Minister of Finance the leadership of the Council of Trade Unions recognises in a polite way the pressure coming on from its own membership. It says of its own membership that they believe the surplus is too big and that they should get some of it. We absolutely agree. The group of people in New Zealand who best reflect the interests of the membership of the Council of Trade Unions are those who make up the National Party. It is not the Council of Trade Unions leadership and it is certainly not the Labour Government—which keeps taking dollars out of the workingman’s pocket to put them into the bureaucrats’ pocket. That is what happens; it is as simple as that. 
The Council of Trade Unions goes on to make one constructive suggestion which I hoped Dr Cullen would have addressed during this debate: why does the Government not bring forward its inflation indexation of tax thresholds from 2008 to 2006? Dr Cullen said one thing about it. He said: “At least someone now thinks it is a good idea.” Well they do so because it is the only option for reducing the overtaxation of the New Zealand worker. It is the only option on the table because he has ruled all the others out and as part of the coalition agreement with New Zealand First and United Future those parties that are now part of the Government have made mention of that. 
Dr Cullen did not address it. He has plenty of money to do it. I do not think he realises how silly it now looks to be the only person in the country who thinks the Government does not have enough money. 
Lindsay Tisch 
: Everyone else does. 
Hon BILL ENGLISH 
: Everyone else knows the Government has more than it can handle but over the next 2 years we will see the odd situation unfold whereby on the one hand Dr Cullen has to tell his colleagues he does not have enough money for things that matter but on the other hand he has far too much so that he is wasting it on all sorts of things from the TVNZ charter to something I came across the other day. It is costing the Government $141 million by its own figures to run the tertiary education system. That is just the Wellington bureaucracy; it costs $141 million. I can tell Parliament that I have spent 2 years looking at what those bureaucrats do and they do nothing. There is no evidence of the spending of that money benefiting any single New Zealander. 
So that is why National does not support this bill. We could have been passing a much better one that would have put 85 percent of taxpayers on a 19c tax rate. We know that if the Government sticks to this overtaxation of the New Zealand worker it will continue to waste money and now it has incompetent Ministers like Steve Maharey and David Benson-Pope to do it with which will make the problem twice as bad. What is more the Government is getting the message from its own people—some of whom voted for the Labour Government—that the membership of the Council of Trade Unions is saying that the surpluses are too big. Those people want a reasonable and small amount of it now but Dr Cullen has thrown that back in their faces with this bill and he will pay a price for doing that. 
Debate interrupted. 
Amended Answers to Oral Questions 
Question No. 7 to Minister 
Hon DAVID BENSON-POPE (Minister for Social Development and Employment) 
: 
 I seek leave to correct an answer I gave to a supplementary question in the House today. 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Is there any objection to that course of action being taken? There appears to be none. 
Hon DAVID BENSON-POPE 
: Today in question time I misunderstood a question from Ms Collins when she asked: “Has the Minister since spoken to or briefed in advance the Prime Minister or any caucus colleagues about the handling of the police report …” etc. I can confirm that I had not spoken to or briefed the Prime Minister in advance of the release of the police files but I have spoken to the Prime Minister since their release. 
RODNEY HIDE (Leader—ACT) 
: 
 I raise a point of order Mr Speaker. We had the same issue last week and it is about correcting an answer at the earliest possible opportunity. I am just interested as to how the Minister came to realise at this particular point that he had misheard the question. 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: I say to the member that as Speaker I do not know when people first have the information available to them. The member is an honourable member. He has indicated to the House that he has taken the first available opportunity to inform the House of that and he has done so. 
Taxation (Annual Rates of income Tax 2005-06) Bill 
Taxation (Urgent Measures) Bill 
Student Loan Scheme Amendment Bill 
Third Readings 
Debate resumed. 
Hon MARK GOSCHE (Labour—Maungakiekie) 
: 
 That was an interesting rewrite of history from the Hon Bill English who is now the champion of the working class. Interestingly he did not mention anything from the legislation at all. He did not mention the Working for Families package going to 160000 families. Why not? He is embarrassed to speak against it because he knows that that lost the National Party the last election. Nobody believed that party but they did in great numbers believe the party on this side of the House. Bill English did not mention the write-off of interest on student loans. Why not? Because the National Party had nothing to offer the young people of this country—those who are studying those who are looking to study or those who are still paying off a loan. So I suppose he was wise in that respect to ignore the wonderful features of this legislation. 
I want to congratulate the Hon Dr Michael Cullen. This is wonderful legislation. Early in the term of this Government there is a defining difference between this side of the House and the parties that support us and the opposite side of the House which has no idea what ordinary New Zealanders want from their Government. Bill English talked with crocodile tears coming down his cheeks about the poor workers and how badly they are in need of a tax cut—which would be very little if they are on a low income but which would be about $100 for MPs. He felt sorry for the nurses the teachers and the public servants who did not get a wage rise for 9 years under a National Government and he says we should now give them a little bit by way of a tax cut. 
I remind the Hon Bill English that it was the policies of the Government that he was part of that just about destroyed the public service in this country that put nurses 10 years behind where they should have been in terms of earnings. 
Hon Bill English 
: That’s rubbish! You don’t believe that. 
Hon MARK GOSCHE 
: Bill English says it is a load of rubbish because he would not have given them the pay rise that this Government gave them; he would have kept them earning nothing like National did when it was in power for 9 long years. 
Earlier in the evening I heard a new National MP—I do not even know who the nondescript member was—feeling sorry for plumbers and electricians and saying how badly off they were under this Government. I remind that member—whomever it was—that the Rt Hon Bill Birch decided that we did not need plumbers and electricians in this country. That is why National did away with the Apprenticeship Act; it decided that this nation did not need them anymore. Poor old Bill English with his memory lapse once again forgets that that was the sort of policy his Government was responsible for. 
This Government has brought in Modern Apprenticeships to make sure we have opportunities— 
Dr the Hon Lockwood Smith 
: The biggest con job ever! 
Hon MARK GOSCHE 
: The Hon Lockwood Smith who gets very sensitive about which window or whatever he exits universities from forgets that National destroyed the apprenticeship scheme. It said to the tradespeople of this country: “You don’t matter; we don’t need you anymore. There is a market out there that will determine whether we need plumbers electricians and builders.”—all those people that National members are now shedding crocodile tears for! Oh they feel very sorry for them now. They were not sorry for 9 long years of screwing them down and of saying to public servants: “You are worthless.” 
National members still have not worked out that they threatened the entire public service of this country—the people who are responsible for building our roads for looking after our children for caring for the sick and the elderly. National members said to them: “You do not matter; you are all a waste of space. We do not want to spend our money on you anymore. We want to give the wealthy people of this country a tax cut and all the rest of you can go and scrape together whatever you can.” That is why National lost the election. That is why National members will not speak harshly about these two wonderful measures that look after the families of our electorates and that say to young families who are working hard to survive that this is a Government that cares. The Working for Families package is coming in greater numbers to greater numbers of people. 
Also we will give a really good incentive to all the grandparents parents and other people who want to go and study. Every single member over there said that they should not have it they will misuse it and they will abuse it. National members say that every New Zealander given the chance will abuse the system like them. I am glad to say that very few people think like that. Every member opposite who got an education did so on the taxpayer and those members are going to vote against this bill because they say: “It was good for me but damn it’s no good for you. We do not want you to do it.” 
It is like saying that all the students will go and borrow this money because it is free. There was basically a free education system in this country when I was growing up. One could go to university and it was paid for by the taxpayers who did so willingly. I did not hear all the people saying that they were going to go to university because it was free and that they were going to abuse the system. Did they do it then? No. Will they do it under this system? No. But there is no understanding amongst the National Party of how real New Zealanders think. The National Party thinks they are all going to abuse the system and I am glad to say that it is absolutely wrong on that. 
This is very good legislation. I am proud to be part of this Government which is getting this legislation through tonight. I know that the National Party will whinge and whine and it will show once again to the New Zealand public why it is unfit to govern. 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 One of the interesting facts about a lie is that no matter how often it is repeated it makes it no less a lie. The facts of the matter around apprenticeships are that in the early 1990s the National Government when I was Minister passed the Industry Training Act. It increased the number of apprentices in this country fivefold in 5 years and that Labour Government that Mark Gosche is a part of has not changed the Industry Training Act at all because he knows that it has been highly successful. 
Mark Gosche claimed that National has no idea what ordinary New Zealanders want from their Government. I can tell Mark Gosche that ordinary New Zealanders do not want a Government that taxes them more and more. As they work harder as their wages and salaries go up they go into higher tax brackets which means they pay more tax and take home no more pay. That is what is happening in this country. Despite increases in wages and salaries the after-tax take-home pay under this Labour Government has not gone up and New Zealanders do not like that. 
New Zealanders do not like a Government that thinks it knows best. New Zealanders do not like Ministers who think they know best and that they should tax people more and more because people are too stupid to spend their own money and only these Labour Ministers know how their money should be spent. 
It is a tragedy that tonight we are confirming these tax rates that mean New Zealanders will pay even more tax. As they get their wage increases they will go into higher tax brackets and pay an even higher percentage of their income in tax. Of course Dr Michael Cullen will then achieve even more massive surpluses and he can therefore claim he is being fiscally prudent. But he is grabbing massively more tax from his fellow New Zealanders—he is spending massively more money. As my colleague the Hon Bill English said it is a billion dollars extra a year just to cover the increase in core public sector wages. When I was a Minister our total Budget increases a year were $600 million and now just the wages of the core State sector each year will cost a billion dollars with no other policy increases. 
It is sad that today New Zealanders are not facing the prospects of lower tax rates which they could have been had the Rt Hon Winston Peters chosen not to get into bed with Labour. Doug Woolerton must be very proud of the fact that tonight New Zealanders face higher taxes—because they will now face higher taxes. Confirming the same tax rates means that people will pay more tax. As their wages go up they will go into higher tax brackets and pay more tax. Doug Woolerton must be struggling to justify how New Zealand First has done that to working New Zealanders. 
I want to spend a little time on the Working for Families package that Mark Gosche claimed National did not want to talk about. We are very happy to talk about this package because it is turning tens of thousands more New Zealand families into beneficiaries. That is wrong. Doug Woolerton when he spoke before claimed that I bang on about these issues around the Working for Families package. I do not want to be unfair to Doug Woolerton but so many people do not understand—although I must say that Gordon Copeland is starting to understand on the select committee. Gordon Copeland fought to get a bit put in the select committee’s report on this bill that showed that not everyone on the Government side was unmindful of the massive marginal tax rates that three-quarters of New Zealand’s families now face. 
 Most people think that the marginal tax rate they face is 21c in the dollar if they earn under $38000 33c if they earn up to $60000 or 39c if they earn above $60000. That is not true. Three-quarters of New Zealand families face far higher marginal tax rates. Any member in this Parliament could give an example and I will tell them the marginal tax rate that a family will face. Let us just pluck a figure out of the air—say a family on $60000 which is well above the average. Now we think $60000 puts them on the 39 percent tax rate. If we are talking about a family that is wrong. That is not what happens at all. Under the Working for Families package a family on $60000 with dependent children—whether one two three four five or six children—does not face a marginal tax rate of 39 percent but according to the Inland Revenue Department pays 60.2 percent on every dollar earned over $60000. The Government takes more of the next dollar earned than the family gets to keep. 
We could name any income we like; it still applies. Take $90000 for example which is way above what most families earn. If the family earns another dollar and there are three children the marginal tax rate is 60.2 percent on that next dollar. This is just crazy stuff. Labour members say this package is good for families. Where is the incentive for families? Where is the reward for a family that wants to earn a bit more money to take the kids somewhere for Christmas? Let us look at the family with one child on $25000 which is a low-income family. Maybe it is a woman on her own with one child on the domestic purposes benefit with earned income—wages—of $25000. Do members know what tax she pays on her next dollar? She pays 92.2 percent tax. If she earns another dollar she keeps 7.8c out of that dollar. For goodness’ sake! Yet the former president of New Zealand First has said I am banging on. Three-quarters of New Zealand’s families with children face those marginal tax rates and that is what this Working for Families package is doing. It is not about banging on; it is not a technical thing. 
R Doug Woolerton 
: Yes it is. 
Dr the Hon LOCKWOOD SMITH 
: Doug Woolerton says it is. Families face those marginal tax rates. If they earn another dollar that is the tax they pay. 
Let us take any combination—for example someone with two children who has been on the unemployment benefit but is trying to get off the benefit. If the family was on $40000 of earned income then on the next dollar they would be taxed 54.2 percent. It is generally thought that the highest tax rate that people face is 39 percent. That is not true. Families face those sorts of marginal tax rates. It is not just technical; it is the rate they face. If they try to earn another $100 the worst-off families our lowest-income families that are not on benefits not on the standard domestic purposes benefit or unemployment benefit our poorest families that are independent of the benefit system—and I want the Maori Party to listen because I am sure Tariana Turia would be concerned about this some of these may be Maori families—if they try to earn another $100 to buy Christmas presents for the children they lose $101.20. They are worse off. It might be 10 hours extra work at $10 an hour to earn another $100 but they actually take home less pay! 
Labour members think that that is good. Doug Woolerton thinks that it is good. This bill although it does not introduce that takes the number of families that are caught in that trap of facing a 101.2 percent tax rate from 1000 at the moment. This year there are 1000 families caught in that. When this bill is fully implemented 3600 more families will be caught in that trap whereby they pay a 101.2 percent marginal tax rate. It is shameful what Labour is doing to those low-income families. 
R DOUG WOOLERTON (NZ First) 
: 
 We had to endure hearing the Hon Bill English perpetuating the myth of the possibility of a coalition between New Zealand First the Maori Party and any and everybody and their mother’s dog at the last election. That was simply not going to happen and he knows it. [ 
Interruption 
] Yes I know all about the baubles. Then we had the Hon Lockwood Smith going on about the marginal tax rate but what he will again not tell the people of New Zealand in spite of everything he said—and we all know there is a point where it is difficult for people to admit things—is that the Working for Families package makes things better for the people. There will be more money in their hand at the end of the day to buy the Christmas presents to do all the things he is talking about. The package ensures there is more money for those people to do that and he knows it. 
Hon Marian Hobbs 
: They will buy their Christmas presents. 
R DOUG WOOLERTON 
: Of course! New Zealand First went on about increased wages at the election. That was our policy but no the National Party would not support it; nor would Labour for that matter. But at least Labour is making up the gap in another way. That is why we support the Working for Families package. 
We believe that the people of New Zealand should do it by themselves; they should have wages that are commensurate with the work they do—somewhere in line with those of Australia not 30 percent out give or take a percentage or so which is where they are today. While I am talking about wages let me address this business that Bill English has gone on about again—public sector wages rising more than private sector wages. He is right but were those ratios right before? No they were not. Nurses were underpaid police were underpaid and the armed services were underpaid. That is what the National Party would like to perpetuate. Public sector versus private sector ratios were not right before so we are seeing a catch-up. I would have liked to see both the public sector and the private sector get a wage increase but National did not agree with that. [ 
Interruption 
] 
They go on about tax cuts ad nauseam—I thank Katherine Rich—because tax cuts in their view are the answer to everything but they did not talk about incentivising the tax system; they were just going to give a tax cut to whomever. New Zealand First in its agreement with the Labour Party will deliver some tax incentive and we will go some way towards delivering recompense to older people as well. But it is New Zealand First who is doing that and we will not be borrowing as the National Party was going to have to do with its promises. 
It is all very well for these people to go on about these things but they did not win the election. 
Rt Hon Winston Peters 
: Really! 
R DOUG WOOLERTON 
: I do not know whether they have noticed it. I tell you what: some of those old men in a hurry at the back of the National Party caucus are going to be causing some hassles come next year—do not worry about that! No National could not deliver those things but New Zealand First is assisting in making sure those things happen. We are not absolutely 100 percent happy with the Working for Families package but we are supporting it because it will help New Zealanders. We are not happy necessarily with doing away with interest on student loans. That policy was just to gazump what the National Party had offered I might say. But we believe in a universal living allowance and we have said so and that is why we voted against Part 3. 
I get back to the fact that if a policy would advantage New Zealanders and progress the country then New Zealand members will support it even though we did not invent it and it is not our policy because that would be the right thing to do. It is all very well for those members to yell from the sidelines because they are upset that they did not win the election and to carry on like trained seals— 
Rt Hon Winston Peters 
: Nine long years. 
R DOUG WOOLERTON 
: —but we are here doing something. Yes it has been 9 long years. Mr Assistant Speaker I doubt that you believe this yourself with due respect—and I know I should not bring you into the debate—but it could be 12 years. What are these old new members of Parliament going to do? They are grey-haired now. They make you and me look young—which of course we do. Those people will be upset and my goodness gracious me they will give this current front bench of the National Party a hurry-up when they start stamping their feet. There are some fearsome reputations at the back of the House but the reputations are only one thing; it is the fearsome egos of those people that will be causing the problems in the years to come. But that is a sideshow that we do not have to pay for. That is a sideshow that we will be able to sit back and watch in the coming years. 
Before I sit down I want to say something to the National Party members who say that tax cuts are the answer to everything and that the people of New Zealand say they want tax cuts. Of course they do. If the National Party asks only half the question and if the half it asks is “Do you want tax cuts?” of course people will say yes. But if they are asked whether they want tax cuts and to cut the wages of nurses or do away with schools or do away with roading and all those things then they are not so sure. They say they do not know that they want tax cuts if that is what is going to happen. That is the second half of the question which National has not been putting before the public of New Zealand. 
SUE BRADFORD (Green) 
: 
 I would like to take this opportunity to make a few key points on behalf of the Green Party during the third reading debate on the Taxation (Urgent Measures) Bill the Taxation (Annual Rates of Income Tax 2005-06) Bill and the Student Loan Scheme Amendment Bill. 
First of all we were dismayed by the attitude of the Government in pushing this legislation through the select committee process with such urgency that there was no opportunity at all for any outside group to make submissions. After the first reading debate representatives of a number of organisations approached me expressing their keenness to make submissions on aspects of this legislation. It is distressing that the select committee could not see its way clear to allow even a few key sector groups to put their points of view forward. The Green Party thinks it is a real pity that the normal processes of parliamentary democracy were set aside and not adhered to in this particular instance. 
Secondly I need to make clear why we are supporting this legislation. Despite the severe reservations we have about aspects of the Working for Families package and the way the legislation is being rushed though the House the reason the Green Party cannot do anything but vote for this legislation tonight is that it amends the Student Loan Scheme Act so that borrowers can get a full interest write-off when they are living in New Zealand. Our policy has always been to get rid of the student loan scheme altogether and failing that to reduce its negative impacts as quickly and efficaciously as possible. We know that students and graduates all over the country and elsewhere have been celebrating ever since Labour’s intention to amend the loan scheme was first announced before the election. Even though this legislation does not go far enough there is no way we could stand in the path of such beneficent progress. 
Getting rid of the student loan interest for resident borrowers will wipe years off their repayment schedules. The money saved will make it much easier for new graduates to contemplate all those things that we from older generations of students took for granted once we started on our career paths—such as being able to start a family or buy our own home. The Green Party is delighted that life will be made a whole lot easier for students and ex-students because of the legislation we are passing tonight. But we will not stop working for the day that the whole student loan scheme is scrapped fees are reduced to much lower levels and every full-time tertiary student is entitled to a living allowance each week regardless of his or her age or the income status of his or her parents. 
The urgent need for a universal student allowance has only been made more pressing by news today that the latest statistics from StudyLink show that the number of people eligible for allowances continues to fall. In the July to September period this year there were over 4000 fewer students getting an allowance than at the same time last year—a decrease of 7 percent. At the same time fees are going up around the country and it is harder than ever for students to make ends meet. It is time Labour took the next step and made sure students got at least the bare minimum required to survive so that their debt burden does not continue to spiral. 
Thirdly and finally I turn to the part of this legislation that amends the Income Tax Act to provide tax relief to some families through the Working for Families package. Although the Green Party supports the extension of the abatement cut-off point from $27500 to $35000 and the reduction in the rate of abatement from 30 percent to 20 percent we remain deeply concerned by the underpinning inequity of Working for Families which denies beneficiary families the same assistance that so-called working families get. 
Any Government but particularly a Labour Government should be aware of basic principles of social justice and common sense—that families including families’ children need the same amount of money to live on regardless of the source of the parents’ income. It is simply unacceptable that Labour persists with its blind adherence to the 1990s ideology that says that unless at least one parent is in substantial paid employment both adults and children within the family should therefore suffer an existence of harassed penury and perpetual indebtedness. At least a fifth of our children still live in poverty today. A large proportion of those kids come from sole parent and other beneficiary families. Many of those children are Maori. The legislation we are passing today gives more money to the slightly better-off families while continuing to deny support to those families who are most in need. This legislation maintains the gap between the working and the beneficiary poor with a discriminatory child tax credit which will become the in-work payment from 1 July next year. 
That is not good enough. It is high time Labour recognised the valuable contribution to society that people make in raising children even when they are bringing them up on a benefit. The bringing up of children even by those dependent on the State for support should be seen as one of the most difficult but most honourable jobs going and it should not be subject to the blatant discrimination upheld here tonight that is intrinsic to the whole concept that paid work is all that matters. The archaic doctrine of the deserving and the non-deserving poor should have been left in the 19th century where it belonged—it did not really belong there either but it definitely should not have been transported wholesale into the 21st century by a Labour Government. 
RODNEY HIDE (Leader—ACT) 
: 
 I rise to oppose this legislation. It was an interesting contribution from Mr Doug Woolerton from New Zealand First. He reminded us that New Zealand First had campaigned to lift wages. What New Zealanders did not realise was that the only wage that would be lifted would be that of Mr Winston Peters. We did not realise that New Zealand First’s campaign was not about lifting the wages of hard-working New Zealanders but was all about the baubles of office and Winston Peters getting a ministerial salary. That is what the campaign was about and New Zealand First has done nothing—nothing—to help the working people of New Zealand. 
That is why ACT opposes this bill. There is a very simple measure— 
Rt Hon Winston Peters 
: I raise a point of order Mr Speaker. You will realise as I do that there are some rules about debates in this House and one of them relates to the issue of relevance. So far we have learnt that the reason the member opposes the bill is that I have got a job. That is a gross waste of Parliament’s time. I know he is an inexperienced member and that is one reason why he will stay in Opposition for the rest of his career as brief as it might be and as overspent as his budget was in the last campaign but he is required to confine himself to the Standing Orders and Speakers’ rulings and to try if he can—and that will be a remote possibility—to address the issue before the House. 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: I thank the member for that. I refer him to Speaker’s ruling 44/3 which allows— 
Rt Hon Winston Peters 
: A very good ruling! 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Order! I am on my feet. It allows a member some leeway in responding to criticism. But Mr Hide will come to order. 
RODNEY HIDE 
: The other thing that Doug Woolerton told the House was that New Zealand First had won. I saw what happened on election night and Winston Peters lost the seat of Tauranga. The people of Tauranga dumped him. 
Rt Hon Winston Peters 
: No no no. 
RODNEY HIDE 
: The member says “No no no.” but the reality is that more people voted for Bob Clarkson—“the old man in a hurry” they called him—than voted for Winston Peters. Why? Because Winston Peters had failed the people of Tauranga. 
Rt Hon Winston Peters 
: You overspent and so did he. 
RODNEY HIDE 
: Everyone who won broke the rules but not poor old Winston Peters who lost the election lost the seat of Tauranga. He is heading off to Malta—[ 
Interruption 
] Steve Chadwick is excited. She is waving at me the original bill that has been split into three. Let me deal with those three bills. I look forward to hearing Mr Peters’ contribution and his explanation of how he won— 
Rt Hon Winston Peters 
: After you? What a waste of time. It’s like taking candy off a baby. 
RODNEY HIDE 
: That is what Bob Clarkson said it was and he said it was like that in court too. He said it was a hopeless court case. 
Rt Hon Winston Peters 
: Overspent. 
RODNEY HIDE 
: Mr Peters sits there and he chips away. He used to be happy to be just the member for Tauranga. Now he is miserable to be just the member for nowhere. That is the problem with Mr Peters—the member from nowhere. 
Rt Hon Winston Peters 
: How many seats have you got? 
RODNEY HIDE 
: Mr Peters calls out asking how many seats we have. We have one—it is called Epsom—and he has none because he lost Tauranga at the last election. He is hanging on through the list. The people of Tauranga dumped him. 
Rt Hon Winston Peters 
: What about Muriel? 
RODNEY HIDE 
: Let us get back to the legislation. I know that Mr Peters wants to talk about his loss because it weighs heavily on his mind. 
A very simple thing we could do to help working people in New Zealand and indeed to help the country is to lower and flatten taxes. The 39c rate should go the 33c rate should go and we should make the top rate and the company tax rate 25c in the dollar. I do not think there is a respectable economist left in the world who does not think that sound tax policy is about flattening the tax system not lengthening it as the Labour Government has done. Indeed as my colleague Dr the Hon Lockwood Smith pointed out under the Working for Families package someone on $60000 with a few kids is paying an effective tax rate of 60 percent. If those people earn an extra $1 they lose 60c and they get to keep 40c and somehow Mr Peters and Mr Cullen think that is a good idea. 
When Mr Peters first came to the House he was a member of the National Party and he supported lower taxes but he lost that seat too actually. He is the only member in this House to have lost two seats yet he expects to come down to this House and say he is a winner. Mr Peters has lost two seats in a row. He lost Hunua then Tauranga. 
The other thing is that if we lowered taxes— 
Rt Hon Winston Peters 
: I raise a point of order Madam Speaker. In the interests of having a fair comparison I have to say that the member on his feet lost in 1996 lost in 1999 and lost in 2002 and now he regards himself as some sort of hero because he has finally won one out of four. What rate of success is that? 
The ASSISTANT SPEAKER (Ann Hartley) 
: The member knows that is not a point of order; it is a debating point. 
RODNEY HIDE 
: That is all right Madam Assistant Speaker; he is a man who has to get attention somehow. The people in Tauranga do not listen to him anymore. In fact I heard that he is closing his office in Tauranga and shifting it to Auckland. 
Rt Hon Winston Peters 
: I raise a point of order Madam Speaker. I draw your attention to the question of relevance and it is particularly relevant when a member on his feet tells a downright lie and says I am closing my office in Tauranga. That is important for the people in Tauranga because they know that unlike him I am not a fly-by-nighter. The office stays open at the moment and he knows full well that is true. 
The ASSISTANT SPEAKER (Ann Hartley) 
: The member knows very well that he cannot insinuate that another member lied. The member will withdraw and apologise. 
Rt Hon Winston Peters 
: I withdraw and apologise Madam Assistant Speaker. Point of order— 
The ASSISTANT SPEAKER (Ann Hartley) 
: No the member knows that he must withdraw and apologise and that is the end of the matter. If it is a new point of order that is different but I also remind the member that we have had two points of order that are not points of order. 
Rt Hon Winston Peters 
: I raise a point of order Madam Speaker. I said it was a downright lie. For you to raise objection to that means that he is owning up to being the perpetrator of it which I did not quite say did I. I said that the statement that I am closing my office in Tauranga is a downright lie. I did not say that he started it but I am saying that what he is saying is a downright lie and if he wants to be the originator and owner of it then he would have cause to raise a point of order. But he did not did he—you did. 
The ASSISTANT SPEAKER (Ann Hartley) 
: It is my responsibility to rule on a matter like that. The member knows that that is very close to the wind. Certainly I took that to be how the member had called it. 
RODNEY HIDE 
: I raise a point of order Madam Speaker. The difficulty you have is that the Rt Hon Winston Peters withdrew and apologised then deliberately repeated on a point of order exactly what you had complained about and what you had had him withdraw and apologise for. That was deliberately questioning your authority in this House. 
Rt Hon Winston Peters 
: No. 
RODNEY HIDE 
: The member can object as much as he likes. You pulled him up for saying that what I had said was a downright lie. He was required to withdraw and apologise. He then raised a point of order and repeated exactly what you had asked him to withdraw and apologise for. I ask you Madam Assistant Speaker to require him to withdraw him and apologise for what he said and repeated on a point of order. 
The ASSISTANT SPEAKER (Ann Hartley) 
: The member was contesting the context in the way that he said it. I certainly did not rule in his favour. 
RODNEY HIDE 
: I raise a point of order Madam Speaker. In that case is it all right for me to stand up in the House as an Opposition MP and say that what David Benson-Pope has told this House most days is a downright lie—because you have just ruled that Mr Peters can say that? 
The ASSISTANT SPEAKER (Ann Hartley) 
: Mr Hide I listened to the member who was making a point of order about the context. I did not agree with him. He withdrew and apologised for the first point that I had pulled him up on. Please continue with your speech. 
RODNEY HIDE 
: Point of order— 
The ASSISTANT SPEAKER (Ann Hartley) 
: No please be seated. 
RODNEY HIDE 
: I will not be seated Madam Assistant Speaker. 
The ASSISTANT SPEAKER (Ann Hartley) 
: Please be seated. I have ruled on this matter. It is the end of the matter. 
RODNEY HIDE 
: Well that is great thank you Madam Assistant Speaker because we now have a new ruling in this House. Members can stand up and say that what Mr Benson-Pope said in the House was a downright lie because that is what Mr Peters said and that is what he got away with in this House. We can say someone is a downright liar and it is a downright lie and it is all OK. 
The ASSISTANT SPEAKER (Ann Hartley) 
: I will rule on what Mr Hide just did. Mr Hide absolutely contested my ruling. Mr Hide will now withdraw and apologise. 
RODNEY HIDE 
: I withdraw and apologise. I thank Mr Peters because what we can say is not that Mr Benson-Pope did anything wrong—because that is the point that Mr Peters made—but that what he said was not true. 
The ASSISTANT SPEAKER (Ann Hartley) 
: Mr Hide I will give you another warning. What you are doing is completely irrelevant to the question. I ask you to come back to the legislation and speak to it. 
RODNEY HIDE 
: I raise a point of order Madam Speaker. I am making a point that you asked Mr Peters to withdraw and apologise— 
The ASSISTANT SPEAKER (Ann Hartley) 
: You are doing it again. You are now contesting my ruling. I ask the member to desist or I will have no choice but to ask the member to leave. 
Rt Hon Winston Peters 
: You’re a good lad. 
RODNEY HIDE 
: I am because I won Epsom and he lost Tauranga. That is the thing that he cannot get over. That is what bothers Mr Peters. He lost his seat. Bob Clarkson got more votes than Winston Peters. Winston Peters is a loser. That is the trouble we have with Mr Peters who is sitting on the sideline and chip chip chipping away. He will be proven a loser again this week. The idea that a New Zealand First member can get up in this House and somehow say that that party won the election is rubbish. Winston Peters from New Zealand First lost his seat. 
ACT members oppose this legislation because we want taxes to come down not sometime in the future not next week but now for Christmas. We want the tax rate flattened. We do not agree with targeted assistance that puts people into a tax rate system of over 100 percent—[ 
Interruption 
] Well Steve Chadwick is another loser stumping up and down. We have a party of losers over there on the Labour benches. We oppose this legislation. We oppose the student loan interest write-off. It takes $2 billion off hard-working New Zealanders off people such as truckdrivers cleaners and waitresses and shifts that $2 billion across to people who are accountants lawyers political scientists and lecturers—and some of them might even get a bauble or two might lose their seats and become Minister of Foreign Affairs! We say that is wrong and unfair. The way to help the graduates of New Zealand is to drop their taxes to a flat rate of 20c or 25c; then they could pay off their loans. 
But wait it gets even better. If we cut taxes there will be more investment more entrepreneurship more jobs and a stronger economy. Instead of heading for the hard landing that Labour and Winston Peters will deliver to this country we will have a strong growing economy. We will have investment businesses that are succeeding and a strong economy. Under the Peters - Clark - Cullen Government we have an economy that is heading for a hard landing next year and I say that this legislation— 
Steve Chadwick 
: There are only two of you. 
RODNEY HIDE 
: Steve Chadwick has a lot to say. How did she get on in the election? Did she lose? 
Hon Member 
: No got back. 
RODNEY HIDE 
: Just got back did she? 
Chris Tremain 
: That much. 
RODNEY HIDE 
: Next time Steve Chadwick will be gone and she will be a loser too. ACT says we should be cutting taxes tonight. We should be dropping the company rate and dropping the personal rate. That would be the best thing we could do for students. That would be the best thing that we could do for working New Zealanders. 
Rt Hon WINSTON PETERS (Minister of Foreign Affairs) 
: 
 What a strange speech from the last of two members of the ACT party. Of course he was the member who deserted his whole party nationwide to rush back to Epsom to grossly overspend way above what the Electoral Act allows. The only reason the Labour Party is not taking that on is because Mr Hide will do more damage to National than anybody else can. So that in a strategic sense is the reason a legal case has not been brought against that man who knows full well what he did and what the law allows and disallows him to do. 
The real issue is that in 1996 this man told the whole world having grossly overspent in Epsom that he would win Epsom. Then he had polls in 1999 saying he was way ahead in Epsom—but he was not of course. He is a fiction creator. He is a merchant of misery in its worst sense. He has the effrontery to come in here as some sort of hero because he took the ACT party to two members and his deputy leader Muriel Newman who did work hard and did try to give a fair representation was cast by the wayside. That is the character of that man. He feels great. On election night he felt so rapt and ecstatic because he had survived in a party that was in the Doomsday Book that night and somehow got one more seat. He was happy with that. He is delighted to be here despite the disaster of his campaign. 
In contrast let me make this very clear. We had a bad campaign. I am the first to admit it. I am the first one to take responsibility for it because some days on one’s best outing one’s best shot is not good enough. But then again my track record is to survive here longer than any other member. To have this four-flusher fly-by-nighter talking about a loser is pretty rich is it not? I am just grateful that I have seven colleagues in this Parliament and we are the country’s third-biggest party. 
I must say this—and we are talking about taxation—that is a party of course that had $15 for every dollar New Zealand First had to spend in the campaign. They have had tens of millions from business interests all wasted because they have never been able to show one outcome for all that investment. Here is my point to everyone in this House. Can they think of one thing that the ACT party has done in politics these last 9 years? 
Katherine Rich 
: IRD. 
Rt Hon WINSTON PETERS 
: Oh excuse me. There was only one outcome from the Inland Revenue Department inquiry and that was the man from Great Barrier Island who got there because I laid a complaint of perjury with the police. He got no one any refuge at all. Even his mate Henderson got done in the inquiry did he not? That is Rodney Hide’s record. I ask members to name one thing—and they can ring all around New Zealand and ask any library any political scientist or any ACT supporter—that Rodney Hide and the ACT party have done for New Zealanders or anybody in the last 9 years. I will give members 5 minutes while I complete my speech. 
Hon Marian Hobbs 
: They lost Wellington Central. 
Rt Hon WINSTON PETERS 
: Oh that is right they lost Wellington Central. 
Hon Brian Donnelly 
: Look who to! 
Rt Hon WINSTON PETERS 
: Well I have to say they were up against stiff competition. But then again when the civil servants saw the ACT party policy for Wellington Central it was goodnight Richard. I know that Mr Hide had that in his mind because as long as Richard Prebble stayed here he was going to look very bad by contrast. Prebble had experience and presence of mind. He had been here a long time and had a record unlike this fly-by-nighter who suffers from the psychological condition of recognition hunger. 
The ASSISTANT SPEAKER (Ann Hartley) 
: I am sorry but the member is going to have to come back to the bill. 
Rt Hon WINSTON PETERS 
: I am getting to the bill because the crux of this matter is as it was in the campaign whether it was better for students to get an interest write-off. I suppose one could say by way of the Government’s treatment of this that if its intention is to try to keep students in New Zealand then that is a logical rational reason for going down that path. We disagree and we have said so. Our policy was a universal student allowance and always has been. 
But look at the contrast. The National Party came out with a massive promise for student loans—not big enough of course. Then if that was not bad enough it topped it up with $3.5 billion of borrowings for the tax cuts it promised. I might well ask the Business Roundtable the Chamber of Commerce and all those august so-called commentators in economics as to where they were in the campaign when they did not raise a sound or a syllable a mutter or a murmur at this gross irresponsibility on the National Party’s part backed up of course by the most irresponsible party in Parliament the ACT party led by Rodney Hide. 
I am going to ask this. One is a hard-working ACT supporter out there giving one’s heart and soul to a cause because one happens to be one of the few mindless true believers but nevertheless that is a worthy belief if one is in a democracy— 
Hon Brian Donnelly 
: Like Muriel. 
Rt Hon WINSTON PETERS 
: —yes like Muriel—working 18 hours a day 7 days a week just for the chance to come back here and represent her views. And then one finds that the party leadership has changed in a four-way contest—in a party of eight—and who have they got: Little Mussolini. He is the new leader. That is who they have got. How disappointing! And members can be certain that after the next election he will be gone. I will bet members any money they like that he will be gone after 2008. One thing that the far right do not like is a lack of performance and results. The second thing the far right do not like is having their message put out the way that he does it. The third thing the far right do not like is seeing something like student loans going up against tax cuts when they know one is affordable and one is not. 
The tax cuts that the National Party offered were going to see this country borrowing $3.6 billion to finance them. I asked some people in the business world why on earth they were sitting back and not saying a word. They said to me that they hate the Labour Party so much they did not care what he says. What sort of rationale is that for so-called business leaders to desert every sacrifice of the last 21 years and all the reforms and all the changes? 
Rodney Hide 
: That’s what Tauranga did when it dumped this member. 
Rt Hon WINSTON PETERS 
: There he goes. Rodney Hide is not prepared to wait for the court case. Like everything else in this House no matter what the subject is he knows everything about it. He is the world’s expert on anything and everything. Has he ever in his life made threepence on any investment he ever invested in? No he has not. Has he ever run a business? No he has not. Has he ever done a thing about what he speaks in terms of ideology and in terms of practice? No. In fact he has not done a damn thing in his life. He does not fit the image of a parliamentarian of the far right because what the far right like—and I have seen them around the rest of the world; I have seen them in New York I have seen them in the United States—are men of style of elegance and of panache. They represent an image of what they are talking about. He is the very antithesis. This is just like the proletariat taking over the far right. In his case it looks outrageous and it will not work. 
New Zealand First’s point is we have an option with regard to student loans. We do believe that that was a better and more sound course of action to take. We believe of course in the universality— 
Rodney Hide 
: But the people of Tauranga didn’t back it. 
Rt Hon WINSTON PETERS 
: It is like—I cannot say it is like a stuck record—a stuck iPod or one that has 37000 copies of the same song. That is what Rodney Hide is like in fact—37000 disks on an iPod all the same. He says it loud. It is the idea that bombast and noise are a substitute for esoteric argument and debate. It is not of course and that is the reason why he is sitting over there in Opposition again. While his colleagues around him are going grey in their hair he loses his. 
I have had quite a few inquiries from National MPs who have written to me asking when they can get the golden age card. I have told them that given their chances of promotion in the political environment of this country that is a very good question and I will try to move it forward as fast as I can. I will add as many discounts and Fly Buys points as I am able because not all of them have Rodney Hide’s arrangements whereby he flew to Fiji to take part in a seminar run by a fraudster who is now in jail in the United States and then came home and would not answer any questions. Do members remember that? He tried to make out he did not take any pay. He was lying on the beach giving an imitation of a walrus for the whole week and getting paid and he would not answer the questions. That is a fact and it probably explains why he finds so unattractive something done in the interests of the balance of students of this country. The repetition of a mindless debate as Doug Woolerton rightly set out he finds— 
Rodney Hide 
: Point of order Madam Speaker. 
Rt Hon WINSTON PETERS 
: I have not finished. Sit down! That is a good lad! 
The ASSISTANT SPEAKER (Ann Hartley) 
: The member’s time has expired. 
RODNEY HIDE (Leader—ACT) 
: 
 In the interests of consistency of ruling it is very flattering to have the new Minister of Foreign Affairs spend his 10-minute third reading speech on the member for Epsom. People of Epsom appreciate the attention. Mr Peters spoke for only 33 seconds on the legislation. When I was responding to the honourable Doug Woolerton you were on your feet to pull me back—quite rightly—but how come Mr Peters could stand up and I think members in the House will support me and speak for over 9 minutes on nothing to do with the legislation whatsoever. 
The ASSISTANT SPEAKER (Ann Hartley) 
: The member was brought back to the topic on a couple of occasions. Certainly he had a wide-ranging speech and introduced matter from the legislation into his speech. 
RODNEY HIDE (Leader—ACT) 
: 
 I raise a point of order Madam Speaker. 
The ASSISTANT SPEAKER (Ann Hartley) 
: Mr Hide I have ruled on the matter. 
RODNEY HIDE 
: Yes I know. 
The ASSISTANT SPEAKER (Ann Hartley) 
: Is this a new point of order? 
RODNEY HIDE 
: : Yes. I seek the leave of the House under Standing Order 350 to make a personal explanation. 
The ASSISTANT SPEAKER (Ann Hartley) 
: Leave is sought for the member to make a personal explanation—[ 
Interruption 
] 
RODNEY HIDE 
: It is about the allegations Mr Peters made about spending in Epsom. [ 
Interruption 
] 
The ASSISTANT SPEAKER (Ann Hartley) 
: The member is on his feet with a point of order. Would the member please clarify again what he is seeking leave for. 
RODNEY HIDE 
: Yes. I want to make a personal explanation—[ 
Interruption 
] 
The ASSISTANT SPEAKER (Ann Hartley) 
: That member knows that while a point of order is being heard there will be silence. 
Rt Hon Winston Peters 
: What’s it about? 
RODNEY HIDE 
: If Mr Peters would shut up for 2 minutes I would tell him. 
The ASSISTANT SPEAKER (Ann Hartley) 
: This is the final warning. When a member is on his feet with a point of order he has the right to be heard. 
RODNEY HIDE 
: Let me make this very plain. Mr Peters through his speech and he has done it before made allegations about my breaking the electoral law and in fact committing corrupt practice—about overspending on my campaign in Epsom. I would like to use the opportunity in this House under Standing Order 350 to make a personal explanation to rebut those allegations. That is what I am seeking leave to do. 
The ASSISTANT SPEAKER (Ann Hartley) 
: The member has sought leave to make a personal explanation as he has outlined. Is there any objection? There is. 
Rt Hon WINSTON PETERS (Minister of Foreign Affairs) 
: 
 I raise a point of order Madam Speaker. If you think we are being unreasonable I want to make this point of order very clear because one would not normally stop a member of Parliament from giving a personal explanation. I want to make this one point: if he came down here with his return of electoral expenses we would know who was telling the truth. 
The ASSISTANT SPEAKER (Ann Hartley) 
: That is not a point of order. An explanation is not sought. Leave has been denied. That is the end of the matter. 
KATHERINE RICH (National) 
: 
 I think that in politics it is always important to know one’s limitations. Following the Rodney Hide and Winston Peters show it would be very difficult for any member to be half as entertaining. 
The New Zealand First member’s speech was very thought-provoking. But I would like to go back to what I thought was a stellar contribution from another New Zealand First member earlier in the night—the contribution of one Mr Doug Woolerton. I thought it was a very brave contribution but in some ways it was a very sad contribution. As Mr Woolerton knows he had the chance to play Santa this Christmas to many of his constituents; to be part of a Government that would put through tax cuts for all New Zealanders. I know that it is very sad for Mr Woolerton to be in a party where the only fun is the passing round of one bauble which on occasion he might get to polish. But he had the chance to be part of a Government that would have passed tax cuts before Christmas for all New Zealanders. Those tax cuts would have offered 85 percent of all wage earners and salary earners in this country a tax rate of 19c in the dollar. New Zealand First members had the opportunity but they did not take it up. They had the opportunity to pass such legislation rather than this miserly legislation arising from the Taxation (Annual Rates and Urgent Measures) Bill which I note the New Zealand First member who spoke before made no reference to whatsoever. In fact if we had asked him the name of the bills I doubt whether he would even have had an answer. 
The bills arising from the Taxation (Annual Rates and Urgent Measures) Bill put in place this Government’s visionless plan for this country. Where is the vision in that legislation? I will say what the vision for this country is. It is a vision where the middle classes become entrapped within the welfare system. It is a vision of greater amounts of debt for students and slower repayments. The legislation does little to make better the lives of a lot of Kiwis who are currently struggling and paying more tax than they have to to a Government that is intent on spending more than it has to in order to provide basic services. 
 There was an opportunity in this legislation to give something back to those hard-working Kiwis those Kiwis who get up every day go to work every morning pay their taxes and pay for the services within this country that they draw on. There was an opportunity to give something back to those families pre-Christmas but one of the first things the original bill did was to confirm the tax rates for next year. So there will be no relief for the electricians the plumbers and the gasfitters who came before the Commerce Committee to present their concerns on another bill that at the moment we are looking at. There is nothing for them in this legislation nothing for those families who are struggling to pay for some of the basics. Although discussions of tax often focus on the wealthy our concern is for those middle-income New Zealanders. If we look at the Working for Families package in particular we see nothing more than income churning—the Government taking more than it needs to from some families only to hand it back. 
One of the concerning things that I found about the Labour Party website was that when one taps in an MP’s salary and the number of kids he or she has one sees that some MPs will be eligible for assistance from the Working for Families package. What kind of message does that send to our country—putting some members of Parliament on welfare on some kind of system where taxpayers’ money is handed back? 
Hon Damien O'Connor 
: You were giving the tax cuts. 
KATHERINE RICH 
: One of the things about tax cuts that that member seems to forget is that a tax cut hands back an individual’s own money that he or she earned in the first place. It is not the Government’s money; it is the money of the worker who earned it in the first place. Therein lies the difference I think between Labour and National. National always understands that the money belongs to the person who earned it in the first place and that if the Government is taking more money than it needs then it should give it back because it is not the Government’s money. Members opposite seem to think that it is their money and that they can put their hands in workers’ pockets and take out more than they need in order to fund a myriad of useless programmes grants and schemes. 
The Government would be better off getting rid of those and offering New Zealanders some of their own money back. If people are given a tax cut they know that it was their money in the first place. This Government likes to extract the money from people only to hand it back so that the people who get those handouts will be grateful and pleased with the generosity of their Government. That is all a have because particularly for middle-income New Zealanders it was their money in the first place and it should never have been taken out of their pockets. 
If we look at the 39 percent tax rate which this side of the House thinks should be flattened we see that the only people happy with it are the nation’s lawyers and accountants who have done very well out of the 39 percent tax rate. They have brought in more fees than they can deal with by setting up trusts and all sorts of devices so that those who have the ability to have trusts and different kinds of set-ups do not have to pay tax in the first place. 
National members think this legislation does not provide a vision for this country. Where is the vision in making more middle-income New Zealanders dependent on the State? Where is the vision in making more Kiwis take out bigger student loans than they need in the first place? This side of the House has made some good points about the fact that the legislation will encourage more students to take out greater loans than they need and all parents with half a brain will say to their kids: “I’ll pay for your fees. You take the money from your student loan and put it into an interest-bearing account at a minimum. You take out your loan and put it into some kind of investment.” When interest costs are removed from a deal there is every incentive to take out more money than is needed and to repay the loan at a slower rate than one has to. Why would students be motivated to pay back their student loans in a shorter space of time than they needed to? It is not just the National Party that says that; Treasury has said it. In fact every single paper that has been done on the subject has said it. 
Tonight we have heard many members on the opposite side of the House paint a rather rosy picture of New Zealand in the future. If that is the case why does almost every single analyst economist or person who has studied the New Zealand economy say that next year things will get tough? Why did Treasury in its briefing paper to Ministers say that the Government needed to be careful with its expenditure because we are in for a rocky ride? Michael Cullen has an unusual approach to economics in that he thinks it would be inflationary if tax cuts were given to Kiwis so that they could spend their own money but if the Government takes their money and spends it on their behalf—on anything from hip-hop tours to overseas trips that are not warranted or sending the Minister of Foreign Affairs away so that he does not have to spend time in the House—then that is not inflationary. 
Well National has better ideas as to how that money should be spent and one of the things we need to do is to cut spending in a wide range of areas. If one is looking at a difference between parties the difference that is seen tonight is the extent of the faith that different members of this House have in New Zealanders—whether they are able to make spending decisions on their own or whether the Government needs to do that for them; whether people should pay for their education; and whether making loans free will actually change behaviour. 
Labour seems to think that taking off the interest on student loans will not change behaviour in the slightest. On this side of the House we know that all parents with half a brain as I mentioned before will encourage their kids to take out a loan because they would be financially stupid not to do so. Free money is free money and certainly if people are going to borrow elsewhere they should make use of a loan that does not incur any interest rate. It is just nuts. On this side of the House we are predicting two things: student loan amounts will go up dramatically and the repayment time will increase dramatically as well. That is just basic Economics 101. In fact it is not even that: some of our primary schools teach it in basic mathematics. 
This legislation is not a vision for this country. Making more middle-income New Zealanders dependent on the State is no vision for this country and certainly will not make us a country that can foot it with the rest of the OECD. 
LINDSAY TISCH (National—Piako) 
: 
 We have had a very interesting debate. We have had a line-up of people on the Opposition side of the House who have been able to articulate the things that matter to ordinary New Zealanders. [ 
Interruption 
] Yes they are. They were able to articulate the things that really matter to the ordinary hard-working New Zealanders whom Government members would not know about. Those members have never invested a dollar and they would not know what it is to take a risk. All they want to do when the country is running huge surpluses is to take more of people’s money. There was a golden opportunity at this Christmas time and during the financial debates earlier on for the Government to say it would give every hard-working New Zealander a tax cut. It is not a tax cut that they deserve; it is their own money. They are the ones who have earned that money. But no the misers on the Government benches say they cannot do that. 
I will tell the House what Government members will do: they will say to hard-working students that they will make things easier for them by taking the interest off student loans. What an incentive that will be! I can tell members what that will do. More students will borrow and there will not be any faster repayments—absolutely not! If someone is given free money it makes sense for that person to borrow more. Every parent will think about where he or she can get free money from. Parents will realise they can get it from this Labour Government so they will use that money. Who will pay for interest-free student loans? I will tell members who will pay: hard-working New Zealanders. The mainstream hard-working New Zealanders who work—they may be young business people retired folk single people or people on some sort of benefit—are the ones who will foot the bill that comes about because this Government says that there will be no interest on student loans. There is absolutely no way that this measure will reduce the burden on students. There is a common-sense premise here: if one can get something for free one will take advantage of it. If it is free for students it will cost somebody else. That is how it works. 
 National’s policies at the election were about fairness and equity. They were about saying that if people worked hard they would benefit. Business people know that if they borrow money they invest in their future be it in education or business—[ 
Interruption 
] The Government members would not know about that because they have never been in business. They have never put a dollar at risk. They do not know what it is to put their money at risk. We would go out and borrow money and we would pay interest on it. 
Our policy is very simple. We would say for instance that the interest was a tax deduction. That is what it is about. That would show fairness and equity whereby everybody was treated the same. But no the Government has a very one-sided approach to this issue. It says it will scrap the interest on student loans but mark my words there will not be a reduction in the number of students paying back their loans. Even the best estimates state that this policy will blow out into billions of dollars and who will pay? You and I will pay Madam Speaker. Hard-working Kiwis will have to foot the bill. 
We have had some very good contributions this evening from some of our newer members. I was thrilled to see those new members have a go. Chris Finlayson was able to crystallise and articulate an argument with much flair and passion. He was right on that. He was able to show the important things about the legislation that make it an absolute farce and to show why National members will not be voting for it. Kate Wilkinson the lawyer was able to bring those arguments together and say what matters to the people she represents. 
And Jacqui Dean well she was the person who was able to win the seat of Otago. We saw at question time today how the Minister the Hon David Parker was not really with it—not even in respect of the questions I asked him. Jacqui Dean is somebody who knows what it is to have her feet on the ground and she was able to bring forward those very important issues about how important business is. That is what we come back to. If we make an investment and have to pay interest on it—if that is what it is about—then let us make it fair and say that that is a cost of doing business. Sure we should be able to claim back the interest on it as a tax deduction. But no this Government says it will not allow that to happen and instead it will make loans interest-free for students. At the end of the day that issue will be the Government’s demise. 
Paula Bennett the young member who sits behind me in the Chamber has also been able to bring a feet-on-the-ground common-sense approach to this legislation. This legislation does not actually help people; it makes beneficiaries out of them. We do not want that. We want people to move away from dependency. We want to give them the incentive to go out and do their thing. But no we are passing this legislation tonight—well National is not passing it; we will be voting against it because it makes beneficiaries out of people. It makes them dependent. That is not the sort of legislation this country should pass. 
Craig Foss the young guy from Tukituki also has his feet on the ground. He knows what this is about. He knows the sorts of things that the people of his region represent. He is another member who has been able to go out and win his seat from a Labour member because he knows what makes the world go round. We are a party that stands for principles. There is nothing superficial about what we stand for; they are the things that are really important. We are a nation of small businesses. When we look at what makes the world go round and at what makes the economy tick in New Zealand we see that it is about being able to take an investment to invest in the things that are important and to grow businesses even if people have to borrow money. But if people borrow money they should be able to claim the interest back as a tax deduction in order to reduce their taxable income. That is what business is about. Why do the Labour Party and its supporters not adopt that same sort of principle? It is common sense—it is absolute common sense. 
Through the Committee stage and the third reading tonight National members have been able to show how foolish this legislation is because it makes beneficiaries out of people. We want to move people away from dependency. We want to give them a hand up not a handout. That is what the student loan interest write-off will do. It will not make people more secure. It will not allow them to progress grow and move on. It will make them dependent. 
Let us look at those who receive money through the Working for Families package. Dr the Hon Lockwood Smith articulated very clearly this evening numerous examples that show that for every extra dollar people earn they are not actually getting any benefit out of it at all. All that happens is that they are hit with high marginal tax rates. They have to ask whether it is really worth their while to work. That is what has happened. Yet National’s policy at the election which was so well received was that one could go out and do the extra hard yards and National would have a flat tax rate of 19c in the dollar. 
Rt Hon Winston Peters 
: What happened? 
LINDSAY TISCH 
: That will come. The member should just wait because next time around that policy will be really good. It will be very relevant in Tauranga. When I go knocking on doors in Tauranga the member will see how important our policy is. 
We have been able to canvas a number of views here tonight but I can tell members that National is the party that stands for fairness equity and low taxes. Student loan interest write-offs do not do that. The Working for Families package makes more people dependent. The carbon tax is coming up shortly. What will it do to the New Zealand economy? There is no vision. This Government has no vision for the future unlike a National Government. It would make people care for New Zealand. We would say to them that we valued their input and contribution and we would reward it through a lower tax system that showed that we thought they were important. We would not just give money away because it sounded good and because people may vote for us at the end of the day. 
This legislation is a nonsense. National has voted against it right throughout the debate. We have had a line-up of great speakers who have been able to represent heartland New Zealand. They have been able to crystallise and articulate those arguments right through the Committee stage and the third reading and those are the reasons why we will vote against the bill this evening. 
Rt Hon WINSTON PETERS (Minister of Foreign Affairs) 
: 
 I raise a point of order Madam Speaker. I move that we have an extension of time. I have just received a call from an old constituent whose Mogadon is not working and she reckons that 10 more minutes of such a speech would be perfect. So I move that we have an extension of time. 
The ASSISTANT SPEAKER (Ann Hartley) 
: The member can only seek leave. 
Rt Hon WINSTON PETERS 
: I seek leave on behalf of an elderly constituent who rang me to say that her Mogadon is not working for an extension of time. She tells me that 10 more minutes should just about do it. 
The ASSISTANT SPEAKER (Ann Hartley) 
: The member knows that he can seek leave only for himself. 
A party vote was called for on the question  
That the Taxation (Annual Rates of Income Tax 2005-06) Bill the Taxation (Urgent Measures) Bill and the Student Loan Scheme Amendment Bill be now read a third time.  
Ayes 71 
New Zealand Labour 50; New Zealand First 7; Green Party 6; Maori Party 4; United Future 3; Progressive 1. 
Noes 50 
New Zealand National 48; ACT New Zealand 2. 
Bills read a third time. 
Hazardous Substances and New Organisms (Approvals and Enforcement) Amendment Bill 
Second Reading 
Debate resumed. 
Dr PAUL HUTCHISON (National—Port Waikato) 
: 
 This Hazardous Substances and New Organisms (Approvals and Enforcement) Amendment Bill was unfortunately interrupted last Thursday when I was saying just how infamous this Labour Government was for imposing compliance costs on ordinary New Zealanders and on ordinary businesses whether small medium or large through the mechanisms of taxation the Resource Management Act and of course the Hazardous Substances and New Organisms Act itself. 
 I mentioned the very well researched paper by Annie English for the meat and wool board for Dairy InSight for Deer Industry New Zealand for the Foundation for Arable Research and for Federated Farmers of New Zealand which pointed out just how costly the Hazardous Substances and New Organisms Act is for ordinary New Zealanders—and particularly for farmers with an average cost per farm in the order of $3000 for arable farmers. When one looks at the explanatory note in the first version of this bill and at the statements of net benefits of the proposal one sees there is need for considerable concern. 
Rt Hon Winston Peters 
: Who brought it in? 
Dr PAUL HUTCHISON 
: The National Government brought it in—yes it did absolutely and it was regarded at the time as one of the best pieces of legislation internationally. But over the last 5 years we have seen some of the most severe regulations in the area of new organisms anywhere in the world. It has sent—literally—hundreds of New Zealand scientists out of this country when we badly need them and I will give members one example—that is the transgenic sheep experiment that was taking place at Auckland medical school to look for a cure for Huntington’s chorea. And what happened? The scientists said they would not carry out the experiment in New Zealand as it would cost too much and it would take too long because of the regulations imposed by this Labour Government. I think that that is very important and the former member for Tauranga should be aware that in this area we have one of the most— 
Rt Hon Winston Peters 
: It’s a boomerang. 
Dr PAUL HUTCHISON 
: He is saying “a boomerang”; well I say to the former member for Tauranga that this— 
Rt Hon Winston Peters 
: Who brought it in? 
Dr PAUL HUTCHISON 
: Yes we did bring it in and he was a member of that Government funnily enough. 
Rt Hon Winston Peters 
: No. 
Dr PAUL HUTCHISON 
: Oh yes he was. He denies it—[ 
Interruption 
] Well maybe he was not. He obviously joined it later on because he recognised the virtues of this bill. Nevertheless I want to point out with respect to the cost of transferring the approximately 70000 notifiable toxic substances from transitional controls to the appropriate control regime under the Hazardous Substances and New Organisms Act the estimation of saving is about $2 million. But we are concerned that nowhere in this amendment bill is there any suggestion that there will be monitoring to ensure money will be saved. 
I will ask the Minister to take a call later on to tell this Parliament whether the Labour Government which brought in this amendment bill allegedly to save businesses money will indeed monitor the legislation when enacted to ensure that it is working. It is all very well to bring in extra burdens on farmers manufacturers importers and exporters under the guise of saving money but this Labour Government has had a very poor record over the last 5 to 6 years. 
I did want to mention one of the good things of this bill and one of the reasons why the National Opposition—the National Government to-be—is supporting it. That is found under a new heading in Part 1 “Rapid assessment and approval of other hazardous substances in special emergencies”. It is something that became a very strong reality during the varroa bee mite epidemic. When it was finally realised by the Labour Government that it would not be able to eradicate that mite there was great concern by bee-keepers that a miticide would be needed in order to protect hives. 
At the time it was impossible to bring in a miticide and according to Federated Farmers there had to be some very very heavy eyeballing of the Minister in order for there to be a mechanism to bring in an appropriate miticide. It took a hang of a lot of trouble and effort to make any move by the Labour Government to make that possible but finally it did. So it is quite good to see a rapid assessment and approval mechanism for biosecurity problems within this amendment bill. 
Hon MARIAN HOBBS (Labour—Wellington Central) 
: 
 I rise to support the Hazardous Substances and New Organisms (Approvals and Enforcement) Amendment Bill and I am delighted to do so. I found that speech that went before me to be very rich and I would like to remind the member that the first Act was passed in 1996. It was a very pure Act it was a very theoretical Act and since then we have had to amend it in order to save money for people. I am very grateful tonight that this bill will go through in urgency because it is a bill about saving money. 
At this stage I want to pass some thanks. I know I am not the Minister in charge of the actual bill but I want to thank the officials who put a lot of work into it and I also thank my good friend Brian Donnelly who took this on in the Education and Science Committee and did a whole lot of work in extra time to get this bill through. Now why? He did it because this is a bill about reducing costs. The previous speaker actually talked about the reduction in costs—maybe as much as $2 million. But there are reducing costs to Government and industry particularly through the introduction of group standards—by reducing the number of applications that a business or a farm has to make to the Environmental Risk Management Authority. 
 The 1996 legislation as I said was very pure. It was introduced I think by Simon Upton. The legislation that the Hazardous Substances and New Organisms Act 1996 replaced was amongst others the Toxic Substances Act. That legislation had been ignored for years. If I remember rightly in the last Parliament a huge debate took place around the fact that many people had not actually notified that they were importing or using toxic substances either on their farms or in their businesses. But when we gave the incentive under the Hazardous Substances and New Organisms Act to grandparent those to make it easier for businesses and farmers we found that the number of toxic substances notified suddenly increased I think by about 100000 so that we now have 110000 toxic substances to be notified. That is effective legislation. It is the second reason why this bill is good. 
The bill not only is about saving money but is about protecting our environment as well because if those toxic substances are notified and the environmental risk management process gone through boundaries will be set around the use and packaging of those substances. Does that mean anything? Use of substances? Members know the complaints that have gone through sometimes about agrichemical trespass. So we are clearly laying out how those chemicals are to be used so that they do not affect say the avocado grower’s property rights when his or her crop gets sprayed by somebody misusing the chemical in the paddock next door. That actually is good environmental practice and good fair business practice in the terms of agribusiness. 
The legislation does a second thing—and I can well remember when the Hon Nick Smith and I were on the case involving rat poisons being dropped into the sea along the Kaikoura coast. No one had done anything about legislating for the packaging and transporting of such poisons which contaminated a whole marine area. That is what this legislation is about. It is about saving money—[ 
Interruption 
] Yes it was probably and it was particularly well-named. It was also about protecting the environment. 
The other important thing about this legislation is that it involves regional councils. Again one of the holes found in that good piece of legislation of 1996 is that rather like the Building Act the Hazardous Substances and New Organisms Act relied on people to enforce the provisions themselves and all dangerous goods inspectors were taken out of the legislation. That left us in a very vulnerable state. It is why it is a very good scene to see regional councils being included probably with some funding from central government as we work through these issues in order to enforce decisions made about the use of chemicals and toxic substances. 
Let me make one other point about toxic substances because it is also about health. If we do not notify or register a toxic substance as would have happened in the past before this particular legislation was in place then nothing is registered in the poisons centre about how to treat someone if that substance is swallowed. So if a child who is on a farm in a factory or in a workshop out the back drinks something that no one knows was actually in this country we cannot treat that child. That is the value of this legislation. It is about people’s well-being—their well-being environmentally and their well-being in the sense that we have heard people and have said that we will find a way through grouping standards so that people do not have to go through individually and so that we reduce costs by $2 million. This is good legislation improving on theoretical legislation that was passed in 1996. 
Hon Dr NICK SMITH (National—Nelson) 
: 
 We need to look only at the tragedy that has just occurred in Britain to understand the importance of our Parliament passing good-quality legislation for toxic and dangerous goods in order to ensure the safety of our public and our environment as well. Where National believes the Hazardous Substances and New Organisms Act has got into significant difficulty is that the net has been thrown so wide that lots of things that have very low levels of toxicity and hold very little risk to the public have been caught up in this bureaucratic monster. That causes all sorts of costs impositions and really a breakdown in innovation within New Zealand. 
The classic example of that for me was the realisation that good old sellotape has now been defined as a toxic and dangerous good requiring its registration under the legislation. So I say again that where we have got ourselves in trouble with this legislation is not in focusing on those goods and items that are of risk but rather in throwing the net so wide that we pick up just about everything. As the previous Minister for the Environment has said in a country of 4 million people we now have 110000 different substances and goods that are within the ambit of this legislation. We have become too carried away and it needs to be simplified. 
This bill goes some way along that road and National says that is good. We are however unconvinced as to whether it goes far enough in focusing on the goods that are truly dangerous and pose some risk to the public of New Zealand. I note that National does support the idea in the bill of having a group standard rather than having individual extra substances that all have to be individually registered. That makes good sense. We also support the introduction of exposure limits. That is a good thing. 
But I also have to note that those changes were approved by Cabinet over 2½ years ago. 
Dr Paul Hutchison 
: How long? 
Hon Dr NICK SMITH 
: It was 2½ years ago I say to my colleague Paul Hutchison who has a strong interest in these areas. So for all the rhetoric that we hear from Labour about its concern about compliance costs we have had a set of quite sensible ideas to try to improve this legislation and it has sat before this Parliament for 2½ years. What does that say about the level of commitment from this Government to getting on with improving important laws such as the Act? 
I want to give a practical example. The previous Minister Marian Hobbs was the Minister for the Environment for 6 years and during that period we have done little more than tread water. We are now talking about legislation that is nearly 10 years old and we are still in transition with it. We can accept when we introduce a new statute that it may take a few years—a couple of years—to get up and running but when the transition period is 10 years long we really do put ourselves in something of a pickle. 
There is a large number of horticultural industries in my electorate and time after time I have written letters to the Minister asking about the compliance costs of introducing a new less toxic approach to pest management. 
Lindsay Tisch 
: What was the response? 
Hon Dr NICK SMITH 
: I received very little response. Basically what has happened is that New Zealand’s horticultural industries have been tied to old technologies simply because it is so expensive to introduce new ones. An organic kiwifruit grower in my area wanted to introduce a new organic substance for use in production. It was going to cost him $23000 to be able to import a 44-gallon drum of a chemical that was approved for organic use. Not surprisingly he threw his hands up in horror and he has gone nowhere. We have killed off that sort of innovation with the poor implementation of the Act and with some of its difficulties. 
I also want to give a steer as to where National sees the future. In a global environment the difficulty of being a country of just 4 million people in trying to register everything from sellotape to glue to very complex agricultural pesticides and chemicals is that it is just too much for a little country to do thoroughly. Just as is the case in respect of medicines and Food Standards Australia New Zealand it is National’s view that we need to take a more international approach. We think there is a real opportunity to work more closely with our near neighbour Australia and to come up with a common regulatory regime around many of these issues. 
As much as we despise the Aussies the reality is that they blow up just like we do. They are affected by chemicals whether they be diesel or petrol or explosives—all of those things. The vast majority of the 110000 goods covered by this legislation pose exactly the same safety and environmental issues in Australia as in New Zealand. If this Government really was concerned about compliance costs it would sit down with its Australian counterpart and move the regulatory environment to the point where when one of these new products or innovations is introduced it is possible to establish common standards between New Zealand and Australia to provide protection against it. A small range of plant materials may pose a greater risk to New Zealand than Australia but they will be a very small minority of what goes through this excessively bureaucratic process. 
 The last comment I wish to make in this debate is in support of my colleague Paul Hutchison who asked where the system is to ensure there are savings. We heard the Minister proudly boast that this bill will save $2 million a year in the hazardous substances and new organisms mechanisms for approving new substances. Quite frankly I do not believe that. I want to know which measure in the bill gives this Parliament any confidence that that will happen. I suspect it will be like the last hazardous substances and new organisms bill. This is not the first one; we had another one. We were told that that bill would solve the problems with regard to the Act and it did not. Now we are back 4 years later having another crack at it. Quite frankly I share the cynicism of Paul Hutchison that although this bill does some things that are useful there are not the checks and balances to make sure they are followed through with savings. 
The very last point I wish to make is that this stuff does matter. There is a very large imposition under the Act particularly on New Zealand’s primary industries. Whether it be the horticultural sector the agricultural sector or our forestry sector the sectors that are the driving force of the New Zealand economy are deeply affected by the legislation. As it stands at the moment we are holding back innovation and holding back success in those industries and we are stopping them from using the latest international technology—much of which is more environmentally friendly—because of issues with regard to the Act. This Government has been tardy in addressing those issues. Six years on we still have problems with the Act. We want to see a wider reform. We want to see the Act working so that New Zealanders can be confident that their environment is looked after and that dangerous goods are managed in a safe way but equally confident that we can be economically successful without holding back the industries that provide the wealth for our nation. 
Hon BRIAN DONNELLY (NZ First) 
: 
 Just for the edification of the previous speaker Dr Nick Smith the Education and Science Committee in the last Parliament scrutinised three pieces of hazardous substances and new organisms legislation. One of course was the GE legislation when the moratorium came off and the other two were more to do with toxic substances—such as this bill. 
As has been pointed out the bill is part of a raft of legislation stemming from the 1996 Act which was the brainchild of Simon Upton and which sought to establish a common framework to regulate the use of a whole range of dangerous substances and novel organisms. Prior to that these provisions were in a range of different Acts and he was trying to put them all under one umbrella. So it is a little bit preposterous for Paul Hutchison to complain about compliance costs because those costs flow through from the original legislation that was put in place by the National Government. It is a bit like the National Certificate of Educational Achievement (NCEA). National complains nowadays about NCEA but forgets that it was brought in by the National Government. However one of the things that was not anticipated by that original legislation is the provision in the bill relating to group standards. The group standards mechanism in the bill will reduce compliance costs and it is an endeavour to reduce those costs. The bill together with subsequent Cabinet decisions sets out a timetable for all the necessary measures that flowed through from the original legislation. The original legislation did not tie it all up. It had an expectation that further measures would be flowing from that—and this bill is one of them—particularly in response to the criticisms around compliance costs and the bureaucratic monster that Dr Nick Smith referred to. 
The key mechanism and the unique mechanism in this bill not anticipated by Simon Upton is that mechanism of group standards so that substances of similar types and characteristics can be treated as a group rather than as an array of different substances each monitoring its own set of regulations and controls. The outcome of this should be a more user-friendly less-bureaucratic and less-expensive way of regulating the use of hazardous substances in New Zealand and certainly it was recognised as such by most of the submitters. Nick Smith referred to the Act turning into a bureaucratic monster. Well if some changes had not been made to it in the previous legislation we would have had the ludicrous situation of farmers for example having to get handlers’ licences purely and simply to distribute or use Billy Peach flea powder on their dogs. So some of those problems have been eradicated. 
Although some submitters suggested that some changes be made and some suggested that the manner in which we have gone about developing the procedures flowing from the 1996 Act are flawed in fact one of the arguments was that we have not sufficiently used some international work in this particular field to springboard off; we have tended to try to recreate the wheel all for ourselves. Everybody agreed. There was not one group of submitters that did not agree it was necessary to pass this bill in a timely fashion. I guess for some of those who hark back to earlier times and wish we had gone down a different path the answer is to be found in  
Macbeth 
 in that statement he made that we are so steeped in blood it would be as tedious to go back as to go forward. As chair of the select committee that saw this legislation through in the last Parliament I want to thank sincerely the members of that committee including those who are no longer with us in this House such as Bernie Ogilvy and Deborah Coddington because the issues were extremely complex. I would have to say that the bill was about as arid as Ayers Rock or as dry as a fish’s proverbial. Nevertheless the committee members stuck with it. They made the effort to engage intellectually. 
I think the hazardous substances and new organisms legislation was put before the Education and Science Committee because of the GE legislation. Normally it would go to the Local Government and Environment Committee. But we know that that committee was chaired by Jeanette Fitzsimons of the Greens which was a partner to Labour but I think that they probably were not quite comfortable with putting it there so because we had the word “Science” in our title they shoved it towards us. However the members I must admit made a sterling effort to engage intellectually and they made some sensible amendments as we went through. For example new section 20A(2) inserted by clause 6 has been amended so that it is consistent with the items for which an exposure limit can be set as specified in clause 17. It is absolutely stunning stuff and I am sure the House agrees but it is critical for ensuring the safety of New Zealanders in using hazardous substances into the future. Nick Smith made a very good point about the example in England. The committee also tightened up some of the provisions. For example it recommended an amendment to ensure that importers who bring unapproved hazardous substances into this country will be required to pay the full costs of re-exporting those materials. Hopefully this will deter the fly-by-nighters who would endanger the well-being of New Zealanders. 
There was one issue that the committee was unable to fully resolve within the scope we had. It was an issue brought to our attention by vets and it was the conundrum they face in that some of the products they use are regulated by two and in some cases three different pieces of legislation. So they have three different regulatory frameworks but in most cases only two that they have to go through. Further work does need to be carried out on this particular issue by officials. Fortunately the vets themselves saw the implementation of group standards as the next best option so they were not dying in a ditch on the matter which they so sensibly brought to the attention of the committee. 
The second reading of this bill cannot be allowed to go through without a criticism of the management of the legislation. I believe that Nick Smith’s criticisms are somewhat justified. This legislation should have been passed before the election for it to meet the time frames and in fact a Supplementary Order Paper is now required to legitimise the actions of the ministry. This is simply not good enough and it arose purely and simply from poor management of the work programme. A timetable has long been established as to when things have to be done. Otherwise if they are not done within that time frame we will have periods of time when we have no protections whatsoever. The Government the Minister and the ministry officials all knew what that timetable was. It is simply not good enough for officials to drop legislation and then put pressure on select committees to meet their timetable. It is certainly not all right for the Government to set report-back dates that require members to attend through January in order to meet those dates. It is certainly not all right to set report-back dates that do not allow the appropriate scrutiny of the legislation by the select committee—something that we would not agree to especially with the sorts of complex matters that need to be scrutinised in legislation such as the bill we are discussing. So I believe we can concur with the criticism of Nick Smith that the timing of this legislation and the timeliness with which it was brought to the House can be justifiably criticised by the House and by members of the select committee. 
New Zealand First however is pleased that it has been able to make a contribution to the legislation. We believe that the outcome will be to make New Zealand a more manageable and safer environment and that has to be positive for our nation. In the end whilst members brought up some flaws in the bill I think it was unanimously agreed to by all parties on the select committee and I think that possibly will be the outcome of the vote tonight. 
NATHAN GUY (National) 
: 
 It is interesting that Mr Donnelly talked about the legislation being as dry as Ayers Rock because I had a look at it and thought the same thing. The previous Minister for the Environment Marian Hobbs talked about a few things that I thought were interesting to do with the whole administration of the legislation by regional councils. I fear that it will just impose another compliance cost that will be a burden on the ratepayer like so many other things passed through this House. This bill is complex legislation that we need some time to digest. I would personally favour amending the whole Act but I heard Mr Donnelly say that that might be quite a task. In speaking to this legislation I am following on from my learned colleagues Dr Hutchison and Dr Nick Smith who have added a lot of value to the discussion here tonight. I agree with a comment made by Dr Smith that we have to work more closely with Australia to get this legislation through across the Tasman. It is also worth noting as Dr Hutchison mentioned and as you would know Madam Assistant Speaker from my farming background that this legislation— 
The ASSISTANT SPEAKER (Ann Hartley) 
: I am sorry to interrupt the member but the time has come for me to leave the Chair. 
Sitting suspended from 10 p.m. to 9 a.m. (Wednesday)