Volume 663 Week 42 - Thursday 20 May 2010 
Volume 663 Week 42 - Thursday 20 May 2010 
[Volume:663;Page:11039] 
Thursday 20 May 2010 
Mr Speaker 
 took the Chair at 2 p.m. 
Prayers 
. 
Appropriation (2009/10 Supplementary Estimates) Bill 
Procedure 
Hon BILL ENGLISH (Minister of Finance) 
: 
 I hereby present the Supplementary Estimates of Appropriations for the Government of New Zealand and supporting information for the year ending 30 June 2010 (B.7). 
Mr SPEAKER 
: That paper is published under the authority of the House. 
Appropriation (2010/11 Estimates) Bill 
Procedure 
Hon BILL ENGLISH (Minister of Finance) 
: 
 I hereby present the Budget 2010 Minister’s Executive Summary the speech the Fiscal Strategy Report the Economic and Fiscal Update (B.2 and B.3) the Estimates of Appropriations for the Government of New Zealand for the year ending 30 June 2011 (B.5) the information supporting the Estimates of Appropriations for the Government of New Zealand for the year ending 30 June 2011 (B.5A Volumes 1-10) and the departmental statements of intent. 
Mr SPEAKER 
: Those papers are published under the authority of the House. 
Points of Order 
Chamber Lobbies and Galleries—Audio System 
Hon TAU HENARE (National) 
: 
 I raise a point of order Mr Speaker. Some of us at the back cannot hear. 
Mr SPEAKER 
: The sound technicians will be aware of the concerns of the member and will do their best to improve the situation. I apologise but I expect improvements will be made before the Minister commences the second reading. 
Appropriation (2010/11 Estimates) Bill 
First Reading 
Hon BILL ENGLISH (Minister of Finance) 
: 
 I move  
That the Appropriation (2010/11 Estimates) Bill be now read a first time. 
Bill read a first time. 
Budget Statement 
Budget Debate 
Hon BILL ENGLISH (Minister of Finance) 
: 
 I move  
That the Appropriation (2010/11 Estimates) Bill be now read a second time 
. 
Mr Speaker 
I move that the Appropriation (2010/11 Estimates) Bill be now read a second time. 
On election day 2008 New Zealanders voted for a more prosperous ambitious New Zealand where Kiwis have opportunities to get ahead. 
The National-led Government came into office with the New Zealand economy well into recession and with the world’s financial system experiencing its worst crisis since the Great Depression. 
By necessity last year’s Budget was focused on getting New Zealand through the global crisis. Budget 2009 maintained the nation’s credit rating preserved income support entitlements and fulfilled commitments from the 2008 election. 
To help sustain economic activity and support jobs the Government absorbed much of the shock of the recession on its own balance sheet thereby significantly increasing its borrowing. 
The worst of the global crisis has for now passed and the economy has begun to grow again. In fact New Zealand has weathered the economic storm better than many other developed economies. 
Government policy struck the right balance between blunting the sharp edges of recession and maintaining control of public finances. 
But we have work to do. That’s why Budget 2010 is about building the recovery creating jobs and helping Kiwi families get ahead. 
Creating and passing through this House a budget each year is at the heart of stable government. I want to especially thank the Government’s support parties ACT the Maori Party and United Future for their contributions. 
I am pleased to tell the House that this Budget will fund improved services to the public will produce a lower track for future debt and will deliver a tax package that will be good for the economy and good for families. 
Mr Speaker 
I now turn to four main objectives of this Budget. 
The first is lifting the long-term performance of the economy. 
The second is reform of the tax system to make it fairer more sustainable and more supporting of economic growth. 
The third is better delivery of public services to make them better for users of those services and better for taxpayers. 
The fourth is to maintain firm control of the Government’s finances so we can return to budget surpluses and pull back our rising debt. 
Mr Speaker 
Growth matters. It is the only way that we can lift incomes create permanent jobs and build the kind of country we aspire to be. 
Lifting the long term performance of the economy will require considered and consistent change over the next decade because the challenges are significant. 
It is convenient to blame sluggish growth on the global recession but that is not the sole cause. 
Our economy entered recession well before the financial crisis began in late 2008. 
Growth in the three years prior was below one per cent per annum. This was less than half our trading partner average and less than one-third of Australia’s growth rate. 
From mid-decade on growth had been fuelled by a mix of rising household debt and ballooning Government expenditure which grew 50 per cent in the five years to 2009. 
By contrast output from exporters and import competing industries had been in decline since 2005. 
These include sectors such as agriculture horticulture mining and resources forestry fishing food manufacturing and tourism all areas where New Zealand should be benefiting from its natural advantages. 
Too many New Zealanders have discovered that growth driven by debt Government spending and property speculation does not create permanent worthwhile jobs. 
The consequences of this decline in our earning capacity are now clear: too few jobs created a balance of payments deficit over 8 per cent of GDP until its recent decline and negative productivity growth between 2000 and 2009. 
The economy has spent more than it earned and borrowed to make up the difference. 
New Zealand’s largest single vulnerability is now its large and growing net external liabilities. New Zealand owes the world $168 billion or around 90 per cent of GDP. 
Private sector debt to foreign lenders has grown steadily over the last decade and our vulnerability will be increased by growth in government debt to foreign lenders over the next five years. 
The dangers of too much debt are well illustrated by a number of European nations who are currently undergoing painful changes involving increasing taxes cutting public services or both. 
The Government is committed to policies that will reduce our vulnerabilities by tilting our economy away from debt and consumption toward savings investment and exports. 
Mr Speaker 
These policies underpin the updated Treasury forecasts showing steady growth of around 3 per cent over each of the next four years. 
The forecasts also show that this growth will raise real incomes of the average household by about $7000 over the next four years and create 170000 jobs. 
Unemployment has already fallen to 6 per cent. We share with both ACT and the Maori Party a common desire to help New Zealanders move off welfare and get ahead under their own steam. 
Global developments highlight the opportunity for New Zealand to stand out. We will emerge from recession with sound finances quality public services and low and stable tax rates. 
We will naturally appeal as a place people want to live and do business. 
Mr Speaker 
The Government’s growth strategy has identified six key drivers of stronger economic performance—a better regulatory environment for business; skills and education; quality infrastructure; science innovation and trade; improved public sector performance; and tax reform. 
These jointly form a programme to address economic imbalances and lift growth. 
The Government is making progress in all six areas. 
Mr Speaker 
I now turn to the Budget’s second objective that of improving the tax system. 
Tax reform is a centrepiece of this Budget. 
We want a system that rewards effort and helps families get ahead. 
One that attracts and retain skilled people in New Zealand. 
One that encourages savings and productive investment. 
And we want to make the tax system fairer. 
Mr Speaker 
Tax has a powerful influence on savings and investment decisions. Uneven tax rates have been a major drag on growth. Sectors with low effective tax rates have expanded at the expense of the rest of the economy. 
The Government is strongly of the view that investments should stand on their own merits and not be unduly influenced by tax. 
There is also compelling evidence of widespread avoidance mostly brought about by taxpayers exploiting differing effective tax rates. The system lacks integrity and fairness. 
The Tax Working Group of 2010 echoed the findings of the earlier McLeod Tax Review of 2001 on these matters. 
We also required any changes to be broadly fiscally neutral. Given the increase in public debt of recent years it would be irresponsible to saddle the next generation to pay for tax cuts now. 
Over four years the package delivers around $15 billion of tax cuts. This is matched by a similar level of revenue increases from less economically damaging sources. 
The total package has a cost of $460 million in the first year due to some revenue initiatives which cannot be immediately implemented. 
The main elements of the tax package are a shift towards lower and more uniform rates of income tax more indirect taxation and broadening the existing tax bases. 
It represents the most thorough and beneficial overhaul of the tax system in 25 years. 
From 1 October 2010 we will lower personal income tax rates and increase the rate of GST to 15 per cent. 
The increase in GST has been estimated by Statistics New Zealand to raise the level of prices by about 2 per cent. 
To put this in perspective this is less than actual CPI inflation in each of the past six years. 
The Government is concerned to protect the vulnerable and those less well off from this one-off rise in the general level of prices. 
This continues the approach taken in last year’s Budget which preserved income support and entitlements in the face of the global recession. 
The tax package will protect the incomes of New Zealanders in two ways. 
First for income earners at all taxable income levels the reduction in personal income tax will be sufficient to match the increase in GST. 
Second the package will provide from 1 October 2010 an immediate lift in the levels of New Zealand Superannuation all main benefits student allowances and Working for Families payments. This will be sufficient to offset the estimated impact on prices due to the rise in GST. 
The payments will be adjusted to ensure the full CPI effect is captured excluding the CPI impact of the tobacco excise increase. 
Revenue raised from GST and other base broadening measures will be used to fund an across the board reduction in all income tax rates. 
The changes to personal income tax rates to apply from 1 October 2010 will be as follows: 
The initial income tax rate applying up to income of $14000 will reduce from 12.5 per cent to 10.5 per cent. 
The tax rate applying to income between $14000 and $48000 will reduce from 21 per cent to 17.5 per cent. 
The tax rate applying to income between $48000 and $70000 will reduce from 33 per cent to 30 per cent. 
The tax rate applying to income over $70000 will reduce from 38 per cent to 33 per cent. 
These are substantial and worthwhile tax reductions. 
They mean that for example a typical two earner family with two children who earns the average household income will after allowing for the increase in GST be better off by $25 per week or $1285 per year. 
When combined with the tax cuts already delivered from 1 April 2009 that family will be better off by over $43 per week or $2245 per year. 
The changes also mean that since March 2009 the marginal rate of income tax faced by taxpayers earning between $40000 and $48000 just below the average wage will have almost halved from 33 per cent to 17.5 per cent. 
Taxpayers wanting to know how their own position is changed by today’s tax package can consult our website www.taxguide.govt.nz and make this calculation. 
Mr Speaker 
The Government believes that in a world of mobile capital business income is particularly sensitive to tax rates. 
When New Zealand’s company tax rate was set at 33 per cent more than 20 years ago that rate was competitive by world standards. 
Since then company tax rates show strong downward momentum around the globe. 
The tax rate applying to New Zealand companies will reduce from 30 per cent to 28 per cent. This will apply from the start of the 2011/12 income year. 
28 per cent will also become the standard tax rate applying to most savings vehicles. 
It will apply to vehicles taxed as companies including Group Investment Funds unit trusts life insurance and superannuation funds. It will also be the maximum tax rate applicable to Portfolio Investment Entities known as PIEs. 
Lower income taxpayers will still have access to lower rates via imputation credits from companies and electing lower PIE rates. 
The tax rate applying to trusts will remain at 33 per cent the same as the new top personal rate of income tax. 
The previous gap between the 33 per cent tax rate for trusts and the 38 per cent rate for higher income individuals has spawned widespread use of trusts as tax planning vehicles. Trusts have an important role in our economy but this should not be driven by tax advantages. 
Applying a lower and more uniform tax rate to most forms of capital income will improve the durability and integrity of the tax system. It will encourage individuals to save and companies to invest. 
Mr Speaker 
The Tax Working Group also reported that anomalies arise through the use of taxable income as a means of determining eligibility for certain Government assistance. Taxable income may not always be a good measure of true economic circumstances. 
As an initial step from 1 April 2011 investment losses will be added back to taxable income for the purpose of determining a family’s eligibility for Working for Families assistance. 
Further changes of eligibility for Government assistance including student allowances covering areas such as distributions from trusts and income from cash PIEs will follow after the Budget. Officials will release a paper setting out the issues and proposed solutions later this year for implementation from 1 April 2011. 
Mr Speaker 
The Budget will also introduce a range of measures to broaden tax bases. These measures are being introduced to improve the fairness and efficiency of the tax system and to improve the economy. 
The existing 20 per cent loading on depreciation for new investments will be removed for assets acquired after today. Assets already purchased will continue to receive the loading. 
This allowance explicitly departed from the principle of allowing deductions for true economic depreciation. It results in other taxpayers effectively supporting investments that might not stand up on their own merits. 
In addition the Government is not convinced that all buildings actually depreciate. 
It is clear that some do. But many New Zealanders live happily in houses constructed over 100 years ago. 
Allowing tax deductions for depreciation provides an unfair tax advantage for these assets. 
Accordingly the depreciation rate for most buildings with an expected life of 50 years or more will be set to zero from the start of the 2011/12 income year. 
Those buildings where the current depreciation schedule is consistent with a useful life of less than 50 years will be unaffected. 
Building owners who believe that under these rules a class of buildings should qualify for depreciation may seek a provisional rate from Inland Revenue as they do at present. 
Following the Budget the treatment of commercial building fitout will be reviewed and if necessary amended prior to 1 April 2011 to clarify the law on the split between buildings which will not be depreciable and separate assets which will continue to be depreciable. 
Taxpayers will of course still be able to claim deductions for repairs and maintenance. 
Many investors hold property through Loss Attributing Qualifying Companies or LAQCs. After a short period of consultation legislation will be proposed so that from 1 April 2011 all LAQCs will be taxed as limited partnerships. 
The main impact of this change will be to ensure both profits and losses are assessed at the marginal tax rate of the investor. 
The Government has also reviewed taxation of inward investment into New Zealand. International tax law generally provides that income should be taxed in the jurisdiction where it is earned. 
However it is relatively easy to transfer income between jurisdictions by use of debt often between related parties. 
New Zealand like most countries operates “thin capitalisation” rules to limit this practice. The current “safe harbour” limit for gearing on foreign owned investments will be reduced from 75 per cent to 60 per cent from the 2011/12 income year. 
Mr Speaker 
This package of tax changes represents a major step forward. By improving incentives to save and evening up effective tax rates across sectors and across vehicles it directly addresses some of the problems that have beset the economy in recent years. 
The package improves fairness and the integrity of the tax system. It ensures that taxpayers with similar circumstances and true economic incomes will have similar tax positions. 
The package is broadly neutral in terms of income distribution. 
While higher income earners pay more tax and therefore receive larger personal income tax reductions these groups also bear most of the impact of the tax base broadening measures. 
In addition the compensation package is targeted to those on lower incomes. 
On average most New Zealanders receive roughly a half to one per cent average increase in real disposable income. 
The impact of the tax changes on economic growth will be positive though only a small allowance has been made for this in the fiscal projections. 
Finally I thank my colleague the Hon Peter Dunne who as Minister of Revenue has worked tirelessly to help deliver the tax package before the House today. 
Mr Speaker 
Budget 2010 also contains a range of other initiatives that will promote growth. 
We have focused funding on investing in innovation and encouraging growth in selected productive sectors. 
The Budget allocates $321 million over four years for a range of science and R&D incentives lifting total spending to $750 million per annum. 
This includes business R&D grants and assistance for firms to access new ideas science and technology from Public Research Organisations stronger commercialisation within CRIs and universities and research infrastructure. 
The global financial crisis was a setback for tourism. The Budget allocates $30 million of new spending in 2010/11 mostly to increase the marketing of New Zealand as a tourism destination internationally. 
The Government will legislate this year to support the aquaculture sector’s objective of becoming a billion dollar industry by 2025 working with industry and other stakeholders to lift regulatory barriers. 
Late last year the Government agreed to most of the recommendations of the Capital Market Development Taskforce and is in the process of implementing them. 
The Government released a plan to unlock New Zealand’s petroleum and mineral potential in November 2009 and has begun implementing it. This Budget funds implementation of that plan. 
Water is also a key strategic resource. The Government is currently working on improving the regulatory regime including those parts that impact storage and irrigation as part of an efficient and sustainable water management programme. 
Mr Speaker 
Another important leg of our growth plan is to improve access for New Zealand exporters to world markets. 
China has recently and rapidly become our second largest trading partner. 
Given the increasing importance to New Zealand of trade with Asia and the Pacific Rim we have also recently signed Free Trade Agreements with Hong Kong and Malaysia and are negotiating with Korea and India. 
Our Agreement with the 10 countries of ASEAN recently came into force. 
We are working with the Trans-Pacific Partnership regional grouping including the United States to open further markets and opportunities for New Zealand exporters. 
Mr Speaker 
To ensure that these and related initiatives continue to benefit the economy we have established the Productivity Commission. This will be a standing body with high level expertise operating independently with a wide brief to undertake inquiries into productivity-related matters. It will be in place by April 2011. 
The Government also intends to release a discussion document on ways to ensure that all new and existing regulation is subject to proper scrutiny. This will help avoid proliferation of red tape. 
For both of these initiatives the Government is grateful for the leadership shown by the Hon Rodney Hide and the ACT Party. 
Mr Speaker 
I now turn to how the Government can ensure better delivery of services to the public. 
A more efficient public sector will deliver better quality services while reducing fiscal and tax pressures on the rest of the economy. 
The Government determined that rather than spread new spending resources thinly it would focus on those few high priority areas that really mattered. 
Three quarters of the new spending allowance has been allocated to improving health and education services and to lifting science and innovation. Most of the other votes received either small or no increases. Many will see no additional funding for several years. 
The Government is working with public sector chief executives to deliver higher quality services more efficiently as every other organisation in the community has had to do over the past two years and I thank them for their efforts. We will continue to scrutinise every dollar of public spending. 
As we committed a year ago Budget 2010 lives within a new operating spending allowance of $1.1 billion per year. In addition a further $1.8 billion has been made available between now and 2014 by redirecting resources into higher priority areas including within health and education spending. 
Core Crown expenditure also increases due to rising benefit and superannuation costs increased finance costs and expenditure on the emissions trading scheme. 
In total core Crown expenditure is forecast to increase by $5.9 billion to over $70 billion in 2010/11. 
Mr Speaker 
The largest share of new spending has been dedicated to improving core Government services. 
In total Health has been allocated an additional $2.1 billion over the next four years including an extra $512 million in 2010/11 to cater for ongoing demographic and price pressures. 
This includes $93 million for disability support and $60 million to boost elective surgery over the next four years. 
The Government’s commitment to education remains strong. This Government wants all young New Zealanders to reach their potential and be given the opportunity to succeed. 
The Budget provides an extra $1.6 billion for education over four years. 
This will fund a 4 per cent increase in operating expenditure for schools. It also includes $349 million for school property $92 million to raise participation in Early Childhood Education for families in areas currently under-represented and $48 million to extend the Youth Guarantee. 
Social services are also a priority. Building on the success of the Government’s Community Response Fund the Budget provides $91 million over the next four years for Non-Government Organisations to deliver extra services. 
Justice receives $147 million in new operating expenditure as well as significant capital expenditure. This will fund a lift in prison capacity legal aid restructuring and increase Family and Youth Court professional services. 
Our commitment to Whanau Ora is matched by funding of $134 million over four years. The first wave of 20 Whanau Ora providers will be selected through an Expressions of Interest process that begins next month. 
The Budget provides almost $20 million for two new Whare Oranga Ake reintegration units. 
I particularly thank the Hon Dr Pita Sharples and the Hon Tariana Turia as the Ministers responsible together with the rest of the Maori Party. 
The Government retains an on-going commitment to growing the supply of affordable housing for New Zealanders and their families. $20 million has been provided to extend Housing New Zealand’s Housing Innovation Fund for another year. 
Mr Speaker 
The Government is determined to improve management of government owned assets. Too often Government assets have been poorly managed and liabilities poorly monitored. 
As at 30 June 2009 the Crown balance sheet showed $217 billion of assets and $118 billion of liabilities. 
The Crown has a wide range of holdings and is by far the largest asset owner in the country. 
It holds around $100 billion of what could be termed social assets including roads national parks state housing schools and hospitals. 
It holds around $70 billion of financial assets comprising a wide range of local and overseas investments all of which produce commercial returns. 
And it holds over $50 billion worth of commercial assets comprising mainly SOEs and KiwiRail. 
These assets have been funded by New Zealanders paying taxes and fees over decades. 
The Budget forecasts show that over the next four years the value of Government owned assets is expected to increase by some $32 billion. This represents growth in taxpayer wealth. 
This level of investment demands a high standard of stewardship by Government. 
Since taking office the Government has been working hard to understand the capital demands of its operations and to allocate capital to where it can best be used. 
We have produced the first National Infrastructure Plan tightened commercial disciplines on SOEs and started to introduce better disciplines on procurement processes. 
New capital spending decisions in this Budget reflect this increased emphasis on managing the public’s resources to promote growth. 
We continue to invest in our $7.5 billion infrastructure programme over the next four years. 
The Budget funds major investment in the rail network. 
The Government has committed in principle to investing $750 million over the next three years as its contribution to KiwiRail’s $4.6 billion turnaround plan. 
This is in addition to $500 million over four years to purchase electric commuter trains. 
Another major investment is the Government’s ongoing investment in ultra-fast broadband infrastructure through Crown Fibre Holdings. 
Budget 2010 allocates a further $200 million of capital funding in addition to the $248 million allocated last year as part of a total expected investment of $1.5 billion. 
This funding will enable Crown Fibre Holdings to start making substantial contract commitments with the private sector to start rolling out the new fibre network. 
A further $48 million has been allocated for ultra-fast broadband in schools. 
Funding has been set aside for a new prison potentially delivered via a Public Private Partnership. 
Mr Speaker 
I now turn to the Government’s fourth objective that of maintaining firm control of the government’s finances so we can return the budget to surplus and reduce our rising debt. 
The fiscal outlook has improved from last year due to the economy returning to growth and the positive impact of Budget 2009 decisions. 
The projected operating deficit for the next financial year is $8.6 billion or 4.2 per cent of GDP. 
It is projected to improve steadily in each subsequent year and to reach surplus in 2015/16 three years ahead of last year’s projection. 
As a result of this improved outlook the debt projections have also become more favourable. 
Net core Crown debt is now projected to peak at 27 per cent of GDP in 2014/15 and then decline steadily. This is both a lower and earlier peak than was projected in last year’s Budget. It contrasts strongly with the outlook of ever rising debt which the Government was presented with in late 2008. 
By 2024 net core Crown debt is projected to be back to 14 per cent of GDP or about the level before the crisis struck. 
However it will require at least a further decade of disciplined fiscal management to deal with the effects of the global financial crisis and the huge lift in Government spending during the boom years leading up to that crisis. 
Financing new and maturing debt will require the Government to borrow around $240 million every week over the next three years. Debt is projected to reach $68 billion by 2014/15. 
This substantial rise in debt will mean that interest costs more than double. 
Our long term fiscal objective remains to ensure that net debt is brought back to no more than 20 per cent of GDP by the mid 2020s. The current projections show this being achieved by 2022. 
If possible it would be preferable to return to this low level of debt earlier. 
Mr Speaker 
The improvement in the debt outlook gives the Government some flexibility to absorb part of any future shocks as it did in the last recession. 
Our intention is that any favourable surprises will be used for deficit reduction and debt consolidation. 
When the books are balanced and debt has stopped rising the Government will have more choices about where to invest spend or reduce taxes. 
Mr Speaker 
Budget 2010 is about building the recovery and helping New Zealanders prosper. 
The Prime Minister has made clear this Government’s aspirations for an economy that values enterprise rewards people for effort and encourages them to get ahead. 
New Zealand has successfully navigated the worst global crisis in a generation. The challenge now is to build growth and create new jobs. Sustained growth provides opportunities for New Zealanders to achieve their aspirations. 
Budget 2010 drives the New Zealand economy forward moving away from debt and consumption while increasing investment and exports. 
We set a path for responsible Government spending last year and we maintain that path in this Budget. 
We have changed the tax system to rebalance the economy to put cash into people’s hands and to encourage them to save more and consume less. This will have a long term benefit. 
We now have our debt under control and unemployment is beginning to fall. We will emerge as one of the countries that other nations aspire to be more like. 
There are risks to the recovery. A mountain of debt hangs over a number of our export destinations and will also influence the markets that lend to New Zealand. 
We cannot take for granted the contribution that the Australian and Chinese economies have made to our growth. 
However we are on track to a position most developed economies will envy. 
This includes more new jobs falling unemployment rising family incomes quality public services and sound public finances. 
Mr Speaker 
This Budget continues to build a platform for a much more ambitious New Zealand. 
Mr Speaker 
I commend this Budget to the House. 
Hon PHIL GOFF (Leader of the Opposition) 
: 
 I move  
That the words after “That” be omitted and the following substituted: “this House has no confidence in the National Government led by John Key which has blatantly broken its clear promise not to raise the Goods and Services Tax has pushed up prices when working people have had their lowest wage rises in more than a decade has failed to implement a plan for jobs lacks any vision for a smart high-skill high-tech and high-wage economy has cut services and assistance to the most needy in our community and has rewarded the most wealthy at the expense of middle and low income New Zealanders.” 
Today the National Government had the opportunity to deliver a Budget that was fair for all New Zealanders—a Budget for the many not the few. Today the National Government had the chance to produce a Budget that invested in the future a Budget that promoted a modern smart economy with more and better jobs and higher wages. This National-led Government has failed absolutely in those objectives. There were no new ideas to create jobs and the future that they need. Instead the Government has pushed up the price of just about every good or service that New Zealanders buy. It has borrowed extra to give a windfall to the most wealthy people in this country. It has broken its promises to senior citizens. It has created the highest level of inflation in decades—nearly a 6 percent rate of inflation. In the time that we have had our estimate is that average earners will be $30 a week worse off after inflation—$30 a week worse off after inflation. Those on the average wage will get a $15 a week tax cut. Goods and services will go up by $45 a week. That leaves them $30 a week worse off by Mr English’s own figures. The top 1 percent of income earners will get 12 times the cut in their income tax of the average earner—12 times the cut of the average earner. 
This Budget is a short-term plan that will look after the interests of the highest-income earners which this National Government represents but it is a Budget that comes with a huge cost. It was ironic to listen to the National backbenchers cheering the figures on health. Why would they cheer the figures on health when those figures left a $300 million gap in maintaining health services even at the current level? That is a $300 million hole in the health budget. 
When we look at the education budget we see that there is not the additional funding in education that will come even near to meeting the cost of extra inflation. If we take the critical area of education where the foundation is laid for our children to learn early childhood education we see a slashing of $400 million over 4 years—$400 million over 4 years. My challenge to the Prime Minister is to ask how that cut will be met. Will it be met with additional fees on all of those who are trying to get a quality early childhood education for their families or will it mean a cut to the quality of early childhood education? Either way that is a disastrous failure to invest in the future of our country—our children. 
Before the election Mr Key promised that the average wage earner would get a tax cut of $50 a week. That has not eventuated. There is no $50 a week tax cut for the average income earner. The Government promised tax cuts. Last year it cancelled the tax cuts and it talked about a tax switch. But this year they have actually delivered a tax swindle—a tax swindle. There is no $50 a week tax cut for those on the average wage. National has done what it never told New Zealanders it would do. It promised income tax cuts but it never told New Zealanders that they would be paying for those cuts themselves through the increase in GST. In fact 2 weeks before the election Mr Key stood up looked down the barrel of the camera and said that National would not increase GST. Every time he denies or tries to qualify that his credibility goes down. That is a broken promise by the National Government. 
This Budget will do nothing to create jobs or fix the problems that need to be fixed for New Zealand. 
Hon Bill English 
: Tell us your GST position. 
Hon PHIL GOFF 
: Bill English has given himself $240 extra a week not to mention doubling his housing allowance until he was caught out. I say to Mr English that this not a Budget that looks after the middle and low income earners; this is a Budget that looks after him and his mates on his level of income but it is unfair to ordinary New Zealanders. 
The cuts in income tax were designed to compensate for GST going up by 2.5 percent but they will not compensate for the rise in the cost of living. Bill English never told New Zealand that he would be pushing up inflation to 6 percent after his second Budget—6 percent. That is the highest rate of inflation that we have seen in decades in this country and it will eat into the living standards and the wellbeing of our people. 
National has increased consumption tax by 20 percent. I say to Mr Key that that consumption tax is regressive. Mr Key might have said that the wealthy will pay more GST in dollar terms but a far higher percentage of the income of low-income earners will be consumed by the GST increase than that of high-income earners. Make no mistake—that is a regressive tax and it is not being adequately compensated for by the cuts in income tax. The big cuts in income tax go to the wealthy; the big increases in income being spent on consumption taxes land on the lower and middle income earners. This country now has one of the highest rates of consumption tax in the world because there are no exemptions to GST. We have the fourth or fifth highest consumption tax in the OECD. Consumers never voted for GST to go up because John Key promised them that it would not go up. 
Businesses are not in favour of GST going up. In a recent survey of small businesses across New Zealand 8 percent supported an increase in GST—8 percent I say to Mr English. Businesses know that the increase will be bad for them and bad for New Zealand. In this Budget we were going to have a rebalancing of incentives to invest in the productive economy rather than the property speculation part of the economy. 
Hon David Cunliffe 
: Wimped out! 
Hon PHIL GOFF 
: This Government wimped out because so many of its supporters are the very property investors that that rebalancing would have hurt. 
Hon Gerry Brownlee 
: Not correct. 
Hon PHIL GOFF 
: That is correct and I say to Mr Brownlee that it would have included a lot on that side of the House. The Minister should know that nothing in this Budget will be effective in rebalancing investment from the property investment sector to the productive economy. This Budget fails absolutely on that count. 
The income tax cuts such as they were were designed to compensate for GST but I ask what the Minister of Finance has done for the lower and middle income earners of this country to compensate for all the other taxes that have been imposed. There is the tax on business and innovation in Mr Brownlee’s portfolio. They cut the 15 percent research and development credit and a year later put 39 percent of that money back into research and development. It is too little too late and an embarrassing acknowledgment that they got it wrong in the first place. 
There is the $200 million windfall in tobacco tax. I would have thought that a Government introducing that for reasons other than simply gaining the windfall revenue might put some of that money back into tobacco-use prevention programmes or addiction treatment programmes. But no that money is being taken as a windfall the cost will fall disproportionately on some in the community and there is nothing in a positive sense that will lead people to break that addiction with the assistance of at least some of that $200 million. 
National promised that it would cut taxes and not increase them. It has not delivered on that; the net position of average New Zealanders will be worse as a result of the costs imposed on New Zealanders compared with the so-called cut-the-tax swindle. The costs facing New Zealanders will go up dramatically in the next year and this Government has done nothing to protect middle and low income earners against that. Homeowners will face three or four hikes in the interest rate they pay as the official cash rate goes up in the next 18 months. Inflation at 6 percent is higher than even the banks estimated would be the result of the impact of National’s actions. The only people who come out of this Budget better off in net terms are the wealthy. Mr Key as Prime Minister will get $350 a week the average Cabinet Minister will get over $200 a week and the average New Zealander will be struggling to get $13 a week—and that will be totally consumed by the additional inflation. 
We heard a lot earlier in the week about closing the loopholes where the wealthy were escaping their obligations to pay even their share of the tax. I ask Mr English where the evidence is that that Minister has made any difference at all to those loopholes. Options were put up by the Tax Working Group and that Government has lacked the courage of its convictions to implement the recommendations that were made. The wealthy will not be paying more tax as a result of this Budget but the 40 percent of New Zealanders at the bottom who Mr Key said were not pulling their weight will be paying more because they will be paying more GST on everything they buy. 
Mr Key said earlier in the week that New Zealanders should not be jealous of the fact that the wealthy were getting the biggest share. They are not jealous I say to Mr Key but they are angry that this Budget does not give ordinary New Zealanders on low and middle incomes a fair go. Some of those New Zealanders who will be angry are people like Henry Lindsay and Vicky Drew and the thousands of other elderly frail New Zealanders who have paid taxes all of their life only to find that when they are elderly and in need and need some help—a very small amount of help $30 a week in home care—that has been cut. Mr English should explain to those people why that small amount of assistance to enable them to maintain their independence is regarded as low-quality expenditure while $700 a week extra in tax cuts to chief executives is regarded as high-quality expenditure. The people who were given a wage rise or a salary rise last year of $1000 a week who were given the big tax cuts last year have again benefited from the big tax cuts this year. I ask Mr English where the fairness is where the equity is in hammering people who are the most needy to reward those who are the most privileged. 
This Budget is not just a Budget of broken promises; it is a Budget of lost opportunities. We need an export-led recovery but where is the evidence in this Budget of anything that will stop the continuation of the cycle of higher interest rates and inflated exchange rates that stop the export sector being able to do as well as it should? Where is the evidence of assistance to savings? The Government cut KiwiSaver contributions from 4 percent to 2 percent while Australia increased its superannuation contributions from 9 percent to 12 percent. Then Mr English wonders why he does not have the investment capital to invest in growth so New Zealanders can have ownership of their own future. 
The Minister of Finance has not put back the additional payments into the superannuation fund. In the last year since Mr English gave his last Budget the superannuation fund increased in value by $3.5 billion. We are losing a million dollars a week in forgone interest alone because of the short-sightedness of that Minister. 
Where is the evidence in this Budget of increasing skills? What is being done about the 70000 young New Zealanders who are not in work not in training and not in education? That is a social and economic disaster for the future. Where are the additional apprenticeships when we know that once the economy recovers there will be a major skills shortage this year? Where is the help for the thousands of young New Zealanders who are being turned away from polytechnics and universities because the Minister of Education has capped entry to those institutions? Where is the investment in research and development to get the smart economy so that New Zealand can be innovative and create jobs? This Government has cut research and development. It cut 2 billion from the Fast Forward fund and the 15 percent research and development tax credit. This Government has failed to put in place a vision and a plan to build a stronger New Zealand for tomorrow. Where is the evidence that this Government has responded to the Top 100 business people in the country who have talked about a cleantech added-value economy? Their pleas have been ignored. 
This is a Budget of missed opportunities. This is a Budget that promotes inequality in a way that no Budget has since 1991—the “mother of all Budgets”. This is a Budget of unfairness. This is a Budget of more new taxes. This is a Budget that will damage hard-pressed New Zealand families to reward the few instead of looking after the many. This Government has failed in its obligation to the people of this country. 
Hon JOHN KEY (Prime Minister) 
: 
 Shane Jones was happy with that speech I have to tell you. The one conclusion we can draw from Phil Goff’s speech is that he has to stop reading those Greek economic textbooks because that speech was about borrow and hope. It was Greek economics Labour Party style. That is all Labour knows how to do. 
When I went to bed last night at 12.30 I read the  
Dominion Post 
. In the  
Dominion Post  
Vernon Small listed 10 things that are highly predictable about today’s Budget and one was a vein-popping speech from Phil Goff. 
Chris Tremain 
: He got that right. 
Hon JOHN KEY 
: No actually he did not get it right. That was not a vein-popping speech from Phil Goff. Do members know why? Other than Labour wanting us to borrow we did not hear one suggestion one policy or one good idea from Labour because Phil Goff does not know what his policies are. He does not know whether GST is going up. He does not know whether GST is going down. He does not know whether GST is coming off a cooked chicken or an uncooked chicken. Neither does the rest of the Labour front bench after that speech. Labour members do not have a clue. 
Interestingly enough in Phil Goff’s speech I did hear—[ 
Interruption 
] It is interesting that members opposite are paying more attention to my speech than they did to their own leader’s speech. But I digress. There were crocodile tears in that speech from Phil Goff but the question is this and it is a good one: did they ring true? That is an honest question that any New Zealander might ask. Let us wind the clock back to 1988 when Phil Goff was in Cabinet. The then Labour Government dropped the top personal tax rate to 33c—exactly as it is in today’s Budget. Did Phil Goff resign? No. Did he protest? No. He came down to the House and said that that reduction would allow Kiwis to keep more of their own money. I say: “Right on Phil!”; I agree with him. In 1988 that Cabinet—wait for this and Roger Douglas knows exactly what I am talking about—dropped the company tax rate to 28 percent—exactly what it is today. Did Phil Goff resign? No. Did he quit? No. He came down to the House and said this: “That will create an environment in which enterprises can succeed—both New Zealand enterprises and those attracted from overseas.” [ 
Interruption 
] Yes it is a good Budget. But wait it gets better. 
Mr SPEAKER 
: I hesitate to interrupt. The debate has been robust and that is fine but the noise has reached such a level that I am sure no one in the gallery can hear what on earth is going on because I cannot either. I have no problem with it being a robust debate and I do apologise for interrupting the Prime Minister but we cannot let it just become bedlam. 
Hon JOHN KEY 
: The truth is I have never seen so much support from Labour for a National Budget! In 1989—wait for this—Phil Goff was in Cabinet. Guess what Labour did? It raised GST by 2.5 percent. Guess what? It was with no compensation—nothing for those on benefits nothing for those on pensions nothing for anyone. Did Phil Goff resign? 
Hon Members 
: No! 
Hon JOHN KEY 
: Did he protest? 
Hon Members 
: No! 
Hon JOHN KEY 
: Did he get in a bus paint “Axe the Tax” on it and wander round New Zealand? No he did not. He said the virtues of it were great. 
Last week I read in the  
New Zealand Herald 
 something very interesting. It was Phil Goff talking to Labour supporters. He said: “should Labour regain the Treasury benches …”—note to self: the operative word in that statement is “should”—“we are going to be doing a lot of reversing.” That is what Phil Goff said—“we are going to be doing a lot of reversing.”—and we will hear about that in a moment. Well ain’t that the truth! Phil Goff has been doing a lot of reversing throughout his whole political career. But this is what he will be reversing. Today Bill English delivered control of Government spending. Well under Labour’s spending-type matters that would be reversed under a Labour Government. Bill English today delivered Government debt under control and falling. That would be reversing under Labour’s borrow and hope. Today Bill English carried on with orthodox monetary policy which is something Labour has supported since 1989. According to Phil Goff that would be reversing. Today Bill English delivered a comprehensive GST system something Labour has supported since 1985. According to Phil Goff that would be reversing. I give him one hint: he should have told Trevor Mallard before he wrote the blog in April of this year in which he had a go at the Maori Party. That is what he should have done. There has been a lot of reversing in that thing. 
It is as simple as this: if New Zealanders want to see debt go up and their country get into worse shape they should vote Labour. 
Mr SPEAKER 
: I apologise to the Prime Minister again but I cannot hear a thing. I think the Government benches need to be a little more reasonable. OK the noise at the final point was from both sides but the Opposition has actually not been as noisy as the Government benches in the last few minutes. We have to be able to hear. It is no use if we cannot hear what the Prime Minister is saying. 
Hon JOHN KEY 
: It is time to leave Labour behind but I can only make this observation: if the only thing Labour has learnt in the last 18 months is to borrow more money then those members need to go and have a good look at Greece. The only assumption I can draw is that the bus they have been on for the last 18 months has spent a lot more time on Mykonos than it has in Masterton! They need to get in the real world. 
This is a great Budget. It will get our economy going. This Budget will create 170000 jobs—170000 jobs. It is tackling the long-term issues that our economy and our country face. There will be some fairness in the New Zealand tax system. There are a lot of things in this Budget and we have delivered on many many important issues. Let us take just one of them: $1 billion for leaky homes. It is a problem we inherited from a Labour Government that spent 9 years ignoring the problem. We will see whether homeowners up and down the country who will have access to a solution to their leaky homes who are currently living in rotting dwellings and who now can see light at the end of the tunnel think this is a good Budget. 
We are living in very difficult economic conditions but today this Government delivered a record amount of expenditure on health care—$2.1 billion more over 4 years. But I want to make a very important point: it is not just about more money; it is actually about how we spend that money. It is about value for money. It is about putting more money on the front line. It is about more money for nurses and doctors and for retaining people in our system. It is about more money for subsidised drugs not just more money for the sake of it. 
The same is true of education. There is a record spend-up on education. There is 4 percent extra for operations grants for schools up and down the country. 
We need to put science at the heart of our economy. This Budget makes a step in that direction. When Labour had billions and billions of dollars to spend it did not spend it on science research and development. Labour members will want to talk about their rinky-dinky little fund which never actually got off the ground. Not one dollar of that fund was spent because it was 9 years too late. What have we done in science research and development? Well we have given a huge amount of money to those companies that want to use that technology. We are linking the Crown research institutes universities and private institutes to our businesses so that those businesses can be smarter. 
When it comes to infrastructure this Government is investing in the future of New Zealand though infrastructure even if we are having to bail out KiwiRail which Labour bought for far too much simply for political and ideological gain. We campaigned on ultra-fast broadband as a device to change New Zealand. 
Hon David Cunliffe 
: Where is it? Where is it? 
Hon JOHN KEY 
: Well actually in the Budget—hundreds of millions of dollars of expenditure. The Crown Fibre Holdings board is making tremendous progress. This is a country getting ready to be wired so that we can deliver to New Zealanders their opportunities to connect with the world through a low-cost highly efficient world-class leading technology; we are letting small businesses in New Zealand all of a sudden connect to the world. 
But in the end this Budget with not a lot of money to go around has tackled one very core thing which is the unfair and inappropriate way in which the tax system has evolved in this country. Today that is what we have done. Let us forget about the rhetoric from the Labour Party and go to what Treasury is telling us: there will be 170000 new jobs and nearly 1 percent growth. Even at Treasury’s most pessimistic view this Budget will grow our economy by 1 percent extra. That is thousands of dollars to everyday Kiwis in their pockets in their households and in job security. That is what a good tax system does. 
Let us have a look at some of those taxpayers. Under the previous Labour Government someone earning $39000 a year paid tax at the rate of 33c in the dollar. Has the National Government stood back and accepted that? No it has not. It has effectively halved that rate to 17.5 percent. But that lower rate is not for just a few New Zealanders; three-quarters of all New Zealanders will face a top statutory rate in this country of 17.5 percent. Let us put that another way: three-quarters of New Zealanders will get to keep 82.5c in the dollar. That is about an incentive to get out there and train work and get ahead. That is two-thirds of the tax package. Let us understand the size and scale of this tax package. Four billion dollars of personal tax cuts are being delivered from a Government that is struggling with an economic environment that is difficult. That is commitment. Those cuts are worth $15 billion over a 4-year period. Where will that money go? Two-thirds of it will go to those on the bottom two personal tax rates. That is fairness. 
What will this package do? Let us think about the young couple that have recently got married. They earn $50000 each. As a result of this package they will have choices because they will have thousands of extra dollars in their hands. Even if they decide to consume the lot they will still be better off to the tune of thousands of dollars and if they want to save if they want to buy a house they will now have the choice to do that. We in National are believers in a property-owning democracy; if people want to live in their own homes if they aspire to own their own homes National is the party that believes in that. Today through this Budget we have delivered the opportunity for New Zealanders to live up to that dream to have that opportunity and to get out there and build their own homes. 
There are many other component parts of this package but one of them is about making sure there is fairness in the system fairness to all New Zealanders. Labour members will spend a lot of time talking about tax cuts for the rich but they have missed a simple point: the rich in New Zealand largely do not pay the top personal rate. The rich funnel their incomes through trusts and today we have essentially aligned all of those incentives. We have made sure that when people who are well off go to their accountants it is to talk about how to grow their businesses it is to talk about how they can do better in their lives not to work out ways in which to get round an “envy tax” that was put on by the Labour Government for no good reason. 
National has been fair across the board which is unlike Labour when it increased GST with no compensation. We have recognised the cost on low-income and fixed-income New Zealanders and have done something about it. Let us take the married superannuitant couple who have no other income—no other income. As a result of this Budget even if they consume every dollar they receive through superannuation they will be over $500 a year better off. 
In the months and years ahead I guess that Labour members will have to consider what they would do. If they decide to put on a high personal tax rate—for those on let us say more than $100000—will they be getting the rich to pay more tax? No the rich will continue to funnel their incomes through trusts. 
What we have delivered today is extreme efficiency in the tax system. We have lowered taxes on savings—we have aligned them at 28 percent—and we have done something very special: we have given New Zealand companies a head start over their Australian counterparts by cutting the company tax rate to 28 percent. A lot has been made of Australia but here are the facts. Before this Budget only those who earned more than $228000 paid less tax here than they would have paid in Australia. Do members know what the result of this Budget is? It takes that amount from $228000 to $55000. That is about competitiveness with Australia! 
In the end this was a Budget about growth a Budget about jobs a Budget about the future of New Zealand a Budget about getting on top of debt a Budget about keeping our expenditure in order and a Budget about fairness. When I look at the millions of New Zealand who will be better off after this Budget I am left with only one conclusion: this was a Budget for the many not the few. 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 This Budget is a triple deficit Budget. It runs a fiscal deficit it runs an environmental deficit and it runs a social deficit. Perhaps most sadly it portrays a deficit of vision for New Zealand. This Budget takes money from overseas creditors to fund its fiscal deficit. 
Mr SPEAKER 
: I apologise to Dr Russel Norman. I ask members leaving the House to please do so quietly and I ask people in the galleries to please not talk because the noise volume just escalates here in the House and it is so hard to hear. It is totally unfair to Dr Russel Norman. I apologise for that. 
Dr RUSSEL NORMAN 
: Shall I start again? 
Mr SPEAKER 
: I think just carry on. 
Dr RUSSEL NORMAN 
: This Budget takes money from overseas creditors to fund its fiscal deficit. This Budget takes away the dreams of our young people with its social deficit. This Budget takes away the chance for our kids to love New Zealand as we do with its environmental deficit. This Budget adds to the deficit of vision that has so far marked this photo opportunity Government. 
New Zealanders believe in more than just money. New Zealanders want prosperity which is enough money to live comfortably but also warm homes; safe healthy food for their kids; a transport system that works; and an Aotearoa that they can love for ever—not mine for a quick buck. The Green Party supports this vision and therefore cannot vote for this Budget. 
Mr SPEAKER 
: I apologise to the honourable member speaking. No member in the gallery may take part in the debate in any shape or form. I make that very clear to members in the gallery. They will not interfere in the debate or they will be removed from the gallery. I apologise to the member. 
Dr RUSSEL NORMAN 
: This Budget was an opportunity to take Aotearoa down a new smarter economic path. This Budget could have provided the map and the funding to transform the New Zealand economy from one based on commodities and extractive industries towards one that rides the clean technology wave and has a reputation for high-quality sustainable commodities and for knowledge-intensive high-tech cleantech industries. 
New Zealand could be a brand of integrity. Our country can be more than just extractive industries—cow faeces in our water and national parks desecrated by mining. We can be more than a quick buck more than what we can dig up suck up and sell off. Indeed this Budget from National ACT and the Maori Party proposes to consume our capital—our financial natural and social capital. We should pass on wisdom to the next generation but we are passing on financial environmental and social debt. Most of all this Budget makes manifest the contradiction at the heart of our age. We live in a society whose central rationale is maximum economic growth at any cost yet we know that this growth threatens our well-being and even our long-term survival. 
I start by addressing the fiscal deficit. This Budget borrows to fund tax cuts more motorways and climate pollution subsidies. We are already borrowing $240 million every week for new and roll-over loans yet this Government has introduced huge tax cuts that will cost $4.6 billion in the 2011-12 financial year. We are already borrowing yet this Government is spending $9.5 billion on holiday highways and other pet motorway projects that even the Government’s figures show will cost us more than they will deliver in benefits. We are already borrowing yet this Government will spend $630 million in 2011 on subsidies to climate polluters. This is fiscally irresponsible. The impact of these measures will mean that Government debt balloons out to 26.5 percent of GDP that annual finance costs will go up to nearly $6 billion in 7 years’ time and that we will not return to pre-crisis debt levels until 2024. 
This unnecessary public debt when piled on top of the mass of private debt in our country reduces our economic sovereignty. Future generations will bear the burden of this debt and will be beholden to the international lenders who own so much of our economy. This is not freedom and this is not the sovereignty New Zealanders seek. The build-up of national debt will also provide an excuse to privatise public assets after the next election. John Bill and Gerry plan in 2012 to sell off what is left of New Zealand’s public assets. The so-called mineral stocktake which prepares the very best of our conservation estate for mining is not the only stocktake in town. Mark my words: John Key will use Government debt to justify a “For Sale” sign over our State-owned assets such as Air New Zealand Television New Zealand Solid Energy Meridian Energy Genesis New Zealand Post and the Accident Compensation Corporation. 
John Key blames tax loopholes for his decision to increase GST and cut tax rates. He could have closed the tax loopholes but he has legalised them instead. He has rewarded tax avoidance with a tax cut. That is not smart and it is not fair. 
A capital gains tax is smart and we can make it fair by excluding the family home. Sam Morgan does not think it is fair that he pays less tax than his secretary; nor do I. A capital gains tax is part of the solution to our property crisis. It can broaden our tax base and strengthen our economy. A capital gains tax is sharply progressive because income derived from capital gains is concentrated amongst the wealthiest. The United States uses a capital gains tax. It shows that those earning more than $1 million a year get around 40 percent of their income from capital gains. Meanwhile those earning less than $75000 per year get less than 2 percent of their income from capital gains. Capital gains taxes are sharply progressive because the tax falls on those who can afford it most whereas GST is regressive because the tax falls on those who can afford it the least. 
The Green Party stands for smart fair taxes and it has the courage to say what National and Labour both know—that a comprehensive capital gains tax excluding the family home would help protect New Zealanders from property speculation. It would help make the dream of homeownership a reality for more Kiwis and it would feed much-needed capital to the starved productive sector. We also know that there is a need to increase housing supply at the same time. Building more State housing can counter upward pressure on rents and boost the building sector of our economy while helping our most needy families. 
John Key may talk about taking a balanced approach but when it comes to rebalancing our economy there is little action. Our tax system remains skewed. The tax treatment of property changes to loss attributing qualifying companies and depreciation measures are a step in the right direction but it is a timid step. The time for a capital gains tax is right now—this year in this Budget—and the Government has missed the moment to strengthen our economy just as it has missed the chance to tighten foreign investment rules on property. To ignore those opportunities fails the fortitude test. 
The tax cuts in this Budget from National ACT and the Maori Party will go mostly to the well-off while raising GST hits those on low incomes disproportionately. This widens the gap between the haves and have-nots. It punishes those who already struggle to make ends meet and the punishment falls most heavily on Maori and Pacific peoples. This Budget will increase inequality the social deficit and ultimately the fiscal deficit. 
Looking after our most vulnerable children should be at the heart of any Budget because one day those kids will fill either our workforce or our prisons. The Budget from National ACT and the Maori Party increases the money for prison beds adding to the fiscal deficit and betting on which direction the social deficit is heading. New Zealand is one of the most unequal countries in the OECD and that inequality drives crime illness violence poor educational outcomes and so much more. The cost of prisons courts and the police in this Budget alone has increased to $3.7 billion from $1.7 billion just 10 years ago. 
Inequality costs everyone. Because some New Zealand families cannot afford to heat their draughty homes it costs taxpayers $54 million each year to treat respiratory illness. It costs businesses 180000 sick days and it costs $400 million in electricity that we do not need to use doing untold unnecessary environmental harm along the way. There are many more examples of how inequality hurts everybody. 
Earlier this week my colleague Metiria Turei launched a plan to reduce inequality and to help make New Zealand a place where everyone gets a fair go—a plan called Mind the Gap. It includes a tax-free threshold of $10000 which would benefit everyone but it would give the most help to the New Zealanders who need it the most: the low-income earners. Mind the Gap also suggests giving every family a reasonable amount of electricity at a fixed low rate so that they can stay warm and healthy. Under a progressive pricing plan additional power would be charged at a higher rate so it would still pay to save power. Again this measure helps all of us but it has the biggest positive impact on our poorest families. 
Those are just two of eight practical and fiscally responsible steps described in Mind the Gap. Measures such as those can address the social deficit that this Government has inherited. Instead John Key chooses to concentrate on tax cuts that help the wealthiest ahead of the neediest. John Key’s Government chooses to dishonour the Treaty of Waitangi by ensuring that Maori remain in poverty. 
The eight-point plan in our Mind the Gap package is part of what we have called a Green New Deal for New Zealand. It sits alongside two economic stimulus packages that the Green Party released last year—packages that offer practical solutions to our economic environmental and climate crises. Green New Deal solutions tackle all these pressing problems at the same time. Green New Deal solutions account for the fact that these challenges are global in nature. Green New Deal solutions see opportunity and lay out a practical path to prosperity. The most high-profile of our Green New Deal solutions is the $323 million home insulation fund which has already made 40000 New Zealand homes warmer and healthier. It is evidence that we offer practical answers to New Zealand’s problems. Indeed we have a surplus of solutions to offer to a Government in deficit. 
As well as having a vision deficit a fiscal deficit and a social deficit the Budget deepens our environmental deficit. We are currently clearing native vegetation at the fastest rate since European colonisation which is an extraordinary fact. We are in the middle of a biodiversity crisis in this country a crisis caused by us. The key reason for that loss of native vegetation is agricultural intensification according to Landcare Research. We know that a key driver of agricultural intensification is the rapid increase in rural land values. Rural developers are seeking the tax-free capital gains that come with dairy conversions and dairy corporations are pushing land harder in order to make the interest payments on the big loans. A capital gains tax would put downward pressure on rural land prices and it would take some of the pressure off our land and off our biodiversity. 
Agricultural intensification is also driving the desperate decline in water quality across our country. Drinking water for rural towns like Dunsandel is polluted by dairy corporations. Rivers are being dammed and drained for irrigation and the water is being replaced with runoff thick with faeces and fertiliser. We have health warnings now that newborns are at risk of nitrate pollution. 
Hon Maurice Williamson 
: This speech should have a health warning. 
Dr RUSSEL NORMAN 
: The Government members think it is funny that our infants are now at risk of nitrate pollution because the water has been so polluted by nitrate from dairy corporations. Well the Green Party does not think it is funny. The Government might think it is funny that they are polluting our waterways to such an extent that it is dangerous for our children and infants to drink that water. The Green Party does not think it is funny; we think that we should do something about it. The Government does not care. The Government is giving funds to irrigation companies in order to expand irrigation in New Zealand so that we can pollute our groundwater even further. Well the Green Party does not think that is funny; the Green Party thinks that is wrong. 
This Budget does nothing to address New Zealand’s environmental deficit. There is no capital gains tax there is no charge for using the public’s water for private profit and there is no charge for pollution. In fact the Government grants for irrigation schemes subsidise the destruction of our rivers and aquifers. How about that? We are now passing a Budget where taxpayers’ money will be used to subsidise the destruction of rivers and aquifers. This is environmentally tragic and it is economically stupid. Likewise the Government’s plan to subsidise greenhouse pollution to the tune of $100 billion over the next 40 years according to Treasury estimates is also environmentally tragic and economically stupid. 
The Greens have shown how we can make a 30 percent reduction in our greenhouse emissions put our economy on a competitive footing to trade in a global economy where carbon matters and do our bit to secure a safe future for our children. Instead John Key’s Government has locked New Zealanders into subsidising our biggest polluters. The more they pollute the more we pay. We teach our children that if they make a mess they should clean it up. But John Key’s lesson to industrial polluters is that there is no accountability for them. Their mess is our problem. They have little incentive to cut emissions through smarter technology. National will keep hidden how much taxpayer money subsidises each individual polluting company. National will publish the welfare details of a couple of mums on the domestic purposes benefit who upset Paula Bennett but it will not publish the details of billions of dollars worth of corporate welfare handed out to greenhouse polluters. John Key’s Government will no doubt also remain silent on the 27 percent cut to environmental research in this Budget. 
The Green Party will not vote for this Budget but we respect the Minister of Finance and acknowledge his hard work. As a Minister who takes his responsibilities very seriously he no doubt argued for a capital gains tax. We extend our sympathies that he lost out to his Cabinet’s more conservative instincts. The result is a Budget that takes our country in the wrong direction. It adds to the nation’s fiscal environmental and social deficit and has a terrible deficit of vision at its heart. It adds to the fiscal deficit and takes away the sovereignty of future generations by borrowing to pay for tax cuts that heavily favour the wealthy borrowing for Steven Joyce’s pet holiday highway projects and borrowing to subsidise polluters. It adds to the social deficit by entrenching inequality and locking our society into a further cycle of poverty crime and illness. It adds to the environmental deficit and takes away the chance to enjoy the wilderness of Aotearoa New Zealand. The Green Party will not vote for this deficit Budget. 
Hon RODNEY HIDE (Leader—ACT) 
: 
 The ACT Party is proud to be part of this Government. We are proud to support it on confidence and supply and we are pleased to vote for this Budget. Along with the majority of all Kiwis we are pleased that we have a Government that is addressing the scandalous abuse of taxpayers that we saw over the past decade. 
We are pleased that we finally have a Government that understands that every dollar that it spends either comes from some hard-working taxpayer or is an attempt to put the tab on our children and grandchildren. We are staggered that after 9 years of grotesque wasteful spending Labour members Phil Goff and Darren Hughes have the cheek to stand in this House and urge yet more spending and more borrowing. 
Hon Darren Hughes 
: A picture of restraint! 
Hon RODNEY HIDE 
: The answer to the debt problem I say to Mr Hughes is not more debt yet that is Labour’s only solution. 
We are pleased that we are seeing action across a wide range of portfolios. The previous Government did nothing about leaky homes even when the global boom blessed us with fiscal surpluses but the current Government is addressing this problem. We are fixing the financial crisis in accident compensation we are getting better value for money in health and we are addressing our poor infrastructure building the roads that are essential to moving our people and our products around. We are looking at common-sense options to utilise our mineral resources better to give jobs and wealth to New Zealanders and to help fund essential social services and we are cutting red tape. We are getting more transparency and more accountability in local government and the Government is addressing longstanding problems in Auckland—issues that the previous Government ducked. We are creating one strong voice for Auckland. Because of ACT’s “three strikes” legislation we are sending a message as a Government that repeat violent crime will not be tolerated. This Government will work to keep our communities safe from the violent predators. 
This Budget is a welcome attempt to get New Zealand’s fiscal problems under control. The Minister of Finance is to be commended for his attempts to restrain Government spending. In just one term of Government he will leave New Zealand in much better shape. We should contrast that with the previous Minister of Finance’s legacy which turned out to be a tsunami of debt. As the cyclical economic decline came Labour increased spending at an even more frantic rate to forestall its political decline. It was irresponsible foolish reckless and entirely typical of Labour. 
I commend the moves to structure the tax system to encourage work and savings but I have to say that the ACT Party would prefer to do more. We would prefer to attack wasteful spending more vigorously because there is still plenty of it. If we did so we would not have to match income tax cuts with tax increases elsewhere and all New Zealand households would be better off. We need more competition and choice within the vast creaking and crumbling State monopolies that dominate our health and education sectors. We could look to the new British Government which is about to introduce ACT’s education policies. 
Although there is much to commend in this Budget and much more yet to do there is one gross and glaring failure. There is one elephant in the room which threatens to undo all the good work that is being done by Government Ministers. We are tuning up the car for peak performance—putting on new tyres getting a tank full of gas and removing any aerodynamic impediments—but someone has locked the handbrake in place. That handbrake is the emissions trading scheme. The rest of the world—every one of our trading partners—has that handbrake off but we have it locked firmly on. We are the only country with an “all gases all sectors” emissions trading scheme. 
Hon Dr Nick Smith 
: What about the European Union? 
Hon RODNEY HIDE 
: Dr Smith calls out: “What about the European Union?”. Well he knows that that applies only to carbon dioxide. He knows that it does not apply to agriculture. He knows that it does not apply to households. He knows that it does not apply to small business. He knows that it is riven with so many exceptions and so many outs that it is hardly an emissions trading scheme at all in practical effect. 
Hon Georgina te Heuheu 
: Why are you worried about it? 
Hon RODNEY HIDE 
: Well I am not worried about the European emissions trading scheme; it is the one here that worries me. Our emissions trading scheme worries me. Georgina te Heuheu is absolutely right. 
The only thing that we can say about the National Government’s emissions trading scheme is that it is not as stupid as the one that Labour had but it is still a damaging and incomprehensibly foolish imposition on our fragile economy and our hard-working export sector. It is stifling our ability to create jobs and to generate higher incomes for working people. Having an emissions trading scheme here but not in Australia will stop our ability to catch Australia and will see more of our young people depart across the Tasman. The emissions trading scheme is a folly on the scale of past National-inspired disasters. This is up there with Rob Muldoon’s attempts at central planning and it matches and surpasses Bill Birch’s disastrous Think Big. 
The emission trading scheme is an act of total financial economic and environmental folly. It will take over $1 billion from struggling households and businesses and bestow that wealth on forest owners whose forests were planted long before the emissions trading scheme was ever contemplated. Have the foresters had too much of an influence? Absolutely. Has the fox been in the hen house? Yes and we know for sure that farmers and other hard-working Kiwis have been in the outhouse. The costs are about to hit on 1 July this year. The emissions trading scheme is an assault on the agricultural sector. We will have higher energy costs and it will bite into the profitability of all our processing industries. It is a bigger hit than the increase in GST. 
The ACT Party opposes the emissions trading scheme and will continue to oppose the emissions trading scheme. I am pleased to say that the membership of the National Party from one end of the country to the other opposes it. Two Saturdays ago the central North Island National Party conference was attended by 300 delegates. They passed a remit to defer the emissions trading scheme. The Manurewa and Tamaki electorates are proposing a joint remit for the northern regional conference of the National Party to defer the emissions trading scheme and I say to those National Party members: “Good on you! Keep at it!”. They should make their employees particularly Dr Nick Smith listen. They pay his wages; they support him in this Parliament. 
We can stop this madness we can stop this self-inflicted wound and we can stop the handbrake on growth jobs and incomes. I say to the brave decent and honest National supporters who are simply urging their party to do in Government what it promised in Opposition—to align with Australia’s policy on climate change but not get ahead of it—that we in the ACT Party are for them. In fact if those members gave their support to the ACT Party they would get the National Party that they thought they voted for. 
Hon TARIANA TURIA (Co-Leader—Maori Party) 
: 
 If ever a political speech was made to get the votes away from National I would have to say that was one of them. 
The Maori Party joins with the Government today to congratulate the Minister of Finance on his leadership in trying to chart a pathway forward in this 2010 Budget statement. A challenge that we in the Maori Party face every day in this House is to lay the w’ariki for the long term and to create the foundation for the generations to come. We have every reason to believe with this Budget and the emphasis accorded to Whanau Ora that this Government is prepared to invest in that foundation. 
Whanau Ora is evidence of a Government prepared to back w’anau families and prepared to let the people determine their own solutions. This Budget has given a clear direction to providers and agencies alike that we want to see outcomes that derive from families having real ownership of their solutions. The transformation that we seek through this approach is that in building w’anau capability and nurturing resilience we are restoring to families that sense of collective responsibility to take care of their own. From the Government’s perspective $134 million is an investment in outcomes achieved for w’anau for providers and we believe for the nation as a whole. But most of all this is an investment in how they do it—how we make the difference by placing trust in people. The Minister of Finance has laid out the challenge for Aotearoa which is emerging from the sharper edges of a global recession. We have an opportunity as a Parliament either to sink further into a cycle of ever-spiralling debt or to take some initiatives to back ourselves. 
The changes that the Budget brings with it—and I am thinking particularly of the tax impact—will not be universally popular despite the acknowledgment from Mr English that at all taxable income levels tax cuts will more than offset the GST rise. We know that the biggest challenge will be encouraging our constituency to look more broadly at the whole picture of the Budget rather than focusing on one measure in isolation. I am reminded of the wisdom of our rangatira from Whanganui Dr Whakaari Rangitakuku Metekingi who told us “Ko te pae tawhiti whaia kia tata ko te pae tata whakamaua kia tina”. It means “Seek out the distant horizons; cherish those that you attain”. The grim reality is that we are in a situation in which we have been spending more than we earn. If the horizons we seek are a stronger economic outlook—a future in which our tamariki and our mokopuna will achieve the jobs the incomes and the living standards that they aspire to—then we must be prepared to take bold action now. 
Lifting long-term economic performance will require a careful balancing of measures of restraint and of support. But it is not as if w’anau Maori are not used to the concept of making the most of meagre resources. The mastery of Maori in managing massive crowds through tangi w’anau reunions or events such as the koroneihana poukai iwi festivals and the Ratana Church celebrations is legendary. Our Maori incorporations have acquired a distinctive reputation for being conservative by nature and at a w’anau level making do with what we have is part of our history. 
But we do not resile from a major issue that neither National nor Labour have ever responded to well which is the challenge to close the gaps. We have constantly argued for a more equitable society where social and economic justice count for something. In our coalition agreement we made the call to eliminate poverty and we will not resile from that challenge either. So we have advocated ferociously for this Budget to protect the most vulnerable and for an immediate lift in benefits superannuation student allowances and Working for Families to offset the GST increase. 
Some aspects of this Budget will help to focus on growth to help our families to get ahead. There is allocation of new funding to grow Maori productivity and export growth and support Maori innovation. The $4.5 million allocated for skills and training for Maori in the primary sector and Maori innovation and the $4.5 million to support initiatives to strengthen and promote Maori tourism are key achievements for the Minister of Maori Affairs and will help to build the recovery that we need. There is $20 million over 4 years for the Maori Innovations Fund in Vote Health which will support Maori service providers with funding and resources that they need to build and implement innovative Whanau Ora services. 
The Housing Innovation Fund has been lifted with another boost of $20 million to extend the fund for another year thereby growing the supply of affordable housing for w’anau. The emphasis on the building blocks for families is also evident with an additional $16 million for grants and loans to support social and affordable housing. The additional $24 million to grow the Warm Up New Zealand: Heat Smart home insulation programme is immensely important to our families. The Maori Party is very proud that we were able to increase the number of low-income households that will benefit from this scheme by at least 8500 families. That is about making a lifetime difference to every aspect of w’anau well-being including health education and employment participation. 
In the disability sector the lifetime difference has been supported through the $1.5 million invested in promoting accessible housing for disabled people through the Lifetime Design Standard. It will also be supported through the $3 million that has been allocated to improving attitudes towards disabled persons and the $2.34 million invested in promoting protecting and monitoring the rights of disabled persons. A key priority for me and this Government is to ensure that the voice of disabled persons is heard and this Budget does that. Although there is $93 million more for disability support I particularly draw attention to the very substantial injection of an additional $20 million over the next 2 years for home modifications and equipment. This funding will have a considerable impact on the waiting lists and will mean that people can access equipment and home modifications much sooner than they can now. Although this is fantastic there is so much more that we need to do and it will remain a key priority for me to continue this work. 
We welcome the injection of $90 million into community-led participation in early childhood education. We believe that this will have particular relevance for Maori and Pasifika families. The increase of $48 million for the Youth Guarantee scheme will help our rangatahi to go forward on a more secure footing. I know that Dr Sharples is particularly pleased about the $12.6 million that will enable kura to benefit from specific and specialised Maori medium assessment tools which will tell us whether any difference has been made. I am particularly pleased with an initiative within the community and voluntary sector to support w’anau to access the information highway through $7.9 million to increase the Computers in Homes and the Computer Clubhouse initiatives. 
Finally Budget 2010 is about putting the support where it is most needed and so I also acknowledge the initiative pioneered by Dr Sharples with close to $20 million set aside for Whare Oranga Ake—rehabilitation centres that have been founded on kaupapa Maori which are available to everybody to help pre-release prisoners with their re-entry into their communities. The Minister of Finance has talked about the goals of economic transformation. For the Maori Party we see this Budget as about a transformation of another kind: the transformation of attitudes. It is about an attitude that backs ourselves an attitude that supports potential an attitude that is about being self-sustaining and in charge of our own destiny and a Government attitude that trusts family and community to know best what their needs are. We are in this for the long haul. It is in that context that we the Maori Party support Budget 2010 for investing in the future for the next generation nga taonga tukunga iho. 
Hon JIM ANDERTON (Leader—Progressive) 
: 
 What is the Government saying with today’s Budget to families on low incomes? Let them eat cake—that is what it is saying. It says not to worry about an increase in GST and rising food prices because the rich eat more than the poor so they will pay more in GST. Is that meant to make low-income families feel better? They might not be able to afford to buy food but just think of the GST they are saving by not eating! The rich have a choice if they want to spend more money and pay more GST; they can choose whether to upgrade the Mercedes or to buy another boat. Those on lower incomes cannot choose whether to eat. What is John Key saying to New Zealand families struggling to pay the bills and to make ends meet on low incomes? He tells them to stop being envious. Well I say to Mr Key that they will not be envious; they will be angry like I am. 
Are New Zealand families more or less equal after this Budget? They are less equal and shame on the Prime Minister and the Minister of Finance and on all those who support those Ministers. After today’s Budget the wealthiest New Zealanders will take home thousands of extra dollars a week compared with those on average incomes. People like Telecom’s chief executive officer who earned $7 million last year will get a tax cut of $6608 per week. State sector chief executive officers who earn more than $600000 in some cases will get a tax cut of nearly $500 a week. However if one earns $50000 after one pays more in GST at the supermarket alone one will take home about $5 a week. The chances are that that $5 will be wiped out by inflation any time soon. Is a chief executive officer who got a $1000 a week pay rise last year really the highest priority for a $700-a-week tax cut this year? 
New Zealand is now on a par with the United Kingdom which has one of the most entrenched income gaps between rich and poor in the world. Our ancestors came to this country to get away from that kind of inequality. John Key is determined to bring it back from his speculating years overseas. Others might be taken in by the Prime Minister’s rags-to-riches story but not me. I remember that he helped to make a pot of money speculating against the New Zealand dollar in the 1980s at a cost to New Zealand of $700 million. Guess what! At the same time New Zealand’s increasing rate of income inequality became one of the worst in the OECD. Over the same period Australia closed the income gap between rich and poor. Mr Key wants us to emulate Australia but he goes in exactly the opposite direction. 
Income inequality widened again under National Governments in the 1990s—I will not mention the Governments in the 1980s—and it started to get better during the period of the Labour-led Governments in the 1999-2008 period. Mr Key misled the House yesterday when he said that income gaps between rich and poor “became worse under the previous Labour Government”. I say to Mr Key that they actually became better and they are set to become worse under this National Government. I will table the facts after this speech to prove just that. Here they are: under a Labour-Progressive Government between 2001 and 2008 everyone became richer even Mr Key but those on low and middle incomes increased their wealth the most thanks to the Working for Families tax break. We closed the gap; National will again widen it. 
The Prime Minister also said yesterday that it was a terrible injustice that 10 percent of the wealthiest New Zealanders pay 44 percent of the tax. He used to invite New Zealanders to go to Australia to pay less. But what is the truth of that? In Australia the top 10 percent do not pay 44 percent of the tax; they pay 46 percent of the tax. Should we all go to Australia and pay some more tax? Where does Mr Key come from? Does he read anything? It turns out that most countries do exactly that: those who earn more pay more tax because they earn a higher share of income. That is what is called a progressive fair tax system. I do not think that Mr Key has ever heard of it. 
John Key is no Robin Hood. I saw  
Robin Hood 
 the other night; John Key looks more like the Sheriff of Nottingham to me and this is the Sheriff of Nottingham’s Budget. Will the average New Zealander be better off after this Budget from the “Sheriff”? No because they will not be getting the lion’s share of the tax cut; the top 10 percent of income earners will. Can members guess who got the lion’s share from the last round of tax cuts by the National Government? The same top tax earners. Has the penny dropped yet? If people are not on a high income this Government is not interested and will not help. Some might have voted for them in 2008 but in 2011 they can make this National-led Government a one-term Government—the first one since 1975—and I say good riddance to them. If New Zealanders are on an average income and have aspirations to do better they can forget it. This Budget puts reinforced glass into the glass ceiling. This Government is showing its true colours today. It does not want our people to prosper; it wants them to know their place. It does not want them to be envious; it does not want them to worry about buying any food because they will be saving some GST for goodness’ sake! This Government is out of touch with the way in which poorer and low-income people live in this country. 
Will more children be lifted out of poverty after today’s Budget? The answer is no. A recent Unicef survey of the well-being of children put New Zealand almost last—24th out of 25 countries. It measured immunisation levels infant deaths and early death from injury and illness. The Ministers have laughed at Greece over recent times. It is collapsing the streets are on fire and the people protest. But do members know what? It is way ahead of New Zealand when it comes to looking after its kids—way ahead. A respected professor of epidemiology in New Zealand said recently that “ … in New Zealand social injustice” which means income inequality “is killing and maiming our kids on a grand scale.” What do we mean by that? We top the scales for OECD rates of whooping cough rheumatic fever pneumonia and other diseases in children. 
I ask whether these tax cuts to the richest New Zealanders help any of that. The answer is that they do not; they make it worse because the Government denudes itself of income to do it. We spend less than the OECD average on child health and the only thing that will change as a result of this Budget is that this appalling situation will get worse. Twenty-eight percent of our children still live in poverty. The Government that I was proud to be associated with lifted 100000 kids out of poverty and we were heading in the right direction. This Budget goes in exactly the opposite direction. I was disgusted to hear the backbenchers in National clap for the Budget. They do not understand what they are doing. It is absolutely disgraceful. This rate started to decline under the last Labour-Progressive Government for the first time in decades. As I said Working for Families lifted 100000 children out of poverty. 
Senior people in the medical profession know what the problem is. Two professors of child health wrote to me yesterday—and I think they wrote to all other parliamentarians—saying that they were absolutely embarrassed by the fact that things have got worse for kids on their watch. They were begging the Government not to make them worse this time but they will be deeply disappointed. I was touched by that letter. 
How do we get rid of poverty? We increase people’s incomes. We give people decent wages and jobs. Will there be more jobs after today? Will there what! There is nothing in this Budget to create new jobs. Where on earth does the Minister of Finance gets his figures from? How many jobs were created by the Prime Minister’s great cycleway from the north to Bluff? The answer is none—not one single job. How many jobs have been created by the amount of money invested in research science and technology which we provided $2 billion for through Fast Forward? The answer is not one cent in the 18 months since this Government was elected. 
This country does not have a tax problem as we have one of the most modest income rates for low to middle-income earners in the world; it has a wage problem. There is nothing in this Budget to fix that at all. If John Key thinks that cutting the top tax rate will stop young doctors and entrepreneurs from going overseas he is dreaming. Australia’s top tax rate in 45c in the dollar and we have already discovered that the top 10 percent pay more tax there than they do here. Yet is that a disincentive? John Key should ask himself why he left the country to go into the world of international speculation. Did he leave to avoid our high taxes? I do not think so. I think he left to get more money. He succeeded and I say: “Good on him.” But tax cuts for the wealthy will not increase the wage or incomes of ordinary New Zealanders. Will the economy grow as a result of this Budget from the “Sheriff” today? No. There is nothing in this Budget for increased exports. The Government is dreaming if it thinks otherwise. 
I will wind up. This Budget has not turned out to be a smiley Robin Hood Budget; it has turned out to be a nasty Sheriff of Nottingham Budget. This Parliament should be ashamed to have received it today. 
Hon PETER DUNNE (Leader—United Future) 
: 
 The best way to create a sustainable economy that deals with poverty that deals with disadvantage and that gives all the things that the previous speaker Jim Anderton and others have said we ought to be providing to people is to have one that is funded on a sound basis. The reality is that until this Budget there were real questions raised first by the Tax Working Group and second by some of the actions taken in years gone by that put the long-term viability of our tax base at risk. 
Let me give the House an example. With the benefit of hindsight what some of us suspected at the time to be true has been proven to be correct. The most disastrous tax decision in the last decade was the previous Government’s decision to hike the top tax rate in December 1999. The consequence of that has been as follows. We have seen a huge explosion in the use of trusts for income-sheltering purposes. The calculation has been that that move alone driven by that differential in the tax rate has cost the revenue around $300 million a year. That is $2.7 billion lost over the last decade as a consequence of that policy shift. But it gets worse. A lot has been said about loss attributing qualifying companies and how they have become another diversionary tactic along the way. The growth in loss attributing qualifying companies in the same period has been over 240 percent. We now have in the order of 130000 loss attributing qualifying companies in New Zealand. The value of their tax losses is now $2.3 billion which is 400 percent higher than it was at the start of the decade. If we put those two figures together we can draw the reasonable conclusion that the net consequence of Labour’s hiking of the top tax rate in 1999 has been a $5 billion revenue hole for the New Zealand taxpayer. 
The speaker who preceded me Jim Anderton asked why we were not doing more to alleviate poverty. I would love to do more to alleviate poverty. I would love to give a bigger boost to child health. But when we have a $5 billion hole to fill it becomes a little difficult. And it gets worse. If members listened to the Leader of the Opposition this afternoon they would have heard that he proposes to restore the hole. He is opposed to the cut in the top tax rate. He would restore it to what it was and set the whole process off again. We heard him and also Russel Norman the co-leader of the Greens say that coming in alongside that would be a capital gains tax. We have a situation where members on that side of the House say that this Budget is all doom and gloom it is terrible people will be punished etc. and to vote for them to have the top tax rate go up a $5 billion hole in our revenue and a capital gains tax as well. That is what does not add up; that is what does not make sense. 
I say to those who advocate a capital gains tax because it is efficient that it is efficient in the sense that it captures just about everything but it is not efficient in terms of producing revenue. I heard the Greens say the other day that with the $4.5 billion we would gain from a capital gains tax we could do all sorts of marvellous things. I have a couple of points about that. That would probably be over a 10-year period because it assumes that assets are moving all at the same time and actually at a maximum of about $450 million a year it is not the huge windfall that people make it out to be. 
As a result of the tax package in this Budget we have a dramatic change in the arrangements that will affect the average New Zealand family. For nearly three-quarters of taxpayers in New Zealand as a result of this Budget’s changes their maximum tax rate will be 17.5 percent. That compares more than favourably with the situation in any other jurisdiction we like to compare ourselves with. We also see a package that supposedly gives more to the rich but actually two-thirds of the cost of the package is dedicated to lowering the bottom two rates of tax. Those rates of decrease are greater than the rates of decrease for the higher rates of tax. So we are seeing a significant shift. 
Let us talk about the GST increase. Yes it goes up to 15 percent from 1 October. Let us contrast that with what happened the last time GST was raised. I was part of the Government that did that too. Unlike now at that time GST was raised with 6 weeks’ notice. 
Chris Tremain 
: 6 weeks? 
Hon PETER DUNNE 
: Six weeks’ notice with no compensation. Members can talk about people being adversely affected by a change that is 3½ months away with compensation and tax cuts on the day it comes into force but compare that with 6 weeks’ notice with no compensation I think it is reasonable to draw a conclusion about who is better off as a consequence. 
I am particularly pleased that the changes that will take effect from 1 October include full compensation for contributors to the Government Superannuation Fund and to the National Provident Fund as well because they are a group that has often missed out in the past when tax changes have occurred. I am pleased they will be addressed in the context of this Budget. 
So there we have it. We have a Budget that makes some significant changes in the disposition of taxes and that gives people more ability to make some choices for themselves about how they spend their income. Surely that is a reasonable proposition. Some may well spend more on food than others; that is a matter of choice. Some may well choose to do other things; again it is a matter of choice as to how one spends one’s income. 
We have heard the suggestion from those opposite that one way of compensating people for an increase in GST is to take fresh fruit and vegetables out of the mix. Let us have a look at that. It is a very arbitrary consideration. It probably would cost about $150 million to do but there are practical problems about how it would apply. Most retailers operate their GST return off their cash register returns. For a start every cash register in New Zealand would have to be recalibrated to take out a fresh fruit or vegetable item. There would be a growing industry in that respect. Also no account is taken of the cost of claiming a GST refund to produce those tax-free items. And it is so arbitrary that other unprocessed items like meat poultry fish and eggs would somehow be in the tax net but not fresh fruit and vegetables. One has only to look at what happened in Australia when this was tried. The great example was that of John Hewson Paul Keating and the ham sandwich. The ham by itself was exempt of GST and the bread by itself was exempt from GST but the sandwich was subject to GST. That is what the Labour Party is proposing to give us as an alternative to a very clear and straightforward system where everyone ends up better off as a result of these changes than they were beforehand. That is the line that cannot be surpassed. 
It is interesting to assess what the public reaction to this has been. At the lock-up this morning and in the various media commentaries subsequent to the presentation of the Budget there has been a generally favourable reaction and it comes around two key points. Firstly there has been surprise at the extent of the movement on the lower two tax rates; people did not expect as big a reduction and they certainly did not expect the move to reduce the company tax rate. Both of those things are positive for New Zealand: they certainly boost our competitiveness; they certainly make it easier for those New Zealanders contemplating a shift offshore to make the choice to stay here; they position our economy well for the future in terms of the uptake that will come from the international recovery; they position our economy well in respect of our traditional major partner and competitor Australia; they send a very clear signal to New Zealanders that what we are about is a better fairer tax system that removes the distortions that have nobbled it for a long time; and they get away from the envy politics that have actually made it more difficult to deliver quality policies in terms of the areas of traditional concern of members opposite. 
So this is a good Budget. It does not do all the dastardly things that were predicted for it; it does a lot of good for New Zealand families and I suspect that it will be well welcomed and positively accepted. 
Hon GERRY BROWNLEE (Leader of the House) 
: 
 I move  
That this debate be now adjourned 
. 
Motion agreed to. 
Urgency 
Hon GERRY BROWNLEE (Leader of the House) 
: 
 I move  
That urgency be accorded the introduction and passing of the Taxation (Budget Measures) Bill.  
The simple reason 
is that this bill gives life to the announcements in today’s Budget speech around personal tax cuts company tax cuts and a range of provisions that relate to the taxation of New Zealand business activities. As the previous speaker the Hon Peter Dunne mentioned these provisions have been very well received by the commentariat so far. It is also important to have them locked into place so that there can be sufficient planning in order for there to be a smooth transition to those new arrangements by the date prescribed in the bill. 
Hon DARREN HUGHES (Senior Whip—Labour) 
: 
 I raise a point of order Mr Speaker. As the Leader of the House has moved that the bill be introduced under an urgency motion which is the impact of the vote we are about to have Opposition members have not had a chance to see the legislation. I wonder whether the Leader of the House could indicate to us the implementation date for the tax changes in the legislation so we can get a sense of how urgent it is that we pass the legislation over the next 2 days. 
The ASSISTANT SPEAKER (Eric Roy) 
: He is not required to do that under Standing Orders. It is a reasonable request but one he does not have to respond to. It looks like he has chosen not to so I will put the motion and the member can vote accordingly. 
Hon GERRY BROWNLEE (Leader of the House) 
: 
 Perhaps it would help— 
The ASSISTANT SPEAKER (Eric Roy) 
: It looks like Mr Brownlee now will respond. 
Hon GERRY BROWNLEE 
: I just want to keep good order in the House. I suggest the member takes the rather large blue book that was handed to him this afternoon sets aside his colouring pencils and reads some of the text which will give him all the answers he requires. 
Hon DARREN HUGHES (Senior Whip—Labour) 
: 
 I raise a point of order Mr Speaker. That simple explanation would have been helpful without all the extra bits that caused the member trouble down the track. The case is that the legislation comes into effect on 1 October and it is only May now so it is not an urgent matter that the House has to deal with straight away under Standing Order 54(3). 
Hon GERRY BROWNLEE (Leader of the House) 
: 
 Speaking to the point of order— 
The ASSISTANT SPEAKER (Eric Roy) 
: I am quite happy to respond. The Government has the right to determine whether a motion should be accorded urgency. Under Standing Orders it has to give reasons. It has done that. There is no debate about that. I will now put the motion. [ 
Interruption 
] I must remind the House that there is to be no comment during voting for two reasons. One is that we need some accuracy about recording the vote. The second is that no member of this House will vote under duress of comment. In the past people have been ejected for such behaviour. I remind the House—it is just a cautionary note—that votes will be taken in silence. 
A party vote was called for on the question  
That urgency be accorded. 
Ayes 69 
New Zealand National 58; ACT New Zealand 5; Maori Party 5; United Future 1. 
Noes 53 
New Zealand Labour 43; Green Party 9; Progressive 1. 
Motion agreed to. 
Taxation (Budget Measures) Bill 
First Reading 
Hon PETER DUNNE (Minister of Revenue) 
on behalf of the  
Minister of Finance 
: I move  
That the Taxation (Budget Measures) Bill be now read a first time. 
 The measures contained in this bill represent the most significant package of tax reforms for New Zealand in over two decades. Although the measures themselves are wide ranging their underlying purpose is straightforward. That purpose is to lift the long-term performance of the economy by giving people greater incentives to work to save and to invest by improving the fairness coherence and integrity of the tax system so that people pay their fair share of tax and by encouraging productive investment in New Zealand thereby increasing productivity and raising wages. The effect of the reforms will be to rebalance the tax mix so that it better supports the economic growth saving and investment that New Zealand needs right now rather than the excessive consumption borrowing and overinvestment in housing that we have had in the past. 
To encourage people to work and contribute to a better-performing economy personal income tax rates will be reduced across the board from 1 October this year. The new rates will be 10.5 percent for people earning up to $14000 a year a 16 percent reduction in that rate; 17.5 percent for those who earn between $14100 and $48000 a 17 percent reduction in the rate; 30 percent for people who earn between $48100 and $70000 a 9 percent reduction in the rate; and 33 percent for those earning income over $70000 a year a 13 percent reduction in that rate. Similarly the company tax rate will be lowered from 30 percent to 28 percent from the beginning of the 2011-12 income year which will encourage productive investment in New Zealand. Tax rates and savings are being reduced so that they are in line with the new personal income tax rates thus giving people more income to reinvest towards their retirement. 
The main balancing feature of the changes is a lift in the GST rate from the current—[ 
Interruption 
] 
The ASSISTANT SPEAKER (Eric Roy) 
: I am sorry to interrupt the member. Interjections are acceptable as long as they are rare and reasonable; discussions across the House while a member is introducing a bill or at any other time is inappropriate. 
Hon PETER DUNNE 
: I was saying that the main balancing feature of the changes in this bill is a lift in the GST rate from the current 12.5 percent to 15 percent. That is in keeping with the intention of the tax reforms to shift the current economic balance away from consumption and spending and towards greater productivity and investment in the economy. The Government does however recognise that the increase in GST will impose increased costs and for certain groups such as superannuitants beneficiaries and others receiving Government assistance relief will be necessary. This compensation will be provided in the form of immediate compensation from 1 October. For those receiving Working for Families assistance the bill contains measures that raise the level of support that families will receive as tax credits from 1 October. Those on New Zealand Superannuation or the veterans pension or recipients of Consumer Price Index adjusted Government Superannuation Fund or National Provident Fund payments will also receive an increase in their payments from 1 October. This one-off compensation will be in place until the normal annual inflation adjustment occurs on 1 April next year. 
In weighing up the changes needed to rebalance the tax system the bill also introduces a number of changes to strengthen the tax rules and ensure that everyone pays his or her fair share of tax. With that purpose in mind measures are being introduced to tighten the income tax test for Working for Families entitlements so that investment losses such as those from rental properties cannot be used to inflate a family’s entitlement to Working for Families tax credits. The rules around property investment are also being tightened so that no depreciation deductions will be allowed for buildings with an estimated useful life of 50 years or more from the 2011-12 income year. That change more accurately reflects the way that New Zealand buildings actually change in value over time which on average means that buildings increase rather than decrease in value. Removing this unnecessary tax advantage will reduce the incentives for people to invest in property for tax reasons and will encourage wider investment in more productive parts of the economy. The 20 percent depreciation loading on new plant and equipment has been removed for assets purchased after today. Finally stricter rules will also be applied to foreign-owned companies to reduce the interest deductions they can claim against debt allocated to their New Zealand subsidiaries. 
Together the changes contained in this bill form a balanced package of measures that will reward people for the work they do encourage broader and deeper economic growth and make New Zealand’s tax system stronger and more equitable for all. I therefore commend the bill to the House. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 Budget 2010 is a tax swindle. It is a lost opportunity and it is a Budget of broken promises. It rewards the wealthiest and it swindles the middle class by gobbling up their small change with the highest rampant inflation in 20 years. It took the previous Labour Government a decade to get inflation down yet this Government has blown it out to 6 percent next year. With that the hopes of middle New Zealand are washed away. 
Carmel Sepuloni 
: Shame on them. 
Hon DAVID CUNLIFFE 
: Shame! Most Kiwi tax cuts which the Minister of Finance vaunts in the House are worse than gone. How bad is it? People on the average wage will be $30 a week worse off on Treasury’s own numbers after the effect of inflation and GST. Every working family on the average wage will be $30 a week worse off. When they get to the supermarket counter they will be 30 bucks a week short. People on $70000 a year will be $45 a week worse off after GST inflation and their tax cut. They will be worse off; those New Zealanders will be going backwards. 
It gets worse. These tax cuts are unfair. There is a group who will be better off: the upper income earners. People on the same salary as the Prime Minister will be $350 a week better off as promised. People on $1 million a year will be $1000 a week better off. What is that? Someone who is already earning $1 million a year will be $1000 a week better off but someone on the average wage will be $30 a week worse off. What is fair about that? New Zealanders will vote against that package in next year’s election. This Government will be a one-term Government and that will be a record for the National Party. 
The Government has broken its promise to be revenue-neutral. There will be a $450 million fiscal hole in the Budget next year as a result of this tax bill. The Government is borrowing nearly half a billion dollars extra to fund the tax cuts for the millionaires who back the National Party. The Government is borrowing the public’s money to fund its mates. It gets worse. The Government will be $1 billion extra in the red over 4 years to fund those tax cuts. 
The Government promised that it would return to pre-funding superannuation when the economy got back into surplus. Do colleagues remember John Key saying that he would resign rather than break the promise to elderly New Zealanders? Has National kept its promise? No it has not. The economy is getting back into surplus. Actually—wait for this—the economy would have been back in surplus by 2012 if it were not for those upper income tax cuts. But the Government is borrowing to sort its mates out. The economy should be going back to surplus in 2016 but when is its pre-funding of superannuation coming back? That will not be until 2019. That is a decade of deferrals. It will wreck the chances of New Zealanders to feel secure in their retirement. 
What about the health budget? The Government promised that health would be paid for but what has happened? There is a $300 million hole in the budget that health needs just to stand still. The Government will be $300 million short next year alone because of the inflation impact on health. So even if there are no new services and even if there is no innovation in health the Government will be $300 million short. 
What about early childhood education? It has been put at risk by this tax bill. It will take $25 a week per child out of the pockets of ordinary New Zealand families. That $25 a week per child is a $100 million-a-year swindle out of New Zealand families. The Government says that this is a Budget for all New Zealanders; we say this is a Budget of broken promises. This is not a tax switch; it is a tax swindle. 
This Budget does not rebalance the economy. Let us look at that part of it. The Minister said that he would address the bias towards property investment. What has he actually managed to do? The chief Government whip has 15 rental properties and I guess he probably had a quiet word with him in the corridor. The Government took only half the depreciation write-down on rental properties. But it did take away the short-life depreciation allowance on high technology. That will cut innovation. The Government failed to ring-fence property losses. People who have a portfolio like Mr Tremain’s can write off their costs against their personal income and make a whopping great tax loss. That is wrong. The Government should have at least touched ring-fencing. It did not. It did not have the bottle it did not have the nerve. It rolled over in front of the Property Council and it will get back only $600 million a year. 
What about loss attributing qualifying companies? The Government had the nerve to state in the Budget that it was fixing the rorts around loss attributing qualifying companies. How much has it actually fixed? In 2008 alone loss attributing qualifying companies cost the Crown $2.3 billion in tax losses. It has mushroomed in the last couple of years. Do members know that the Government is getting back a measly $70 million? That leaves over $2.2 billion a year of the public’s money in the hands of phoney companies being written off against people’s personal income when it should not be. Labour would fix that— 
Hon Steven Joyce 
: Labour set it up. 
Hon DAVID CUNLIFFE 
: Yes Labour set it up and Labour has seen it being used for purposes that were never intended. We have the guts to admit that it should be changed and we will change it. We will change it because National does not have the nerve to do what is right. I say to National that we cannot make an omelette without breaking eggs and we cannot fix the property imbalance without putting a few property speculators on the wrong side of the ballot box. So it should have the nerve to front up and do the job. 
This was supposed to be a Budget for the many. It is quite obviously a Budget for the few. It was supposed to be a Budget for middle New Zealand. Those people will find that their incomes go down when rampant mega-inflation from the Minister of Finance hits them in the wallet. It was not supposed to be a Budget that made our elderly our sick our frail and our children worse off in order to pay for the tax cuts for the rich. But that is what the Budget has done. This Opposition will fight this Budget all the way to the ballot box because we know that New Zealanders can tell the difference. We know that New Zealanders have a sense of fairness and a sense of decency. They know that when an average earner is 30 bucks a week worse off and a millionaire is 1000 bucks a week better off something is wrong. Something is not right in the state of New Zealand. Do members know what it is? It is the current Government. Fortunately for New Zealanders that problem can be fixed relatively easily. 
To sum up this Budget is not a tax switch; it is a tax swindle. Headline numbers pretend people are better off but the Treasury documents calculated those numbers with a 2 percent inflation rate while the actual inflation rate that is in the rest of the Budget is 5.9 percent. That is why average income earners are worse off. 
Hon Steven Joyce 
: No it’s not. You’re making it up. 
Hon DAVID CUNLIFFE 
: That is in the Budget documents I say to Mr Joyce. I thought he was inside the loop. Obviously he has been left out. That is a bad sign. He has been consigned to the focus group routine. He has been consigned to reading the focus groups. John Key rings him only after a Tuhoe moment but not to prepare for the Budget. Now he probably will not ring him at all after the trouble that Mr Joyce caused over Tuhoe. That was a bad Sunday afternoon phone call I say to Mr Joyce. 
Hon DARREN HUGHES (Labour) 
: 
 I raise a point of order Mr Speaker. It is a technical point about the bill. The regulatory impact statement that is referred to in the explanatory note of the bill contains a reference to a website and I am advised that the website address that is in the explanatory note does not actually connect to the regulatory impact statement. It can probably be fixed very quickly from an information technology perspective but it is the Minister for Regulatory Reform’s— 
Hon Member 
: Is this a point of order? 
Hon DARREN HUGHES 
: It is a point of order about the bill. We need to have the information. If the Minister in charge of the bill could see to that it would be great. 
The ASSISTANT SPEAKER (Eric Roy) 
: It is not a point of order in relation to the order of the House. I think that the member having raised the point someone will now address it. 
CRAIG FOSS (National—Tukituki) 
: 
 First before I comment on the Taxation (Budget Measures) Bill I acknowledge and thank the Minister of Finance Bill English and our Prime Minister Mr John Key for a step change Budget which this bill starts to bring alive and put into effect. The Budget is a step change. It gets rid of some of the imbalances in our economy it addresses so much of what has been talked about by so many over so many years and this bill puts the Budget into action. As I acknowledged yesterday the previous Labour Government talked about some of those issues but it never did anything about them. In fact it perpetuated them and made them worse. I also acknowledge our coalition partners and particularly the Hon Peter Dunne for the work he has done on the taxation changes. 
I was quite intrigued that the previous speaker the Hon David Cunliffe had a new-found interest in inflation. Under his regime—when he was in Cabinet in fact—non-tradable inflation was running at about 4 percent and the rest of the economy was in recession. The reason I raise that is the member made inflation a key point of his speech. Labour is focusing on inflation yet it is also trying to rewrite the monetary policy framework—it is doing some task groups on it or something. Members on the other side of the House need to get their story straight. Either they are rigid about inflation or they are not. David Cunliffe missed some other points. Labour assumes life is static. If inflation is going up one assumes that wages are going up because wages tend to track inflation; real wages actually increase as our economy gets better. 
Fairness and equity are back. This bill brings fairness and equity back. Interestingly as the Prime Minister noted in his Budget speech many of the tax rate numbers have been brought back to exactly where they were in 1988 and 1989 from memory when Mr Goff was in Cabinet. It also puts some of the balance back. There is encouragement for financial assets. We heard time and time again the previous member wrongly I suggest talk about nothing being done about the housing bubble and the creation of housing assets or investment property assets. Actually if we look at the change in the taxation of financial assets—down to 28c in the dollar matching the awesome corporate tax changes—therein lies the incentive in action. Members should watch those macros change as investment moves to financial assets in New Zealand and hand in hand with some of the changes the Hon Simon Power is bringing in. 
I just say one other thing. There are a few commentaries in already. Regardless of what the previous member said I will quote from Mr Bernard Hickey’s commentary on the Budget which is only about 2 hours or 3 hours old. I could not put it better myself I do not think—apart from the last sentence perhaps. But I will read it: “This is the most comprehensive and coherent reform of New Zealand’s taxation system in more than 25 years. It goes a long way to tilting the economy back towards productive investment and away from property investment.” That sums up the Budget which is only 3 hours old. Feeding from that Budget is the bill that is before us tonight. I will not read it right through to page 61. I suggest members read the explanatory note. There are some interesting highlights on page 2 which has the new schedule of taxation rates particularly the changes—the current rates versus the rates from 1 October 2010. 
Fairness equity and sustainable growth are back. New Zealand is about to step up and take charge of its destiny again. With the current financial stresses around the globe this is a Budget for our time and for future generations. Fairness and equity are back. 
Debate interrupted. 
Tabling of Documents 
Income Distribution—1998-2008 
Hon JIM ANDERTON (Leader—Progressive) 
: 
 I gave notice in my Budget speech that I would seek leave and I do now to table three graphs from the Ministry of Social Development that demonstrate that the gap between rich and poor in New Zealand narrowed not widened under the last Government contrary to what was stated in the House yesterday by the Prime Minister Mr Key. 
The ASSISTANT SPEAKER (Eric Roy) 
: Leave is sought to table those papers. Is there anyone opposed to that course of action? 
Craig Foss 
: Are they Ministry of Social Development reports that have been tabled in the House in some form or are they from a select committee? 
The ASSISTANT SPEAKER (Eric Roy) 
: We have gotten into the habit of finding out precisely the nature and the origin of documents. Have they already been tabled? Are they public documents? 
Hon JIM ANDERTON 
: I cannot ascertain that. 
The ASSISTANT SPEAKER (Eric Roy) 
: I will put the leave anyway. Leave is sought for that purpose. Is there anyone opposed to that course of action? It appears not. 
Jo Goodhew 
: Yes. 
The ASSISTANT SPEAKER (Eric Roy) 
: It is too late. 
Document by leave laid on the Table of the House. 
Taxation (Budget Measures) Bill 
First Reading 
Debate resumed. 
Hon CLAYTON COSGROVE (Labour—Waimakariri) 
: 
 That speech by the chair of the Finance and Expenditure Committee Mr Foss was— 
Nicky Wagner 
: It was fantastic. 
Hon CLAYTON COSGROVE 
: No it was not fantastic; it was insightful because of what it said and what it did not say. That member started his speech by talking about this Budget and the Taxation (Budget Measures) Bill being fair and equitable. Let us examine what this bill does. My colleague David Cunliffe said a person on the average wage after we factor in the increased GST and inflation at 5.9 percent will be $30 a week worse off than at present. A millionaire earning $1 million a year will be $1000 a week better off. Now I do not know how Mr Foss in his little world explains and defines fairness and equity but in my world that is not fair is not equitable and is not right. 
A person on the average wage apparently—Mr Key said this to every New Zealander and there are many people who are worse off today—should not be jealous of the guys on the top of the heap the super-wealthy. They should not look up at the super-wealthy and be jealous. Well Kiwis in my view are not generally jealous creatures. They will not be jealous; they will feel let down angry and disappointed. I wonder what people on the average wage will think tonight about being $30 a week worse off because at the hands of that crew and its mismanagement of the economy we are about to see some of the worst inflation that we have experienced and the increase in GST. Will people hang on the words of Mr Foss who says this is fair and equitable when they realise that if they were earning a million bucks a year they would get $1000 a week back? I wonder what Mr Foss on the campaign stump will say to those people in his constituency or where he resides who are on the average wage. They will come to his office and say to him that they do not think it is fair or equitable that they are 30 bucks a week worse off because of his mismanagement of inflation and his GST hike. What will he say to them? Silence—silence is deafening. What will he say to them? He will not have an answer because he knows—and if he does not know there is a word that I will not use but it is the word for what he is—that this is not fair and is not equitable. He knows that this is not fair and is not equitable. 
When we look at this Budget we can see what we get. We get inflation going up by 5.9 percent. We get debt skyrocketing. If we look at page— 
Amy Adams 
: What? Skyrocketing—unbelievable! 
Nicky Wagner 
: That’s amazing. How does he get away with it? 
Hon CLAYTON COSGROVE 
: Oh hang on; the squawk-boxes are going over there. Well I invite those members to look at page 30 of volume B.2 and B.3 of the Budget documents. The report states: “Financing new and maturing debt will require the Government to borrow around $240 million every week over the next three years.” 
Amy Adams 
: It’s your mismanagement. 
Hon CLAYTON COSGROVE 
: Hang on; is there a squawk over there? I say to Amy Adams that she should look at page 30. Then the report states: “Debt is projected to reach $68 billion”—that is billion with a “b” for the benefit of the uninformed over there—“by 2014/15.” If we look at the next sentence we see that it is a cracker: “This substantial rise in debt will mean that interest costs more than double.” So inflation is going up debt is going up and interest is going up. What effect will that have on the average Kiwi? 
If we turn over to page 40 of the same document and look at “Figure 2—Finance costs” we see that the financing costs the interest on that massive debt will not even start to decline until about 2021. So we know— 
Amy Adams 
: That’s from the party that wants us to borrow more. 
Hon CLAYTON COSGROVE 
: I invite the member to read her own Budget documents because that is what they say. Debt will be going up inflation will be going up and interest costs will be massively exploding which will effectively mortgage our kids’ future. What is fair and equitable about that of course is that the person on the average wage will be 30 bucks a week worse off but a millionaire someone who earns a million bucks a year will get back a thousand bucks a week. 
So I ask the members opposite to explain their definition of fairness and equity today. I ask them to tell us in the coming days and in the coming hours of this debate how it is possible for people on the average wage to feel that they have been treated fairly or equitably when they are 30 bucks a week worse off which is what the documents show. I would like Government members to explain how they will justify that to average New Zealanders. 
It was said—I think in Muldoon’s time when we had an explosion in inflation —that the biggest thief taking money from our wage pocket was inflation. The biggest thief taking money from the pockets of working men and women was at that time said to be the spectre of inflation. Now inflation is projected to go to 6 percent. So interest is going up debt is going up inflation is going up and the average Joe in the street will be worse off. I would like those members— 
Nicky Wagner 
: Not true. 
Hon CLAYTON COSGROVE 
: Nicky Wagner says no and shakes her head. I doubt whether she has got past the contents page of most of the Budget documents but I give her an invitation. I know that members on this side of the House are quite happy to go out to their constituencies have a group of average New Zealanders on the average wage come in and debate the Budget with the National crew. Let us have a meeting about it. Let us get the responses of people who are on the average wage to the Budget in a hall anywhere in this country—in Otaki in Dunedin in Rimutaka or in Auckland. Let us get a group of them together in a room and ask them whether they feel they have been dealt to fairly and equitably by that crew over there. 
Phil Twyford 
: They’ve been dealt to all right. 
Hon CLAYTON COSGROVE 
: They have been dealt to my colleague said—absolutely; they have been dealt to. 
The only rooms that the members opposite the National crew will be happy and comfortable in are the cabins of the yachts parked in the Viaduct Basin harbour which belong to the people who will be a thousand bucks a week better off. I can see Gerry Brownlee in the galley with his mates who are on a million bucks a year. They will be congratulating Mr Brownlee and saying how wonderful it is that he is giving a thousand dollars a week back to them. But we will not see Gerry Brownlee at the food bank—well we might but for different reasons—talking with ordinary New Zealanders. The food banks in my electorate and around this country are chocker but we will not see Gerry Brownlee and Bill English at the Salvation Army at Presbyterian Support or at the Methodist Central Mission as people rock up day after day trying to make—[ 
Interruption 
] “Evidence” Mr Bennett says. He wants to be given evidence. Well I invite him to come to Kaiapoi and visit Kaiapoi Community Services—old “Cue-ball” in the back row over there—where I will introduce him to some of the lost and lonely people in my electorate. I will introduce him to them and they will be very happy to sit down with that member Mr Bennett and explain to him how life goes for people who are on the bottom of the heap. 
It might be instructive for Mr Bennett to actually meet somebody who is scratching for it. It might be instructive for Mr Bennett to meet a couple of constituents in my electorate one of whom is a builder who lost his job. His wife is in two part-time jobs. They have a vegetable garden and grow produce that is better than that of Turners and Growers. They preserve that produce freeze it and do everything else that they can to make ends meet. They have a couple of kids. But that family cannot make it and their mortgage may well be foreclosed. I can tell members that after the Budget today that family of four will not be any better off. They will not feel that they have been treated fairly. They will not feel that the veil has been lifted from politics in New Zealand that there has suddenly been a redistribution of wealth and that they will be looked after. Oh no! 
Nicky Wagner 
: They are. 
Hon CLAYTON COSGROVE 
: So if Mr Bennett and the other member over there whose name I cannot remember want to come to my electorate and meet some of the lost and lonely people—those who live on income that is below the average wage—let alone the people on the average wage who will be $30 a week worse off then I am quite happy to take them around. But they just squawk over there. 
I am sure that Kate Wilkinson a Cabinet Minister who resides in my electorate would not know a poor person if she fell over one. I wonder whether she is prepared to have a public meeting with a group of people on the average wage and to front up and explain to them that she is a Cabinet Minister and that she sat in Cabinet and voted for this package. I wonder whether she is prepared to say that she sold out Waimakariri and the rest of New Zealand and that she did not oppose a thing. I wonder whether she will tell that to the people on the average wage or whether she will swan around the various public houses and clubs in New Zealand where those members over there enjoy the finer things of life. She will feel very comfortable in those places I am sure because she will not be challenged there; she will be congratulated. 
I say to Government members that they should have a good look in the dictionary and see what “fairness” and “equity” mean. They should go and talk to a few ordinary people who are scratching for that now. They should not go and talk in the fashion-ways of Christchurch—no no—but should go and talk to some ordinary people and ask them whether they feel equitably and fairly treated today. Those members should ask ordinary people whether they feel ambitious for New Zealand or inspired by this Budget. Oh no! They feel let down angry and disappointed. 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I stand to speak on the first reading of the Taxation (Budget Measures) Bill. This bill is part of the Government’s overall Budget package and part of the Government’s overall fiscal strategy. I said earlier today in reference to the Budget that in many ways this Budget is a triple-deficit Budget. It runs a fiscal deficit it adds to the social deficit and it adds to the environmental deficit. I appreciate that the Government inherited some deficits; there is no question about it. It inherited a fiscal deficit and with this Budget it is making it worse. It inherited a social deficit and with this Budget it is making it worse; and it inherited an environmental deficit and with this Budget and this bill the Government is making it worse. But it is worth examining some of the particular measures that are being proposed in this combination of tax changes. 
I think that when the Minister of Finance said we should look at the tax changes as a whole he has a point. We should look at the tax changes as a whole. When we look at the impact of the income tax changes which lower the tax rates very significantly and combine that impact with the impact of a GST change we see that the two tax changes together are doubly regressive. When the two elements of them are incorporated—one of which lowers the top tax rates and the other of which increases GST—we get a doubly regressive tax policy and the tax changes announced in this bill will be doubly regressive for that reason. 
We know that GST is a regressive tax because those on the bottom decile spend about 14 percent of their incomes on GST whereas those at the top spend about 4 percent. So GST acts as a regressive tax because it punishes the poor more than the rich. At the same time we know that the changes to income tax will make the tax scale flatter and not as progressive as it currently is. So when we combine the two elements together—the changes to GST and the changes to income tax—we end up with a more regressive tax system. 
That might not be the worst thing in the world if New Zealand did not already start from a position of being one of the most unequal countries in the whole OECD. If we started from a position of massive equity from a very flat income scale then it would not necessarily be a big deal that we flatten the progressivity of the tax system and that we increase GST. It would be a problem but it would not be a big deal. But when our starting point is that New Zealand is one of the most grossly unequal countries within all of the advanced industrialised countries on the planet it does not make any sense to introduce a combined tax package that put together is highly regressive. It is hard to fathom why a Government that is governing a country that is already grossly unequal would introduce a package that increases inequality. 
It is important to understand just how grossly unequal our country is. For example we know that the top 50 percent of income earners earn 84 percent of all the income and the bottom half of income earners earn 16 percent of all the income. Eighty-four percent of all income goes to the top half and 16 percent of all income goes to the bottom half. When we look at those numbers we get a sense of how out of touch the people in this Chamber are. Almost all the people in this Chamber are paid well above the average wage. They have no idea that half of the country earns 16 percent of the income. How else could we pass a tax package that adds to inequality? How could we possibly pass that tax package which National ACT and the Maori Party are proposing to do today? How could those three parties support a tax package that will increase inequality in New Zealand when we already start from a position of being one of the most grossly unequal countries in the OECD? Why would we add to that inequality? 
One of the justifications the Government gives is that it will increase GDP growth. The Green Party is a bit sceptical about GDP growth. We recognise that we live on a finite planet and we cannot continue to grow the use of resources and the use of pollution when we live on a finite planet. There is that small issue that there is only one planet which pretty much every other party in the House struggles to come to terms with. Let us put that to one side in order to just indulge the Government’s argument that it will grow GDP. 
We know that in 1986 the last time there were very significant tax cuts the New Zealand economy in terms of GDP per capita absolutely flat-lined. It flat-lined straight after the biggest tax cut package this country has ever seen. It was a huge cut. We cut it from I think 66 percent down to 33 percent or something like that. We went from a very high percentage down to 33 percent. That was during Labour’s term when Roger Douglas introduced the package. I know that colleagues in the Labour Party do not agree with that any more and recognise the wrongs of their ways back then when Roger Douglas was in charge. What happened after Labour cut the taxes so significantly? GDP flat-lined; it absolutely flat-lined. That was the impact. I am not saying there is cause and effect because there are so many more complicated factors—the relationship between GDP change and income tax rates is very complicated—but we certainly cannot walk away from that and say that if we cut personal income tax rates it results in an increase in GDP because the exact opposite happened. 
Of course the other thing that happened in 2000 was that we increased tax rates. The top tax rate went from 33 percent to 39 percent and what happened? Did the economy in terms of GDP flat-line? No it grew. We had the situation that after the increase in income tax rates the economy grew and after the drop in income tax rates overseen by Roger Douglas who is sitting to my left the economy flat-lined. The evidence is compellingly against the argument that the Government is putting forward. 
The second argument that is put forward is the one around tax avoidance. That is a really interesting argument. The tax avoidance argument says that there are all these people who are using the loopholes in the tax system to avoid tax. Did it never occur to the Government that maybe it should close the loopholes? If there are loopholes in the tax system maybe the Government should close the loopholes. Let us take the example of people avoiding other laws such as the laws around shoplifting. If a whole bunch of people are coming into a shop and shoplifting all the time does the proprietor say: “Well that’s a bit of problem. What we need to do is to drop all the prices and put a fixed charge on everyone who comes into the shop in order to cover the difference.”? Instead of saying we will enforce the rules against shoplifting the opposite is that we say no obviously our prices are too high so we will cut the top prices and because there will be less income every person now coming into the shop will have to pay a little fee at the door. That is effectively what the Government is doing. That is the Government’s argument around tax avoidance. The Government’s argument is that there are people avoiding the tax so what it needs to do is to cut the top tax rate rather than enforce the rules. There was another option here. The Government—the National Party the ACT Party and the Maori Party—had an option other than making our tax system more regressive. The option was to enforce the tax rules as they currently exist. That is an option the Government has chosen not to take. 
I would like to talk briefly about the property tax changes. The Green Party obviously has been a supporter of trying to direct a lot of our savings away from investment property because we have had a speculative boom in investment property. The obvious solution to it is a capital gains tax excluding the family home—we all know that—even though the Government does not have the political courage to do what it knows should be done. There are two parts to the problem with the way the Government has addressed investment property. It is far too weak and will not have the effect we are talking about. David Cunliffe said earlier that loss attributing qualifying companies will be only marginally affected. The other part is that to the extent it puts an impact on rent—and to the extent that it is effective it will have some upward pressure on rent prices—what we have to do is make sure there is a supply of affordable rental properties to account for that. 
The Green Party has a programme for example of massively increasing the number of affordable State houses so that we can deal with the fact that the Government is putting upward pressure on rents which is what this package will do and make sure that there is more affordable housing available through State housing through non-governmental organisation housing and through council housing. Unfortunately in this Budget the Government has slashed to almost zero the amount of money that is going towards new State housing. At the time that the Government is proposing to put upward pressure on rents it has cut all new building of or acquiring of affordable State rental housing. That is just damn wrong. The Government cannot do that. At the one time that upward pressure is going to be put on people’s rental prices to the extent that the Government’s changes in property will do that we should make sure that affordable rental properties are available. This Budget is inequitable. It leaves a social deficit an environmental deficit and a fiscal deficit and this bill is part of the problem. 
Hon Sir ROGER DOUGLAS (ACT) 
: 
 I have recently been reported in the newspapers as giving National three out of 10 for this Budget. 
Amy Adams 
: A bit tough Roger—a bit miserly. 
Hon Sir ROGER DOUGLAS 
: Well it is slightly tough I think but in fact it was not quite what I said. I said that this Budget was being prepared against three trends. The first trend was the fact that New Zealand relative to other countries had been in decline for 40 years and I gave the Government three out of 10 in terms of whether I felt it would make the changes that were necessary. The changes that I felt were necessary were very low taxes—and the Government has gone some way towards that—and the need to introduce competition and private enterprise into the areas of health welfare and education. I knew that would not happen so I gave the Government three out of 10. 
I said on the expenditure front that frankly for 13 years successive Governments have spent way above the rate of inflation. I thought that probably the Government would get a score of six or maybe even seven. I have had to revise that score down to five I am afraid. But on the other hand in terms of the Government’s tax proposals I said that I thought the Government would get maybe four or five and I would certainly revise that up to six or seven. Just what it is overall whether it is 3½ or four I am not sure. Maybe on Tuesday when I speak in the Budget debate I will make that decision. 
If I look at this particular tax bill and at what is in it I would say that there are some good measures. But I think it could have been improved considerably from where it is. I will touch on where I believe it could have been improved. 
The first point I will make is that I do not believe there was any necessity whatsoever to increase GST. I believe that it was possible to have reduced Government expenditure by at least the net amount of revenue that GST will bring after compensating superannuitants and welfare beneficiaries. I say that for a number of reasons and I will give some examples. First of all in a paper that I put out the other day I identified about $3 billion worth of possible expenditure savings which is double what GST net will bring in. If I look at this particular Budget and at items of what I would call corporate welfare—handouts to various businesses organisations and the like—I can see that that comes to about $2.6 billion and I am sure that over the weekend I will find other costs that will take it to over $3 billion. So handouts to corporates subsidies for this and that the emissions trading scheme etc. come to over $3 billion. Again that is double what will come in in terms of the net return from GST. 
The next point I will make is that if I look at page 15 of the Minister’s executive summary in the Budget documents—and this is why I marked the Government down from seven to five—I see that Government expenditure this year rather than flat-lining as I thought it would has actually increased by 9 percent. It has gone up from $64.79 billion to over $70 billion. It has increased by just over 9 percent. I accept and I think it is being fair to the Government to say that almost 2 percent of that 9 percent increase is compensation for the GST increase but even allowing for that the increase in Government expenditure in this Budget is 3½ times the current rate of inflation. I have to say that this country cannot continue to increase Government expenditure at 3½ times the rate of inflation. At some point in time that has to stop. It has been going on for 13 years. We had a Labour Government that simply did not care and got us in a hell of a mess and we need to stop that. That is the first point I would make. I do not believe that GST needed to go up from 12.5 percent to 15 percent. 
What were the other parts of the tax package that I personally do not really agree with? I would not have reduced the 12.5 percent rate down to 10.5 percent on the first $14000 of income. The thing that impacts on people’s behaviour is the rate they pay at the margins—what they earn on their extra few hours of overtime. The rate that is paid is what determines whether a person will do overtime; that final rate is what determines whether people will invest etc. We know that those people who earn under $14000 actually come from the wealthy families of this country so when we reduce the tax rate from 12.5 percent to 10.5 percent we are not in fact helping the low-income earner; we are helping the more affluent—the person who is able to income split etc. I remember that vividly from the time I tried to put in a flat tax rate of 23c and we were concerned about lifting everyone from 15c to 23c. The fact was that 90 percent of the people who were paying simply the 15 percent came from wealthy families. They were the wives husbands or children of people who were earning high incomes. Their families had high incomes. So I would not have done that. 
The other thing that I would have tried to do—and I really do not understand why the Government did not do it—was to align tax rates. I believe that the Government should have aligned the various rates whether of personal income tax corporate tax or tax on trusts at a rate of 30c and then maybe next year it should move the rate down to 29c and move it in the following year to 28c. But at some point in time it is important that the corporate and the top personal income tax rates are aligned otherwise we are simply encouraging people to try to dodge tax payments. 
AMY ADAMS (National—Selwyn) 
: 
 I am delighted to have the chance to stand here on Budget day and speak to the Taxation (Budget Measures) Bill. Today Bill English delivered a Budget that will move our economy from the sluggish underperforming unbalanced debt-driven and consumption-focused economy that the previous Government encouraged and presided over. It sat by with its head in the sand for 9 years while our productive sector went down the toilet. This Budget will move us from that position where we were consistently living beyond our means and put us back on the track to becoming an economy focused on growth. That is what this Budget is about. It is about having an economy focused on growth. 
Why is growth so important? Well for the benefit of members in the House who do not seem to grasp it I say that growth is important because through growth we will see jobs. Growth will create real jobs in this country. Members should not tell me that there is nothing in this Budget about jobs. Growth is what will gives us jobs and this whole Budget is about delivering growth to the New Zealand economy. It will give us not only jobs—and not just jobs in the public sector but real jobs in the productive economy—but better incomes and a higher standard of living. That is what we in the National-led Government want for this country and that is what this Budget is moving us towards achieving. 
Let us look at some of the projections that we have heard today. They are stunning—they are stunning. We have 3 percent projected growth every year for the next 4 years. That is a staggering turn-round for this economy and it is a mark of the success of John Key and this National-led Government. Growth of 3 percent every year for the next 4 years will mean 170000 new jobs—170000 new jobs. That is what Treasury is telling us. That is Treasury’s conservative estimate of what that sort of growth means to this economy. Not only that it also means an average of $7000 a year of extra income for New Zealand families. That is what I came into Parliament to help deliver and I am incredibly proud to be part of a Government that has delivered a Budget like the one we have seen today which will give that sort of growth that number of new jobs and that level of lift in income to all New Zealand families. 
That growth comes about from a couple of very important aspects of this Budget. It comes about through controlling our national debt. Debt is a massive issue as Greece and the UK know. It is their No. 1 issue. Let us just remember that without the changes that this Government made in last year’s Budget and in this Budget by 2020 we would have been looking at net Crown debt of 60 percent of GDP. Now it is projected at that stage to be 20 percent. From 60 percent under Labour’s policies to 20 percent under National’s policies—that is the sort of control that will make a difference in this country. 
That growth comes from supporting business. All we have heard today particularly from the Green Party is how those members would shut down and kill the productive sector. They do not like farming they do not like the productive sector; all they want to do is to shut it down. We are about supporting our industry and supporting growth because that is where jobs will come from. Importantly in respect of this bill growth is about getting the incentives right. It is about ensuring that through our tax system we say to New Zealanders that we will get behind them if they are going out there to work hard and get ahead. We will not be getting behind the consumptive debt-driven economy; we will support Kiwis who are trying to work hard and get ahead. 
Labour spent most of the afternoon trying to tell us that this Budget is about favouring the rich—talk about last resort of the desperate! Let us look at what is really happening. Two-thirds of all the tax cuts delivered in today’s Budget will go to reducing the bottom two income tax brackets. Two-thirds of everything will go to the bottom two income tax brackets. After the passage of this bill 73 percent of New Zealanders will face a top tax rate of no more than 17.5 percent. Nearly three-quarters of all New Zealanders will face a tax rate of 17.5 percent or less. Labour is trying to tell us that it is about a few rich pricks at the top; well it is not. This is about fairness. It is about equity. The only reason that Labour is so angry is that this Budget has left it with nowhere to go. National is delivering to all New Zealanders. We are delivering to low and middle income New Zealanders and Labour knows it. Labour knows it the public knows it and the commentators know it. 
Let us took at what the commentators say. Bernard Hickey today reported that “Labour cannot accuse the Government of delivering a budget for the rich because rich property investors and foreign investors will be hit most by this Budget.” He is right. Tracy Watkins commented: “If the holy grail of budgets is that they under promise and over deliver Finance Minister Bill English can score Budget 2010 as a win. … everyone will be better off.” I encourage anyone listening to this debate not to buy into the histrionics and crocodile tears from across the House because those who know economics know that this Budget today is delivering a fairer more equitable tax system and a stronger growing economy for all New Zealanders and I am very proud to commend it. 
Hon DAVID PARKER (Labour) 
: 
 How one values this Budget depends on how much one values one’s word. On this side of the House members value their word but this Budget has been built on three broken promises which the National Party cannot deny. The first promise was that National would not increase GST. John Key was on camera immediately before the election promising that there would be no increase in GST. That is the first broken promise of this Budget. How does one value that? Well National does not put much value on its word. It lacks integrity. It lacks integrity— 
Craig Foss 
: I raise a point of order Mr Speaker. I believe that under the Standing Orders a member cannot question the integrity of other members in the House. As well as that I take offence at the accusation made by the member opposite. 
Mr DEPUTY SPEAKER 
: The Speakers’ rulings are quite clear that one cannot challenge members’ integrity. I am sure that the member will be able to use some other phrase and I ask him to continue. 
Hon Clayton Cosgrove 
: I raise a point of order Mr Speaker. This is not to challenge your ruling but as I understand it Mr Parker was talking about the National Party— 
Mr DEPUTY SPEAKER 
: I have already ruled and I invite the member to continue. 
Hon DAVID PARKER 
: How does one value one’s word? I value my word highly. National obviously does not value its word. It promised before the election that it would not increase GST but this Budget increases GST. 
National’s second promise was that it would not increase borrowing for tax cuts. That promise has been broken. The Government’s borrowing has increased as a consequence of the tax cuts in this Budget. That is the second broken promise. 
The third broken promise is that National would not cut public services. In particular it promised explicitly that it would not cut early childhood education—in fact it would have made it free. What did National do in this Budget? Audrey Young picked up on this issue in her column today. She stated that it will “save about $400 million over four years in abolishing the top two funding rates for early childhood centres”. That means in those cases a decrease in the subsidy that parents get for their children of about $25 per child per week—$25 per child per week. That is the third broken promise. 
Amy Adams 
: No it’s not. 
Hon DAVID PARKER 
: Amy Adams says that that is not a broken promise. She does not know what a promise is. 
The other thing that needs to be said in respect of the changes to income tax is that we know the projection of the rate of inflation as a consequence of these changes is that next year inflation will be 5.9 percent. As for the income tax cuts that people will get to compensate them for the increase in GST all but the most wealthy people will have them eaten up as a consequence of the increase in the prices they will pay when they go to the supermarket. Rather than being some great boon to people the money will be gobbled up by an increase in their cost of living. Their rents will go up their supermarket costs will go up all of their costs will go up. 
We heard Amy Adams say that the income tax cuts are being fairly distributed but 41 percent of the income tax benefits will go to the top 10 percent of income earners—41 percent goes to the people who already earn the most. New Zealand already has low income tax rates for high earners. That is set out in the Tax Working Group paper that was produced on behalf of the Government. It stated: “The current New Zealand top personal tax rate at 38% is not especially high by OECD standards”. It was already low by OECD standards and this Government is cutting it further for the top 10 percent of income earners. The top 10 percent of income earners will pick up 41 percent of the decrease in income tax. That is just not fair. 
I will say something about the rebalancing of the economy. The Government said that this Budget is all about rebalancing the economy. The Tax Working Group stated that we needed to rebalance the economy away from speculative investment in housing towards the productive sector. Labour agrees with that as an ambition. Until today we were all expecting that there would be ring-fencing of losses so that people would not be able to buy some residential property and offset the interest costs on the loss they make on that rental property in order to decrease their personal income overall. What has the Government done? It has backed away from that. One of the disappointments that Bernard Hickey has with this Budget—and he is right—is it does not properly rebalance the economy away from speculative investment in the housing sector. People can still make those investments in the residential property sector incur a big mortgage cost and offset that against their personal income tax. Rather than closing that loophole the Government has gone a little bit of the way and said that people cannot deduct depreciation costs on buildings that will last for more than 50 years. That is a fair enough step and I do not criticise that but the Government has not taken the more important step of ring-fencing those losses. 
What has the Government done about catching up with Australia? Well the answer is nothing. The growth rates in New Zealand projected for the years out are lower than the growth rates predicted in Australia so the gap continues to grow between New Zealand and Australia. The wage gap between New Zealand and Australia will continue to grow ever bigger and this Budget does absolutely nothing to reverse that trend. 
What has the Government done in terms of encouraging smart business? It has cut the depreciation rates that businesses can claim for investments in high-tech plant and equipment. It has cut depreciation rates so it is going in exactly the opposite way there. 
Fran O’Sullivan wrote a very good column in the  
New Zealand Herald 
 a couple of weeks ago I thought or it might be about a month ago now. She stated that given the high rates of youth unemployment in New Zealand and given our experience last time we had high rates of youth unemployment particularly Maori and Pacific Island unemployment—and the last time we had that in New Zealand was in the 1990s under the Bolger Government and then the Shipley Government—a big mistake made then was that we did not spend enough on training and the people who were on the dole queue ended that period of unemployment without further skills and had got into the habit of sitting on their bums at home. They did not have a work habit. She said that this Budget needed to be judged in terms of what it would do for the training of the large cohort of young people in New Zealand who are currently unemployed. What this Budget does about that is just about nothing. Rather than increasing the amount of funding that is going into training the Government is setting quotas on the number of people who can go to university. People are being excluded from university and we do not have an increase in funding for training for those people who because of the state of the economy and through no fault of their own are stuck on the dole. 
What does this Budget do in terms of debt? It stated that the amount that will be spent on the interest on Government debt goes from $2.5 billion per annum to $5.5 billion per annum. That is a big increase in the amount of our taxes that is being spent on interest. 
What it does in terms of the current account deficit is woeful. We heard the Government say that it will rebalance the economy towards exports. What does this Budget show? It shows the current account deficit going up every year from now on—the current account deficit goes up to 7 percent of GDP. How is that proof of rebalancing the economy? It is not. It is proof of a return to a deficit-based economy so much weighted towards the property sector with not enough exporting. This Budget does not solve that problem. The effect is that by 2014 New Zealand’s total net assets as a country including both Government and private debt will rise to negative 100 percent of GDP—100 percent of GDP. Rather than going in the right direction the deficits from the Government and the lack of movement of the economy towards the productive sector and exports will mean that total net assets will go to negative 100 percent of GDP. 
Lastly I will mention the fact that the position of the Government and the country would have been even worse were it not for the fact that the previous Government reduced debt. Bill English and John Key every time said the previous Government should have had tax cuts not surpluses but that would have led to more inflation. It would have to led to higher interest rates and to a higher level of debt than the current Government has inherited. New Zealand would have been closer to the position that Greece and Great Britain are in and closer to the position that the National Government under Muldoon left the country in with debt at 80 percent of GDP. Instead we reduced gross debt to 17 percent of GDP and reduced net debt to 0 percent of GDP. This Government has got it going in the other direction. 
The Government has not rebalanced the economy. The tax cuts will be eaten up for all but the most wealthy people in the extra costs that people face in rent and in inflation on their food costs. But overall the worst thing about this Budget is that it breaks three promises. 
Hon TARIANA TURIA (Co-Leader—Maori Party) 
: 
 In Maoridom we say “Te po uriuri me te ao marama” which basically means “In the darkest of dark and the lightest of light”. The general concept is like the Chinese version of the yin and the yang—the need to balance and achieve a sense of equilibrium as we take a steady foot forward. It is with this sense of balance that I stand to speak to the Taxation (Budget Measures) Bill. 
The previous speaker David Parker talked about the high unemployment rate amongst Maori and Pasifika and the need for more training. Some in the room will remember that in the 1980s when we had really high unemployment our people knew what it was like to be on the “training-go-round” through access training steps programmes you name it. Did any of those young people get trained in real job skills? No they did not. Why did they not? The union movement would not allow the kind of skills training that needed to take place for those young people—training that would have given them really employable skills in the workforce—because it was afraid that by training these young people in those skills they would take jobs away from those who were working. It is one thing to get into the whole notion of Maori unemployment and talk about skills training and development but our young people want training that will get them into the workforce. They want training and education that will give them the opportunity to improve their life chances and their educational opportunities so that they will not end up always being the last on and the first off in the job market. 
I think it is really important that we had 9 years of plenty yet Maori youth unemployment rates and Pasifika youth unemployment rates were still incredibly high during those years. 
Hon Clayton Cosgrove 
: What a load of rubbish. 
Hon TARIANA TURIA 
: It is not a load of rubbish. I think it is probably a really good opportunity for those who are shouting at me in the House to go back and look at those figures. Maori youth under 24 years of age had a high unemployment rate in a time of plenty. It is manifestly evident that something is wrong with the state of the nation when we can sit back and think that really a high unemployment rate amongst young Maori people is OK. It is not OK. If we do not have those young people contributing to the economy in the way that they should be in productive work we will be in serious trouble with this ageing population so that needs to happen as quickly as possible. 
I will move off that take. Something is wrong when New Zealanders are crowding the property market and feeding their own wealth yet no new jobs are resulting from it. Something is wrong when our economy is trapped in excessive debt and cycles of long-term borrowing and business and investment confidence is declining with it. We do not want to pass on this history of unmitigated spending and debt to our young. 
We will be supporting this bill in its entirety as is the expectation of our coalition agreement with National and in doing so we will seek to promote two particular priorities throughout the passage of the debate. The first is that we want to be sure that new tax rates for companies and savings the depreciation in capital contributions the personal tax cuts and the other tax changes proposed in this bill give confidence to people to invest in businesses which can then grow and strengthen the economy and give confidence to employers to employ more people. 
Hon Clayton Cosgrove 
: You sold out your electorate. 
Hon TARIANA TURIA 
: Mr Deputy Speaker I object to the person across the House making the comment that the Maori Party has sold out. I object in the strongest terms possible. 
Mr DEPUTY SPEAKER 
: Is the member bringing a point of order? 
Hon TARIANA TURIA 
: Absolutely. I want an apology. 
Mr DEPUTY SPEAKER 
: The member has taken offence under Standing Order 116; it is a personal reflection on the member. I ask the member to withdraw that comment and apologise. 
Hon Clayton Cosgrove 
: I withdraw. I raise a point of order Mr Deputy Speaker. I think other speakers have ruled on these sorts— 
Mr DEPUTY SPEAKER 
: I have ruled. The member took offence and we take her word for that. She was offended by the comment. I have ruled and that is the end of the matter. 
Hon TARIANA TURIA 
: The second priority is the vital need to guarantee that poverty will be addressed and that household income standards of living and economic performance will indeed be lifted. It is vitally important to us that we do what we can to build our economic recovery and to provide more opportunities for New Zealanders to back themselves. We need incentives in place to strengthen the economy and make a brighter future. But this is not just about the Government tipping the scales to create the balance that we need. This is also about us—about our people and our nation preparing for our future. 
If my colleague Rahui Katene were here she would talk to the House about Whai Rawa. Whai Rawa is designed to provide a base level of savings for all registered Ngai Tahu to support a culture of savings and asset building to encourage and assist Ngai Tahu w’anui to improve their financial situation and knowledge. Whai Rawa is about empowerment and giving Ngai Tahu the ability to create a better tomorrow for themselves and for their children. It is about rebuilding the savings culture that we once believed in. Maori are phenomenally thrifty people who can make a meal spread to feed a crowd. They know how to make the best of what they have in front of them. But also we are a people who focus on the future for the generations to come. In this sense although our people did not like the proposal to increase GST they are also not happy with the concept of leaving our grandchildren burdened by the heavy price of debt. 
The Maori Party entered into coalition with National with the explicit focus that we seek significant outcomes in Whanau Ora through eliminating poverty advocating for social justice and advancing Maori social cultural economic and community development in the best interests of this nation. These are ideals that we hold true to as much today as we did when we signed up to that agreement. Unlike the two major parties of this Parliament we are not afraid to say the word “poverty”. Indeed in our policy manifesto we made the explicit commitment to set a deadline to eliminate child poverty by 2020 and to designate an official poverty line. We will not resile from the challenge of preventing poverty. 
In today’s Budget an additional $1 million is being invested in Maara Kai recognising that community gardens are a key means of encouraging us to live more collectively and to live alongside one another restoring our families to being the gardeners the hunters and the gatherers that they once were. In today’s Budget we also have seen honoured one of our policy goals to raise core benefit levels. 
Over the past few months as the policy thinking around this Budget has evolved all of our MPs have hit the road taking the challenge of the tax question to our constituency. I have to say that no one in our electorates was pleased about the proposed rise but there was a general acceptance of the rationale for why we needed to support the tax changes. Primarily this issue is a condition of our coalition agreement and to that extent our constituency told us clearly that they want us to continue to have the influence that we do. But other members can understand the precarious financial position that we are in: the situation that on average New Zealanders are spending more than they earn—some 22c more than every dollar we make. 
I come back to the notion of “Te po uriuri me te ao marama”. We believe in balancing up the scales and making things spread. It is in this light that we support this bill. 
DAVID BENNETT (National—Hamilton East) 
: 
 I congratulate the Minister of Finance and the Prime Minister today on an excellent Budget. It has been well received by the public and the commentators of New Zealand. It is a Budget that shows leadership in the economic and the political fields that this country has lacked for many years. I bet members that the headlines in the  
Sydney Morning Herald  
will read “Why haven’t we got a John Key and a Bill English to take our country forward?” like this country has been taken forward today. People around the world will be looking at New Zealand as an example of how to build a stronger country of how to create economic management and of how to have reform in our tax system which has been long overdue. It seems crazy that in this place Labour with its position of looking after the downtrodden and those on low incomes did nothing about property investors for 9 years. They did nothing about that and it came only to us. We had to make that change to taxation which delivered the right incentives for New Zealanders. 
I look forward to the young people of New Zealand knowing that they need to get an education that they need to work hard and that the opportunities are there. We will give them the rewards. We will make it worth their while to do the right things in life. That is the signal and the incentive this Budget sets. 
I thank our coalition partners because they see the big picture. They do not see the small petty-mindedness of what one needs to do to win elections; they see that we need to build a stronger people so that we can have a stronger country and that their success will be our success in building that country in the future. We look forward to that. This is a tremendous day for New Zealand. It shows that we can get out of recession quicker than we thought that we can create tax change that is meaningful and that delivers the future and that we can look after our public services and health and education which need investment. This is a great day for New Zealand a great day for National and something that all New Zealanders can be very proud of. Thank you. 
STUART NASH (Labour) 
: 
 I want to deal with some facts. The Maori Party member Tariana Turia has sold Maori out. Seventy-three percent of the people in that member’s electorate earn under $40000 a year. If her support for the Budget is not regarded as selling Maori out then I do not know what would be. That party is about to vote in a Budget that will increase GST from 12.5 percent to 15 percent whilst it has a member’s bill which was just pulled out of the ballot that proposes removing GST from healthy food. Now that is hypocrisy if I have ever heard it. 
Mr DEPUTY SPEAKER 
: The member cannot use that word. I ask him to withdraw it. 
STUART NASH 
: I withdraw. 
Tariana Turia talked about high Maori unemployment. Well let me tell her about high Maori unemployment. When Labour took over in 1999 the Maori unemployment rate sat at just about 30 percent. The previous Labour Government took it down to a 32-year low of 12 percent. Does the member know what the Maori unemployment is at the moment? It sits at 20 percent—it sits at 20 percent. The previous Labour Government was the first Government to bring down the Maori unemployment rate to a level that was even close to becoming acceptable—in fact it was not acceptable at all. Does that member know what this Budget will do? This Budget will be the worst Budget for Maori since the “mother of all Budgets” in 1991. This Budget is a travesty and for that member to stand up and say it is a wonderful Budget is a complete sell-out of Maori. Seventy-three percent of the people in her electorate earn under $40000 a year. 
Mr Bennett over there talked about the downtrodden corporate property investor. The downtrodden corporate property investor—now that is a strange one. I do not know what sort of electorate he lives in or where his downtrodden people are but I can tell members that the really downtrodden people in this country will be sitting back and asking how this Budget will help them when all it delivers is an extra $16 a week or a mere $5 a week extra to those on the median wage after the GST hike has been taken into account. I ask members to remember that 50 percent of Kiwis still earn under the median wage. Those people will receive less than an extra $5 a week in the hand when the Prime Minister will receive $350 a week more in the hand. The chief executive officer of Telecom will receive $1600 a week more in the hand. That is 100 times more—100 times more—than the increase for a person on the median wage. That does not take into account the inflation rate of nearly 6 percent that this Budget creates. This is not a Labour Party figure; this is not scaremongering. This figure is in the Budget documents. It is the Minister of Finance’s figure this 6 percent inflation. That is the bogeyman that Mr English does not want to talk about because he knows that it not only erodes but eradicates the effect of the tax cuts. 
Phil Goff the next Labour Prime Minister and the next Prime Minister of this country has pointed that out. Mr English informed a horrified National caucus—[ 
Interruption 
] We can see them. He talked about inflation. The National members had their statements. The National members were ready to go out and tell people how much better off they were going to be but then Phil Goff told them what inflation would do to the tax cuts. I saw the reaction of the National members in the back row. Those members over there were saying “Oh goodness me. How will I counter this?”. I ask those members whether Mr English told them about the rise in inflation. No he did not tell them about it at all because those members were sitting back saying “Oh goodness me.” As Mr Cosgrove said those members should go to halls full of their constituents and tell them that their Prime Minister will be about $350 a week better off and that they will be worse off but that that is OK. I ask those members how they will sell that. How will they sell that? I would like to see them do that. 
I think the theme song for this Budget should be “(I Can’t Get No) Satisfaction”. That song was about a young man who no matter what he did could not get ahead. People kept telling him that everything was better; there were mixed messages but still there was no joy. That is what this Budget is about: mixed messages from Mr English and Mr Key. They told Kiwis that they would all be better off under this Budget—that this would be a Budget for all Kiwis. It does not matter to Mr English and Mr Key that there is to be $11 billion—$11 billion—in extra revenue from GST over 4 years. They are giving the lion’s share of the tax cuts to the very wealthy to the likes of Mr Key and the chief executive officer of Telecom who will receive $1600 in the hand every week. That money is coming from the 50 percent of Kiwis who earn under $30000 a year or the 75 percent of Kiwis who earn the average wage. But those members say that is OK because Mr Key will receive $350 a week in the hand! 
I do not think there will be feelings of envy from Kiwis about that as Mr Key suggested there would be. I think there will be feelings of anger. They will be thinking “Oh my God we’re being let down again”. Mr Key promised—he looked into the camera and promised—prior to the election that he would not raise GST but he has done that. He said he would not do that but he has done so. That is not nice. It is not fair and it certainly is not what people voted for. 
The first principle of tax legislation is that there should be equity. This is about who carries the burden of tax. I argue that those who are less well off will carry the significant burden of tax through the increase in GST. That is a regressive tax because it is a tax on petrol food electricity and all the items that people need in order to lead a decent life—a life with dignity. GST is increasing at a time when most people are struggling with rising costs and falling real wages. What we have not heard is that Mr English has said to Mr Brownlee that he wants to have increased dividends from the State-owned enterprises. Do members know what that means? 
Brendon Burns 
: Power prices. 
STUART NASH 
: Mr Burns is right. This will be a real winter of discontent. People will look at the Budget tomorrow and think that they have a bit of extra money but they will realise that their power bill will go up by 10 percent. Inflation will erode their tax cuts and their real wages will be eroded. This is not a Budget for the many at all; it is a Budget for the very very few. 
The Reserve Bank Governor Alan Bollard wrote a paper in 1992 entitled  
New Zealand’s Experience with Consumption Tax 
. It dealt with the implementation of GST in New Zealand. He wrote: “in 1989 when GST was increased to 12½% the effect on retail sales and subsequently on growth was marked; after experiencing signs of a pick-up the economy dropped back to recession the following year.” Let us remember that when GST was increased by 2.5 percent in 1998 Kiwis at the top end had received massive tax cuts in 1988. Less than 12 months beforehand the top marginal tax rate had dropped from 48 percent to 33 percent. I wonder whether anyone has asked Dr Bollard what he thinks about the idea of increasing GST. Just as he is managing the economy out of recession this increase comes along. He probably read through the history books and reread his paper with a sense of impending dread. We are borrowing $1.1 billion over 4 years in order to fund tax cuts for the very wealthy at the expense of the many and in all probability at the expense of the economy. It is a dreadful legacy for those who are at school at the moment. 
I would like to point out that last year’s Budget focused on three objectives. The first was to help Kiwis through the recession and support jobs. The Government had a Job Summit and what did that throw up? The cycleway. How many jobs came from that cycleway? Six. Let us forget about that objective because the jobs thing seems to have petered out with a whimper. The second objective was to lift productivity. I understand that a report released today says we have dropped five places in productivity down to 20 percent while Australia has increased its ranking. That one is a failure. The third objective was to keep future Government debt under control. I can tell members that Labour got rid of debt through 9 years of prudent fiscal management. Even Dr Bollard said in his latest statement that the reason that this recession was not as bad in New Zealand as it was overseas was due to the prudent management of the previous Government and the way that Labour left the finances. Dr Cullen’s legacy was set but it has been destroyed in 18 months by this Government. 
I will make one final point in which I will give the perspective of an entrepreneur. This is a case study—a real-world example. I spoke to a very good friend of mine who is one of New Zealand’s most successful entrepreneurs. He is worth $100 million give or take a little. He does not like those guys over there in National by the way. His comment was that the tax rates do not even come into the equation when he is considering a business venture. So Mr Key and Mr English should not tell me that the National Government is cutting taxes in order to stimulate economic growth because that is just not the case. This is a Budget for the very few not the many at all. Thank you. 
PESETA SAM LOTU-IIGA (National—Maungakiekie) 
: 
 I rise to support the Taxation (Budget Measures) Bill for 2010. The previous speaker Stuart Nash asked about facts. I tell that member that the one fact he has not got quite clear in his head is that his tie is an ugly detestable tie and he should not wear it 2 days in a row in this House. 
The member talked about electricity prices going up. 
Hon Trevor Mallard 
: I raise a point of order Mr Speaker. I was waiting for you to intervene on the personal nature of the comments just made by that member about the dress of a member on this side. If we started criticising members opposite for their dress sense you would intervene pretty quickly. 
Mr DEPUTY SPEAKER 
: I am actually quite fashion conscious on some of these matters so I did not take offence. I did not take offence myself but if the member took offence I apologise for not interrupting earlier. Possibly if someone has taken offence our clothing might be something to be mindful of. 
PESETA SAM LOTU-IIGA 
: I apologise to the member. I described his tie in such a way only because he— 
Mr DEPUTY SPEAKER 
: No I have already ruled on this. It has been very clear that exception was taken and I ruled on it. Do not mention it again. 
PESETA SAM LOTU-IIGA 
: This tax bill is about compensating ordinary Kiwis for a rise in GST by cutting personal income tax rates increasing superannuation payments and increasing Working for Families payments and benefits—something Labour did not do last time it increased GST. Labour says that this bill compensates only the rich. The previous speaker wanted facts; I will give him facts. Seventy-three percent of income earners will have a top tax rate of 17.5 percent or less. Two-thirds of the tax cuts will apply to people on an income below $48000—two-thirds. They are low to middle income earners. 
This is a Budget that has delivered for New Zealanders. It builds on the good work that has been done in the past 18 months of this Government. It will secure prosperity for New Zealanders. It lowers tax rates. It allows exporters to get on with producing and selling goods and services overseas. The company tax rate is being decreased from 30 percent to 28 percent. We are encouraging savings through various changes in portfolio investment entity rates and personal income tax rates. This Budget will deliver surpluses sooner rather than later. We inherited a bad economy and a bad recession from the previous Government. This Government is about taking action about investing in New Zealanders’ future and about the prosperity of our people. I support this bill and I look forward to the second and third readings. Thank you. 
A party vote was called for on the question  
That the Taxation (Budget Measures) Bill be now read a first time. 
Ayes 69 
New Zealand National 58; ACT New Zealand 5; Maori Party 5; United Future 1. 
Noes 53 
New Zealand Labour 43; Green Party 9; Progressive 1. 
Bill read a first time. 
Second Reading 
Hon PETER DUNNE (Minister of Revenue) 
 on behalf of the  
Minister of Finance 
: I move  
That the Taxation (Budget Measures) Bill be now read a second time 
. I will not traverse the ground that I covered in my first reading speech; I simply make the observation that over the last year there has been a great deal of public debate about our tax system. The Government has responded to that debate with the measures announced in the Budget this afternoon. It is now time to put the results of that into action so that we have a tax system that supports growth encourages productivity and moves us away from the consumption and distorted investment decisions of the past. 
In order to achieve those purposes this bill introduces what we describe as a balanced packet of changes. Lower income tax rates not only will provide greater incentives for people to work and save but also will help to attract skilled people to our workforce and encourage New Zealanders to stay and contribute to our economy. In this regard it is interesting to note that outside Ireland and Luxembourg we among OECD countries have the highest rate of skilled citizenry living overseas—about one in five New Zealanders. 
Hon Trevor Mallard 
: Why? Why! 
Hon PETER DUNNE 
: There are a number of reasons for that but the fact is that if we want to attract those citizens back we have to have a competitive tax environment in this country and that is what this bill is seeking to establish. The lower company tax rate that it ushers in will encourage productive investment throughout New Zealand thereby increasing productivity and contributing to raising wage levels. Lifting the amount of GST will help shift the current economic balance away from consumption and spending and will channel efforts towards saving and investment. As part of the rebalancing of the tax system certain rules will be tightened and strengthened to make the system more equitable so that everyone pays his or her fair share of tax. In making these substantial changes to our tax system the Government has been mindful of those New Zealanders who will need support as a result of the rise in the GST rate. As has been indicated compensation will be an immediate and permanent part of these changes. 
In summary these are the main features of the tax reforms proposed in the bill. They were well aired in the earlier debate and in the Budget presentation this afternoon. Taken together they offer a fairer more balanced system which will better support the efforts of New Zealanders to get ahead and for that reason I am very happy to commend this bill to the House. 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 I think we can tell when there is real enthusiasm behind the speeches made by the Hon Peter Dunne. He is not one to sit down early especially a third of the way into his speech if he is truly enthusiastic about legislation he is promoting. He knows that the good people of Ohariu will not be happy about the Taxation (Budget Measures) Bill. He knows that the good people of Ohariu know the effect of inflation on their assets. They know that 5.9 percent inflation will not be covered by the extra that they will get as part of this package of measures. The people of Ohariu know that the person who gets $1 million a year and a $985 a week tax cut will be much better off than they are as a result of that. 
The Hon Peter Dunne is sitting next to the co-leader of the Maori Party. I say to Tariana Turia that I have some sympathy with her and the position her caucus is in with regard to this Budget especially the increases in GST. Because those increases are so regressive they will proportionately hit Maori much harder than the Pakeha population generally. There is no doubt that what Mr Harawira was reported in the newspaper this morning as saying was right. I disagree with the fact that he did not front and that his vote did not follow his voice. I had always thought of him as a warrior who would be here who would be around and who would not scuttle off after making comments like that. 
But going back to the legislation I can see the hand of Peter Dunne in it. I think it is fair to say that there is a change to do with middle incomes that he would have had much more responsibility for than John Key or people such as that. I am sure there will be people who appreciate that part of the changes. But what people will see in the end is something that benefits rich people and high-income people much more than those who are on middle incomes. It will be especially bad once Dr Bollard has a look at the inflation. Having myself been involved in a few meetings on this subject with the good doctor over the years I can accept that he will almost certainly accept the 2.02 percent increase in inflation arising from the increase in GST but the other 3 percent or 4 percent is something that he will look at and it will be well outside the requirements for tightening. I have not had a look at iPredict this afternoon but I would be pretty sure that betting on interest rate increases in the middle of this year later this year and early next year has gone up substantially as Dr Bollard has a look at the inflationary effects of this Budget and what it will do to the economy. 
What do we need now? What we do not need now is the choking off of business even more through the increased interest rates that will flow from this taxation bill. The Labour Party’s view on the GST increases has been made very very clear. GST is a regressive tax. It is a tax that disproportionately hurts poorer people. Increasing it hurts them more than it hurts anyone else and these increases will therefore hurt lower-income and middle-income people much more than they do people on higher incomes and people who have a higher proportion of discretionary income. It is sad because I thought there was general consensus across the House that the current GST was a good comprehensive tax. At 12.5 percent it is relatively high by OECD standards. I think we have the sixth-highest level of consumption tax in the OECD. If there was a debate it would have been that at 12.5 percent it is higher than most countries would think reasonable. But I think its comprehensive nature is something that has got support because it is seen to be relatively low and fair. What the Minister of Revenue has done in the legislation he has promoted is start to unravel that. As people see GST going up as they see us heading right to the very top of the developed world for the level of this type of tax we will see the support for it beginning to unravel. 
Clearly the Maori Party led the way on that. I have made my views clear on the Maori Party’s approach. The idea that we exempt all poultry and all vegetables would mean that Kentucky Fried Chicken and chips would become GST-free as healthy food— 
Hon Tariana Turia 
: No. 
Hon TREVOR MALLARD 
: It would under the definition in the Maori Party bill that is on the Table of the House. Kentucky Fried Chicken and chips would be healthy food under its definition. I say to Peter Dunne that the problem is that as he puts up the rate he opens it up to that sort of approach which I think undermines the tax. I accept what the member says—that as he puts up the tax level he opens it up to a number of other suggestions that would not have arisen if he had not taken the leadership in the way in which he has done in promoting this bill. I think it would be better to stay with the 12.5 percent GST rate and to stay comprehensive but the member knows my views on that. 
I think we have three things happening here—and I would be interested in the Minister’s views when he makes his reply. We have some loopholes being closed. I say to the Minister that no one can argue against closing the depreciation loophole; we all know that it is a rort. The changes made to thin capitalisation are again a good thing. I am not there yet on the company tax changes; my view is that the major beneficiaries of those are the Australian banks because for New Zealand companies of course company taxation is effectively a withholding tax and with the imputation credits it is a matter of timing rather than absolute amounts—and I am glad Mr Woodhouse is agreeing with me. So there is not a lot of benefit to New Zealand companies from these changes. The end benefit of the taxation changes is to overseas owners of New Zealand companies. 
In my view the closing of those rorts has effectively given some money to lower-income and middle-income earners in order to offset the increase in GST for them. But the revenue from the GST is what is effectively paying for the massive tax reductions for high-income earners. People on incomes similar to the Prime Minister’s full income will get about $1000 a week. People like the Prime Minister will get about $1000 a week in the hand as a result of these changes. I ask whether we as Kiwis think that is fair. I say to Paul Hutchison that most of his voters would have been happy if the Government had raised the threshold for the 38c rate to say $150000 or $120000. I think his voters would have said that yes they liked that and thought it was fair. When people such as the Prime Minister and a number of his mates are earning—or receiving; I do not want to say that the Prime Minister is earning it—$1 million of taxable income a year do most Kiwis really think that those people should have an extra $1000 a week? No we do not; we think it is fair for them to make a contribution to our system. This is a tax switch bill; it is a switch from the poor to the rich. 
Dr PAUL HUTCHISON (National—Hunua) 
: 
 The Hon Trevor Mallard really does display the huge muddle that Labour members are in. After all what did their leader say about vegetables and GST? Well this is what Trevor Mallard said in April. He said that it was a very silly idea to take GST off healthy food. He said on his blog: “Just imagine trying to define that. And how much of each we are allowed each hour/day/week before GST kicks in. And the army of inspectors to check the food. And increase the GST or other tax to cover the diff.” It is quite obvious that Labour will be in Opposition for a long long time; its members have very very muddled thinking. 
It is a huge pleasure to speak on this Taxation (Budget Measures) Bill because the purpose of this bill is to implement the extremely well-researched well-reasoned and well-received Budget decisions announced today. I say “well-received” because within about 30 minutes employers and manufacturers had said that it was the fairest Budget for many years and that it contained the biggest tax reforms in many years. Just listening to the news tonight I heard that five out of five commentators gave it seven points or higher. Even Guyon Espiner gave seven points for this Budget; that has to be pretty good. 
Hon Member 
: 7.5. 
Dr PAUL HUTCHISON 
: That is even better. But it is important to put this Budget in context because if one thinks back to 2001—if Labour members can think back that far—one can ask what the Labour Government did after organising a highly respected report the McLeod Tax Review. That Government totally ignored it. If it had actually implemented some of the report’s recommendations we would not have been in the pickle we now are. In contrast after this National Government had organised in 2009-10 a highly respected report known as  
A 
Tax System for New Zealand’s Future 
 tonight the National Government is implementing its measures or the thrust of most of those measures. It is salutary to record in the House what the Tax Working Group report said. It said: “The current system”—this was after 9 years of Labour—“is incoherent unfair lacks integrity unduly discourages work participation and biases investment decisions.” Those are the things that have been corrected and are being corrected in this Taxation (Budget Measures) Bill tonight. The working group explained that due to New Zealand’s current financial circumstances it accepted the constraint to consider tax reform on a neutrally fiscal basis. That is absolutely correct. 
So what does this bill do? Firstly it rewards effort and helps families to get ahead. Just in case Labour members do not know let me tell them that people respond to incentives. People think that it is fair and equitable that if they work hard they are rewarded. The great thing about this Taxation (Budget Measures) Bill is that it decreases taxes right across the board. These measures certainly make the system fairer. At all taxable income levels tax cuts more than affect the GST rise; furthermore two-thirds of the cost of the income tax cuts goes to reducing the bottom two rates. Two-thirds of these reductions go to addressing the bottom two rates. They are Labour’s people that this Government is looking after. 
The third thing this Taxation (Budget Measures) Bill does is help attract and retain skilled people. I was over in Australia a few weeks ago with the Health Committee and we were deeply concerned by the number of research institutes that had skilled New Zealanders in them. But those New Zealanders wanted to be here and the measures in the Budget are the very sorts of things that will attract and retain skilled New Zealanders here. 
The other important thing is that this Budget encourages savings and productive investment instead of the Labour Government’s 9 years of vacuuming up hard-working Kiwis’ important earnings and redistributing them in a nanny State manner. Kiwis had got so used to that that they had forgotten about it. But as Peter Dunne said earlier this afternoon when Labour put up the tax rate in 1999 it was a disaster. There are now 130000 loss attributing qualifying companies in New Zealand which is four times as many as there were in 1999. Gross distortion has occurred over the last 9 years. 
This bill is an extraordinarily great suite of measures to correct the disasters of the past. It will cement in a bright future for New Zealand and economic growth to ensure that New Zealanders get sustainable world-class health education and welfare. 
Hon RUTH DYSON (Labour—Port Hills) 
: 
 For members and those of the public who may have been listening to the contribution from the member who has just resumed his seat that was Dr Paul Hutchison— 
Hon Trevor Mallard 
: Who? 
Hon RUTH DYSON 
: Dr Paul Hutchison who is a National member of Parliament. Dr Paul Hutchison is from somewhere just out of Auckland and is also the chair of the Health Committee. I find it extraordinary that in a 10-minute contribution on a tax bill he did not mention the Taxation Budget Measures Bill. I am not all that surprised; I would be ashamed too if I were the member. Also despite being a doctor and the chair of the Health Committee he did not mention the $300 million hole that today’s Budget has left in our health budget. Any basic calculation will show that with inflation at the level it is and with the 2.5 percent increase in GST which came in with the Budget there is now a $300 million hole in the health budget. I could say that this makes the job of an Opposition health spokesperson a dream come true in many ways because all we have seen over the last few months is health cuts. That may make an Opposition health spokesperson’s job easier but they do not make the lives of good hard-working ordinary New Zealanders any easier. It has not made the lives of people in Otago and Southland who have had their home support cut very easy. It has not made life any easier for the people in Palmerston North who are terminally ill and who will have 8 hours a day cut from the district nursing services they were receiving. It does not make their lives any easier either. 
So I am not surprised that Dr Paul Hutchison is so embarrassed that during a 10-minute speech he not once mentioned the tax cuts or the $300 million gaping hole in the health budget that was announced today. Nor did he did not mention that the Budget was a Budget of broken promises. The first broken promise was a promise made by John Key before the last election that GST would not be increased; today we saw it increased to 15 percent. Before the election John Key categorically denied that there would be an increase in GST but today in the House we saw him as Prime Minister break that personal promise. 
The second broken promise from the Prime Minister Bill English and National was an earlier promise that they would not increase borrowing for tax cuts. What did we see in the Budget today? We saw exactly that; there is increased borrowing for tax cuts and not even fair tax cuts. [ 
Interruption 
] The woman from Christchurch who has taught Aaron Gilmore everything he knows about economics says that that cannot be right. But one just has to read the Budget to see that we now have increased borrowing in order to deliver tax cuts. That is another broken promise from John Key Bill English and National. 
The third broken promise was that there would be no cuts to public services and I am sure my friend and colleague the member of Parliament for Wellington Central will have further contributions on this later. What are the services that are delivered through our education system and our health system? Are they front-line services are they public services and are they being cut now? They certainly are. That was the third broken promise. 
New Zealanders are pretty tolerant; they understand when we are going through hard times. They understand when we all need to work together—central government local government and members of our community. They understand the need for people to tighten their belts and do a little bit more in hard times so that our country can get ahead. However what they will not and do not understand and what is making them very angry is that this Budget and this legislation that we are debating had an opportunity to lift New Zealand out of the recession to give people an opportunity for jobs and to create a fairer tax system in any changes that were being introduced. But that is not what happened at all. We see that the people who are doing OK still despite everything—the people who are in the very very top income bracket in New Zealand—are doing the best out of tax cuts while people who are on the average wage or below doing very very badly. 
Yesterday in the House I heard the Prime Minister announce—it certainly was an announcement and news to everyone including Treasury—that Treasury had told him that GST was a progressive tax. Well it is not. It is a regressive tax. It means that people who have less income spend a higher proportion of that income on items that have GST attached to them. Those people do not have a lot of spare money so a higher percentage of their income goes on items that attract GST so when GST goes up it is harsher on people who are low and middle income earners. On the Government’s own figures now we know that most people will not be compensated for the GST increase. Many people will be worse off. People on $70000 a year and that is well above the average will be $45 a week worse off with the tax cuts and GST increases. That does not factor in some other situations—for example people in an income-related rental house whose income goes up as it will for many people who are beneficiaries or on superannuation. Their rent will go up as well. So as their income goes up their rent goes up. That means they will not be better off but when they go into the supermarket they will not get a discount; they will pay an increased level of GST. 
We see that 41 percent of the tax cuts go to the top 10 percent of income earners and 15 percent of Bill English’s tax cuts go to the top 1 percent of income earners. How can that be fair on people who are just getting through a recession many of whom have lost their jobs and have had to get another job at a lower income. They work as hard as people on the top income bracket. I was appalled when John Key said to them to wait for the Budget and the Government would give the biggest tax cuts to the highest income earners but not to get jealous because those very very wealthy people are the backbone of the country; they are the people who are important to New Zealand! 
I think those people are important to New Zealand but I think the cleaners who work in this building are important to New Zealand and as much of importance to our country as the people who are on the highest income. The average-income earner and people earning right up to $70000 a year will be worse off under this legislation. Today the National-led Government squandered an opportunity to put a fairer tax system in place and create a more modern economy where people would have open opportunities. When we look into the other budgets—like the education budget and the health budget—we see more cuts to adult and community education introducing costs on people with children in early childhood education reducing the number of qualified teachers in early childhood centres and leaving a $300 million gaping hole in the health budget. 
The Government has not introduced a fair tax system as National promised. It is not the $50 a week tax cut that National promised before the election. This Government has introduced a tax swindle. It has broken three promises. It has increased GST when John Key promised personally to this nation that National would not increase the level of GST. It has cut public services and certainly it has not introduced a fair tax system. This legislation will be a huge disappointment. It will cause more unfairness in our community and a lot of anger. Labour will oppose this legislation. 
METIRIA TUREI (Co-Leader—Green) 
: 
 I enjoyed the contribution from my Labour colleague Ruth Dyson. She is quite right about the productivity of low-paid workers. I just inform the House that ACT disagrees completely. If members look at ACT’s alternative budget they will see that Roger Douglas has said very clearly that high-income earners are the most productive members of our society—not the nurses not the police not the people who clean Roger Douglas’ office so that it is nice and tidy for him in the morning and not the parents of this country. No the excessively and ridiculously wealthy are he says by virtue of their wealth alone obviously much more productive. That is the kind of extremist position that we see from ACT and that informs National policy. That is the attitude of John Key when he tells the country that low-income earners pensioners and solo parents struggling to make their way with kids and take good care of their kids should not be jealous that they will get virtually nothing out of this Budget while the very wealthy get the most. 
The Greens have a vision for a smart economy and a better society—a smart economy that will deliver real prosperity for our people for everyone and for our environment. A smart economy protects our environment. In Aotearoa particularly if we have no environment we have no economy. Upon our environment rests all of our security and our wealth. Whether it is our fresh water our oceans our forests our natural healthy soils or our most treasured places we are 100 percent dependent on our environment. 
A smart economy will sustain our natural capital rather than squander it as this Government intends to do. A smart economy includes smart taxes that fairly share the tax obligation and the tax burden across our community. A smart economy delivers real and new jobs and sustainable industries that will enhance rather than degrade our environment and our communities. The Taxation (Budget Measures) Bill and the Budget on which it is premised fail to meet all those criteria for a smart economy and it is a great shame for those families and their children who will bear the cost of that failure. 
On Monday the Green Party launched our Mind the Gap proposal a Green New Deal package of solutions that would create jobs generate Government income and combat the growing inequality that is a blight on our communities. We focused on inequality and its effects on children because income inequality has been shown to be the single most important cause of a wide range of social and economic problems. We chose to focus on children and the effects of inequality on children because they are the future of our planet and our society. 
Hon Steve Chadwick 
: Hear hear! 
METIRIA TUREI 
: I thank the member. All children are entitled to live in a safe sustainable society that protects their right to warm housing safe affordable food and quality public education and health care—all within a loving and supportive whanau. We know that inequality hurts every child and every family not just those people who are at the bottom. We know that New Zealand is one of the most unequal countries in the developed world: we are 23rd out of 30 in the recent OECD report. We were the sixth most unequal country among highly developed countries in last year’s  
United Nations Human Development Report 
. 
Simon Bridges 
: Shame on Labour! 
METIRIA TUREI 
: Shame on the Government. Shame on the Government for failing to do anything about it. Shame on John Key’s Government for making it worse which is exactly what its tax cuts and its GST increase do—they make inequality worse. 
New Zealanders like to think of ourselves as an egalitarian society where everyone gets a fair go but the truth is that we are not—the facts tell a very different story. The Green Party has the vision that we can be a more equal and more sustainable Aotearoa. It is within the choices that we make. But this Budget and this bill produced by the John Key Government choose not to pursue that vision. John Key’s Government has already initiated some very big spending: about $10 billion on new motorways an estimated $500 million from cutting the top tax rate and potentially hundreds of millions of dollars in taxpayer subsidies to polluters through the emissions trading scheme. Again it is always a question of priorities and the Green Party would prioritise our people and our environment. 
I will talk about the area of housing. There are some provisions in this bill for changes in property taxes and speculation. The Mind the Gap package produced by the Green Party recommended the introduction of a comprehensive capital gains tax excluding the family home. My fellow co-leader Russel Norman has talked about that tax in some detail today. We know that in the longer term a capital gains tax will provide a serious and significant part of the solution to New Zealand’s property crisis by broadening the tax base and protecting housing from what currently seems to be irrational property speculation intensity. A capital gains tax is necessary to strengthen our economy in the short and the long term. This bill makes some minor changes around property speculation and property taxes. They are a small step towards the changes we need to make but we also know that any changes in property taxes could lead to increases in rental prices particularly in the short term and particularly for those at the very bottom. 
In order to make sure that the spread is fair around the tax obligation and the tax benefit we need to make sure that for any changes in property tax there is also a comprehensive building programme of new State housing to help provide affordable housing for those who need it the most. That is absolutely an urgent priority in this country. We have severe homelessness in this country in different ways: primary secondary and tertiary levels of homelessness. It is incredibly important that families who live in overcrowded cold expensive housing have affordable alternatives but this Government will not be doing that because it has cut the budget for the building of new State homes. This Government has cut the budget for the building of new State houses by more than $100 million. So no State houses will be built under this Government. That is clear from the Budget cuts. In fact the Government’s only proposal is to sell off more State housing. It congratulates itself on having sold off 17 houses last year. There is no plan by this Government to increase the supply of affordable housing for those families who need it the most. 
The fact is that we must make that change because safe secure and sustainable housing is fundamental to the health and well-being of everyone and everyone should have access to housing that is suitable for their needs. It is a basic necessity and we know that being homeless or in overcrowded housing affects income employment attendance and truancy at schools and health. The Human Rights Commission has identified that crowding dampness and coldness are key issues for the New Zealand community. There is a State housing crisis with 10000 families on the waiting list. Many people are living in rental accommodation where they have to move regularly which has a huge impact on their education and employment. We know that about 30 percent of at-risk and vulnerable young people are in unsafe and insecure housing. It is a serious crisis. 
The cost of cold housing on families in the community cannot be allowed to continue. We know that we are losing about $1 billion per year in costs from cold housing whether it is in relation to hospitalisation the cost of respiratory illnesses or the cost of lost working hours. We have a package that would deal with that cost. The building of 6000 new State houses over 3 years at the cost of $2 billion would provide 28000 jobs. Housing is part of the bill. That is a way of providing access to affordable housing and creating 28000 new jobs so that people have employment as well. There is no employment strategy in this Budget. 
We would also introduce progressive pricing into the electricity market. That is a way of making sure that we can bring 70000 households that are currently living in energy poverty out of energy poverty by providing a fixed rate of electricity provision at a low cost; anything that is used above that fixed level of provision comes at a higher cost. It is an effective way of providing support to those who are in the worst energy poverty. For example pensioners who live on their own in old homes have a 97 percent chance of living in energy poverty. We can provide for them and support them out of that energy poverty if we simply choose to do so. The Green Party chooses to do so. 
JOHN BOSCAWEN (ACT) 
: 
 There is much to commend in the Budget. In particular the tax changes that are incorporated into the Taxation (Budget Measures) Bill which we are discussing this evening are to be commended. 
Let us start with the reduction in the marginal tax rates. There is a significant reduction in marginal tax rates. Those whose annual income is $14000 or less will see their marginal tax rate drop from 12.5c in the dollar to 10.5c in the dollar those earning from $14000 to $48000 will see a reduction from 21c to 17.5c those earning from $48000 to $70000 will see a reduction from 33c to 30c and finally those on incomes above $70000 will see their marginal tax rate go down to 33c. Much more was possible in terms of reduction in marginal tax rates but at least that is a good first start by the Government. 
The Government has also moved to close loopholes—in particular loopholes in relation to qualifying companies and the tax advantages available through investment in residential and commercial property. The restriction on depreciation claims on properties is a move to see a rebalancing of the economy and that has to be commended. 
We also have a reduction in company tax rates from 30 percent to 28 percent from the beginning of the 2011 tax year. Finally there are moves to incentivise savings with the setting of a new maximum tax rate of 28c in the dollar for portfolio investment entities or PIEs. 
One can look at the impact of the tax changes contained in this bill on page 9 of the Minister’s executive summary in the Budget documents. Those members who have that document might be interested to look at page 9. It shows the effect of the various changes whether they be the reductions in personal income tax the increases in GST or the changes to benefits for people on various incomes. In particular it shows that those households earning an annual income of $40000 or less will have a net impact from these tax changes of 0.7 percent—0.7 of 1 percent. Those earning between $40000 and $85000 will have a net benefit of 0.4 percent. I suspect that this bracket includes the great bulk of working households in New Zealand. Those earning in excess of $85000 will have a net impact of 0.7 percent. The Minister of Finance—I guess—summarises that very nicely when he states at the bottom of page 25 of the Budget speech: “On average most New Zealanders receive roughly a half to one per cent average increase in real disposable income.” That is not much but one could say that it is better than nothing. 
I wish that were the full story but it is not. What both the Government and the Labour Opposition are ignoring is that starting on 1 July we will have an emissions trading scheme tax. We will have a tax on energy a tax on electricity— 
Hon Members 
: Oh! 
JOHN BOSCAWEN 
: I am interested in the barracking from the Government members because they should be ashamed. The reason they should be ashamed is that New Zealand’s Treasury estimates that the impact of the emissions trading scheme will be to add 5 percent to the price of electricity and 4c per litre to the price of petrol from 1 July. Those costs will flow throughout the whole economy. They will flow into food prices and into everything that New Zealanders purchase. The Reserve Bank has calculated that the annual effect in the first year of the emissions trading scheme will be to add 0.4 percent to the CPI. 
Where does that leave this Budget? Where does that leave the Budget that Mr English and Mr Key are so very proud of—the Budget that says that on average most New Zealanders will receive roughly “a half to one per cent”? Well the people on incomes from $40000 to $85000 which the Budget document “B2 and B3” shows on page 9 will get a benefit of 0.4 percent will be left with absolutely nothing—zero. National members— 
Nicky Wagner 
: Whose side are you on? 
JOHN BOSCAWEN 
: Do I hear a comment asking whose side I am on? 
Nicky Wagner 
: Yes. 
JOHN BOSCAWEN 
: That is interesting. I am very pleased that the member has asked that question because I find myself more and more having to stand up and represent her constituents. Overwhelmingly National Party members are opposed to the emissions trading scheme. They tell me that at the meetings I have conducted up and down the country. I read with a great deal of interest that at the National Party’s central North Island regional conference in the weekend a subset of National Party members moved a resolution unanimously that the National Government should be delaying the introduction of the emissions trading scheme. 
How interesting it is also to hear Labour members talk about the impact of this Budget on working people’s incomes and their expenditure. I have heard Mr Goff and Mr Cunliffe talk about the increase in GST and of how inflation is going up. Well National members can be proud of one thing. They can be proud of the fact that they are putting electricity up by only 5 percent because the previous Labour Government would have put it up by 10 percent. That is right; that is the one thing and the only thing that the emissions trading scheme has to commend it. If there had not been a change of Government then from 1 January we would have had an emissions trading scheme that Treasury has said would have increased electricity prices by 10 percent. 
The National Government is confident and relaxed about the fact that it is increasing electricity and petrol prices and increasing the flow-on effect of those things by 5 percent from 1 July. The impact of that is there for all New Zealanders to see on page 9 of the Budget document. Households earning between $40000 and $85000 will get a net impact of 0.4 percent and the Reserve Bank tells us that the impact of the emissions trading scheme will be 0.4 percent. So everything that this Budget purports to give to those people will be taken away from 1 July which is 3 months before the tax changes we are debating in this bill will come into effect. 
It is actually worse than that. We can look at the position of superannuitants. The Minister of Finance goes on to state very generously on page 22: “the package will provide from 1 October 2010 an immediate lift in the levels of New Zealand Superannuation all main benefits student allowances and Working for Families payments. This will be sufficient to offset the estimated impact on prices due to the rise in GST.” Well is that not generous of the Minister of Finance and the National Government to be making adjustments to superannuation that will be sufficient to compensate for the increase in GST? 
I ask about the increase in the price of electricity. What about the 5 percent increase in electricity? I ask about the flow-on effects throughout the whole New Zealand economy. I ask about the 0.4 percent increase in costs that the Reserve Bank of New Zealand said the emissions trading scheme will cause. What about that? There is no reference to compensation in the Budget speech. One thing I will say is that beneficiaries and those who have their benefits adjusted in line with the CPI will receive an adjustment which will be carried forward because those benefits are adjusted in line with the CPI. But superannuitants those people over 65 who rely substantially on New Zealand Superannuation—and who may be listening to this debate tonight—will receive no permanent compensation for those increases in electricity and petrol prices. 
Let us turn to page 15 of the Minister’s executive summary. We see that in 2011 the cost of the emissions trading scheme will be about $907 million. In the following year it will cost $275 million. I have heard the Minister for Climate Change Issues tell this Parliament that we have to proceed with those electricity increases because we have the massive cost of the emissions trading scheme. We heard Metiria Turei the co-leader of the Green Party talking tonight about subsidies for polluters. But this is not a subsidy for polluters. That $1.3 billion over 2011-12 is not a payment to polluters. I am sure that she is referring to the emitters of carbon dioxide and carbon dioxide is not a pollutant. But that is a totally separate argument. 
What is this sum? It is $1.3 billion that will be paid to the people who planted trees in the 1980s and 1990s. That is right. There were 70000 60000 70000 and 80000 hectares planted in trees every year through the 1990s. The people who planted those trees had no expectation of receiving a subsidy but that is what they are getting. They are getting it courtesy of the taxpayer so every single New Zealander will have to pay for that. It is a disgrace. If National’s politicians will not represent their members then the ACT Party certainly will. Thank you. 
RAHUI KATENE (Maori Party—Te Tai Tonga) 
: 
 There is a story to be told as one browses the Net to ascertain how the market and the press gallery are responding to Budget 2010. I want to share with the House an absolutely random selection of headlines gathered from cyberspace: “Budget woes for property investors” “Biggest tax reform in 25 years” “Major incentives for investment” “Headaches for retailers over GST rise” “Income tax slashed GST to 15 percent” “Tax changes will keep Kiwis home” “Dollar responds positively to Budget” “More in most pay packets” “Budget politically safe but economically timid” “Tax package will bump up deficit” “Higher economic activity picked” “Experts praise tax cuts for all” and so it goes on. This is just a random selection of headlines. 
Nowhere in that list of analyses did I read that this is a Budget that reflects the melodramatic hype we have heard in the House today. Sure we read the words “safe” and “timid” but we do not read that this Budget is a tax swindle or a lost opportunity as members on the Opposition benches might mutter. In actual fact we read the exact opposite—that this is a Budget that will crack down on property investors and tax evasion. We read that this is a Budget that will benefit all workers. So much for this being a Budget that privileges the rich and leaves all other New Zealanders out in the cold. The worst that could be levelled at the changes to the tax system would be that they are by and large fiscally neutral. In effect this means that the increase in GST is offset by cuts to all personal tax rates and the immediate rise of 2 percent in benefit payments. 
All payments including New Zealand Superannuation and Working for Families will increase by 2.02 percent to compensate for the increase in GST. Two percent might not sound a lot but it is 2 percent more than the previous Government ever put out there. This is something we argued for right throughout the lead-up to Budget day—that no one should be any worse off as a result of the Budget tabled today. It has been a hard slog to bring the need to protect our most vulnerable to the forefront of this debate. To be frank it has not been the easiest Budget to promote amongst our electorate. I have just come from a Maori Party film evening fund-raiser and there were about 120 people present who are really supportive of this Budget. I spoke to a couple who are superannuitants and they are just so pleased that they will be getting $10 a week extra in their superannuation payment. An amount of $10 may not sound a lot but to them it is mana from heaven and they are rapt; and so are the others. It is all about perspective about restoring balance and about taking a long cool look at what will make the difference in order to create the promising financial outlook we all seek. 
The Maori Party has spent many hours debating and debunking myths about the facts about tax. We know that in many respects this issue has much to do with perception—the perception of punters about whether a tax cut or a rise in GST will directly impact on their lives. We have been told by National that once all the measures are accounted for the Budget has almost exactly the same impact on the average incomes of low medium and high income households. When we looked at a range of different scenarios and all scenarios the GST increase was offset by the income tax decrease. In simple terms there was no loss of money. What might be the breaking news of the day is that the biggest losers in terms of this tax package are foreigners who lose through a combination of the tightening of tax on foreign investment and also because they own a lot of property. 
This is a policy goal that we in the Maori Party campaigned on to protect and preserve our land to keep it from falling into foreign ownership which is something the previous Government did nothing about. The Budget will tighten investment property tax rules. One of the immediate impacts that will be achieved is that wealthy families will not now be able to use losses from rental properties to become eligible for Working for Families. Some might call this practice morally bankrupt—a claim we could also throw at those rental property investors who manipulate the system to dodge tax. In that light another feature of this tax legislation is that it puts a stop to those who try to rort the system for their own benefit. It seems a pretty hefty amount of money $26.6 million for the next 4 years allocated to the Inland Revenue Department but if it can put a stop to what surely amounts to theft and deception then that has to be positive. In fact it is almost incredible to believe that these measures according to Minister of Revenue Peter Dunne are expected to generate an extra $2.48 billion in the next 4 years. 
I want to return to the concept around the redistribution of wealth to invest in well-being—the “pay it forward” mentality. Paying it forward is a concept of doing good for others to repay the good that has been done to oneself. In effect reforming the tax system can make our economy fairer more sustainable and able to provide a better support for economic growth. I think therefore that those who are hardest hit by this tax legislation are the commercial and industrial property owners. They are hurt the hardest by the new depreciation rules. 
I want to return to the discussion around Maori and Pasifika unemployment generated just before the dinner break. We know that in the population aged 18 to 25 years the number of Maori and Pasifika young people receiving the unemployment benefit demands that we take action. The figures are startling. Out of 19000 youth receiving the unemployment benefit 34.8 percent are Maori—that is 6500 of our rangatahi—and 13.4 percent are Pasifika which is another 2500 young people. We must do something to ensure that they have a future to look forward to. We need to be able to support those young people with skills work experience and the confidence to invest in our future. Paying it forward is all about helping us to regain our footing and in particular to help Maori and Pasifika youth to find employment as the economy continues to recover. We need the putea in the national accounts to help make that happen. I hope that part of the $2.48 billion that Mr Dunne promised can be set aside for just that. 
The Maori Party is supporting this bill in the interests of our young people in the interests of our economy and most of all in the interests of setting a strong pathway forward into our future. 
JACQUI DEAN (National—Waitaki) 
: 
 What a pleasure it is to follow that contribution from our colleague in the Maori Party who understands very clearly what matters in this country. I think this Budget delivers on what matters in this country which is putting the right incentives into the New Zealand economy and looking after all the people who live here. 
This Budget is about across-the-board tax cuts delivered to people in New Zealand. I will go through those tax cuts and tax rates because I think it is worth repeating them. People who have an income of under $14000 and who were paying a rate of 12.5 percent in tax will now get a tax rate cut down to 10.5 percent and that is significant. The tax rate for those people on an income between $14000 and $48000 goes from 21 percent down to 17.5 percent. That is significant for that range of members of our country. The tax rate for the people on an income between $48000 and $70000 goes from 33 percent down to 30 percent. That change has been welcomed across the board. The tax rate for the people on an income of over $70000 has gone down to 33 percent. This Budget is providing across-the-board tax cuts. 
It is interesting is it not that Opposition members are all at sea with this Budget. They are hardly putting up much of a fight and do not seem to have latched on to anything they really dislike about this Budget. In fact it was very interesting to hear the contribution of Trevor Mallard who has largely agreed with a number of the provisions that have been brought about in this Taxation (Budget Measures) Bill. 
There is a rise in the rate of GST to 15 percent from 12.5 percent and to balance that there will be an immediate rise of 2.2 percent in income for those on superannuation benefits and Working for Families. 
A number of spending boosts are contained in this Budget. In health there will be $2.1 billion more over 4 years. That will go into front-line health services. It is good-quality health spending. In education there will be $1.4 billion more over 4 years for better schooling and also for early childhood education. In research science and technology there will be $321 million over 4 years for new initiatives. That is all about growth in the New Zealand economy. And of course there is faster broadband—$248 million extra over 4 years. 
But I want to talk about a Budget initiative that has not been mentioned so far. It is a tiny initiative but it just goes to show that a very small amount in the Budget carefully placed can have a big impact on growing the New Zealand economy. The first initiative I will talk about is the $30 million to be used to promote New Zealand overseas as a tourism destination. That amount in the Budget is relatively small but in my view it is significant for tourism in New Zealand because we are an exciting tourism destination. With the Rugby World Cup proposed to be held here next year I believe that it is important that we promote ourselves overseas. 
The other example I will raise is comparatively minuscule at $5 million but I am excited that the Department of Conservation is to put $5 million into developing more cycle trails and camping grounds over the next year. Why do I think that is significant? Although $5 million is relatively small in the grand scheme of things I can tell members that in my electorate the Otago Central Rail Trail has had a huge impact on the economic well-being of the Otago region. I will focus on one very small provider of tourism services and that is the Chatto Creek Tavern. Before the rail trail came into being the Chatto Creek Tavern—which is at Chatto Creek just out of Alexandra—was struggling. It was one of those small businesses in one of those very tiny little towns that was struggling and facing closure. These days 5 or 6 years later the Chatto Creek Tavern not only is surviving but also is thriving. There are now 13 people working in the Chatto Creek Tavern. They serve 180 lunches in the high season and 100 lunches in the low season. Members opposite do not see the significance of that—and I do not blame them because they do not represent the provinces—but if we extrapolate that benefit out from Middlemarch down to Clyde and all along the length of the Otago Central Rail Trail we can quickly see the benefit that an initiative like the rail trail brings to the local region. Five million dollars is a very small Budget amount but it is significant. 
This Budget is about putting the right incentives into the economy. It is interesting to see how well it is being received. I will leave members with this one statistic. The  
Close Up  
poll returned a result of 80 percent of people being in favour of the Budget. That was on prime time television tonight. That is good news. I commend this taxation bill to the House. 
Hon CLAYTON COSGROVE (Labour—Waimakariri) 
: 
 For those who do not know the member who just resumed her seat was Jacqui Dean. 
Hon Trevor Mallard 
: I didn’t know. 
Hon CLAYTON COSGROVE 
: Mr Mallard did not know. She is a member who is famous for two things. First she is the member who thought that one should ban water. Secondly she is the member who during a public meeting with my colleague David Parker showed that her in-depth knowledge of economics rivals that of Aaron Gilmore. She said: “No we’re not going to borrow money. We’re going to get it from overseas.” 
Hon Trevor Mallard 
: Who said that? 
Hon CLAYTON COSGROVE 
: It was an economic theorist rivalling Aaron Gilmore. 
Let me say that it has been an interesting day today. This is a very prophetic day because on this day Mark Bryers the biggest crook in the Blue Chip scam got 75 hours’ community service. On the same day that Mark Bryers the biggest crook in the Blue Chip scam got 75 hours’ community service—he is a very wealthy man a multimillionaire—the National Government gave him a $1000 a week tax cut. In fact it would be more than that because he earns well over $1 million per year and we know that under this Budget if one earns $1 million per year one gets a $1000 tax cut. 
Hon Trevor Mallard 
: A week. 
Hon CLAYTON COSGROVE 
: I am sorry: it is a $1000 tax cut per week. Mr Bryers thanks to Mr Key will get that. I am sure Mr Bryers will send Mr Key a nice Christmas card saying: “Thanks very much. I have done my 75 hours’ community service.” There were tears in court today according to the media but Mr Key was good enough to give him 1000 bucks a week. 
Hon Trevor Mallard 
: And there’ll be a pensioner who will deliver the card. 
Hon CLAYTON COSGROVE 
: My colleague Mr Mallard said that a pensioner who was ripped off will deliver the card to Mr Key. It is a very very prophetic day today. Mr Bryers will have a lot to celebrate tonight as he contemplates his whole 75 hours of community service. 
Let us look at the Budget. What do we have? We have inflation. We have the highest inflation I believe since 1990—5.9 percent. I really enjoyed the Maori Party contribution especially the contribution of Tariana Turia. I said that she had sold out her electorate and a number of other members have said the same thing. Well those members are very proud of this Budget. I ask them how proud they can be when 72 percent of the constituents in Rahui Katene’s electorate earn under $40000 per year and when we factor in the increases in GST and inflation 72 percent of her electorate are going to be worse off. I say to Tariana Turia—and I am sure that she will take another call to try to justify this—that 73 percent of her electorate earns under $40000 and will be worse off when we factor in the increase in GST and a 5.9 percent inflation rate. 
Ms Dean and others have said that it is fantastic that people who earn $70000-plus will get a tax rate of 33 percent. Well here is the problem with that for the Maori Party which signed up to it today. In Ms Katene’s electorate the number of people who earn over $70000 equates to 5 percent—5 percent. In Mrs Turia’s electorate it is even worse; there they equate to 3 percent. So I say: “Well done!” to the Maori Party. Those members have done a wonderful job of getting gains in this Budget for their electorate because what they have got is some hocus-pocus and a couple of prisons which Pita Sharples has put on the deck tonight and which Judith Collins could not explain to the media and they have sold out 72 to 73 percent of their constituents. I invite them—the weekend warriors that they are—to get up in this House and justify that to their constituents. If they are so proud of this Budget then it will be very interesting during the hui on the campaign trail when their constituents get up and say to Ms Katene that they are part of the 73 percent who missed out and that she and her colleagues inside and outside Cabinet voted for this move never opposed it and ripped them off. That is what those constituents will say to the Maori Party. I do not know whether it is mana-enhancing when 73 percent of one’s electorate is worse off thanks to one’s vote and thanks to the fact that one is so proud of this legislation and this Budget. 
Then we come to the other aspect of this Budget: the broken promise about the New Zealand Superannuation Fund. Mr English had a history of breaking promises to our superannuitants when he was last in Government in the 1990s when under him their pension was cut three times. Last year he said: “Oh well we will suspend payments to the Cullen fund but when we get into surplus”—and the Budget documents show that allegedly that will be in 2016—“we will activate funding again.” Oh no that date is now 2019. 
National members and their leader went around the country with the second broken promise which was that they would not raise GST. I invite them to front up on a Saturday if they ever hold electorate clinics if they ever get off their backsides and go and talk to the 73 percent of the people in some electorates like the Maori electorates who are affected if they ever meet those folks who are worse off as we speak tonight. I invite them to go to Grey Power and explain why their leader broke that promise. Every last member opposite got his or her backside over the line in the vote and was elected on two false promises. 
Mr Gilmore should get off his chuff go to Grey Power members and explain to them why he broke his promise. They will not know who he is of course but he might get in the door. I am sure they would invite him in and he could justify the pay he gets by explaining to them why his leader said that he would not put up GST why Mr English said that he would not mess with superannuation and why Mr English said that he would pre-fund superannuation when the Government accounts moved into surplus. It is the same with Nicky Wagner. But we will never see them fronting when it is bad news. They stand up in here but none of them will front up out there. Well I challenge them. Let us have a meeting. Let us get every person in their electorate let us get 10 of them five of them three of them. Let us get Mr Gilmore who does not have a patch of course to talk to everyone in the area where he lives who is on the average wage. After we factor in National’s broken promise on GST and factor in record inflation of 5.9 percent let us hear Mr Gilmore explain to them why National has ripped them off and why they are worse off. They are the battlers the strugglers and the people who are trying to provide for their families. 
I remember polls about Budgets too—rolling out the 80 percent. Well I have always held the view as a member of Parliament that people are not stupid. I know this about Budgets: the Government might win on the night when the flashbulbs are flashing and certain people are tripping over camera cords but as the days go on and the pay packets are opened and the GST receipts are added up at the end of the week the people are not silly and it is very dumb and stupid politicians in this House who think they can hoodwink the ordinary folk in the street. I say to them that it is a simple equation: get up and explain why the Government will borrow $240 million per week for the next 3 years and get up and explain why the debt track and the interest costs do not start even declining until 2021. If we look in the Budget we see that those are important numbers. 
But National members will not do that; they will not explain and they will not justify. They hide in their various patches and constituencies and they will not explain to anyone why they broke their promises. Kate Wilkinson a Cabinet Minister who occasionally resides in my patch was told by the Prime Minister to go out and sell the increase in GST but there was not a meeting not a whimper not a press statement nothing. The invisible woman never ever fronts the bad news. Well in my patch of Waimakariri 72 percent of my electors earn under $40000 a year. Kate Wilkinson who sits in Cabinet who voted for every last measure in this legislation who never opposed it and who wants my job and everybody else’s has sold out that quadrant of the electorate. Seventy two percent of people in my patch are worse off as we sit tonight. They did not expect 5.9 percent inflation. I invite Ms Wilkinson Ms Wagner Mr Gilmore and the other tumbleweeds over there to get off their backsides get up in the House and tell us tonight why they broke their promises to the people of New Zealand and to their constituents. 
I ask why the member for Tauranga—the Perry Mason in his own lifetime; I forget his name—does not get up. He loves going on the  
Breakfast 
 TV show and waxing eloquent about his golf handicap and how he got gold membership of his local golf club. Well he will be able to afford a membership with his tax cuts but a pensioner in Tauranga will not and a person earning under $30000 will not. I invite the next speaker to show some intestinal fortitude and tell us why National members broke their promises. 
MICHAEL WOODHOUSE (National) 
: 
 I begin by congratulating the member Mr Boscawen on the aplomb with which he is able to build matters relating to the emissions trading scheme into every single call he takes in the House. Tonight was a bit easy because there was a little bit of that topic on the inflation figures. I think we need to make it a little bit harder for him. I propose a bit of Order Paper bingo and I hope that when the following bills come up he is able to mention the emissions trading scheme with the same aplomb: the Cultural Property (Protection in Armed Conflict) Bill the Gambling Amendment Bill and the Oaths Modernisation Bill. I look forward to those bills coming to the top of the Order Paper and hearing how he will handle mentioning the emissions trading scheme in debate on those bills. 
I look forward very much to talking about the many many good things in this Budget but I cannot resist addressing some of the nonsense that has been spoken by our friends on the other side of the House. Their response to this outstanding Budget has been frankly anaemic weak half-hearted and quite misleading. I will start with Mr Nash and his Rolling Stones tie. He said: “(I Can’t Get No) Satisfaction”. Well that is not what we have heard. I take the issue of the inflation rate. It has been mentioned and it is true— 
Hon Clayton Cosgrove 
: What goes around comes around. 
MICHAEL WOODHOUSE 
: That is right. I think that has been proven. Yes inflation is higher this year for reasons that are well understood by everybody but the Opposition. But the Opposition will not tell people that this is a one-off adjustment. Next year it will be 2.4 percent the year after it will be 2.4 percent and the year after that it will be 2.4 percent. What happens to the tax cuts? They stay and endure for a very very long time. 
Hon Clayton Cosgrove 
: Bad mistake tonight sonny boy. 
MICHAEL WOODHOUSE 
: That is not the mistake. We know that there is absolutely no doubt that the inflation figure would have been much much higher had this been a Labour Budget. It would have been materially higher. Labour’s spokesperson on finance Mr Cunliffe said as much in the  
New Zealand Herald 
 this morning: “If Labour were writing today’s Budget it would spend more than National to ensure the recovery from recession remained on track.” So there it is: Labour would spend its way out of recession and continue to tax the heck out of hard-working New Zealanders. Well that worked for Greece! It worked for Portugal! It worked for Italy and Spain! The UK is in a similar mire. Mr Cunliffe would take New Zealand down exactly the same tax-and-spend track that got those countries into trouble into the first place and it would not stop there. 
I will mention the emissions trading scheme. Labour’s emissions trading scheme would have imposed double the cost and it would have been introduced sooner than this Government’s scheme. That would have added to inflation. More consumption leads to higher borrowing and higher borrowing drives up interest rates. That is an unacceptable burden on hard-working New Zealanders. Electricity prices went up 72 percent under the 9 years of the previous Labour Government and I have no doubt that that would continue were Labour back in Government. 
Where is Labour’s alternative budget? It does not have one. Labour does not know what it would do. Labour members crusaded around the country in a bus that said “Axe the Tax”. They did not need a bus; they could have saved on gas and travelled in a two-door Morris Minor. That is about as much interest as they got. They would have had enough room for a suitcase and a six-pack. But the slogan did not ring true. Would they axe the tax? We do not know the public do not know and the commentators do not know. The reason is that even Labour members do not know. Labour members cannot even make up their minds on whether to axe the tax they said that they would axe. That confusion was still evident in Mr Cunliffe’s first call about loss attributing qualifying companies. He saw them as terrible things. I think he said that yes Labour put the system in place but it saw it used for purposes that were never intended. God forbid that loss attributing qualifying companies were used to attribute losses! That is consistent with the sort of confusion around the tax arbitrage that Labour created over 9 years. These arbitrage measures are being put down. 
I really want to focus on the last thing that unfortunately Labour members still do not get. Three-quarters of income earners will now have a top tax rate of 17.5 percent which is nearly half what they had when the previous Government came into office. For that reason alone this Budget will be applauded right around the country by all but the 20 percent of people who still support Labour. 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 I am very disappointed in this Taxation (Budget Measures) Bill because it is not ambitious for New Zealand. Nothing in this Budget is ambitious for New Zealand. The only step change that I could see in this Budget and in this bill is a step back not a step up. I would have thought that a step up was what the Government was talking about when it talked about a step change but no we find it is a step back. I found in the regulatory impact statement on this bill that the Government was looking to achieve a step up in economic growth by improving the incentives to work save and invest. Well that is not a very clear message to the people to whom I have been talking about the implications of this Budget in the lead-up to it today. 
This bill is not about providing a brighter future for the vast majority of New Zealanders who—I really would like the Prime Minister to hear this—contribute to the economic social cultural and environmental aspects of what defines us as a nation. The Prime Minister dismissed the entire significance of their contribution to our nation when he told them not to be envious of the huge decreases in tax that the wealthy were to face. He told them that those who earned the most would get major increases to their income increases beyond even the weekly earning capacity of some of the people who will receive the smallest additional amount. But he told people not to be envious of the wealthy and the reason that he told them not to be envious was that we had to do something to assist those people because we needed to keep them in New Zealand. 
Well the front page of the  
Dominion Post  
this morning had a very interesting article about who these valuable people were: lawyers and accountants. This is the first time that I have ever heard anyone describe lawyers and accountants as being major contributors to the productive economy. 
Hon Trevor Mallard 
: That’s you and me! 
Hon LIANNE DALZIEL 
: That is Trevor Mallard and Lianne Dalziel. We are among these major contributors to New Zealand’s economic capacity. How extraordinary! It is absolutely extraordinary. 
Hon Steve Chadwick 
: I’d be jealous. 
Hon LIANNE DALZIEL 
: Are you jealous of me? I think members should be jealous. They should be envious of me because I am a lawyer so I am one of the people who the Prime Minister thinks are so valuable that he wants to encourage us to stay in New Zealand. Well I am determined to stay in New Zealand and I am determined to make sure that we reclaim the Treasury benches in this country at the next general election. 
Scientists were also included in the list. Now I buy that. I agree with John Key that scientists are a valuable contributing factor with regard to our productive economy. The real economy needs more scientists to work in it. 
Moana Mackey 
: But they don’t earn over $70000. 
Hon LIANNE DALZIEL 
: No they do not earn over $70000 but I will come to wage rates in a minute. We actually get to the nub of the problem—and scientists are included in this—when we get to nurses. Nurses do not earn enough to put them into the extremely wealthy category. What is absolutely extraordinary is that—[ 
Interruption 
] I am listening to all of the National MPs because I want it to be recorded in  
Hansard 
 that the deputy chair of the Commerce Committee Aaron Gilmore the Dunedin list MP Nicky Wagner and Simon Bridges are saying when we are talking about nurses that yes they are in the extremely wealthy category. I said nurses had not been put into the extremely wealthy category and “Yes they are.” is what we heard back in a barrage of interjections from the National Party members. 
I make the point and put it on the record that nurses earn as much as they do because of the pay jolt that the previous Labour Government gave them because of the problems created by National. National opposed the pay jolt. In fact National criticised the previous Labour Government for spending what we did in the public health system and for giving the pay jolt to nurses. Anyway let us look at what National said. That pay jolt only works in the public health sector. How many nurses do members think are paid over $70000 a year to work in rest homes? How many do members think? I think it would not be many. So let us look at what the Nurses Organisation said on the front page of the  
Dominion Post  
this morning which was that nurses with 5 years’ experience earn on average $60000 per annum. So they do not even reach that category. 
Why have those professionals be singled out by National? It is to stop them leaving the country. But Statistics New Zealand tells us that workers across all sectors leave the country. Housekeepers restaurant workers drivers and labourers are also among the top 10 percent of occupations of people who leave New Zealand alongside nurses teachers and finance and sales professionals. I tell this House that these changes are not about reducing the tax paid by housekeepers. I am sure that Bill English has worked out exactly how much more he will receive in this pay packet each week but I bet he has not worked out how much his housekeeper will receive because that person will not receive very much at all. 
The issue is actually not just about low-paid wage earners as well. I know that we have talked about them tonight. But I have been talking to taxi drivers other self-employed people and small-business owners and they say they are gutted by the increase in GST. It will put their precarious businesses under a real threat of failure. I know that National does not give a toss about small to medium sized enterprises and certainly not about the self-employed. But when those businesses have to put 15 percent on their GST accounts they will know that their precarious businesses are really under threat of failure. I have had conversations leading up to this Budget day with many taxi drivers. We use taxis a lot these days and taxi drivers said they were very worried leading up to this Budget. 
I had my first post-Budget conversation with a taxi driver in the dinner break before I came back to the House. He said to me that when he had heard John Key say people should not be envious of the wealthy for receiving much bigger tax cuts then he was he was reminded of the expression “Let them eat cake.” He was a very very intelligent and capable taxi driver. Tonight he said that if there was a Bastille he would storm it; that is what he said to me tonight. That was absolutely extraordinary and I said to him that I would quote him in the House tonight. He said that was great and he would down tools and storm the Bastille—he would switch the key off in his taxi and he would storm the Bastille—if we had a Bastille to storm. That taxi driver gets something that John Key simply does not get: it is not tax that is holding back incomes in this country; it is wages and it is the income-earning potential of our small to medium sized enterprises sector. That is what holds New Zealand back yet this Budget does nothing to increase wages and it has nothing to do with improving the productive capacity and the earning ability of our small to medium sized enterprises sector. 
My taxi driver tonight knew the figures; he knew that Paul Reynolds was to receive over $6000 more in his pay packet every week. He knew that the Prime Minister and Cabinet Ministers were to receive hundreds of dollars extra a week in their pay packet. He did not know what the minimum wage earner would receive. He did not know that because the minimum wage earner— 
Hon Clayton Cosgrove 
: I raise a point of order Mr Speaker. I know this debate is robust; this is a tax debate. But inane endless barracking as the speaker is trying to speak even though the member tried to take advantage of the microphone to combat it is beyond the pale. Robustness is fair enough but inane barracking is for the street. 
The ASSISTANT SPEAKER (Hon Rick Barker) 
: I thank the member but I did call for order in the House. I say to people that this place can become a bit excitable on occasions but members have a right to free speech. Free speech should be able to be heard. Of course we invite interjections and I am sure the Lianne Dalziel responds to them and likes the cut and thrust of the debate but it should not drown her out. 
Hon LIANNE DALZIEL 
: What my taxi driver did not know was how much someone on the minimum wage would receive which is that such a person will receive an extra $4 a week. Someone who earns five times the minimum wage will receive over $50 a week. Five times $4 is $20 so why is someone in that position to receive over $50? My taxi driver has worked it out—this is a terribly unfair Budget and the bill that is before the House today is very unfair. 
The last thing that I ask is why this is being done under urgency. This legislation is to take effect from 1 October and today is only 20 May. We should have time for the bill to have a short period at the Finance and Expenditure Committee and for public feedback to be given on it. Why are we not to have any public feedback? The Government does not want it. It does not want to hear from the public on this issue; it does not want to hear a single word. This is a tax swindle not a tax switch. 
NICKY WAGNER (National) 
: 
 I am enormously pleased to be supporting the Taxation (Budget Measures) Bill in the second reading debate. Today’s Budget is a cracker. It promotes growth and competitiveness and provides the right incentives for Kiwis to work to save and to invest. This bill cements these gains. It is good for New Zealand and it is good for future generations of New Zealanders. There has been a whole heap of wide-eyed histrionics from the Opposition: overzealous shouting red-hot rhetoric and numerous claims that are totally without basis or fiscal common sense. 
I will inject into the debate some independent factual analysis from financial specialists. My comments will be based on the regulatory impact statement prepared by Treasury and the Inland Revenue Department. Treasury and the Inland Revenue Department understand our economy. Their job is to give independent financial advice to the Government. This is what they say in their regulatory report: “officials from Inland Revenue and Treasury both agree that … the … tax reform package as a whole will …”—contrary to Lianne Dalziel’s statement—“achieve a step up in economic growth by improving incentives to work save and invest”. New Zealand needs this. They said it will “improve the fairness coherence and integrity of the tax system by reducing opportunities to avoid tax”. New Zealand needs this. They say it will “result in a tax system that supports New Zealand’s competitiveness globally in a sustainable manner.” New Zealand certainly needs this. This is what Bill English and the National-led Government set out to achieve and we have been successful. 
It was great to see that 80 percent of New Zealanders in the  
Close Up  
poll tonight supported this Budget. It was also very interesting to hear from Colin Espiner who said that this Budget was better than last year’s effort and probably trumped anything Labour came up with in the past 9 years. 
Let us have a look at this regulatory report. This report provides an index that analyses each taxation measure as to how it affects taxpayers and how it supports increased efficiency of the system improves equity within the system and strengthens the integrity of the system. All measures were rated as increasing efficiency and some such as removing the depreciation loading were rated as having significant improvements in efficiency. All measures were rated for equity. Again removing the depreciation loading gave a significant improvement in equity as did addressing the GST base maintenance that closes the loopholes for largely fraudulent taxpayers. All measures were rated for integrity. In this case the 60 percent thin capitalisation threshold the management of loss attributing qualifying companies and the GST base maintenance have significantly improved the integrity of the tax system. 
I repeat: today’s Budget—and this bill which implements it—is a cracker. It promotes growth and competitiveness and provides the right incentives for Kiwis to work to save and to invest. It is good for New Zealand and it is good for future generations of New Zealanders. I congratulate Bill English on a job well done. 
A party vote was called for on the question  
That the Taxation (Budget Measures) Bill be now read a second time. 
Ayes 67 
New Zealand National 58; ACT New Zealand 5; Maori Party 3; United Future 1. 
Noes 52 
New Zealand Labour 43; Green Party 9. 
Bill read a second time. 
Result corrected after originally being announced as Ayes 67 Noes 53. 
In Committee 
Part 1 Personal tax cuts company tax cuts and GST rate increase: 1 October 2010 start 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 We are at the technical stages of this bill the Taxation (Budget Measures) Bill where there is an opportunity to go through part by part and within the parts. Part 1 is the most substantial although I think that it is fair to say that Part 2 reflects a lot of what is in Part 1 and some additional things. Part 3 may be described as a bit more technical and not quite as substantive in the way that these things work. There will be within Part 1 areas that the Opposition are supportive of and there will be areas within it that we are opposed to. I think probably in my first call that it is worth going through the areas that we are supportive of and asking the Minister in the chair the Hon Peter Dunne a couple of questions because there is room for some explanation. 
Starting off with that I ask the Minister whether he can give some explanation as to the reasons for the CPI treatment of tobacco price increases. I think these are being excluded from CPI adjustments for the purposes of the benefit of national superannuation and I understand of war pensions. That is something that I can vaguely remember the background to and quite a lot of discussion on. But I think that it would be good if members who had not focused on that issue had an explanation of it. 
On the question of depreciation again this at first glance is pretty technical and might not mean much. As far as depreciation on buildings for rental purposes is concerned it is fair to say that the Opposition is broadly supportive of this part although later when we focus more on short-life depreciation of assets there will be more debate on that area because the Government is yet to convince the Opposition that its plans in that area are appropriate. 
As far as thin capitalisation is concerned the changes in the rules are logical. I think that giving the ability to shift the “safe harbour” regime from 75 to 60 percent and the ability for the Inland Revenue Department to look more carefully at transactions under or over that threshold are matters that I do not think there will be much argument on from this side of the Chamber. 
If we look at two areas at personal tax cuts and the GST increase there will be substantial opposition from the Labour Party and I expect from the Greens as well. As far as company tax is concerned it is an area where we would like to have more discussion with the Minister to work the issue through. Members on this side want some reassurance that we are not just moving to further subsidies for Australian banks. I think the Minister is pretty aware of the views of some members on this side—that is for New Zealanders the company tax rate is essentially withholding tax. In the end the people to whom the dividends are paid or who sell the company effectively end up paying the tax. For overseas owners it is effectively the final tax—certainly for the New Zealand taxation system—that they pay. The likely major beneficiaries of this will be the Australian banks. 
As I move through I say that the Inland Revenue Department has done a good job with major litigation over recent years. I think the banks thought they would be able to see the department off and I am pleased they did not and are paying. That is not exactly part of this but the point I make is that the very people and institutions that have been forced by the courts to pay their tax appear to be being forgiven some of that tax in the future through the changes we are making here. Of course I am not asking the Minister of Revenue to identify individual taxpayers but I would like him to give an indication as to groups of taxpayers that are most likely to benefit from this change and where it is a withholding tax rather than washing out as part of a final taxation rate. 
I want to focus the major part of my speech on GST and personal income taxes. The more and more we look at the detail in this particular area the more uncomfortable the Opposition is getting. We see a change to the rates of income tax from 38 cents to 33 cents for people who earn above $70000. Frankly I would find it pretty hard to argue if there was a threshold increase to $100000 or even $120000. I would not find it that hard to argue with if the vast majority of people who voted for the National Party at the last election had their tax effectively cut from 38 cents to 33 cents at the margin. It is not something I would support or promote— 
Chris Tremain 
: The vast majority of people who voted for National were under that threshold. 
Hon TREVOR MALLARD 
: I tell that member because he may not understand this that at the margins we now have working families are paying the top marginal tax rate. That is what the Prime Minister told us. I know the Prime Minister gets a bit loose; he is a bit Abbott-like with the truth every now and again. He gets a bit enthusiastic and he is not always right on the facts but I believe— 
Chris Tremain 
: Three-quarters of New Zealand workers’ tax is capped at 17.5 percent. 
Hon TREVOR MALLARD 
: That member can tell me if I am wrong. Chris Tremain can tell me that the Prime Minister is a liar if he wants to. 
The CHAIRPERSON (Lindsay Tisch) 
: The member cannot use the word “liar”—[ 
Interruption 
] I am on my feet. The member said “the Prime Minister is a liar”. Under Speaker’s ruling 43/6 members cannot use the word “liar”. I ask the member to continue. 
Hon TREVOR MALLARD 
: I do not think the Prime Minister is a liar but Chris Tremain might be contradicting me— 
Chris Tremain 
: I raise a point of order Mr Chairperson. If you alleged that the member called the Prime Minister a liar— 
The CHAIRPERSON (Lindsay Tisch) 
: I have ruled and the member knows exactly what I said. Members cannot refer to anyone as being a liar nor to say that they are not a liar. I know that the member knows what I am saying. I do not need any help in this matter. I invite the member to continue. I know it will be a robust debate over the next few hours and I ask him to continue in that vein. 
Hon Clayton Cosgrove 
: I raise a point of order Mr Chairperson. It may be that we do not waste the time of the Committee with this but I invite you to very carefully consider your last ruling and I think I might be joined by some colleagues across the aisle. If it is the case that we are defending somebody by not calling them a liar or saying they are not a liar we are in difficulty. 
The CHAIRPERSON (Lindsay Tisch) 
: I am on my feet. Let me say this: the slate is clean. 
Hon TREVOR MALLARD 
: I thank the Chair; I am glad we got there. I want to really thank Chris Tremain for his intervention as it was particularly helpful to get the truth on to the table whichever way it went—whether he was right or the Prime Minister was right or whichever side of the National Party was accurate. We know that no one voted for the Prime Minister to get a $1000-a-week tax cut. That is what he has come to this House to promote and vote for. Some of his mates will get tax cuts that are seven times that size. Some of his mates— 
Paul Quinn 
: That’s exactly what they voted for. 
Hon TREVOR MALLARD 
: No one voted for that. I am saying that most decent Tories would have accepted a lifting of the threshold to $100000 or $120000. They would have thought that that was fair—[ 
Interruption 
] 
Hon Clayton Cosgrove 
: I raise a point of order Mr Chairperson. It is an absolute rule in the House that a member cannot move his or her seat to take advantage. “Mr What’s-his-name” sits right at the back in the cheap seats and he has moved his seat to interrupt my colleague. 
The CHAIRPERSON (Lindsay Tisch) 
: I thank the member for that; the member is correct. I say to Mr Quinn the member on my right that interjections are fine but he also brought me into the debate by saying “you” and he mentioned the member by his first name not his full name which one cannot do. I know that the member’s seat is usually at the back and he has moved forward. I am happy to accept interjections and I am happy to acknowledge that this is a robust debate but I ask the member to tone it down. 
Simon Bridges 
: Mr Speaker— 
The CHAIRPERSON (Lindsay Tisch) 
: I have ruled on this matter and I am inviting the member to continue. 
Hon TREVOR MALLARD 
: Thank you— 
Simon Bridges 
: I raise a point of order Mr Chairperson. Mr Cosgrove referred to “Mr What’s-his-name”. I thought we had to use correct names in this House. 
The CHAIRPERSON (Lindsay Tisch) 
: This is getting silly. I thank the member for that intervention. The member knows exactly what needs to be done. I am inviting Trevor Mallard to continue. He has 1 minute 34 seconds to do so. 
Hon TREVOR MALLARD 
: The point I am making is that these tax cuts are inherently unfair. They are absolutely unfair because in the end although some loopholes are being closed to give lower and middle-income people a little bit of relief a massive GST impost is being put on those people to give the Prime Minister and people on similar incomes $1000-a-week tax cuts. No one from the National Party and certainly no one who ran against me in Wainuiomata told the public that they would be voting for the Prime Minister to get a $1000-a-week tax cut. We know that if National members had said that the Prime Minister would get a $1000-a-week tax cut they would never have been elected. If they had told the truth if they had had integrity going into the election campaign they would not have been elected. 
I finish the way I started an earlier speech which is to congratulate Peter Dunne on the minor change he made to this legislation to make it slightly more palatable than it might have been. 
CRAIG FOSS (National—Tukituki) 
: 
 Part 1 of the Taxation (Budget Measures) Bill deals with some of the technical issues as the previous speaker Trevor Mallard said. They were probably the only couple of words he got right. From there he departed a bit but he was right in saying that Part 1 is the technical part that addresses the schedules the changes in the income tax rate the changes in the portfolio investment entity rates the changes in company rates and of course changes in GST rates. It also provides the mechanism for amendments to the Income Tax Act 2007 and their wording so that we can have transitional rates because much of these proposals move in halfway through the financial year. 
Part 1 is quite substantial and I look forward to the Greens speaking on it because it proposes an increase in GST. As members opposite have said GST is a tax on consumption. I note that in many speeches in this House the Greens say that they are opposed to consumption so presumably they will be speaking for this part of the bill putting a tax on consumption and perhaps even slowing down consumption. 
Other clauses in this part point to an encouragement in relation to financial assets where portfolio investment entity rates go down from 30 percent to 28 percent. So for once I am looking forward to the contribution of Green members to see whether they would encourage an increased tax on consumption a movement to more financial assets. 
This is a technical part and I have been reading some of the provisions to do with GST. I was trying to figure out how on earth one would write this bill if the GST clauses included exemptions for fresh fruit and veges. In the whole bill there are 50-odd pages dealing with GST. Apparently that absurd suggestion in relation to fresh fruit and veges was an opinion from the Labour caucus but not from the leader I understand—and I am sure other members may correct me on that. We have a world-renowned tax on consumption in New Zealand. In fact this very clean and crisp tax was brought in by the party now in Opposition—some of its current members were either near or in Cabinet at that time; they were definitely in Cabinet when the rate was increased from 10 percent to 12.5 percent without any compensation—so I will be interested to hear their comments about that. There are no exceptions to GST; it is an across-the-board goods and services tax. 
One point seemed to be missed in some of the earlier speeches related to tilting New Zealand’s economy away from consumption towards saving or reducing debt. Of course if people want to go out and spend their entire after-tax income that is fine and 15 percent of that as proposed in this bill would attract GST. But if people pay off their mortgage with their higher after-tax income which would increase their home affordability they will get a better bang for their bucks so their net debt position would improve because of this Budget. If people have positive savings they will attract tax at 28c in the dollar on their portfolio entity investment regime as Part 1 changes those rates. 
To be fair I acknowledge that it was the previous administration that brought in the portfolio investment entity regime in recognition of the imbalances in the New Zealand economy. So I find it curious that members opposite seem to be attacking some of the moves in the bill before us and I will be interested to hear their justifications for that. 
To go back to the GST side of things can you imagine what would have to be in this bill if it included the proposals from the other side? Essentially a cabbage that is dug out of the ground and an apple that is picked off the tree would not attract GST but an apple that has gone through the pack-house and been washed and bagged or a cabbage that has been chopped up would attract GST. Can you imagine the legislation the regulation the holes and the arbitrage you would have under that regime? The administration of it would far outweigh any gain to the Crown or any perceived gain to the consumer because they would have— 
The CHAIRPERSON (Lindsay Tisch) 
: I remind the member that he is continually bringing me into the debate. 
CRAIG FOSS 
: I apologise Mr Chairperson. Someone somewhere would have to pay the impost on that. It would fall on the taxpayer or on small businesses which a previous speaker was so concerned about earlier. The previous speaker contradicted another speaker on his side when he talked about some court cases today totally forgetting the outcome of some cases that are now no longer before the court. The other Opposition speaker who was the Minister of Commerce at the time when all that mischief happened started to justify them so again we have contradictions. 
Clause 36 is one of the highlights of this part because it contains the changes to schedule 2 which includes the basic tax rates of PAYE income payments. Subsections (a) (b) (c) (d) and (e) are identified in that clause and I would like to read them for members opposite because they contain some highlights. In fact they highlight the changes not the transitional rates. 
Clause 36(a) states: “in clause 4 ‘0.21’ is replaced by ‘0.175’;” being the PAYE rate. That is interesting because three-quarters of New Zealand taxpayers will be attracting that rate or less. Three-quarters of New Zealand taxpayers will be facing a rate of only 0.175 or 17.5 percent as they make their PAYE payments. At the next levels “0.33” goes to “0.300” and “0.38” goes down to “0.330” which seems to be causing so much concern to Labour members opposite. There does not seem to be any acknowledgment whatsoever that it was that particular party that took the rate from 33 percent to 38 or 39 percent. It was the first thing Labour members did in regard to tax when they became the Government in 1999. I will be interested to hear their comments on that. If they are opposed to this it implies that with the $7 billion of extra spending announcements they have already made they would have to increase personal tax rates corporate tax rates savings PAYE tax rates or GST rates. I thought they were going to axe the tax but I do not know what they are doing now. I look forward to those members as we talk about the clauses in Part 1 in particular telling us what they would do if this Taxation (Budget Measures) Bill were their bill. 
Hon Clayton Cosgrove 
: No no you’re in Government you’re responsible you explain. 
CRAIG FOSS 
: No I say to the gentleman from the South Island that the Chairperson is not responsible. I look forward to the comments from the Greens in relation to the increase in the consumption tax which I believe aligns with their core philosophy. At least the Greens are consistent in their advocacy of a capital gains tax. If I look at the material from Labour when in Opposition and when in Government there are huge inconsistencies and we heard that in earlier speeches on the Budget itself. I look forward to those speeches and to this bill being robustly debated but overall Part 1 is the real detail and the real thrust of the bill and it is that which is getting the nod from New Zealand as we speak. I will be particularly proud to go on the hustings next year and debate and discuss these points. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 Sometimes people watching Parliament wonder why we appear to disagree all the time. It is certainly true that there are some things in the Tax (Budget Measures) Bill that we agree on. For example I think both sides of the Committee agree on the need to improve New Zealand’s parlous savings rate. The debate on the savings and tax interface is about whether the measures in the bill will get us there or whether some alternative measures would be better. Likewise both sides of the Committee agree very strongly on the need to rebalance our economy away from the tax privileges of the property sector towards a more neutral tax playing field. Again the question is whether the measures in the bill get us to that objective. 
Hon David Parker 
: They say they want that. 
Hon DAVID CUNLIFFE 
: They say they want that but in fact the measures do not get us very far and we will come to that. 
The previous speaker the member for Tukituki said that three-quarters of taxpayers will be on the 17.5c tax rate. I wonder whether the taxpayers who go to the Government’s online calculator to see whether they will be better off or worse off have factored in what that calculator rather sneakily leaves out: that next year they will face 6 percent inflation. That means that everybody has to take 6 percent off his or her gross income before working out whether he or she is better off or worse off. For example by the time a family earning as much as $78000 with two kids in preschool gets their great tax benefit they face higher GST paying more for childcare and inflation and they will be 55 bucks a week worse off. So Labour members will be working with the public—the listeners and the viewers—over the next week or so during this debate to uncover some of the hidden traps the fine print and the places where the gloss is not as good as people were led to believe it would be. 
There has been some discussion of whether GST should be on or off fruit and vegetables. Labour has not taken a position on it but we think it is worth having the debate. The reason it is worth having the debate is that it is easier to have a comprehensive GST programme when GST is at a low rate but the higher we raise the rate the stronger we make the case for a possible—note “possible”—exemption. At the moment prior to the increase in GST New Zealand has—wait for it—the fifth-highest level of indirect tax in the developed world. And that is before the increase in GST. The arguments against taking GST off fruit and vegetables are partly based on compliance and partly on definition. But I do not believe that New Zealanders in their hearts would actually find it very difficult to say what a vegetable was. They might look at the members opposite. They might look at say the member for Maungakiekie and ask what he has done since he got to Parliament and whether he would qualify. But that is not very nice so I will back right off it. 
Mr Foss made another point about how fair this measure is. The word “fair” keeps coming up almost as often as Craig Foss saying “Mr Chairman”. What does he say? He says: “Mr Chair Mr Chair.” The word “fair” keeps coming up but here is something that is not fair in this bill: 14 percent of the tax refund goes to the top 1 percent of the population. Trevor Mallard is absolutely right: if you are earning a million bucks you will get $1000 a week extra in your hand. If you are earning a million bucks do you need anything extra in your hand? I am not asking you Mr Chair; I am sure you earn much more than that—I am sure you do. But if a person in the real world the member Mr Foss for example earned $1 million he would get $1000 in his hand. That is not a matter of need. If the Government is to be believed that the country needs to move forward and to address the structural challenges then the country’s needs should be put ahead of the need of millionaires to get another $1000 a week in the hand especially when a family with two kids on $78000 is $55 a week in the red. That is not fair. 
On the question of rebalancing both sides of the Committee—I think all sides of the Committee—agree with the need to rebalance. What we are wondering is why the Government has lost its nerve. It has taken away only a part of the building depreciation tax allowance. The Tax Working Group said that $1.1 billion a year was sitting there; the Government has taken about $600 million. But it did not touch ring-fencing which is worth $2.5 billion—it did not touch that. What it did do rather stupidly is take $200 million off the depreciation of short-lived assets which is technology which is needed for innovation and growth. It is running against the growth objective in order to raise funds because it did not have the bottle to really take some parts of the property industry to task. So the Government has not achieved the goal. It has not achieved the goal of comprehensive reform to achieve rebalancing. 
Let us sum up. In this Committee stage Labour members will be going through the detail of the “how”—not so much the “why” which we will get back to in the third reading debate but the “how”. Are the measures in the bill going to deliver on the stated objectives of the bill? Will they encourage savings? Frankly the Government has got a nerve to ask the question. 
Hon Clayton Cosgrove 
: Gutted KiwiSaver. 
Hon DAVID CUNLIFFE 
: It is the same Government that gutted KiwiSaver as Mr Cosgrove said. Its members said they will return to pre-funding New Zealand superannuation when the country is back in surplus except they have changed their mind done a Tuhoe call it what one likes— 
Hon Clayton Cosgrove 
: Broken their promise. 
Hon DAVID CUNLIFFE 
: They have broken another promise. The country will be back in surplus in 2016 but pre-funding does not resume until 2019. When will the Government have the courage to say to senior citizens that it is sorry but superannuation as they know it is for a limited time? Do they have the bottle to do that? I do not know. And if they do not why not resume pre-funding? 
Hon Gerry Brownlee 
: I raise a point of order Mr Chairperson. I am surprised that you did not pick up on the unparliamentary comment from the Hon David Cunliffe. Perhaps it is because his rhetoric is normally so filled with unparliamentary comments— 
The CHAIRPERSON (Lindsay Tisch) 
: I want the member to state exactly what the point of order is and not make a speech. 
Hon Gerry Brownlee 
: To refer to another member or to any number of members as lacking courage is completely unparliamentary. 
The CHAIRPERSON (Lindsay Tisch) 
: I say sorry to the member. I did not hear that comment. If David Cunliffe did say that I say to him that in future he must not say that someone lacks courage. 
Hon DAVID CUNLIFFE 
: Thank you Mr Chairperson. It is certainly good to have Gerry Brownlee back early from his dinner break at a quarter to 10. We are summing up this part of the debate by showing that there is some common ground between the parties. We agree on the need to encourage savings; we are rather surprised that National has come late to that but it is good that it has. We agree on the need to rebalance the economy but we have serious doubts that this bill will get us there. What we disagree with is the “Robin Hood in reverse” of this Budget which takes from the poor takes from the forgotten middle class and gives $1000 a week to millionaires who do not need it and probably did not ask for it—and it is being done at the expense of the country. 
To make matters worse this Government is borrowing extra to give millionaires a handout. Next year it will borrow $450 million extra for the millionaire handouts and that is $1.1 billion extra borrowing over 4 years for the millionaire handouts. Gross debt goes up and interest payments double and do not come down till 2021. This is not a Government that has got its priorities right. This Budget neither is fair nor fixes the problems. 
As this debate continues Labour members will be showing for each of the portfolios represented by members of our team where the sneaky cuts have come where the loopholes are where the rules are wrong and the better way that we could have achieved those objectives that are sensible and that are agreed across the House. We challenge the Government to be open-minded. It is not too late for it to accept sensible amendments. There is a very sensible Minister in the chair. The Hon Peter Dunne looks great on TV without his tie on. We hope that he will accept the odd amendment as the Committee stage goes on. Thank you. 
Hon PETER DUNNE (Minister of Revenue) 
: 
 I was not going to intervene in the discussion as early as this but given that some measures have been put on the Table that there seems to be a measure of agreement about I thought I would address those now so we could then move on to the more substantive debate about the areas where we disagree on. 
Hon David Cunliffe 
: We were just warming up. 
Hon PETER DUNNE 
: I appreciate that the member may be just warming up and we have a long way to go yet and it can get very hot before it is all over. Mr Mallard raised a question earlier on about the reasons why the tobacco excise increase had been excluded from the CPI calculations in respect of changes to veterans pensions and New Zealand superannuation. The reason is quite simple: it is not a taxation argument; it is simply because compensation would be made available in due course in the normal course of events for that increase. That increase was made to encourage people to desist from smoking; it seems somewhat perverse to then factor in what would effectively be compensation for that decision that had been made. 
Hon David Cunliffe 
: What about the broader 5.9 percent? 
Hon PETER DUNNE 
: That is a question we will come to separately. I am answering questions that have been raised by other speakers. I will come to that point in a moment. But let me just say that when GST was introduced in 1986 the rate of inflation post-introduction rose to about 18 percent. The effect of that was comparatively short term. It is exactly the same here; if we look at the underlying track for inflation over next year the year beyond and the year after it is around 2.5 percent flat. That in fact will mean that the tax changes will not have the negative effect that the member claimed in his address; they will be very beneficial by comparison. One cannot make an omelette without breaking some eggs. The change here gives that short-term boost but in the long term as I say it will even out. 
Let me come to the question of depreciation and the issue Mr Cunliffe raised which I want to pick up on because it is quite critical. The Tax Working Group costed depreciation changes at around $1.3 billion. In fact when officials retested that calculation the figure came out at around half that. So when the member says that we picked up on only half the recommendation in fact we picked up the actual cost if he follows what I am saying. [ 
Interruption 
] Let me just work my way through it. The issue there was not so much of saying we would go with only half the figure; when we looked at the size of a figure it was only half of what the Tax Working Group had set it as being. 
The issue then came down to the introduction of the 50-year limit. That is a very practical exercise given the nature of the buildings that will be categorised as being under 50 years. One may say that that is very easy to get around; I know that one or two colleagues had discussions earlier on about fit-outs and renovations and I think we had given a pretty clear signal that that is on our agenda. There will be a discussion paper issued by the Inland Revenue Department in due course about how those issues will be handled. 
I wanted to talk about the depreciation loading particularly the 20 percent excess. The reason for the change is a twofold one: it is picking up on a recommendation from the Tax Working Group and it is also aligning the rate of depreciation to the actual economic rate of depreciation not the accelerated 20 percent that was there previously. So this is really a streamlining given the recommendation from the Tax Working Group. 
Mr Mallard also raised a question relating to company tax and I am tempted to remind him of his arguments which he knows in reverse very well because they were rehearsed at the time of the 2007 company tax changes. But the reality is this: we live in as members know—I am not going to lecture on this point—a competitive international environment. Our company tax rate was even at 30c out of line with a number of jurisdictions. The international average is around 26.3 percent. We were cognisant of the fact that the Henry review in Australia was likely to recommend a company tax change. In fact it did. The time frame has been a slightly more elongated one. We felt that given the scope of this package it was prudent to make this change now. It certainly gives New Zealand a short-term competitive advantage. It preserves if you like the gain that we had when we cut the tax rate to 30 percent a couple of years ago. 
On the point about who benefits Mr Mallard is correct when he talks about the banks to some extent. But I think the point needs to be made that a lot of New Zealand businesses pitch themselves against that company tax rate. In fact many of those smaller businesses will be more advantaged by the change in the marginal tax rates than they will be by the change in the company tax rate. Some of the very small sole traders I think will do quite well out of that 17.5 percent rate. 
I simply wanted to take a call at this point to cover those points. I appreciate that issues relating to the imposition of the GST and the changes in personal tax rates will excite more debate and I will come back in due course and take part in that. 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I take a call to speak on Part 1 of the Taxation (Budget Measures) Bill and in particular some of the rationale for the tax cuts that are outlined in this part. We have heard some arguments from the Government as to why it is so important that it makes these tax cuts so I think it is important to examine its reasoning. 
One of the reasons given and probably the predominant one concerns growth. The Government argues that as a result of these changes we will get increased growth so it is important to look at some of the historical record and what we know in New Zealand about the relationship between tax rates and growth. We can draw on some case studies. For example we know that in 1986 we cut the top rate from 66 to 33 percent. If the argument for this tax cut was correct—that it results in increased GDP growth—then one would expect that if there is some relationship there would have been an increase in GDP per capita growth after that tax cut in 1986. In fact from the period 1984 to 1992 the average GDP per capita growth was 0.4 percent. After the tax cuts of 1986 the New Zealand economy flat-lined. So in spite of the rhetoric of the Government the evidence in fact is extremely hard to find. Many many studies from numerous countries will repeat that evidence: there is a very poor relationship between the top rate of income tax and GDP per capita growth. 
We can compare that case to the year 2000 when we increased the top rate back up from 33 to 39 percent. In the 5 years after the increase in the tax rate compared to the 5 years before GDP growth per capita doubled. So we see that the evidence for the central argument being made by the Government regarding growth is extremely thin. That evidence is not just from New Zealand; it is from the United States and many other countries. If the Government is to rely on that piece of evidence for its argument then the Government does not really seem to have a leg to stand on. 
The other argument that has been promoted by the Government is labour mobility. One of the key arguments relates in particular to Australia. The Government argues that our tax rates in relation to Australia’s result in people moving to Australia. They also argue that that is the case in relation to wages. I will get to wages in a second. If we look again at the two examples of changes in the top tax rate we see that we actually get the complete opposite result of what the Government would argue. In 1986 we cut the top rate from 66 to 33 percent. In the 5 years after we cut that top tax rate we had a net migration of 65900 people. So in the 5 years after we cut the top tax rate on a net basis we lost about 66000 people through their moving overseas. In 2000 we increased the tax rate from 33 to 39 percent. We actually had in the 5 years that followed that a net migration gain of about 84000. So if the argument is that we have to cut the top tax rate in order to keep more people in New Zealand and to attract more people to New Zealand—the labour mobility argument which is obviously an interesting argument to have—the problem is that the evidence goes in completely the opposite direction. 
Whether we look at GDP per capita or whether we look at labour mobility the evidence for the arguments that the Government is putting on the table for the cut in the top tax rate is actually in the opposite direction. That is odd. We would think that the Government with all its resources and the entire monolith of Treasury behind it in looking at tax rates and legitimising a cut in the top tax rate would make two arguments in relation to GDP per capita growth and labour mobility but the evidence in New Zealand is the opposite. The evidence is as plain as day. Anybody can go and look at that evidence; it is freely available. 
Part of the reason for all of this argument is that there is actually not a strong relationship at all. I am not arguing that if we increase tax rates we increase GDP per capita or that if we increase tax rates we increase net migration into New Zealand. In fact the relationship is not very strong. That is the fundamental truth. None of us here would be able to prove that the relationship is very strong. The relationship is not very strong so in making this argument there is not very strong evidence for the Government to rely on. 
I think that one of the arguments that ties into both of these relationships is about relative tax rates. The Minister spoke for example about the international environment and that is a legitimate argument. We have seen a race to the bottom with tax rates and particularly with company tax rates around the world but also with personal income tax rates labour has theoretically been competing and playing countries off one against the other. Supposedly we have been seeing that race to the bottom and New Zealand has had to lead that race to the bottom. We are leading that race to the bottom. That reality is unfortunate for the Government’s argument. 
PricewaterhouseCoopers and the World Bank in their  
Paying Taxes 2010 
 report compared the total tax take. When we look at the headline “Income tax rates” we know that it does not take into account everything else that goes with it. We do not know whether it takes into account a Medicare levy as in Australia; state taxes; or all the different taxes that are allocated. When we look at Australia we find that the total tax rate that PricewaterhouseCoopers and the World Bank came up with was 48 percent. When we look at New Zealand and at all of its taxes together we find that the total tax rate is 32.8 percent. So the New Zealand total tax rate is already dramatically lower than that of Australia. The problem with the Government’s rhetoric—rhetoric we hear constantly telling us that we have to do all of this to compete with Australia—is that it does not stand up against the evidence. The evidence is that Australia is much more highly taxed than New Zealand and if we look at the World Bank’s  
Ease of Doing Business 
 report which is linked into tax rates we find that New Zealand is rated right at the top of that report. 
In relation to both of the key levers that the Government wants to use to promote economic growth—tax rates and regulation—Australia is both much more highly regulated and much more highly taxed. One could make an argument if one wished to that there seems to be a correlation—if we compare Australia with New Zealand—between higher rates of GDP growth more regulation and higher tax rates. 
This part of the bill is justified on the basis that lower tax rates will result in higher GDP growth but we see very poor evidence for it. To the extent that there is evidence if we compare ourselves with Australia we know that New Zealand has much lower tax rates than Australia does. Some of the members opposite disagree with that but I ask them to go and read the PricewaterhouseCoopers and World Bank report  
Paying Taxes 2010 
 which compares the numbers. It may be that the Government does not believe the World Bank and PricewaterhouseCoopers but although I do not agree with them on everything I think they do have a point: compared with Australia New Zealand is a much lower taxed environment. So the arguments for this part—the arguments based on GDP growth labour mobility and international comparisons—do not have strong evidence. 
We have to wonder why this bill is being brought into the House with justifications for which there is not strong evidence. Surely we should have an evidence-based approach to legislating. Just as we should have an evidence-based approach to medicine or to any other field we should have an evidence-based approach to making decisions about taxation. But the truth sadly is that the evidence does not support the Government’s position. 
The CHAIRPERSON (Lindsay Tisch) 
: I am sorry to interrupt the member. There is a lot of noise over on the Government benches. It is difficult for me to concentrate on hearing what is being said. If members want to talk that is what the lobbies are for. 
Dr RUSSEL NORMAN 
: Those arguments go on top of the other arguments in respect of this part which of course are about equity and avoidance. I have already addressed those issues. The issue of equity particularly has been done to death in this debate; clearly these are regressive tax changes. The issue of avoidance is basically about rewarding avoidance behaviour rather than closing loopholes. Thank you. 
SIMON BRIDGES (National—Tauranga) 
: 
 This Budget and this bill are about tax cuts for the many. This is the people’s Budget and I think that is why Labour members do not like it. That is why they are angry. Actually I think they were a bit embarrassed when their leader was speaking this afternoon. Labour members had come to the Chamber prepared for a Budget that was about tax cuts for the rich; that is what they thought they were getting. They had done all their sums and Phil Goff had a pre-prepared speech that he was to give on all of that. But what we have found is that this Budget has tax cuts for the many. Whether one is an employee at any level he or she is getting a tax cut. In fact the bulk of the tax cuts are going to those on lower incomes. 
Let me give a few I think remarkable facts that show very clearly why this is tax cuts for the many. This is not about doctors lawyers and people in those kinds of professions. It is also about cleaners and the people whom the Labour Party says it thinks it is about. Two-thirds of the tax cuts apply to people on incomes below $48000 and 73 percent of income earners will now face a statutory income tax rate of 17.5 percent or less. The tax changes that we are seeing in Part 1 are not about the rich. The effect will be felt by those people on low and middle incomes. 
It is remarkable as well when we look at these tax changes and tax cuts. Of course we know that and I will not go through the various rates. The tax rate of 12.5 percent for people in the bottom income bracket zero to $14000 has gone down to 10.5 percent. We know all that. But what is also very interesting is that when we go through the various average tax rates we find that the rates are even lower than that. The average tax rate—I suppose we could say the actual tax rate—on an income of $48000 is 15.46 percent. It is not 17.5 percent but 15.46 percent. For someone on an income of $40000 the tax rate is 15.05 percent. People earning $35000 have a 14.7 percent tax rate people earning $30000 have a 14.23 percent tax rate and those on twenty-five grand have a 13.58 percent tax rate. We have not brought a bill to this Parliament—Bill English has not given a Budget today—that is about the rich. The Budget has been about the many. It has been the people’s Budget. We have the people’s princess over there the people’s daffodil but this is the people’s Budget. It has not been about just doctors lawyers engineers and consultants. It has been about ordinary Kiwi jokers such as cleaners and house workers. 
I can understand why Labour members are quite angry tonight. They thought they were getting something else. They had a caricature of the Budget ready to present and to hoe into. But they have had the rug pulled out from underneath them. We are giving these people—the cleaners the street workers—an incentive to get ahead. But we are giving them more than incentive to get ahead; we are not doing just that. We are giving them future options and a desire to get ahead to make more money and yes to get into the top tax bracket. I am not one of those members who think that earning $100000 is evil. 
Debate interrupted. 
Sitting suspended from 10 p.m. to 9 a.m. (Friday)