Cunliffe David: Taxation (Urgent Measures and Annual Rates) Bill — In Committee Third Reading 
Cunliffe David: Taxation (Urgent Measures and Annual Rates) Bill — In Committee Third Reading 
[Volume:651;Page:252] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 It is appropriate in the Committee stage debate of the title clauses to recall the overall significance of the measure that they represent. This has been an extraordinary debate so far on an extraordinary bill. What is clear which will no doubt carry through into the third reading debate is that thanks to the loss of mana by the Maori Party the Government will have the numbers sadly to pass this bill and thereby these clauses will be enacted. That I think we can take as a given based on the voting patterns so far. 
What has become equally clear through the debate is that there is neither a valid social justification nor any valid economic justification for the measures that are proposed. There has been a growing recognition throughout the House in the media and amongst the commentators that when we strip it all away the bill is about politics it is about who gets what and it is about rewarding constituencies. It is not about growth it is not about savings and it is not about good policy design. 
Let us recall that the bill that these clauses represent is going to cost New Zealand about $5 billion. Of that $5 billion $3.5 billion comes from gutting KiwiSaver: providing not a 2 percent option but effectively a 2 percent cap and thereby taking away with it not only the best chance working New Zealanders have ever had to have a nest egg—a big nest egg on retirement—but the hopes and dreams of many New Zealanders who had just started to believe that maybe they too could have a pool attendant like Mr Key one day. But those dreams are gone. So has the dream of paying off the mortgage when they can cash in their KiwiSaver because 2 percent plus nothing will not go very far. It will cost the average income earner starting at 30 years of age about a quarter of a million each by the time he or she retires—thank you National Government! 
So the real losers today are ordinary New Zealanders but the other loser here is actually the National Party interestingly—and ironically—enough. Up until today National had done a pretty fair job of telling New Zealanders they could have everything they had under Labour. The polls were very clear. We were not a Government that was reviled by New Zealanders; they just thought maybe it was time for the other guys to have a go. We will find out in 2011. All of the data is showing that most New Zealanders thought that the economy under Labour was well managed that the Government was doing a good job and that overall it acted in New Zealand’s best interests. It is just that they were a bit bored and thought they could have all of that and some new faces. 
The real problem with this bill—the bill supported by the title clause—is that the title should be the “Emperor’s New Clothes Bill” or the “Wolf in Sheep’s Clothing Bill” or the “New Zealanders Start to Come to Their Senses Bill” because it dashes the hopes of the million New Zealanders who were KiwiSavers and it gives a kick in the guts to those Kiwis who were paying the self-admitted veto-driven $750 million loss that Bill English first confessed to which is now on the Internet and which he then withdrew—that was extraordinarily inept for his first week on the job. That is almost historic. I have never seen a financial veto withdrawn and taken off the Table after it has been posted on the Internet. Extraordinary! 
Those people will not forget this. They will not forget this because on our first day of business National dropped all pretence and reverted to type just like Ruth Richardson’s first week on the job. Bill English once presented himself as the centre candidate in the leadership race against John Key—and why is it by the way that Mr Joyce is sitting right behind Mr English? We will figure that out. 
Hon Dr Michael Cullen 
: He gets to stab Bill before Bill stabs John! 
Hon DAVID CUNLIFFE 
: I figured that might be something to do with it. 
So we know who the losers are. I actually think one of the biggest losers here is the Maori Party. We had been hoping to build a working relationship with the Maori Party because I think there is some stuff we need to work on together. I fear that those members are not going to be here in 2011 because the majority of Maori Party voters who voted Labour with their party vote are not going to be impressed by the fact that the only reason that this veto was not needed and the only reason they are not getting the $750 million insurance cheque from Michael Cullen’s amendment is because Hone Harawira and his mates supported that bill. It is the beginning of the end for the Maori Party. It is like the foreshore and seabed legislation in reverse. This is the beginning of the end of the Maori Party because it has put itself let us hope unwittingly in the situation of propping up a National Government that is already showing itself to be different from what it told the electorate— 
Hon Parekura Horomia 
: And what they told the Maori Party. 
Hon DAVID CUNLIFFE 
: —and what they told the Maori Party. So I feel kind of sorry for them in this because they have been taken for a ride. 
This bill could also be called the “Bad Economics Tax Reform Bill”. It is bad economics for four principal reasons. The first reason is the savings gap is one of New Zealand’s enduring structural economic problems and it is one of the most important legacies of the outgoing Government that there was a structural solution that was working well. This guts it. 
The second principal reason is because the measures in this bill are the opposite to productivity enhancing. They are funding a tax cut that will be either frittered on consumption or perhaps squirrelled away and have no multiplier. But either way—and Mr Bennett cannot count it twice—it does nothing for the drivers of growth. It does nothing for technology; in fact it does the reverse. It cuts the research and development tax credit that was being used to good effect by our most innovative businesses. 
The third reason it is bad economics is because it was never going to be an appropriate solution to a relatively short-run cyclical recession problem. It is a structural tax cut which Treasury itself has confirmed was inappropriate. Members should read the bill which says it was inappropriate. The briefing to incoming Minister states it was inappropriate. The flow-ons have not been quantified and the briefing to incoming Minister makes it clear that after $9 billion of stimulus from the Labour tax package in Budget 2008 another $5 billion was imprudent. Between Budget 2008 and now—wakey wakey!—the world financial markets have gone into a tailspin. That means it will be harder to borrow and banks are having to get expensive credit guarantees. 
Against that background the last thing we need is to be driven further into debt. I tell New Zealanders that the fear is that we will be driven so far into debt that the decade of prudent management inherited from the outgoing Government will be wasted. We started off on 35 percent sovereign gross debt to GDP. We got it down to 17 percent. My bet is— 
Chris Tremain 
: At $48 billion. How can that be? 
Hon DAVID CUNLIFFE 
: I tell Mr Tremain that National will not actually tell us. National will not publish the forward debt track. My bet is it is back up to 35 percent in part as a result of this bill and in part admittedly as a result of factors beyond the control of all of us. But it is not an appropriate solution to a cyclical problem. 
Finally this does not maintain a prudent stance in the markets. Both this and talk about driving the New Zealand Superannuation Fund to override good process and forcing it to buy assets in New Zealand will push up the price of assets it will push up the price of debt and it will make the borrowing problem worse. It is bad financial economics as well as bad real sector economics. 
But let me conclude as I began this summary under the title clause. I think New Zealanders now know it is not about economics it is about who gets what.