Smith Lockwood: Debate on Budget Policy Statement 
Smith Lockwood: Debate on Budget Policy Statement 
[Volume:645;Page:14837] 
Dr the Hon LOCKWOOD SMITH (Deputy Chairperson of the Finance and Expenditure Committee): 
 I move  
That the House take note of the report of the Finance and Expenditure Committee on the Budget policy Statement 
. The Budget Policy Statement is published with the Half Year Economic and Fiscal Update and outlines the Government’s intentions for the 2008 Budget and also for future years. The best thing I can say about this Budget Policy Statement is that Labour will not be involved with it in future years.  
The people of New Zealand are sick of the controlling tentacles of this Labour Government reaching into every aspect of their lives. They are sick of the burgeoning bureaucratic regulation under this Labour Government. They are sick of this Government getting bigger and bigger at the expense of ordinary New Zealanders whose financial position is getting worse as this Government takes more and more tax off them. If members doubt what I have just been saying the submissions to the Finance and Expenditure Committee covered a number of these issues and I will outline a few of them. 
We at the select committee heard from business and farming interests in New Zealand. They were quite clear when they told the community that they were alarmed—that was the language they used—at the rate at which government spending has been increasing leading to higher inflation higher interest rates and a higher exchange rate. That was their language—they were “alarmed” by it. They said that the higher overall taxation levels we have under this Labour Government are simply crippling the productive sector of this country. But worst of all they said that collapsing productivity growth has got them really worried because that is leading to higher inflation and higher interest rates. 
What we see is a lost opportunity. We have had probably the best international environment for economic growth since the 1950s and 1960s and this Government has squandered it. It had a chance to do something to really raise New Zealand’s productivity levels. The submitters to the select committee pointed out that productivity since Labour came into office in 2000 has collapsed. That was their language—productivity has “collapsed”. When productivity collapses we cannot get growth without inflation and we therefore get high interest rates hitting every mum and dad with a home mortgage in this country and of course those high interest rates push up the exchange rate hitting all of our exporters as well. 
Interestingly though it was not just the business and farming organisations that made submissions. So too did social interest organisations. There was a submission from one group called the Child Poverty Action Group which is actually an interesting name for a bunch of researchers from Auckland University. This group is based at Auckland University and is made up of academic researchers. They told the select committee that the Working for Families package which is the Government’s flagship policy has failed New Zealand’s poorest families. They went on to say that KiwiSaver benefits the better-off interestingly. 
In their evidence on the Working for Families package they told the committee that 185000 children from families at the bottom of New Zealand’s income levels get little out of it. In fact they pointed out in their submission—and it is covered in the committee’s report to the House—that if the mums and dads of those 185000 children try to earn more for their families this Government taxes them on any dollar they earn by over 90 percent—90 percent! And if they try to get off the benefit and try to stand on their own feet the Government taxes them at 100 percent—100 percent! If they dare to earn another dollar under this Labour Government the Labour Government takes it all off them—and Government members say they care about the poorer people of this country! 
What is interesting is that we asked Dr Cullen—because Dr Cullen came to the select committee—whether the Budget will do anything for those 185000 children whom the Child Poverty Action Group identified. Dr Cullen said no. He said there would not be anything in this Budget to help those 185000 children from our poorer families who were identified by the Child Poverty Action Group from Auckland University. [ 
Interruption 
] And Steve Chadwick says Labour cares! We know when Labour members care. They care when they are 15 points behind in the polls. That is the only time they care. 
This Budget Policy Statement covers the vexed issue for Labour of tax cuts. I think poor old Dr Cullen is allergic to the words “tax cuts”. I think Dr Cullen genuinely believes that New Zealanders are too stupid to know how to spend their own money. Dr Cullen believes he knows far better how to spend people’s money and he goes quite septic at the thought of tax cuts. In his Budget Policy Statement he outlines four conditions for tax cuts. He says the Government will cut taxes without increasing borrowing without cutting public services and in a way that does not exacerbate inflationary pressure. He says the Government will cut taxes in a way that does not lead to greater inequalities in our society. 
I think that Dr Cullen forgot two conditions for tax cuts. I am sure he would have included them had he remembered. The first condition is that we have to be in an election year. We know that Labour considers cutting personal taxes only in an election year. The second point Dr Cullen forgot is that Labour will cut taxes in an election year only if it is more than 15 points behind in the polls. Do members remember the last election? Dr Cullen promised the “chewing gum tax cut”. Do members remember that? Well of course that final condition was not met because Labour was not more than 15 points behind in the polls. So Dr Cullen just said: “No. We won’t cut taxes because that final condition was not met. We weren’t 15 points behind in the polls.” So even though it was an election year after the election Labour broke its promise and did not cut taxes. New Zealanders should remember that. New Zealanders should remember that although Labour might talk the language of tax cuts before an election it will find every excuse in the book after an election to cut back on them or cut them out altogether. 
This Budget Policy Statement has a big headline on page 8: “Revenue forecasts are being revised upwards”. That is why Labour promised tax cuts. But of course since this Budget Policy Statement was published in December things have turned to custard a bit. We have had the international financial markets continuing to gyrate. We have had the housing market hitting a thicker wall than people had actually expected. We have had droughts hitting a crucial part of New Zealand’s economy—the agricultural sector. And what do we see? The Government’s latest financial statements to the end of January—the latest financial statements—show that revenue is down. Whoops! The Budget Policy Statement forecast revenue to be up but the latest financial statements show that revenue is down $700 million. 
Already the Labour Government is having to borrow money. The Budget Policy Statement makes that very clear—members should look at the tables on page 57. Already the Government is having to borrow money to fund its operations. Now with revenue down by $700 million it will have to borrow more money to fund the tax cuts and that will breach Dr Cullen’s test about no borrowing for tax cuts. Which will go? That will be the test. Will Dr Cullen breach that test or will he scrap the tax cuts the way he did before? 
The people of New Zealand should be very suspicious of this Labour Government when it comes to tax cuts. New Zealanders right now under this Labour Government are facing climbing house mortgage and rental costs spiralling food and petrol costs and rising electricity prices because of a rushed emissions trading scheme. They are facing an exchange rate that is crippling our exporters. The only thing that is likely to grow under this Labour Government is more bureaucratic regulation. This will be Dr Cullen’s last Budget.