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:213] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 This part is a very interesting component of the bill and merits the close consideration of the Committee for some time. It is a misguided attempt to ensure that New Zealanders do not lose because of the clumsy and haphazard effects of this rushed and ill-conceived tax legislation. Unfortunately the Government has introduced the independent earner tax credit but is vetoing—on financial veto grounds I understand—an amendment proposed by my colleague Dr Michael Cullen that seeks to protect all income earners from exactly those effects. Dr Cullen took the Minister of Finance Bill English at his word when he said earlier in the Committee debate: “There are no losers under this bill.” 
Hon Ruth Dyson 
: That’s what he said. 
Hon DAVID CUNLIFFE 
: That is what he said and that is the Government’s position. The interesting thing of course is that it is just not true. As we have proven earlier in the debate anyone earning between $14000 and $20000 will by April 2011 face an 8.5c increase in their tax rate. 
Hon Ruth Dyson 
: Wouldn’t that make them worse off? 
Hon DAVID CUNLIFFE 
: That would make them worse off. Let me prove the point. Dr Cullen’s amendment simply provides for a compensatory tax credit for low-income earners and others who might find themselves “inadvertently” penalised. If we took the Government at its word nobody would be in that situation and the cost of the amendment would logically be zero. Nobody would lose so it would cost nothing to indemnify them. However the Minister of Finance has come along with a very blunt instrument called a financial veto. He has said that the actual cost of insulating low-income earners would be—wait for it—$730 million over 5 years. In other words he has made a $730 million change of mind—that is the nicest way I can put it. He told us earlier that the penalty would be zero but he went away and did his sums and found that—oops—he was out by another three-quarters of a billion dollars. Sorry! That is a hole he cannot blame on the outgoing Government. It is a $730 million kick in the guts for low-income New Zealanders. 
Who are the people who will pay this $730 million so that someone earning three-quarters of a million dollars can have an extra $260 a week? They are people who might have a second job cleaners people who are late in their careers and have a pre-retirement part-time job. They are people who earn well below the average wage. As admitted by the Government those kinds of people will be taxed in order to subsidise those who do not need a cut. This is Robin Hood in reverse except that Bill English is not playing the role of Robin; he is playing a rather venal Sheriff of Nottingham just before Christmas. It is not a good look for the Government let us all admit in its first week on the job. In particular it is not a good look because Government members told us there would be no such penalty and now they have quantified the real penalty in order to veto Dr Cullen’s rather elegant amendment. They have shot themselves in both feet at the same time. 
The particular irony of this rather interesting self-contradiction is that it stands in strong contrast to the so-called independent earner tax credit which seeks to improve the relative position of certain sectors of the community who felt a little brassed off because they did not get Working for Families payments. To enter that argument we need to think back and ask ourselves why Working for Families was brought in. It was brought in at a time when our families were under particular stress because of increased housing costs rising fuel prices and other things that we have all talked about and that we all understand are beyond our control. People who had the responsibility to bring up children faced huge costs so we prioritised; we targeted State assistance to those who needed it most. It was a pretty fair thing to do. 
Ah along came a little thing called politics. Some of my parliamentary colleagues from all sides of the Chamber have probably done what I do occasionally in an election campaign and that is stand on a traffic island. Jonathan Coleman does that—[ 
Interruption 
] Mr Coleman’s electorate is just north of the bridge and I recommend that he go back there sometime soon. [ 
Interruption 
] Labour won the party vote in New Lynn thank you very much. And that will be the high tide for the blue tide—let us not worry about that. I noticed while standing on the traffic islands of New Lynn that anybody with a non-Caucasian face would generally give two thumbs up as he or she drove past. But I always knew I was in trouble when I saw a four-wheel drive driven by an overweight white male with a No. 2 haircut. Those drivers would generally wave only one digit and it was not the thumb. That is the market segment that this independent earner tax credit is designed to assuage. The grumpy white male vote is in play here. OK that is fine; I think we can assume that the Government won the grumpy white male vote in the election. 
Hon Gerry Brownlee 
: He’s sitting behind you. 
Hon DAVID CUNLIFFE 
: No no. Here he comes. I said grumpy not bumbling. Mr Brownlee should read the Standing Orders; then he will be just fine in a year or two if he is still here. The independent earner tax credit is a remarkable achievement for this Government. This bill was predicated on the unevenness of the marginal tax rate effects throughout the tax scale. In some misbegotten attempt to solve that problem the Government has helicoptered in a tax credit for one particular section of the population. The net effect is that it makes the problem worse by singling out one small group of people who do not receive any of the other high-priority benefits and giving them a seemingly arbitrary gain. 
I come back to where I began. If the Government were serious about indemnifying New Zealanders at risk it would choose not this mechanism but the mechanism that my good colleague Dr Cullen thought of in 5 minutes during the tea break. It would indemnify the net losers whom Bill English said do not exist—except that he then changed his mind and said that they exist to the tune of $730 million. Merry Christmas New Zealanders! They thought they had voted for a benign kind of National Government one that would keep in place the things they appreciated from the last 9 years of a good Labour Government such as Working for Families KiwiSaver and the research and development tax credit that gave help to our innovators. The smiling face of Mr Key as a likable bloke bounced from cloud to cloud and told us it would all be OK. Then on the Government’s first day in the job it introduced legislation that kicks low-income New Zealanders in the guts. It kicks our innovators in the guts and kicks in the guts prudent New Zealanders who are saving for their future. Merry Christmas Mr Key. Merry Christmas Mr English. 
I say to New Zealand that unfortunately this is probably a foretaste of things to come. As one colleague said earlier today when we look back in history we can see that this week is remarkably similar to the first week of the Ruth Richardson economic reign when tax cuts to the wealthy punitive employment relations legislation and misguided intervention were the order of the day. 
It is interesting to see Sir Roger Douglas back in the House. He opposed that Government and now he is in favour of the same thing. He still holds to the same ideals; it is just that he has had an interesting policy evolution on the way to serve them. I look forward to nothing so much as his maiden speech so I am getting in early to see whether I can identify the contradiction before he gets the chance to underline it. That will be a precious moment in New Zealand’s economic history—when he justifies the full circle that he has travelled. We look forward to that with great anticipation. That kind of full circle that kind of logical OODA loop to use military technology is rather like the logical backflip that has been done here by the Government. It has put in an independent earner tax credit. It has singled out the grumpy white males with the No. 2 haircuts and chucked them $10 a week ignoring low-income families.