Street Maryan: Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill; and Bills Therefrom — Third Readings 
Text is incorporated into the Bound Volume 
Street Maryan: Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill; and Bills Therefrom — Third Readings 
[Sitting date: 16 October 2012. Volume:684;Page:5832. Text is incorporated into the Bound Volume.] 
Hon MARYAN STREET (Labour) 
: 
 I rise to support this legislation. I listened intently to the third reading speech of the Associate Minister of Health Tariana Turia. The Labour Party is wholeheartedly in favour of the bill that was Part 1 of the original Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill. We are less wholeheartedly in favour of the legislation that was Part 2. I want to elucidate that shortly. We will support Part 2. Certainly there is no argument from the Labour Party as far as Part 1 is concerned where this excise is used to reduce tobacco consumption. It is one very valid way and one very effective way of reducing consumption particularly to discourage new smokers—young people in particular. 
I want to use some reference from the regulatory impact statement from Treasury when it was considering and advising the Government on this measure. Treasury said: “There are three broad reasons for taxing tobacco: raising revenue addressing negative financial ‘externalities’ from smoking”—that is what Treasury calls it—“and discouraging tobacco use for social policy reasons”. 
The bill that was Part 1 addresses quite properly the social policy reasons. There are very profound health reasons for increasing the cost of tobacco. In fact Treasury says that there will have been a very substantial impact between the years ended June 2009 and June 2012 on tobacco volumes. They are forecast to have fallen in that period by 20 percent which is a good thing following a 38 percent increase in price. We in the Labour Party absolutely support this. This is a lethal drug. It is legal and it is lethal and if there is anything we can do to discourage people particularly young people from taking it up then it is incumbent on this Parliament in my view to do so. And so we have no issue at all in supporting the Minister entirely in her efforts for the social policy reasons. 
The concerns I have around this are that it is going to generate additional revenue of some I think $528 million over 4 years—$528 million over 4 years—with the passing of this legislation. Treasury says: “At over $1.3 billion per year tobacco excise revenues may already exceed the direct health system costs of smoking”. That is contested by one of the latest surveys—a recent Ministry of Health study which Treasury refers to—which estimated the health costs of smoking at up to $1.9 billion a year or some 15 percent of Vote Health and that estimate used more detailed information than ever before. What I really hope the Minister is able to do and to impress upon her Cabinet colleagues is that this excise should be ploughed back into health. It should be ploughed back into addressing quitting smoking making sure that there is as little access to it as possible but mostly assisting people even more assiduously than we do now paying more money into the assistance for those who wish to quit smoking. 
But my suspicion is that this is not the aim of other members of this Government and certainly not of members inside Cabinet. If it were a health measure entirely this legislation would have come to the Health Committee. It did not. It went to the Finance and Expenditure Committee because it is a revenue-raising measure. I would like to see this revenue-raising measure tagged to the health budget as additional funding to assist people to quit smoking and then I might take some of the Minister’s colleagues more seriously in their intent. The Minister proposing this legislation has outlined her absolute commitment to the reduction and eradication eventually of smoking in New Zealand and I support that entirely and I do not doubt her motives but I would like to see more teeth in this legislation which would apply this additional revenue to health outcomes. 
I need to talk for a moment about Part 2 of the original bill which is the bit of the bill that divides the bill up into six additional bills. We expressed some concern in the Committee stage of the bill and I was one who expressed some of those concerns. We will support these six bills but they raise issues for us that I think are worthy of consideration. First of all of course the CPI measures the rate of the change in the price of goods and services purchased by New Zealand households. Statistics New Zealand visits 3000 shops across New Zealand to collect prices for the CPI and to check product sizes and features in order to arrive at some understanding of how much the cost of goods and services to New Zealand households has increased over the previous year. 
The import of the part of the bill with six additional bills in it is to take tobacco products out of the CPI basket of goods that applies to beneficiaries of all sorts—we are talking students we are talking war veterans we are talking superannuitants and we are talking other beneficiaries—and what those families might spend their money on. So the CPI indexation drops for those people and those people only. This is a way for the Government to mitigate its costs. In other words it is cheaper for the Government to take tobacco out of the CPI indexation for the appropriations for which it is directly responsible—in other words benefits. So all of those benefits—war pensions and all of those things that I mentioned earlier—will be adjusted by a CPI that is lower. It is a CPI that is lower by a fraction but it all adds up to Government expenditure lowered by a fraction for those people who are dependent upon the Government for their income. 
This raises issues for us and we in the Labour Party think that it is time perhaps to review how the CPI is arrived at. It might be a useful exercise to see whether or not it remains fair and non-discriminatory to apply a differential CPI to those who are dependent on the Government for their income. Of course there are cost impacts for Government in this but we think that it is time that the process around arriving at the CPI could be reviewed particularly to see whether there are items that ought to be exempted and there are items that ought to be included in the CPI and whether or not a differential CPI rate is fair and equitable. 
If this is about money then certainly this all works in the Government’s favour. Not only does the Government get additional excise but it also has to pay out less of a CPI increase to those for whose income it is responsible. We did not do this when we were in Government. We did not exempt tobacco products from the CPI for beneficiaries. This has been something that this Government has done. What I am saying is that we fully endorse the health objectives of these bills. We will support the other objectives entirely we will support progress of the legislation that was Part 2 of the bill but that is not without question marks and not without the need for some future consideration and review.