Smith Lockwood: Budget Debate 
Text is incorporated into the Bound Volume 
Smith Lockwood: Budget Debate 
[Sitting date: 16 June 2004. Volume:618;Page:13696. Text is incorporated into the Bound Volume.] 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 I know it is not easy when a member has to replace a man like the Rt Hon Mike Moore the former member for Waimakariri. Mike Moore is a very fine New Zealander. I guess what distinguishes him from the current member for Waimakariri is that Mike Moore has a big heart. He is respected up and down this country and right around the world. If that member continues to make speeches like that when this country faces important issues he will never ever gain the respect of Mike Moore. As we speak to this Budget I am reminded of previous Budgets Dr Cullen has been involved with. There are not many members in the House today who saw the one that comes to my mind. It was 1990 and the Hon David Caygill and the Hon Michael Cullen came into this Parliament to deliver the 1990 Budget—and in my mind right now I can just see them coming into the House. Michael Cullen was the Associate Minister of Finance. Do members know what the distinguishing feature of that Budget was? It was its dishonesty. Michael Cullen supported David Caygill and they came into this Parliament and presented a Budget that claimed there would be a $79 million surplus. It was a big thing because this country had not seen surpluses for a while. The only problem was that it was dishonest. When the books were opened after the election we found what was growing into a $5 billion deficit. 
One may ask what similarity there is between the 1990 Budget and this Budget of Dr Cullen’s. I will not say that this Budget of Dr Cullen’s is dishonest but what is similar in some ways to the 1990 Budget is that this Budget abandons principle just as the 1990 Budget did. This Labour Government purported to have as one of its overriding objectives taking New Zealand back into the top half of the OECD. That was Helen Clark’s big claim in this Chamber only a couple of years back yet this Budget abandons all pretensions of ever trying to achieve that. Instead Dr Cullen has set out to use his surpluses to buy votes—surpluses generated through overtaxing New Zealanders. According to the OECD since this Labour Government has been in office the average New Zealand worker has suffered the second-highest increase in income tax of any worker in the OECD—that is in the whole of the developed world. The Government chose to use the Budget surpluses to buy votes. The question is whether that has worked. If we look at the polls in the papers we can see that it looks as though the answer is no. There have been two polls: the  
Herald 
-DigiPoll and the Colmar Brunton poll. Both those polls report that 60 percent of New Zealanders—a far greater majority than those who agree with the Budget—would like to see taxation cuts. That is understandable because people do not like going cap in hand to the Government to get back the money they earned. They would rather have respect shown to them by letting them keep the money they earned in the first place than have to go cap in hand to the Government in order to try to get it back. 
There is no question at all that low-income families needed help. The abatement thresholds for taxation credits have not been changed for years and low-income families were suffering and needed help. However the question is whether this Budget has delivered the help that the Government claims it has. I have sought through written questions details of the official taxation rates that people will face once the Working for Families package is in place and they are very interesting. I have here the taxation rates faced by someone trying to be independent of the benefit system. After low-skilled people working for $10 an hour—people Labour is meant to care about—have worked 20 hours a week they have earned $10000 gross. Do members know what their taxation rate is as they try to earn another $1—that is people who are earning just $10000 year independently of the State? Their taxation rate is not 33 percent and not 39 percent but is 101.2 percent. That is the rate for low-skilled people who are earning $10 an hour and working 20 hours a week trying to be independent of the State and trying to care for a family with three children. And on the next $1 that they earn the Government takes the lot. In fact it takes more than the lot; it takes 101.2 percent. Those are not my figures; they are official Inland Revenue Department figures. 
Do members know how many more hours the people who are on $10 an hour have to work in order to get their families another $1? We just heard the member for Waimakariri say how much Labour cared about working people. Can he tell me whether he thinks this is fair and reasonable? David Cunliffe should listen to this too. He said that decent and fair people thought this Budget was good. Is it fair that people on $10 an hour should have to work 40 hours a week in order to get another $1 for their families? In going from 20 hours a week to 40 hours a week at $10 an hour the taxation rate those people face for every dollar of the $10000 of extra income that they earn is 101.2 percent. That is an outrage; it is a disgrace. A Government that had $6 billion dollars to spend on helping low-income people should be bloody well ashamed of itself for not doing something to help those hard-working families. 
 They are not the only ones who are affected. Let us take the example of a family that improves its lot in life and gets up into the middle-income level with $65000 of earned income. According to official Inland Revenue Department figures if New Zealand families have three children they will face a taxation rate of 95.2 percent on between $60000 and $65000 of earned income. What is more if we look at a family that is trying to improve its position from one of earning $10000 of income a year we see the lowest taxation rate it will pay until it earns $90000 a year is 40 percent. Throughout the entire $10000 to $90000 income range that family will earn no extra dollars of income where it pays less than a 40 percent taxation rate. Through most of the range that family will pay 100 percent 77 percent 89 percent and 95 percent taxation rates—and Labour says that is good for working people? It is a disgrace. 
To me the staggering thing is that Dr Cullen is so arrogant that he thinks there are no ways of solving the effective marginal taxation rate dilemma. That is a dilemma and it is not just a problem in New Zealand. I have heard Dr Cullen say it is a problem in other countries with taxation credits. But if Dr Cullen is as smart as he thinks he is and if David Cunliffe and Clayton Cosgrove are as smart as they think they are they would know there are ways of designing a taxation system to deal with that problem. However they are so stupidly arrogant that they lampoon cutting the taxation rates. I heard those members tonight. David Cunliffe said that if we cut the top taxation rate all that we would do is to give huge benefits to high-income people. He ought to think that in this country there are people just a little more intelligent than he is who can actually solve that problem by direct taxation cuts to low-income people rather than have them come cap in hand to the Government. 
This Budget is a disgrace in terms of what it does to working people.