Parker David: Public Finance (Fiscal Responsibility) Amendment Bill — In Committee Third ReadingText is incorporated into the Bound VolumeParker David: Public Finance (Fiscal Responsibility) Amendment Bill — In Committee Third Reading[Sitting date: 27 August 2013. Volume:693;Page:12903. Text is incorporated into the Bound Volume.]Hon DAVID PARKER (Labour): Can I begin by thanking the Minister of Finance for his speech and saying that I agreed with much of what he said in his speech. The Labour Party agrees that it is appropriate that we have fiscal responsibility legislation. We think that New Zealand has done well since having the high levels of debt it had when National’s the Rt Hon Mr Muldoon left office. New Zealand at that time had amongst the highest Government debt in the world. One dollar in five of the tax that was collected off New Zealanders was being spent on interest and that amount on the then track was heading to one dollar in four if the New Zealand Government’s finances had not been brought under control.I also agree that one of the strengths of the fiscal responsibility legislation is the obligation on Treasury to produce for the Minister to sign off a pre-election fiscalupdate. I also agree that we should be striving to do better on all of these things over time. I think it would be wrong if I did not note what I thought was a pretty sloppy piece of work by Treasury at the last election in respect of allowing the Government to book the proceeds of asset sales in the Pre-election Economic and Fiscal Update without accounting for the loss of revenue that would flow to the Crown as a consequence of the dividends flowing from those assets that were sold going to someone other than the Government—that is Treasury allowed the Government to book the proceeds of asset sales without making any allowance for the loss that would accrue to the Government following the sale of those assets.It was not until subsequent Budgets that Treasury was forced to admit for the first time that the loss from the sell-down of the State-owned enterprises would increase the Government’s Budget deficit by about $100 million per annum because the capped rate at which those shares were sold was higher than the cost of Government borrowings so that the money that was saved through avoided borrowings or debt reduction was less than the profits and dividends foregone.I think that is still a pretty shameful episode in respect of the fiscal responsibility legislation. In fact I know of no more glaring error made worse by Treasury and the Government by the fact that when that was pointed out by the Opposition including me during the election the Government denied it and Treasury stayed mute. I think that that was pretty poor governance in New Zealand under the existing fiscal responsibility legislation.Having said that it is basically good legislation but at one level it is motherhood and apple pie. We used to have all these books around. I think they started withDOS for Dummies thenWindowsfor Dummiesand thenExcel for Dummies and it looks like this bill is a bit like “Fiscal Responsibility for Dummies”.Does a Government really have to be told that we have to take into account the effect of Government finance decisions between generations? The prior Labour Government did not need to have that written in legislation in order to set up the Cullen fund to help pre-fund the future growing cost of superannuation.The prior Labour Government did not need to be told that in a time of plenty you should run Budget surpluses even if the National Party then in Opposition was opposing those surpluses as being too high. We knew that that was the proper thing to do and that is why we reduced gross Government debt from 38 percent to 18 percent of GDP and net Government debt to zero. We knew that that was the right thing to do. The fiscal responsibility legislation reminded us of that but there was no need for us to be told that we had to achieve fairness in the tax system or fairness between generations because we knew that that was a duty of the Government. Any Government that does not know that is not fit to govern. I think even this Government knows—Maggie Barry: Well you’re not; no argument there.Hon DAVID PARKER: Oh we have got Rusty on the other side there chipping in and suggesting that the prior Labour Government did not understand that. We concede that the current Government understands that. It is just not credible to suggest that either side of this House does not understand those basic duties of Government. They do not need to be set out in amendments to this legislation.I want to address a couple of other issues. I was disappointed that in the Committee stage in respect of the pretty minor alterations that the Labour Party side wanted in respect of this legislation the Minister in the chair the Minister for the Community and Voluntary Sector did not address why the Government could not move on that in order to get cross-party support for this legislation. The Minister of Finance in his contribution did not address any of them either. The reality is that those requests were reasonable and principled.We heard Mr Goldsmith say in his contribution that the future cost of superannuation growing as it is and Government spending on superannuation will exceed education expenditure within 2 years. It already exceeds all welfare benefits for the unemployed and the unwell plus the accommodation supplement plus the Working for Families tax credits. Superannuation already exceeds those in total and he said that issue does not need to be addressed.Well I was at a meeting on superannuation the other day and Mr Goldsmith was there. The same question was put to us from the audience and he was very careful in his words. He did not completely dis the Government but nor did he make a fool of himself in front of that audience. What he said was that some future Government will have to address the issue—just not National; just not National. So his head is in the sand and he is denying what is probably the biggest cause of increasing Government expenditure outside of health. Health costs are more unavoidable and harder to change than the age of eligibility for superannuation. So I thought that there was an example of where Mr Goldsmith thumping his chest in this House was unnecessary. But when he was speaking to actuaries people from the savings and superannuation industry who know these issues as well as he and I do if not better he took a different tune.Another issue that Mr Goldsmith raised in his contribution was that because of the prior Labour Government putting up tax to 39c in the dollar for higher-income earners there was a tax wedge between the trust rate and the highest income tax rate. That wedge led to tax avoidance and that had not been fixed by our Government. Both of those propositions are true. I accept both of those propositions but you fix that by not letting trusts be used for tax avoidance. Trusts have got a very proper role in society but it should not be as a tax avoidance vehicle. The answer for this Government in respect of all of these things is just to cut taxes for the wealthy. That is not a solution. The wealthiest people were avoiding tax through trust structures and those loopholes should have been closed. It should not have been the case that it cut the highest tax rate giving 40 percent of its income tax cuts to the top 10 percent of the population as the Government did. It should have addressed the problem of tax avoidance through trusts.We had advice from Treasury officials in respect of fairness between generations that it would not affect the Government’s decision not to address the age of eligibility for superannuation. As the Hon Clayton Cosgrove said in his contribution that shows you that this legislation is pretty meaningless. It is window dressing.David Bennett: Oh shocking.Hon DAVID PARKER: Oh here we have David Bennett. He made a similar intervention during the second reading. At that time I had said that the proposed spending cap that was originally a part of the confidence and supply agreement with ACT—and that was the progenitor of this bill—was nonsense. I said that those sorts of fiscal caps were ridiculous and caused problems overseas and he said that I was talking rubbish. Well I will remind him as I did then that the country that is probably the exemplar of how caps as a percentage of GDP are wrong is the United States. California in the United States used to have one of the best State education systems in America. Then it introduced a fiscal cap and it could no longer properly fund education. As a consequence the education system in California has gone from being one of the best State education systems to one of the worst. That is what happens when you have inappropriate fiscal caps. If we had a fiscal cap like National agreed to in its confidence and supply agreement with ACT we would not as a country have been able to properly fund the Christchurch rebuild.In respect of capital spending I agree with the Minister’s statement that there is more work required to better and more transparently deal with the capital spending and capital assets of the Government. My last point is on monetary policy in New Zealand.We think that the amendments we had to the wording would have made that better. We also think that there should have been a reference to national savings. Neither of those was agreed to by the National Government and that is why we are opposing this bill.