Hodgson Pete: Taxation (Annual Rates and Budget Measures) Bill — In Committee Third Reading 
Hodgson Pete: Taxation (Annual Rates and Budget Measures) Bill — In Committee Third Reading 
[Volume:672;Page:18965] 
Hon PETE HODGSON (Labour—Dunedin North) 
: 
 The member who has just resumed his seat is the chair of the all-powerful Finance and Expenditure Committee. He said that he is very proud because inflation is low. He also said that under the previous Government inflation ran north of 5 percent. Well in which year—in which year I ask the chairperson of the Finance and Expenditure Committee? The only year inflation has been at 5 percent is the year we are in now—under his Government. That is the truth of the matter. I could pick on any part of that member’s speech but the last part of it will do. It was full of factual inaccuracies as has been the case commonly in this debate. 
This country went into deficit 3 years ago. On the change of Government 2½ years ago the big deal a few months later in April 2009 was tax cuts for the rich. Let me say that again: our nation our official books started running at a loss and the big public policy response was to cut tax for the rich—not smart. That is the first point. Therefore we had to borrow more to pay for those tax cuts than we would have had we not made those tax cuts. That is just arithmetic. 
We are borrowing to pay for tax cuts for rich people. That is irresponsible it is ideological it is very expensive and in Part 1 of the Taxation (Annual Rates and Budget Measures) Bill we had a chance to revisit it. We argued it for hours but the Government said: “No tax cuts for rich people will stay where they are we are not going to reverse them.” Governments are reversing tax cuts in many other jurisdictions but not here. The Government will not reverse tax cuts for the rich. So the Government will have to find money from somewhere else. Therefore we go to Part 2 of this legislation and find that that money is coming out of Working for Families and we find that it is coming out of KiwiSaver. 
Remember that the Government says that it does not like the idea of having to borrow to then put money into KiwiSaver accounts. I will quote the Minister of Finance from his speech. It is a very short quote: “it means the Government is borrowing … to contribute to private savings. This does not lift national savings.” That is what the finance Minister said and he is correct. If the Government borrows a dollar from offshore and puts it into Clayton Cosgrove’s KiwiSaver account the national savings are not improved. But nor are they worsened. However if the Government borrows money and gives it to Clayton Cosgrove as a tax cut dissaving gets worse. We have a Government whose members say they do not want to borrow to sustain KiwiSaver in Part 2 of this legislation but they are really happy to borrow until their eyes water to pay for tax cuts for rich people. That is not fair that is not just and that is not right. And I am angry about it. 
I will tell members something about KiwiSaver. KiwiSaver is not the preserve of rich people; KiwiSaver is something that everyone uses. Labour members when we got started were surprised at how popular KiwiSaver was amongst low-income earners and middle-income earners as well as high-income earners. I agree with Craig Foss when he says that it is not rational not to have a KiwiSaver account because one gets a thousand bucks for nothing just to get started. I agree with that. So it stands to reason that KiwiSaver is something that can be found across all parts of society yet all parts of society will now get it in the neck twice. Less money from the Government will go into KiwiSaver—because the Government cannot bear to borrow for that; it will borrow for tax cuts but it will not borrow for that—and then there will be a requirement for half of the contributors to KiwiSaver to lift their savings from 2 percent to 3 percent because National members are concerned about savings. 
If National members are so concerned about savings the way to fix that is to lift the minimum contribution rate from 2 percent to 3 percent or from 2 percent to 4 percent if they wish and to retain the Government contribution and pay for that by reversing the tax cuts for the rich. It is easy. At that point two things would happen. Our savings would get even better—and boy do we know that our savings in this country need to get better especially in the private sector; we know that. The second thing that would happen the second leg of the double is that if the tax cuts for the rich were reversed the current account and the balance of payments would improve because rich people spend disproportionately on imports. Why? Because they can—the classic example is an overseas trip. 
So if we wanted to look at what this country needs most of all we would see that overall it is to reduce our debt by improving our savings—savings not in the Government’s accounts but across the entire economy so we can own more and more of our own country instead of less and less of it—and to improve our exports. Part 1 of this legislation by not reversing tax cuts for the rich therefore makes the current account worse. Part 2 of this legislation by not backing Kiwis to save makes our savings record worse. It is not OK to take a scheme as popular as KiwiSaver and make changes as large as these twice in 2½ years. That destroys confidence. KiwiSaver is an opt-out scheme so that is a saving grace. It may be that people will just continue to fall into it. But my goodness this is an economically reckless Budget for those reasons. 
Let us leave aside the effect the Budget will have on an imagined family with so many kids on so many dollars and what will happen to the family’s amount of money per week. Leave aside all that and sticking only with macro-economics only with what is good for the nation I ask why we in this Chamber are under urgency deciding that we will not reverse tax cuts for rich people thereby not improving our current account and further damaging our savings record which is appalling. Why has this Government when faced with the choices of needing to get money from somewhere—we earnestly agree with that; the deficit must come down—chosen that way to do it? What is good about it apart from the fact that it is ideologically suitable for the Government? 
It is ideologically suitable for the Government to use the sophistry that tax cuts are fine because they cause people to somehow create jobs instead of spending money on overseas trips—but who believes that—and that cutting the Crown’s contribution to KiwiSaver is also fine because it is mandated that everyone on a 2 percent contribution rate will lose 1 percent of their income because they will have to go to a 3 percent rate because that is what the Government says. That is not very bright. It is not very fair—but that is another speech. It is economically dumb and the Government needs to be told off roundly for its economic stupidity. 
Let us have Government members get up and defend the Budget. Let us have them get up instead of lowering their heads—every one of them. Look at them. Not one of them is looking me in the eye. Oh one or two of them are pretending to now. [ 
Interruption 
] Well they are now awakened. Even Rodney Hide is awake. Let one of them take the call now and refute my analysis that this country needs to save more that this country needs to export more and that both parts of this bill damage both of those goals. That is the essential thesis. 
Hon Tau Henare 
: I saw  
Clash of the Titans 
 and he looks like Hades. 
Hon PETE HODGSON 
: I wonder whether Tau Henare would like to get up and refute my analysis. It would be an interesting bit of analysis from him. Let us just hear what he has to say or what Rodney Hide has to say—or what anyone else would have to say—about that analysis. It would be far better given we have a $17 billion deficit to pay attention to reversing the tax cuts and to retain attention on maintaining savings.