Smith StuartDEBATE ON BUDGET POLICY STATEMENTSTUART SMITH (Chairperson of the Finance and Expenditure Committee): I move that the House take note of the report of the Finance and Expenditure Committee on the Budget Policy Statement 2024. Budget 2024 is going to take—[Interruption]SPEAKER: Mr Smith we're going to stop and we're going to start your time again because some people seem to think that the conclusion of question time is a good time to start conversations all over the House. It's not. We'll start again—I'm calling Stuart Smith the chair of the Finance and Expenditure Committee. STUART SMITH: Do you want me to move it again? SPEAKER: Yes. STUART SMITH: I move That the House take note of the report of the Finance and Expenditure Committee on the Budget Policy Statement 2024. Budget 2024 is going to cover three key themes: prioritise investment in the public services that matter most to New Zealanders deliver personal income tax reduction for working Kiwis and deliver durable savings to support investments today and to get the Government books back into balance. It is a fact that we are in a significant downturn in New Zealand. Our books are taking much longer to get back into good shape. Our deficits are much stronger than in other countries of comparable means to us and it's going to be very tough for us to get it back in shape. We run a structural deficit that is the second-worst in the developed world and we heard today that that's expected to be 1.5 percent. The country that has the highest structural deficit is the United States which has the reserve currency. We can't afford to run structural deficits at that level. We are in a significantly difficult position and that's thanks to the mismanagement of the previous Government quite frankly. Government expenditure has got completely out of control. We have the official cash rate (OCR)—which was confirmed again today—at 5.5 percent which drives interest rates which is a significant impost on household incomes or disposable incomes. What I think we all have to remember is that once we did come out of that COVID era and we had inflation getting a little bit out of control the Reserve Bank kept the funding for lending programme going at the same time that it was tightening the OCR. That is effectively making it cheaper on the one hand for banks to lend money and on the other hand trying to make it more expensive for banks to lend and drive interest rates up. One foot on the accelerator one foot on the brake and when we asked the Reserve Bank Governor about that his response was that he had a moral contract with the banks to continue that funding for lending programme going. My question is: what about the moral contract that the Reserve Bank has with the taxpayers of New Zealand because they are the people who are feeling the effects of that. So inflation has driven rents up as we've heard today to an increase of $170 a week from 2017. That is a significant impost on household incomes. The Minister of Finance told us this in the select committee. When she was asked about whether we had a tax problem and that perhaps we weren't raising enough tax she pointed out that in 2011 the median-income earner was paying 15.5 percent of their salary in tax and today that figure is 20.6 percent. So we don't have a tax problem. What we have is an expenditure problem and we have to bear in mind that only 40 percent of taxpayers pay net tax. So that is a very difficult position for us to be in and I think as the famous former chancellor of the exchequer for Louis XIV said the art of taxation is plucking the goose with the minimum amount of hissing. I would postulate that we are getting quite a bit of hissing and so we need to focus much more on our expenditure. The Minister of Finance also committed to keeping the operating allowance to less than $3.5 billion and she confirmed that yesterday in question time and here today. However the previous Government had locked in $2.3 billion of that spending so it's very little to come and go on. We wait with bated breath to see what the Minister is going to do next week but I'm sure it's going to be well worth the wait. She also said she was going to set a clear direction on debt and she made it very clear that debt needs to come down as a proportion of GDP. She has committed to reduce it to less than 40 percent; in fact she wants to operate it in the range of between 20 and 40 percent. Now some pundits call for a much higher level of debt but that is not actually suitable for New Zealand because we suffer from quite regular shocks be they natural disasters or other things so we need to have that buffer to move on. The Minister indicated that she didn't have an issue with debt provided that debt was for infrastructure that would drive productivity—that is getting a good return from that investment. So in short the Minister emphasised that it's results that the Government is looking for not money out the door and I think the best example of that is one of the pre-Budget announcements on school lunches. That is a saving of $104 million and it's still going to feed actually more than the same number of children. It's going to feed 10000 additional children between the ages of two and five. It just shows how you can find wasteful spending right across the Public Service I'm sure just by looking at doing things in a different way and I think that's a great start for our Budget. Mr Speaker I don't know about you but it certainly didn't do me any harm at school—having sandwiches and a piece of fruit rather than butter chicken—and there are many more savings to be made in other places. But I want to move on to other Budget announcements such as Gumboot Friday which was mentioned here today. That's $24 million over four years going to I Am Hope to deliver mental health services. I think that that's a fantastic initiative. We have to trust and give an opportunity to those in the private sector to deliver services and I'm sure that they are able to do that in a cost-effective way. Surf Life Saving and the Coastguard—I was at the event last night and it was great to see one of my constituents get an award for the Coastguard. I think that they're a very worthy cause and it's not a large sum of money but it will go a long way and make a big difference to those services: $63 million. Of course our defence forces also got a mention in pre-Budget announcements with $571 million going to back our Defence Force. In the uncertain times that we are in today we have to be mindful of those services and of how much they deliver for us in New Zealand. So that was a very good announcement. We also had the corrections announcement of a $1.9 billion investment to enhance public safety and rehabilitate offenders—another great announcement. So we're actually delivering more for less I believe. But I think that one of the key things for me was the education announcement on structured literacy: $67 million. That has gone down incredibly well out there I think. All those people who are out and about talking to the schools—there's been great feedback on that and so that's a really good announcement. Then we had $153 million for charter schools. I'm really looking forward to seeing those take off because I know what difference they make and actually often they take on the children with the most difficult learning situations and get fantastic results. So I think that's another good announcement. Then there is $429 million in savings from the Ministry of Education to redirect funds to the front line. Again this is getting money out of the back office and into the front office. Then of course there is the Pharmac announcement with the largest ever Budget of $6.294 billion and we do know—we canvassed this well—of the fiscal cliff that was left by the previous Government. So in short we have a Budget that is about sensible spending. It's about delivering results for New Zealanders and it's about delivering tax relief for hard-working New Zealanders. That is long overdue. Fiscal drag is a terrible way to try and raise more taxes. It's doing it by stealth. We're going to get rid of that and I think that that's long overdue. So with pleasure I commend the select committee report on the Budget Policy Statement. SPEAKER: Thank you.