English Bill: Taxation (KiwiSaver and Company Tax Rate Amendments) Bill — First Reading 
English Bill: Taxation (KiwiSaver and Company Tax Rate Amendments) Bill — First Reading 
[Volume:639;Page:9380] 
Hon BILL ENGLISH (Deputy Leader—National) 
: 
 In the brief time—6 minutes I think—that we have had to peruse the Taxation (KiwiSaver and Company Tax Rate Amendments) Bill National has decided that it will be opposing it. [ 
Interruption 
] Yes there is the trapdoor. [ 
Interruption 
] I ask members to get over it. The problem with this bill reflects the larger problems of the Budget. We believe that this country needs a better balance of incentives for saving and incentives for growth. The growth forecasts in the Budget itself show just what the effect of 8 years of Labour in power actually is. Over the next 5 years they forecast that this economy will not grow faster than 2.5 percent and over the next 3 years it will grow on average slower than 2.5 percent. So in that context it does not matter how many savings are stacked away now if the economy has not grown significantly in 20 or 30 years’ time when New Zealanders comes to realise the value of those savings then their standard of living will simply be lower. It will simply be lower. 
The other reason we will oppose this bill is not because we are totally opposed to incentives for savings—that is not a bad idea—but because of the dishonesty about who is going to pay for these incentives. Who is going to pay for these incentives? This bill is titled the Taxation (KiwiSaver and Company Tax Rate Amendments) Bill and is meant to encompass aspects of the KiwiSaver announcements made today and aspects of the company tax rate announcements. In the end there is only one group of people who will pay the bill for all of that—the average New Zealand wage or salary earners and the lower-income self-employed. 
The $20 tax credit that is coming from the Government comes from the taxpayers’ pockets. It is their own incentive. Who is paying for it? The person who is paying for it is the taxpayer. That is the only place that the Government can get the money from. So it is a money-go-round as my leader John Key said today. Who is going to pay for the compulsory employers’ contribution? Well the wage or salary earner is going to pay. If wage or salary earners opt into this version of KiwiSaver they can forget about increases in their net pay for some years. The employer is going to say to them: “You opted in so I have to contribute 1 2 3 and eventually 4 percent—in pretty short order actually—so why are we going to have a wage increase on top of that to increase your net pay?”. 
For the average wage or salary earners sitting there today the news is that the “chewing gum tax cut” they were going to get has now gone. They were promised that two Budgets ago—before the election. Labour was saying that it would give some grudging tax reduction but today that promise is gone and it will not happen. The effect of that is that because of inflation people on the average wage who in 2000 were paying 19 percent of income as tax now pay 22 percent of income as tax. Their effective rate of taxation has risen—it has risen—and today they lost the chance for any tax reduction and I now get the news that they are going to be funding a tax credit to help them save. They are going to be funding a tax credit to help them save. They are going to be giving up increases in their net income. They are going to be giving up increases in their net income in order to fund the employers’ contribution to the KiwiSaver.There is no new money coming into this system; the money can only come from the economy. It can only come from the pockets of the taxpayers who pay the tax. I think Dr Cullen should write legislation that is more honest. 
The best insurance that this country can take out against future demographic challenges and retirement income is still a growing economy. It does not matter how those claims are accumulated; if there is no growing economy then people cannot get much of value when they retire. Let us just remind ourselves that the KiwiSaver part of this bill is all about people putting money away until they reach 65. So the $20 per head that the Government puts in stays in there until a person is 65. I ask members to imagine they are part of a household that is struggling to deal with rising costs facing rising interest rates—[ 
Interruption 
] Well Dr Cullen is trying to tell people he will increase savings but not cut consumption. One of the first laws of economics is that savings are what one does not consume. So I want Dr Cullen to go out there and tell New Zealand that the $5 billion he is putting into this is not coming from reduced consumption—because he knows that it is. The only way he can finance any of this is to cut the workers’ pay. That is what he has to do—cut the workers’ pay. 
Some of those cuts of course are quite dodgy. That is taxation increases because inflation pushes salaries up through the tax brackets. So he is cutting the workers’ pay now by $1 billion per year in fiscal drag. That is one way he will finance it. The other way he will finance it is that when the workers go to the boss and say they want a pay rise the boss will say: “Sorry mate Dr Cullen has already given it to you. It is sitting in your account. You’ll get it when you’re 65.” 
Simon Power 
: Andrew Little knows that. 
Hon BILL ENGLISH 
: Andrew Little knows that. If he thought this was a great idea he would be coming in here to get the political credit but he is staying out there. So Dr Cullen’s challenge is to explain to the households of New Zealand that this is what he is saying. The Government will keep spending up large—$3.785 billion of new spending in this Budget—so it can win the 2008 election with people’s taxes and it will cut New Zealanders’ consumption and make them save in order to cure the inflation that he caused. That is the recipe. That is why 50 percent of New Zealanders will not take it up. 
He has made it more attractive but they just cannot afford it. After 8 years of a growing economy nothing has come back to New Zealanders. What lies behind this bill is the fundamental problem with Labour. Dr Cullen imagines himself as engineering the economic outcomes for New Zealand. He is absolutely dismissive of the idea that any proceeds of growth should be allowed to be used by households and that they should have any say at all over what happens about the future of this economy—it is all him. Labour does not fundamentally trust the people of New Zealand. The effect of that is the worst growth outlook we have had for 15 years and that is 5 years of 2½— 
Hon Trevor Mallard 
: No way! Dear oh dear! 
Hon BILL ENGLISH 
: Well even in the depths of the recession in the 1990s it turned out that we got up to 4 to 5 percent growth. Now we have an economy that will grow at 2.3 percent and that means that the gap between us and Australia will continue to widen. The income gap will continue to widen. 
We support some incentives for savings but we also support a much better balance between a focus on savings for problems that will actually come up in 20 to 30 years and a focus on growth in an economy that needs to yield higher incomes for New Zealand households so they can make their own choices take their own opportunities express their own innovations and fulfil their own aspirations all of which are increasingly different from those of the Labour Government.