Taxation (Urgent Measures and Annual Rates) Bill — Second Reading In Committee 
Taxation (Urgent Measures and Annual Rates) Bill — Second Reading In Committee 
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Taxation (Urgent Measures and Annual Rates) Bill 
Second Reading 
Debate resumed. 
Mr DEPUTY SPEAKER 
: The House is resumed. 
John Boscawen 
: Mr Speaker— 
Mr DEPUTY SPEAKER 
: Is the member seeking the call? 
John Boscawen 
: Yes. 
Mr DEPUTY SPEAKER 
: You have not given your maiden speech. If you were to speak now it would be deemed to be your maiden speech. 
John Boscawen 
: Yes it is. 
Mr DEPUTY SPEAKER 
: Yes it is? I take it that the member is seeking the call. If the member speaks now his speech will be regarded as his maiden speech. He will not get another chance to make a maiden speech if he speaks now. 
John Boscawen 
: I pass the call then. 
CHRIS TREMAIN (National—Napier) 
: 
 Kiwis are breathing a sign of relief at the speed with which this new Government is addressing the work order that we took to the electorate over the election period. We have put our new bill on the Table and we are making progress already. You know this is what New Zealanders have been wanting for the last 9 years—a Government that is focused on its agenda focused on the issues that matter and making progress. Even just in the last few weeks I have been out in my electorate of Napier talking to my constituents. Do members know what they are saying? They are saying “Thank God we have a Government in there now that is focused on the issues and on taking this country forward.” That is what they have seen have they not? 
Our constituents have seen a Government put together within 7 or 8 days—quick-smart action. They then saw a Cabinet put together within a couple of weeks—action again. Then our Prime Minister—an aspirational Prime Minister—quickly went to APEC then to London to get a feel for the world financial crisis and an understanding of what global leaders were doing with that crisis. Then he came back here and made sure that the promises we took to the electorate were being delivered today. So here we are in the second reading of the Taxation (Urgent Measures and Annual Rates) Bill which delivers on that agenda. That is why constituents out there are saying “Thank goodness we are seeing a Government that is focused on the issues and taking the game forward for us.” 
The second reading of this bill includes changes to personal tax rates and thresholds and I will talk to that in some detail as we go through it. It also includes the introduction of a new independent earner credit for middle-income New Zealanders. Those are the Kiwis out there the battlers who have continued to be pushed into higher tax brackets—the teachers the policemen and the wharfies. They have been the traditional constituency of the Labour Party but they have been forgotten about by that party over there and they have been pushed into continually higher and higher brackets. That is why those members are sitting on that side of the House today and we are sitting on this side. We are focused on the issues and on addressing those tax thresholds. We are bringing those hard-working Kiwis back to a level of taxation that is affordable for them and where they can ensure they can put bread on the table for their families. Those families do not have access to the support that has been delivered over the last 3 years. They have continued to be pushed into higher and higher tax brackets and that has hurt them so we are unashamedly focused on those taxpayers in this bill. 
The third area I will focus on is the changes being made to KiwiSaver making it more affordable and sustainable. I will also touch on the repeal of the research and development tax credit. 
It is important that this bill be passed into law and passed into law quickly. We made that commitment to the New Zealand electorate. Today we have heard speeches from the other side of the House saying that there is no regulatory statement or that the bill is not going to a select committee. But we made it clear to the electorate that we had a 100-day agenda. There is no confusion out there among the public about that. We told them on countless occasions in every newspaper in the country—except for the Melbourne 
 Age  
newspaper which was where as my leader pointed out the other day many members of the Labour Party were flicking around in the underground and trying to dig up dirt on our leader. No it was not in the headlines of that paper so they probably missed it. But our 100-day agenda was in the  
Dominion Post 
 and the  
New Zealand Herald 
 and 
in 
just about every major daily so Kiwis knew we had a big agenda and they are proud to see a Government standing up there now and delivering on that agenda. I think it is absolutely fantastic; I am proud of that and it is great to see us taking this forward. 
I will also talk about the repeal of the research and development tax credit which is a tough decision we had to make when we laid out our tax cut agenda. We knew that that would cost some money and we had to make some hard calls going into the election. Again we stood on the platform and said that these were the things we would address. When Labour rolled out their one or two policies that had any innovation at the election there was no costing around those. There was no “Oh we’ll actually change this and pull that back.”. There was absolutely no costing whatsoever above the pre-election fiscal update; it was an absolute joke. 
Anyway I will focus on the tax changes we are talking about and look at the provisions of the bill. As members have heard there are reductions to personal tax rates and particularly to thresholds. As I said earlier the hard workers of our community—the social workers the teachers the wharfies—who have got into higher and higher tax brackets will actually have those thresholds brought backwards. That will not increase tax. I do not know what papers the Government is looking at but if we look at tables for 1 April 2009 we see that that middle-income tax threshold is coming back to $48000 so people will pay only 21c in the dollar on an income of under $48000. By 1 April 2010 that threshold will increase to $50000 so again we are focusing on those in that middle-income bracket and they will still pay only 21c in the dollar. Then from 1 April 2011 the rate for that threshold will actually move down to 20 percent. 
Moana Mackey 
: Why are you putting taxes up for poor people? 
CHRIS TREMAIN 
: So I say to Moana Mackey that everybody benefits from that: if they are earning anything between $14000 and $50000 they will benefit from a reduction from 21 percent to 20 percent. I ask Moana Mackey to tell me how they would not benefit from that. How would they not benefit from that? That is a reduction from 21 percent to 20 percent. Those lower-income earners—we are not talking only about middle-income earners here; we are talking about lower-income earners—will benefit not only from the increase in the threshold level but also from the reduction of the rate from 21 percent to 20 percent. Hold on I will say that again: we are taking the tax level from 21 percent to 20 percent. 
Hon Phil Heatley 
: Is that up or down? 
CHRIS TREMAIN 
: Hold on—that is down! That is for a threshold of between $14000 and $50000. I would have thought that that covered a fair chunk of middle-income New Zealand and probably an even bigger chunk of lower-income New Zealand. I ask those members to tell me how people will not benefit from that. Oh it has all gone quiet over there now! This tax bill will actually deliver the changes we need and I think it is fantastic. The cuts will be delivered through the PAYE system which will be good for employees and if someone is an independent contractor that person will be able to have that delivered through his or her tax return at the end of the year. There will be no immediate changes to the tax rate structure that applies to portfolio investments but that will be addressed by 1 April 2010. 
I just want to talk about the independent earner tax credit. This tax credit really hits those battlers out there who have had no benefit from the Working for Families tax credits. There are 600000 people who qualify for this—600000 of the hardest-working New Zealanders who go out there day in day out paying tax and allowing our Government to make tough decisions about how we allocate that money. Let us understand that it is not our money; it is theirs and 600000 Kiwis have totally missed out on that. They have been part of threshold rises the whole way and they have just been taxed and taxed more and more. It is time we were dealing with that through the independent earner tax credit which will ensure that we start to deliver—and I say “start” to deliver—some rebate back to those middle-income earners. So from next year the credit will be worth $10 a week rising to $15 per week from 2010. It will be abated at 13c for every dollar of income earned over $44000 and as I have said 630000 people will qualify. Again I ask how that is not addressing a big chunk of the electorate. That 630000 is a huge proportion of our workforce being addressed. They have not had even one iota of tax reduction in 9 long years. 
I think this bill is a massive step in the right direction. We have gone out to the electorate and told them that we will deliver tax cuts and here we are within 32 days out there actually doing that—delivering on our promises building trust and delivering on what John Key said he would do. This is a good bill and in the second reading I recommend it to the House. Thank you. 
Hon RODNEY HIDE (Leader—ACT) 
: 
 I raise a point of order Mr Speaker. I have looked through the Standing Orders and the Speakers’ rulings and I can find no rule that precludes a new MP from speaking under urgency because if he or she did so then he or she would have to forgo his or her maiden speech. The ACT Party agreed to the Address in Reply debate being broken into to do this urgency on the basis that we would be able to contribute to the debate. Mr Deputy Speaker what you have done I think is make a new ruling—which is your right as Deputy Speaker—which essentially precludes the ACT Party from contributing to this important debate. I have two MPs here who are willing and ready to contribute and I would like you either to point out to me the Standing Order or Speaker’s ruling that says that if John Boscawen or David Garrett speaks under urgency he therefore cannot give a maiden speech in the Address in Reply debate when Parliament resumes it or to tell the House that you are making a new ruling. 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 It might seem somewhat unusual for me to come to the aid of Mr Hide but I think the position that he has outlined is correct. There is an expectation that maiden speeches are made as part of the Address in Reply debate. That does not necessarily have to be the case but as far as the Standing Orders are concerned and given the times available and the approach we are taking there is certainly that expectation. I am going a long way back in my memory but I have vague memories of members back in the 1980s speaking on Committee stages of bills or in fact on estimates before they made their maiden speeches. They certainly asked questions before they made their maiden speeches. So the idea that people cannot get on their feet before their maiden speech or that by getting on their feet they lose their right to a maiden speech I think is incorrect. Mr Deputy Speaker if it would help you I indicate that the Labour Opposition would not object to a leave-type arrangement in order to protect you but I think your ruling was wrong. 
Mr DEPUTY SPEAKER 
: Thank you Mr Mallard. The Standing Orders allow maiden speeches to be made during the Address in Reply debate—that is Standing Order 350—and provide for additional time to be made available for members to make maiden statements. The Address in Reply debate takes precedence over other business and therefore in normal circumstances new members would make their maiden speeches before speaking in any other debate. One of the consequences of our adjourning the Address in Reply debate is that the opportunity for maiden speeches has been delayed. I take on board the point that Mr Mallard just made and I am prepared to allow the member John Boscawen to seek leave to speak if that is the wish of the House. 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 I raise a point of order Mr Speaker. I think I would prefer you to go further than that to start with and to rule that the speech he shall give is not a maiden speech because it is not part of the Address in Reply debate. I think we should not have to seek leave to deviate from a ruling that appears to be wrong. 
Mr DEPUTY SPEAKER 
: Thank you. I will seek some advice from the Clerk. I am prepared to allow John Boscawen to take the call. I make it clear that his speech is not his maiden speech. He will speak for 10 minutes with a warning bell at 8 minutes. 
CHRIS TREMAIN (Junior Whip—National) 
: 
 I raise a point of order Mr Speaker. I have a question: if this speech is allowed to occur what precedent does that set for the rest of the debate on the items in the urgency motion in terms of allowing new members to take calls in the Committee stage and other stages of debate? I need to have that question answered first. 
Hon RODNEY HIDE (Leader—ACT) 
: 
 The point is that it is not a precedent. The point that Mr Mallard and I are making is that it is perfectly within an MP’s right to stand up and take a call to speak in Parliament and then when we go back into the Address in Reply debate to give his or her maiden speech. The Deputy Speaker is not making a precedent with this ruling; the precedent would be to say that new MPs cannot speak under urgency unless they forgo making their maiden speeches. This is not a precedent ruling; it is simply the Standing Orders. 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 I would go one step further than Rodney Hide has gone. It is not a precedent because it is not new in my understanding. But to answer the question the junior Government whip asked I say that it is clear that other new members will also be able to speak in the first readings of bills the Committee stages and the second and third readings and not lose their maiden status. 
CHRIS TREMAIN (Junior Whip—National) 
: 
 I want to indicate to ACT that if that is the case then there is not a clear ruling and that we would deny leave for that request. 
Mr DEPUTY SPEAKER 
: We do not need to ask for leave. There is no precedent being set. I shall seek further advice if members will wait for just one moment. Yes I can confirm that allowing a new member to speak now does not curtail his or her opportunity to make a maiden speech of 15 minutes during the Address in Reply debate. 
JOHN BOSCAWEN (ACT) 
: 
 I thank the Deputy Speaker and I thank Mr Mallard— 
Hon Darren Hughes 
: The Labour Opposition is here to help. 
JOHN BOSCAWEN 
: I thank the Labour Opposition and I say long may it remain the Labour Opposition. I am proud to be part of the new National - ACT - Maori Party Government and to speak in support— 
Hon Members 
: Say it again! 
JOHN BOSCAWEN 
: I will say it again. I am proud to be part of the new National - Maori Party - ACT Government and to speak in support of the Taxation (Urgent Measures and Annual Rates) Bill. 
I will start by referring back to yesterday’s Speech from the Throne. I quote: “The driving goal of the new Government will be to grow the New Zealand economy in order to deliver greater prosperity security and opportunities to all New Zealanders.” The driving goal will be to grow the New Zealand economy in order to deliver greater prosperity security and opportunities for all New Zealanders and nothing is more fundamental to driving prosperity than a taxation system that encourages thrift enterprise and hard work. How appropriate it is that one of the first moves by the new National - ACT - Maori Party Government is the introduction of this tax bill which makes a number of significant changes to our taxation system. 
First of all the bill introduces a regime where by 1 April 2011 80 percent of taxpayers will be paying 20c or less in every dollar in tax. Secondly it introduces a reduction in the top marginal tax rate—initially from 39 percent to 38 percent and then to 37 percent. I say that that is the first step because I believe that the top marginal tax rate should be a lot lower than 37 percent. I thought it was very appropriate that the Hon Michael Cullen asked a question of the House a few minutes ago when he asked what the main attraction was of going to Australia. What is the main attraction of going to Australia? Let me tell Dr Cullen that the main attraction of going to Australia is the standard of living in Australia where net wages after tax are a full 25 percent higher than in New Zealand. 
What a contrast there has been between the first move of the National Government and the first move of the previous Labour Government. When the Labour Government first came to power in 1999 it moved to increase the top marginal tax rate from 33c in the dollar to 39c in the dollar. Since that time we have had the Labour Government’s 2001 McLeod Tax Review which recommended that the top marginal tax rate should drop back from 39c in the dollar to 33c in the dollar. Did the previous Labour Government listen to the advice of its own advisers on the McLeod Tax Review? No it did not. I say that this is the first move of the National Government in this area because we in the ACT Party believe that the top marginal tax rate should be a lot lower than 37c in the dollar. 
When Dr Cullen introduced the bill in 1999 to increase the top marginal tax rate he said that 95 percent of people would not be asked to pay more tax; instead only the top 5 percent of income earners would pay more. That has never been the case and over the last 9 years more and more New Zealanders have moved into the top income threshold of $60000. More and more New Zealanders have been penalised for working hard and making sacrifices in order to get on and improve their lives. They have been penalised for doing that with the “envy tax” of 39c in the dollar. That overtaxation has cost New Zealand families hundreds of millions of dollars. It has cost New Zealanders jobs growth and lost opportunities. Why is that the case? It is because the taxation system has sent a message to all New Zealanders that we do not recognise hard work. It tells them we do not recognise hard work thrift and enterprise. It says we want to have a regime in New Zealand that penalises people who want to study go into higher paying jobs work hard and try to provide a higher standard of living for their families. 
My colleague the Hon Sir Roger Douglas commented on Government expenditure in his speech to the House yesterday. He talked about how the rate of Government expenditure had increased over and above the rate of inflation by $18 billion over the term of the last Labour Government—by $1000 a month or $12000 a year per capita. In order to have lower taxes one has to first get Government expenditure under control. By allowing Government expenditure to grow by more than the rate of inflation on a per capita basis Labour has cost the average income earner in New Zealand over $12000 a year. 
I say to Mr Cullen—who asked what the main attraction was for people to go to Australia—that the main attraction is for people to enjoy a higher standard of living with a top marginal tax rate that does not cut well into incomes in excess of $100000. What has the regime been under Mr Cullen’s Government? It has been a top marginal tax rate of 39c in the dollar on income over $60000 a year. 
The ACT Party as the party that encourages individual responsibility enterprise and thrift has always opposed Labour’s tax hikes. ACT has been the only party in this House that has been consistent in its approach to tax. We have advocated tax cuts since the party’s inception in the mid-1990s. 
Hon Darren Hughes 
: Why is the member voting for increases? 
JOHN BOSCAWEN 
: I am voting for a reduction in the top marginal tax rate from 39c in the dollar to 37c in the dollar and I am saying that it is far too high at 37c in the dollar. I say to the member that if his Government had managed to control Government expenditure and keep increases to the rate of inflation the average New Zealander on the average income in this country would be $1000 a month or $12000 a year better off. I campaigned at the last election on a policy that would hold increases in Government expenditure going forward from 2009 at no more than the rate of inflation. We are five MPs and by 2011 we expect to be a lot more than five MPS. Our forecasts show that if we can maintain increases in Government expenditure at a rate of no more than the rate of inflation by 2018 we can have a flat marginal tax rate of 20c in the dollar. 
In 2005 the Labour Party had the opportunity to reduce the tax burden on hard-working New Zealanders. If the Labour Government had implemented the tax rates that the ACT Party suggested at that time the previous Government could have added 1 to 1.5 percent growth in the economy which would have put New Zealand in a much better position to cope with the recession that we are now in. We have now led the OECD countries into the recession. 
This bill talks about tax rates changes to KiwiSaver and a number of other tax-related issues. Let us talk about KiwiSaver. 
Hon Darren Hughes 
: Yeah let’s— 
JOHN BOSCAWEN 
: Let’s talk about KiwiSaver and let us talk about the people that you purport to represent. 
Mr DEPUTY SPEAKER 
: The member cannot use the word “you”. That word brings the Speaker into the debate. 
JOHN BOSCAWEN 
: I am sorry Mr Deputy Speaker. We have 800000 people enrolled with KiwiSaver and without doubt KiwiSaver has been a tremendous success—far in excess of what the Labour Government expected. But we have to look at who those 800000 people are. Are they ordinary working men and women on the average ordinary wage? Can those people afford 4 percent or are they people who have been attracted by the massive incentives and particularly parents who have encouraged their children—and infant children in some instances—to take advantage of the very generous incentives? As the Hon Bill English said when introducing this bill the recession is now upon us and we have reached the stage where we can no longer afford those incentives. 
If we are to improve the livelihoods and living standards of ordinary New Zealanders we have to increase productivity in this country. There is more to it than reducing taxes. There is more to it than the changes to the KiwiSaver scheme. There is a need to reform the Resource Management Act. There is a need to build infrastructure. There is a need to improve the roading system and to complete the roading system in Auckland. 
Thank you for the opportunity to speak. I say the ACT Party will be supporting this bill. 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 I congratulate the previous speaker John Boscawen on taking the opportunity to make a speech on this occasion and I say that that is about all I agree with him on. 
I repeat one of the comments I made to Sir Roger Douglas last night—that is that I am very very surprised that the ACT Party is supporting a bill that increases tax for quite a large group of people. More than that it introduces a big area of inefficiency and bureaucracy in the sense that the credits involved will require an army of bureaucrats to implement. It complicates the tax system much more than is necessary and it increases the top marginal tax rate for a very large group of people. 
The very thing that Sir Roger Douglas told us was most important as far as tax rates are concerned was the top marginal tax rate and here we have ACT making the top marginal rate higher for a large group of New Zealanders. ACT members are removing or reducing the very incentives that they tell us are so important. 
I will also make a comment or two to the Maori Party. I thank those members for not taking their call and for giving the Labour Party an extra call again. I say to Mr Flavell that we remember. We remember seeing Maori Party MPs going around the country and saying that they wanted a tax-free area up to $25000. That was their policy: nil tax to $25000. You know one would think that if that was their policy then their minimum position would be that every tax change heads in that direction. But what do they do? They vote for a bill that puts tax up for low-income people. And who are those people? They are much much more likely to be Maori proportionately than Pakeha. 
The Maori Party members are putting tax up especially for people who have families people who have a couple of low incomes and have kids and people who are struggling on incomes in the $20000s and the low $30000s. They are the group of people whom the Maori Party was kind enough to support in terms of Working for Families and now they are the ones who are being punished by the Maori Party because it is following blindly behind National. 
What is Mr Flavell going to say to that family whose dad earns $33000 and whose mum earns $22000 in a bit more than a part-time job who have a couple of kids and who are in KiwiSaver? Does the member know how much their net income will go down? Between $60 and $70 a week. Those people will have $60 or $70 a week less under the National-Act-Maori Government as it was described. 
I say to Mr Flavell that I want to come on to the marae with him as well. Not only does Mr Ririnui want to do that but I want to be there as well. I want to hear him explain how it is mana-enhancing to take $60 or $70 a week off some of the poorest Maori families in New Zealand—$60 or $70 a week from some of the poorer families compared with what the law says they would get now in 2011. [ 
Interruption 
] What is now clear is that the junior Government whip also does not understand the difference between what is in the law now and what is being worked through. 
Chris Tremain 
: You detail it for me then. 
Hon TREVOR MALLARD 
: We will. We will work throughout today we will work throughout tomorrow and for the next 3 years we will work our way around the poorer communities of New Zealand. We will show them what will happen because of the rise in the thresholds between the package that has already been legislated for by the previous Labour Government and this Government’s legislation. Although some of the marginal rates are coming down the lift in the threshold hits the poorest people in New Zealand. It hits the poorest workers in New Zealand and it hits not only those who are working. 
I give members the example of the older family—a couple on superannuation. They have done the right thing they have saved up and they have a small income that is coming in as a result of their savings. What happens to them? Their tax goes up. Their tax goes up under the National Government. 
I know that National appealed heavily to superannuitants but what will happen under this legislation is that the tax on people who have an income of $20000 as a result of the amounts they have saved over and above their superannuation will go up. They might have that income coming from another superannuation plan but as a result of this legislation their tax will go up. Notwithstanding the small increase those people will get in their national superannuation their total income will go down. And the National members sound like they are proud of it. 
I will tell members something—Paul Quinn did not go and tell people at the Grey Power meetings that if they had some savings then their net income would go down. He did not tell them that. I am not sure whether he knew. He did know; he is putting up his hand to indicate that he did know. Well in that case it is very very sad that he misled the Grey Power people at the meetings he went to in Lower Hutt and Wainuiomata. 
I will get back to the Maori Party in particular and to something that those members and John Key had in common during the election campaign. That was around the relative attractiveness of New Zealand and Australia. One of the very good things that the previous Government negotiated was an arrangement for portability of superannuation back and forth. One of the reasons for that I say to Mr Flavell was so that whanau could bring their superannuation from Australia back to New Zealand and so that some of the higher-income earners who were living in Australia and wanted to come back to New Zealand would not lose their superannuation as a result of coming back. It was something to bring families together to bring whanau back to bring leadership back into communities in New Zealand and to allow some of the older people to get a piece of the pie by keeping the superannuation that they had earned in Australia. What has Mr Flavell has done? He is voting for the gutting of the KiwiSaver arrangements which will result in that portability being lost. 
Were Government members polite enough to ring the Australian Government to get on the phone to Mr Rudd—John to Kevin—and tell the Australian Government that they were walking away from the superannuation portability? Did they do that? No. They did not even think of it. So what do we have here? We have legislation that removes the incentives to do research and wrecks the portability of superannuation. We have legislation that increases the marginal tax rate for some poor and middle-income people and increases the taxes paid by a significant group of people who have kids and have joined KiwiSaver. It is just not fair and we are going to fight it right through. 
DAVID BENNETT (National—Hamilton East) 
: 
 I congratulate you Mr Deputy Speaker on your election to your new role. It is great to see somebody from the Waikato in such an esteemed role and I say well done. I am sure you will follow in the footsteps of other great people in that role such as Margaret Wilson before you who also had Waikato links. I say well done and congratulations. 
When we look at what we are passing today we see that the Taxation (Urgent Measures and Annual Rates) Bill is very important legislation. It is legislation that goes to the heart of many New Zealand individuals and families who are struggling who know there is a world economy out there that is very tight who know they need some help from their Government in their time of need and who want to see a Government that listens and is aware of the issues that are involved in the way they have to live their lives at the moment. They want a country and a Government that will deliver something to help them through this tough time. 
The National Party has listened to the people. The National Party went out to the people during the election campaign and said we understand the dilemma they are in we understand they want a better future and we understand they need a Government that will understand and work in their best interests. 
This is what we are seeing here today. This bill is the first step in building a better future for New Zealanders and building a stronger economy that will actually deliver that future for our people. Our people know it is going to be tough out there. They know there are going to be some major economic issues that we have to deal with as a country. They also know they want a Government that will make decisions; a Government that will go out there and not just look around the world and try to say we are leading on social and environmental issues but not actually do anything. They want a Government that will do things and that is what they will get from the National Party. 
The National Party will deliver constructive solutions and we will deliver them now to the people of New Zealand. We have a 100-day plan we have a plan of action and we know what is needed for the New Zealand economy to turn it around. The New Zealand economy is in recession. I invite anyone who does not believe that to look at what is happening around the world. The US and the Australian economies are teetering on the edge of recession and those countries are looking at ways of avoiding going into that situation. New Zealand has been in recession under the Labour Government that was in power before the election and now it is time to turn that around. Now it is time for the Government to make some constructive changes that will deliver a stronger economy. 
This bill is the first step. It is the first legislation the National Party has put through in Government and it will deliver some relief for hard-working New Zealanders. Hard-working New Zealanders want to see a reduction in the taxes they pay to the Government. They need to see a reduction in taxes because they are struggling out there. They are struggling to pay their bills and meet their mortgage payments at the high interest rates that have been inflicted on them for many years under the previous Labour Government. They are struggling to pay the high expenses that have been inflicted upon them by the previous Government through the high inflation it controlled in this economy. 
It is time now for a change of approach. It is time now for relief for hard-working New Zealanders. It is time now for these tax cut packages to come forward and for New Zealanders to see a Government that cares acts and delivers something constructive to hard-working Kiwis. That is what they are going to get under the National Party. They will get a Government that delivers that looks forward and that promotes solutions. That is what this bill is about today. 
Let us look at the personal tax cuts. They are significant tax cuts. They are the first step but they are significant. When we look at those percentage and rate decreases we see it is in the best interests of New Zealanders to give them that money so they can deliver to their families the future they want. Those cuts will deliver the right signals and incentives for New Zealanders to go out there and get a good education take risks and progress their lives and the lives of their families. That is the whole point of a tax regime. It is to provide those signals and incentives at the same time as providing the Government with the revenue to deliver its social services. 
This is a robust tax regime that takes into account the need for New Zealand families and individuals to have some tax relief at this point in time and the National Party will deliver that tax relief over the next week or so. The independent earner tax credit is an initiative for many New Zealanders who have missed out who want to get into the home ownership market who are struggling through getting an education and into the workforce and who want to build up a future for themselves so they can have a family and deliver what we need in New Zealand—strong and sustained growth for our economy. It is good to see the National Party coming out and delivering for those people and giving them the independent earner tax credit an initiative that will deliver much-needed finances to individuals who are working hard doing the right things making the right decisions and need to get that support from the Government as they make those investments in their future and the future of this country. 
Let us look at other parts of this bill which are very important for New Zealanders. The KiwiSaver changes enable a lot more New Zealanders to get into the KiwiSaver regime. At the moment it is a regime that is dominated by people who are putting their families into it and taking advantage of a system. We need to let more New Zealanders have the ability to get into KiwiSaver and into the savings regime. The Labour Party’s attitude is that it knows what is best for New Zealanders. That is not the case. New Zealanders can make their own decisions. They need to have the opportunity to make those decisions and by lowering that percentage this bill gives more New Zealanders the chance to get into a regime where they can save for their future and deliver what they need to deliver for themselves and their families. 
The research and development tax credit is another important part of this legislation. We have to look at what is important for the research and development industry and that tax credit was not delivering what was needed. That was never going to be what was needed. Let us look at what was happening. The Labour Government members just sat there while AgResearch laid off staff. They were not interested in research and development. It was all about the mantra of what they thought sounded good and the reality is we need to do constructive work in the research and development industry and deliver real solutions. The biggest solution we can deliver for research and development in New Zealand is to have a stronger economy. Without a stronger economy companies will not engage in research and development and if we are in a recession like the Labour Party has delivered us then it does not matter how many tax credits are given people will not go into research and development. If they do they will be using it only to project something that is different from what they are doing in their business. 
The National Party understands what is good for the New Zealand economy. We understand what would benefit research and development. It is to give a strong vibrant economy. That is what this tax cut package is part of. It is part of delivering that strong economy. We need the economy to function and grow and in order to deliver that we must take some important steps. This is the first step in that process and a very good step it is. We are looking at an approach that is constructive well meaning and in the best interests of New Zealand. We will not take the approach the Labour Party is taking this morning of coming to the House and trying to use fear and scare tactics and saying that this is not in the best interests of hard-working New Zealanders. No we will actually go out there and deliver constructive solutions for New Zealand. 
People in the street have come up to us and said that they are confident and very supportive of the National Government because they see a Government that is making decisions a Government that is actually willing to go out there and build a better future for New Zealanders a Government that is not trying to project fear to put people down and to say that it knows best which is what the Labour Party does in this House time after time. It is time for a different direction in New Zealand. It is time for a direction that actually delivers solutions. It is time for a direction that looks at what economic fundamentals are required in the country to deliver the growth we need. That is what we will get under the National Government. We see the previous Minister over there laughing away. He does not care about growth; he never has. He never delivered it. He just waited for somebody or for some other world economies to deliver him economic growth. He was not taking the steps but National through this bill has taken the first steps towards delivering that stronger growth economy. 
Hon CLAYTON COSGROVE (Labour—Waimakariri) 
: 
 I seek leave to table a report in the  
Waikato Times 
 of 28 October in which one Mr David Bennett stated: “I don’t think that our”—that is the National Party’s—“(R & D) policy is as good as it could be but we need to invest in our infrastructure to boost the economy.” 
Mr DEPUTY SPEAKER 
: Leave has been sought to table that document. Is there any objection? 
MOANA MACKEY (Labour) 
: 
 The one thing clear from that speech from David Bennett is that he has not read the legislation before him because it does none of the things he says it does. It does not deliver for all hard-working New Zealanders. In fact it penalises some of the poorest families in this country and it comes off the back of a campaign during which National members went around the electorates smiling at everyone saying: “It’s OK. We’ve changed. We’re different. We know that people don’t want cuts. We know that people want support for their families. We know that people don’t want the same old tired policies and failed arguments of the 1990s all over again.” And what do we see? On this first day of business in this new Parliament with this new National - ACT - Maori Party Government what do we see? We see the putting up of taxes on the poorest New Zealand families compared with the tax cuts they would have got—and were already legislated for—under the previous Labour-led Government’s tax policy. I say to the National Government “Shame!”. 
If the Government thinks for a second that this Labour Opposition will roll over and let it destroy the economy and destroy the finances of some of our poorest families then it has another think coming. Its members think that we do not know we have lost the election. We know it when we stand here and see legislation that once again attacks some of our most vulnerable families. The difference is that—unlike that party—it will not take us 6 years in Opposition to get stuck in. We are getting stuck in from day one. We will be here today tomorrow and—as Mr Mallard said—for the next 3 years holding this Government to account on every promise to the electorate that it breaks. 
Hon Dr Wayne Mapp 
: This is actually delivering the promise. 
MOANA MACKEY 
: Mr Mapp need not worry; I will get to him soon. 
Let us remember the context in which this bill comes to the House. The outgoing Labour Government left the economy in a very good position for the incoming Government. We had halved debt from 35 percent to 17 percent of GDP. We left this National Government with a very good position in which to move. The previous National Party leader Don Brash agrees. He said New Zealand is in a very good position to weather this storm. We have seen international credit agencies agree. New Zealand is in a very good position to weather this storm because of the fiscal prudence shown by the previous Minister of Finance the Hon Dr Michael Cullen. And what is the first thing we see on day one of this Government? We see legislation—if those members opposite will ever show it to us—that puts us on a track back to the 35 percent debt we inherited when we became Government in 1999. 
I refer to the Speech from the Throne in relation to this bill. There were lots of nice words in that speech. We heard that the Government is going to look after people we heard about turbocharging about protecting about enforcing about innovation about aspiration and about individual responsibility but nothing in this bill will assist vulnerable New Zealand families through the recession nothing in this bill will help our most innovative businesses bring us through the recession and nothing in this bill will help bring liquidity into our capital markets through our savings in this country. In fact not only does this bill not do those things; it destroys them. It undermines the gains we have made as a country over the last 9 years. 
I want to talk a little about the research and development tax credit. I am very glad that the Minister of Research Science and Technology the Hon Dr Wayne Mapp is in the House now because he has made a big deal about how great he will be for research and development. I wonder whether Mr Mapp is aware that with this bill New Zealand will go straight to the bottom of the OECD when it comes to research and development. In one go this legislation puts New Zealand straight to the bottom of the OECD when it comes to research and development and this is at a time when one would think it would be sensible prudent and common sense to provide incentives for our most innovative companies—those that are most likely to bring New Zealand through the recession faster those that are most likely to be exporters and those that are most likely to employ people on higher salaries and therefore provide higher take-home incomes for families. One would think that a Government would want to provide incentives for those companies to invest in more research and development. [ 
Interruption 
] 
Dr Mapp says it is a tax rort. The Australian Government thought that. A year later it had to bring the research and development tax credit back because it realised that getting rid of it did much more damage than these kinds of tax rorts that people talk about and never prove. Of course Australia is meant to be the nirvana that we are following so why with one stroke of a pen in this legislation are we putting ourselves at a competitive disadvantage to Australia? 
I want a guarantee from Dr Wayne Mapp. He promised that a third of the money that would have gone towards this research and development tax credit would go to our Crown research institutes. He promised. Will that continue? 
Hon Dr Wayne Mapp 
: It’s broader than that. 
MOANA MACKEY 
: Oh it is broader than that. No Dr Mapp promised in the election campaign as did Dr Hutchison that a third of the money saved by scrapping the research and development tax credit would go straight to funding science directly. I think that is what he called it; he said it would be a third. Will they get that money? Will the Crown research institutes get that money? 
Hon Dr Wayne Mapp 
: You haven’t read the policy. 
MOANA MACKEY 
: Well I say to Dr Mapp that we will be getting out the policy; he need not worry. The policy was very clearly that the Crown research institutes would be directly funded with a third of this money. 
Hon Dr Wayne Mapp 
: I didn’t say that at all. 
MOANA MACKEY 
: Oh no what a great day for science! Not only are we scrapping the research and development tax credit but we have just heard here on the floor of the House that the $330 million promised to the Crown research institutes by Dr Paul Hutchison and by the new Minister Wayne Mapp will not be given to them—they will not get it. What is it going towards? It is going towards paying for tax cuts that disadvantage some of our most vulnerable families and do nothing for our economy. 
Research and development tax credits are a common tool around the world for lifting rates of private sector research and development investment. Just about every country has them. All the countries the National Party compares us with have them yet we are getting rid of them at the one time in history when we need them more than anything else. Well I am sure the scientists and the manufacturers around New Zealand are saying: “Thank you for a very merry Christmas the National - ACT - Maori Party Government. Thank you for a very merry Christmas Dr Wayne Mapp our new Minister.” 
We know that the research and development tax credit was supported by all of National’s mates. Business New Zealand’s Phil O’Reilly pointed out that many companies had made long-term investment plans based on that research and development tax credit and they will be out of pocket now that the National - ACT - Maori Party Government is getting rid of it. They are going to be out of pocket. We know that when National announced its tax policy different groups such as manufacturers’ organisations flew all over the country to meet with Bill English to try to convince him to back down on the research and development tax credit abolition because they knew how important that single policy was for our economy especially going into a recession. 
So I say to Mr David Bennett who said before that the National Party does not want to lead on anything in the world—he does not think it is important to be a world leader on anything—that his mission is accomplished. We are now with one stroke of the pen on this legislation last in the OECD on research and development. The member might not think that that is particularly important. He thought it was important during the election campaign when he was in his own home area because of course there are lots of manufacturers in the Waikato. There are Crown research institutes and lots of scientists. It is a fabulous area for science innovation—it is a hub. He got up during the election campaign and said that he did not agree with abolishing the research and development tax credit. He has obviously realised that that has got him seated somewhere further back in the Chamber than he was during the last term so he has come down here with a mea culpa road to Damascus speech. He has suddenly realised the error of his ways and that getting rid of the tax credits is a really fabulous idea. 
We have just heard from Wayne Mapp that the money he was promising the Crown research institutes was kind of so that they would not feel so bad about his getting rid of the research and development tax credit—which they may have got money from through contracts they have in the private sector—because he will give them $330 million to tide them over. Of course they were very happy with that. Well that has gone. That has gone out the window as well and what for? To pay for cuts to KiwiSaver that will limit the level of liquidity we have in our venture capital markets which is important for our research and development. National will cut KiwiSaver. It will cut taxes for the people who need it the least. It will raise taxes on some of our most vulnerable families. 
I genuinely want the Maori Party to think very seriously about its support for that legislation which raises taxes on some of our most vulnerable families. Thirty-five percent of families in the East Coast electorate earn under $40000 and they will get nothing—they will get absolutely nothing. In fact for some of them their taxes will go up. Well I say merry merry Christmas from a National Government which from day one is showing its true colours—a National Government that campaigned on being softer campaigned on being friendlier and campaigned on being smiley—their smiley selves. Well once again we are seeing the cold face of reality behind the friendly mask of John Key and this National - ACT - Maori Party Government. 
Hon Dr WAYNE MAPP (Minister of Defence) 
: 
 Congratulations Mr Deputy Speaker on your elevation. One of the disappointing things when listening to Opposition members is that apparently they cannot read. If they had read our policies they would know that the statements they are making are simply not correct. I could actually say something else but I will not because it would be unparliamentary. But I remind members that if they are going to make assertions about another party’s policy they at least should take the trouble to read it before doing so. 
Extraordinary things we have been finding in Government are all the problems the previous Government left for us. For instance one of the very first briefings I received related to the issues around AgResearch—all its redundancies. Did the previous Government tell the public that—did it tell the scientists that? No it did not. It was actually a great relief—and I know that my colleague Mr Bennett knows this particularly well because he comes from the area—that that in fact has been ameliorated quite substantially. I know that that has been a substantial relief to the people in AgResearch. One would not hear that from Labour members would one? One would not hear that Labour’s legacy was going to be redundancies rolling out for ever. That was Labour’s policy when it was in Government. That is what it was going to do about protecting New Zealand’s science research and technology bases. So it was a good result to see that the effects of that were being ameliorated substantially. I know that that was appreciated within AgResearch itself and within that community. So let us not hear from the other side about all the work it did for science research and technology. When one measures the facts against Labour’s rhetoric—actually that was a feature of the previous Government: rhetoric on the one hand was always noble grand and highfalutin; reality on the other hand well that was a bit different was it not? 
Hon Darren Hughes 
: How about the whales Wayne? How are the whales getting on? 
Hon Dr WAYNE MAPP 
: Let me just remind the senior whip on the other side to look at the Defence Force. 
Hon Darren Hughes 
: How’s the frigate? 
Hon Dr WAYNE MAPP 
: That member should ask the former Minister of Defence about all the problems in defence that he has left with the current Minister of Defence. I tell that person that he had better be quiet on that particular issue. 
I just want to bring the Opposition to a reality check. We explicitly campaigned on this bill. The public knew exactly the nature of the tax programme that National is offering not just in terms of personal income taxes but also in terms of KiwiSaver itself. The public made a judgment on Labour’s programme and made a judgment on National’s programme. That is why we are on this side of the House today and that is why we are moving this bill. We told the public that this was part of our 100-day programme and that is why we are implementing it in this way. 
Hon Clayton Cosgrove 
: You don’t want it to go to select committee? 
Hon Dr WAYNE MAPP 
: The former Minister knows full well that tax rate issues never go to select committees. They are always dealt with by this House. I remind that member that that is what happened in December 1999. There is a good reason for that in fact. It is because the public have actually made a judgment. They voted for specific tax rates. We have a specific promise and there is no point putting that specific promise to a select committee because the issue has already been judged and that is why we are implementing it in the way we are doing. 
I just want to go through some aspects of the detail. Labour always goes on about its tax package being better than ours. Well the first point of which I need to remind Labour is that the public has made that judgment already and Labour was not on the winning side of that. But the second point I make to the Opposition is this: the major difference is that we put our priority into middle New Zealand families and their aspirations. So our focus was shifting the 21 percent rate up from $40000 through ultimately to $50000. That is where the vast majority of hard-working aspirational New Zealand families actually fit. We are not talking obviously about people who have just entered the workforce we are talking about people who have built experience and are going into careers and looking at opportunities for the future and looking at opportunities in other countries. 
This is the key point in the New Zealand tax system. One only has to look at the whole group of people that Labour often talks about—teachers nurses and so forth. This tax rate affects them more than any other tax rate. So we have aimed this package right at aspirational New Zealanders who are building skills and building careers. We are saying to them that our tax package will make it easier for them and their families. Our tax package will make it easier for them to decide that “Yes perhaps I should stay in New Zealand.” I also remind the Opposition of this: at this point in time with the economy in the situation that it is right now stimulus is exactly what is needed on 1 April 2009. What would the public have got from the other side? Zero! Actually zero was Labour’s tax package for 1 April 2009. That is one of the reasons Labour lost the election. The public understood that in this difficult financial situation which not just New Zealand but much of the rest of the world is involved in as well stimulus is what is required. Every country in fact is undergoing that process and this bill is part of the National Government package to deliver stimulus to the economy. 
Labour members might talk about savings and all of that. That is not the core issue right now in the New Zealand economy. The core issue is getting money into the economy by 1 April next year to keep demand up keep aspirations up keep jobs going and keep hope going. That is the difference between us and them. Their package for 1 April next year was zero. Our package will stimulate the New Zealand economy at a time when it will count. 
Dovetailed to that is that it is pitched at those New Zealanders who have been crying out for some relief in the tax system. In 9 years under Labour they got zero. National is delivering. That really sums it up. National in Government is delivering we are honouring our promises and we will deliver this in the next day or so when the bill comes into effect. That fundamentally pitches the difference between this side a Government of action and that side an Opposition of failure. 
Hon CLAYTON COSGROVE (Labour—Waimakariri) 
: 
 As I reflect on the debate of the last 24 hours a question comes to mind and it is simply this: in that speech Mr Tremain’s speech Mr Bennett’s speech and all the speeches we have heard from the Government in defence of this bill which increases taxes for the bottom end why have we not heard any rebuttal of the allegations the Opposition has put on front of them? 
When Phil Goff used the example of a family on $50000 with one child and investing in KiwiSaver losing $70 a week—that is seven-zero for Mr Bennett’s benefit—as a result of this package did we hear one denial from Bill English or Mr Tremain or Mr Bennett or that tax expert Mr Foss? Did they deny it? I remember that last night Mr English grinned as if he had been caught like a kid with his hand in the cookie jar. Did any of them get up deny it and say: “No that is not true. The facts are other than what is being put forward by the Opposition.”? No they did not deny it because they cannot deny it. 
Last night we saw the Maori Party members look as if they could have leapt into the desks in front of their seats as they stuck their hands up and gave their party vote in support of this bill. Every one of their constituents earning under $40000 will be getting either zip from this or an increase in tax. A couple on $55000 a year with three kids will have to pay $14 extra a week because in effect they get a tax increase. If Hone Harawira could have shrunk himself and dived into his desk or under it to get away from this debate he would have. Mr Flavell is piling the computer and the boxes higher and higher on his desk because he knows he has to answer his constituents probably in a couple of months when they rock into his office and say: “Mr Flavell we voted for you. Why are we paying more? You never told us about this.” 
Here comes the man himself Bill English. He is the architect of this bill. Not once in any of his contributions in the last 24 hours did he say: “No the Opposition is wrong. As the National Party promised in the campaign everybody will do better out of our tax policy.” That is what National said. They talk about aspiration. I ask Mr Bennett that learned gentleman on the other side of the House how it is aspirational if a family that is on $50000 is in KiwiSaver and has one child loses $70 a week. 
The only National Party response last night was from that genius Nick Smith who when he decided to stop holding his breath said that that is the politics of envy. That is what he said. I have the  
Hansard 
 and I am going to blow it up. I along with Maryan Street and the troops on this side will come to Nelson and find all the families on $50000 a year who are in KiwiSaver who have one child and who lose $70 a week. We will line them up in front of that genius’ electorate office and let him say on behalf of National: “Oh you $50000 parents with one child losing $70 a week—that is the politics of envy.” 
As I said last night to Mr Bennett and Mr Tremain that is the politics of betrayal not envy. Where is the aspiration when dad is on $35000 and mum is on $22000 they have three kids and they have to pay $14 a week extra in tax? Where is the aspiration in that? Or does aspiration and the so-called choosing a brighter future apply only if one is at the top end? We know that Mr Bennett and Mr Foss wherever he is and Mr Mapp—and I now know the anatomical impact of peroxide on the cranium—will get a big tax rebate of around $100 a week. Apparently aspiration applies only to those who are pretty far north of $40000. 
I looked at the  
Dominion Post 
 this morning. It said that those on $42000 a year will get $4.62. Those members criticised us for the so-called block of cheese tax cuts. Well that is one slice of Chesdale without the plastic wrapping. Apparently aspiration and choosing a brighter future applies only to their mates at the top end. I do not think it is the politics of envy to stand up as we are in this House do our duty and point out that this bill was not signalled in its entirety before the election campaign. 
Dr Mapp got up and said: “You don’t need to send this bill to a select committee. You don’t send tax bills to a select committee.” I say to Dr Mapp: “Wake up!” I used to chair the Finance and Expenditure Committee and we did tax bills—we did a lot of them. We can send this bill to a select committee and why? Because it comes into effect in April. That is plenty of time to send it to a select committee for a week or a couple of weeks. But oh no Dr Mapp does not want to do that because then the tax experts and the venerable social services agencies such as the Salvation Army and others would come in and point out the things that we are pointing out today. 
Moana Mackey 
: And the manufacturers. 
Hon CLAYTON COSGROVE 
: And the manufacturers of course. 
My colleague Moana Mackey talked about the research and development tax credit. She made reference to a meeting that happened with Mr English. I know for a fact that manufacturers flew from all around the country to have a meeting with that member in Auckland and they worked him over. They got the blowtorch out and did the rotisserie on him. Do members know what he said to them? He said: “Ah look do not worry we will fix it some other way.” They did not believe him and they do not believe him now. 
The justification for doing away with the research and development tax credit was this which appeared in the  
New Zealand Herald 
: “National leader John Key in announcing the move to drop the scheme yesterday as part of the party’s tax policy said…‘It’s clear that the tax credit has created a lot of business for tax accountants and tax advisers but evidence of real increases in R and D is harder to find.’ ” Hang on; there is a problem with that. That sound business person and good guy the chief executive officer of the Canterbury Manufacturers Association in my area John Walley said that Mr Key’s comment was “daft”. Another member of the House was called daft—the electorate chairman of the National Party for Gisborne called Anne Tolley daft I think. 
Hon Darren Hughes 
: No Nick Smith. 
Hon CLAYTON COSGROVE 
: Oh Nick Smith. 
So Mr Walley of the Canterbury Manufacturers Association said that Mr Key was daft because the research and development tax credit applied for the first time in the 2008 income tax year. Unless Mr Key is a clairvoyant—and he portrays that he has the powers of a miracle worker—or unless Mr English is a clairvoyant and can see into the future and into the mists of time they cannot predict what will happen. Of course the Aussies do not agree with Mr Key. He said it all has to be a rort but it is a rort that has not happened. So National will get rid of it although it actually has no evidence. That is the truth. 
Then we had the great betrayal of Dr Mapp. As my colleague pointed out $330 million was to be the compensatory factor to go to the Crown research institutes. That is up in the air. That is disappearing really quickly. One would think that members of a new Government would be so proud of their tax policy the benchmark document that they say they campaigned on that they would get up and say: “No the Opposition is wrong. Dr Cullen is wrong Mr Cosgrove is wrong Ms Mackey is wrong. You and all the examples you have used are all wrong.” But that has not happened once. Even the great guru Mr English has not once got up and admitted it. Even the  
Dominion Post 
 worked it out on the front page today. A large number of people in our community will get nothing from this or worse still they will be grossly disadvantaged. 
I again say to the Maori Party members that there is still time for them to get themselves out of the pickle they have got themselves into. There is still time to come down to the House and oppose this bill as there are a lot of votes to go and a lot of water to go under the bridge. I would love the Maori Party to do that. We know that National Party does not care what its constituents think when they rock up and ask why they are paying more when National said during the campaign that people would gain out of this measure. But there is still time before the Maori Party constituents rock up and ask: “Why are you supporting the National Party in this?”. 
On every marae and at every kohanga reo when the parents come to pick up their kids the explanations will have to be given. I do not think the Maori Party members will have their research people write them a word for word speech as they do and then come down to the House and read out an explanation and a justification for supporting the National Party in this. Even the research unit will not be able to come up with that one. The Maori Party members did not campaign on it. They were against it. They should be against it because they represent some of the poorest people in the community who will be hit hard by this. 
I invite one of the geniuses over there to get up and negate what the  
Dominion Post  
has said what Dr Cullen has said and the examples that I Phil Goff and others have given. There are large groups in our community that are disadvantaged. [ 
Interruption 
] Mr Bennett can shake his head but why in that great oratory he gave us did he not say “That is wrong and here is why.” and give us the proof? It is because the member does not have the proof. Well there could be another explanation—it was not in big print. But the member does not have the proof nor does he have the evidence. It is now apparent to us that it is aspirational if one is at the top end. If one is the chief executive officer of Telecom my word that person is brimming with aspiration. It is just pouring out of every pore. But if someone is at the bottom end that person is in trouble. 
A party vote was called for on the question  
That the Taxation (Urgent Measures and Annual Rates) Bill be now read a second time. 
Ayes 68 
New Zealand National 57; Maori Party 5; ACT New Zealand 5; United Future 1. 
Noes 52 
New Zealand Labour 43; Green Party 8; Progressive 1. 
Bill read a second time. 
In Committee 
Part 1 Personal tax cuts 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 It is good to have an opportunity to discuss some of the detail of this bill after what has been a very rushed process to date. I hope that some of the political rhetoric may subside for a while and that we and New Zealanders can get our heads around some of the measures that are embedded in the bill. 
Let us start if we can by going through exactly what will change for average New Zealanders with regard to the KiwiSaver component of this bill. Firstly they will not get the $40-odd down payment for their registration fee. Secondly although National has tried to fill in part of the gap if someone is a low-income earner—by which we mean anyone earning less than around the average income of about $44000 a year—and that person has kids he or she will be worse off despite the fact that National has late in the piece restored some of the Government’s contribution. 
Chris Tremain 
: I raise a point of order Mr Chairperson. We are considering Part 1 which deals with personal tax rates. The speaker who is a learned member of the House is talking about KiwiSaver. I ask you to bring him closer to the part please. 
The CHAIRPERSON (Eric Roy) 
: I think that is a fair call. Members can refer to something else but they need to draw what is said back to the part for comparative purposes or whatever other purpose. 
Hon DAVID CUNLIFFE 
: Of course the tax rates are funded largely by the changes to KiwiSaver and I had thought it was appropriate to cover both the funding and the expenditure side of this bill. 
However let us go directly to the tax component. The principal difference here is twofold. The first difference concerns where the rates and thresholds are set and the second is in the top rate. Let us turn first to the thresholds. Under Labour’s package some $8 billion has already been invested in the changes that came through on 1 October. They were designed to lift the thresholds thereby providing all New Zealanders with approximately equal improvements in the tax actually paid. It was a very very fair set of tax changes and it would have carried on in that way. By 1 April 2011 people earning up to $20000 a year would have been paying 12.5 percent those earning $20000 to $42500 a year would have been paying 21 percent those earning $42000 to $80000 a year would have been paying 33 percent and those earning above $80000 a year would have been paying 39 percent in tax. What has happened of course under this bill from National is that people who are earning between $14000 and $20000 a year will now pay 21 percent not 12.5 percent. That is a very very significant difference. It means that many below average income earners second earners and families will face a higher tax threshold a higher tax rate at that level. 
Why has that been done? This is a very artificially constructed tax cut. It appears to be built around the promise that National made during the election campaign to try to engineer a $50-a-week cut for the average income earner. So in fact the tax remission spikes around that part of the band and then on either side of that it drops down. The real change occurs for those in the top bracket—over $70000 a year. Why this Government thinks that people who earn over $70000 a year deserve to be the biggest beneficiaries from this tax cut escapes me. Someone who is earning three-quarters of a million dollars gets $200 a week and someone who is on the average wage gets $2 a week. Why is that? There is no economic justification for that. People who are very wealthy of course do not spend the tax cut that they get. They can afford to save it or invest it and therefore it is taken out of circulation. 
Chris Tremain 
: So you admit that some people actually save it. Some actually save their tax cuts. That’s good to hear from you. 
Hon DAVID CUNLIFFE 
: I say to Mr Tremain that that can be useful but one has to be very careful about why one is doing it. The Government has said that the principal reason for this tax cut is to restore demand in an economy that is facing recession. It simply will not do that if the money is saved away. We have to start with $3.5 billion more in savings because that has just been sucked out of KiwiSaver. Then we have to offset the $1.5 billion of innovation that we are not going to get—or more; probably $3 billion or $4 billion—because the research and development tax credit has been axed. I think we need to be very clear about the arguments for this tax change. 
To summarise we know we have a threshold problem for people who are on lower and middle incomes. We know we have a skew of benefits to people who are at the upper end of the income range and we know that we have some perverse effects in terms of whether this tax change will help to offset the recession as a result. There is a lower multiplier on tax cuts than on Government spending if it is well directed and a very low multiplier on high-income individuals who are squirrelling the money away because frankly they do not need the tax cuts. Those are some of the economic arguments. 
The next questions that we come to around the tax rates are what the actual fiscal impacts be will be and what the outlying debt track will be. Most New Zealanders by now understand that under the previous Labour-led Government under Dr Cullen’s leadership the gross debt to GDP ratio the amount of Government debt that we owe other countries was cut in half from 35 percent to 17 percent. With the recession it is up to about 18 percent but it is still very low by world standards. Why does that matter? It matters hugely because it means the incoming Government has the wiggle room to spend and invest in infrastructure or take other measures to offset the recession. The Government has the fiscal headroom. 
The question is what has happened to that headroom as a result of this package. Treasury’s briefing to incoming Ministers made clear that in Treasury’s view it was unnecessary to pursue further tax cuts on top of the close to $9 billion of stimulus that came in on 1 October. The reason for that was that it considered that stimulus to be sufficient and that there were real risks about driving us deeper into debt. 
How deep into debt are we getting as a result of this tax cut? The answer is that we do not know. We do not know because the new Government is not telling us. It has taken the unprecedented step of ramming a major piece of tax legislation through the House under urgency with no select committee process with no ability to interrogate it on the detail and with no reliable statement of the macroeconomic implications of what it has done. This bill is a balancing act. Of course we would all like to give tax cuts—and we want to give fair tax cuts—but we have to be constrained by the ability of the Government’s books to support them. There is no information provided to the public let alone to the Opposition about the state of those books as a result of this bill. 
Let us now turn to some of the anomalies that arise. Some of those are deliberate; others may be unwitting. As Dr Cullen has said there is an anomaly around pension portability. Australia has a 9 percent robust employer-funded superannuation savings scheme. We had a roughly equivalent scheme under Labour’s KiwiSaver scheme and the previous Government had sought and received the approval of the Australian Government to allow people to move backwards and forwards between the two countries—something that was especially important one would have thought from a National Party point of view because National members spent most of the election campaign grousing about people who cross the Ditch. So what is the implication? The implication now that our tax package has resulted in a change to the KiwiSaver benefits is that that portability could be eroded. 
Regarding superannuation savings the employer contribution for those who were seeking part-time work or who were close to superannuation age was at 4 percent on a net basis after tax credits. Now that comes down to I believe about 3.2 or 3.4 percent net under this bill undermining further the ability of New Zealanders to save for their superannuation especially if they are doing so from a secondary income. 
So a number of technical anomalies alongside the headline rate and threshold changes are built into this bill and they deserve very significant consideration. 
On the question of process we have already discussed the lack of a select committee hearing. We have not really gone into the fact that the commentary on the bill admits up front—and I have never seen this before—that due to the haste with which the bill has been prepared the Government has not been able to do a regulatory impact statement. 
Hon Member 
: Amazing. 
Hon DAVID CUNLIFFE 
: That is amazing given that the new Government campaigned on regulatory integrity and has a confidence and supply agreement with the ACT Party. 
Hon Darren Hughes 
: They’ve got a new Minister for it. 
Hon DAVID CUNLIFFE 
: Yes the Government even has a Minister and on its first bill— 
Chris Tremain 
: I raise a point of order Mr Chairperson. Once again we are straying right off the subject. That is a matter for a speech on the title of the bill and this debate is about Part 1. We are dealing with personal tax cuts and the thresholds. 
Hon DAVID CUNLIFFE 
: I certainly respected the member’s earlier point of order but I think respectfully Mr Chairman that on this one he is mistaken. The regulatory impact statement applies to the whole bill including the rate changes which are the subject of this part. 
The CHAIRPERSON (Eric Roy) 
: I am not going to uphold the point of order. 
Hon DAVID CUNLIFFE 
: Thank you very much. So we know that the proper processes for regulatory scrutiny have not been gone through on this bill. 
The next problem is that the economic effects of this bill as the commentary on the bill states have not been fully analysed. We do not know those effects not only because the Government has failed to publish the debt track but also because according to the commentary on the bill the analysis has not been done even by the Government’s officials. We do not know what the flow-on effects of the funding mechanisms of this tax change will be. We do not know the net impact on innovation. We do not know the net impact on savings. We do not even know the net impact of the spending multipliers from the tax change. I say to those who have not been in Government for a while that one normally does the work before one puts a bill on the Table. Otherwise there might be an unintended consequence. 
One of the unintended consequences of this bill from a Government point of view is that a whole lot of New Zealanders are waking up and realising that this is not what they voted for. What they voted for they thought was a kinder gentler kind of National Party that would leave in place the good things that Labour had done and maybe offer a fresh face such as it was. But that is not what they got on day one. Besides this bill they have a very harsh piece of industrial relations law which we will come to shortly and they can see that some people have joined the flat earth society. 
CRAIG FOSS (National—Tukituki) 
: 
 I will take the liberties that the previous speaker took around a wide range of topics although he did eventually come back to Part 1. In speaking to Part 1 which is clauses 3 to 17 inclusive I draw the Committee’s attention to the title of Part 1 which is “Personal tax cuts”. Does that not sound great? Personal tax cuts—right here in this bill. 
Hon Dr Michael Cullen 
: Oh God! Don’t slobber. 
CRAIG FOSS 
: I will say it again for the member over there—personal tax cuts. I imagine that his first taxation bill said “personal tax hikes”. Is that what the member’s first tax bill said? Actually all the way through the last 9 years the member’s bills have probably said various things about threshold and fiscal drag etc. 
There are a couple of points in this part. OK the micro staff which members on the other side of the Chamber keep talking about—$2 here and $3 there—is relevant but what they keep missing and do not talk about which says much about the head space they are still in is the macro the vision the investment that this makes in New Zealand. The threshold changes in Part 1 actually are all about the biggest investment in the infrastructure of New Zealand—the people. It is saying to them: “We value your hard work. We value your staying hopefully in New Zealand and we value your investment in your education with your student loan and these tax threshold changes will enable you to pay your student loan off earlier and will offer you a higher more viable after-tax income.” I am yet to hear anything of that nature from members opposite rather the myopic vision they have of trying to justify things to each other in spite of their somewhat diminished majorities. 
Part 1 contains a pro-rata provision and explanations of it. As all members will acknowledge there are many complicated issues around all things related to taxation and this policy that the Government has introduced here was flagged very very early on. So there is much certainty out there and in fact members will see as they go through some of the detail in the bill how with the top marginal rate going down to 37 percent the banks can start to use resident withholding tax at 38c from 1 April next year because over the year the pro-rata will catch up. Most things will come out in the wash. 
Previous speakers have mentioned that these changes will mean that 80 percent of New Zealand taxpayers will be at or under the 20 percent rate. That is not too bad but why stop there? I was very interested in the speech made by the previous speaker who this morning was basically arguing for higher taxes. He started to refrain a bit and tried to justify that a bit further but his multiplier arguments were all over the show this morning. I guess he has gone out and googled the stuff in between speeches and realised what he was saying. What he was saying was that if this was his bill the rates would all be going up and the bill would be called the “Personal Tax Hikes Bill”—or at least this part of it would be. I look forward to debating and discussing further points in this bill. There will be some good and robust questions I am sure and the Minister in the chair is more than prepared to push further National’s vision and our ambition for personal tax cuts. 
Hon Dr MICHAEL CULLEN (Labour) 
: 
 The various parts of this bill are either unfair incompetent dishonest or stupid. Part 1 is the unfair and incompetent and dishonest part. Part 1 is entitled “Personal tax cuts”. 
Chris Tremain 
: Yes! 
Hon Dr MICHAEL CULLEN 
: Well the member may be able to afford a brand-new four-wheel drive to park out at Napier airport even further into the future because he actually is not in the electorate; he needs the four-wheel drive at the airport to give the impression he is somewhere around. But in fact for many New Zealanders Part 1 is a personal tax rate increase. For many people it is a personal tax rate increase. 
In the debate on Part 3 I will move an amendment—and I foreshadow this now because it relates to this part—that will provide an opportunity for the Maori Party in particular and the National Government. In the case of the Maori Party the amendment will give it the chance to put its mana where its mouth is and in the case of National to put its money where its mouth is—that is to move for a new tax credit that will apply where anybody under this legislation will be paying more tax than he or she would have done under the personal tax cuts legislation of 2008. Those taxpayers will be able to apply for a compensatory tax credit to make up the difference between what they would have received under the existing legislation and what they will get under this new legislation. It is very simple—they will be able to apply at the end of the tax year for that compensatory tax credit. That will show whether National believes that nobody is worse off under this bill. If nobody is worse off under this bill that amendment will cost it nothing. If the Minister in the chair the Hon Bill English then issues a financial veto saying that it will have more than a significant impact on the fiscal balance we will know that it will cost money. In other words people will be worse off under this bill. 
Who is worse off under these personal tax cuts? The answer is anybody earning $14000 to $24000 a year of taxable income. Why? Because the $14000 threshold does not go up to $20000 as it does under the existing legislation. The difference of $6000 will be at a different marginal tax rate by 2011 of 7.5c in the dollar. That is $450 a year. That is nearly $9 a week. For a person on $20000 a year $9 a week is quite a lot of money. It is peanuts for the members of this Committee. It means nothing to Jackie Blue who is looking bored over there. It means a lot to a person on $20000 a year. Who is such a person? It is a second-income earner in the family. Maybe it is the wife going out on a part-time job. It is a cleaner—a beneficiary who is putting in some effort and earning some money himself or herself. And now these people will be paying a higher tax rate on that than they otherwise would have done. It is a superannuitant with a bit of investment income or a superannuitant who has a small part-time job maybe delivering pamphlets. Would it not be ironic if that superannuitant had been delivering National Party pamphlets at the last election and ended up paying a higher tax on those deliveries than he or she otherwise would? So I invite members to consider this very simple amendment; let us just see what they will do with it. The amendment protects the low-income earners. 
The second group who will lose under this bill are all families with kids who earn under $44000 a year. There are quite a lot of those people—that is nearly the average wage. So by 2011 a single-income family on nearly the average wage will be worse off under this bill than they will be under the current Act. But even people earning a good deal more than that are worse off because they lose their entitlement to the new independent tax credit if they are receiving Working for Families and that is a cunning means of trying to stop them applying for Working for Families if they get only a little bit at the end of the day. They will all be worse off. 
Surprisingly Mr English has developed an antipathy towards modest-income families on small incomes. Why that is I do not know. Maybe he supports only large families on large incomes; he does not seem to support small families on small incomes. They will be penalised as a result of National’s taxation changes. So I say to Mr English that a family on 40000 bucks a year struggling to pay the rent and the mortgage—we have heard about them for the last 3 years from the National Party—will face a higher rate of tax and a lower net income as a consequence of this bill. How does that fit in with a Catholic social justice perspective? I remember asking Mr Bolger the same question in late 1990 when the National Government legislated to provide that a widow had to go to the Department of Social Welfare to apply for a widow’s benefit within a week or she would lose money. How did that fit in with those kinds of precepts? It does not fit in with those kinds of precepts at all. 
You see we used to attack the National Party for the trickle-down theory—the notion that as long as the people at the top got more eventually it would trickle down to those at the bottom. What was proposed for those at the bottom was not even a 6-litre shower but a half-a-litre shower as the margin eventually trickled down to those people. Well this is “trickle up”; it is a new theory from National whereby the taxes on low incomes are increased and that trickles up to those at the top. And why? In one of his previous speeches Mr English gave away that it is more expensive to give tax cuts to people on low incomes because as he said people on high incomes get that tax cut as well—as if somehow that was wrong. That was a very interesting little slip there as if to increase the bottom threshold or lower the bottom rate was somehow wrong because everybody got it because the rich also got it. 
That was Mr English doing his usual strange reverse logic in trying to look equitable by saying that it is awful that rich people get the tax cut that poor people get. Of course the point is that it is the other way around: poor people get the tax cut that rich people get whereas if one does it the other way and simply lowers the top rate poor people do not get the tax cut that rich people get. But of course we were told that the important thing was the threshold. Under this bill the threshold that the top rate cuts in at is lower than under the existing legislation because under the existing legislation it rises to $80000 a year. Under this bill it goes up to only $70000 a year. Do members remember when we were told that there was some kind of envy tax whereby the top tax rate would cut in at $60000? That was in 1999 and 2000 which was 8 years ago. It is perfectly all right now to cut in at $70000 a year some way down the track from here and that is not some kind of envy tax! But of course the theory underlying this is that if marginal tax rates are lowered people work harder. This is the capitalist version of the Stakhanovite worker—much beloved of the Soviet Union. This approach says that if we kept an extra 1c or 2c in the dollar we would all work miles harder. 
Well Mr Bridges will not do so. He will get paid the same anyway; it does not matter how hard he works. Members should look at National members; most of them have not done a stroke of work for the last 3 years. That is becoming very obvious in the way they have carried on in the House in the last day or two. They have not done a stroke of work. They are pretty well paid. They received a personal tax cut on 1 October and did not even say thank you for that; it just was not big enough—they want more please! In fact the marginal tax rate goes up on those people who earn between $14000 and $20000 a year—the people we want to encourage into work who are on benefits to earn a bit and to help themselves get started and move along. The superannuitants want to keep a little bit of work to earn a bit so their marginal tax rate goes up from $70000 to $80000 a year. That is a lot of senior teachers and nurses and other people who will be paying a higher marginal tax rate than they would have done under the current legislation. It goes down to Mr Foss who does not believe in work. He is the poor man’s John Key. He went overseas and did not make a fortune then came back to New Zealand. 
We have one area where there is a big cut in the marginal tax rate. Where is it? Between $42500 and $44000 a year the marginal tax rate goes down 13c. So we will see an extraordinary country a country where people earning low incomes will work less because that must be the theory—the marginal tax rate goes up. People in the next range will work exactly the same amount because their marginal tax rate has not changed. Then there will be this extraordinary group of heroes of the new sort of capitalist Soviet Union earning from $42500 to $44000—the turbocharged people of New Zealand—who will be working incredibly hard until they get to $44000 a year. Then suddenly they will stop working harder as there is no point because their marginal tax rate would now be back to where it was going to be before in any case. Of course if the taxpayers are independent credit earners then their marginal tax rate would not be 20c in the dollar but 32c in the dollar. So there is basically no change at all. So from an economist’s perspective there are no real incentives in this at all that make any difference to people working harder. So the theory then became—because they have kept trying to invent new theories—that the whole purpose was a stimulus for an economy in recession which many countries have been in for some time. But in fact if one wants to stimulate an economy in a recession one does something temporary to increase demand in the short term but one does not in a country with a chronic current account deficit and a chronic savings problem have a structural change. 
DAVID BENNETT (National—Hamilton East) 
: 
 I am following on from the man who lost about $5 billion or $6 billion in the last couple of months from the New Zealand economy so those words were rich coming from Michael Cullen. The so-called promised tax cuts for New Zealand workers were in legislation that was never going to be delivered because Michael Cullen would have delivered a post-election Budget that took away those tax cuts. That was Labour’s real plan. Michael Cullen should be honest and tell the Committee what he really wanted to do. 
Today National is delivering on its promises. We are giving tax cuts to those hard-working New Zealanders who have been out there slaving away for 9 years working hard making all the right choices and taking the right directions in their lives. They needed some support from the Government. They needed a Government that would stand up and deliver for them and give them the right signals and incentives to keep on that track—the signals and incentives that build a strong country—and that is what National is doing here today. National will give people tax cuts. We will make sure they have that reward for their hard work. We are giving them that reward for making the right decisions and we are making them successful in the world economy. We will give them the money to help them actually go out there and survive in an economy that is difficult an economy that is in recession as a result of the failed policies of the previous Labour Government and we will actually give them an economy that will deliver a future for New Zealand. 
This bill is the first part of delivering a growth economy. Through the personal tax cuts this bill will give the impetus needed for the New Zealand economy to grow and be successful. With a growing economy we can deliver in all the other areas of social spending of research and development and also of growth in our infrastructural investment which New Zealand desperately needs and has not had in the last 9 years. The National Government with its coalition partners will deliver a tax cut programme. We will not just talk about it; we will not just put legislation out that is about some time in the future. We will actually deliver that tax cut programme and that is what we as a Government are about. 
We will deliver for the people of New Zealand. That is what the people on the street have been saying. They like what they see. They see a Government that says what it will do and then actually delivers it. That is what members are seeing here today. We will not muck around trying to tell people there is a better future sometime around the corner; we will deliver that better future now. We will give it to people in the first 100 days in Government; we will give them some constructive changes that deliver to hard-working New Zealanders. We will not lead them on a path and say we know best and they do not have choices in their lives; we will give them those choices. We will give them money in their hands so that they can make those choices; we will give them the personal tax cuts that are in this legislation. The tax cuts enable people as individuals and as families to make the right decisions about what they want to spend their money on so that they can actually deliver for their families in these hard economic times. 
These personal tax cuts are the first stage of delivering a brighter future for New Zealand. They are the first stage of delivering a situation where people can go out there and actually live the lifestyle that they expect to live in the First World. We need to give that impetus to the New Zealand economy and we need to give that strength to our people who are experiencing hard-working days and reward them for their work. That is what National is about. We are here to deliver for New Zealanders—to deliver for the working people of this country. That is what this legislation is here for and we will deliver to New Zealanders through personal tax cuts as part of that process. 
If we look at the personal tax cut regime we see that a big part of it is the independent earner tax credit which is a great initiative. It is good for those young people who are making a start out there. They want to actually get some reward for their hard work. They do not want to be just looked down on; they want to be told they are doing the right things for themselves and for their country. Through the independent earner tax credit we are giving them that support. We are going out there and saying they are doing the right thing and we are going to help them and make them more successful and give them the opportunities that they desire in their lives. 
That is what this legislation is about. It is about giving the right start for New Zealanders in a tough time because it is tough out there and the world economy will get tougher. We need to give New Zealanders the ability to get through this tough time and in order to get through it we have to give them some money in their hand which is what this tax cut programme is about. It is about giving some stimulation to the economy. 
Hon PHIL GOFF (Leader of the Opposition) 
: 
 I want to know what David Bennett will say when he goes back to Hamilton East and talks to the folk who come into his constituency clinic—presumably he has one—who are earning between $14000 and $24000 a year. What will the member say when they say: “Mr Bennett you promised us a tax cut but under your tax changes we are paying more tax.”? What answer will Mr Bennett give to the people in Hamilton East? What about when the hard-working family that Mr Bennett has just told the Committee he is representing comes in? They are earning less than $44000 and they will come in and say: “Mr Bennett you said you were going to look after the hard-working battlers in your electorate but under your tax changes—the National Government’s tax changes—we’re paying more tax.” What will Mr Bennett say to those people? 
The title of this part of the bill—“Personal tax cuts”—is a lie. It is a lie for many New Zealanders because for lower-income people the hard-working battlers of this country these so-called tax cuts are not tax cuts at all; they are tax increases for those people. The Labour Party will vote against this legislation because of the unfairness of it. We know that people at the bottom of the heap—the people who struggle to pay the bills the people who struggle to get their kids to school and to meet the cost of living—get nothing from the National Government. But if we turn up at a decile 10 school where the children’s parents are earning big money we see that they will be getting hundreds of dollars of tax cuts. 
The ordinary New Zealander has a sense of fairness. The ordinary New Zealander believes that people need to be given a fair go. Sixty-six percent of Mr Bennett’s electorate is earning less than $44000— 
Hon Parekura Horomia 
: How many? 
Hon PHIL GOFF 
: Sixty-six percent. I ask Mr Bennett what he will say to the battlers to explain why they are paying more tax while those on a good income such as Mr Bennett himself will probably get $100-plus in tax cuts. I ask Mr Bennett where the fairness is there. There is no fairness and that is why we are opposed to this bill. 
The rhetoric that we heard in the Speech from the Throne was about how this National Government was not going to tolerate an underclass and how it was going to stand up for the rights of the everyday New Zealander. What about the everyday New Zealander who was promised a tax cut by the National Party in Opposition and now finds that in fact he or she will be worse off than if there had been a Labour Government and they were receiving the tax cuts that had already been legislated for? What about a couple where the man is earning $35000 a year? Many people in Mr Bennett’s electorate are in that situation: the man is earning $35000 a year and probably is working in a factory; the wife may be earning somewhat less—say $22000 a year—because she is looking after the kids. They will actually be $14 a week worse off because of the so-called tax cuts that Mr Bennett has just got up in front of this Committee to defend. What will Mr Bennett say to those people? I would like to know the answer to that. 
Hon David Parker 
: “Sorry.” 
Hon PHIL GOFF 
: “Sorry.” That is what he will have to say. “Sorry. Oh you didn’t read the fine print?”—as Mr English said—“It was all there. We didn’t say it—we put it in the fine print.” That couple did not read the fine print so I am sorry but caveat emptor they have ended up with a National Government cutting their living standards not raising them as they had been promised. 
The truth is the National Government does not give a damn about the Kiwi battler. Those members do not even pay lip-service to the decent society that Jim Bolger once talked about. What happened to the decent society? What happened to that sense of fairness? The truth is that the people who will be paying more tax are the same people who are most vulnerable to job loss. As we saw again from the Speech from the Throne there is no plan and there is no vision from this National Government about how it will protect people’s jobs. It can talk about tax cuts till the cows come home but if one does not have a job then a tax cut is no use. There was a lack of planning by National. It wasted 9 years in Opposition. It had no plan to deal with a situation where jobs might be threatened. 
The people whom we heard about yesterday are the same people who will be denied protection against unfair dismissal. In the first 3 months of their working life they can be sacked for being pregnant sacked for their eyes being the wrong colour and sacked for standing up for their rights and there is no right for them to get redress for the unfairness of those actions. 
I tell Mr Flavell that I have a question for the Maori Party. This legislation is the first test for the Maori Party in this House. This legislation whose first reading was voted for by the Maori Party will damage the economic interests of almost all of that member’s constituents. The Maori Party members are collaborating with the National-ACT Government in doing that. This legislation is the first test for the Maori Party members as to whether they would stand up for the interests of their electorates and they have been found wanting. They have been found wanting because they are supporting this legislation which undermines the rights the income and the living standards of ordinary Maori working families who will be punished by this legislation. Those families will say to you Mr Flavell that you will go the same way as other Maori electorate members who made promises then joined with a National Government—Maori electorate members collaborated with the last National Government—and failed to deliver and to stand up for the rights of your people. You should hang your head in shame at what you are doing in the Chamber today. 
Hon Bill English 
: I raise a point of order Mr Chairperson. This member seems to be unaware of the Standing Order that we cannot address members of Parliament in that fashion—quite apart from the very distasteful language he is using. He was told yesterday by the Speaker not to use that terminology. He is doing it again today and I suggest that the Chairperson advise him to become aware of the Standing Order and to practise applying it in the Committee. 
Hon Darren Hughes 
: The Deputy Prime Minister has a habit of taking this point of order when Labour members are speaking. The speaker before Mr Goff Mr Bennett repeated exactly the same phrase all through his speech but we did not pull him up on it. We let the debate flow. The Deputy Prime Minister has decided he will raise this point whenever a Labour member is speaking. I thought we had one standard of citizenship in New Zealand. 
Hon Trevor Mallard 
: I think it is also important that when the Deputy Prime Minister opines on these matters he is accurate. There are Speakers’ rulings on this matter; I think he will find that there is not a Standing Order. I think he should have a bit of a look at the Standing Orders and the next time he goes to break up a speech at least get it right. 
Chris Tremain 
: I will speak to the senior Opposition whip’s comment about our being the only ones today to bring up the point about incorrect use of “you”. The Hon Trevor Mallard over there has brought it up on numerous occasions. In fact throughout the second reading debate he brought up that point. 
The CHAIRPERSON (Eric Roy) 
: Let me make a quick ruling. Firstly members know that they must raise a point of order at the time—that is important. Members cannot say that because they did not raise a point it should not be raised. It is a matter of whether the institutional understanding and rules of the House are being broken 
. 
 That is the first point. With regard to the point of order I think the Committee needs to bear in mind that when it moves away from a certain standard of decorum that does bring a degree of unrest within the Committee which is not helpful to the debate. I ask the member to continue and to bear in mind the points I have made. Thank you. 
Hon PHIL GOFF 
: Thank you very much Mr Chairperson. The first reason we have opposed this legislation is its inherent unfairness. The second reason is just as legitimate. It concerns how these tax cuts will be paid for. The first way in which they will be paid for is through cutting $1.5 billion out of research and development. At the time when New Zealand needs to be smarter than its competitors this National Government is paying for short-term tax cuts by undermining the ability of our economy to be smart to be innovative to be creative and to be competitive. One award-winning exporting company Endace Ltd made the comment through its chief executive Mike Riley that this cut flies in the face of the knowledge economy. We know that New Zealand as a small and geographically isolated country needs to be smarter than its competitors. That cut to research and development undermines our ability to be smarter and undermines the ability of our industry to create the jobs we need to move forward in the world. 
The second thing that is cut of course is KiwiSaver. Every economist for decades has told New Zealand that New Zealanders need to be greater savers. 
Chris Tremain 
: I raise a point of order Mr Chairperson. We are on Part 1 which deals with tax cuts but the member is talking about KiwiSaver and research and development tax credits which have nothing to do with Part 1 at all. 
The CHAIRPERSON (Eric Roy) 
: There is a certain degree of flexibility. Members can raise issues for purposes of comparison. I do not think the Minister—no the Hon Phil Goff—had strayed too far away from that. Thank you. 
Hon PHIL GOFF 
: Your form of address is 2 years and 10 months premature Mr Chairman! 
The second way in which the tax cuts are being paid for is by gutting KiwiSaver—taking $3.5 billion out of the savings accounts of New Zealanders who for the first time in our history have been given the opportunity and the motivation to save. This bill is a disaster from that point of view as well. 
JOHN HAYES (National—Wairarapa) 
: 
 I rise to speak to Part 1 but first I congratulate you Mr Chairperson on your appointment as Assistant Speaker of this Parliament. Secondly I want to address a couple of the comments made by the Leader of the Opposition who will be ankle-tapped by Shane Jones before he gets to 2 years and 11 months from now. 
The difficulty we face in this debate as politicians is that the community wants more police to be on the streets. It wants better health services it wants lots of big roads it wants excellent welfare benefits and it wants to pay lower taxes. People want to pay lower taxes and that is why they voted against the last Labour Government. They knew that too many taxes were being collected which were being spent inefficiently. We on this side of the Chamber want to avoid inefficiency because if we did not we would pass up the opportunity to make somebody better off at no cost to anybody else. That is what we do by increasing efficiency. 
But taxes by their very nature cause some inefficiency and most of us think we need to pay less tax. Most of us think—and this is the essence of the Labour Party’s argument—that taxes are about only the redistribution of income to a lesser or greater extent from the rich to the poor. 
Hon Trevor Mallard 
: This is redistribution from the poor to the rich. 
JOHN HAYES 
: Well we have two contradictory imperatives I tell Mr Mallard. The first is to avoid needless waste—and he wasted plenty particularly through Sport and Recreation New Zealand—and the second thing is that we want to decrease inefficiency and increase efficiency while making sure that wealth is at least somewhat evenly distributed. 
This legislation aims to make the New Zealand economy both efficient and fair—both efficient and fair. If we look at the actual cuts that are being made we see there is no change for people at the bottom of the income levels. Those who earn less than $14000 a year will pay 12.5 percent in tax. The next step to increase efficiency and put more money in the pockets of individual taxpayers applies to those who earn $14000 to $48000 a year who will have a 21 percent tax rate. The maximum income for that group will be moved to $48000 a year so those earners will be significantly better off. 
We want to put more money in people’s pockets. We want to stop them leaving at a rate of 80000 people a year and going to Australia. People deserted Labour but National is interested in keeping those people in this country. 
I will address the comments made by the Leader of the Opposition when he said we were cutting research and development payments. That is completely untrue. He was arguing that there will be a huge drop in research and development in this country. That is not the case at all. Labour’s policy involved borrowing $700 million and in year 1—this next financial year—paying out $20 million for research and development in year 2 paying out $30 million and in year 3 paying out $40 million. That is not what we are doing. We are paying out $75 million a year over each of the next 3 years. That is significantly more than what Labour was going to pay for research and development but we are doing it in a different way from Labour. We did not have to borrow $700 million in order to kick off that fund and that is why we are able to start from lower base borrowing than the Labour Government did. 
This is not a 1-year programme; Mr English has been extremely ingenious in constructing this tax package. In the year from 1 April 2010 for the earners group of $14001 to $48000 a year we will lift the limit to $50000 a year and give those people a tax cut. We will increase the tax cut available to people earning from $50000 to $70000 a year. Again in year 3—in 2011—people in the $14000 to $50000 a year earners group will get a significant reduction in tax. That will be the pattern in every year. Why will we do that? We need to put money into people’s pockets. When I go to Kuripuni in Masterton in my electorate I see people who are on an average wage of $12 to $15 per hour. We need to help those people because they have children to bring up holidays to take and transport to pay for. Tax cuts will pay for that. 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 I think that John Hayes who I understand comes from Wairarapa has an incredible cheek to speak on the Taxation (Urgent Measures and Annual Rates) Bill because Wairarapa other than the electorate of Dunedin North which mainly consists of students is the electorate in the country with the most people aged 15 years and over who earn $40000 or less. This is the very group that has been most attacked by this legislation. I do not know whether John Hayes is thick whether he has not read it or whether he is being a hypocrite. I do not know which of those things he is doing but I will leave one out and just say that he is silly. It is one or two of the other words. 
Hon Member 
: Why don’t you just come across and punch him. That’s a good idea. 
Hon TREVOR MALLARD 
: No no. Next time he tries to throttle me I will. 
Getting back to the legislation I say that John Hayes did not understand the way that thresholds interplay with rates. As a result of this he did not understand what was in the legislation that is now being taken out. The tax changes previously legislated for the threshold rate currently at $14000 going to $20000. The effect of this change means a loss of almost $500 a year to some of the poorest income earners. That is without doing some other things as well that impact on them in the KiwiSaver and other changes. 
I ask John Hay whether when he goes to Masterton East to the poorer areas and to some of those schools he will explain to people that he is putting his hand into their pockets taking their wallets and taking out $9 or $10—not a year but every week. I wonder whether John Hay is prepared to act as a personal tax collector for the chief executive of Telecom whether he is prepared to wander around 50 Maori families to take $10 a week from out of each of their pockets and hand it over to the chief executive of Telecom who gets the extra $500. Is John Hayes prepared to work his way around? 
Craig Foss 
: His true colours are being shown right there. 
Hon TREVOR MALLARD 
: No no. I am making it very very clear that the Maori Party is collaborating with this change which will result in John Hay going around Maori families and getting the tax collector to put his hand into the pocket of those Maori families—not all of them only the poor ones—and taking out from their pockets $9 or $10 a week and handing it over to the chief executive of Telecom and his like. How many Maori families will John Hay have to go around in Masterton East? He will have to go around about 50 or 60 families to collect up the tax cut which is being handed over to people on the highest incomes in New Zealand. As well as that will he be prepared to tell the people in Masterton that the taxation bureaucracy in Wellington will climb enormously to handle the provisions of clause 12 which is within this part of the bill? 
The CHAIRPERSON (Eric Roy) 
: Speakers’ ruling 26/7 is quite specific about the use of the correct name. The member of Wairarapa whom you were referring to as Mr Hay is actually Mr Hayes. It is a small point but if we do not use correct names names can be used in a way that is inappropriate. 
Hon TREVOR MALLARD 
: Which one is the correct one? 
The CHAIRPERSON (Eric Roy) 
: Hayes. 
Hon TREVOR MALLARD 
: Thank you Mr Chairman and I apologise to the member. He is one of a number of the back benchers who have not quite made an impression over the 6 years that they been in Parliament. 
Hon Member 
: Only for 3 years! 
Hon TREVOR MALLARD 
: No wonder I did not notice him in the first 3 years. 
Returning to the bill I ask the Minister in the chair Bill English who I understand will take a call what the extra budget is for the Inland Revenue Department to implement schedule 1 in clause 12 of this bill. Clearly this will involve a lot of extra work for the Inland Revenue Department. It will require extra staff and I want to know whether these extra staff have been provided and what the costs of those extra staff are to implement the schedules of the bill. I want to know from the Minister of Finance whether these staff will be regarded as front-line staff or not. Are the people who are working out these credits and it might be a very cunning job creation scheme on the part of the National Party— 
Chris Tremain 
: I raise a point of order Mr Chairperson. We are wandering way off Part 1. Tax credits are in Part 3 of the bill. This is Part 1. Can you bring the member back to the part please. 
Hon TREVOR MALLARD 
: Speaking to the point of order I point out that clause 12 is in Part 1 and it is the clause that puts in the schedule that implements the employers’ superannuation contribution tax. 
The CHAIRPERSON (Eric Roy) 
: I will not uphold the point of order. 
Hon TREVOR MALLARD 
: The point I was getting to is that the bureaucracy that will be involved in this could well be a cunning job creation scheme to make sure that the unemployment in the electorate of Wellington Central—the electorate of Grant Robertson—does not fall. I want to know whether that is a deliberate policy. And I want to know from Sir Roger Douglas whether he regards clause 12 as something that is efficient that is pure and that works towards a fair tax system or whether he regards it as something that pushes up the marginal tax rate—the effective tax rate—for a lot of lower and middle income earners. Because that is what it does. It pushes up the marginal tax rate and at the same time it requires a bureaucracy of tax officials in order to check probably tens of thousands—and maybe hundreds of thousands—of returns to make sure that people are eligible. In fact it puts a whole new group of people into the group who have to file returns in order to get changes in tax rates. 
We have had quite a good system over the past few years in New Zealand where fewer and fewer people have had to file tax returns because it is all done as part of the wash-up and if people consider they have been fairly treated then they do not have to file a return. One of the effects of this bill will be that a whole new group of people probably hundreds of thousands of people will have to file a return which then has to be processed. And we have to employ people to process it. Rather than moving towards being efficient towards being proactive and towards chasing some of the delinquents in the way that has been done under the previous Minister of Finance—and that has had I think it is fair to say very good effects on the revenue—we will have as a result of clause 12 in Part 1 a new army of people who look at the forms being sent in load them into the computer and then check them at the end of the year— 
Hon Annette King 
: Is it definite it’s a wash-up yearly or— 
Hon TREVOR MALLARD 
: No no; it can be in the wash-up yearly or it can be the other way. It does not matter; whichever approach is taken there needs to be either bureaucrats at the front end or bureaucrats at the back end if it is to be done as a wash-up. As a member of the Labour Party and somebody who has had a lot to do with the Public Service Association (PSA) I welcome the approach of the Minister of Finance in building PSA membership. Building up PSA numbers is I think a good thing to do. 
Hon BILL ENGLISH (Minister of Finance) 
: 
 It is interesting hearing from a Leader of the Opposition who cannot tell the difference between a decile 1 and a decile 10 school and I expect that reflects the kinds of dilemmas that the Labour members will have to deal with over the next few years as they try to decide who they are. Let us just—[ 
Interruption 
] Well the public is not listening either to be quite frank. I think that is the difference. 
Let me make a couple of points clear. This is a different tax package from the previous Labour Government’s tax package. There has been ample opportunity over the last 12 months for everyone to poke and prod and discuss the details of it and the public did that. Then there was a general election. The only reason we have this bill with the National Party’s tax package in it is that the public of New Zealand voted in a different Government. If the public wanted the former Labour Government’s tax package they had the opportunity to vote for it and they did not. 
One of the reasons they did not is the spin and crocodile tears that the nasty dirty previous Labour Government had got into the habit of using. Let us just look at some of the stories Labour members are telling. The member from Hutt South—I do not know how he managed to win the seat actually—talked about taking cash out of people’s pockets. 
That is actually just wrong. No one is going to be worse off as a result of our passing this legislation. 
Hon Darren Hughes 
: Oh yes they are. 
Hon BILL ENGLISH 
: No they are not. The Labour Party keeps putting up some cases where if Labour had been re-elected and if it had kept its promises about taxes which it never did before then some people would have got more. That is bound to be the case when this is a different tax package. The thresholds and rates are different. But let us talk about some of the people— 
Hon Darren Hughes 
: That’s intellectually dishonest and the member knows it. 
Hon BILL ENGLISH 
: Well it is just a different tax package. I know the Labour members find it very difficult to understand that if one gets elected into Government it is to execute one’s policy and that when one gets thrown out of Government it is because people did not want one’s policy. 
Hon Darren Hughes 
: Arrogant! 
Hon BILL ENGLISH 
: Well no; that is what the voters think. I just accept their verdict. 
Let us take some of the people whom Labour members say they are crying about—the 630000 low-income New Zealanders who will get the independent earner rebate. They got nothing under Labour in 9 years of low incomes in the best economic period of a generation and they know that. Every person without children who was earning under $44000 got nothing—nothing. Full-time earners earning $24000 to $44000 got zero. The reason families do not get a big benefit out of this package is that in the last 2 or 3 years they have had big benefits. Their after-tax incomes have gone up very substantially. National has locked in the Working for Families package in its entirety and now it is the turn of the 630000 people for whom those members now cry crocodile tears but for whom for a decade they did nothing to help. Now it is their turn and National is delivering a tax package that will give 630000 low and middle income earners—yes; members of unions who voted for us because they thought Labour would give them something—some benefits. 
Those people waited loyally for a decade and they got nothing and Labour is telling us today that we are making a mistake in giving it to them. Well that is what we will say when we go back to our electorates to people earning $35000 who got nothing from Labour in 10 years. We will say that we promised them something and here it is and that Phil Goff is trying to stop it—630000 people. The Labour caucus thinks that Mr “Phil-in” is the answer. Well the reason he is not the answer is that he has not understood that fundamental political problem for Labour. 
These personal tax cuts deliver substantial weekly gains to the 630000 people who were ignored by Labour despite the fact that in three elections in a row a good proportion of them voted Labour. That is why those Labour members are out of touch and out of Government. Those people got tired of being told that it was the students it was the people with families or it was the bureaucrats who would get the next $300 million but those hard-working battling Kiwis who do not happen to have children would get nothing. 
This is a balanced package because we are locking in the gains families made which were considerable and we are keeping them in their entirety— 
Hon Dr Michael Cullen 
: Oh what a generous man. 
Hon BILL ENGLISH 
: —we cannot have everything I say to Dr Cullen as he used to tell everybody—and we have added to that a mechanism that provides increasing weekly incomes for 630000 people who earn under $44000. These are not the higher-income high fliers. These are Mr Cosgrove’s heartland voters which is why he lost the party vote in his electorate. I ask when Labour members are going to figure that out and when they are going to figure out that some people hearing the crocodile tears today from Labour just will not believe it because they know it is wrong. 
What about other people who earn under $20000? Well 300000 of them are beneficiaries. I ask what the Labour Government did for those people through a decade of the best economic times we will see in a generation. Mr Goff did not mention them but I bet he will now he is in Opposition. He will go on and on about what National is doing to beneficiaries when he did nothing for them. When Labour members go on about who is affected by the changes in these tax rates I say that a big part of that group under $20000 are beneficiaries. The other group are superannuitants. Superannuitants are the biggest single group who earn under $20000 and they are considerably better off as a result of these tax cuts. In our constituent clinics we are going to say to them: “We promised you more super through lower taxes and we have delivered you more super through lower taxes. It’s that simple.” They’ll go: “Well that’s a fair cop. I didn’t vote for you but next time I will because you kept your word.” That is the other big group under $20000. 
The Labour Party will cry crocodile tears. There will be some people where the rates and thresholds mean that compared with what Labour would have done if it had been elected— 
Hon Dr Michael Cullen 
: No it’s the current law. 
Hon BILL ENGLISH 
: Well the 2005 “chewing gum tax cuts” were the law and we remember what happened to that. Broken promises on tax cuts meant half the people did not believe Labour would keep its promises on these tax cuts. 
Hon Darren Hughes 
: That’s not true. 
Hon BILL ENGLISH 
: Well I ask why Labour members are in Opposition if they had such a magnificent tax package. It has to be because people did not believe them and they were right not to believe them because the last time Labour made promises about tax cuts it broke those promises. 
This bill is a step in a direction of a broad based - low rate tax system. It delivers benefits for many people who missed out on the benefits of economic growth in the last 10 years and we are very pleased to support it. 
Hon ANNETTE KING (Deputy Leader—Labour) 
: 
 What a collection of blatherskite we have just heard from the Minister in the chair the Minister of Finance!. He was trying to put the Tory spin on policy that is going to hurt the most vulnerable in our society. It does not matter how Mr English cuts up the Taxation (Urgent Measures and Annual Rates) Bill package here in this House: we know the truth about what is happening to vulnerable New Zealanders today. 
He had the cheek to tell this House and New Zealanders listening that if we had wanted to discuss the National Party’s tax policy we had had a whole year to do so. That is what he told us. Well I have to say to Mr English that his nose grew an inch because the National Party released its tax policy in October this year and New Zealanders and this House had no opportunity to debate it. People on the hustings had to get what information they could from a website. They had to scrounge for information in order to be able to debate that policy. That is the truth of the matter. The National Party released its policy in October this year. 
I ask why it would release it so late. It was because National did not want scrutiny of its tax policy. It did not want New Zealanders to know that it was going to pull the biggest Christmas hoax on New Zealanders that anyone has pulled since Ruth Richardson in 1991. That is what National was doing. Mr English backed up Ruth Richardson then and he is doing it now. She was the mistress who taught him the tricks he is using now when he has the opportunity. 
Mr English said this bill is going to help hard-working Kiwis who had got nothing under a Labour Government for 9 long years. He referred to people who did not have families. He said the Labour Government had looked after those with families. Of course that was “communism by stealth” a few months ago and National voted against it at the time; now it has adopted it. But he did say that we had looked after families. What National has bravely and courageously done is to look after people who have not got families—hard-working poor New Zealanders. Mr Bennett is shaking his head. I hope he realises that hard-working poor New Zealanders must have a net income of $24000 before they can access National’s independent earner tax credit. So the lowest-paid New Zealanders who do not have children the most vulnerable who probably have a gross income of around say $30000 do not get anything. I ask Mr English why they are not included. I ask why they do not get the tax credit which he said was for the battlers the hard-working Kiwis of New Zealand. They do not count. They do not count because they do not vote National. That is how cynical it is. This policy is not about giving something to those who have not got children; it was a smart little manoeuvre during an election campaign to try to garner a few more votes. 
Perhaps Mr English will tell us what happens to the hard-working battling Kiwi families who earn $23500 net—the husband and wife both earning $23500—and whether they get this tax credit. No they do not qualify. They have a very low income they are working hard but they get diddly-squat. The words about caring about New Zealanders the low paid the vulnerable and the underclass of New Zealand are nothing more than a hoax on the people of New Zealand. I ask why this tax credit does not cover all of those people if caring about New Zealanders was the genuine intent of the National Party. We have seen through the tricks. 
I just have been in a taxi. We all know that taxi drivers know everything. They are already starting to wonder what this is all about. National has been in this House for 3 days and its first attacks are on the vulnerable New Zealanders. Its first attacks are on women children the low paid and the people who do not have children—the very ones National said it was going to support. I can tell members that in my own constituency of Rongotai almost 30000 people earn less than $40000. In some way or other they will be affected. 
Dr PAUL HUTCHISON (National—Hunua) 
: 
 Thank you Mr Chair for the opportunity to speak on the Taxation (Urgent Measures and Annual Rates) Bill Part 1 “Personal tax cuts”. It is absolutely extraordinary that the Opposition— 
Hon Dr Michael Cullen 
: Speak up for the common man. 
Dr PAUL HUTCHISON 
: I missed that. Would Dr Cullen like to say it again? 
Hon Dr Michael Cullen 
: Speak up for the common man. 
Dr PAUL HUTCHISON 
: Absolutely because that is what Dr Cullen did not do back in 1999 when he said he would raise New Zealand to the top half of the OECD. I ask members what happened. We went down two slots and that affected the common man very very deeply. 
Mr Chairman I personally congratulate you on your appointment as Assistant Speaker. I am sure you will do an absolutely superb job. 
What I think is extraordinary is that this tawdry Opposition has not made any mention of the fact that we are in urgency over this bill. It is absolutely right and proper that this is going through under urgency because after all it has taken 9 long years of a very tawdry Labour Government before finally the New Zealand people are going to receive this well-deserved tax break. It is also quite extraordinary and ironical that when the Labour Government came into power back in 1999 the very first thing it did was to raise personal tax from 33c to 39c and that was very ably pointed out by the new ACT member John Boscawen an hour or two ago this morning. 
The very thing they did was to curb personal freedom and to curb incentives and signals for thrift enterprise and reward for effort. And it is no wonder that record numbers—tens of thousands—of New Zealanders have left this country for Australia. They left because the Labour Government had no understanding of the fact that New Zealanders wanted to have incentives to ensure they were indeed rewarded for effort. In the last year 80000 people left. New Zealanders left in huge numbers because they realised that the Labour Government was mediocre and had already caused New Zealand to go down two places on the OECD ladder. That of course very much affects the common person and affects his or her standard of living. 
After all it was Dr Cullen who mentioned Labour’s legacy of 1990. Dr Cullen should remember that in 1990 New Zealand was technically bankrupt. Unemployment was at its highest level inflation was about 7 percent and interest rates were 22 percent. But let us shift on to 2008 after 9 years of Dr Cullen’s regime. His Government came into office with a growth rate of 4.6 percent and ever since it has gone down and down. His Government came in with a growth rate in the last quarter of 4.6 percent and ever since then it has gone down. 
Look at it now. Look at the dire predictions of Treasury and the Pre-election Economic and Fiscal Update of 10 years of deficits. [ 
Interruption 
] Well I say to Dr Cullen that he is part of the fault; there is no doubt about that. That is the legacy left by Labour and that indeed is part of the reason that so many New Zealanders have been leaving for Australia over the last 9 years. 
The other point of course is that these personal tax cuts outlined in Part 1 are absolutely central to the concept of personal freedom and to the concept of reward for effort. This is something espoused by the National Party since 1936 as fundamental to getting an enterprise economy and resisted year after year Government after Government by the Labour Party. That I say to Dr Cullen is why he is over there. 
Hon PAREKURA HOROMIA (Labour—Ikaroa-Rawhiti) 
: 
 I think Treasury was quite clear on the platform that has been left by the well-managed Labour Government of the last 9 years. It has been quite specific about the performance and the free way forward for the Minister of Finance. The last speaker talked about 1990. I remind him about 1999 when in relation to Maori people the unemployment rate was tracking at 28 to 32 percent. When our term in Government finished it was tracking at 5 percent. At the end of the 9 years—during the last 3 years—Maori were going into the workforce at the rate of 4 to 1. That represents the very very important effort that went not only into Maori but into all people in this country. 
It was really interesting to hear Mr Bennett talk about redistribution. He was quite right: it is redistribution of money from the poor and those who need it to the wealthy. He is revelling in those who are milking the till in his dairy-sodden area of Hamilton. And it is important to understand what Mr Hayes was trying to say. The National members opposite are making sure they are making hay over there but this budget hints at what is to come in their period in office. One does not need to be a rocket scientist to understand that this is one of the worst starts—one of the most overrated starts—by a financial manager in relation to a parliamentary session. This measure is disgraceful. It punishes the people who need the money and it is being done with an attitude of arrogance. Mr Hayes will remember that in the time of the last National Government all the State houses in the Wairarapa were sold. A whole lot of hinting is going on by this Government’s financial manager. There are hints that no more State houses will be built and that landlords will have the right to manage housing issues in this country. 
This measure is about redistributing money that is not National’s—$3.5 billion out of KiwiSaver. That is outrageous. My plea to the Maori Party is not to support this bill because it will hurt Maori people. It will hurt them badly. In terms of incomes of up to $40000 a year 73 percent of Maori will not get anything in this budget— 
David Bennett 
: Budget? 
Hon PAREKURA HOROMIA 
: In this allocation. Last night Nick Smith said that this was the politics of envy. That was said in relation to the example we brought up of someone who was benefiting from Working for Families and KiwiSaver and who has one child and earns $50000 a year. He or she would lose $80 a week. What is the answer to that? It is outrageous. Bill English is pitching up the macro and making out that research and development funding is something this country does not need when the unions the Business Roundtable and the Government agreed that would be the best injection to go forward on. 
I ask the Maori Party what it is going to tell the 73 percent of our people who are working and who will get nothing in this budget. What are we going to do about that? Where is the improvement for our people that was promised by the National Party? Maori were hoodwinked going forward in relation to this financial statement. Mr English goes on about giving a fair go to earners who do not have children. It is fascinating when we line that up alongside the entry on KiwiSaver. He is going to take a fair bit out of research and development but there is no mention of how much people will lose in relation to knocking KiwiSaver down. 
This measure is a disgrace. This is one of the most hurting entries in a parliamentary session for our Maori people and the Maori Party is going to vote for it. Hone Harawira knows it is wrong. The members of that party are going to vote for this measure. They are going to support something that undermines the rights of their people and they want to talk about other issues. But in relation to income—[ 
Interruption 
] What will they tell people in Flaxmere? What will Chris Tremain tell people when I see him wandering around there? What will he tell people in Camberley? He has nothing to tell them and he knows that this issue is right on his doorstep. He knows that the people sitting in his electorate will be hard done by under this legislation. This bill is not fair and the member knows that full well. 
At the end of the day this measure is not an improvement. It is bad for Maori people and the Maori Party should vote against it. It still has time to do that. 
CHRIS TREMAIN (Junior Whip—National) 
: 
 I move  
That the question be now put 
. 
Hon CLAYTON COSGROVE (Labour—Waimakariri) 
: 
 I rise to speak to Part 1 in relation to the thresholds and it is interesting that the Government moves so quickly to close the debate down. Again I want to comment on a point made by Mr English. He made great play when he got up to speak to Part 1 about the level these so-called tax cuts had dropped to. He alleged that the Labour Government had done nothing for low-income people. He talked about beneficiaries and said that the Labour Government had done nothing for these people. Of course the Labour Government did do a lot for beneficiaries. The primary thing it did was to give most of them a job. It created 350000-plus jobs through its 9 years of Government. 
But I just raise this point with Mr English and I would be indebted if he would answer it. It is Mrs King’s point in relation to the thresholds abating at the lowest level and the independent earner tax credit. I think he quoted the fact that 600000 low-income people were going to be helped by this tax package. But I again put this scenario to him and I would be grateful to hear his answer. A person on $23999—someone who does not breach the $24000 threshold—gets nothing. So let us say that we have a person on one side of the fence who earns $23999 and gets nothing and has a neighbour on the other side of the fence who earns $24000 and kicks in and gets the tax credit. Well what is fair about that? The so-called low-income people that Mr English—late in life in his career in politics—says he has decided to actually think about and maybe do something about will get nothing from this package. I invite Mr English to deal with that point. We are debating the tax thresholds kicking in and abating whereby if I am on $23999 I get nothing but my neighbour across the fence once this kicks in at $24000 will get something. I am addressing the Minister’s point in rebuttal which is valid because he got to his feet and raised that point. 
I would like to know where that person will acquire the aspiration that National kept talking about during the election. How will that person choose a brighter future? Does a brighter future even exist for that person? Where would that person go hunting for it? That was the aspirational rhetoric used by Mr English during the campaign. One would think that everybody was sucking up aspiration through every pore. Well a person on $23000 who does not breach $24000 ain’t getting a lot of aspiration ain’t getting a lot of help and ain’t getting any assistance at all. These single people with no kids the quartile that Mr English says his Government will help will get nothing. 
National members did not campaign on this package but Mr English says they went around the country and line by line every person went through it with a microscope. He said they were all told exactly what they would get. Well this huge group of people I referred to must have been told they would get nothing. 
John Hayes 
: No. 
Hon CLAYTON COSGROVE 
: In fact they were not told. It was never announced. There is a word for that behaviour. If members look at page 2 of the  
New Zealand Herald 
 they will see that people earning less than 40K will get zip. That fact was never canvassed with the electorate at all. I invite Mr Hayes to go and find 10 or 20 of his constituents on $23999 singles and say to them: “You knew that we the National Party in Government were going to give you nothing.” I invite him to find five people or even two people. 
Hon Annette King 
: Did he tell them that? 
Hon CLAYTON COSGROVE 
: Did Mr Hayes tell that to his constituents? Oh no. I bet he could not find one person. He should take out an advertisement in his local paper inviting all those people on $23999 with no kids who will get nothing from this package to write to him and confirm that they knew all about this before they voted at the election. I doubt he would get one reply. 
John Hayes 
: 12.5 percent is just brilliant. 
Hon CLAYTON COSGROVE 
: I put a question through the Chair to Mr Hayes: “Can you name a person in your electorate who knew about this? Did people know about this?”. I bet they did not say that to the Sir Les Patterson of this Parliament. They did not know about this at all. 
DAVID BENNETT (National—Hamilton East) 
: 
 It is with great consideration that I move that the question be now put. 
The CHAIRPERSON (Eric Roy) 
: No the member is out of order. 
Hon DAVID PARKER (Labour) 
: 
 We have heard Government members extolling the affordability of these tax cuts and then in the same breath saying that they have inherited a difficult set of financial cards from the Labour Government. I want to put on record the nonsense that has already been written into history by the previous National Government. It left the prior Labour Government with debt that was 35 percent of GDP. 
Hon Parekura Horomia 
: How much? 
Hon DAVID PARKER 
: It was 35 percent of GDP. Not as bad as the National Government before that which left the Labour Government with debt at 60 percent of GDP but still too high. We inherited debt equal to 35 percent of GDP. We reduced it during the 9 years of wise stewardship under the Labour Government to 17 percent of GDP. The fiscal position of the Government is very very good. We are hearing exaggerated rhetoric from the National-led Government that is now complaining that there are all sorts of hidden expenses. It is overstating things in respect of accident compensation. National members are saying that they have all sorts of problems and a difficult set of cards to play from here on. But the reality is that they have had a very good set of fiscal settings left to them—debt at 17 percent of GDP and low unemployment amongst the lowest unemployment in the world—and they still complain that they have a difficult set of cards. Over the next 3 years we will hear National members say they cannot do this they cannot do that and that it was the Labour Government’s fault. 
But the reality is different. National has inherited an almost unparalleled position compared with most developed countries in the world. We are in a position to help people in New Zealand get through this recession but this bill does not do it. It does not help the people who need it most. Low-income people do not get help under this bill. In fact money comes out of their pockets not just out of the pockets of those in KiwiSaver although all of those in KiwiSaver are worse off no matter what their income is. All those who are on lower incomes even if they are not in KiwiSaver are worse off under Part 1 of this legislation. It is disgraceful. National is saying that Labour did not do enough for low-income people who did not have children. Yet this bill ignores the lowest-income group without children and does not give them any help. The National Government is set to increase New Zealand’s debt in a way that is unnecessary by giving greater tax cuts to those who are already well off nothing to those who are worst off and not changing the position of those families with children who have rising costs to meet and increasing debt. We will see increasing unemployment. 
At the same time the Government is gutting the research and development effort that we need to fund our growing economy. Research and development expenditure in New Zealand is quite good at the Government level and it is poor at a private sector level. The research and development tax credit which this part of the bill abolishes through the schedule matches New Zealand’s position to Australia and indeed in some ways betters it. But this bill tears out that research and development tax credit in order to fund tax cuts for those who need those tax cuts less than the lowest-income people who do not get anything under this legislation. 
The other anomaly here is that we have had 3 years preceded by 3 years and preceded by 3 years before that of the National Government saying that the threshold at which the highest marginal tax rate cut in was too low. It complained that the $69000-income level at which the highest tax rate cut in was too low a threshold. The Labour Party in its tax package increased the threshold for the highest marginal tax rate to cut in at $80000. What does this bill do? It does exactly the opposite of what the National Party said should happen. It actually drags back the threshold so that the highest tax rate cuts in at $70000. That is the exact opposite of what National said for 9 long years in Opposition should be done. Nine years in planning what National should do with tax and it dishes up this irrational piece of legislation. 
CRAIG FOSS (National—Tukituki) 
: 
 I move  
That the question be now put 
. 
Hon NANAIA MAHUTA (Labour—Hauraki-Waikato) 
: 
 The Maori Party members must be hanging their heads in shame on this bill right now. They must be shaking their heads because I am absolutely sure that when they walked into their mana-enhancing relationship they did not realise they were delivering hardship to vulnerable families—or maybe they did realise that. At no point during the election campaign when they were championing the rights of vulnerable people of Maori families of young people of poor people and of people without work did they think that they would be supporting a measure like this which delivers tax cuts to those who really do not need them at the expense of the poor the vulnerable and the children in many of our communities. They must be hanging their heads down in shame. 
We know that 74 percent of the people in Te Ururoa Flavell’s electorate of Waiariki earn less than $40000. Yes 74 percent of families in Waiariki earn less than $40000. So when we look at who will really benefit from this measure we see that not many families in Waiariki will benefit. Clayton Cosgrove raised the point that people earning around $23999 will get absolutely nothing. The Maori Party members must be hanging their heads in shame. They must be thinking again about the implications of a mana-enhancing relationship that puts at the centre-front of the stage a measure benefiting those who do not need it at the expense of the vulnerable the poor children and families in many communities around Aotearoa New Zealand. Let us see that one being explained to the Maori electorates. It is no wonder that the people in those electorates voted to have the Labour Government continue its policies; they knew that at least we do what we say we are going to do. We do not say one thing so that people will support us then deliver something totally different. 
As I said that mana-enhancing relationship had better be explained very carefully to the 74 percent of Maori in Waiariki who earn less than $40000 because they will be very concerned about what they are hearing today in this Chamber. They will be very concerned that the things they thought they were voting for in supporting members of the Maori Party are not being delivered. They have not been told about it. We are putting this legislation through in urgency. We are addressing the very issues that people really want to hear about in urgency. 
People have to ask themselves why at a time of economic hardship when there is a financial crisis when many families just before Christmas are wondering how they are going to pull it all together over the next 2 years the Government is doing that. What is the National Government—supported by ACT and the Maori Party—doing? It is delivering tax cuts at the expense of poor vulnerable families in our community and it needs to be accountable for that. That level of accountability has to ensure that people are not duped by the types of changes that will be bulldozed through the House over the next few days. People need to know about them. I can see Paul Hutchison looking at me quite carefully; the people of Tuakau in his electorate need to know the cost of this tax cut to those families in Tuakau whom Mr Hutchison knows I represent who will be negatively affected. They will not see a dime. They will not see any benefits from this policy. Mr Hutchison knows that and I know that. When we are at our next community meeting I look forward to his explaining this policy to many members of my constituency. 
Let us recap. At a time when the most vulnerable in our society need more support not less we have tax cuts that are not delivering to them at all. People should be very concerned. Annette King the previous Minister of Justice raised very good points about the implications in terms of lifting about 220000 children out of poverty. How will this measure benefit those families? There is no explanation from the other side of the Chamber. The Maori Party must be very very concerned at this time. Those members should be hanging their heads in shame. As I said 74 percent of the people in the Waiariki electorate earn less than $40000 very few of whom will see any benefit from this measure today. 
Dr PAUL HUTCHISON (National—Hunua) 
: 
 I move  
That the question be now put 
. 
The CHAIRPERSON (Lindsay Tisch) 
: The Hon Ruth Dyson. 
CHRIS TREMAIN (Junior Whip—National) 
: 
 I raise a point of order Mr Chairperson. We have had 19 speeches on this part of the bill today. That is a significant number of speeches. 
The CHAIRPERSON (Lindsay Tisch) 
: I am the sole arbiter of the time allowed for the debate. I call the Hon Ruth Dyson. 
Hon RUTH DYSON (Labour—Port Hills) 
: 
 Mr Chairman thank you for the opportunity to give my first contribution in this part of the debate. I am very keen to ask the Minister of Finance some questions and I am even keener for him to answer them. That is because I have been watching his National colleagues respond to our contribution on this Taxation (Urgent Measures and Annual Rates) Bill and it is very clear to me that National Party members and in particular Chris Tremain and John Hayes do not understand what is in the bill. Either they have not read it or had it explained to them or the printed version is different from the draft they were given. We know that the taxation policy of the National Party was released in October. That was not very long ago. I would have thought that before a bill came before this Committee the members of the party that is supporting it would have it explained to them. 
First of all I ask the Minister whether he has explained the bill to his colleagues. Do they know what is in it? Are they prepared to put their names to it fully aware that they are increasing taxes for the lowest-paid and most vulnerable people in our community? [ 
Interruption 
] The constituents of the Wairarapa should know that their member of Parliament John Hayes has confirmed that yes he is prepared to put his name to a bill that increases the marginal tax rate for the lowest-income earners in our country. 
I ask Mr English as the Minister to respond to this next question. Under existing law what is the 2011 marginal tax rate for a person who is earning between $14000 and $20000 a year? Mr English does not know the answer to that but the Hon Dr Michael Cullen has indicated he does so if he interjects— 
Hon Dr Michael Cullen 
: 12.5 percent. 
Hon RUTH DYSON 
: It is 12.5 percent. That is the answer to that question. That is currently the 2011 marginal tax rate in the existing law. Under the legislation that we are now debating in urgency which is a matter of critical importance because it increases the tax rate for the lowest-income earners in our country what will be the marginal tax rate for those same people? What—and it will be in force immediately upon the implementation of this legislation—is it proposed to be? 
One would think that the proposed rate might be lower than 12.5 percent because those people are the lowest-income earners in New Zealand. Well the answer is 21 percent. The current law is for the 2011 marginal tax rate to be 12.5 percent and the proposal is to put it up to 21 percent. I ask Mr Hayes which is higher: 12.5 or 21? The answer is that Bill English is proposing to this Parliament that the marginal tax rate for the lowest-income earners in New Zealand be increased from 12.5 percent to 21 percent and all the National Party backbench members should know that before they put their names to this legislation. ACT probably thinks that that rate is getting close to being about right. 
The Maori Party should know that its most vulnerable constituents the people who make the most effort to work fewer hours than the full-time cut-in for the amazing new independent earner tax credit are going to be penalised so that the chief executive of Telecom and the Prime Minister of New Zealand can get a lofty great tax cut. What is fair about that? What is progressive about that? How does that help any single individual or family let alone the New Zealand economy? The answer is that it does not. It takes us back to the division the poverty and the disempowerment that we saw Bill English preside over as chair of the Finance and Expenditure Committee during the bad old days with Ruth Richardson as Minister of Finance. During the election campaign people up and down the country said that National had said it would not go back to those days and it would not penalise the most vulnerable people in New Zealand. Less than 24 hours into the start of this Parliament we see promise after promise being broken by the incoming National Government. The most vulnerable people in our country are paying for that and we will make sure that they know exactly what the National members are doing. 
JOHN HAYES (National—Wairarapa) 
: 
 I move  
That the question be now put 
. 
LYNNE PILLAY (Labour) 
: 
 Thank you Mr Chair for recognising the importance of debating this horrible Taxation (Urgent Measures and Annual Rates) Bill. I think that this bill should be renamed the “Personal Interest Tax Cut Bill”. It is for the personal interest of the National Party and its wealthy supporters who will benefit the most from this bill. It is the redistribution of wealth from the poor the working families and the modest-income earners in New Zealand to the wealthy. It is from a party that campaigned on a brighter future. 
Sitting suspended from 1 p.m. to 2 p.m. 
Debate interrupted.