Williamson Maurice: Customs and Excise (Motor Spirits) Amendment Bill — In Committee 
Williamson Maurice: Customs and Excise (Motor Spirits) Amendment Bill — In Committee 
[Volume:623;Page:18600] 
Hon MAURICE WILLIAMSON (National—Pakuranga) 
: 
 I am hugely disappointed in the Minister in the chair Rick Barker because he has shown a complete lack of understanding of a term referred to in financial circles as “fiscal creep”. We are not talking about the Minister of Finance; we are talking about a process that happens when indexation occurs. I shall put it to the Minister in the chair. My colleague John Key pointed out that some time ago only 13 percent of police officers were paying the top rate of tax of 39c in the dollar but now 39 percent of them are paying it. The Minister said that showed how great the Government was in having increased their pay. What he did not seem to understand was the time value of money. 
I put it to him that back in 1999 when this Government came to power and legislated for the 39c rate a lot of police officers would have been earning around $59000 or $58000 or maybe even $57000 a year. Now those police officers receiving just straight inflation adjustments to their pay—that is no improvement in their actual standard of living because it is just correcting for inflation alone—will have accumulated around 12 percent. I have an accumulative inflation figure over that time of about 12 percent. So if one accumulates 12 percent on that $58000 one is talking of say another $7000 pay. That means those officers are receiving exactly the same amount as they were beforehand. They were being paid $59000 and now they are on say $66000 which is the exact stand-still pay rate. The Minister said those people had now all moved from the 33c top bracket to the 39c top bracket and that they were much better off. In fact they are no better off. If their pay has only kept pace with inflation and their tax rate on that money is higher than it was they are worse off. We have a Minister who said to this Committee that those policemen should be grateful to the Government— 
Opposition Member 
: He’s dumb. 
Hon MAURICE WILLIAMSON 
: Clearly he is a dumb Minister if he does not understand the principle of “fiscal creep” and that 5 years ago that money was worth a lot more per dollar than it is now. So we get to the principle of Part 1—that is indexing the revenue stream. The Minister has come along here with a bill and said that instead of just collecting so many cents petrol tax per litre he wants that figure as the starting point and then every year as the consumer price index goes up he wants to catch a little bit more and then a bit more and a bit more. I ask why he does not do that at the other end in terms of the income tax brackets at which a person slips into the 33c in the dollar rate and the 39c. 
I shall give the Committee an example of what will happen if that does not occur at some stage. Within 25 to 30 years every worker in this country will be earning more than $60000. In fact $60000 will probably be the pension or the unemployment rate in 25 to 30 years if one looks at what “fiscal creep” means. If this Government does not do any indexation everybody in New Zealand will be on the 39c top tax rate. But maybe that is what Labour actually wants. I have suddenly realised that I am wrong. That is the great plan! Why did I not spot it? I thought Labour said originally that it was done to catch the top 5 percent of high-income earners but of course I was wrong. It was to do with catching everybody. There will not be a single sausage out there in the workforce who one day will not be on $60000. I tell the Minister that with “fiscal creep” they will all be on the top tax rate paying 39c in the dollar. 
If the Minister genuinely believes that the Government just wants to catch the top rich and he believes that indexing is right let us do it for both. Let us put up an amendment right now to do it for both; to take the 39c at $60000 correct it every year so that—my colleague John Key will have a more accurate figure—we would be up to a figure of $67000 by then and we say that it would kick in only at $67000 and within the 25 to 30 years I was talking about when everyone is on $60000 they would not pay that tax rate until they were on the $250000 mark. But oh no! We heard nothing: not a sausage not a mutter not a murmur from the Minister. 
Then United Future came out with an absolutely lame-duck report saying they would be supporting the bill so long as there was a corresponding reduction in taxation. Then we heard the previous speaker Mr Copeland double dog National to explain its policy. Our policy is to reduce taxes for all New Zealanders when we become the Government. Income tax GST and other costs will be reduced so that the total tax take will drop across the whole country. It will not be with regard to just petrol tax; it will cover company tax personal tax—the lot. There is his answer.