Key John: Debate on Prime Minister’s Statement 
Key John: Debate on Prime Minister’s Statement 
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Hon JOHN KEY (Prime Minister) 
: 
 I move  
That this House express its confidence in the National-led Government and commend its programme for 2010 as set out in the Prime Minister’s statement to Parliament 
. The Government starts the year with a very full programme in front of it. Our driving goal is to lead a step change in New Zealand’s economic performance so that we can deliver to New Zealanders the jobs— 
Mr SPEAKER 
: I apologise to the Prime Minister for intervening so early in his statement but I ask the House to recognise that this is a very important debate. I expect courtesies to be extended to the Leader of the Opposition when he speaks and I expect courtesies to be extended to the Prime Minister when he delivers his speech. I am not ruling out interjections but I think they should be reasonable. I ask all members to be reasonable so that the public can hear a speech that they want to hear. I thank members. 
Hon JOHN KEY 
: Our driving goal is to lead a step change in New Zealand’s economic performance so that we can deliver to New Zealanders the jobs increased incomes and better living standards that they deserve. In recent times New Zealand’s incomes have fallen further and further behind those of the countries we like to compare ourselves with including Australia. This year the Government will make a large number of economic reforms to turn this round. These will include changes to the tax system reforms in the public sector changes to our science and innovation systems unlocking access to our abundant natural resources and measures to improve firms’ access to capital. 
The Government’s other priority this year is to make significant changes in order to improve service delivery in social sectors like welfare education justice and health. We owe this not just to the people who rely on these important public services but to all taxpayers who fund them. What is more it is time that New Zealand came to grips with some of the big social problems that persist in our communities including welfare dependence crime and other social dysfunction. I have outlined the details of this programme of economic and social reform in a statement that has been published in this House. I urge members to read that statement in full. 
Let me take the opportunity today to address some parts of that statement starting with tax. This year the Government will make significant changes to the New Zealand tax system. We will announce the details of these measures as part of the Budget in May. We want to have a tax system that drives economic growth and the creation of jobs that creates incentives for people to work hard and to get ahead in New Zealand that boosts savings and increases the productivity of investment and that is regarded as fair and relatively simple to administer. We agree with the Tax Working Group that this is not currently the case. In particular we agree that New Zealand relies heavily on the taxes most harmful to growth particularly corporate and personal income taxes that there is a hole in the tax base around the taxation of property that the tax system lacks integrity and fairness because of differences in the treatment of entities and that there is significant risk to the sustainability of the tax revenue base. Tinkering over recent years has made the tax system more complicated. It has led to poor incentives and created a raft of different ways for people to minimise their tax payments. Given these facts is it any wonder that our economy has tilted towards consumption and property investment that we have a shortage of savings and that a high proportion of New Zealand graduates live overseas? 
We are looking at possible reductions across the whole personal tax structure not just to the taxpayers on the top rate as has been suggested by some people. However some of the reforms discussed by the Tax Working Group are not favoured by the Government and are therefore off the table. In particular we will not be developing any proposals for a land tax a comprehensive capital gains tax or a risk-free rate of return method for taxing residential investment properties. However the Government does believe there is a gap in the current tax system around property investments where income is being derived but in aggregate no tax is being paid. In fact the Government is actually losing revenue in this sector. We will therefore be making changes to the way that property is taxed that will result in increased revenue and more fairness for taxpayers. 
The Government is also carefully considering a modest increase in the rate of GST to no more than 15 percent. We are acutely aware of the effect that a rise in GST could have on lower-income families if it is not balanced out by compensatory changes elsewhere. Therefore if an increase were to occur it would have to be accompanied by across-the-board reductions in personal taxes as well as upfront increases in benefits New Zealand superannuation and Working for Families payments. 
These changes will allow New Zealanders to take home more of their own income. Do they not deserve to do that? They could use that income to save or to pay off their mortgages without being taxed on it. Saving and investment rather than consumption would be encouraged. GST is also a very difficult tax to avoid paying no matter how people structure their financial affairs. As David Lange once observed even drug dealers pay GST. No final decisions have been made about raising the rate of GST and the Government has asked for more work to be done on that. But suffice it to say that the Government would not embark on a policy of increasing the GST rate unless it would benefit the New Zealand economy in the long term and unless it would see the vast bulk of New Zealanders become better off. 
The Government is not considering a major change to the Working for Families scheme. But we are concerned that some people are using income structuring techniques in order to gain eligibility to a scheme that was never intended for them. This runs contrary to the policy intent and the Government is therefore looking at how to make the Working for Families scheme fairer in that regard. 
Science and innovation are also key elements of the Government’s economic agenda. From Weta Digital and Icebreaker through to Zespri and Fonterra New Zealand’s leading exporters have harnessed science and innovation to develop new products and improve the way they do business. The challenge for New Zealand is to get more out of our firms using science research and technology to deliver more valuable products and services and to create new and better-paid jobs for New Zealanders. We are not satisfied that the current policies are doing enough to encourage this. Therefore in 2010 we will make changes to our public science system to increase its contribution to economic growth and to encourage firms to increase their take-up and application of research. This will include changes to the way that we invest in the Crown research institutes. 
As I have previously outlined the Government will be keeping a tight lid on new spending over the foreseeable future which will help to keep public debt under control and keep pressure off interest rates. Even so we have been convinced that in order to be effective in the long run our reforms in the science and innovation area must be matched with a step up in public investment. Accordingly we have made science and innovation a priority for new spending in this year’s Budget and we are focused on boosting business research and science capability. 
The Government also wants to unleash the untapped economic potential of New Zealand’s incredible natural resources. Although Australia is sometimes described as digging its way to prosperity New Zealanders often forget that we too have access to highly valued resources. Fertile land petroleum minerals and water are in particular abundance. Our challenge is to make more use of that economic potential. In general the Government is in favour of unlocking resources for economic benefit where this is consistent with environmental conservation and other objectives. This year we will improve or remove regulations that prevent natural resources from being used more productively or from being used at all. In particular the Government will progress an action plan to ensure that more use is made of New Zealand’s petroleum resources. This is because although oil is already New Zealand’s third-largest export earner the estimates are that with improved Government policies the petroleum sector could generate up to $30 billion in export revenue by 2025. 
We will also take steps to maximise the economic potential of the minerals that are currently locked up in Government-owned land. Mining in New Zealand uses just 40 square kilometres of land which is around 1/100th of 1 percent of our total land area. The export value of that land however is $175000 per hectare which makes mining an extremely valuable use of land. The Government will shortly release a discussion document recommending that some areas of Crown land be removed from schedule 4 of the Crown Minerals Act. We will be calling for submissions on this document. But the Government is eager to unleash the increased economic growth and new jobs that could be produced from our mineral estate so we expect to make some changes to schedule 4 thereby opening up more Government-owned land to mining. I can assure New Zealanders that any new mines will have to meet strict environmental tests. Moreover the Government is proposing to establish a new conservation fund potentially drawn from royalty revenue from mining operations on Crown land. 
Finally the Government will this year take steps to ensure that New Zealand can make more of our abundant supplies of water. We will ensure that water storage and irrigation projects that meet environmental standards and are good economic propositions can happen in a decent time frame. This will include a particular focus on removing regulatory roadblocks to water storage and irrigation can begin in Canterbury. 
The Government will this year undertake substantive reforms to improve the access that New Zealand businesses have to capital investment. Our businesses simply cannot expand or take on new workers unless they can access the funding they need in order to grow. The challenge of accessing capital has increased since the global economic and financial crisis. Investor uncertainty has been high and a number of people lost money on investments that they were poorly advised on or knew little about. We want New Zealanders from all walks of life to be able to invest their savings in productive businesses either directly or through funds with more confidence in the regulation of those capital markets and with the knowledge they need in order to make informed choices. To this end the Government has been considering the report of the Capital Market Development Taskforce. We will respond to its recommendations shortly. Our response will outline significant policy changes across the Government sector including changes to the Securities Act. We are intrigued by the opportunity for New Zealand to become a hub for financial services in the Asia-Pacific region specialising in providing high-value middle and back-office functions for the funds management industry. If new industries could be developed here we have asked officials to determine what steps we should take to make this initiative a reality. 
The reforms I have just outlined demonstrate how ambitious this Government is for growth to occur in the New Zealand economy and how bold we will be in the pursuit of that ambition. However these are just some of the highlights of our economic plan for 2010. This will also be the year in which the Auckland super-city becomes a reality and in which four free-trade agreements are signed. It will also be the year in which we start to lay out the first of our ultra-fast broadband initiatives build new highways to relieve chronic bottlenecks and encourage our tourism industry to thrive. 
For now though let me turn to the Government’s other key priority for the year which is to make significant social sector reforms starting with our education system. Central to this reform effort will be the implementation of our national standards policy in years 1 to 8 in schools—backed I might say by 73 percent of New Zealand parents and rightfully so. This will be backed up with changes to ensure taxpayers’ funds are being used effectively for the schools for children that need extra support. They will include policies to improve the take-up of preschool education by children in our poor communities and in the Maori and Pacific populations. It will include moves to improve the training of our teachers to make more of the funding that is intended for struggling students and provide for more aggressive intervention in schools that are consistently failing their students. We will also step up our push to ensure secondary school - age pupils have greater opportunities to learn trades and practical skills in our schools and tertiary education institutions. This will include furthering our Youth Guarantee policy and supporting it with reforms to modernise the funding and legislative arrangements that govern our secondary schools. 
This year the Government will introduce legislation to reform the benefit system a move that is consistent with our election policies. In 2010 New Zealand taxpayers will fund an estimated $7.6 billion of benefits and income support not including superannuation. This amounts to more than $20 million every day or just under $1 million every hour. I need to be able to look New Zealand taxpayers in the eye and assure them that their hard-earned wages are not being used to support those who lack the will or the desire to work as hard for their living as their fellow New Zealanders do. Our benefit reform package will therefore be squarely focused on encouraging people to get back to work as soon as possible. It will include adjustments to the criteria used in testing eligibility for sickness benefits and strict application rules to prevent people from languishing on the unemployment benefit and it will increase work and training expectations for those who are currently receiving the domestic purposes benefit when their youngest child turns 6. These changes will be supported by adjustments to the benefit abatement regime. 
The welfare reforms will have a very positive impact and effect not just for the beneficiaries themselves but also—and this is more important—for the sustainability of the welfare system. For example if just 100 domestic purposes benefit recipients were to move off their benefits and into work the welfare system would save close to $10 million over their lifetimes. If we were to assist into work 5 percent of sole parents whose youngest child is aged over 6 years we would save almost $200 million over the next 10 years. 
This year will also be a year in which we tackle issues of law and order. We will have a comprehensive programme that follows on from the enormous work effort in 2009: stronger punishment for the worst offenders; reform of the legal aid system; reform of the liquor licensing rules; new youth justice programmes; extension of and progress on our P action plan; intensification of proactive policing policies; and improvement of our prisons. In the health sector highlights for 2010 will be new legislation to stop the duplication of waste make progress on elective surgery and make a new push for better-performing primary health care. 
In concluding this statement to the House I acknowledge the ongoing collaboration and support of our confidence and supply partners: ACT the Maori Party and United Future. We look forward to another year in which we work constructively with them to provide stable and inclusive Government. 
Let me wrap up this speech by saying that 2009 was not an easy year for many people. Some people lost their jobs some lost their savings and others lost their confidence. Yet things are undoubtedly looking up. The economy is picking up and new jobs will appear as businesses gain their confidence. The policies we intend to introduce this year will be a big part of this country’s improvement. The Government’s overriding concern is to improve opportunities fairness and security for all New Zealanders. As this statement has shown we have an active and comprehensive programme ahead of us in 2010 in almost every economic and social area and as a result of that New Zealand will be a better place to live in. Today I presented to Parliament a statement of 9500 words that has a work programme for this country to make a step change. A few weeks ago Phil Goff’s idea was to cap the wages of 16 bureaucrats in New Zealand. No wonder Labour is in Opposition!