English Bill: Taxation (KiwiSaver and Company Tax RateAmendments) Bill — Second Reading In Committee Third Reading 
English Bill: Taxation (KiwiSaver and Company Tax RateAmendments) Bill — Second Reading In Committee Third Reading 
[Volume:639;Page:9484] 
Hon BILL ENGLISH (Deputy Leader—National) 
: 
 I want to make just one point to Dr Cullen. If he is going to claim that KiwiSaver will bring very large benefits to the New Zealand economy because of the size of its effect he cannot then turn round and say: “But you’ll only have to give up 0.5 percent of your wage increases over 4 years.” The fact is that if it has very little effect on moderating wages it will not generate much in the way of new savings. The fundamental economics he will have to explain to people is that to increase our savings we have to reduce our consumption. That is the only way to do it. 
Labour MPs will have to go to the people they have been talking about in this debate—like the person in the supermarket working for $11.25 an hour. Charles Chauvel and some other champagne socialist over there said that they would go into supermarkets and tell those workers on $11.25—no on $12 an hour because they will be on the minimum wage—that they should put aside $18 a week that it will make them better off and they will get a tax credit when they turn 65 in 45 years’ time. I suspect that if we took a vote in a morning-tea room those former Labour voters would vote to take the tax cut Labour promised them then withdrew. That is the other thing that low and middle income earners will understand from this Budget. 
For two elections in a row Labour promised those earners “chewing gum tax cuts” and those cuts were rational; Peter Dunne had pushed them on to Labour. We were told that low and middle income people should have their taxation thresholds adjusted for inflation. I think it was going to cost $400 million. But in a spend of $3.8 billion Dr Cullen could not find it in his heart to give them something—just something. So the effect of this Budget is as follows: the 50 percent of people who go into KiwiSaver will have to reduce their net pay to get the benefits. Is that right? 
Hon Members 
: Yes that’s right. 
Hon BILL ENGLISH 
: People on higher incomes can do that or—much more likely—get their savings from other places and put them into KiwiSaver. That is what these schemes all do; they shift money around. That is where the bulk of KiwiSaver money will come from. But low and middle income people are worse off. They are worse off. They will have to drop their net pay when they are already under pressure to get the $20 tax credit in 20 years’ time and they will all be worse off because they will not get the tax cut Labour promised them. That is what Labour is going to regret over the next 18 months—that it deserted its core constituency. People who have higher incomes and people who are more likely to vote National will bank the profit. They will bank it because they will say that Dr Cullen should have been reducing taxes. He was not so they will take this bit. And they will not give him any credit for it whatsoever. 
There is another issue of equality that Labour used to care about: equality among retired people. One of the effects of KiwiSaver is that it will increase inequality among retired people. It is a Government subsidy to increase inequality among retired people because the people who get the biggest benefit of $20 a week for the next 30 years are people on higher incomes. This will leverage them up into even higher incomes when they retire. People who work part-time who are in and out of the workforce who are on benefits who are seasonal workers who are mothers at home or who are invalids sick or disabled will not get that leverage and they will get national superannuation as they always would. Is that right? 
Hon Maurice Williamson 
: What does Dr Cullen say to that? 
Hon BILL ENGLISH 
: How is Dr Cullen going to explain that? He came into politics to reduce inequality and he will go out of politics creating the largest Government subsidy for increasing it among old people— 
Hon Tony Ryall 
: He’s going to eat the rich and now he’s feeding them. 
Hon BILL ENGLISH 
: And he is feeding us. He goes on about how bad the subsidy on our superannuation is. Why is he increasing it? Is it because he plans to retire? Is that why he is doing it? I presume it is. 
The other thing that has come out of this “money-go-round Budget” is the illusion which Dr Cullen is trying to create that there is some kind of cargo cult about savings—that if the Government puts some money into people’s accounts somehow the country will be a whole lot better off. There is a place for incentives on savings and National members have indicated that we support KiwiSaver. The big issue ahead of us is how far that support should go and in making that decision we will take into account the fact that savings are not everything in an economy. 
The economy has actually been growing about 3 or 4 percent a year on low savings. So we can have growth without having a whole lot of savings. Japan is drowned in savings actually. Its savings have been so large that it has had a 10-year recession and a 1 percent interest rate. It has had no growth at all. I do not think that even KiwiSaver is going to achieve that. The point is that we need a much more balanced approach. There is no point in making people save and therefore compelling investment of their money unless there is a productive growing economy in which to invest. That means an economy with decent education standards and an infrastructure where Government money can actually be spent after it has been promised. It means an economy where labour productivity is growing an economy where young people feel that if they stay in this country they will get incomes higher than they would get if they went across the Tasman to Australia and an economy where people believe they—not just the Government—have a say about their money. 
Unless we have all those other factors savings will not contribute to the growth of this economy. Savings are a quantum of money. What is done with them is what matters. So the Government may grow the pile of savings—I am a bit sceptical; there may be some more—but on the other side of the equation it will gradually suffocate all the incentives for the economy to improve and for incomes to rise. You see Labour members might not understand this because of where they are in the electoral cycle. Labour members are all heading towards retirement but the country is not. The people of this country are not all heading for retirement at the next election. Government members are winding down when we need to wind this country up. 
Our message to 20 to 25-year-olds in New Zealand will be that they can choose either to support a Labour Party that is totally focused on building up money to deal with demographic risks that are 30 years away or to support a party that will help them save but will also help make a productive economy where they can invest that money and lift their incomes. I found when talking to 20 to 25-year-olds that they do not regard what is going to happen in 2040 as a vision for their future. Labour’s vision for today’s 20-year-olds is that they can have a big bank balance when they are in a retirement home. The best they can hope for in this country is to put up with low incomes be told by the Government what to do with all their money and get a bank balance when they are sitting in a rest home. 
Well National does not believe in that; fundamentally there is a basic philosophical divide. Dr Cullen is absolutely dismissive of what New Zealanders would do with an extra dollar. He says they will waste it. The only person in this country who is capable of deciding what to do with an extra dollar is Dr Michael Cullen PhD. Well there is a choice: back Michael Cullen or back New Zealanders. National backs New Zealanders. It believes that they can make good decisions about a dollar they earn. It believes that a dollar taken off them in extra tax by the Labour Government is likely to be wasted. 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Just before I call the next speaker members are advised that New Zealand First has split its call. Each member speaking will get 5 minutes. The bell will go at 4 minutes indicating 1 minute remaining.