Taxation (Annual Rates and Budget Measures) Bill — First Reading Second Reading In Committee 
Taxation (Annual Rates and Budget Measures) Bill — First Reading Second Reading In Committee 
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Taxation (Annual Rates and Budget Measures) Bill 
First Reading 
Hon PETER DUNNE (Minister of Revenue)  
on behalf of the  
Minister of Finance 
: I move  
That the Taxation (Annual Rates and Budget Measures) Bill be now read a first time. 
 This bill focuses on two main important areas for New Zealand at the present time: building faster economic growth around higher national savings and setting New Zealand back on the road to surplus in the repayment of debt. As the Budget outlined the Government will continue to protect the most vulnerable New Zealanders by increasing funding for health and education and maintaining income support programmes. But to achieve those objectives the Government needs to reduce its spending and its level of debt. 
This bill addresses two large programmes administered through the tax system Working for Families and KiwiSaver to maintain targeted support while eliminating unsustainable spending. The Government recognises that some New Zealand families need assistance. This bill aims to provide those people on a continuing basis with the support they really need while remaining fiscally prudent. The bill achieves that by increasing the abatement rate by 1.25c at every inflation adjustment from 1 April 2012 until it reaches 25c in the dollar by lowering the current abatement threshold of $36827 to $36350 on 1 April 2012 and then by reducing it by $450 at every subsequent inflation adjustment round until it reaches $35000 and by removing the inflation adjustment for the family tax credit amounts for children aged 16 and over from 1 April 2012 until the amounts for younger children catch up. 
Collectively these changes will help to ensure that limited resources are directed to where they are most needed. The tax credits will begin reducing earlier on the income scale and they will reduce faster. That will mean that a number of families who are higher up the Working for Families income scale will no longer qualify or will receive lower amounts. 
There has been much public discussion about possible changes to KiwiSaver. I assure the House that the Government is committed to improving national savings. KiwiSaver has been extremely good at encouraging saving habits amongst New Zealanders but like any taxpayer-funded programme the spending associated with it needs to be prudent. Currently over $1 billion a year of what goes into people’s KiwiSaver accounts comes from the Government through subsidies and tax breaks. Over time the Government has put in nearly half the money that has built up in KiwiSaver accounts. But to continue to be an efficient part of the savings landscape KiwiSaver needs to be affordable as a retirement savings scheme for its members for employers and for taxpayers. 
To that end the Government is proposing changes that will ensure that the desired outcome is still achieved and that will ensure the future of KiwiSaver by making the scheme more affordable while continuing to encourage savings. The main changes to KiwiSaver are therefore that all employer contributions to employees’ KiwiSaver accounts will be subject to employer superannuation contribution tax—ESCT—from 1 April 2012. Employer superannuation contribution tax will be applied at a rate equivalent to an employee’s marginal tax rate meaning that it will have a greater impact on higher-income earners. The member tax credit is to be halved for the next MTC year—that is the member tax credit year that ends on 30 June 2012. The Government will now contribute 50c for each dollar contributed by the individual KiwiSaver member up to a maximum of $521.43 per year which is equivalent to $10 per week. The minimum employee contribution will rise from 2 to 3 percent for all members—new and existing—from 1 April 2013. The default contribution rate for new employees who do not select a rate will also be 3 percent from that date. Compulsory employer contributions will rise from 2 percent to 3 percent from 1 April 2013. 
Of all these changes this bill contains the member tax credit and the employer superannuation contribution tax changes. The changes to employee and employer contribution rates will be included in a bill to be introduced later this year. 
This bill also sets the annual rates of income tax for the 2011 tax year. These are the main features of this bill. When taken together they help ensure that Government spending is both prudent and focused on areas of real need. This bill continues the focus on providing for a fair and equitable tax system for all supports national savings and encourages economic growth. It is therefore with great pleasure that I commend this bill to the House. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 The Government touted this Budget as the “Zero Budget”. The Government was right. It is a “Zero Budget” because it is a zero out of 10. It has zero ideas zero leadership and a zero chance of making New Zealanders better off either in the short term or in the longer term. 
The Taxation (Annual Rates and Budget Measures) Bill contains some of the worst parts of this Budget. It is a great pleasure that we will be addressing it right up front in the House in urgency. I thank the Government for the opportunity to do so. 
There is absolutely no doubt that the foundation upon which this bill rests is precarious. It is precarious because this Budget is a bridge to nowhere and the road is paved with fudges and double-talk. It is paved with for example a broken promise not to sell State-owned enterprises and other assets which provide $7 billion of the baseline in this Budget. It is paved with a $1 billion unprecedented fudge that Roger Douglas would never have signed off as Minister of Finance. The unspecified cuts are not even allocated to an individual department. It is a $330 million a year whim out there somewhere in the cloud because the Government does not want people to know before the election where the cuts will come from. 
The road is paved with a $4 billion difference between the revenue estimates from the Inland Revenue Department and those from Treasury. Guess whose numbers were higher! Treasury’s. Guess which numbers the Government is working off! The higher ones. The Inland Revenue Department does not believe the growth numbers in this Budget. It does not believe them. There is no reason why it should. These are rosy glow growth numbers. When one strips away the Christchurch earthquake and the Rugby World Cup sugar rush the sad truth is that at the end of the 4-year period we are still left with growth of only 2.2 percent. That is below the previous long-term average of 2.5 percent. Even then the Inland Revenue Department does not believe that the money will actually come in. That is why its numbers are $4 billion below those of the Crown. 
The road is also paved with a $650 million a year theft from the personal pockets of public servants partly because their departments have been forced to pay their KiwiSaver contributions out of baselines. But it does not stop there. This Budget raids the superannuation scheme for public servants as well. It is iniquitous. It is $650 million a year and that is not even the fine print. 
The road is also paved with the fudge that the $5 billion Canterbury Earthquake Recovery Fund will not be paid for by the Crown; it will be sucked from the public through these new Canterbury reconstruction bonds. They are much less secure than if the Crown was putting its balance sheet fully behind Canterbury’s recovery. The rhetoric is not matched by the reality. It is yet another fudge and yet another zero out of 10 for this Budget. 
Most of all sadly this Budget is paved with the sacrifices of middle New Zealand families and working Kiwis who will have their KiwiSaver slashed and their Working for Families abated more rapidly. What does that mean in real people’s language? It means 20 bucks a week less for a family with two KiwiSavers—$10 a week less each—because the member tax credit is cut in half. That is if they are contributing 2 percent. The bill changes the default up to 3 percent. Well is that not heroic of this Government? It has not even reversed its reversal; it has half reversed its reversal. The Government has half reversed the reversal it made last year when it took the contribution from 4 percent to 2 percent. This year it has gone back up from 2 percent to 3 percent. Wow! That is leadership! 
Hon Steve Chadwick 
: Who pays? 
Hon DAVID CUNLIFFE 
: The punter pays. The family pays. The employer tax credit has also gone and employers have to match the 3 percent contribution if that is required. There is a problem with that because it creates an incentive for them to hire people who are not on the higher threshold. It therefore opens up the potential for discrimination between employees. 
On Working for Families the numbers are even worse. The abatement threshold and abatement rate have both been changed and the amount clawed back for a family of four on $80000 by April 2012 is $12.33 rising to $24.77 in 2014 $37.42 in April 2016 and then $50.30 a week. This is for a family of four on $80000—that is two $40000 incomes—who are struggling to pay the bills feed the kids put school uniforms on them and take them to soccer or rugby. Those families are being penalised up to $50 a week by this Budget from Working for Families alone let alone the $20 a week they lose in KiwiSaver which equals $70 a week. Let us not forget that last year they got hit with $30 a week cut per child in early childhood education. It is iniquitous. 
When will these cuts stop? When will middle New Zealand stop having to pay for the tax cuts the Tories gave their rich mates? They have made choices. This is not about the earthquake and this is not about the New York stock market; this is about the choices this Government has made in this House about who gets what and who gets shafted. We know who has been shafted again today: middle New Zealand. 
The Maori Party looks on. Well this is what the Maori Party paid for. I wonder whether that party’s people are happy because most of them get Working for Families. They get Working for Families and they are I hope in KiwiSaver— 
Hon Tariana Turia 
: They don’t earn $80000. 
Hon DAVID CUNLIFFE 
: I tell Tariana Turia that those families are $70 a week worse off. That member has brought a $70-a-week penalty to a Maori family of four living in Ngaruawahia New Plymouth or Te Tai Tonga. That member’s party has penalised those families by $70 a week. Any family with two adults and two children on $80000 a year loses $50 a week from Working for Families and $20 a week from KiwiSaver. When will it stop? 
What would a good Budget look like? What would this bill look like if it were a good bill? It would contain changes that allowed us to earn more work more create more and export more but it does not. There are zero new ideas to help New Zealand export zero new ideas to grow productivity and zero new ideas to create jobs. There is not a shred of an economic development strategy and not a shred of a real savings plan. KiwiSaver has shrunk not grown. National said the savings gap was crucial and that it would lead on savings policy. National said that savings would be the centrepiece of the Budget but what is it? A $20-a-week kick in the guts for a family with two KiwiSavers. That is the centrepiece of National’s Budget. Working for Families is worse. It is all for nothing because it rests on a foundation that Treasury knows in its heart of hearts is as flimsy as a house of cards. 
It is paved with broken promises such as the promise not to sell State assets and to get a mandate to do so. But National has booked the money now before the election. National promised not to cut KiwiSaver but it has booked the money now and we are passing this bill under urgency even though it supposedly does not hit town until April next year. What kind of a mandate is it when we are passing this bill under urgency 6 months before the election? That is absolute rubbish. That makes a mockery of democracy. Members opposite cannot keep a straight face because they know it is flimflam. They are clowns and they do not deserve to be taken seriously by the New Zealand public. 
Here comes the member Hekia Parata who is smiling like a Cheshire cat. She knows she has taken $20 a week out of KiwiSavers up in the East Cape and she has taken $50 a week from people getting Working for Families who are struggling to make ends meet up in Ruatoria. Ruatoria will be “Rua-poor-ia” after this bill goes through because every person on Working for Families will be poorer as a result of this bill. 
This is a zero Budget with zero ideas zero leadership zero compassion and a zero chance of re-election. 
CRAIG FOSS (National—Tukituki) 
: 
 I thank the previous speaker David Cunliffe for thanking the Government for going into urgency on these bills. His other colleagues may want to note that as they go through the next few hours on this Taxation (Annual Rates and Budget Measures) Bill. 
Before I get into it I must congratulate our Minister of Finance Mr Bill English on his third Budget under this Government and what a Budget for our time. What a prudent courageous and brave Budget for our time. Tempting as it might be in an election year and as the other party is wont to do to borrow to spend up the courage the fortitude and the prudence shown by Mr English in this his third Budget which builds on the previous two are truly to be admired. 
I must also note the speech of our Prime Minister our leader John Key. What a legendary speech and what legendary delivery compared with that of the Leader of the Opposition Mr Phil Goff. I thought Mr Phil Goff was doing some planking or something in the middle of Parliament. He was flat. He did not seem to be doing anything. He was looking around. I do not know what was going on. When we compare him with the honourable Prime Minister we see it was like watching Richie McCaw play the Golden Oldies team or something like that. The floor was absolutely wiped with Mr Goff. He resorted to I think his 2007-08 speeches. He lost his way very very early on and that was obvious from looking at his comrades around the House. 
Regarding the Taxation (Annual Rates and Budget Measures) Bill I acknowledge the Hon Peter Dunne for what he has pulled together here in bringing this bill to the House. I also acknowledge the key points he noted particularly that this bill codifies and reconfirms the current tax rates PAYE rates etc. Yes it makes changes to KiwiSaver and yes it makes some changes to Working for Families but the core Budget is a prudent Budget for our time and these are prudent measures for our time. If we go beyond the 40-something members on the other side if we go out of this Chamber and ask members of the public whether we should borrow money from overseas to put into KiwiSaver accounts—whether that is a good idea—I think all of them would say absolutely not. That is what the other side is promoting. 
If that were to continue KiwiSaver itself would be in danger. Members on the other side constantly go on about one side of the balance sheet. The bit those members often forget is that their Government relied on short-term ongoing constant growth in revenue which was related to the state of the economy—PAYE and GST—but they put in place long-term committed index spending such as interest-free student loans Working for Families and things in and around KiwiSaver. Essentially in a financial sense they borrowed short and lent long and this Government had to come in and tidy that up because those members got themselves and this country into huge huge trouble. 
This Budget and this bill before us pass four tests. This Budget builds an export economy. It builds the platform for an export economy. I recall that the previous Government’s version of that was to have something called Export Year in 2008 and New Zealand promptly went into recession one year before the rest of the world. This Budget and of course this bill help grow savings and bring in capital efficiency. Those members seem to have missed the new investment statement that is before them to help Governments—not only this one but also future Governments—make efficient fair allocations of scarce capital decisions for New Zealand as we decide what to build be it infrastructure tax or whatever. This Budget and this bill assure and bring in deficit reduction. This Budget passes the third test that someone put up for Budgets. It does because right there we are bringing down the deficit and we are coming back into surplus one whole year early. Members might recall that when this Government came in the update to the incoming Government said that this country was heading to debt being about 60 percent of GDP. Right now we are at 28.9 percent. That is not too bad so I think this Budget passes that test as well. Does it pass the test of helping families deal with living costs? Of course it does. As I said earlier it confirms existing tax rates. New Zealanders’ after-tax incomes after only 3 years of this Government have gone up 6 percent—after-tax incomes—enhancing their affordability to live and to purchase a house versus in the 9 years of the previous Government after-tax real incomes going up only 3 percent. 
Therefore this Budget does pass all four of the tests that someone put up as to whether a Budget is successful. This bill confirms part of that Budget and I look forward to its further stages. 
Hon DAVID PARKER (Labour) 
: 
 This Budget was written against the context of the Prime Minister and the Minister of Finance having repeatedly said that New Zealand has a problem with total New Zealand indebtedness rather then Government indebtedness and against the background of them having said that we needed to restructure the economy in order to have a fundamental shift in the economy. It fails. The Budget document on page 70 describes the net international investment position—that is New Zealand’s net debt as a percentage of GDP. The forecast for the year ended 2011 is 78.6 percent of GDP having gone down a little over the last year and for every year hereafter in the projections New Zealand’s net international position gets worse—that is New Zealand becomes more indebted as a nation year after year after year not just in nominal terms but also as a percentage of GDP. It goes up from 78.6 percent forecast for the 2011 year to 85.3 percent forecast in the year ended 2015. That is an indictment on the Government’s policies. 
The other really bad figure in this is the current account deficit. The current deficit pops into surplus of 0.5 percent this year in part because of the moneys coming to New Zealand from reinsurance overseas. Every year after this we have a growing current account deficit as New Zealand gets poorer year by year which is reflected in that debt position I just referred to. The current account deficit forecast for 2012 is 4.1 percent rising every year to 6.9 percent in the year 2015. The Government can only pretend it has maintained any one of its pre-election promises. Remember it was going to close the wage gap with Australia—fail. It was going to lead us to a brighter future—fail. It was going to cause a step change in the economy—fail. This Budget lays bare the failure of the Government’s economic policy. 
We have heard from other contributions that National will go to the electorate for a mandate for its changes including the sale of State-owned enterprises and cuts to the likes of KiwiSaver tax credits yet it counts every one of them in the Budget. Every one of those measures is counted in the Budget yet this year we have a $16.7 billion cash deficit and we have deficits going into the future. Indeed those debt figures I quoted for the country are after the sale of the energy State-owned enterprise interests and Air New Zealand interests so those figures I have as to total net debt are after the family silver has been sold. 
David Cunliffe covered some of the effective tax increases that are in this Budget for middle-income New Zealanders as a consequence of changes to KiwiSaver. It is worth noting that the effect of this Budget and of the Taxation (Annual Rates and Budget Measures) Bill that we are now debating is to increase the tax burden of middle-income New Zealanders as a consequence of those changes. This same bill reinforces the cuts that were made to income tax rates by stating them again for the forthcoming year for the highest income groups. So the 10 percent of the population that got 42 percent of the income tax cuts in last year’s Budget keeps them. Middle-income people who are on lower incomes than them get their KiwiSaver tax credits cut. Is that fair? No. Does it cause the economy to grow? No. We have had a much-vaunted figure of 4-point-something percent as being the growth outlook for the first year in the Government’s forecast. That includes approximately 1.5 percent of money coming into the economy mainly from overseas as a consequence of the Christchurch earthquake and the insurance money being paid out of New Zealand coffers that is being spent in Christchurch after the earthquake. If that is cut out the underlying growth rate for New Zealand is a little over 2 percent. 
What New Zealand needs now is a credible plan to grow the economy. The Government has had 3 years to do it. Its outlook is very poor as shown by the fact that New Zealand’s net debt position in the world gets worse. Even to get to that position the Government has included asset sales. National sold the family silver once; it cannot sell it again. It has broken its promises to New Zealand in many different ways. The figures I would have reinforced to listeners are not those debt figures that the Minister of Finance has been repeatedly emphasising as being important. The net international debt position of New Zealand as a percentage of GDP is a proxy for whether we are getting richer or poorer as a country and that number gets worse. Every year from here on in we go backwards. We heard the Prime Minister say in his speech that interest rates are going to be better than they would otherwise be. His own Budget on page 70 shows the 90-day bill rate going up from 3 percent to 5 percent over the forecast period—a 3 percent to 5 percent increase in interest rates over the forecast period. So that is not quite what the Prime Minister would have people believe either. 
The other point that I find worrisome in this Budget relates to the predictions as to tax revenue. The Inland Revenue Department and Treasury cannot agree as to how much tax revenue will be collected. I will read out what it states: “Both sets of tax forecasts were based on the Treasury’s economic forecasts.” So it is not related to economic forecasts but it states: “Using slightly different assumptions and forecasting models Inland Revenue has produced a set of tax forecasts that are much lower than the Treasury’s.”—not just lower but much lower than Treasury’s—“In this  
Update 
 the total difference between the tax forecasts across the five … years … is nearly $4 billion a larger difference than is usually the case … The bulk [of this is in] corporate tax.” That is what it states. What does the Government do? Does it take the prudent course and use the lower of those figures because it has got it on the wrong side in every one of its Budgets so far? No. Does it average the two and take a mid-range figure? No. 
The Government is taking the irresponsible course in the face of what is already a $16.7 billion deficit in order to protect those income tax cuts of last year 42 percent of which went to the top 10 percent. It takes the irresponsible course of taking the highest figure because that suits its cause. It has taken the Treasury forecast it has ignored the Inland Revenue Department’s forecast and it has not even taken the mid-point. As a consequence even by this Budget document it is possible that these numbers over that 5-year period are $4 billion out. It is not a trifling amount of money. 
I will say something about what is heading towards the education sector as a consequence of a change in this Budget. At the moment for teachers in KiwiSaver the employer contribution matches the teacher contribution and it is paid out of Government revenue. It comes out of Government revenue via the Vote State Services. This Budget changes that and states effectively that schools have to pay for that themselves. Effectively there is a hole in the budget of every school because they have teachers who are entitled to be in KiwiSaver whose matching contribution from their employers will go up from 2 percent to 3 percent next year—with the Government having reversed the change in employer contribution from 4 percent to 2 percent last year—but the school now has to pay that 3 percent contribution to the teachers’ superannuation. Where is that coming from? How does the magic work in the schools’ budget? I cannot work that one out and I do not think that schools will be able to either. 
I also ask with regard to this pretence that KiwiSaver contributions are getting better by going from 2 percent to 3 percent whether people realise that the 3 percent that is coming from employers will have tax deducted from it before it hits their accounts. Tax is deducted at the employee’s tax rate before it hits their KiwiSaver account presumably at the cost of a future wage increase for the employee—and I am not necessarily criticising all of that as some of it is unavoidable; I am not saying that the employer can magic it—so the tax payment that will now be deducted from that 3 percent employer contribution effectively comes out of the employee’s superannuation account. Not only are teachers being asked to sacrifice some of their wages but also they are paying the tax on that 3 percent contribution. 
This Budget fails against the test that the Government set for itself of leaving the economy substantially changed. That was its promise yet we see that the growth forecast is unchanged. New Zealand still wanders along at a pretty modest rate and New Zealanders still have to wait yet again for the promised golden day just round the corner that never seems to arrive under this Government. 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I rise to speak to the Taxation (Annual Rates and Budget Measures) Bill which is part of the Government’s Budget that was introduced this afternoon. The framework for the Government’s Budget was what I have called “borrow cut and sell”. The Government has increased borrowings very significantly; it has cut spending on programmes that ordinary New Zealanders like and benefit from like Working for Families and KiwiSaver; and it is proposing to privatise Government assets in order to get some money from that privatisation to pay for future capital expenditure. It is a “borrow cut and sell” Budget. A “borrow cut and sell” Budget is not exactly an inspirational Budget and when we look at the numbers in the economic forecast we see that it shows how much of a failure this Budget will be. 
The previous speaker Mr Parker referred to table 1.2 in the Economic and Fiscal Update forecasts which has the long-term implications of this Budget and no doubt others. For those of us who are concerned about the imbalances in the New Zealand economy—clearly the Government is not—it is notable that the 2015 forecast has a current account balance of minus 6.9 percent of GDP. Minus $16.8 billion is the current account deficit forecast for 2015. If the Government has criticised the performance of the economy under previous Governments by saying that it was a borrowing-fuelled consumption boom which was the critique the Government has made then it is not changing that. If that is the Government’s critique of the position on how the economy was previously managed then further down the track our net international investment position—and that is the difference between what we owe the world and what the world owes us—is still minus 85 percent of GDP in 2015 under the magical transformational Budget that the Government has introduced. 
If the Government’s critique has been that there was a debt-fuelled consumption boom—and we see that there was considerable truth to that when we look at what happened in the housing sector—its changes will not do anything about New Zealand’s current account deficit or its net international investment position. The kinds of changes that National is bringing in will take us backwards. 
One of the problems we have in New Zealand is our savings record and the Government is proposing to reduce the incentive to save. The Government is proposing to take $2.6 billion away from KiwiSaver contributions. This was part of the incentive for people to save. The people who are members of KiwiSaver—some of us are members of KiwiSaver—will have the contribution from the Government cut and that will happen to all KiwiSaver accounts across the country. People will lose $10 a week that previously went into the KiwiSaver account which was an incentive to encourage people to save. 
The Government has argued that there is no point in borrowing from overseas in order to put money into KiwiSaver accounts; it has asked what the point is of borrowing just to put into savings. The point is that according to Treasury we get 40 percent additional savings as a result of KiwiSaver—that is it has a multiplier effect. The incentives that are in KiwiSaver produce a multiplier effect in terms of private savings. 
Hon David Parker 
: And you could say that they are borrowing for their upper-range tax cuts. 
Dr RUSSEL NORMAN 
: I will come to that. But on the issue of savings KiwiSaver actually has a multiplier effect in terms of private savings and that is why it is different from the Cullen fund. I agreed with Bill English when he said that we should take a break from contributions to the Cullen fund while we are running a deficit—I can see the logic of that. However KiwiSaver has a different logic because of the multiplier effect that we get from those contributions. There is another part of it which is the culture of savings. KiwiSaver was turning around the culture of savings in New Zealand but this Government has twice—or is it more—interfered with the basic settings of KiwiSaver. It is undermining the confidence that people have in the savings culture that is building around KiwiSaver. 
The reason why that is important is that a country that does not save will eventually lose control of its assets. It is just a simple matter of fact: if we continue not to save then sooner or later other people will own the country because slowly we flog off assets or we increase debt in order to cover the fact that we do not save. Changing the savings culture which KiwiSaver was designed to do—and there are arguments about the design of KiwiSaver but it was certainly working—interferes with the change of culture around savings which is one of the things that we are actually trying to achieve. It is hard to see how the changes to KiwiSaver are consistent with all of the Government’s rhetoric around changing the savings culture in New Zealand. 
I think it is also important for people to realise that they will end up paying for this. This is actually a tax increase. The Government does not want to sell it like this but that is what it is. Although it is going to direct employers to increase their contributions to KiwiSaver the employers are on the record as saying they intend to take that cost out of wage increases. So instead of getting a wage increase employees will get an increase in their employer’s contribution to KiwiSaver. Employees will pay for their employer’s contribution to KiwiSaver as well as the increase in their employee contribution to KiwiSaver. It is effectively an increase in tax. It is a drop in the take-home pay of workers in New Zealand in order to pay for this cut to KiwiSaver. 
As was alluded to earlier why are we in this fiscal deficit position? There are a number of contributors and to be fair to the Government it has been living in a world where there have been some really wild events that have put enormous pressure on its books. But it is also true that some of it is of the Government’s own making. The changes in income tax rates that the Government introduced the so-called tax switch was not fiscally neutral. It is funny that the Government talks about the tax switch being broadly fiscally neutral. 
When we look at the Government’s own figures in the 2010 Budget we see that over 4 years it cost $1 billion—the so-called broadly fiscally neutral tax switch. If I told someone that broadly zero is broadly equivalent to $1 billion if I said something fiscally neutral is something broadly the same as something costing $1 billion they might think I was off my rocker. When we look at the Government’s own tables in the Budget from 2010 we see in black and white—we can show them to members—that the Government’s so-called fiscally neutral tax switch cost according to the Government $1 billion over 4 years. It was not broadly fiscally neutral. When we look at the whole balance of the tax shift we see that it broadly cost a billion dollars in lost revenue. 
But that was only in theory. In practice it has cost a lot more than that because in practice the GST take has dropped—and for some good reasons; the fact that people are saving more is a good thing. But the Government’s GST increase has not covered the loss in income tax. So not only was it not broadly fiscally neutral at the beginning in spite of what the Government says—you know like the Government is only $1 billion wrong; “What’s a billion dollars between friends?”—but since then it has actually got worse because the GST take has dropped. 
The Government had to cover this huge fiscal hole in the Budget because the Government gave tax cuts most of which went to people like the people in this room who earn more than $100000. The people in this room did really well out of the tax cuts—pretty much everyone sitting in this room was a major beneficiary of the tax cuts—but the cost of them has to be covered somewhere. The way it will be covered is that ordinary workers will effectively have a tax increase because they will have to increase their contribution to KiwiSaver from their own salary and then from any potential wage increases they may have otherwise got. So that is not a tax shift; that is a tax swindle and there is no question about that. It is in fact the tax switcheroo as I have called it. It was poorly designed and poorly timed. 
The Government has missed the opportunity for transformational change in this economy. It has not had a price on carbon; instead we are subsidising carbon. This Government is giving $2 billion to greenhouse polluters. 
David Bennett 
: Go back to your billabong! 
Dr RUSSEL NORMAN 
: I ask Mr Bennett how he is going to explain that to his kids. Is he going to tell them “Oh yeah we gave $2 billion to greenhouse polluters so I am really sorry about the fact that the planet’s up shit creek because we subsidised greenhouse pollution.” What a brilliant Government strategy—not only are we $2 billion further in deficit because it is subsidising pollution but our kids have to live with an out-of-control climate because idiots decided they would subsidise greenhouse pollution. 
How about a price to make water use more efficient? How about something that would actually be transformational in the economy instead of business as usual? How about making sure we drive capital into the productive sector by using a capital gains tax excluding the family home instead of money going back into the housing market which is where it will go because there are not proper tax signals? The Savings Working Group said half of the increase in house prices from 2001 to 2007 was because of the way that the tax system is structured to encourage people to speculate in housing; so people cannot afford to buy housing because the tax system encourages this. 
This Budget is a “borrow cut and sell” Budget; it is not a transformational Budget and we will live to regret it. 
Hon Sir ROGER DOUGLAS (ACT) 
: 
 This Budget was one that could be described as fiddling while Rome burns. In many ways I believe that although it may not do much harm it will cause a degree of uncertainty which we could do without. There is a need I think for some comprehensive change and we certainly have not got it in this Budget. As a result there is not much to this piece of legislation and we may as well pass it and get on with it. 
One point I do want to raise is I believe that the assumptions that lie behind this Budget are in some ways quite heroic. They might prove to be accurate and I am sure that Treasury or whoever advises the Government has done its best. I want to raise three or four points. Since 2008 nominal GDP has risen by $16 billion from $183 billion to an estimated $199 billion. In the same period core Crown expenditure has risen by $16 billion from $56 billion to an estimated $72 billion. In other words the Government has taken to itself the entire increase in nominal GDP. Nominal GDP went up by $16 billion. Government expenditure went up by $16 billion. What did the Government leave for the private sector? Nothing. The Government crowded the private sector out and no wonder the country is in some difficulty. 
I ask the public what they get from that massive increase in expenditure. For a family of four that increase in Government expenditure is $16000 a year. I ask the average family out there what they get for that $300 a week extra the Government is spending on their behalf—so-called. Do they feel better off? The families I meet certainly do not feel any better off. Can they buy more groceries as a result of the Government spending an extra $300 a week on their behalf? I do not think so. Can they take their kids to the movie theatre? No I do not think so. There is no free lunch. 
So what do we make of it? Let us have a look at one point and this comes back to my reference to heroic assumptions. The estimates of core Crown expenditure by the Government in recent Budgets have systemically underestimated core Crown expenditure by on average 6.83 percent a year. What leads us to believe that this year the Government has got it right? In previous years we have seen a massive increase. The Government is talking about it being flat from now on. If we take the case that this year core Crown expenditure increases by 6.83 percent which is the average over and above estimates of recent years another $4 billion or thereabouts would be added to the Budget deficit. Also in terms of GDP growth recent Budgets have overestimated GDP growth by 1.8 percentage points over the last 6 years. Again what assurance do we have that the figures which are quite high in terms of GDP growth wage growth etc. are any more accurate than they have been in recent years? Core Crown expenditure as I said has hit an all-time high as a percentage of GDP; it has gone up by about 5 percent in 3 years or by $10.5 billion. I think this House needs to start to question itself. We have increased Government expenditure in the last 3 years in nominal terms by $16 billion which is $4000 a person and $16000 per family of four. So $16 billion is the entire increase in nominal GDP. Nominal GDP is up $16 billion and Government expenditure is up $16 billion. Nothing—nothing not one cent—is left for the private sector and we wonder why we are in difficulty. I want to know whether the estimates that the Government has made in this Budget will prove any more accurate than the estimates that we have had in the last four or five Budgets. The estimates have been way out in terms of expenditure. Expenditure has always been higher than estimated and GDP growth has been lower. 
The final point I want to make is about the Labour Party and the Greens. Although I am critical of National in terms of its estimates I really wonder about the Labour Party and its attack on high-income earners. That does surprise me. It is over the top. The Labour Party has this strong focus on distributive questions—that is it tends to think that to help the poor we must hurt the rich. We have heard it in speech after speech from the Labour Party and from the Greens. They are reluctant to face the fact that in New Zealand’s current situation it is almost impossible to help the poor without also helping a section of the rich—those who invest in productive areas. If we do not help that group we will certainly not be able to help those on lower incomes. If those old colleagues of mine were not so one-eyed they could just possibly construct something really radical—a radical scheme that might just be redistributive and growth orientated. I do not hold my breath. The fact is that in the way they operate at the present time they are simply unable to formulate sensible attitudes towards any of the basic social issues we face which are invariably tied to economic ones. Although I know that a lot of those people are highly intelligent and knowledgable on all sorts of things—that is those things one can put on a lapel badge—they are often intellectually at least lopsided. 
Hon TARIANA TURIA (Co-Leader—Maori Party) 
: 
 Tena koe Mr Assistant Speaker Roy. Tena tatou e te Whare. The Taxation (Annual Rates and Budget Measures) Bill gives effect to tax reforms announced in Budget 2011 to reduce the fiscal costs of the KiwiSaver and Working for Families tax credits programmes. This Budget was never going to be a walk in the park. The astronomical fiscal impacts of the 6000 earthquakes that have cumulatively taken their toll on Canterbury were unprecedented and certainly not anticipated. Then of course there have been blizzards droughts leaky homes finance company collapses and the AMI and South Canterbury Finance sagas to name but a few. 
The damage caused by the two earthquakes has been estimated as costing around $15 billion which is about 8 percent of GDP. At even the most minimal budgeting we require $5.5 billion for expenditure such as temporary housing repairing roads and restoring infrastructure with another $3.3 billion to recognise the costs of both the Earthquake Commission and the Accident Compensation Corporation. So something had to give. 
I acknowledge that for most New Zealanders there has been an incredible sense of generosity of spirit that recognises that there was simply no room in this year’s Budget for discretionary spending. Of course there are always those looking for a soapbox from which to project their particular brand of attack. But actually the biggest challenge that faces any of us is how to reprioritise in order to ensure the best value for the limited resources that we have. 
This concept is particularly well known to tangata w’enua communities. The practice of kaitiakitanga entails an active exercise of responsibility in a manner beneficial to resources and the welfare of the people. Kaitiakitanga is synonymous with the notion of being prudent. The practice of rahui illustrates how one might have to exercise restraint in order to ensure sustainable management and growth of the economy so as to provide a stable and secure environment for future generations. When we look at both of the key tax reforms articulated in this bill they remind us of the behaviours and attitudes of our tupuna in tightening the belt curbing excesses and living within our means. 
The objective of the changes in the Working for Families scheme is to reduce the fiscal costs of the scheme while protecting amounts of tax credits for lower-income earners and minimising the effects on work incentives. As a result of alignments that will be made as a result of Budget 2011 the scheme will be much better targeted to vulnerable families. A number of the families who are earning higher up the income scale will receive a little less than they currently do. The worst-case scenario for them is that they may no longer qualify. 
Ten weeks ago the Maori Party issued a challenge to the Government asking for support from higher-income New Zealanders to exercise what we might call manaakitanga or good old-fashioned charity beginning at home. In our statement entitled “Time for those who ‘have’ to help those who ‘have not’ ” we asked the Government to promote generosity by raising taxes for those on incomes over $70000. This Taxation (Annual Rates and Budget Measures) Bill is an honourable response to that tono. It better targets Working for Families at lower-income families who need more help. It will be less generous to higher-income families. 
Take as an example the case of Amohia and Hemi on a combined family income of $40000 per year with three tamariki. Currently they receive $280 a week in Working for Families tax credit. From 1 April next year this will go up by $4 a week which is $16 a month. Down the road lives Sonya on a salary of $90000 with two children. Her income level is right near the top so she currently receives only $18 a week from Working for Families. After the changes she will receive only $7 a week which is $28 a month. When we talk about impacts like this in single dollar terms it is always hard to understand just how effective the changes can be. But the important point is that the changes will be made gradually in a way that minimises the impact on these families. 
I think it is really important that each of us starts to cultivate the art of financial literacy in our homes so that we truly understand the state of the nation and the different levers that impact on our well-being. I have heard a lot of ranting about how the 2 percent lift in GST has brought the country to its knees. Yet missing from that same korero is a flabbergasting statistic that under the term of Labour electricity prices over the 9 years rose 72 percent. That is akin to a jump of 8 percent each year. Although the prices have risen 9.5 percent since this Government took office the rates of rise have halved to under 4 percent a year. But it is still a hefty rise from one decade to the next. Added to that the price of petrol has risen by 17.1 percent. Our heavy reliance on oil demands that we look seriously at establishing alternative renewable sources of energy—a cause that the Maori Party and many hapu iwi and marae are actively considering. 
The other raft of changes in this taxation bill is to do with KiwiSaver. The changes alter the balance of contributions to KiwiSaver accounts away from public financing and towards private saving. This is another approach that the Maori Party has supported in terms of reducing how much money the Government borrows from overseas to put into KiwiSaver. Our concerns around KiwiSaver are that although savers and employers will have to pay more to make the scheme more affordable over the long term the Government is lessening its commitment. This may have a backlash effect in terms of discouraging the other two partners in the scheme. In other words we are mindful that reductions in incentives may end up undermining the confidence in the scheme. 
If I take into account what the Hon David Cunliffe said one would think that the majority of KiwiSavers are Maori families. I think that if we were to look into that particular issue we may find that they are in the minority in terms of contributing to the scheme. They do not earn the $70000 that the member talked about and not many of them earn the $40000 that he talked about either. 
The other key concern that we have put forward is whether any increase in the minimum payment by savers could prove unaffordable for lower and middle income constituents who are already struggling to cope with rising costs. That is why we opposed the introduction of Labour’s KiwiSaver scheme when the individual contribution was 4 percent as we believed it did not do enough for the less well-off and particularly for the w’anau of the working poor and the families of beneficiaries. 
We certainly are of the view that those people on lower incomes should carry less burden proportionately than those who are on higher incomes. We will be concerned if any disincentive to save because of increased payments causes them either to not enter the scheme or to take contribution holidays. But also we do not want to overemphasise KiwiSaver. We all need to return to the old ways of the practice of good saving and there are many other methods of encouraging this to happen. We have been very supportive of the KiwiSaver initiatives such as the Whai Rawa programme. This scheme is designed to provide a base level of savings for all registered Ngai Tahu members as well as supporting and incentivising a culture of savings and asset building. From all accounts we understand it has been highly successful. 
The Taxation (Annual Rates and Budget Measures) Bill provides Parliament with the opportunity to make alterations to the generosity of those schemes particularly Working for Families where it reaches into very high income levels where these people have enjoyed reasonably good tax cuts. We support the first reading of the Taxation (Annual Rates and Budget Measures) Bill. 
AMY ADAMS (National—Selwyn) 
: 
 I am delighted to stand here on Budget day and take a call in the first reading of the Taxation (Annual Rates and Budget Measures) Bill which is the bill that delivers the key revenue changes that make up this year’s Budget. In 2008 Michael Cullen stood in this House and told New Zealand that after the best global economic times in living memory the Labour Government had been so incompetent such a poor economic manager and so financially illiterate that he was deserting the ship leaving a decade of deficit as his legacy. 
Stuart Nash 
: Michael Cullen did not say that at all. 
AMY ADAMS 
: It was a decade of deficit. The numbers do not lie. Labour left New Zealand with 10 years of having to borrow from the world to pay the bills because under its stewardship the productive sector had been decimated businesses and taxpayers had been kicked time and time again and the only sectors that grew were the public sector and Labour’s good mates in the unions. When it comes to New Zealand Labour will always look after its union mates before the hard-working people of New Zealand. We have dealt with the mess that Labour left such as the unfunded commitments the gaping hole in ACC and the export sector in massive decline and we have dealt with the fall-out from the global financial crisis. Now of course we have the two earthquakes in Canterbury that are equivalent to 8 percent of our GDP. Yet today in this House Bill English delivered a balanced responsible and prudent Budget that is right for our times and will set New Zealand further along the path to recovery. This Budget is about reducing debt it is about supporting growth and it is about paying for the rebuilding of Canterbury. 
Let us have a look at those things—first reducing debt. At the moment we are borrowing a staggering $380 million a week. I defy anyone to stand here and tell us that that is sustainable. It is not. With what we have heard today that figure will drop to $100 million a week from next year. We still have work to do but that is a significant gain. That is money that our children and grandchildren will not have to repay in years to come. 
One of the statistics that jumped out at me was that compared with Labour and the forecast it left this Government will be borrowing $45 billion less than the top numbers the Labour forecast left—$45 billion less. And that is before we cost in any of the election promises that Labour members are already starting to throw around. This Budget alone just today’s Budget has meant that over the next 4 years we will be borrowing more than $10 billion less than we would otherwise have to borrow. That is what these changes mean. They mean $10 billion over 4 years that we do not have to go out and borrow from the Chinese or the rest of the world and that my children and everyone else’s children will not have to pay back in years to come. 
For Christchurch this Budget has put $5.5 billion into the Canterbury Earthquake Recovery Fund on top of the $3.3 billion that we will be paying through the Earthquake Commission and ACC. That is $8.8 billion set aside funded and committed that the people of Canterbury know is there to help them through their time of need. 
It is really interesting to me that Labour members stand in this House and talk about exports. I cannot believe that David Cunliffe can stand in this House and have the barefaced cheek to talk about supporting exporters when it is clear to everyone that Labour’s intention is to get back on its old hobbyhorse of taxing and regulating exporters into extinction. We only have to listen to Stuart Nash’s comments yesterday to know exactly what Labour’s intentions are for the productive sector of New Zealand. 
Let us look at the Greens. I was staggered to hear Russel Norman say that the Government has to lift its revenue when the Greens have voted against every single proposal for productive economic growth that has come before this House. They have voted against those proposals yet the Greens stand here and talk about the need to lift revenue. 
Well I challenge both of those parties. If the 13 percent of New Zealanders who pay more than half of the tax in this country went away who would pay for the handouts? Who would pay for the grants? Who would pay for the bureaucrats that those two parties stand up and support? That is head-in-the-sand ostrich country and it is time that those members woke up and stopped threatening this country with the inevitable bankruptcy that their economic mismanagement would bring. They need to wake up and they need to start realising that we have to have a productive engine room in this country that we have to support growth and that we have to support skills. We have to get behind our export sector not bag and kick exporters through capital gains higher taxes and continued regulation. That is what this John Key-led Government is about. I for one am so proud to be part of this Government and supporting the Budget that Bill English delivered today. It is a Budget that will rebuild Canterbury and get this country back on a path to growth. 
Hon CLAYTON COSGROVE (Labour—Waimakariri) 
: 
 I will start off by addressing for the record some of the historical inaccuracies from the member who spoke previously and who made accusations against the last Government. It is important to say this in the overall context of the Budget because it was Bill English of course who on taking office acknowledged that the reason we could get through this recession was— 
David Bennett 
: No it’s not true. Rubbish! 
Hon CLAYTON COSGROVE 
: The quote is there for “Old Cue Ball” over there because he does not read the historical record of course. Bill English said that the reason we could get through this recession was that we were in such a good shape as a legacy of the last Government. 
National members talk about the 9 years of a Labour Government and I will provide evidence of that by the following: 9 years of low unemployment 9 years of economic growth and 9 years of surpluses. I will read out the surpluses. I remember being taunted by Bill English when I was Associate Minister of Finance because he said that a Labour Government was too tight—too tight to spend any of the money that we had squirreled away on surpluses. Never in my life would I have thought that a Labour Government would be attacked by National for not spending money. But that is what it did. Let us look at the 9-year record as Ms Adams crawls behind the desk. In the year 2000 there was a surplus of $594 million in 2001 a surplus of $1.4 billion in 2002 a surplus of $2.47 billion in 2003 a surplus of $4.366 billion in 2004 a surplus of $5.5 billion in 2005 a surplus of $7 billion in 2006 a surplus of $7.1 billion in 2007 a surplus of $5.8 billion and in 2008 a surplus of $5.6 billion. I am very very proud to say of those 9 years that we had 9 years— 
David Bennett 
: What were your interest rates? 
Hon CLAYTON COSGROVE 
: I invite “Cue Ball” to read the historical record— 
The ASSISTANT SPEAKER (Eric Roy) 
: Order! 
Hon CLAYTON COSGROVE 
: He did not take offence. 
The ASSISTANT SPEAKER (Eric Roy) 
: I am taking offence. 
Hon CLAYTON COSGROVE 
: You cannot on behalf of another member. 
The ASSISTANT SPEAKER (Eric Roy) 
: I am on my feet; it is not good for the member to start interjecting. I am saying that all members will be referred to by their appropriate titles. 
Hon Rick Barker 
: I raise a point of order Mr Speaker. I respect your decision. I think it is the right decision. I think my colleague was incorrect to say that. But earlier today I did not raise a point of order when Opposition members were referred to as muppets which is as disrespectful as one can get. I say to you Mr Assistant Speaker that all we want is consistency and even-handedness. If the decision is to set a standard like that then I expect that it will be applied evenly to all of us. 
The ASSISTANT SPEAKER (Eric Roy) 
: I think the member will know that if offence is taken the matter should be raised at the time. I cannot rule on that. I will also make the point that there are probably a few subtle differences between a general assertion across a group of people rather than towards an individual. But the standard that I wish to see in here is one of greater respect than we have just had. I think the member nodding appreciates that so let us move on. 
Hon Rick Barker 
: I raise a point of order Mr Speaker. I do not want to extend this matter but I will make the point to you that numerous Speakers’ rulings make it clear that if it is offensive to say something to an individual then it is equally offensive to say it to a party. The reason for those Speakers’ rulings is very clear. If the level of offence is different for a party than for an individual then of course members will start to use the offensive material collectively as a means of avoiding the Speakers’ rulings. I think it is fair that if something is offensive to a member it is also offensive to a group of members. They should be treated equally whether as individuals or as a collective. 
The ASSISTANT SPEAKER (Eric Roy) 
: I have affirmed that I want to see more respect in the House. 
Hon CLAYTON COSGROVE 
: So we had 9 years of surpluses 9 years of low unemployment and 9 years of growth but now we have had a Budget today that has presented us with $16 billion worth of deficit—$16 billion worth of deficit. I say again for the record that on taking office Bill English noted—and I can produce the quote for that honourable member opposite—that we had left this country in good shape. I say that because we have to view this Budget in the context it deserves. 
The Government has now presented a $16 billion deficit. The member who spoke before me spoke about the Canterbury earthquake and the money that has been set aside or put up for that. I say in passing that I am sure the people of Canterbury to be generous will welcome the fact that there is money and that money will flow to assist them. I know that all Canterbury members of Parliament if not all members of this Parliament will welcome that. The issue now is about how that money will be spent. The issue is also that the Government—thanks to the Budget documents—can no longer keep blaming the Christchurch events for the economic woes of this country. That alibi has been torn asunder in the Budget documents today. 
The question is how that money for the Canterbury earthquake will be spent. Now of course Mr Brownlee has all the powers—like extraordinary wartime powers which Labour supported—his own Government department and a bucket of cash. So the expectation of the people of Canterbury now that all the bases are loaded and all the tools are at his disposal is that there will be no more excuses and no more delays and that we will see a speedy acceleration of the recovery at a far faster rate than we have seen up to this moment. I welcome that because I am sure that it is Mr Brownlee’s intention to provide money for businesses—businesses that will be cauterised because of the end of the support package in a couple of weeks and the end of the money and support for employees who have been depending on that—for the heating programme which is not as it should be and which has been delayed for the draughty houses and so it goes on. 
I look forward to that acceleration and to having no excuses and no delays in the Canterbury recovery given the massive resources that this Government has bestowed on itself. But I also say that the people of Canterbury I suspect will not take much of an interest in this Budget—and I do not say that in a disrespectful way—because they are interested in the here and now. They are interested in whether they have a dunny in how they going to get their houses fixed and in what the future holds for them. But there will come a time as they move past that when they will focus on this Budget as they realise that their KiwiSaver has been cut again their ethos of savings has been kicked in the guts again and that $20 less will be going to a family where there are two KiwiSavers—they lose 20 bucks a week because of that. Those families in Christchurch are smart and they will focus on the detail as they move past their own personal circumstances. 
Of course middle New Zealand is whacked again by this Government and the cuts to Working for Families. Many Canterbury families the victims of the quakes who are in dire economic circumstances will be hit in respect of their Working for Families package thanks to this Government. 
Then we come to the asset sales. It is very very interesting because the Government has confirmed in writing in its Budget documents what it intends to do in respect of asset sales which is what it signalled some months ago. The Kiwi public are told they will be better off and the community will be better off if assets are sold. They were told in the 1990s by the then Bolger Government that all would be fixed and everybody would be better off if we flogged off the family silver. They were not better off and people remember that. The economic proposition being put to them in this Budget aside from the fact— 
Hon Maurice Williamson 
: Wasn’t it Labour that sold a lot more assets— 
Hon CLAYTON COSGROVE 
: We sold assets in the 1980s but the difference is I say to Mr Williamson that we learnt. And in 9 years—[ 
Interruption 
] They do not like it. It is like the old  
Dad’s Army 
 thing. They do not like the old cold steel. The difference is that yes in the 1980s we sold assets and when we came back into power for those 9 years of surpluses we never sold a thing. The difference is that Maurice Williamson who was a Minister in the Bolger Government who was party to selling all those assets and who is now a Minister in the Key Government has learnt nothing. He never made it through SmartGate at the airport. He has learnt nothing. I say to Mr Williamson “Eat that one.” because he has learnt absolutely nothing—Mr Williamson and the Government go to the New Zealand people and tell them the proposition. 
The Budget documents say that New Zealand investors will be at the front of the queue for shareholdings in these assets. How will National members guarantee that? They could not guarantee it with Contact Energy which is now owned by foreigners. Yes a few Kiwis may have grabbed a few shares but the truth is that it is now owned by foreigners. So I ask Mr Williamson given that he is now selling assets twice how he will guarantee that Kiwis will be first in the queue to buy by the way the assets they already own. They already own them. 
Then I ask Mr Williamson the proponent of SmartGate—maybe he ain’t been through it—where all the cash is that these Kiwis will have to buy the shares and the assets they already own the cash that is awash in the economy and in the wallets of Kiwis. Where will they get that from? I am sorry. Mr Williamson is a bit silent now. Kiwis do not have the cash given the cost of living they are facing to make ends meet let alone to go and buy the assets that genius for the second time in a second administration over nearly 20 years has decided he will flog off again. National members cannot guarantee that Kiwi mums and dads will be first in the queue. They cannot guarantee that those Kiwi mums and dads can buy if they have the cash which they do not assets they already own. That is the proposition the Government has put to them. It has borrowed for tax cuts for the rich blown all the cash the credit cards are maxed out so what it will do is flog off a few assets. I ask Government members what the plan is. Then what? After they have flogged the assets what do they then do? 
A group of those assets are power companies. The other thing that Kiwi mums and dads know is that people who invest a dollar in a business want a return. They want a return otherwise they would not invest. The interesting point is that the foreign interests that grabbed the energy assets will naturally want a return. And how do they get a return? Naturally it is by making a profit. And how do they make a profit? They raise the price of what they are trying to sell. That means for Kiwi mums and dads that if they had the cash to buy back—as old “Curly” in the corner would know because he was at university and did an economics degree— 
Aaron Gilmore 
: I raise a point of order Mr Speaker. My name is actually Aaron Gilmore not “Curly” and I wish the member would use that name properly in the House. 
Hon CLAYTON COSGROVE 
: I withdraw and apologise. As Mr Gilmore— 
The ASSISTANT SPEAKER (Eric Roy) 
: Hang on. I thought we were doing OK. Offence was taken. I ask the member to withdraw the comment. 
Hon CLAYTON COSGROVE 
: I withdraw. From someone who is follicly challenged I was offering a compliment. But I withdraw and apologise. If only I had his style and those follicles and those wonderful locks akin to Samson. 
What we have here is a proposition that sells a bill of goods to the New Zealand people and that says that if they have a bit of money they can buy shares they already own. Then the energy companies will be flogged off and the power prices will go up. This is a wonderful Budget for people is it not! KiwiSaver is cut Working for Families is kicked in the guts and now they flog off the assets. 
DAVID BENNETT (National—Hamilton East) 
: 
 The last speaker from Labour Clayton Cosgrove tried to make out that the Labour generation of the 1990s was holier than thou by saying they had learnt from their mistakes and understood everything and everything was rosy in the economic environment. Well let us look back at the economic environment when Labour put New Zealand in recession before the rest of the world. Just remember that: the rest of the world was still ticking along there were some of the best economic times we have seen and Labour managed to strangle this economy. It managed to put it in recession. Maybe it is time Labour members learnt the lessons from what they did wrong in the 1990s and the 2000s because their economic management has been poor many a time and that was shown in the way that they put this country into recession. 
The other thing Labour did in its last period in Government was that it had high interest rates. Those interest rates were much higher than they are now. They were double-figure interest rates. Go to Kiwi families now and ask how much they are saving on interest rates under a National Government. They are saving a lot. A lot of money is being saved by Kiwis at this time because they know they have stable economic management they know they have leadership that is delivering for them and they know they have a Government that is looking after those in most need the people of Christchurch at this time. They know they have a Government that is also focused on growth. It is investing in infrastructure to lead this country forward. By having solid stable economic management we have a Government that delivers lower interest rates for New Zealanders. That is the best thing we can do for our people: deliver them an economy that gives them low interest rates that gives them an education that gives them a chance to be the best people they can and that gives them some reward when they do things properly so that they get the right signals and incentives. That is the difference between National and Labour. 
This Budget is a Budget in very difficult times. We have to deal with a world recession that is not over although the Labour leader thought it was. It is a recession that is still going. He did not make the free-trade agreement with China either— 
Hon Member 
: Yes he did! 
DAVID BENNETT 
: Oh he did it by himself did he? That is great to know. He went and did it himself. I am sure that is how it worked. The reality is that the Leader of the Opposition had a poor speech today. He had no understanding of economics. He had not even read the Budget. He talked about stuff that was not even in the Budget and missed out on the big issues in the Budget. And what are the big issues? We are investing $8.8 billion to rebuild Christchurch. The people of Christchurch have got a Government that delivers to them when they need it. We stood beside Christchurch when they wanted us and we are giving them what they need now to rebuild that city. 
The second thing in the Budget is that we are still investing in infrastructure. The people of the Waikato are so happy with that. We are getting broadband first. We are getting the Waikato Expressway. That is happening because this Budget kept on building on the infrastructure of New Zealand. 
The third thing about it is that we are reducing our debt. We are having prudent economic management. If those members on the other side had tracked along there would have been $45 billion more debt than that proposed by National in this Budget. 
This is a solid Budget. It delivers to New Zealanders in their time of need it builds a stronger country and it represents sound economic management. Labour has still to learn the lessons of what it got wrong in the past two generations. Thank you. 
STUART NASH (Labour) 
: 
 I am pleased to take a first reading call on the Taxation (Annual Rates and Budget Measures) Bill. I think a couple of points need clarification. Amy Adams stood up and said that Michael Cullen was incompetent. Imagine saying that the man who delivered nine Budgets in surplus is incompetent. If Dr Cullen was so incompetent why did this Government appoint him to the board of New Zealand Post and Kiwibank? It is a disgrace to say that Michael Cullen is incompetent. As Miss Adams knows and as Mr Foss knows the reason why this economy has done OK compared with a lot global economies is that Dr Cullen banked surplus after surplus and put money away for a rainy day. My goodness me when it poured down during the global financial crisis thank goodness Michael Cullen had had the foresight to understand how the New Zealand economy worked. That is the reason why Michael Cullen left this country with no sovereign debt. 
Amy Adams also accused me of economic illiteracy. She should not accuse me of that. I think she needs to talk to the Minister of Revenue. Those were not my facts that were quoted yesterday. Those facts were provided by the Minister of Revenue. All I was doing was outlining to the people of New Zealand the facts that had been given to me. 
Hon Peter Dunne 
: You were interpreting them. 
STUART NASH 
: I did interpret them. I looked at the black and white facts and they were as plain as day. We need to have this debate as a nation. The agricultural sector holds itself up as the backbone of this country and I tend to think it is a very important part of our economy but it pays no tax according to the figures provided to me by the Minister of Revenue. It pays no tax—not in my figures. So either the rural sector is in dire straits or there is something inherently wrong with the tax system whereby farmers are claiming back a whole lot of expenses that perhaps they should not be. I do not know what the answer is. All I know is that the dairy industry in the last financial year paid $26 million in tax and I ask whether that is fair. 
Mr Foss stood up and waxed lyrical for about a minute about what a wonderful speech his Prime Minister had delivered. What a sycophant. It made me sick. In fact I find it quite insulting that Mr Key simply does not take this House seriously. He treats it with disrespect and I think it is dreadful. I find it quite insulting and I think that if a lot of MPs who have spent a significant amount of time in this House had listened to Mr Key’s speech they would have been insulted. 
David Bennett stood up and said that Kiwis are better off because interest rates are lower. The unemployment rate is now double its level when Michael Cullen wrote his last Budget. How can Mr Bennett say that New Zealanders are better off when 150000 New Zealanders are on the unemployment benefit? New Zealanders are not better off. Mr Bennett said that New Zealanders are better off because they are saving more. The facts show that if one earns over $1 million one receives over $1000 worth of tax cuts. We are better off in that respect but if a New Zealander is on the average wage they are not better off. We have to keep in mind that 75 percent of New Zealanders earn less than the average wage. 
Sir Roger Douglas criticised Labour for beating up the wealthy. I say to Sir Roger that we do not beat up the wealthy. The Labour Party is a party for equity and fairness. That is all we demand on behalf of the people of New Zealand: fairness and equity. That is all we ask for. 
I will make three more points. Good hard-working New Zealanders have been let down by this Government. By cutting KiwiSaver and Working for Families the Government disadvantages the whole economy. The third point is that there is no plan behind these figures. All that the people of New Zealand were looking for was a plan. Is that too much to ask? They were looking for a plan for growth for economic recovery for our families and for our future. New Zealanders did not get a plan. They got a whole lot of words that fell through a hole as large as Africa and ended up in China. That is where our jobs are going unless we start investing in research and development in the productive economy and in our people. Ten million cubic metres of logs are exported to China each year while sawmills in New Zealand are closing down. We are becoming more and more of a commodity economy because this Government is not investing in our productive sector. Where are the policies to help our companies exporters and workers to drive up productivity? They do not exist because the Government does not have a plan to drive economic growth. 
The Government crowed last year about how it had invested in early childhood education. Well the Napier Kindergarten Association had $575000 cut from its budget yet Mr Tremain had the nerve to come and tell the association at its annual general meeting how much money the Government had invested in early childhood education. He was told in no uncertain terms that the association had had $575000 cut from its budget.  
Craig Foss 
: $1.7 million of financial assets by the way. 
STUART NASH 
: The Heretaunga Free Kindergarten Association I say to Mr Foss had over $500000 cut from its budget as well. Is that fair? No it is not. 
What do the people of New Zealand get? They get cuts cuts and cuts. That is simply not fair. Cutting KiwiSaver: who does that hurt? It hurts hard-working New Zealanders who are saving for their retirement and doing the responsible thing by putting money away—and $10 a week adds up. [ 
Interruption 
] Mr Gilmore knows that it adds up over time. If someone puts away $10 a week extra into their savings account when they are 25 by the time they retire it will be a substantial amount of money will it not? These cuts are not what the Savings Working Group suggested. It said that it is time New Zealanders started to save. This Budget does not do that. 
Cutting Working for Families: who does that hurt? It hurts families who are already facing dire economic circumstances. In Hawke’s Bay Working for Families pumps about $120 million into the economy. I do not know how much money this cut will have taken out but cutting Working for Families for Hawke’s Bay families will hurt not only those families who are struggling but also the economy of Hawke’s Bay. Under this Government the people of the Bay are going backwards. 
All that the people of New Zealand were looking for was a plan. Was that too much to ask for? 
Craig Foss 
: Single-digit mortgage rates; double-digit mortgage rates under Labour. Do the numbers. 
STUART NASH 
: It is interesting that Mr Foss talks about the mortgage rate. Why did he not do something about monetary policy? Why did the Government not give the Reserve Bank the tools to have an influence over the exchange rate and therefore over the interest rate? The Government did not do a thing. It crows about the interest rates but the only reason the interest rate is as low as it is is that the economy is tanking and Mr Foss knows that. 
I will say one last thing. There is a discrepancy of $4 billion between the revenue forecast by the Inland Revenue Department and by Treasury over 5 years. Page 81 of the Economic and Fiscal Update shows a discrepancy of $4 billion and the Government has gone with the Treasury figures. The Government states: “The lower forecasts of tax revenue from Inland Revenue indicate there may be some downside risk to our tax forecasts.” Well that is the understatement of the decade. The Government does not listen to the Inland Revenue Department. It listens to Treasury when Treasury continually gets it wrong. 
This Budget had absolutely no plan for the people of New Zealand and no vision for this economy and it is a disgrace. 
AARON GILMORE (National) 
: 
 It gives me enormous pleasure to stand and talk about the voodoo we just heard from the Opposition. We actually have a plan; it is called Budget 2011. The big difference between the Opposition and us is that we will spend $45 billion less than it would. We will spend it in a different better and cleverer way. What are people saying out there today as a response to Mr English’s third Budget? The commentator in the  
New Zealand Herald 
 
Audrey Young gave the Budget six out of ten. That is not bad; I thought that was not bad. John Armstrong the great Tory gave us six out of ten. Fran O’Sullivan whom the Opposition love to quote time and time again gave us seven and a half out of ten. I think that is pretty good given the economic times we are in. 
This Budget for me puts in $8.8 billion to rebuild Christchurch. I hope most of that money will be spent on my side of town in the eastern suburbs. A lot of the money will be spent on rebuilding our roads rebuilding our water supplies rebuilding our schools and—this is important—rebuilding homes: the thousands of homes up and down parts of eastern Christchurch that are ruined including my brother’s my mother’s and in part my own home. 
Another interesting thing in this Budget is the focus on KiwiSaver. KiwiSaver will grow to $60 billion in ten years due to the subsidies and input going through and the savings that will occur—$60 billion which is a great thing. The incentives are still in place for people to save. People are saving. They are still joining up to KiwiSaver at a rate of 20000 people a month. We heard from Mr Nash who spoke just before me the ironic idea that we need to invest more in crazy things. An interesting thing is that people are saving more. The whole purpose of the tax switch was to reduce consumption and increase savings. That is what we need to do. That is what the Taxation (Annual Rates and Budget Measures) Bill actually helps to encourage and that is what the Budget does. The Budget puts in place an increased savings rate. Savings have gone up and debt servicing costs have come down. That has to be a good thing. 
We heard from Mr Nash that 75 percent of New Zealanders earn below the average wage. Well that figure includes kids and the retired. The last time that I saw Labour’s policy it did not have a policy of sending children out to work but maybe it does now given that it has a turnover tax policy as well. 
Hon Members 
: Down the mines! 
AARON GILMORE 
: Send them off to the mines in many ways. We heard from Mr Nash that early childhood education in Napier had been cut and had no money. It has $1.7 million floating around in bank accounts as I have seen. Also the Canterbury Westland Free Kindergarten Association has even more money than that floating around. We do not think it is appropriate that hard-working taxpayers should pay money in order for kindergarten associations to bolster their bank accounts. We think those associations should use the money that they have first in the most sensible way that is possible. That is what we do in tough economic times—we look at what is in our bank account we look at what we have in the cupboard and we look at spending it in a more sensible and appropriate way. 
That is what Budget 2011 does. It reprioritises a whole lot of things. It puts in place a lot of plans to spend our money in a more sensible way. It puts in place a plan to invest tens of billions of dollars in new infrastructure and new assets. Those are exactly the things that we want to do. Budget 2011 reduces our debt levels puts the economy on a sustainable basis and grows jobs. What more could we want? Thank you very much. 
A party vote was called for on the question  
That the Taxation (Annual Rates and Budget Measures) Bill be now read a first time. 
Ayes 68 
New Zealand National 58; ACT New Zealand 5; Maori Party 4; United Future 1. 
Noes 54 
New Zealand Labour 42; Green Party 9; Progressive 1; Independent: Carter C Harawira. 
Bill read a first time. 
Second Reading 
Hon PETER DUNNE (Minister of Revenue) 
on behalf of the  
Minister of Finance 
: I move  
That the Taxation (Annual Rates and Budget Measures) Bill be now read a second time 
. This bill addresses two of the bigger programmes administered through the tax system—Working for Families and KiwiSaver—and the changes foreshadowed in the Budget brought down earlier this afternoon. The changes proposed in this bill are about making those programmes more sustainable by focusing them better to ensure that Government spending is directed to where it is needed most and eliminating spending that is not. 
Working for Families recipients on higher incomes will therefore find that the changes the bill makes will reduce their tax credits at a faster rate and their reductions will begin at an earlier point in their salary scale. In brief the changes introduced to Working for Families are an increase in the abatement rate by 1.25 cents at every inflation adjustment from 1 April next year until it reaches 25c in the dollar; a decrease in the abatement threshold at every inflation adjustment from 1 April next year until it reaches $35000; and the removal of the inflation adjustment for family tax credit amounts for children 16 and over from 1 April 2012 until the amounts for children aged 13 to 15 catch up. Once these amounts equal the family tax credit amounts for the oldest child the inflation adjustment will apply again. Because these changes take effect from the beginning of next year they need to be put in place at this point to allow systems changed to cope. 
The changes to KiwiSaver are intended to ensure that the scheme continues to make it easy for people to save and so be better off in retirement while reducing the cost to taxpayers of the subsidies to individual accounts. All employer contributions to employees’ KiwiSaver accounts will be subject to the employer superannuation contribution tax and the member tax credit is being halved for the next member tax credit year which ends on 30 June 2012. The minimum employee contribution rate will rise from 2 percent to 3 percent from April 2013 as will the default contribution rate and compulsory employer contributions will similarly rise from 2 percent to 3 percent at the same stage. Those changes are not included in this bill. They will come in legislation due later in the year. 
These are the major measures contained in this bill. The bill also confirms the annual tax rates for the 2011-12 tax year as is the customary process. With those few comments about the measures which I think are about ensuring a fairer more balanced tax system that is part of the Government’s overall strategy to return New Zealand to a pathway of economic recovery I am happy to commend the bill to the House. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 The Labour Opposition completely and thoroughly disagrees with and objects to this sham of a bill the Taxation (Annual Rates and Budget Measures) Bill. The first point we make is to ask why we are here in urgency debating a bill that does not take effect for 18 months. If it took effect earlier it would be proof positive that the Government had broken its promises not to cut KiwiSaver and not to touch Working for Families in this term of Government and its promise to go back to New Zealanders to seek a mandate—just like with asset sales. But the Government has thrown all that aside and is pushing through this bill in urgency on a sham. Those members should be ashamed. The whole Budget is a sham. It is built on flimsy foundations of unspecified cuts and divergent forecasts between different departments. It is built on a very very flimsy foundation to the risk and cost of all New Zealanders. 
I tell the Government to talk to New Zealand families who are losing up to $50 a week because of the Working for Families cuts or couples losing $20 a week because of the KiwiSaver cuts and tell them why they are bearing the brunt while farmers and high-income individuals keep their tax dodges and keep their 2010 tax cuts. Working New Zealanders are picking up the tab. This bill is unfair it is ill-timed and it is unconstitutional because there is no mandate to do it. It is a sham like the whole Budget is a sham. The Minister of Finance should be ashamed the Government should be ashamed and the public should throw them out. That is what they deserve. The public has a final last chance on 26 November this year to stop these cuts dead in their tracks but they will have to stop this nasty greedy Tory Government dead in its tracks to do so. It is the only way to protect KiwiSaver it is the only way to protect Working for Families and frankly it is the only way to restore rigour to the Budget process after the pathetic excuse of a sham that has been presented to the New Zealand people today. 
Sitting suspended from 6 p.m. to 7 p.m. 
Hon DAVID CUNLIFFE 
: Before we broke for the dinner break we were asking ourselves why the Taxation (Annual Rates and Budget Measures) Bill is being debated under urgency because the changes it incorporates apparently do not come into effect until 2012. That is hardly urgent. What is more Government members have argued that that is an entirely good thing because it shows that they are keeping faith with the electorate which still has the chance to throw them out on their ears. However as a matter of fiscal prudence that argument does not square well with the fact that the proceeds of these cuts are already incorporated into the Budget baseline as of now. They are in Budget 2011 not Budget 2012. That means that next year if members opposite find themselves rather fewer in number and sitting on the Opposition side of the House the Government of the day will have to either unpick these changes or find other means of filling in the baseline hole. In other words the constitutionality of going to the electorate for a change that was already booked in the Budget 6 months before is dubious. It is a sham it is spin and it is a victory for the political spin doctors in the Beehive over the substance of good government. 
How would members opposite know—some Labour members here remember what it is like being a backbencher on the Government side of the House—when no one tells them anything. They know less about what is in the Budget than we do. They get dragged in at lunchtime by the Ministers and told “This is when you have to clap” and they all bark like seals. That is how it works and they are still doing it. But I ask why the Government members are doing that because I have been debating with myself and colleagues as to whether this Budget is a zero or a one on a scale to 10 depending on where one starts. I will stick with Bill English’s definition. He called it a “Zero Budget” and I think he was right; it really is a zero. Phil Goff called it sub-zero. He might have been a bit harsh and that is our job but I think zero is a fair balance point—zero out of 10. I ask members why that is. It is because it had to do three big things. It had to credibly reduce the deficit and I will go into why that has not occurred and it had to make structural changes to the economy to lift our growth rate lower debt increase savings and improve the balance between the export sector and the domestic non-tradable sector. It has done none of those things. 
There is not even the pretence the sham or a shadow of an economic development plan anywhere in this Budget. I thumbed through the  
Budget Economic and Fiscal Update 
 in the lock-up. I thought I had missed a chapter or maybe there was another volume but there was not. There is no plan in this Budget for growth. That might be why the Inland Revenue Department does not believe Treasury’s growth projections and has run out a revenue track on pages 81 and 82 that is $3.8 billion lower than Treasury’s revenue track over 4 years. Even the Inland Revenue Department does not believe the rosy glow of the growth forecasts that are in this Budget. It about as solid as a tissue. 
I turn to the third criterion that a good Budget needs to satisfy: it has to be fair to all New Zealanders. We on this side of the House actually agree with the Government that the deficit and the debt mountain are too big. People need to draw in their belts and savings need to be found. That is all true but the fact remains that there are choices. If there are to be savings then they had better be fair. They have to be fairly spread around the community so that those who can afford it most pay a little more and those who can afford it least are given a little bit of a hand up. We as Kiwis do what we do well. We look after each other and we try to get through bringing everyone along. But oh no the Budget does not do that. It does not say “These are tough times. We’re short of money and we gave away too much with those upper income tax cuts as $23 billion of tax revenue forgone was a bit excessive in light of the way the world has turned. Let’s claw some of that money back and ask upper-income earners to give back a little of the 6-cent tax cut they had on the original rate of 39 cents in the dollar.” The Budget does not do that. It does not close down loopholes for the people writing off income on their businesses or farms or creating a trust. It does not do any of that tax-avoidance work. It does none of that. There is nothing about broadening the tax base in this Budget. There is none of that. 
Through the changes in this bill the Budget claws back KiwiSaver investments at the rate of $10 per week for each KiwiSaver and the employer tax credit will partly be offset against the employee’s accumulated funds. In that way each KiwiSaver is about $10 to $12 per week worse off. That is not as bad as what is happening with Working for Families. By 2015 a middle-income family with two children and two parents earning $80000 per year between them will be $50 per week worse off according to our analysis—$50 per week worse off on Working for Families. That is why we said to members opposite earlier on that Ruatoria will be “Rua-poor-ia” by the time those changes feed through. Te Ururoa Flavell will have to explain to the good people of Waiariki why he supports a Government that is cutting their putea and what will go on the table for their whanau. He will have to explain why he is backing a conservative Government that makes life harder for ordinary working families in New Zealand. That is what this Budget does. It tightens the belts of those who are already wearing them tight whereas the belts of the fat cats are loosened even more. That is wrong. 
There are three things wrong with this Budget. Firstly it is built on flimsy foundations. There is too much smoke and mirrors. Even the Inland Revenue Department does not believe the numbers. Secondly there is not a shadow of a plan for growth in jobs. Thirdly there is no equity. Some belts go out some come in and we end up with a divided society that is no better off by the end of the forecast period. 
CRAIG FOSS (National—Tukituki) 
: 
 I find myself in the very awkward position of agreeing with members on the other side of the House on something. Before the dinner break Mr Cunliffe and one of his colleagues who spoke earlier said that Dr Cullen would have never delivered a Budget like this one. That is so true. Let us look at some of the differences in this Budget. It is transparent it has a path to lower debt and a surplus it is open and its numbers have integrity. Wherever possible things have been front-loaded such as putting into this year this Government’s full commitment to the reconstruction of Canterbury which is all up about $8.8 billion going on to the accounts this year. The previous member started by worrying about why this bill was being debated tonight because some of the changes do not come in until next year. I think he was asking why it was counted. I say to members that there is a little thing called the forecast period. In the Public Finance Act I think members will find that for 3 or 4 years the Minister of Finance has to forecast anything and everything that he or she knows will affect the accounts of this country. Anything that the Minister of Finance knows is happening has happened or probably will happen is in this Budget. If there is something a bit further that he or she is unsure of then it is in the various contingencies at the back. It provides certainty in very uncertain times. 
We note how the Leader of the Opposition said earlier that he had signed the free-trade agreement with China all on his own or something like that. After he said that he also told us that the global financial crisis ended some time in 2009. Our Prime Minister invited him to go around the PIGS—Portugal Ireland Greece and Spain—to suggest to them that the global financial crisis is over and see what they say. 
This Budget and this bill will keep interest rates lower for longer. It is as simple as that. Mortgage interest rates and working capital interest rates will stay lower for longer. They have been at record lows under this Government. They will continue to stay low under this Government. Why might that be? There are a couple of reasons. One is that this Government is getting its books and its house in order after inheriting ongoing spending increases from the previous Government which had no corresponding revenue increases attached to it. 
The second is that under this Government real inflation is around 2.5 percent. Everyone has been compensated for the GST increase unlike with the previous administration. Under the previous administration inflation was running at 5-plus percent in spite of the Reserve Bank of New Zealand Act which Labour members now seem so keen to want to change. Yet for at least 3 or 4 years of Labour’s last period in Government inflation well exceeded the 3 percent cap as defined in the Reserve Bank of New Zealand Act. 
This Budget and this bill pass four solid good tests. They put New Zealand and New Zealand enterprises in a better frame to grow their exports because this recovery has to be export led. There is only upside since the last 4 or 5 years prior to the National administration coming through because there was no real growth. In fact export—the real tradable sector—went backwards after 2004. The Budget and this bill pass the test of an export growth - led economy. They will grow savings. KiwiSaver contributions are going up. Household savings rates are on the increase. Dr Bollard from the Reserve Bank noted the other day for the first time in living memory that bank deposits are growing. New Zealanders are saving more borrowing less and moving from the debt-laden property boom we had in the previous administration. 
The Budget and this bill pass the test of reducing a deficit and of showing a lower debt track. We will have surplus sooner than was predicted even in last year’s Budget and much much sooner than was in the papers to the incoming administration after the election of this National Government when the decade of deficits was forecast and when the real numbers started to hit home. Members may recall a minor problem with Budget 2008. It did not include all those things around KiwiRail and ACC but that is for another day. 
This Budget and this bill also pass the test of higher real after-tax incomes for New Zealanders New Zealand families and New Zealand households. Part 1 of this particular bill sets the annual rates of income tax. Therefore they define the after-tax incomes of New Zealanders which have grown at 6 percent after only 2½ years of this National Government. After 9 years of the previous administration and the best economic times possible real incomes grew only 3 percent—after 9 years. There is a bit of a problem there. 
Finally I will make just one more point. Members opposite are starting to point to page 81 of the Budget and are talking about some conspiracy theory or something. As they are wont they are reading half the page. They talked about a discrepancy between the Inland Revenue Department forecasts and Treasury forecasts on tax take. If members read the page they will see that it is all about corporate tax. I will read the first couple of sentences of paragraph 2 which the members opposite seem to keep forgetting. Paragraph 2 states—as the members opposite point out—“The lower forecasts of tax revenue from Inland Revenue indicate there may be some downside risk to our tax forecasts.” That is fair enough. It is open and honest. 
The second sentence is the bit the Opposition members keep forgetting to mention: “At the same time there are also upside risks.” Basically that says that on the downside the tax forecasts from the Inland Revenue Department possibly could be wrong but on the upside they possibly could be right. If Treasury is at one level and the Inland Revenue Department is at another level they will tend to merge along the way. In fact I recall Dr Cullen having ongoing problems with this issue which from memory started an inquiry as to why his various forecasts were so discrepant from those of the Inland Revenue Department in many of his Budgets. 
As we move through talking about this Budget and the taxation bill in front of us I agree with members who interestingly are starting to justify previous Budgets at least over 2 years and maybe even 11 years on from Dr Cullen. They are trying somehow to justify what they are saying today but totally forgetting to offer their own alternative plan for this Budget. Going into an election Labour members are still stuck in the past and talking about Dr Cullen. Interestingly I find myself agreeing with members on the other side. Dr Cullen would never have delivered a Budget like this one because quite simply this Budget is attempting to fix the problems that the previous administration under the stewardship of Clark and Cullen put upon this country. They were quite devastating problems but this administration this Minister of Finance and this Budget will arrest and fix those problems and put New Zealand on a solid and good path for growth and prosperity. Thank you. 
Hon DAVID PARKER (Labour) 
: 
 I will begin by correcting what I think is a misrepresentation of the real position in respect of wages that the previous speaker Mr Foss made in his contribution. He said that real wages after tax had increased by 6 percent since the date of the last election. Of course these averages can be very deceptive. That figure is only right if we include the top 10 percent of income earners. 
Craig Foss 
: Ha! 
Hon DAVID PARKER 
: That is true. If we look at the spectrum of wage increases across societal wages we see that more than half of New Zealand wage earners are earning less in real terms than they were at the last election. It is only if we weight that average by including the 10 percent of salary earners and wage earners who profited handsomely under National’s income tax cuts—in fact got 42 percent of the tax cuts—that the average that Mr Foss gave is correct. For the vast majority of New Zealanders that is not the position they personally have found themselves in. 
I will speak more on a topic that Mr Foss agreed was important which is savings. One of the things I want to emphasise as I said in an earlier contribution is what page 70 of the Budget shows being New Zealand’s net international investment position as a percentage of GDP. This is the figure that the Minister of Finance quite rightly has been emphasising in the House. This is the sum of all of New Zealand’s assets overseas—that is assets owned by the Government and private—less all of the debts that are owed to overseas and other people’s investments in New Zealand. It is our net investment position. In 2011 it is 78.6 percent of GDP which is slightly better than it was in 2010. From here on it gets worse every year. 
The Minister of Finance has been telling us that the biggest problem in the country is our net investment position and from here on it gets worse every year. That is the effect of the Budget and this legislation we are passing. How can the Government crow about that? It gets worse every year. In fact it grows from 78.6 percent of GDP now to 85.3 percent of GDP in 2015. We are told that we are already one of the worst countries in the world and the effect of this Budget and of the economic management of the Government is that by 2015 that figure gets worse and will be 85.3 percent of GDP. It is a sobering reality. It is a sobering reality in regard to the effectiveness—or ineffectiveness—of the Government’s management. 
Another point that I agreed with Russel Norman on in an earlier contribution was when he said “And to get there you’ve got to have a return to effectively property-based consumption.” In his view that is signalled by these Budget documents. Inside that figure is also an assumption that KiwiSaver will grow in the way the Government thinks it will as a consequence of the changes it is making to KiwiSaver. The regulatory impact statement that we provided in Parliament today talks about its assessment of the changes to KiwiSaver. 
Members should remember that the Government is predicting that as a consequence of this savings will still increase but that does not make common sense to me. If we are going to require people to contribute more to their savings with fewer incentives how can we credibly conclude that more people will do that voluntarily? How does that work? 
I am not the only one who is concerned about that. When I read the regulatory impact statement I see lots of riders in it about how the Government does not really know how this will pan out and it is not very confident about that. I will read out a couple of sentences. “The impacts of each option cannot be easily modelled using historical data given the relative newness of the KiwiSaver savings model nor is international comparison always appropriate given many of KiwiSaver’s unique features and New Zealand’s TTE model of taxation. Our analysis of the options is therefore dependent on behavioural assumptions for which there is minimal empirical evidence about individuals’ and employers’ responses to changes in savings incentives and other regulatory requirements.” That is the first thing I will read out. 
The next thing is: “We have also recognised that KiwiSaver is less than five years old. Since its launch in July 2007 there have been several significant changes to contribution requirements which have mostly affected employees and their employers as well as new providers entering into the KiwiSaver market. The KiwiSaver industry has not experienced any period of stability in which to establish its core products and this uncertainty and unpredictability is not helpful to either the industry or savers.” It then goes on to say: “The proposal to increase the compulsory employer contribution rate at the same time as increasing the minimum employee contribution rate will lead to some additional costs on businesses that employ staff”— as well as of course the employees who are contributing—“… in the short term this may reduce firm profitability.” 
Against that background and all those uncertainties how can the Government have any confidence that its changes to KiwiSaver will result in the level of savings that it is assuming? Therefore it is possible in my submission that if those people are not saving that money—the savings that this country so desperately needs to improve the productivity of our businesses so that we have more capital available to our businesses to grow and to invest in more expensive capital plant and other things to improve productivity—then we can have no confidence that the Government’s projections will be met. I tell Mr Foss in regard to his point about there being an upside and a downside in forecast that there is always an upside and a downside in revenue forecasts. The point the Opposition was making is that even the Budget documents note that there is a very large discrepancy between the forecast from the Inland Revenue Department and Treasury as to tax forthcoming from the corporate sector— 
Craig Foss 
: Over 4 years. 
Hon DAVID PARKER 
: Correct. In the face of that uncertainty the Government has not taken the prudent course in taking the lower number. It has not even split the difference between them. It has taken the most optimistic number and plugged it into its forecast. That is another example of wishful thinking on the part of the Government. 
Another area of poor practice according to the Opposition of which there is no precedent that I am aware is that the Government has said it will save $330 million per annum in respect of programmes it will cut but it has not identified them. We are expected to believe what the Government is saying that it can be relied upon to find those savings yet we are not told where Government departments are meant to look to find them. 
Another example of what seems to me to be voodoo economics is that the Government has imposed on every school in New Zealand the requirement to co-fund the superannuation savings of their teachers. The teachers are entitled as is any other employee to opt into the superannuation savings scheme called KiwiSaver. If they do that then under that scheme they will be saving 3 percent of their own salary plus the employer—in this case the schools—will have to match that with another 3 percent. That 3 percent—2 years ago it was 4 percent then it dropped down to 2 percent and now it is going to 3 percent in the middle—has to be funded by the schools now whereas previously it was funded by the Government. The Government used to fund that contribution to match the teachers’ savings. 
Where are the schools going to find that? Where will they magic that money from? There is silence from Government members; their heads are down. They know there is no answer to that. That is effectively a significant decrease in the funding of every school. I have been on a school board of trustees as have a number of other members of this House. Those schools are constantly fighting to balance their budgets. They are facing inflationary pressures in any event from power prices going up which by the way will only get worse if the Government sells off State-owned enterprises. That is also counted in its Budget forecast. Despite the fact that the Government pretends that this is not yet upon New Zealanders and that they have a choice it has already counted this in the Budget as if they had already been sold. 
DAVID CLENDON (Green) 
: 
 Kia ora Mr Assistant Speaker Robertson. Kia ora koutou. I am pleased to take this first opportunity to speak to the Taxation (Annual Rates and Budget Measures) Bill and to the Budget generally. Today we heard the opening salvos in what will be a long debate. We welcome that debate and the opportunity to put up some of our ideas beliefs and alternative approaches to this very critical issue of where the money comes from where we spend it and in whose interests we undertake those transactions. 
A lot can be said—and no doubt will be said—about this bill and about the Budget more generally but a great deal more can be said about what has been left out of these documents. We can talk about doing a gap analysis of the series of propositions we heard from the Government today but we can more properly talk about a chasm. There is a great white space where there could be something resembling a vision. There is a complete absence where we might have hoped to see something that would suggest there is a long-term strategy or plan to establish and create a long-term socially and environmentally sustainable economy in this country that has an absolute and clear capacity to achieve that goal and that state. 
Instead we are offered nothing more innovative or visionary than some quite mean-spirited cuts to public spending cuts to income support and cuts to the Government’s contribution to individuals’ and families’ long-term savings. These cuts will hurt families and households because they come at a time when incomes are at best flat and in many cases reducing and when people are struggling to pay their day-to-day expenses and costs and to meet their bills. We see nothing in here that will give those people much hope or much confidence that they are in good hands that their future is being well regarded or that they should have some hope of a better future. 
We see the cuts to the Government’s contributions to KiwiSaver. That in itself is a breach of an assurance that this Government gave to the general public to participants and to contributors that KiwiSaver would not be meddled with. This has been a remarkably successful mechanism. KiwiSaver has been a success. It has almost been a victim of its own success to the extent that the take-up has caused some difficulties. 
An investment scheme of this sort is one of the last things that Governments should play politics with. Like superannuation funds people need to have confidence in long-term savings schemes. They need to know there is some security and that the rules will not change arbitrarily year by year Budget by Budget or political term by political term. It is not helpful for the investors who in time will utilise the sums of money that are available to them through these funding programmes and savings programmes. It diminishes the confidence of the saver and the investor and that is not helpful. 
The Government insists that it will seek a mandate for its changes at the next election which I must say is one of the few innovative aspects of this Budget—to suggest that somehow retrospectively the Government can get a mandate for taking away something that it assured voters it would not take away. 
Something like 110000 parents will be affected by the cuts to Working for Families as unveiled in the Budget. More than 23000—about one-quarter of those parents—will be earning less than $60000 in their combined household incomes. Families with a combined income of some $60000 are not well-to-do particularly if they are still supporting mortgages that they may have taken on in happier times or if they are paying rent on homes that are increasingly poorly maintained and often sub-standard. 
We see a lowering of the abatement threshold to $35000. We can look at what this means in practical terms for a two-parent family with one partner working full-time for the very meagre minimum wage that this Government allows them even given the generous 25c per hour increase. Where one partner works full-time on the minimum wage and the other is working 12 hours a week on the minimum wage the abatement will apply to them. Raising the abatement rate to 25c in the dollar results in an effective marginal tax rate of some 58 percent which is simply untenable. Where is the incentive for people to improve their position or to try harder? We are constantly hearing from the Government side of the House that people simply need to work harder to better their position. Where is the incentive to do that when we take away the level of support that people have come to expect and are still reliant on to a large extent? 
Much of what we have seen in this Budget and in the tax bill we are debating here tonight is an assumption—which can at best be termed an optimistic hope—that the economy will come right. The growth forecasts here are extremely optimistic and already financial commentators are shining a light on what have been termed “heroic assumptions” about growth in the economy over the next few years. The Government is relying on Treasury estimates but there is an unfortunate history to that. Treasury in the last several years—particularly since 2008—has routinely overestimated growth by some 2 to 3 percentage points of GDP. Why would we depend on forecasts that have historically proved to be at best optimistic and often plain wrong? 
Perhaps it is a reflection of the Prime Minister’s former profession as a currency trader— 
Hon Clayton Cosgrove 
: A speculator. 
DAVID CLENDON 
: —a speculator. Essentially that is an activity and a sector that require people to be very good at gambling. We are seeing essentially a gamble—gambling on growth. It is not even gambling on solid productive sustainable growth. There seems to be an inbuilt assumption that this meddling—this fiddling around the margins of taxes spending and cuts in Government—will somehow return us sooner rather than later to economic growth: increased confidence; more consumption particularly of imported goods; more borrowing; and more debt related to property. In short we are back on the good old treadmill. It is the treadmill of increased debt—debt-fuelled inflation which will inevitably lead to the next bubble. 
We have heard a lot from the Government tonight that nobody has put up much in the way of an alternative. [ 
Interruption 
] Some suggestions? I am very happy to do it. If members go to our website they will find a more comprehensive set. We have a small paper here the  
Green Budget Paper 2011 
. We are putting it out there for people to see what the Green Party thinks the future should look like. This is what we think are the solutions. There are some practical propositions to get us out of the unfortunate situation that there is no doubt we are in. You are most welcome to read it and I hope you do. 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Order! 
DAVID CLENDON 
: Excuse me Mr Assistant Speaker. One hopes that members of the Government will undertake to read that document. 
We are told that one of the reasons for spending cuts is to fund the repairs of Christchurch—the very necessary investment in rebuilding that very fine city. We have an alternative proposition. It is of course a levy—a fixed-term probably 5-year very modest levy—that would provide over 5 years some $5 billion which would remove the necessity of borrowing. The Government’s proposition of borrowing that $5 billion will lead us to an interest bill per annum of some $250 million. I struggled to comprehend this afternoon. We heard the Minister of Finance and the Prime Minister speak of the problem of rebuilding Christchurch as having been somehow solved because they are going to borrow money to fund it. In what world is borrowing to the hilt a long-term sustainable solution to a natural disaster when we have a viable option right here? 
We propose a levy of 1.5 percent on incomes from $48000 to $70000 a 3 percent levy for those on incomes above $70000 and reversing the 2 percent cut to corporate tax. That would raise $1.1 billion a year. For the taxpayer earning about $50000 a year that levy would amount to the princely sum of some 50c per week—not dollars but 50c per week. It would not be visible to the average person on $50000 a year. Those on $70000 and above would pay about $6 a week—again not an extravagant figure. People earning above $100000 would pay about $23 a week and most of those could well afford it. That levy would enable us to rebuild that city without resort to the unfortunate propositions put forward by the Government. Kia ora. Thank you. 
Hon HEATHER ROY (ACT) 
: 
 The ACT Party supports the second reading of the Taxation (Annual Rates and Budget Measures) Bill. First I have a few comments about the Budget generally. I agree with several of the comments made by the previous speaker David Clendon from the Greens about the need for vision and planning and to grow the economy but where the ACT Party differs from his ideas is on the means by which we would achieve those goals. The ACT Party has been quite disappointed in many areas of this Budget. There is too much tinkering in many areas we think rather than real solutions to the problems that this country faces. When we look at how to tackle the current fiscal situation that we find ourselves in coupled with the additional burden that the Christchurch earthquakes have added to our economy we see the need to look at a higher level. That is where I agree with the Green member David Clendon regarding his statements on vision and planning. We need to consider the state of our economy as it pertains domestically but we also need to look at the international situation. 
I would compliment the Minister of Finance on his statements today and on his actions to tackle the deficit and the debt that we face in this nation which are far too high. The focus in this Budget as he has outlined is on encouraging saving. Those things are all very commendable but they need to be coupled with actions the actual things that will make this saving happen and tackle the deficit and the debt in a meaningful way. 
The ACT Party was particularly disappointed in the way that student loans have just been tinkered with. If the Government really wanted to make an impact on tackling the more than $12 billion of student debt that is now owed to the country then we should have taken a long hard look at re-establishing interest rates on those student loans so that the incentives were in the right place. 
The other area which pertains directly to the bill that we are speaking about is Working for Families. We have seen just a skimming-off from the top. Working for Families should never ever have become the middle-class welfare for those on higher incomes that it became under the previous Labour Government. I will give this example. The member for Waimakariri was busy creasing his face and wriggling around in his seat before he stood up just now but he should remember that people who are capable of earning and of supporting their families should be doing that themselves. When Working for Families was first established in 2004 had I been the sole income earner in my household as a backbench MP on $122000 a year with five children I would have been eligible for $22 per week of Working for Families tax credits. Why on this earth would anyone ever consider it reasonable that a backbench MP could be eligible for welfare? That is nothing more than middle-class welfare and it should never ever have been on the agenda in the first place. Although I would have liked to see the National Government take a much more responsible look at Working for Families and tackle it in a much more meaningful way at least it has taken a knife to this area where doing that is absolutely warranted and that is why we support this bill. It is absolutely imperative that we grow this economy. That is the way out of this situation. 
I also compliment the Government on the two very thorough regulatory impact statements. I raise this issue because when Working for Families was first put forward in 2004 under the previous Government we hardly ever saw any sort of regulatory impact statement. Those statements were always in the drafting phase; they were always about to be tabled but never were. The regulatory impact statements that we have before us which have been tabled in the House today are very good and they clearly outline where we should be going. I would like to take the Government to task though—having just complimented it—on some of the things that are written here. It should have acted much more strongly to put many of these measures in place. 
I will pick out one paragraph from the introductory comments in the KiwiSaver regulatory impact statement and quote it here: “As the quickest way for the Government to improve national saving and reduce economic imbalances would be to improve its own saving position the identification and development of options quickly narrowed to those most likely to reduce Government spending without undermining the primary purpose of KiwiSaver.” That is very pertinent and as we put policies in place we should remember those things. I looked at the conclusions for the KiwiSaver changes and I also want to quote a piece from them: “The proposed measures could also encourage higher private contributions.” which is something that we should be very mindful of in this House. The Government is making a bit of a move towards that but looking to the future we should be acting very strongly in this regard. The comments also noted that “education … about the continuing importance of individual saving to ensure resources are over and above New Zealand Superannuation in retirement are highly desirable.” That is quite right. It is the benchmark against which we should always be measuring the policy initiatives put in place. 
I have already noted our concern about the skimming-off of just the very top level of Working for Families when much more stringent changes could have been made by the Government. Again the conclusion statements in Working for Families regulatory impact statement say this: “Officials consider that the majority of the options identified in this RIS including the preferred option will generate fiscal savings broadly protect lower income earners and better target WFF without”—and this is the important part—“having significant impacts on incentives to work child poverty or income inequality.” Again those are very good benchmarks and principles that all policy should be measured against. I compliment the Government on putting those forward. 
There has been plenty of detail in the discussion in the House tonight but I would like to come back to the point I made at the start of my speech which is that we should look at things at a very high level before putting detail in place. We see plenty of tinkering in this Budget. We see plenty of tinkering in a number of areas where we could have made much harder decisions that would tackle debt and the deficits more quickly than they are being tackled. We are moving in the right direction and that is why we support this Budget and this bill. But the ACT Party would have liked to see much more regard being given to getting the incentives right in all of those areas so that we could increase the rate of economic growth much more quickly than we will be able to do. Thank you. 
TE URUROA FLAVELL (Maori Party—Waiariki) 
: 
 Tena koe Mr Assistant Speaker Robertson. Talofa lava ki a tatou katoa i tenei po. Thank you for the opportunity to speak at the second reading of the Taxation (Annual Rates and Budget Measures) Bill. There has been a key word in this Budget: responsibility. The Maori Party is conscious of our responsibility to grow a country that takes us all with it by creating a positive future for every citizen in Aotearoa. We must protect our most vulnerable and no one must be left behind. Our role in Budget 2011 has been to call for a reasonable Budget that takes account of the sharp edges of recession but also invests in our mokopuna. 
Young Maori New Zealanders are particularly critical to the Maori Party as 54 percent of Maori are under 25 years of age. We know that when we get the best deal for Maori we get the best deal for New Zealand for Aotearoa because New Zealand’s future is in the hands of our future workforce. Our youth who increasingly are Maori Pacific and Asian need our support now because their education their success will be our support as we grow old. We need to embrace diversity as it will be through our combined talents and strengths that we can plan for the future. 
The Maori Party’s other key theme in shaping Budget 2011 has been the notion of investing in the future. Our focus in education in this round has been on addressing some fundamental challenges such as $60 million over 4 years to build new kura kaupapa Maori and upgrade existing school buildings. I refer to a speech given by the member who tomorrow will be the former member for Te Tai Tokerau Hone Harawira. He suggested that the Minister of Maori Affairs and Associate Minister of Education Dr Pita Sharples had sold out on kura kaupapa Maori. I do not think so. An extra $60 million over 4 years is pretty helpful. There is an investment of $3 million over 3 years to support Te Runanganui o nga Kura Kaupapa Maori o Aotearoa to develop a curriculum and associated resources based on the philosophy of Te Aho Matua and another $8 million—I say another $8 million—over 4 years to realign kura transport assistance which has been capped since 1995 with that of mainstream schools. And there is $6.5 million to expand family-based literacy programmes to all decile 1 2 and 3 schools building on the current Reading Together programme. That is awesome—that is awesome—and it could not have come about without the help and assistance of the Maori Party and indeed its promoting of this programme with the National Government. 
These are just a few of the new initiatives that the Maori Party has achieved in Budget 2011. We say it is about whaia te rangatiratanga—taking control of our destiny. If we look at Whanau Ora we see that that best embodies the concept of shaping our future taking responsibility for our own solutions and being successful by trusting in a collective model. This again is where the Maori Party comes in in terms of getting National to change the paradigm. That has been important. 
I want to return to the key planks in Budget 2011 of protecting the vulnerable and investing in the future in relation to this taxation bill. With KiwiSaver of course we are concerned about the impact that the proposed changes will have on the vulnerable. But also and in line with the concept of whaia te rangatiratanga—taking control of our destiny—we need to look at the wider issues around creating a savings culture. We accept that New Zealand has a poor savings culture and we need to address this. High levels of household spending have fuelled inflation pressures over recent years and New Zealanders have spent more than they earned. Consequently the pressure on promoting the concept of savings is paramount. We are conscious of the need to plan for what has been called the “silver tsunami”—caring for the baby boomer generation. While savers and employers will have to pay more in the move to make this scheme more affordable over the long term the Government is reducing its commitment and this may have a backlash effect in terms of discouraging savers and employers. Our other concern is whether the changes might prove unaffordable for lower and middle income constituents already struggling to cope with rising costs. We believe that those people on lower incomes should carry less of a burden proportionately than those who are on higher income levels and we would be concerned if any disincentive to save such as increasing their payments would cause them either not to enter the scheme or to take contribution holidays. But we are pleased that the changes will not happen overnight. This will give people and businesses more time to adjust. 
I come back to being responsible. We have heard that KiwiSaver currently costs the Government $1.1 billion. Halving the Government’s KiwiSaver contributions would save the Government around $600 million per annum we are told. That amount of savings has to be good for the nation. 
The other big focus in this taxation bill is related to changes to Working for Families. From this legislation it would appear that Working for Families will be better targeted at low-income families who have a much greater need for assistance and a little less generous to the families higher up the Working for Families scale. We support this change and we support the intention to do it gradually in a way that minimises the impact on families. 
Outside the scope of this bill but well within the ambit of our focus is the fact that the Working for Families package as such offers no poverty relief for benefit-dependent families. It does not sufficiently address poverty or more to the point child poverty in Aotearoa. Although we support the refocusing of Working for Families to support the most vulnerable participants in the scheme of course we cannot ignore the situation of so many of our families who are not even eligible for the scheme. We have a commitment to eliminate poverty. Poverty reflects worse on those who have but do not share than on the have-nots. We will continue to advocate for the protection of the vulnerable the elderly and the young and the disadvantaged and we will continue to focus on restoring whanau responsibility and on investing in the future. Education is not a cost but an investment in the future prosperity of the nation. But for the purposes of the second reading of this bill we are prepared to support this second reading. 
PESETA SAM LOTU-IIGA (National—Maungakiekie) 
: 
 Malo le soifua maua. Thank you. It is certainly my privilege to speak on the second reading of our Taxation (Annual Rates and Budget Measures) Bill. Today is a momentous day. It is a momentous day because this Government has set out a plan to get us on the road to recovery. It has set out a measured plan a balanced plan and a prudent plan in order to get this country back on the road to recovery. 
As we have all heard tonight the country is on a precipice in terms of the Budget deficit of $16 billion. It has been shaken by two major earthquakes and of course we had the Pike River disaster. But the country’s future has been set out in a Budget that is prudent and balanced. 
When we came into power 2½ years ago we had to cover the damage of 9 years of Labour. Under Labour there were 5 years of exports contracting and 9 years of some of the highest interest rates that our businesses and our consumers have faced. Inflation rates were well above Reserve Bank requirements. Those are the conditions we inherited. 
Where have we been in the last 2½ years? This Government has been about investment: investing in infrastructure investing in people and particularly investing in our schools and in our health system. I am proud of this Government. In my local electorate our local high schools have received a services academy—an investment in our young people to grow and develop. One Tree Hill College had a music suite put in place. Admittedly that was started under the last Labour Government but it was certainly constructed and opened under the National Government. We have an arts centre at Onehunga High School. These are the types of investments in our young people that this Government stands for. 
It has also been about investing in our roads and in our infrastructure in broadband. Investment in State Highway 20 which runs through my electorate and is one of the biggest State highways in the country demonstrates the Government’s commitment to infrastructure. It was constructed on time to budget to scale and to specification. That is the type of Government that people want to see. 
David Shearer 
: Who put it in place? 
PESETA SAM LOTU-IIGA 
: I did not negotiate the free-trade agreement with China. Someone did. It might have been the Rt Hon Helen Clark but I do not know what role Mr Goff played in those negotiations. 
This Government has also been about delivering front-line services. It has not been about increasing the bloated bureaucracies that are part of a Labour Government. The biggest show in town in the previous Government the show that actually fuelled inflation was Government spending—Government departments. We are about delivering more police in South Auckland. We are about delivering more nurses and doctors in our hospitals and our general practitioner clinics. This Government has delivered on those promises. 
We have heard tonight about the details around this Budget. Working for Families has been modified. KiwiSaver has certainly been altered. The student loan scheme has been streamlined. But I point out what the Budget really does at a grassroots level. It is about having a go at Government bureaucracies. We have put a figure in our estimates that looks at providing a better Public Service. Efficiency savings will be in the vicinity of $980 million over 3 years and that is to be admired. 
It is also about building the confidence and the trust of our investors in our capital markets. I had the privilege tonight to go to a function that certainly signalled the inauguration if you like of the Financial Markets Authority. This Government worked on the legislation that set up the authority in collaboration with all parties in this Chamber. It is part of the measures that we are undertaking as a Government in order to restore confidence and trust back to financial markets. This Financial Markets Authority which is part of this Budget is about dedicating resources and putting in place the people who will actually take a stand in our capital markets. The authority will be well resourced it will be well run and it will certainly protect investors—the mum and dad investors who were abandoned under the last Labour Government when finance company failures were not responded to in an adequate or an appropriate way. 
How do we know the optimism that is prevalent in our economy? I visit businesses in my electorate like Owens-Illinois where $600 million has been invested. That was the biggest investment in capital works in this country last year by a private sector business. When I see the investment the employment opportunities and the jobs created I certainly feel buoyed. We also see the Government’s investment in businesses like Compac Sorting Equipment. That company is based in Onehunga. It produces equipment that sorts fruit. The investment of millions of dollars which are being put in over the next few years will see that company grow and will see its markets and its customer base grow from a few countries to a number of countries around the world. That is the type of investment we want to see in terms of science and innovation. 
We look at the members opposite to see whether a credible Opposition is in place. As we all know it is important that a democracy delivers a credible Opposition. We hear from members opposite cries of taxing revenue and sales. We hear cries of taking out GST on fruit and veges. They are gimmick-type policies that are uncosted unfunded and do not deliver the type of growth that this Government is putting in place. I suggest to members opposite that they need to sort their own house out internally before they will be able to come out and deliver something positive for this country. 
I will end as I started. This Budget is about consolidating the road to recovery that was begun 2 years ago. This is about a prudent measured and balanced Budget. It is about being positive. It is about growth jobs and opportunities and it is about taking New Zealand into the future. Thank you. 
Hon CLAYTON COSGROVE (Labour—Waimakariri) 
: 
 We now know the marketing strategy of the National Government. Say a cut is a modification say a cut is streamlining but do not call a cut a cut. This is the sort of spin that the previous speaker has come up with. “We modified Working for Families.” [ 
Interruption 
] No no. The facts are that 200000 participants in that scheme are getting a cut. It is a small word of three letters. Everybody apart from that member understands what it means. It is not streamlining. 
Likewise for KiwiSaver. On the one hand members and especially the member who has just spoken say they want to encourage a savings culture. That member said that the Government has modified or streamlined KiwiSaver. No no the Government has kicked it in the guts. Every participant in KiwiSaver has had a kick in the guts from that member’s Government. They do not feel like they have been streamlined or modified. They know what it is. The people are not stupid. That member thinks his constituents are stupid. They know and smell a cut when they see it. It is not a modification. 
I say to that member that it is very interesting. The National Government of course has banked this whole Budget on a series of projections—the creation of 170000 jobs and 4 percent wage growth over 3 or 4 years. But that is a very interesting set of projections. I can remember another set of projections nigh on a year-plus ago. The great plan was going to be a Job Summit. That then went west and we had a cycleway which was to be the nirvana in terms of job creation for this country. I am told that to date the numbers are around 70 people employed on a cycleway to nowhere. Then that went west. Gerry Brownlee the parliamentary blunderbuss of the Chamber had a brilliant idea—and the first I suspect in his terms in his life—and it was to mine national parks. That lasted 5 minutes. That was to be the great job creator the roads would be paved with gold and other miracles according to Gerry. Then of course we had: “No that’s off. We’re going to make New Zealand an international financial hub.” That was a great slogan. It lasted 5 minutes and we have never heard of it again. 
The plan of Government members because they know the people know they have no plan is to say they have a plan say it often enough and hopefully people will believe it. They did not get it last time. No member on that side of the House when they articulated a plan actually put it into place. So I ask those members whether they really think people will believe them now. 
I also say this. They use the Canterbury earthquake—and I must say I do get a little raw that these members would use the Canterbury earthquake over and over again as some sort of alibi to cover their tracks in terms of what they are doing now. They make a case that says somehow the great contributor to the $16 billion deficit which they have delivered in this Budget was the Canterbury earthquake. If they read the Budget documents they will now know that the Canterbury earthquake according to Treasury’s own figures contributed a mere 10 percent of accumulated deficit—10 percent of that accumulated deficit. Now we have dealt with that load of bunkum and that alibi I tell members to think carefully before they use the people of Canterbury and the earthquake as an alibi for a $16 billion deficit. We now know thanks to the Government’s own Budget documents that that is not the case. 
The previous speaker talked about the record of the last Government. I say this. Here are a couple of facts—low unemployment high growth and 9 years of surpluses. Who agreed with us on that? On 19 December 2008 just some days after taking office the finance Minister Bill English said the following in the  
New Zealand Herald 
: “I want to stress that New Zealand starts from a reasonable position in dealing with the uncertainty of our economic outlook.” I will say it again slowly for the more challenged members on the other side: “I want to stress that New Zealand starts from a reasonable position in dealing with the uncertainty of our economic outlook.” To unbundle that statement Mr English was saying: “Thank God we had 9 years of surpluses so we can actually try to deal with this global economic meltdown as it impacts on New Zealand unlike other countries that spent the lot.” 
When I was speaking on the first reading I recalled as an Associate Minister of Finance being taunted as we all were in Government by Bill English the then Opposition spokesperson saying we were mean-spirited because we did not spend the dough. We were squirreling away all these surpluses day after day and that we were a mean Government and we should be frittering it away. [ 
Interruption 
] That member at the back of the Chamber squawking was not in the Chamber at the time so I forgive him for his lack of historical knowledge. We were told we were being mean because we did not spend the lot. 
I say to members that I have a document from a series of Budgets starting from 2000 and I will read a couple of figures. These are the surpluses that we had: “year 2000 $594 million; year— 
Hon Hekia Parata 
: For God’s sake! 
Hon CLAYTON COSGROVE 
: The member does not like it. It is not “for God’s sake” but for her sake I say. In 2001 the surplus was $1.4 billion in 2002 it was $2.4 billion in 2003 it was $4.3 billion and it goes on right up to a high in 2006 to a surplus of $7.1 billion. When Labour left office it was a $5.6 billion surplus. If we are looking at facts about economic track records and what this Government inherited there it is in black and white. 
Then we can fast forward to today. The biggest deficit I think in our history of $16 billion has been delivered by this Government. Here is the problem when one is in Government. Government members are responsible. I do not think the members over there have quite got it. When they win an election they become accountable. They become responsible for their own performance. At some point they have to stand up and say: “We’re taking the hit. We’re biting the bullet. We are accountable. We are responsible.” What they have delivered today apart from all—[ 
Interruption 
] Here we go. Come on a bit more life! The blood is pumping through the veins. What they have delivered today is a cut in KiwiSaver yet they say they want to encourage a savings culture. They have delivered a cut in Working for Families yet they bleat aloud that they want to look after people—except there are 200000 participants who will receive a cut. 
The last speaker then had a crack at Opposition members because we want to provide some GST relief around fresh fruit and vegetables. They say it is all a slogan; it is all hoo-ha. That suggests to me that that member may be like all of us in this Chamber. He may be in the privileged position where he can probably afford a decent feed 7 nights a week—or in one member’s case a few more than that but he is in another place. I say that member can probably afford it. Maybe what I suggest he and others do is go around the food banks. I think it was Mrs King who challenged the Prime Minister to visit a food bank visit McGehan Close or visit a few other places where people are battling away and maybe ask them what they think about the cost of living and their food and grocery bills. Maybe they should do that. That may be instructive for them as they bleat clichés tonight about looking after people. 
Then we come to the other plank of course that will solve all ills—the sale of assets. That crew presents a proposition to people that says: “You’ve all got a lot of money out there New Zealanders ordinary mums and dads. You can buy back the assets that you already own.” That is the proposition they put up to them. It is a great benevolent Government: “Kiwis buy back the assets you already own and you have a lot of disposable income to do that with.” What a benevolent Government. 
They do not tell people of course what happened last time they did that and everybody was promised they would be better off. They do not tell people of course that those who will want to invest in our assets will be foreign companies foreign institutions and foreign agencies. Of course quite rightly those foreign institutions having invested in our State-owned enterprises like the power companies and generators will require logically a dividend from them. They will want their pound of flesh and that pound of flesh will be in the form of higher power prices delivered to consumers over the cold winter. Then somehow in a benevolent way the Government will put the icing on the cake by saying that it will go to the country with this matter even though it is in the Budget documents that the decision has already been made to do it. But as my Green colleague said the Government is asking for a mandate in retrospect or words to that effect. 
So I say to National members that if they want to get up on their hind legs and actually compare economic and political records then they should do it with facts. “Old Sooty” over there will not stand up and compare his record because that member has delivered a $16 billion deficit whereas we delivered 9 years of surpluses and we stand on our record in Government. 
CHRIS TREMAIN (National—Napier) 
: 
 The Hon Clayton Cosgrove is the constituency MP for the seat of Waimakariri. By all accounts he is a pretty good constituency MP but not once tonight have I heard him speak about a matter of importance a cornerstone of this Budget which is the repair and recovery of Christchurch. At the very least he could have acknowledged that this Government has put together— 
Hon Clayton Cosgrove 
: I raise a point of order Mr Speaker. Most of my first reading speech was acknowledging those issues. 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: No the member will sit down. That is a frivolous interjection and it leads to disorder. 
CHRIS TREMAIN 
: At the very least he could have acknowledged one of the cornerstones of this Budget which is the renovation and repair of Christchurch. The Government has made the rebuilding of Christchurch a cornerstone of this Budget. The Budget has ring-fenced $8.8 billion to repair Mr Cosgrove’s Waimakariri constituency and the wider Christchurch area. Yet tonight in this House he would not spend a minute talking about his constituents and how this package could lead to the recovery of Christchurch or about building a new city. He did not acknowledge that at the very least this Budget is taking a step forward towards that. Tonight Labour members will vote against this Budget and against the rebuild of his own city. That is unbelievable. 
I come back to the Taxation (Annual Rates and Budget Measures) Bill. Part 1 is very important because it reconfirms the annual rates of taxation. That fact was not really alluded to in the Budget speech but I want to pick it up again tonight in order to reaffirm to New Zealanders the importance of those taxation rates. 
Let us cast our minds back to the 2010 Budget which set in place for this country a change that I was particularly proud of. That change is reaffirmed in this tax bill tonight. For incomes under $14000 New Zealanders pay 10.5c in the dollar which is down from 12.5c in the dollar under the previous Government. For incomes between $14000 and $48000 New Zealanders now pay 17.5c in the dollar down from 21c in the dollar. For incomes between $48000 and $70000 they pay just 30c in the dollar down from 33c and on incomes of $70000 they pay 33c in the dollar which is down from 38c. 
On any level that is a reduction in personal income tax—on any level. But I hear from members across the House constantly that this side of the House has not delivered help for middle and lower income New Zealanders. Well in the reaffirmation of those tax rates the facts are clear. Income tax is lower for New Zealanders across the board—across the board. Seventy percent to 75 percent of Kiwis now pay income tax at a rate of 17.5 percent—in fact the average is below 17.5 percent. 
But that is a double-edged sword. On the one hand we can say that it is good that people in a big chunk of the country are paying lower income tax rates but on the other hand the fact that 75 percent of Kiwis have incomes of $48000 and below is not good enough. That is why I am so proud of what we have put together in this Budget. The projections are that real incomes in New Zealand will grow. We can lift the incomes of New Zealanders and continue to grow those incomes. 
I am proud of what we have delivered in this Budget today. I think it is a fantastic step forward. It ring-fences money to help to repair the likes of Mr Cosgrove’s electorate. I think that is a fantastic thing. This Budget provides a real vision something tangible that people can have going forward. The Budget brings debt under control and lifts wages in the long term. This is an excellent Budget and I commend it to the House. Thank you. 
Hon SHANE JONES (Labour) 
: 
 Kia ora no tatou—greetings Mr Assistant Speaker Robertson. Today we saw a Budget that really has to be called the “Tui Budget”—yeah right! It is so far to the right that there is no way that members on this side of the House will shrink from fighting an election on firstly the wholesale privatisation and sell-off of our assets. Those assets are not starved of capital. Those assets are well run but we are to lose their valuable revenue and valuable dividends. Worse still the Maori Party will be there as an active and consistent helper to watch the dilution and liquidation of those historical assets of the Crown estate. 
The Prime Minister got up and delivered one of his trademark  
Eurotrash 
 contributions. He is a man who has learnt his oratory and his life skills as he has wandered around amongst the super-rich of the world. He has no compassion no empathy and no understanding. If I were to go to the senior whip on the Government side of the House and use his figures then I would tell members that 75000 Kiwi workers earn less than $45000 a year. But there has not been a single bit or sliver of empathy from the Prime Minister towards them. He has also had the cheek to tell New Zealanders as he puts their assets on the block that they will be the beneficiaries of that. How many of those people will be actually in a position to purchase shares in those assets? We will watch the inexorable slide towards further foreign ownership of key monopoly assets etc. 
Not only is the Prime Minister presiding over the sell-off of those assets but he has based everything on a heroic assumption that he can trust Treasury’s figures. Well we trust what the Inland Revenue Department had to say as the  
Dominion Post  
showed us yesterday on page one. Those figures will not let us down. Just as they did not let us down yesterday neither will they let us down in the future. But Treasury’s heroic assumptions were concocted unfortunately when aggressive politics met sterile analysis. Those heroic assumptions are all that the Prime Minister’s vision for the future is written on. 
Let us just think about what the Prime Minister is telling Kiwis through his “Tui Brewery Budget”. The first thing is that everything is for sale. The second thing is that he wants people to save but he will not actually incentivise or help them to do so because encouraging savings is a Labour legacy. Muldoon destroyed the first savings initiative Jenny Shipley destroyed the second savings initiative and John Key and Bill English as a consequence of their narrow partisanship against the legacy of Dr Cullen and the Labour Government are continuing to tinker with and unravel the savings legacy that we put into place. The man has said to Kiwis that National wants to see savings increased and that it wants to reduce the country’s reliance on overseas sources of capital but National has used this Budget to further undermine and gut KiwiSaver. 
These are great issues upon which to fight the next election. At least we did not hear simpering from the Prime Minister—but we have heard it from the Maori Party—when he told Phil Goff that National would meet us in the halls and on the hustings and would fight the election on these issues. Labour cannot wait for that. 
OK so we have heard a little from the Maori Party which is a brief improvement on the simpering contributions that we have endured over the last couple of days. I have news for those members: the love-in is over. The love-in is over as the low tide has revealed how unpopular and irrelevant the Maori members on the Government side of the House have become. They have been able to secure nothing else but what we might call kongakonga crumbs. That is a simple reprioritisation where Peter pays Paul or as we might say it is a nick-and-tuck contribution for the Maori Party—a nick-and-tuck contribution. Its legacy is to be the nick and tuck. The assets of hard-working Kiwis politically speaking are about to be nicked and the Maori Party is tucked up. Those members do not care that ordinary hard-working Kiwis—or should I say garden-variety Kiwis—will be worse off as a consequence of this asset sell-off. No. The Maori Party members are focused on constitutional reform yet they will definitely lose Tamaki-makau-rau and Te Tai Tokerau. They have already lost them anyway as a consequence of poor management with regard to Hone Harawira without a doubt. 
Given the importance of jobs a decent income and the provision of housing why have our colleagues on the Government side of the House whether they are the Maori in discredited National or in the ebbing Maori Party forgotten about those core issues? Why are they running around talking about flags and now a constitutional review which as a consequence of their mean-spiritedness they did not invite this side of the House to contribute to? How can they with any sliver—with any measure—of sincerity say they want to change the constitution of New Zealand then wander off and with Wiremu Pakeha Bill English as their handmaiden think they are going to do it on behalf of all iwi? Their views about constitutional review will be revealed on 26 November and they will be in the form of a UB40—that is an application for an unemployment benefit. That benefit is likely to disappear as a consequence of the very parsimonious approach that we have seen evidence of today in Bill English’s speech. 
I really need to come back to the Budget in order for the members on the Government side of the House to fully understand the sort of electoral debate that we are about to have. Where are all the contributions about cutting red tape? There is not one single initiative—not one single initiative. Rodney Hide—off he goes and Don Brash comes in ceding to those villains the opportunity to cut red tape. Where is the supposed business-friendly party delivering opportunities for both small and medium sized businesses? Those opportunities are somewhere near zero. Although the ACT Party vaunts itself and promotes itself as being a great friend of the world of business it is not. There is destruction of savings and a sell-out at knock-off prices of State-owned enterprises. There is absolutely no plan in terms of the long-term growth of the key pastoral sector. What have we seen? We have seen ongoing further corporate welfare—ongoing corporate welfare. 
We realise that the Maori Party has not learnt all the acronyms—along with Steven Joyce—nor has it actually understood what the man is doing in terms of the damage to the taxpayers as a consequence of his broadband scheme. No there is no plan. In fact although the man boasts about infrastructure the only infrastructure we are going to see there is a new subsidy that the taxpayer will write out as the much-vaunted infrastructure plan sinks out of sight. The man will not back down. It shows how ill-conceived the plan was that Steven Joyce was outsmarted by Rahui Katene. If there is any evidence that this is not a plan to take this country forward there it lies. 
I am sorry Mr Assistant Speaker Robertson but please let me explain to Maori that there are 2 more minutes of this wisdom—of this very judicious contribution. Let me also talk now about Mr Steven Joyce and his contributions via the discredited script that is otherwise known as the Budget. Why is he stinging Aucklanders with a $500 million bill for a transportation system that the super-city mayor has a mandate for? Not only has the Government alienated savers disappointed the business community and shown an absolute barrenness of empathy and of compassion through the  
Eurotrash 
 contribution of the Prime Minister today in what ought to be a prime ministerial speech but it is now sticking it to Aucklanders. Aucklanders do not want Steven Joyce to continue in that supercilious manner. They do not want that. They are waiting for the opportunity to show him the exit. But it will be a crowded exit because as he moves to that door Te Ururoa Flavell Tariana Turia Rahui Katene and indeed Dr Pita Sharples will be singing “Now is the Hour”. Kia ora tatou. 
CHESTER BORROWS (National—Whanganui) 
: 
 I raise a point of order Mr Speaker. I wish to seek a clarification in respect of language used in the House. I was watching the debate earlier when the Hon Clayton Cosgrove was speaking and I believe I heard him refer to a member on this side of the House as “Sooty”. 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: The member will be seated. Points of order have to be raised at the time. You cannot come down and do it later on. 
Dr PAUL HUTCHISON (National—Hunua) 
: 
 It is indeed a pleasure to speak on the second reading of this Taxation (Annual Rates and Budget Measures) Bill. But I must say that perhaps it is a dubious pleasure to be following the Hon Shane Jones who is the quintessential example of the Labour work ethic. After all he was the man who on  
Make the Politician Work 
 went off through the Manukau Heads. But what happened to him? He slept. He was asleep. Out he went through the Manukau Heads but when the crew came looking for him they could not wake him up. In fact they had to turn on a fire alarm to wake him. If they had not had the fire alarm he would have gone out there for 3 days and come back having achieved nothing. 
I acknowledge firstly the Hon Bill English for delivering a highly intelligent and balanced Budget for the times. It is a Budget that is extraordinarily prudent and responsible and a Budget that ensures that health education and our justice services are well provided for. Indeed they are the core winners of this Budget and they are the core concerns of ordinary New Zealanders. The Budget delivered by the Hon Bill English makes a clear setting for our country to come out of deficit by 2014-15. 
Secondly I acknowledge the outstanding Prime Minister the Rt Hon John Key for the finest Budget speech I have ever heard. It was the finest Budget speech I have ever heard and it rebutted the Hon Phil Goff at every single point and clearly demonstrated the dire position that Labour is in. 
Thirdly I acknowledge the Hon Peter Dunne who is responsible for this bill that deals with the fiscal costs of the KiwiSaver scheme and the Working for Families tax credit programme. This bill is one of the reasons why health education and our justice services are winners in this Budget. 
I pay tribute by the way to the outstanding stewardship of Vote Health by the Hon Tony Ryall because in health alone we see that $54 million in this Budget will be delivered to maternity services including Plunket and Well Child checks. Those are hugely important for the potential of our children. There is $44 million in the Budget for dementia care. Again that area is often left out but this excellent National Government has put in that extraordinary amount in difficult times. There is $68 million more for elective surgery—and how we remember the days when Annette King grew the waiting lists to over 130000 and then culled them at the rate of 10000 at a time. There is $20 million more for medicines at a time when Governments around the world are cutting their budgets for health and certainly for medicines. 
There is a spectacular graph that shows the trajectory of where spending would have gone under a Labour Government from 2008 if its rate of spending had continued in the same way. The graph demonstrates that by 2023 the public debt would have ballooned to 60 percent of GDP. That is the sort of irresponsible trajectory that a Labour Government would have put on the people of New Zealand. Any sensible economist I have come across when talking about the New Zealand economy has said that we must curb our spending. We have heard the rhetoric of David Cunliffe the man of the people who runs his electorate downtrodden there in Grey Lynn— 
Hon David Cunliffe 
: New Lynn. 
Dr PAUL HUTCHISON 
:—oh it is New Lynn—by remote control from St Mary’s Bay. We have heard him and the Hon Phil Goff talk about at least $5 billion worth of more spending and probably significantly more than that. 
In stark contrast to the spending promises of David Cunliffe and Phil Goff this John Key - led National Government will bring New Zealand’s deficits down to nothing by 2014-15 and if the same wise and prudential trajectory is followed the deficit will be down to 20 percent of GDP by 2020. If it continued on further it would possibly be down to no debt whatsoever which would be a huge achievement for New Zealand. 
It appears that Phil Goff is in absolute denial of reality. He claimed that this was a do-nothing Budget. He claimed that there was no plan yet this Budget is built on National’s 2008 election policy a six-point plan that clearly showed a sustained pathway to growth. First was changing taxation to ensure that we delivered a world-class taxation system with clear signals that those who were prepared to work hard would be rewarded. Second was reducing waste in the Public Service and that has happened palpably particularly in the health system. Third was reducing red tape and enhancing regulatory reform in the use of the Resource Management Act and fourth was bringing in legislation for a flexible labour market. The New Zealand Institute of Economic Research has shown that an extra 13000 jobs were created as a consequence of that legislation being brought in. Introducing standards in education was a further priority along with making science research and development central to Government policy. 
This Budget is indeed a well-crafted responsible and pragmatic Budget. Labour which opposes it must be kept out of office for a very very long time. 
A party vote was called for on the question  
That the Taxation (Annual Rates and Budget Measures) Bill be now read a second time. 
Ayes 68 
New Zealand National 58; ACT New Zealand 5; Maori Party 4; United Future 1. 
Noes 54 
New Zealand Labour 42; Green Party 9; Progressive 1; Independents: Carter C Harawira. 
Bill read a second time. 
In Committee 
Hon RICK BARKER (Senior Whip—Labour) 
: 
 I raise a point of order Mr Chairperson. First I say that I accept without reservation the Chair’s uncontested right to make a decision on when to put a closure motion. But this is very heavily contested ground and I want to make a point before we get into the Committee stage—right from the outset—about the rules of engagement. The first point I make is that the Taxation (Annual Rates and Budget Measures) Bill has not been to a select committee. This bill has only just been put on the Table today and therefore I think the Chair needs—and I am just asking before I come to the matter later—to ensure that the rights of the Opposition are well protected and that the rights of the Opposition to examine a bill extensively are taken into account. I hope that the Chair is very lenient in consideration of when to put a closure motion because I have no doubt that the Government members— 
Hon Sir Roger Douglas 
: Oh there’s nothing in the bill. 
Hon RICK BARKER 
: I raise a point of order Mr Chairperson. 
The CHAIRPERSON (Lindsay Tisch) 
: Points of order are to be heard in silence and the member has the floor. There will be no other comment. 
Hon RICK BARKER 
: This bill has not been to a select committee. The Opposition has had limited time to read the bill. I know it is not extensive. I know it is short and that there are lots of numbers in it but I hope that the Chair will give a lot of forbearance in allowing the Opposition to have plenty of calls and to put plenty of questions to the Minister in the chair recognising the fact that we are in urgency and the bill has not been to select committee. I hope that the Opposition is given plenty of time to examine the bill over time. I just make that point before we start. 
The CHAIRPERSON (Lindsay Tisch) 
: I thank the member. This is an important debate. It confirms the annual tax rate and I thank the member for his contribution. The member will be aware that the discretion to accept a closure motion is that of the Chair. The Chair will always be looking at the relevancy. I hear what the member says and this is an important debate. I am sure that we will have a lively debate and there will be full participation from all sides of the Chamber. 
Part 1 Annual rates of income tax 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 It is appropriate at this point in the debate to come up a level and consider the broad framework of tax policy that stands behind the Taxation (Annual Rates and Budget Measures) Bill. It is appropriate in the Committee stage to repeat what we have said in the first reading debate and to stake out the ground upon which the Labour Opposition will be fighting this bill. Although it is uncontested that a significant and serious debt problem with net international liabilities equalling 85 percent of our GDP confronts this country and that a deficit of $16.7 billion per annum cannot be sustained it is also true that in reducing those deficits the tax system plays a key part and that the equity and efficiency of any tax rate changes must be carefully considered as a means of deficit reduction. 
It is essential that the Committee recalls the changes that have recently been made. When I say recently I mean during Budgets 2008 2009 and 2010 which formed the basis of the rates that we are being asked to pass today. In 2008 a number of changes were made to tax rates mainly in the middle and the bottom brackets which cost the country about $8 billion in forgone tax revenue. That was passed against the background of a somewhat slowing economy and there was a view that that was an appropriate level of stimulus based on the information available at the time the Budget went to print in about March 2008—in other words 6 months before Lehman Brothers collapsed the global financial crisis and the terrible deleveraging process that has since ensued affected New Zealand. I think it is a fair bet that had we known how bad that was going to be there may have been some reconsideration of the depth of those tax remissions. However that was the information available. Nonetheless even with those reductions in tax rates Labour was able to bequeath to the incoming National Government— 
Hon Dr Nick Smith 
: Rubbish! 
Hon DAVID CUNLIFFE 
: Dr Smith is a man of letters a man of intelligence discernment and an impeccable reputation. He has declared that my sentence is “rubbish” before I have even finished it. He cannot therefore know what he is rubbishing—except himself. The Labour Government bequeathed to the incoming National Government a net debt position including the assets of Crown financial institutions—Treasury numbers—of 7.6 percent of GDP. I have it in front of me on a spreadsheet. That has deteriorated to a net debt position including financial assets of minus 15 percent and is headed for minus 30 percent before the measures taken in this Budget. There could be no clearer deterioration in position than that. 
The CHAIRPERSON (Lindsay Tisch) 
: I reminded the member right at the beginning on two occasions that we are debating clause 3. Clause 3 is about the annual rates of income tax for the 2011-12 tax year. The member must come back to clause 3. 
Hon DAVID CUNLIFFE 
: Clause 3. As I said at the start but I will repeat the passing of the rates today has to be considered in light of how we got those rates. Three preceding Budgets are essential for us to recall. The first was 2008. I have acknowledged that it may have been somewhat brave in the remissions it offered in those rates. In 2009 as the Chair will remember National incorporated rate changes into the 2009 Budget that were passed in urgency around Christmas of 2008 so urgent were they. It was the first part of a three-part rate reduction programme by the incoming National Government which dropped the top rate from 39c to 38c in the dollar. Then in their wisdom in the 2009 Budget those members cancelled the rest of the three-part programme only to re-instigate them the following year in the 2010 Budget. How is that for leadership? It was a reversing of the reversal rather like KiwiSaver for which today they were brave enough to half-reverse the reversal of last year’s Budget change. But in this case in terms of income tax rates which is what we are discussing in clause 3 those measures in Budget 2009 cost another $8.5 billion in forgone tax revenue over 4 years. 
When we get to Budget 2010 which was of course the doozy the Government was so concerned about the Crown’s fiscal position and the growing deficit that what did it do? It dropped the top tax rate from 39c to 33c in the dollar and the company rate from 30c to 28c. That was extraordinary. That cost $14.3 billion in forgone revenue growth over the 4-year forecast period resulting in an accumulated amount of revenue forgone—wait for it—of $23 billion under the National Government over 4 years plus Labour’s $8 billion which equals around $31.5 billion. Why is that relevant? Because today we face a deficit of $16 billion which is roughly half the quantum of the tax remission in gross terms in the last three Budgets. So go figure! The Government reduced rates reduced revenue and could not manage the economy out of a paper bag; growth fell in a hole and now we do not have any money to spend. 
That brings me to the second important point of the argument about tax rates. If we are contracting Crown expenditure to accommodate the size of the deficit might we not also consider changing some of those rates back up? Why is it that the top tax rate is somehow sacrosanct? Why is it that when middle-income New Zealanders are having KiwiSaver cut and Working for Families cut—and I see that those cuts go way below $70000 combined family income; $60000 is caught by these changes—why is the top tax rate sacrosanct? In other words if the country is being asked to tighten its belt why are the tight belts the first to be further tightened and the rather more generously proportioned waistlines of certain other taxpayers allowed to expand further? Are we creating in short— 
Craig Foss 
: Leave Parekura out of this! 
Hon DAVID CUNLIFFE 
: —I am not speaking about the distinguished chairman of the Finance and Expenditure Committee in person; his waistline is no business of mine. But why are some being asked to bear the brunt and not others? Why are we building two New Zealands? Those who have not who shall have less and those who have who shall have more. This seems wrong to me but hey I am only a social democrat—what would I know? I represent very proudly only the electorate of New Lynn. I do not represent some other electorate such as Grey Lynn those latte-sipping socialists from the inner city. No no: New Lynn where good working people live and I am very proud to be their MP. Does Cam Calder come from the North Shore and commute to South Auckland? The nice thing about New Lynn is that when I look up on a crystal-clear day when the birds are singing I can actually sometimes see John Key flying over us in his helicopter to get from his mansion in Parnell to his electorate in Helensville. I count that a great privilege—but back to the rate issue. 
What would a sensible moderation of tax rates look like? We have to have regard for international competiveness and I am sure Mr Dunne in the chair would remind us of that. Therefore changing the corporate tax rate would not be top of our list of things to do. But in looking at the marginal personal rates it seems to me that some rebalancing there that brought a stronger sense of social equity to the exercise of reducing the Crown’s deficit would be appropriate in most ordinary Kiwis’ sense of fairness. Of course we have to balance the growth aspects of this—the building of the strong export-oriented economy that we need. That brings me back to the part of the discussion in the first reading of the bill where we noted—I think collectively; I think Government members joined with the Opposition on this—that there was no economic development strategy anywhere in this Budget no pretence of one. That is not what they do; they are conservatives. They are good with a little nip and tuck here and there around the fist they reckon. Even so some of them take us backwards. But growing the pie? That is not for them. That is for us. When the public wants the pie grown they will vote them out and vote us in. Is that not right colleagues? And that is what we do. They are also the party of continuity. They are the Holyoakes of the modern era there to sit on their well-proportioned bottoms while the country goes to rack and ruin. It is Labour that historically has been the party of change. 
Coming back to the bill: if we want rates changed again this is unlikely to be the Government that will do it. They seem to think the epitome of courage is to semi-reverse last year’s reversal. That is not strategic; that is not the kind of change this country needs. It will not take us forward. 
This is a rare opportunity. It happens once a year for Parliament to recall what has happened to tax rates. What has happened to tax rates in three successive Budgets before this one has been massive tax remission to the public and proportionately speaking much of it to the top end. That needs to be rebalanced. 
Dr CAM CALDER (National) 
: 
 What a pleasure it is to rise to speak on the Taxation (Annual Rates and Budget Measures) Bill. That was a very learned discourse from the member opposite on the relative merits of lattes in Grey Lynn New Lynn and possibly St Mary’s Bay. There was a very brief discussion about taxes but he did mention at one stage that yes the default position is that he wants to raise taxes. Can members believe that? He wants to raise taxes. Actually I can believe that because that seems to be the default position of his leader Mr Phil Goff as well. 
Incidentally we heard Mr Goff make the breathtaking assertion in the House earlier today that the global financial crisis finished in 2009. What then is happening in Portugal and Ireland—Mr Goff has completely missed that on the radar—as well as in Greece and Spain? He seems to be completely unaware of the EU bail-out or in fact the IMF bail-out masterminded by DSK before he himself bailed out. There were billions of dollars in quantitative easing. 
Tax borrow spend and hope seems to be once again the default position of the Labour Party. We heard Mr Phil Goff confirm that Labour members have not learnt. Punitive pusillanimous and pathetic describe Labour’s politics of envy as it once again wants to hit the 13 percent of New Zealanders who pay over 50 percent of tax in this country. Labour members want to wallop the wealth creators evict the entrepreneurs and bash the businessmen and businesswomen who are so—[ 
Interruption 
] 
The CHAIRPERSON (Lindsay Tisch) 
: The Hon Pete Hodgson knows he cannot be on his feet while interjecting. 
Dr CAM CALDER 
: —crucial in growing the economic cake for the benefit of the most vulnerable New Zealanders. 
National’s tax changes will provide more money for hard-working New Zealanders. We heard from the Prime Minister this afternoon that three-quarters of New Zealanders pay a top marginal tax rate of only 17.5 percent. Despite international pressures on food and petrol tax reforms have allowed after-tax wages to go up faster than the cost of living. Wages have gone up 7.1 percent in real terms. If my memory serves me well in the blighted 9 years of the previous administration real wages went up 3 percent. 
As a result of our tax changes a typical married couple on superannuation has seen their joint income increase by $166 per fortnight. That is almost 20 percent over the last 3 years; 8.5 percent if adjusted for inflation. Interest rates have fallen dramatically to their lowest level since 1964. Our tax rates have put more money in the pockets of hard-working New Zealanders. I commend the Taxation (Annual Rates and Budget Measures) Bill to the House. 
Hon DAVID PARKER (Labour) 
: 
 I will refer to clause 3 of the Taxation (Annual Rates and Budget Measures) Bill. I ask the Minister in the chair the Minister of Revenue to take a call in order to advise the Committee on the income tax rates proposed in clause 3. According to this clause “Income tax imposed by section BB 1 of the Income Tax Act 2007 must for the 2011-12 tax year be paid at the basic rates specified in schedule 1 of that Act.” In my reading of that clause the rates of income tax are not being adjusted for the losses that most New Zealanders in the KiwiSaver scheme are suffering as a consequence of the decrease in the tax credits applying for KiwiSaver. As I understand it despite the fact that people are losing the member tax credit and therefore the effective tax burden they suffer in New Zealand is greater their income tax is not going down. That is my reading of clause 3. It would be good if the Minister would take a call to confirm that the tax credits are going down—so people do not have the old benefit they had for saving under KiwiSaver—but their income tax rates under clause 3 remain unadjusted and therefore they are worse off. I ask the Minister to take a call in respect of that point. 
The second point I would like the Minister to confirm is that the adjustments that are made to Working for Families are of similar effect; that the middle-class tax bill after the changes to Working for Families in the later part of the bill which take money off them is not adjusted in this part of the bill by an amendment to the income tax rates. At the same time I would be grateful if the Minister could explain why if I am right it is fair that there has not been some redistribution of the disproportionate tax cuts that went to higher-income earners in respect of National’s income tax cuts in the last Budget. Remember that the statistic we were given was that 42 percent of the income tax cuts last year went to the top 10 percent of income earners. If I am right in my assessment of what happens overall in this bill why has there not been some redistribution so as to make that fair because it does not seem to me to be fair. 
Similarly why are there no significant changes to the rates of income tax in respect of the farming sector? There was a headline in the paper yesterday on this subject and I agree with some of the criticisms that were made of what I think were sub-editorial changes to the heading which suggested that farmers got $500000 of income but paid only a small amount of tax. The headline did not make clear whether it was gross income or net income and that should not have been the case. 
Amy Adams 
: Yeah it did it was just wrong. 
Hon DAVID PARKER 
: It did not make it clear whether it was net income or gross income and some people like Amy Adams read it and chose to interpret it as being a reference to net income which it never was. None the less it was clear that effectively an insufficient rate of income tax was being paid by the rural sector. Why is that not addressed here? 
I ask the Minister whether it is right that the only change that is signalled in respect of those tax settings is a future review of the livestock valuation schemes that are open to farmers. One of the ways in which those effective income tax rates are low in practice for the farming sector one of the ways that members of the farming sector can effectively minimise their taxes in New Zealand is by opting in and out of different livestock valuation schemes. At the moment if the value of livestock is going up farmers can opt in to the capital scheme and the increase in value is not attributable to them for tax purposes because it falls into a capital scheme. But when the value goes the other way at the moment farmers can opt out of the capital scheme and go into the revenue-based scheme for the valuation of livestock the value of their livestock goes in and they decrease their income for tax purposes on that part of the cycle. So farmers capitalise the upside and put a drop in value into the revenue scheme. 
Even that problem is not fixed in this Budget. The Government knows that it is a problem that decreases the effective rate of tax and these tax rates are set for the forthcoming year by clause 3 of this bill. The Government could have fixed that problem in this bill this year by saying that it is plainly wrong but no all it has done—as far as I am aware and I have seen the press release from the Hon Peter Dunne today—is to say that it will look at the situation in the future. I congratulate him on doing that because it is better than doing nothing but given how little tax is being paid by this sector looking at it and maybe doing something tomorrow is actually better summed up as doing nothing in this Budget because nothing is done in this Budget to remedy it. That is one of a number of areas of unfairness in the tax system relating to farmers and I thank the Minister for identifying that one but there is a long list of other things that are not being fixed that I do not have time to go into today. 
I come back to my primary point. Will the Minister confirm that notwithstanding the other changes to taxes for individuals that increase the effective tax burden of middle-class people in KiwiSaver and middle-income people who are having their Working for Families abatements made more severe the income tax rates that clause 3 in Part 1 of this bill sets remain unchanged so the net effect of both of those things is that the tax payments in effect go up and notwithstanding that last year 42 percent of income tax cuts went to the top 10 percent that is not revisited and instead there is an increase in middle-class tax burden. 
Hon PETER DUNNE (Minister of Revenue) 
: 
 The member who has just resumed his seat David Parker raised a number of points that I want to respond to. I am sure he will forgive me if I do not get them all in order. 
I will start with the last one first: the question about the change in the livestock regime that we foreshadowed in an announcement today. His analysis of the problem is correct. One of the reasons why we are going to have a look at this regime is precisely the situation he described to the House. I remind the House that what we are doing is the normal way of addressing these changes. We will issue an issues paper that will lead to some decisions being made. I imagine there will probably then be either a discussion paper or draft legislation to follow. The member should take it from me as a very clear indication that this area is not being looked at just for the sake of it. An issue needs to be addressed and we are keen to address it. 
That leads me back to the question about the material that was in the media yesterday relating to the amount of tax paid or not paid by dairy farmers. As I said at the time it was a shoddy piece of reporting. I think the member partially acknowledges that. It was a case of apples and pears. I will explain some of the reasons why. We have a self-assessment tax system. When people put in their tax returns they describe their occupation. A number of people describe themselves as dairy farmers. That led to the categorisation of those people and the amount of tax that was attributed to them. From memory it was around $26 million. 
But if the member had looked down the table he would have seen that there was another category—effectively “other”—that had $1.5 billion of tax assessed for it. A lot of the people in that category would be dairy farmers or other farmers who would simply describe themselves as farmers agricultural businesses or whatever. It becomes a classification issue. The issue was also raised about the distinction between taxing on turnover and taxing on income. I do not want to canvass that point any further because it has been well canvassed today. 
I will come back to the other questions that David Parker raised relating to the status in effect of Part 1 of the Taxation (Annual Rates and Budget Measures) Bill in relation to the changes made in Part 2. I see from the wry smile on his face that he knows the answer as well as I do. I am happy to confirm for the member that Part 1 of this bill confirms the rates of taxation that were put in place in the companion measure last year and that they are not being changed in this bill. 
I come to the other point that underpins both his contribution and the contribution of Mr Cunliffe earlier. I say to the Committee that it is now very clear that Labour and I suspect the Greens—although to be fair the Green Party members have not yet spoken in this debate—will go into the election with a policy of increasing taxes. It is only a matter of by how much. 
Michael Woodhouse 
: They won’t tell us. 
Hon PETER DUNNE 
: They will not tell us. 
Hon David Cunliffe 
: We are. 
Hon PETER DUNNE 
: I am grateful for that admission. 
Hon David Cunliffe 
: Read our lips. 
Hon PETER DUNNE 
: The member says we should read his lips. I place as much credibility on him as I placed on the original George Bush when he made that comment. Let us take the member at his word: Labour will increase at least the top tax rate. 
Hon David Cunliffe 
: We said that. 
Hon PETER DUNNE 
: He has confirmed it. Let me then work though the consequences of that increase which is where I come back to the points raised by Mr Parker. The biggest adverse tax change made in this country in the last decade was when Labour put up the top personal rate as its first act in Government in 1999. That triggered the explosion in the growth of loss attributing qualifying companies the explosion in the growth of family trusts for tax avoidance purposes and the explosion in a whole raft of people trying to define their income as something else in order to minimise it in respect of their tax obligations. All Labour is doing by signalling that it will go back to that policy is again setting off those massive distortions that we have spent the last few years trying to tidy up. The member may well say— 
Hon David Cunliffe 
: We haven’t announced that. 
Hon PETER DUNNE 
: That is exactly the point. It is the consequence of his actions. He knows it because he was part of a Government that started the process of trying to unwind the problem. 
The next issue that arises from that increase relates to differential rates. At the moment we have a top personal rate of 33 percent. The company rate is at 28 percent. There is an argument about whether a 5c gap is too great. In an ideal world it probably is but it is survivable in these circumstances because we aligned the trust rate with the top personal rate. If Labour wants to put up the top tax rate again—I think I heard Mr Cunliffe say this evening that Labour will not touch the company rate which will remain at 28 percent— 
Hon David Cunliffe 
: I didn’t say that. 
Hon PETER DUNNE 
: He did not say that. 
Hon David Cunliffe 
: No I said we’d be reluctant. 
Hon PETER DUNNE 
: This gets better the more we go on. The company rate would probably go up as well. The question we are then left to answer—and we may get an answer if I push Labour members—is what Labour’s attitude to the trust rate is. Unless the trust rate is aligned to the top personal rate then it will set off that whole process of avoidance that we spent the last decade trying to get over. 
So far we know from the debate this evening that an incoming Labour Government at some theoretical point in the future will put up the top tax rate. It will probably put up the company rate although by not quite so much. It is bound then to put up the trust rate and—[ 
Interruption 
] As the member interjects quite correctly because it will need to in order to get the support of the Greens it will have a capital gains tax a carbon tax a resource tax and all sorts of other things. 
I am grateful to Mr Parker for raising the question of what is in Part 1 of this bill. It confirms the annual tax rates as they were passed in last year’s Budget. We have no intention of changing those. I am delighted that we have now confirmed that just about everything is on the table to be increased if Labour gets into power. 
STUART NASH (Labour) 
: 
 We are talking about Part 1 of the Taxation (Annual Rates and Budget Measures) Bill but I feel as though I have to clarify a couple of things that the Minister in the chair the Hon Peter Dunne has mentioned. First and foremost I find it a little rich that we have the Minister of Revenue in the chair talking about the bad things Labour did when it was in power when that Minister was also the Minister of Revenue under Labour. If the loss attributing qualifying company structure was so poor then why did the Minister of Revenue in the previous Government not do something about it? If there was such a discrepancy between the trust rate and the company rate then why did that Minister not do something about that? I find it a little bit rich to have him stand there and lecture Labour members on what they did wrong when in fact he was the Minister in charge of revenue under Labour. The irony has not escaped any member on this side of the Chamber. 
There is one thing the Minister said that I think I am allowed to rebut. He talked at length about dairy farms. He said that the figures were a little bit disingenuous because there was a figure under “other” that contained $1.5 billion worth of revenue. But I would like to say to the Minister that in the line for dairy farms over 17000 entities classified their primary activity as dairy farming. They were companies trusts and partnerships. The definition according to the Inland Revenue Department was that they had to have tradable activity. There were no shelf companies there and there were no trusts that hid assets. Instead these were trading trusts trading partnerships and trading companies as defined by the Inland Revenue Department. I am more than happy to send over to those members the information that I received from the Minister and that he received from the Inland Revenue Department. These were not shelf companies; these were trading companies. The statistics from the Inland Revenue Department said that dairying was taxed $26 million. 
The statistics also showed that 9000 of those trading entities declared a loss. I have had a number of calls from farmers and one was from a very high executive in Federated Farmers. He said to me that I was right and that the farming industry was in trouble. 
Peseta Sam Lotu-Iiga 
: Name and shame! 
STUART NASH 
: The member really wants me to? Conor English called me and said that yes the farming industry was in trouble. This is a debate that we need to have as a country because the farming sector is the backbone of this economy. It is a very important part of this economy. No one on this side of the Chamber would deny that. But the question that was posed and the question we pose is whether the sector is in such a dire state that it can afford to pay only $26 million in tax. That is the question we pose. 
The other question we pose which goes back to Part 1 is whether the integrity of the tax system is in such bad shape that it has allowed farmers to claim expenses for a whole lot of stuff they were able to write off against their incomes. They were allowed to write them off against their incomes to the point where they paid no tax. 
Amy Adams 
: What are you smoking mate? 
STUART NASH 
: I would love Amy Adams to take a call because she has three farms that are all held in trusts. She is a lawyer and I would like Amy Adams to stand up and tell us how she did that. 
Amy Adams 
: I do—sheep farms. You hate them too? 
STUART NASH 
: It does not matter because the statistics on dry stock were just the same. In fact according to the figures from the Minister which were supplied by the Inland Revenue Department 75 percent of dry stock farms earned $20000 or less. Are they really in such a bad shape that they cannot pay tax or is the integrity of the tax system in such a bad way— 
Amy Adams 
: You’re a moron. 
STUART NASH 
: Am I a moron Amy Adams? Mr Chair I take personal offence— 
The CHAIRPERSON (Lindsay Tisch) 
: The member knows that that is not a parliamentary term. I ask the member to withdraw and apologise. 
Amy Adams 
: I withdraw and apologise. 
STUART NASH 
: Thank you very much. All I am saying is that I know the difference between income and payout and I know about expenses. I know how economics works but I also know that when a sector that describes itself as the backbone of this country pays only $26 million in tax some serious questions need to be asked. 
JOHN HAYES (National—Wairarapa) 
: 
 I would like to say to the listening public that that was the voodoo economist in this Chamber or possibly the “member for misleading information”. I accept that he is not a moron at all and I am pleased— 
The CHAIRPERSON (Lindsay Tisch) 
: No. I ruled against the use of that term and it is not appropriate to bring it into any form of debate following. I tell the member to not do that. 
JOHN HAYES 
: Thank you— 
Hon Rick Barker 
: I raise a point of order Mr Chairperson. The other point I would make—and you have been very good on your rulings to make sure the Committee is in order—is that the member made reference to a member for such-and-such. I thought that was a disrespectful reference to members on this side of the Chamber. Members are either members for an electorate or they are list members but to call the member the “member for misleading information” was I thought disrespectful to a member in this Chamber. 
The CHAIRPERSON (Lindsay Tisch) 
: The intent of that was not directed particularly to a member. These are debating points and I am sure they will be taken in that light. 
JOHN HAYES 
: The point of the issue is that we have had two members speak in this Committee who are both list members of Parliament—unlike myself who deals with a provincial area of New Zealand the Wairarapa. I have a great connection with dairy farmers sheep farmers and beef farmers. I can tell members that there has been a very important rain event in the northern part of my electorate which if members will bear with me bears on this argument. The reason is that some of the farms in my electorate have lost more than 60 percent of their land area between Porangahau and Cape Kidnappers. For that reason we have tax rules as I am sure the Minister in the chair Peter Dunne understands that allow farmers to remove their capital stock from their land sell it and raise capital from it. That money is treated as capital not as income because when the pasture is restored and the grass starts growing in the spring those farmers will want to bring back capital stock on to their pastures. So it is fundamentally important that we have flexible arrangements as we have in the legislation for allowing this sort of transaction. 
I have to say to the member Stuart Nash that he is quite wrong and I do not believe he understands the difference between a person who draws wages or a salary and a person who pays an employee. All of those people take money from the business entity for which they work and they pay full tax on that at whatever is the relevant rate. That does not mean that the business and all dairy farmers pay no tax. That is absolutely outrageous to suggest— 
Stuart Nash 
: I’ll send you the figures. 
JOHN HAYES 
: I think the member needs to look at the issues he was talking about and it is how he was talking about it. I have to assert again that this is voodoo economics and the member is just taking headline figures and wrongly interpreting them for the benefit of his argument. 
I return to clause 3 of Part 1. I need to say that when the Government took the reins of office in the financial crisis the economy had gone into recession and had shrunk 3 percent a year topping off 5 years of historically low growth. Then what happened was that exports flattened out completely Government spending—which the member David Parker who spoke earlier was responsible for—was out of control and Treasury books showed never-ending budget deficits spiralling out to 60 percent of GDP and beyond. Despite the surprises of the two earthquakes and the global recession our economy now under John Key’s leadership is far stronger than it was 3 years ago. We have improved the tax system so that we are setting up signals for people in my electorate and elsewhere in New Zealand who want to improve their lot by working hard by saving hard and by paying tax through GST rather than on income tax. We have done that to improve the efficiency of the economy and to set up signals so that people will respond better. They will put money in their pockets and spend it as they wish. 
If we did not do that what would the list member across the Chamber do? He would be involved in a Government that would tax businesses on revenue not on profit. David Cunliffe has already explained that Labour plans to spend $5 billion a year but it will not tell anyone where the money is coming from. The member opposite has a really good opportunity to do that. It may be a turnover tax. I expect that Labour is going to give people a discount on GST; it has already said that in the House. That discount would cost about $250 million. It would benefit 10 percent of households by a magnificent amount: $1.50 a week. The Labour Party is talking about having a $5000 tax-free threshold but David Cunliffe said that the tax-free regime will not happen for 5 years and even then it would be worth about $10 per week. A month ago Labour had fully costed policies according to Mr Cunliffe—fully costed policies on a spreadsheet. 
BRENDON BURNS (Labour—Christchurch Central) 
: 
 I take the first opportunity in this debate to acknowledge that the Government is making some effort in respect of the recovery in Christchurch. I acknowledge also that it will of course be hard-working New Zealanders who provide the money for that recovery through their taxes and that is what is provided for in clause 3. 
I also want to pick up on the point made by my colleague Mr Nash about taxes being paid by particular sections in the community. I acknowledge too that we have a situation in respect of the dairy farming community where tax liabilities are also created because of the failure of the Minister for the Environment who is sitting opposite to deliver in the national water policy statement of last week any mechanisms for environmental control. So we have taxpayers funding the clean-up of some of the inputs that the dairy industry provides. We need only look at the lakes in Rotorua and at the Waikato River for examples of where taxpayers through their annual rates set in bills like this one are paying twice in effect. Not only is tax not being paid effectively by many across that sector but also we are paying through taxes for the clean-up. 
Then of course provided for under this Budget will be the irrigation schemes which the dairying industry will with others be a major beneficiary of. That of course will also be funded by taxpayers—ordinary hard-working taxpayers who on about a $50000 income are paying 10 times what at least in one recent financial year some dairy farmers were paying. That is a matter of fairness and equity and it is simply not acceptable to have that kind of imbalance in the taxes being paid by two sectors of society. 
The Prime Minister commented today that the largest amount of tax is paid by a relatively small part of the community and that is always the case when we have a progressive tax system. This part of the bill is implementing that progressive tax system and I for one believe that that is an appropriate tax system for us in New Zealand. Just last night I attended the graduation of my daughter from Victoria University. She graduated as a primary teacher. I was a very very proud father there last night amongst many many others; there were many other parents there. Those students of course will have contributed somewhere around 20 percent of the cost of their tertiary education. We as taxpayers will have contributed 80 percent as provided for under the clause in this bill where we have set the annual rates for our taxes. 
But I make the point that those students as they graduate and go into high-earning jobs will be the beneficiaries of the stable and orderly society that we treasure in New Zealand. How do we provide for that stable orderly society? We provide for it through our taxes. We provide for it through parts of bills like this one tonight. 
We have rules in our society and those at the top end are generally as much if not more the beneficiaries of those rules as those at the bottom end. Things like the courts things like regulations in business and things like tenancy requirements are all paid for overseen supported and facilitated through the taxes we pay and we as taxpayers also get back benefits for those. Those of us on higher incomes tend to get more benefit back because we get the regulations in business and tenancies and things like that which lower-income taxpayers may not be receiving even if they might sometimes be getting more in terms of particular other benefits. 
We get a welfare net and we get the provision of health care and I would rather live in a society where somebody is able to go to a hospital provided for in a health system funded through our taxes through clauses like this than have the system we see in other countries where as David Lange once put it: “They feel for your wallet before they feel for your pulse.” That is part of having a progressive tax system. 
Of course the Government makes much play sometimes about the fact that it has cut taxes and it points to the fact that there have been three tax cuts across the last 3 years. But it usually fails to take account of the fact that the first of those tax cuts took place under the guidance of Dr Michael Cullen and that those tax cuts were really sheeted home to lower and middle income earners not to the top end of town. We have seen in the latest two tranches of tax cuts without any doubt that the top end of town has been the real beneficiary and we have seen some of the figures on that provided to the House on numerous occasions. 
I will pick up on some of the commentary in the Economic and Fiscal Update as tabled today by the Minister of Finance around tax matters. I say to the Minister that on page 80 it is acknowledged that we are yet to see a full year of GST at the new 15 percent rate. I just wonder whether the Minister can give us any assurance as to whether there is any work consideration going on for any further lift in the GST rate under the potential of a re-elected National Government should he still be there as part of that. I think that is an important question to ask. 
I also draw attention to page 82 of the Economic and Fiscal Update which is reflected I think by this bill and the annual setting of the tax rates and to the differential between Treasury and the Inland Revenue Department in respect of the tax revenue forecasts and as Treasury— 
Craig Foss 
: All Budgets always use Treasury forecasts. 
BRENDON BURNS 
: No but Treasury notes that the Inland Revenue Department has produced a set of tax forecasts that are much lower than Treasury’s— 
Craig Foss 
: Read the whole paragraph. 
BRENDON BURNS 
: —much lower than Treasury’s. In this update— 
Craig Foss 
: Read the whole thing. 
BRENDON BURNS 
: —yes I will—the total difference between those tax forecasts across the 5 June years 2011 to 2015—it is on page 8; it will help the member with his own guidance—is nearly $4 billion. That is not an amount to be sneezed at or to be dismissed as just a minor variation between two Government departments. It is an actual $4 billion difference in projections between— 
Craig Foss 
: Four years. 
BRENDON BURNS 
: That is right and that is a billion dollars a year in anybody’s language. A billion dollars a year is not to be sneezed at. Why has that come about? It has come about because the Inland Revenue Department is less upbeat on the business tax— 
Craig Foss 
: At the same time they upsized the risk— 
BRENDON BURNS 
: That is right. The bulk of the difference—I am again quoting from the papers—is the difference in estimates for corporate tax because Treasury is upbeat. It is saying the corporate sector is bouncing back. The Inland Revenue Department which is a less political organisation if you like is simply there to make sure that the revenue comes in to meet the needs and objectives of the Government. It is simply there for that reason and it is simply not prepared to be as upbeat as that on that issue. 
I refer the member opposite and the Minister in the chair the Minister of Revenue to the regulatory impact statement for this bill which refers to the issues of KiwiSaver. That is another issue of analysis by credible officials. It is actually an analysis by both Treasury and the Inland Revenue Department if my memory serves me right. It has I think the Inland Revenue Department’s fingers all over it because it is talking about the department’s concern that we are making changes to KiwiSaver when it is less than 5 years old. It was launched only in 2007. There have already been several significant changes to contribution requirements. Who made those? Those changes were made in 2008 and 2009 by the National Government which wanted to fund the first round of its tax cuts. So it took away the 2 percent contribution. 
Craig Foss 
: Half the people are on 4 percent now. 
BRENDON BURNS 
: Yes it did. It took it away and now it is going halfway back to reinstating it because we need a new savings regime. Here is what the department says about that in the regulatory impact statement: “The KiwiSaver industry has not experienced any period of stability in which to establish its core products and this uncertainty and unpredictability is not helpful to either the industry or savers.” The National Government’s track record on this issue is appalling dating back to Muldoon. 
MICHAEL WOODHOUSE (National) 
: 
 So now we know that Labour is going to campaign in the general election on a new top tax rate. It was not very clear in what Mr Cunliffe said but if we take the Leader of the Opposition’s speech there will be a new top tax rate because the alternative is that Labour simply puts up the existing top tax rate. Let us analyse why that will be so bad for New Zealanders. I will give members a scenario. It is of a family with two kids under the age of 13 where the gross income is $60000. I will take another family with exactly the same circumstances but the gross income is $90000. 
Stuart Nash 
: Do you know the difference between income and revenue? 
MICHAEL WOODHOUSE 
: Yes indeed absolutely. This chartered accountant knows the difference. That is one-and-a-half times more income. A progressive tax system says that the higher-income family should pay more than one-and-a-half times more tax. How much more? Is it 200 percent or 250 percent? At the moment that family is currently paying 675 percent more in effective income tax than the family on $60000 pays. That is nearly seven times more income tax. They are looking at each other and saying: “How can that be?”. 
Stuart Nash 
: It’s called a progressive tax system. 
MICHAEL WOODHOUSE 
: It is the system that the member put in place. 
Debate interrupted.