Cunliffe David: Debate on Prime Minister’s Statement 
Cunliffe David: Debate on Prime Minister’s Statement 
[Volume:660;Page:8673] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 Firstly I wish a happy New Year to the member who has resumed her seat. The last time I saw her was on Indian Republic Day where at the Aotea Centre she and the regional apparatchiks of the National Party were on stage in front of a scant crowd of around 200 people drawn together by a front organisation—the so-called “United Indians”—which has since been disowned by the reputable bodies of the Indian community. I think that National was embarrassed about the manipulation of community organisations when 3000 Indians turned up at the function put on by the Bhartiya Samaj Charitable Trust in South Auckland and there were more National Party flunkies at the Aotea Centre than there were genuine representatives of the ethnic community. 
But coming back to the issue of the day New Zealanders are asking themselves the question about “Big Tuesday”. Is that it? Is that really the best that National can do after a decade to think about it and 15 months in office? It proves Alan Bollard right that there is no plan to catch up with Australia. If raising GST on thousands of ordinary New Zealanders is the answer Kiwis are asking what on earth was the question. What was the question if that was the answer? Surely it cannot be to make the tax system fairer because as Labour said from the outset dropping the top tax rate and paying for it by raising GST is the precise opposite of “fair” to ordinary New Zealanders. 
Surely it cannot be to make New Zealand more productive to benefit the real economy because National has ruled out all of the options put up by the Tax Working Group that would thoroughly address the property bubble leaving only the removal of depreciation rates. By virtually ruling out all those steps it has left itself with no fiscal wiggle room unless of course there is the old arsenic or castor oil trick. Instead of the arsenic of GST on Budget day we get the castor oil of a limited capital gains tax. Perhaps that is the real plan; we shall have to wait and see. 
In my remarks today I will provide a quick summary of our rebuttal of the National plan concentrating on the proposed tax changes and I will set out Labour’s three-way test for progressive sustainable tax reform. Today was supposed to be “Big Tuesday”. This day John Armstrong said would be the day that big John Key broke a few eggs to put New Zealand on course with the policies the country needed. Well today the same commentator has given National 4 out of 10 for boldness. Brian Fallow a respected economic journalist said it was a pity that rather than grasping that lever he barely crooked his “ … little finger around it.” Bernard Hickey rightly called John Key “mediocre” “not a real leader” “a seat-warmer”. He told him to move on and let someone else do the job. The team that is ready to do that is sitting here on this side of the House ready to grasp the real issues. It seems the little emperor has no clothes after all. The smiling assassin was all smiles and no assassination of the underlying problems in the tax system. He has no vision and no strategy to get us to a resilient a productive and a truly brighter future. 
No amount of flag waving can hide the hole in National’s strategic doughnut. There is no “there” there there is no centrepiece. Today has proved that. After the piece of fiscal genius that was the heart of that speech we are called to look at the re-release of other policies like the famous Kopu Bridge. As my colleague has mentioned John Key must really love holidays in Pauanui. That is unless he does not like the fact that Gerry Brownlee is going to turn it into a slagheap by mining all over public land. Of course John Key also did the perfunctory squeezing of the Public Service the traditional National recipe to shrink the State so that ordinary New Zealanders who rely on the services the State can provide will get less tomorrow as well as today. 
The three-way test of whether the tax plan will succeed comes down to this: is it fair to all New Zealanders; does it pass the equity test? Does it solve the underlying problems; does it pass the productivity test? Will it last; does it pass the sustainability test? National’s plan fails all three. Let us see why. The equity failure could not be more stark or obvious to all. Cutting the top tax rate to say 30 percent costs about $1.6 billion; leapfrogging to 25c—getting ahead of Australia if you like—costs $2.3 billion. In a deficit environment quite rightly the Minister of Finance says it must be fiscally neutral so how are they going to pay for it? Well raising GST to 15 percent raises around $2 billion but compensating ordinary New Zealanders for the regressive nature of that tax costs virtually all of it around $1.9 billion leaving only $100 million to $200 million over to fund the top tax cuts. Obviously it does not work. 
Ordinary New Zealanders are therefore quite right to be sceptical that they would be fully compensated. Mums who are trying to feed their three or five kids on a medium or a low income are frightened about the cost of bread and milk let alone power and rent. They are right to be concerned at the fairness of it because someone on the average wage as our leader has said will get 35 measly cents a week in tax relief. But someone on John Key’s wage will get $509 in tax relief. The chief executive officer of Telecom will get $2600 in tax relief. The equity test is absolutely beyond question. This policy fails. So why do it? Why raise GST? New Zealand is already—wait for it—the sixth highest in the OECD for indirect tax take as a share of total tax. It is sixth from the top. It is not light on indirect taxes. 
From National’s point of view raising GST can make sense only if it does not fully compensate other New Zealanders otherwise there will be nothing to contribute to the reduction of the top tax rate. National’s plan fails the productivity test. It does not sufficiently address the structural problems and here is why. Firstly—surprise surprise—there was no mention in Mr Key’s speech at all of closing down the rorts or plugging the tax avoidance and tax planning loopholes around loss attributing qualifying companies trusts and portfolio investment entities. They did not get a mention. Not once did they get a mention but the Tax Working Group highlighted it as a fundamental problem. 
Secondly as I have said he ruled out nearly all of the measures that would address the property bubble. Everybody accepts that it is wrong that there is a tax incentive to invest in real estate speculation rather than in things we can actually export and sell. That is making New Zealand poorer. He has ruled out nearly all the tools in the tool box. The only one left is depreciation on buildings and at $1.3 billion it does not raise enough tax to solve the problem. Hence perhaps the deep dark Budget secret of 2010 is actually a partial capital gains tax instead of GST. We shall have to wait and see. 
To quote Bernard Hickey: John Key “ … is saying tough. My backers own property. We won. You lost. Eat that.” He is saying: “I don’t like it but I’m not brave enough to challenge it.” “He has finally shown his true colours.” says Bernard Hickey “He is a mediocre leader without the vision or the ability to change New Zealand. He is a seat-warmer …”. Last time I checked Bernard Hickey was not a member of the Labour Party. 
This fails the final test too: the sustainability test. Labour offered National a gold-plated “get out of jail free” card. Labour members said right from the start that if National wants to make New Zealand better they would honour that with a bipartisan discussion and they would work constructively and in good faith to do that job with it provided it was a two-way street and provided it did not just jack up GST to fund the cut to the top rate. But what did National do? It ignored the offer of a sustainable plan and it did exactly what we said it should not do: raise GST in order to fund the mates rates at the top. It is a two-fingered salute to bipartisanship. New Zealand will be the poorer because when Labour members are inevitably occupying the Treasury benches we will have to change that back. We will do it for the good of all New Zealanders. We will make a policy that is equitable that does support the real economy and that is sustainable for the future of New Zealand. Today was “Big Tuesday”—no it was not. It was “Barely Timid Tuesday” “Tiny Tuesday” as one of my colleagues has said.