Key John: Taxation (Annual Rates and Urgent Measures) Bill — First Reading Instruction to Finance and Expenditure Committee 
Key John: Taxation (Annual Rates and Urgent Measures) Bill — First Reading Instruction to Finance and Expenditure Committee 
[Volume:628;Page:205] 
JOHN KEY (National—Helensville) 
: 
 I rise on behalf of the National Party to oppose the Taxation (Annual Rates and Urgent Measures) Bill and all I can say—and I do want to touch on the student loan scheme in a moment because it clearly forms a significant part of the legislation—is that this policy has caused Michael Cullen tremendous embarrassment so far in the House. I know that Labour stands for the notion that the means justify the ends and it does not matter what it takes to get there but he has embarrassed himself even further in the House today if he seriously expects anybody in New Zealand to believe that it will cost $202 million to run this policy. I am tempted to repeat what Mr Locke said—he said he would go naked in Epsom if Rodney Hide won the seat. I do not want to make a similar pledge because my wife could be listening although she hardly listens to Parliament but I am tempted to say that that kind of pledge is befitting of the comments of Michael Cullen. 
Just a very simple analysis of cancelling the interest alone equated to around $348 million. No Treasury was right when it costed the policy as one that was tremendously expensive. 
 The front page of the  
New Zealand Herald 
 was right the day after John Belgrave the Ombudsman required the Government to release that document when it led with the headline: “What Labour didn’t want you to know”. That was the headline: “What Labour didn’t want you to know”. That is quite a significant issue that I wish to discuss. But before I start I want to draw to the House’s attention Part 1 which deals with the affirmation of the annual income tax rates and I say that for this reason. At 4.30 this afternoon the Government dumped on the media unit its incoming briefing to the Minister. The Government dumped it at 4.30 for a reason—it does not want it on the 6 o’clock news tonight. The Government could have dumped it at 6.01 p.m. but chose not to do that because that would have been tremendously embarrassing for a Government that does not want that kind of information in the public domain. 
But for the listeners to this address and for the members of the House let me just paraphrase what the briefing says. It says that if this country wants to get into the top half of the OECD then it needs a lot more than rhetoric and that what the country actually needs is growth-enhancing policies and that Treasury’s No. 1 growth enhancing policy is to cut taxes. It says that New Zealand will not get into the top half of the OECD with Labour-led policies. It says that this country has grown at a rate of around 2 percent per capita and it needs to grow at a rate of 4 percent if it wants to get back into the top half of the OECD. The briefing makes it quite clear: the international evidence is overwhelming that if we want a fast-growing economy and for this country to get what it wants and deserves—a growing economy that delivers opportunities—then this country must cut taxes and that information comes on the day the Government released its full-year surplus of around $8 billion—$2000 per head. In case the Minister of Finance has missed it it was a 42 percent increase in tax revenue. 
This country needs a lower-taxing Government. The country voted for tax cuts. Treasury said that National was right to advocate that position. The international evidence said that National was right to advocate that position. The public said we were right and the public knew we were right. Treasury said that if New Zealand wants to get into the top half of the OECD it is the No. 1 most important thing to do and the leading statement in the Speech from the Throne was that this Government—this Labour Government—will not be cutting taxes. This Labour Government will not be growing this economy and this Labour Government will not be taking New Zealand back into the top half of the OECD. It does not matter how many times Michael Cullen Helen Clark and the rest of the Labour front bench come to this House and argue to the contrary they are wrong just as Michael Cullen is wrong when he embarrasses himself by claiming that a policy such as interest-free loans will cost $202 million. As I said last night the most sense we will get out of Michael Cullen now will be when he delivers his valedictory in 2½ years’ time. 
I want to move on to the student loan policy because it was an amazing policy. I remember that before the forty-seventh Parliament broke up I asked Michael Cullen what the cost to the balance sheet would be—in other words what the cost would be of having roughly about $6 billion worth of loans that no longer have any interest bearing on them. My previous history was in the financial markets and anybody in the financial markets will know that a valuation of a loan portfolio that all of a sudden yields zero is worth considerably less than a portfolio that has an interest rate applying to it. And that was right because earlier in the year the Government had passed the financial reporting legislation which required New Zealand to adopt international accounting standards. I argued with Dr Cullen that that cost would be $1.7 billion nearly the equivalent of taking Solid Energy and Landcorp and giving them away to anybody for zero. Michael Cullen looked at me grunted a few things did not really say a lot and sat down. Again about a week ago in a rather embarrassing and sort of coy moment for the Minister of Finance he had to admit that in fact even I was wrong—it was not $1.7 billion; it was $2 billion. 
This is a Government that took $2 billion and gave it away. It does not want to privatise assets but it is happy to give some things away for zero because Helen Clark was so desperate to become Prime Minister again. She did not care that the country will not get back into the top half of the OECD and she proved it because she is doing the complete opposite of what Treasury said. She just gave away $2 billion. It was a disgrace. Michael Cullen went on to say in his press release that it was a one-off charge. Well that is not correct. What actually happens is that for every dollar that gets written in student loans—and there will be a great many student loans written—about 30c will have to be written off the Crown balance sheet. That is the truth of this policy. It is a policy that tells young New Zealanders to go and borrow— 
Dr the Hon Lockwood Smith 
: To the hilt. 
JOHN KEY 
:—to the hilt. The poor old students will be out there borrowing a whole lot of money and what will they also be doing? Yes—they will not be paying interest under a Labour Government. They will not be paying interest on those loans. But they will be paying off larger loans it will take just as long and the great tragedy of it is that under a National Government they could have had tax cuts they could have had vibrant opportunities and they could have had the things that Treasury told this Government in its incoming briefing notes to the Minister were so much required to make New Zealand go forward. I think it is a great tragedy. 
Helen Clark has spent quite some time as Steve Maharey and others on that side of the House have done lamenting the fact that student loans are there—lamenting the fact that young New Zealanders are in debt to the tune of around $6 billion. Well the great tragedy is that Treasury was right Michael Cullen was wrong and we need only roll the clock forward another 14 or 15 years to know that young New Zealanders will owe somewhere between $18 billion and $20 billion. That will be a sad day and that is a very expensive price tag in order for Helen Clark to secure a third term. What a cost to the country! What an unaffordable— 
Lindsay Tisch 
: Irresponsible! 
JOHN KEY 
:—and irresponsible cost to the country! It is a sad day. 
I want to finish by talking about the Working for Families adjustments. Under Labour’s Working for Families package—and the incoming briefing notes to the Minister made this point equally as well—families who live in many of our electorates and who earn under the average wage in this economy will face effective marginal tax rates of well over 50 or 60 percent. New Zealand families who so desperately want to get ahead and who are working hard to make a difference face a Labour Government that says it will tax them at the rate of 60 percent. That is so wrong and that was what was so right about National’s tax package because it picked up people who earn between $38000 and $50000 and applied to them a tax rate of no more than 19 percent. It was significantly below the 33 percent and it took an effective marginal tax rate of around 60 percent down to 39 percent. 
Lindsay Tisch 
: Very good policy. 
JOHN KEY 
: It was a very good policy. National members will be opposing this legislation with every bone in our bodies.