Smith Lockwood: KiwiSaver Bill — First Reading 
Smith Lockwood: KiwiSaver Bill — First Reading 
[Volume:629;Page:1680] 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 National does not condemn the Government for exploring how to improve the savings record or the savings progress of New Zealanders. We support the notion that it is in New Zealand’s interests that its people save more. But the central problem with this bill with this Labour Government’s approach is: how does Dr Cullen expect people to save more money when as they earn more money he taxes them more and more? That is what is happening. Look at the tax collected from Kiwis in the year before Dr Cullen came to office. In the last year that National was in office the Government collected $30 billion in tax revenue from New Zealanders. This year Dr Cullen will collect $46 billion. The figure has gone from $30 billion to $46 billion in just 6 years. In just 6 years the tax taken from Kiwis has gone from $30 billion to $46 billion. That is a 50 percent increase. The population sure has not gone up 50 percent. The working population to pay that tax has not gone up 50 percent. So how does Dr Cullen expect New Zealanders to save money when as they earn more money and go into higher tax brackets Dr Cullen taxes them more and continues to tax them more? As we look ahead he will continue to tax them more. 
I have news for Peter Dunne. His increases in the tax thresholds are well and truly dog tucker. Dr Cullen has made that very clear. The other day at the select committee—and these are not exactly his words—the message he gave was that the public should not take any notice of Peter Dunne and that they should listen to him; that he was the Minister of Finance and the buck stopped with him; the public should listen to him. That is a little message for Peter Dunne. 
But the issue is serious. How does Dr Cullen seriously expect New Zealanders to be able to save money when as they earn more money he takes it in tax? Of course that is why the after-tax income of New Zealanders has not increased much under this Labour Government. Wages have gone up sure but the amount New Zealanders are paying in tax has gone up and the amount New Zealanders have left in their pockets has not gone up. Hence to make ends meet people have had to borrow more and “dis-savings” have been going on. But it is part of the problem of overtaxation. If Dr Cullen is serious about New Zealanders saving more money a far more effective way to do that would be to ease the tax burden especially the marginal tax rates on New Zealanders. 
The extent to which Dr Cullen and this Labour Government control ordinary families’ net incomes is staggering. I would love some of those members opposite like David Cunliffe to sit down and calculate the net incomes of families. Let us say that a low-income family is trying to make a better life for themselves—it might be a sole parent trying to get off the domestic purposes benefit. One would have to calculate the impact of their work and the PAYE they pay; the domestic purposes benefit they are paid and the fact that as their income goes up there is an abatement of their domestic purposes benefit; the family support tax credits and as their income goes up the amount that that abates; the in-work payments as their income gets a bit higher and the amount that abates; and the extra tax they have to pay because the domestic purposes benefit is paid on an after-tax basis. We have to gross it up and work out the extra tax then finally work out the net income of that family as they try to earn more money—which they will have to do if they are going to save. Dr Cullen and the Labour Government are controlling that. 
Some families with small children must double their hours to increase their income significantly. Our lower-income people get to keep only a tiny percentage of that income. Over a certain income in a low-income range a family could double its income and get to keep $1000 of it. They could take their earned income from $10000 to $20000 a year and keep only $1000. They would be only $1000 better off at the end of the year. I do not believe that any of those Labour members opposite have ever sat down to think about that. I suspect that good people like Hone Harawira even are staggered to hear that kind of thing because many Maori families are caught up in it. Dr Cullen is in a dream-world if he thinks that this “baubles” tax bill will appeal to New Zealanders. Labour got Winston Peters sucked in with baubles and they think that a KiwiSaver scheme with a few baubles in it will suck in ordinary New Zealanders. Ordinary New Zealanders are not as stupid as the Rt Hon Winston Peters. It will not work.  
I was talking a moment ago about low-income families. I invite members opposite to nominate the sorts of families that will put money into the KiwiSaver scheme and what kinds of income they will have. Mr Cunliffe may nominate the income and I will tell him the marginal tax rate that that family will face. Mr Cunliffe may tell me the family size and the income and I will tell him the marginal tax rate that they will have to pay on the next dollar they earn. I will tell the member that from ordinary income from say just below average—about $30000—up to $100000 the Government takes more of their next dollar earned than they get to keep. I tell members that right the way through that income range—from $35000 to $100000 of income for a three-child family—the Government takes more in tax of the next dollar that the family earns than the family gets to keep. The Government takes more than the family gets to keep and when I say more I mean more—that Labour Government under Dr Michael Cullen takes more than 50 percent of the next dollar earned over that income range. How can we expect that family to save money? Where is the opportunity to save money? 
A lot of people would like to save money. People realise that saving money for their retirement is a good thing. But how do we expect them to? In some ways the bill is an insult to good hard-working New Zealanders because it treats them as fools. It shows no recognition of the realities that ordinary hard-working New Zealanders are grappling with. Often the age group that this is targeted—our working-age population—is the one with dependent children and 90 percent of the age group are caught up in those kinds of tax rates that I spoke of. Those people who think that families only face the marginal tax rates of our basic income tax structure are simply wrong. Those families face tax rates miles higher than that. The bill is targeted at our working-age Kiwis. But they are the people with dependent children. They are the people from whom the Government takes more than half the next dollar they earn. The bill is an insult to them because it does not recognise that it is not that they do not want to save; it is that they cannot save. They cannot save and also provide the education they want for their children because their children need the money spent on them today. They cannot save for their future as parents because as good parents they are providing for their children today. 
One thing is certain the scheme is not going to work. If one looks at the State sector superannuation scheme which the Government subsidises much more dollar for dollar one can see that there is a 50 percent take-up. My good colleague John Key mentioned how Ireland has tried the scheme. What was the percentage? 
John Key 
: 92 percent. 
Dr the Hon LOCKWOOD SMITH 
: Under a scheme like this one 92 percent of people ended up with dormant accounts. One must ask oneself what is going on here. I know that Dr Cullen is no fool. I do not agree with him in any way shape or form but he is shrewd. I suspect that what we are seeing here is the birth of the next election bribe; that in 3 years’ time the Labour Government will do a student loans scheme thing with the policy or a Working for Families thing with the policy and come the next election the baubles will be increased in size tenfold. New Zealanders deserve better. They deserve a Government that understands that cutting their taxes would help them to save a great deal more.