Taxation (Annual Rates and Urgent Measures) Bill — First Reading Instruction to Finance and Expenditure Committee 
Taxation (Annual Rates and Urgent Measures) Bill — First Reading Instruction to Finance and Expenditure Committee 
[Volume:628;Page:203] 
Taxation (Annual Rates and Urgent Measures) Bill 
First Reading 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I move  
That the Taxation (Annual Rates and Urgent Measures) Bill be now read a first time. 
 At the conclusion of the first reading I shall move that the bill be referred to the Finance and Expenditure Committee for consideration and that it be an instruction to the committee to report back the bill to the House by 5 December. I will also seek leave for an instruction to the committee through Supplementary Order Paper 1 to consider amendments to the bill to enable the Inland Revenue Department to assist in the administration of the Australian wine producer rebates. I thank all other parties for their expression of support for that measure being included and I understand that that does not necessarily mean they will support other parts of this bill. The bill will be fast tracked through all its stages before the House rises in mid-December. That will enable the changes it introduces to take effect from 1 April next year which of course is consistent with the pledges made by the Labour Party before the election. 
The bill delivers on three key election pledges to the real benefit of hundreds of thousands of ordinary New Zealanders. It reflects the Government’s commitment to an inclusive society that is based on fairness security and opportunity for all its people including its young people. The bill extends the Government’s landmark Working for Families package. It builds upon changes that were already scheduled to come into effect on 1 April next year as part of the phased implementation of that package. As a result of the changes in the bill about 100000 working families who were to receive increased assistance next April will receive even more and an extra 60000 families will become eligible for family assistance under the Working for Families programme. 
The size of the extra relief introduced in the bill will depend on family circumstances including the number of children and the family income but will average around $50 a week. For example a family that was already on track to receive an extra $55 a week from 1 April next year will now receive an extra $48 a week on top of that—a total of $103 a week. That is achieved by raising the threshold at which family income assistance begins to abate from $27500—actually at the moment it is still $20000—to $35000 and by reducing the rate at which assistance abates for income that is over the new threshold from 30 percent to 20 percent which for very large numbers of working families also decreases the effective marginal tax rate by some 10c in the dollar. 
The bill further honours the Government’s election pledge to make student loans interest-free for most borrowers. The changes are designed to reduce the cost to students of tertiary study and to encourage tertiary-educated New Zealanders to invest their skills in New Zealand. From 1 April next year borrowers who are studying part-time or full-time will continue to have the interest on their student loans written off. Borrowers who are no longer studying regardless of whether they have gained a qualification will pay no interest on their student loans provided they are living in New Zealand. Interest will be charged on student loans if borrowers are away from New Zealand for more than 183 consecutive days which is of course the same criterion that applies to tax residency within the taxation legislation. Short visits of 31 days or fewer to New Zealand will not count as living in New Zealand. The Inland Revenue Department will have the discretion to exempt from this rule borrowers and their partners who are overseas for a variety of reasons including postgraduate study or being unexpectedly delayed overseas. 
There has been a considerable degree of interest in the cost of this policy and we have heard some very large claims being made about that. Before the election the Labour Party costed the impact on the operating provisions of this policy as rising to some $300 million or so a year by 2008-09. This was attacked as being ludicrously low. Let me announce today that Treasury has refined its costings of the policy and I have to admit that the Labour Party was significantly in error. The actual costing will be $202 million a year by 2008-09 in terms of the impact on the operating provisions. Those are the actual Treasury costings—not done on the back of an envelope like its first effort but done somewhat more carefully taking account of all factors. [ 
Interruption 
] I am so sorry to disappoint the members opposite about that fact and I must congratulate myself on my self-discipline in holding back those numbers until the first reading of this particular bill because I have been sitting on them for some time up to this stage. 
The third key election pledge delivered in the bill is for an amnesty on student loan penalties for borrowers in arrears who are living overseas at 1 April next year if they give an undertaking to meet all their obligations under the Student Loan Scheme Act for a 2-year period. That will apply to those borrowers who give the necessary undertaking between 1 April next year and 31 March 2007. The removal of the very very large penalty payments that some people overseas have accumulated offshore will enable them if they want to to come back to this country. A significant proportion of the level of outstanding debt on the student loan scheme is accounted for by a relatively small number of borrowers nearly all of whom are actually offshore and whose penalty payments have now mounted to the point where it becomes impossible for them to return to New Zealand. That is not in our interest as a nation. 
The changes in the bill will save many thousands of dollars a year for many young people in terms of the costs of their tertiary study and will knock years off repayment times. Indeed the new member for Tauranga has already had an effect on Government policy. This was one of the three elements in his speech—apart from one might say the somewhat uncharitable remarks about his predecessor. He might have learnt that one is usually nice about one’s predecessors in this House when taking over a new seat. Mr David Carter managed to bring himself to be so when he was once an electorate MP. 
The bill also fixes the rates of income tax for the 2005-06 tax year which is an annual requirement. That is contained in the main tax bill but there is a risk—I hope not a serious risk—that that bill may not be passed by the end of March. I am hopeful that the Finance and Expenditure Committee will be able to get that bill through by the end of March so that measures such as depreciation and other changes can come into force on 1 April. But there has been some pressure I might say from the Institute of Chartered Accountants of New Zealand amongst others to delay the provisional tax and GST measures for a short period to give some more time for publicity and other matters. 
In closing I am extremely pleased that the Government has been able to deliver so quickly on the promised reforms introduced in the bill which will have long-term benefits for New Zealand and its people. I commend the bill to the House. We anticipate it passing in the last sitting week before Christmas—13 to 15 December. 
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. 
Hon STEVE MAHAREY (Minister of Education) 
: 
 I do not think that we have very many worries about Mr Key opposing this legislation with every bone in his body. I am not sure how many he has got left after the election that he helped to lose—that he helped to ensure would put the National Party back in Opposition for what is going to be a historic 9 long years. Dr the Hon Lockwood Smith will be retired nosed out by the end of that period of time and will slip off into the darkness having never returned to where he wants to be on the Government benches. The man to blame for that Mr John Key just spoke. He helped to lose the election and Bill English no doubt is seeing that his chances of returning to the leadership—having lost it some time ago—are now rising because of John Key’s performance. [ 
Interruption 
] It is worth pointing out to Dr the Hon Lockwood Smith who is calling out across the House that the National Party lost the last election. 
This is a Government that has won not one term not two terms but three terms. It went back into power with 100000 more votes than it won last time. After three elections we have 0.03 percent less of the vote than last time and we won on more votes this time than we won on in 1999. That is not bad for a third-term Government—not bad for a Labour Government I would say on looking back over history. 
I say to people on the National side of the House that they should ask themselves why that was. I think the simple answer to that question is that New Zealanders believed they wanted to see a continuation of investment in the things that make a real difference to the future of this country. The students of this country understand themselves to be people who will get an education and then invest their skill back into what we do in this country. They know that if the costs of that education are too high then the chances are that they may take those skills somewhere else. If we want to retain those people—if we want to ensure that they can start a family buy a house start a business and do all the things we want them to do—we should not have them leave tertiary education with the kind of burden they would have under a National Government. 
Members should remember National’s track record. Who allowed the fees to rise on average 12 percent every single year in the 1990s? National. Who said that people did not really need an allowance as students? National. Who put in the loan scheme? National. Who gives the signal that they will give people back a tax cut but that they will pay more for their education because all the regulation of fees will be lifted? The National Party. Students could see that; anybody could see that. So students said that they wanted to look at a party that would invest in keeping the cost of education down and that they would then stay in the country and invest their skill here as they should. I want to applaud students for saying that that is what they wanted to do and for not being led off by some massive bribe by the National Party that says: “ Let’s cash up the hard-won gains of the last 6 years—the hard-won gains that came under a Labour-led Government—and just blow them on immediate consumption.” as would have happened if the National Party were the Government today. Students understand that investment is the key. 
I want to turn to the Working for Families policy. It is one of the most important policies this country has seen in 30 years because it is the first time in 30 years that we have set an intentional purposeful redistribution of wealth in this country into the pockets of people in lower-income brackets all over the country. It means that they get accommodation supplements and childcare supplements and that when they go to work from a benefit they will get a definite increase in their take-home pay. It means that money goes into the households of families and kids all over the country are better off on that. Now Dr the Hon Lockwood Smith would say we should not do that but should give more money to higher-income people. But we have said that we have to start reinvesting in having children in this country. That is not just something an individual should be doing by himself or herself. This country has always stood for sharing the costs of having children and for making it attractive to have a family. 
We on the Government side of the House believe in families and I see Gordon Copeland sitting there representing a party that wants to make sure that families are something people want to have because they can share the cost with people across the country—as they should be doing. That is what Working for Families does; it is a direct investment in the families and children of this country. 
I say to Dr the Hon Lockwood Smith that we were seeing child poverty driven to a point where one in five children were in poverty under the previous National Government in this country. We are now finally seeing ourselves on a track by which we can compare ourselves to the best in the world. That has to be an achievement that everybody in this House should be proud of. Iknow the National Party is not proud of that. It would rather have given more money to people who are well off as an incentive for them to work harder—as if people who are less well off do not work hard! National does not seem to want to put money directly into the pockets of families who have children. It does not seem to want to be family-friendly. It does not seem to want there to be an in-work payment so that when a person goes from a benefit into work he or she actually gets genuine money. It does not seem to want to help with childcare costs.  
But Working for Families does provide such assistance. It was another part of an investment policy alongside the investment in keeping students in this country so their skills will stay here. Students know that their country has invested in them and they will invest their lives in this country just as generations of us in this House today have done—staying here to live and investing our lives here. Labour has invested in working families; we have invested in children. That is the difference between Labour and National and we are on the Government side of the House because we belong to a group of people who said: “Please carry on investing in the future of this country. Do not cash up after only 6 years of really getting some gains carry on making a difference and do not have the short-sighted view that Dr Brash and John Key had.”  
That is why we have the privilege to be on the Government side of the House leading this country and why the National members have the privilege of going for 9 long years—probably 12—sitting there opposing opposing and opposing.  
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 One does wonder what the question was that Helen Clark was asking herself when she came up with an answer that was to put Steve Maharey on the front bench and back into education. I think it must have been: “How can I destroy any possibility that he will become leader of the Labour Party?”. And she got the right answer. The most incompetent education Minister the country has seen in my lifetime was sacked from that portfolio then put back 12 months later. I note that she said he was there because of his marketing skills. I hope on behalf of hundreds of thousands of children in New Zealand it means he will not actually be allowed to do anything because he will be busy marketing. I hope that is the case. 
I remind Mr Maharey who in the fashion of left is totally rewriting history that the in-work payment was invented by National. It was called the child tax credit and he said that it was a right-wing conspiracy against fair pay for the workers. Now he calls it the in-work payment and says it is the best thing in 30 years. The childcare subsidy has been there for a very long time it was not invented by the Labour Party and this false and new interest in families from Steve Maharey and the Labour Party is just about more than I can sit here and listen to. These are what are called his marketing skills! 
I want to give Mr Maharey one simple fact out of one of his own Government publications. He says that Working for Families is the biggest redistribution of income in 30 years. Well he is wrong about that. The tax packages of 1996 and 1997 were a much much larger redistribution and he should be smart enough to know that but he wants to rewrite history. I had a look at the social indicators report. After 6 years of Labour being in Government income inequality in New Zealand is worse than it has ever been. 
Lindsay Tisch 
: What? 
Hon BILL ENGLISH 
: It has been getting worse. After listening to Steve Maharey’s speech one would think that it was really bad before and that now he is doing all these things that will fix it—but he is not. Income inequality in New Zealand is worse now than it has ever been. I invite members to look at the social indicators report that the Government puts out if they do not believe me. Labour members are intellectually unable—their brain cells will not let them—to understand or absorb that information because it runs totally counter to everything they believe they are doing but it is the truth. 
The other truth about this bill is that we have not yet talked about the elephant in the lounge behind this bill. 
Lindsay Tisch 
: How does that work? 
Hon BILL ENGLISH 
: Well it is not in the bill. The elephant in this lounge is Government spending. Why are these tax rates being set where they are? It is because Dr Cullen is going to spend every last dollar of it and he has those plans well in train. He is not going to make the mistake he made at the last election which was to have a surplus that could have rightfully fairly and economically been successfully returned to the people who paid it—that is the taxpayers. No no he will not let that happen again. 
John Key 
: Once bitten twice shy. 
Hon BILL ENGLISH 
: Once bitten twice shy—very very shy. Government spending has been increasing at about 6 or 7 percent in nominal dollars every year. The economy has been growing at about 5 or 6 percent in nominal terms every year. What is about to happen is that we are going to see the wave of Government spending breaking over a beached economy. Nominal growth in the economy will slow down. It could slow down to 4 percent maybe 3 percent. Inflation is quite high and that helps a bit with the numbers but the growth in Government spending will not slow down. What is driving the 6 or 7 percent growth is principally a startling figure that Treasury has produced. The State sector pay bill over the next three or four Budgets will grow at $1 billion per year year on year. That is why Dr Cullen needs to collect every dollar of tax. 
I invite the Labour Party to think about what it will feel like out in the suburbs. The first thing is that those middle-income families will be facing marginal tax rates of 50 or 60 percent. They will now be facing a future with no tax cuts. They were looking for those tax cuts. Dr Cullen can argue that they make stupid decisions about housing investment and saving and he will continue to do that—I hope that he does because I do not think they are stupid people; I think he is the stupid one—but those people were looking for tax cuts and they will not get them. It is only just starting to sink in out in the suburbs that there will be no tax cuts. 
But secondly they will be facing higher interest rates. Their floating mortgage rates are now getting well up over 9 percent. With a couple more official cash rate moves they will be 10 percent. We will have double-digit interest rates and who will people blame? Do members think they will take Dr Cullen’s theory which is “Blame yourself. You’re the problem.”? No they will get a grip on reality and they will blame Dr Cullen. 
John Key 
: And rightfully so. 
Hon BILL ENGLISH 
: And I will tell members why. Here is another silly question that Helen Clark asked herself: “Who can I get to go out there and jawbone interest rates down because we know it will eat into our support? I know let’s get the person who is doing the most to push them up.” and that is Dr Cullen. His spending programme is becoming the biggest single influence on pushing interest rates up. That is the elephant in the lounge. That is the bit the Governor of the Reserve Bank kind of had to sit on in the run-up to the election—and funnily enough he is now coming out with three official cash rate increases in rapid succession. It is a typical example of the contradictory policy that the Government is presenting to New Zealanders and this is where as the economy slows down the economic credibility is going to corrode. 
In relation to the student loan issue we have had “he said she said” and now we have a number that is so small that we cannot really believe it. The important point about the student loan debacle is this: the Government is pushing our young people further and further into a culture of debt and it is doing it by telling them the story that they will have less. Do members know what is happening with student support? The number of students on student allowances is dropping quite fast because of means testing and because they do not bother applying for small amounts. In the Speech from the Throne the Prime Minister said that there were more students on student support. Well there are not there are fewer and the number has been dropping for at least 12 months. The most recent reports tell us that it is dropping further. The Government will save money it will not be paying out as much student allowance as it said. What is happening is that students are getting less student allowance so there is more need to borrow. They are now being encouraged to borrow as well as the fact that they have more need to borrow. 
 I just cannot see where the Government is going to go next. The $150 a week borrowing for living costs is not sustainable. It will just have to lift that. The dropping numbers of student allowances are not sustainable either. But what the Government has done is make one of the biggest single fiscal decisions of its last term in office. It has committed a billion dollars to interest-free student loans. No attention has been given to the quality of education that those students are getting. The Government has forgone every opportunity to do something significant about literacy and numeracy rates in our primary schools. The reality is that in education the commitment to interest-free student loans is giving the most money to the group who need it the least. Of course they want it! Who would not? But the Government has no sense of priority and as the economy slows as its tax take slows and as its spending explodes it will be forced to make some very very hard decisions. Now I look forward to debating those decisions over the next couple of years in this House. The public could have had 85 percent of New Zealanders on a 19c marginal tax rate under National’s plan. 
Lindsay Tisch 
: A great policy that! 
Hon BILL ENGLISH 
: That is an absolutely outstanding policy the one opportunity in 30 years that New Zealand had to secure it and that is my biggest regret about losing the election because we could have had that. Instead we will have what Steve Maharey calls investment and everyone else calls over-taxing wasting and exploding Government spending. The wave of Government spending will break over a beached economy in the next 2 or 3 years and the Government will be back within this term looking to increase these tax rates. 
Hon BRIAN DONNELLY (NZ First) 
: 
 To start with I wish to take the opportunity to express my sense of loss at the passing of Rod Donald. Having made my affirmation the previous three Parliaments alongside Rod I tangibly felt his absence last Monday. I also sat beside him for some time during the last Parliament and seeing his seat empty last week certainly was poignant. 
New Zealand First has some misgivings about this legislation. However I can say at this point that we will be supporting it through its first reading. There are two reasons for that. The first is an important thing called democracy. We recently had an election. Different parties put up their policy positions and the largest number of New Zealanders voted for the party that proposed the policy changes contained in this legislation. 
New Zealand First listens to the voice of the people—as we did back in 1997. We put to the people a proposal regarding a retirement savings scheme. We responded to the voice of the people even though it overwhelmingly rejected our very sensible proposal. In the same way the voice of the people on 17 September told us it was largely in favour of the policies that this legislation advances. 
The second reason we will support this legislation going to a select committee is much simpler: we agreed to do so in our confidence and supply agreement with the Government. I shall read the relevant passage—and also tell members about the bauble that came with it: “The government has identified the pledges on its commitment card along with their election policy to extend the working for families package as priorities for them and New Zealand First agrees to support the legislation if required to give effect to these policies.” New Zealand First is an honourable party and we will be honouring that pledge. Honouring that pledge in no way denies us the right to express our misgivings. 
This legislation deals with the Working for Families package. From New Zealand First’s point of view if there is redistribution of wealth it makes sense to target such redistribution to families with children. Some years ago economist Brian Easton did some research into this and revealed that four-fifths or 80 percent of the total cost of rearing a child falls to the family. One-fifth in fact is funded by the State. However the benefit of the educated healthy pro-social adult that the child becomes accrues to all members of society. Therefore New Zealand First supports the targeting of redistribution to families with children. 
However our misgivings lie in the potential of this proposal to lock in welfarism. Let me put it this way. My father was a shirt-cutter by trade. I do not think that the trade actually exists any more but it certainly was not a very highly paid job by any means. His tax code would have been M5—married with five kids. As a result of that he would not have paid very much tax at that time but he never brought home more than he earned—and that is the problem this legislation has. The thinking of the day was that if one was funding the upbringing of children directly as a parent must then one paid less in taxation. It was not welfarism. 
The problem we have now is that because we have become such a low-wage economy many people cannot earn enough in a normal week to fund the costs of catering for the physical health educational and social needs of their children. So we have the prospect of decent hard-working families being forced on to welfare for the mere basics of survival of the adults and children within those families. 
New Zealand First believes that the real challenge to our nation is to become a high-wage economy rather than the low-wage one that the forces of Rogernomics and “Ruthanomics” created. To that effect we believe that New Zealand First’s gain in the confidence and supply agreement—to raise the minimum wage to $12 per hour by 2008—is a bauble we are quite happy to accept. This policy will create a “trickle-up” effect and we well know that the trickledown theory just did not work. 
However we will continue through the period of this Parliament to work towards the other part of the quinella of New Zealand First policy which is to reduce the company tax rate. Business creates jobs and nothing but social good flows from the employment created by business. Government policy that maximises profitability of businesses needs to be devised. So New Zealand First supports the idea that we invest in our children by creating more disposable income within families; it is just that we see fish-hooks in the manner in which this legislation will achieve that. 
New Zealand First’s second area of misgiving is interest-free student loans. We believe that is a simplistic answer to a genuine problem of student debt. During New Zealand First’s short period in Government in 1997-98 it took steps to reduce student debt. For example we stopped the lump-sum loans that existed at the time and we introduced in 1998—people will remember that the Rt Hon Winston Peters was the Treasurer at the time—a partial interest write-off on student loans. What we would not do however was to wipe out the base rate which accommodates inflation so that the student pays back the real amount of the loan. 
This Government’s policy is in fact a giveaway because students will be paying back less than what they are borrowing and not the real amount. The worst feature of the policy is that rather than reducing student debt it will dramatically increase it. The Minister of Education has come up with some figures in the House today that are really quite unbelievable. When the Minister announced them to the House he told us that the calculations were based on a loan uptake of 70 percent of students. Well guess what—the current take-up rate is 70 percent. We are being asked to believe that this policy will not make any difference to the take-up rate of students and if I looked out of the window I would see pigs flying by if I were to believe that particular premise. 
However I also make the point that National needs to come clean with its policy which was based on treating education as a commodity. New Zealand First believes that education cannot be equated with a set of carpenter’s tools or a herd of cows but that is exactly what National’s policy was based upon. 
New Zealand First has long had a policy of a universal student allowance. Its rationale is based on a fundamental belief in the manner in which our society should operate. We believe—and in fact all the parties in the House with the possible exception of ACT believe—that one of the fundamental principles of our society is this: if for whatever reason a person is unable to earn the rudiments of survival which are food shelter and warmth then there is a collective responsibility to provide those rudiments. That principle is fundamental to the way our nation operates. Yet students as the only people in our society who are unable to provide for themselves because of their full-time study have to borrow purely and simply to live. There is already an opportunity cost in full-time study so why do we also burden our students with debt by making them take out loans purely and simply to live? This bill will not lead to reduced debt; it will lead to increased debt. 
The real problem that our society faces is the level of student debt and we believe that a universal student allowance would have cut into it in a manner that this bill will not. Nevertheless we will support its passage through to the Finance and Expenditure Committee. We believe that we have an obligation to do so because in doing those sorts of things we have enabled ourselves to achieve some of the other baubles such as the $12 per hour as a basic minimum wage. We are prepared to pay that price. 
SUE BRADFORD (Green) 
: 
 The Green Party will support this bill through all stages of its progress through the House but not without reservations. We will certainly be seeking to put up amendments at the appropriate stage in the process. Although we welcome unreservedly the bill’s improvements to the student loan scheme which I will turn to in more detail shortly it is in the area of Working for Families that we take particular exception to the underpinning assumptions that the Government is making in carrying out these reforms. This bill increases the annual income level at which the abatement of family assistance starts from $27500 to $35000 at the same time as it reduces the rate of abatement from 30 to 20 percent. Dr Cullen estimates that this would help up to 160000 families at an average additional $50 a week—great stuff! The Green Party has no objections per se to this extension to the Working for Families package. We appreciate and support any increase in assistance to families struggling to raise children in our current low-wage high-cost economy. 
However what we do object to—as we have done since Working for Families was first introduced—is that a bonus has once again been given to what the Government calls “working families” while the children of beneficiaries continue to miss out. Right from the start even through its very name Working for Families has been the latest subtle tool in an ideology promoted by National and Labour from the mid-1990s through to the present day. It is an ideology that promotes structural discrimination against children if they happen to be unfortunate enough to come from a family dependent on the benefit system for survival. According to the last publicly available Government figures over 20 percent of our country’s children still live in poverty and that is according to the Ministry of Social Development itself. A high proportion of those children come from sole parent and/or beneficiary families. On principles of social justice and human equity it is simply wrong and cruel to continue to increase the amount of Government assistance that is going to the better-off while denying that the child tax credit / in-work payment should be given to those children who need it most just because one of their parents is not in the paid workforce for 30 hours a week or more. 
As the Child Poverty Action Group stated last week “it is misleading for the Governor General to claim that the change ‘will mean tax relief for every low and middle income family with children in New Zealand.’ ” when in fact this addition to Working for Families offers nothing to the 250000 poorest children in Aotearoa. The Child Poverty Action Group’s finance spokesperson Dr Susan St John also went on to say: “The latest changes only shunt the poorest kids further to the back of an already long queue when they urgently need to be first in line”. 
On top of the intrinsic unfairness epitomised by this bill—in its current form at least—is the fact that Labour in the new Parliament appears bent on continuing with its intention to scrap the special benefit which was brought in through the legislation that also produced the initial Working for Families package. The special benefit is to be replaced by temporary additional support or “TAS” as it is colloquially known which the Government claimed would save it some $26 million in the 2006-07 financial year and a further $38 million in 2007-08. This new system as far as we are able to ascertain will mean an end to the last layer of discretionary support that allows people who do not have enough to live on to survive. The fact that a Labour Government makes no bones about saving an initial $64 million through cutting this special benefit is a disgrace. The special benefit under both the National and Labour Governments has been the only means by which Work and Income can exercise discretion in making sure that at least some of those who do not get enough to live on by other means can access the bare essentials of survival. Without a discretionary benefit like this poverty and indebtedness will only increase for those who are already suffering the consequences of unemployment sickness long-term disability or sole parenthood. Those impacted are disproportionately tangata whenua Pasifika peoples and refugees and migrants. 
Strangely enough the Hon Mark Burton in a speech to the House in 1995 criticising the National Government’s then social welfare reforms said that the removal of discretion from special benefits was “just a de facto extension of benefit cuts”. The new Minister for Social Development and Employment the Hon David Benson-Pope should take this opportunity in taking on his new portfolio to reflect on his colleague’s earlier comments and to reverse this further attack on those in our society who already have the least. Mr Benson-Pope should either allow the special benefit to continue until such time as benefits are enough for people to live on with dignity or ensure that the new temporary additional support regime continues to allow discretion and to meet people’s actual rather than imagined needs. The Government should not take Green Party support for this particular bill before the House today to mean that we accept Labour’s further consolidation of systemic bias against the children of the non-working poor nor that we will stay silent if it continues with its plans to end genuine discretion at the tough end of the benefit system. 
To those who may be asking why on earth the Green Party is supporting this bill at all given the criticisms I have just been making I must reply that not only are we giving it our backing because it does increase aid to some families but also because of what it does to student loan recipients. The current $8 billion or so of student debt is not affordable for our graduates or for our country. We have to stop seeing education as a cost and understand that it is an investment in the future of Aotearoa New Zealand. In amending the Student Loan Scheme Act 1992 to allow a full interest write-off for resident borrowers and in granting an amnesty on penalties for people who return home between April 2006 and March 2007 the Government is taking a major step towards reducing the horrendous consequences of this dreadful scheme. The Green Party has been campaigning for an end to the student loan scheme for many years. It has been a key plank for us in the last few election campaigns and we remain committed to getting rid of the whole thing alongside reducing and capping fees instituting a universal student allowance that is a truly universal allowance—not a partial one—and allowing a year for year debt write-off for people who stay in the country and still have loans outstanding. 
Meanwhile we enthusiastically welcome any moves in the right direction. Students should not be forced to borrow to live any more than beneficiaries should be forced to borrow to live. We also believe that high-quality tertiary education is a public good not a private property right. Those complaining about the potential costs of interest-free student loans are wrongly assuming that our young people will act like property speculators. National seems to be saying that if students are offered interest-free loans they will all borrow the maximum amount in order to make a profit from the State. This assertion is completely out of step with reality. The vast majority of students borrow money because they have no choice if they want to pay their course fees and study and if they want to meet their basic living costs while studying. In 1999 when Labour and the Green Party made student loans interest-free for the period of study National predicted that all students would rush out and get loans yet the pick-up rate barely moved. A recent study by the Educational Policy Institute found that New Zealand’s student loan interest rate of 7 percent is higher than any other comparable OECD country. Our graduates are paying one of the highest student loan interest rates in the world. 
For all these reasons the Green Party is therefore delighted that scrapping student loan interest as laid out here today will wipe years off the repayment schedule of many loans and will save an average of $4000 in interest payments per graduate. I imagine there will be some complaints of unfairness from graduates now living and working overseas as two of my own graduate offspring currently do. However I think it is fine to have a scheme that offers such a great incentive to our young people to come home and bring their New Zealand education and overseas experience back with them to enrich our society and our economy. Our support for this part of the bill rests on our commitment to a tertiary education system that is accessible to all and that through that accessibility can manifestly benefit the country as a whole not just students and graduates as individuals. I hope that before too long the Green Party will be part of a Government that is foresighted and courageous enough to get rid of the whole foolish student loan scheme altogether. 
TARIANA TURIA (Co-Leader—Maori Party) 
: 
Tena koutou katoa. I rise on behalf of the Maori Party to speak to the Taxation (Annual Rates and Urgent Measures) Bill. We support this bill in light of the commitment to a full interest write-off for student loan scheme borrowers. We also support the expansion of the Working for Families package in the bill despite many concerns. 
We do however have very serious reservations regarding the need to respond to the most vulnerable—the poorest families and in particular the tamariki who are severely affected by the trauma of poverty. Our party supports the introduction of a full interest write-off for student loan scheme borrowers. We have consistently argued the need to respond to the huge number of past current and future tertiary students with loan debt. We believe that the $8 billion student debt is a huge barrier to learning for the next generation. If we are serious about supporting our rangatahi towards making a successful transition to parenthood homeownership financial security and community-mindedness we need to demonstrate the willingness of the State to invest in education as a public good. 
In particular our concerns are with the fact that Maori student debt is escalating at a greater rate than non-Maori student debt. This is due to a number of factors: a greater proportion of Maori are undertaking tertiary education—more than any other group; and a greater proportion of Maori students take out a loan reflecting socio-economics. Maori also earn significantly less than non-Maori after graduation—because of this repayment times for Maori are significantly longer and with accumulated interest they pay significantly more than non-Maori for their education. 
Although the interest-free loan scheme legislation will alter things and is a significant step in reducing the student debt crisis the fact still remains that more Maori will hold a debt and they will take longer to pay it back because they will earn less. Debt limits the ability to get credit for some of those things that we consider necessary to enable us to participate as citizens within Aotearoa—things such as a warm secure home. We support this bill being passed through as quickly as possible in order to ensure that students receive the vital support they require as soon as possible. It is my firm belief that education should be free and should be seen as an investment not only in our future but in the future of this country. 
I turn now to the expansion of the Working for Families package. The Maori Party is very pleased that the bill introduces additional targeted tax relief to 160000 working families. Although the size of the tax reduction will differ for different families it will average around $50 a week and there is no doubt that that will make a difference. 
Our concern however is for the many families and the children therein who will not receive the benefits of that package. The Maori Party recognises some very serious reservations in the effectiveness of this bill to offer relief to those who most need it—benefit-dependent families. The Working for Families package has targeted relief for those engaged in either part-time or full-time paid work. What this means in effect is that the expansion offers nothing to the 250000 poorest children in Aotearoa. That is despite the Prime Minister’s statement yesterday that addressing child poverty should be a high priority for this Parliament. I am sure that the issue of child poverty will be of particular interest to the UN special rapporteur on the situation of human rights and fundamental freedoms of indigenous peoples in his visit to New Zealand this week. 
We know that more than one in five children live in low-income families which is nearly twice the level of the late 1980s. If we were to see real child poverty addressed the Maori Party would expect to see a number of specific strategies in place. The strategies that we present include establishing a poverty line in Aotearoa and monitoring it with living standards assessments each year setting agreement on specific target dates to reduce child poverty and reviewing the child tax credit to ensure that children of parents whose income includes benefit assistance are also supported within the Working for Families package. 
 The poor are not responsible for being in poverty. They did not create the conditions in which they find themselves today. We need to consider that today’s political solution is an attempt to correct yesterday’s political solution which was in fact a failure but was at the time claimed to be the mother of all solutions. It is an indictment on both Labour and National Governments that besides inflationary adjustments core benefit levels have not changed since 1991. 
Our preference would have been for lower taxes for those families. We cannot understand why taxes are taken from a low-wage worker and then given back to them under another name. That creates the perception that this is a benevolent Government. This Government wants to present itself as caring for the working person yet it does not want to care for our poverty-trapped children of beneficiaries. All this package does is continue to entrap workers in welfare rather than give workers a sense of pride in saying: “We earned this money.” The Government’s redistributing of the tax denies the initiative entrepreneurship and creativity that should be rewarded by a higher working pay. Those who have only just escaped are actually being re-entangled back into the welfare net just as our old people use the hinaki to entrap a slippery slimy eel. Should not the focus be on helping people out of the net as opposed to what is currently being done which is trapping them back into that net? 
This whole package is designed to force beneficiaries to become the working poor—to join their many kith and kin whom my former colleague Parekura Horomia in referring to our people frequently says are the working poor. He knows that well because the wall of wood that was supposed to descend from the East Coast is actually a barrier to forestry workers earning a decent living wage while employed in a highly dangerous occupation. Their level of remuneration does not reflect the danger of the work they do and the Minister of Maori Affairs knows that. 
This is a war that is being waged on the poor. What hope is this Government offering to those who are more than willing to give a decent day’s work for a decent day’s pay? How will this Government explain to the many workers in this country that if they work hard they will be able to enjoy the fruits of their labour when we all know that many people have worked hard? As my colleague and co-leader Pita Sharples stated in his maiden speech many of the hard-working people in his electorate can never afford a home in Kohimarama. How do we explain that away? 
Finally the Maori Party will support the Taxation (Annual Rates and Urgent Measures) Bill going through to the select committee where we hope that many of these issues raised today will be discussed in more depth. 
GORDON COPELAND (United Future) 
: 
 Pursuant to the confidence and supply agreement with the Labour Party United Future will be voting in favour of this bill. Notwithstanding that reality when it comes to the issue of the removal of student loan interest post-graduation for those who remain in New Zealand our own policy position differs greatly from that of the Labour Party. We believe that a policy that would write off 10 percent of the principal of a student’s loan for each year he or she remains in New Zealand post-graduation would better incentivise debt repayment and avoid the obvious moral hazard of Labour’s policy. However we live in a democracy and as the saying goes the people have spoken. By a narrow margin we have a Labour-led Government through the last election. 
Our approach to the provision of an adequate income for families with children also differs from the extension of the Working for Families package as it is proposed in this bill. Having said that however I say an adequate income for such families is also a high policy priority for United Future. I think that any civilised country particularly one such as New Zealand with a history of social justice needs to give— 
The ASSISTANT SPEAKER (Ann Hartley) 
: I am sorry to interrupt the member but the time has come for the dinner break. 
Sitting suspended from 6 p.m. to 7.30 p.m. 
GORDON COPELAND 
: When we adjourned for the dinner break I was commenting on the Working for Families package and saying that an adequate income for families with children is also a high priority policy for United Future. I think that any civilised country particularly one with a history of social justice such as New Zealand needs to give policy priority to income adequacy for families raising children. United Future certainly wants to ensure not only that child poverty is reduced significantly but also that all Kiwi parents have the financial means to give their children the best possible start in life. Therefore we reject the notion that the Working for Families package is some kind of handout. That is not its motivation. Rather in our view it is an investment in the future of our nation and an advancement of the common good of our society—a tangible and practical recognition that intergenerational families are the irreplaceable foundation on which the social and economic future of New Zealand will be built. A moment’s consideration will I have no doubt reveal the self-evident truth of that proposition. 
United Future is delighted however that our confidence and supply agreement with the Labour-led Government foreshadows a Government discussion document covering income splitting for couples with dependent children. Income splitting for taxation purposes has been and remains a key part of our policy and one that is designed not as a replacement for but as a supplement to the Working for Families package. Income splitting will reduce the tax burden for an estimated 325000 couples and in many instances especially for single-income families by substantial amounts. Income splitting is a tangible recognition of the fundamental contribution that couples with children make to our society and our economy and it would increase the after-tax income of those families right up through the income tax brackets to a combined income of up to $120000 per annum for a household led by a couple with dependent children. 
John Key mentioned in his speech the high effective marginal tax rates that flow from the Working for Families package. But John Key knows—because I have shared the figures with him—that that problem is also addressed through an income-splitting system. Because it actually reduces the tax burden in the first instance for many families in the way I have explained it deals with the problem that he has identified. So from that point of view too it is an integral and important addition to the current taxation system in New Zealand. 
Why is income splitting a priority for United Future? Simply stated it is because it is fair and just. A considerable self-sacrifice is demanded of those who choose to continue the intergenerational structure of human society by becoming parents. The arrival of one or more new babies is but the first step in the 18-year or so task of raising educating and training the next generation of our society. All the studies show—and there are significant international longitudinal studies that have evidenced this fact—that on average the best outcome for children in terms of health education income level and the avoidance of involvement in the criminal justice system arises when two parents combine their complementary gifts and talents to perform the task of raising children. That is especially so when those parents are aided by contributions from grandparents and other whanau members and are surrounded by supportive local communities. It surely must be objectively recognised that such couples are in a different position including financially than either single people or those in adult relationships—which include many grandparents such as my wife and me who are now without dependent children. Income splitting is a fair and just way of recognising those different financial circumstances. 
At the same time income splitting both recognises and assists the promotion of that mum dad and the kids ideal based on the best interests of the children themselves. As I mentioned earlier all the international studies indicate that the best results for children flow from families that are headed by a mum and a dad who are committed jointly to the raising of their children. We know that virtually all of the negative statistics in our society—be they for health education low income poverty or involvement in the criminal justice system and crime—flow predominantly from families where that is not the case and where there is very often one parent who is struggling. I salute those parents as I did in my maiden speech because they are doing a very difficult job but they themselves tell me United Future should keep pushing its policies because their position is not ideal. They say that poverty is not great that is it not a great way to live and that they only wish their circumstances had turned out differently. 
We need to continue as a Parliament and as a society to emphasise the reality that families headed by a mum and a dad are the best way to bring up children. That is the best way and it has stood the test of time. It is an irreplaceable part of any strategy whose objective is to build a strong and prosperous future for our lovely nation of New Zealand. 
RODNEY HIDE (Leader—ACT) 
: 
 I rise on behalf of the ACT party to oppose the Taxation (Annual Rates and Urgent Measures) Bill. I was very heartened to hear from Brian Donnelly because one of the things that has happened with New Zealand First is that part of its—what is it called I ask Mr Brown— 
Gordon Copeland 
: Enhanced supply and confidence agreement. 
RODNEY HIDE 
: —enhanced supply and confidence agreement— 
Peter Brown 
: You mean you don’t know what’s going on? 
RODNEY HIDE 
: Well it is hard to keep up with what is going on with New Zealand First; it changes on a daily basis. But I know that Mr Brown is really on this side of the House so we are brothers. 
I was very pleased to hear Mr Donnelly say that New Zealand First members will support this bill going to a select committee because it is part of their enhanced confidence and supply agreement but they have had problems with it and they will give it a good look over in the committee and I suspect we may see some changes in this legislation following select committee examination. 
Hon David Carter 
: No no—the bauble won’t allow it. 
RODNEY HIDE 
: No they will—Brian Donnelly and Doug Woolerton will—because this bill is wrong. Let me just point out why. We had a big election campaign and several political parties went out and campaigned for lower taxes. I just want to go through the list of those that did. First of all there was the National Party which succeeded with 48 MPs—it had big support. National wanted large-scale tax cuts. Next was New Zealand First which succeeded with six MPs plus Winston Peters and it wanted large-scale tax cuts. In fact New Zealand First wanted to drop the company tax rate to 20c in the dollar. We had United Future which went out and campaigned for large-scale tax cuts. In fact its estimate of the cost was about $2.5 billion—I think I am correct. United Future particularly wanted the company tax rate to go down to 30c in the dollar. The Maori Party to my left campaigned for large-scale tax cuts particularly for low-income workers but it also wanted the company tax rate dropped to 30c in the dollar. The Greens actually campaigned for lower income taxes but they wanted the money collected in the form of pollution levies and resource taxes. 
Darren Hughes 
: This is yesterday’s speech. 
RODNEY HIDE 
: Members should listen to Darren Hughes and look at him. I thought that after one term in Parliament he would have grown up. [ 
Interruption 
] Dover Samuels is calling out; that is the man who lost his seat. Dover Samuels is the man who lost his seat and he wants to sit there and call out. The only one who is being quiet is David Benson-Pope because he knows that there is a police report sitting in Crown Law with his name on it and he is not prepared to say anything. 
Darren Hughes 
: Get out of the gutter. 
RODNEY HIDE 
: I would suggest to Darren Hughes and Dover Samuels that unless they want me to reveal the contents of that police report they should be quiet and let me deliver my speech in peace. We have 65 MPs out of 121 in this House who campaigned for lower taxes and what does the Clark Government do? It sticks tax rates at the same level. That is wrong. So this bill is opposed by the ACT party and I hope it will eventually be opposed by United Future and New Zealand First true to their word to the people of New Zealand. 
What else happened today? Well at 4.30 in the afternoon—and we always have to read the stuff that this Government releases at 4.30 in the afternoon— 
Hon David Carter 
: What did it say? 
RODNEY HIDE 
: It was a report from Treasury. We discovered that there is one department left that is not cowed by the Clark-Cullen Government and will actually stand up and speak the truth. What is the truth? The truth is that this economy cannot prosper cannot succeed cannot sustain the current tax rates and it called for lower taxes particularly the company tax and the high rates of tax on high-income earners but also and most important the high effective marginal tax rates on low to middle income working New Zealanders. That is what Treasury called for. Have not Labour members gone quiet now! They know they are wrong on taxes. The public has said they are wrong because they elected the majority of MPs to this House on a promise of lower taxes. 
We learnt something else this afternoon. This Government is sitting on a surplus of $8 billion. 
Mark Blumsky 
: A mountain. 
RODNEY HIDE 
: A mountain of money—and that is after it has wasted truckloads of hard-working taxpayers’ money on twilight courses on the wananga— 
Darren Hughes 
: On Pipitea Street. 
RODNEY HIDE 
: —and I say to Mr Hughes on police reports on David Benson-Pope showing that he is guilty and that he misled the House. That is what they wasted the money on because the public is not allowed to see that report. Nineteen students said that it happened and David Benson-Pope stood up in this House and said that it did not and he is not prepared to let the public of New Zealand see the police report about what the ex-students said. Nineteen students who were in the class that day said that that member lied to the House in the last term when he gave his answer in this place—19 students. 
So I would like Darren Hughes to reflect on that. We drag the police in to do a report like that and they do the report but no one is able to see it. That is because they have a problem—because Mr Benson-Pope told the police he did not do it but the investigating police officer told me that it happened and that the evidence is overwhelming. 
So the people of New Zealand miss out on their tax cuts. The Labour Party unilaterally declares that working New Zealanders—that includes low to middle income working New Zealanders who face the highest effective tax rates in New Zealand and it includes the entrepreneurs who create the wealth and the jobs for all of New Zealand—are going to miss out on tax cuts. 
Hon Tau Henare 
: Shane Jones will like this. 
RODNEY HIDE 
: Shane Jones is all right because he got a tax rate last term of 19.5 percent for Maori authorities. Maori authorities got 19.5 percent. They did OK but everyone else has to pay 33 percent for their business. 
Gordon Copeland 
: I thought you were arguing that everyone should have 19.5 percent. 
RODNEY HIDE 
: Absolutely! I do not mind Shane Jones’ Maori authorities getting 19.5 percent. All I want and I stand with the Maori Party is that we should have one law for all New Zealanders. Let us have 19.5 percent for every New Zealander. The tragic thing is that the Government can afford it. 
There is something else we are voting on—and I would like to hear from United Future and New Zealand First about how to justify this. I know that Labour Party members say they justify it because they just did it as an election bribe but how does one justify taking off the taxpayers of New Zealand $2 billion in a hit and handing it across to graduates? How can one in good conscience stand up in this House and say: “I will vote for this.” which takes $2 billion off New Zealanders who are earning $30000 or $35000 or $20000 a year—the very people Darien Fenton purports to represent; those who do the cleaning the cooking on $12 an hour or less—and give it to the accountants— 
Dr the Hon Lockwood Smith 
: The dentists. 
RODNEY HIDE 
: —to the dentists to the doctors and to the lawyers? And Gordon Copeland is going to stand up and vote for that theft from hard-working New Zealanders. So too is New Zealand First. So too I think is the Green Party. How can they possibly take $2 billion off the working poor of New Zealand and give it to the graduates who are earning $60000 $70000 $80000 or $100000 over a year? How can they in good conscience do that? I say that this bill is a shocking thing. 
Hon DAVID BENSON-POPE (Minister for Social Development and Employment) 
: 
 It is great to have the opportunity to speak in this debate and it is great to be part of a Government that is delivering on its promises. We gave these undertakings to the electorate just a few weeks ago and already we have in the House legislation to deliver on those undertakings and commitments to our community. 
This bill represents the biggest investment in families made by any Government in decades and it will have a dramatic effect on child poverty in this country. The widening of the scheme was promised as part of our election campaign and means that almost all families earning up to $70000 will qualify for extra support. We are committed to the belief that the top priority for tax relief right now is for our hard-working families. They face the extra costs associated with raising children and the well-being of the next generation should be of vital concern to all in this country. 
As the people of New Zealand have known for the past 6 years they can trust Labour to deliver on its campaign commitments—and deliver fast. Members can compare that with National which rolled over on every single campaign pledge it made as it tried desperately and fruitlessly to form a Government. Dr Brash turned out to be just another used car salesman in a cheap suit. Orewa was gone the Maori seats were fine and the hypocrisy that that party and its policy displayed continued. As the Prime Minister noted yesterday what distinguishes centre-left Governments from those of the right is a determination to see the benefits of our growing economy reach households and families across the land. 
The extension of the Working for Families scheme will see an extra 60000 families eligible for relief increasing the number of families helped by the Working for Families package to 350000. We are putting more money in the pockets of New Zealand’s low and middle income families with children and making work pay for parents who move off benefits and into work. Significantly the extension of Working for Families sees substantial income gains for middle-income families and greater income support for working families. Combined with the existing package it will reach a total of 348000 families from 1 April. 
Hon Ruth Dyson 
: How many? 
Hon DAVID BENSON-POPE 
: It will reach 348000 families from 1 April 2006. This represents over three-quarters of all families in this country receiving an average of $64 extra a week. The impact of changes like this will be substantial and widespread. I give as an example a married couple in Waitakere City with three children who currently earn $52000 and have a mortgage. To date they have been $100 a week better off thanks to the Working for Families package. From 1 April 2006 they will be better off by an additional $76 per week—in addition to the $40 they were expecting to receive on 1 April 2006. They will get a further $30 more family support from 1 April 2007. In total by 2007 Working for Families will leave them better off by $246 per week. That is $12792 a year for that typical New Zealand family. Those gains are available to thousands of New Zealand families. We expect to see child poverty reduce by around 70 percent. 
National’s tax cuts policy would have cost a whopping $9.95 billion over 4 years. That would have delivered savage cuts to health education and the other public services New Zealanders value so much. It would have required more borrowing. And what would it have delivered? It would have delivered a stingy $10 a week to two-thirds of taxpayers. But let us not forget that it would have delivered $92 a week to someone like Dr Brash or to millionaire Mr Clarkson or to Dr the Hon Lockwood Smith or to the rest of us in here—or to other sewer-dwellers like Mr Hide. It is no wonder the voters rejected the National Party. What is the old sports adage? [ 
Interruption 
] It is I say to Mr Henare that second place is the first of the losers. 
This Government is making sure that every New Zealander has a fair go opportunity and security. As this country grows and develops every one of us will be able to share that progress. 
RODNEY HIDE (Leader—ACT) 
: 
 I raise a point of order Madam Speaker. I know that the Labour Party does not take Maori seriously but it is a convention in this House that members try to pronounce people’s names appropriately. I think that Mr Benson-Pope should be pulled up for the way he pronounced Tau Henare’s name. 
The ASSISTANT SPEAKER (Ann Hartley) 
: The member knows that is not a point of order. 
Rodney Hide 
: It is a point of order. 
The ASSISTANT SPEAKER (Ann Hartley) 
: The member knows that is not a point of order. 
Rodney Hide 
: It is a point of order Madam Speaker. 
The ASSISTANT SPEAKER (Ann Hartley) 
: I will give the member one warning. He will please be seated. That is not a point of order and the member knows it. 
Rodney Hide 
: Point of order Madam Speaker. 
The ASSISTANT SPEAKER (Ann Hartley) 
: I will give the member just one warning. If he relitigates my decision I will have no choice but to ask him to leave. 
RODNEY HIDE (Leader—ACT) 
: 
 I raise a point of order Madam Speaker. Could you please explain why members in the previous Parliament were constantly pulled up for mispronouncing surnames in this House yet when Mr David Benson-Pope does it in respect of my colleague Tau Henare it is suddenly OK and even raising the matter is not a point of order. 
The ASSISTANT SPEAKER (Ann Hartley) 
: I have already told the member that that is not a point of order. [ 
Interruption 
] The member is interrupting me while I am ruling on the point of order. If there is a deliberate failure to address a member properly then yes that would be something. But that is not the case in this instance. It is not up to the Speaker to correct the mispronunciation of a member’s name. The member will now leave the Chamber. 
Rodney Hide withdrew from the Chamber. 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 It is not often that even this Labour Government introduces into Parliament legislation that I totally oppose every part of. Usually in taxation legislation there is something we can support but I totally oppose every part of this bill. I shall tell the junior Government whip who is trying to interject why that is. This Labour Government— 
Darren Hughes 
: Got re-elected. 
Dr the Hon LOCKWOOD SMITH 
: It was re-elected because it gave Winston Peters the baubles of office and that gave Labour the numbers. What a shonky shonky Government! I want to come back to why I totally oppose this legislation and talk first about the part of it that deals with expanding the Working for Families package. 
I believe that the Working for Families package is one of the most serious and most destructive pieces of legislation that has been introduced into Parliament for a long long time. The reason is that this Labour Government now sees fit to control the net income of we are told 350000 New Zealand families. This Government will dictate the income of three-quarters of all New Zealand families with dependent children. No matter how hard they work and try to get ahead in life this Government knows best. 
Steve Chadwick 
: It is nothing about dictating. 
Dr the Hon LOCKWOOD SMITH 
: The trouble with people like Steve Chadwick and Ruth Dyson is that they do not employ anyone. I do. I pay PAYE for middle-income families. An employer doing that discovers that he or she has to deduct PAYE. The employee then has to go along cap in hand to the Government to get it all back. 
Low-income families can get back more than middle-income families but the tragedy is that the effective marginal tax rates they face are not the published tax rates. The briefing papers for the incoming Government has graphs and tables that show people like Steve Chadwick what the figures really are. There are poor families in this country who face 100 percent effective marginal tax rates. Is that good? The effect is such that for families on the minimum wage there is no point in their trying to work more hours because they do not get to take home any more pay. If Steve Chadwick were to look at the tables that the Government’s own Inland Revenue Department publishes and at the effective marginal tax rates of different family configurations right through the income range she would find that on incomes of from $30000 to $65000 a year there is no point in people who happen to have three children working harder because they do not get to take home any more pay. This Government takes most of it in tax. That is outrageous because it traps families in hopelessness. There is no way those families can get out of it. 
Over the next few months the National Opposition will show just how destructive the Working for Families package is. Admittedly this legislation changes the effective marginal tax rates a bit but they extend up to a higher level of income. At the moment we think that highly taxed New Zealanders pay a marginal tax rate of 39 percent. When people talk about New Zealand’s tax system they say that 39 percent is the top tax rate. Nonsense! For the 350000 families who are caught up in this legislation 39 percent is one of the lowest marginal tax rates they face. They face marginal tax rates of way above 60 percent. This Government thinks that poorer families do not deserve to be able to get ahead in life. This Government thinks that when they try to work harder to earn more money Dr Cullen has the right to take most of it off them. If this country is to have any future that has to change. 
The briefing papers for the incoming Government show how the peaks have grown. Those peaks represent income points where the marginal tax rates change. Around that very high effective marginal tax rate for families with about $20000 of income a year there is a huge growth. 
Hon Dr Michael Cullen 
: It’s called superannuitants God help us! That is single superannuitants. 
Dr the Hon LOCKWOOD SMITH 
: Dr Cullen is not even aware for example of the research work being carried out at Victoria University on those kinds of income peaks. If the Minister were to look at those graphs he would see massive growth in the number of people earning salaries at certain key points on the income scale. What did he say tonight on television? He said that every 3 years we get the Treasury burp. Treasury is trying to advise the Minister that there are real problems in our taxation system but Dr Cullen knows best. Just like Helen Clark Dr Cullen knows best. He knows better than all the experts in Treasury. He knows better than all the experts in the OECD. Dr Cullen knows more about tax than anyone else in the world because he is so so clever. 
But I say to Dr Cullen the problem is that families suffer hugely under this kind of legislation because it destroys hope. This country will start to see that it is a disaster when the State controls how much take-home pay families can get. If members do not believe what I am saying they should read the briefing papers to the incoming Government. The serious problem of high effective marginal tax rates for families is all spelt out there. That is the first problem with regard to this bill. 
The second problem is that of tax rates. This bill reconfirms the existing basic tax rates including the corporate tax rate. Again if we read the briefing papers to the incoming Government we see that there are huge problems around the corporate tax rate. The briefing papers tell Dr Cullen and Peter Dunne that in fact we are starting to lose tax revenue. As other countries reduce their corporate tax rate New Zealand—because Dr Cullen knows best; Dr Cullen knows far better than Treasury—will not reduce the corporate tax rate and the revenue base bleeds. 
The third reason I totally oppose this bill is the interest-free student loan policy. It is probably one of the most blatant political bribes I have seen in 21 years in this Parliament. I have seen bribes over the years when politicians thought they could buy the odd vote. I designed the student loan scheme in the early 1990s so I know a wee bit about it. This measure will vastly expand the amount of money being borrowed. What is more Dr Cullen is giving dentists doctors lawyers and accountants a huge $2 billion handout over the years while families—taxpayers—on the minimum wage who may not be able to get a son or daughter into dentistry medicine or law pay for it. They pay for Dr Cullen’s and his Labour colleagues’ political bribe of giving New Zealand’s graduates $2 billion. It is like giving the graduates Solid Energy and Landcorp Farming combined. It just gives away a massive $2 billion asset to people who are some of our highest income earners. 
Those are the reasons why National and I totally oppose this bill. Every part of this bill is bad policy and we will fight it tooth and nail. The officials all agree with us. All Dr Cullen can say is that Treasury has released its 3-yearly burp. That shows his arrogance; it shows why this Labour Government is in its death throes. 
Hon DAVID CARTER (National) 
: 
 I certainly join with my National Party colleagues in opposing the Taxation (Annual Rates and Urgent Measures) Bill. Is it any wonder that in the first few days of this Parliament the very first piece of legislation the Labour Government introduces is a taxation bill in order to grab more money off hard-working New Zealanders? Here we are debating a taxation bill within the first few days of Parliament because Dr Cullen wants not only to accept an $8 billion surplus but to see whether he can do better than that. 
First of all I will address the issue of the incorporation into this legislation of interest-free loans to students. I agree with what Lockwood Smith said. That policy was the most blatant election bribe I have ever seen in the time I have studied politics. I remember the pledge card of 1999—with Helen Clark’s dollied-up photograph—which stated that the Government would address the issue of student loans. At that stage student debt was $4 billion. In order to address the quantum of student debt in this country Dr Cullen and his cohorts came up with a mechanism to make loans to students interest-free while they study. Well surprise surprise student debt did not come down; it finished the last parliamentary term at over $6 billion. Helen Clark pledged to address student debt yet it has gone up by over 50 percent. Because the election was suddenly looking pretty tight and Labour needed to do something very very desperate it advanced a policy to make all student loans interest-free. We are told by Treasury that the quantum of student debt in the next few years will peak at $18 billion. That is because of Helen Clark and Michael Cullen who promised to address student debt. 
I also want to talk about the costings. Dr Cullen came into the House today and said that Treasury has re-costed the policy at $202 million. Yet I listened with interest to John Key who said that income from interest on student debt is currently around $360 million. In other words I have no faith at all in the figure of $202 million that Dr Cullen introduced into the House tonight. I suggest that if that is not a Treasury burp it is probably a Michael Cullen burp. The reason the costing will exceed that figure considerably is that Dr Cullen seems to fail to realise that students will now borrow to the max. Why would they not? If they have the intelligence to involve themselves in tertiary education they surely have the intelligence to take up a student loan to the absolute maximum quantum available to them. If they do not need it they can stick it in the bank and earn bank interest rates. That is another reason why under this policy student debt will extend extensively to at least $18 billion. 
The other thing in this legislation that I will talk about is Dr Cullen’s attempt tonight to confirm the annual taxation rates for the 2005-06 year. He has an $8 billion Budget surplus and is continuing to tax what he calls wealthy New Zealanders—those earning over $60000 per year—at a rate of 39c in the dollar. We know that Labour introduced that “envy tax” after the 1999 election and we know it will stick with it. But let us look at the parties that we think will support this legislation being referred to the select committee and following that through its readings in this Chamber. 
During the election campaign New Zealand First campaigned around the country for lower taxes. Somebody suggested today that New Zealand First campaigned for a company tax rate of 20c in the dollar. For a small bauble of power New Zealand First has sold its principles completely and will now vote for the continuation of a company tax rate of 33c in the dollar. New Zealand First is not the only party that will do that. United Future candidates argued all around the country that the country is overtaxed and that they would make sure they delivered lower taxes to New Zealanders. Do the United Future members look as though they will vote for this legislation to go to the select committee? Yes again they do. 
That is what happens when an election campaign becomes as tight as the last one was. Dr Cullen got into a situation that gave him a hell of a fright. If we go back to the start of this calendar year we see that the members of the press gallery one and all were saying that the election could not be lost by the Labour Party because the economy was so strong. But Dr Cullen personally underestimated the strength of ill feeling among New Zealanders who know that they are completely overtaxed. Suddenly as the polls became tighter and tighter the student loan policy came out. Then at the end of the day Labour could not form a Government without giving the bauble of power—only one bauble—to Winston Peters. Doug Woolerton missed out. Ron Mark would have been a superb Minister of Police. He deserved to have the title “Honourable” added to his name but he did not get anything. Winston Peters took the lot and sold the New Zealand First members down the drain. 
There is one small piece of this legislation that I want to agree with and acknowledge tonight. The matter is on Supplementary Order Paper 1 which Dr Cullen has put before the House very late in the piece. It will change the taxation laws in New Zealand in order to allow New Zealand wine producers to also collect the rebate that was announced by the Australian Government in a previous Budget. The Australian Government for reasons known only to itself determined that a tax rebate would be made available to wine producers in Australia for produce sold in Australia. That was a complete breach of CER and the Government was not prepared to do anything about it until the Wine Institute supported by the National Party raised it as a serious issue. Very belatedly the Minister for Trade Negotiations the Hon Jim Sutton—[ 
Interruption 
] He was the Minister at that stage and he still is the Minister for another month or two as he speeds around the country. Dr Cullen then managed to raise the issue sensibly with the Australian Government and what we see is the Supplementary Order Paper tonight. When enacted into law it will change the taxation law sufficiently so that the Inland Revenue Department can monitor that situation and make that rebate available to New Zealand wine producers who produce wine here in New Zealand and market it for consumption in Australia. 
Those are the only couple of pages in the whole of this legislation that are worth anything at all. The rest the fact that taxation rates delivering an $8 billion surplus continue to be raised in this country is an outrage. Well-qualified talented New Zealanders continue to leave this country in droves because suddenly it is a lot easier to make progress in Australia. Dr Cullen is going to continue that process unless he is prepared to investigate and reduce taxes. He can appear on television on  
Close Up 
 and waffle all he likes about the Treasury report; New Zealanders now know the truth about the taxation situation in New Zealand. They know that New Zealanders are heavily overtaxed and that we will continue to see qualified talented young people leave this country unless the Government is prepared to do something about that. 
A party vote was called for on the question  
That the Taxation (Annual Rates and Urgent Measures) Bill be now read a first time. 
Ayes 70 
New Zealand Labour 49; New Zealand First 7; Green Party 6; Maori Party 4; United Future 3; Progressive 1. 
Noes 50 
New Zealand National 48; ACT New Zealand 2. 
Bill read a first time. 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I move  
That the Taxation (Annual Rates and Urgent Measures) Bill be referred to the Finance and Expenditure Committee 
referred to Finance and Expenditure Committee 
for its consideration and that it be an instruction to the committee to present a final report on the bill by 5 December. 
A party vote was called for on the question  
That the motion be agreed to. 
Ayes 70 
New Zealand Labour 49; New Zealand First 7; Green Party 6; Maori Party 4; United Future 3; Progressive 1. 
Noes 50 
New Zealand National 48; ACT New Zealand 2. 
Motion agreed to. 
Instruction to Finance and Expenditure Committee 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I seek leave for the Finance and Expenditure Committee in its consideration of the Taxation (Annual Rates and Urgent Measures) Bill to have the authority to consider and if it thinks fit adopt the amendments set out on Supplementary Order Paper 1. Those relate to the wine equalisation tax rebate. 
The ASSISTANT SPEAKER (Ann Hartley) 
: Is there any objection to that course of action? There is not. That is agreed to.