Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill — In Committee 
Text is incorporated into the Bound Volume 
Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill — In Committee 
[Sitting date: 26 September 2012. Volume:684;Page:5707. Text is incorporated into the Bound Volume.] 
Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill 
In Committee 
Part 1 Excise and excise-equivalent duties on tobacco products 
IAIN LEES-GALLOWAY (Labour—Palmerston North) 
: 
 Thank you for the opportunity to speak on Part 1 of the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill. What Part 1 of this bill does is allow for four substantive 10 percent increases in the excise duty on tobacco products. This is being done in the name of harm reduction to reduce the harm caused by tobacco smoking in New Zealand. It is being done in a way that as has been discussed in earlier readings of this bill actually follows the evidence for using tax increases or price increases to reduce the prevalence of smoking in a much stronger way than previous increases have done. That is because it allows for four successive increases in price. What the evidence tells us is that each time we have a price increase then associated with that is a spike in quitting activity whether that be people contacting organisations like Quitline whether that be acquiring nicotine replacement treatments—or a whole host of quitting activities. We also know that as a result of those quitting activities many people do remain tobacco-free as a result of those quit attempts although the nature of addiction being what it is many people also go back to using cigarettes and other tobacco products after those quit attempts. But what we also know is that there is a brief period of activity after each increase which then tails off and we return to a steady level of tobacco consumption albeit hopefully lower than what it was previous to the increase. So with these consecutive increases what we should then see are consecutive periods of quitting activity from people who are currently using tobacco and they will assist in progressing New Zealand towards the goal of being smoke-free by 2025. 
But it is important to also note that this being a tax increase does generate additional revenue for the Government. Treasury estimates that this legislation will raise an additional $528 million for the Government over the next 4 years. What I found interesting is that for a piece of legislation that the Government has proposed in the name of health and in the name of harm reduction this bill went not to the Health Committee but to the Finance and Expenditure Committee and in fact the reports the regulatory impact statement and the departmental report were prepared by Treasury not by the Ministry of Health. That is more appropriate for a bill that is designed purely as a revenue-gathering exercise rather than an exercise in improving the health and well-being of New Zealanders. The chair of the Health Committee is looking at me a little bit perplexed and is perhaps concerned that I might be suggesting this is not a health measure and is in fact just a revenue-gathering exercise. I do not believe that Mr Hutchison. I do know that this is being done with the best intentions—the right intentions. But it does also raise money for the Government and it comes at an interesting time. 
It is interesting that the Government has chosen now rather than the year before or the year before that or even going back to the days when National was in Opposition to support a bill like this. Of course what we do know is that the Government has been having a lot of trouble raising the revenue it requires because the economy is so sluggish at the moment. So this does have a positive benefit for a Government that is having a lot of trouble in its economic management at the moment. It is having some difficult getting the economy moving along. This measure does have an additional benefit for the Government in that it does raise some more revenue. That of course then begs the question of what the Government ought to do with that revenue. It is true that there are a number of measures that the Government could be undertaking in order to further tackle the prevalence of tobacco smoking and to further advance New Zealand towards that goal of being smoke-free by 2025 that in fact would be a very very good use for this money. 
There is a range of things that the money being raised from the sale of tobacco could be used for whether it be through GST and whether it be through excise tax. Obviously there is the expenditure on the treatment of people who have diseases that are related to smoking. There is of course tobacco. We know that tobacco is related to all the big four killers—not just the big four killers but the big four creators of cost in the health system—cardiovascular disease diabetes respiratory disease and of course cancer which is well documented. Of course a lot of the money raised from the duties excises and GST on tobacco products needs to be used to pay for those treatments. It also needs to be used to boost the health promotion activities that the Government ought to be carrying out in order to convince people to not start smoking in the first place and also to quit. 
Of course what we know is that one of the other initiatives that has a strong evidence base behind it is social marketing which encourages people to quit. In fact if that social marketing was aligned to these tax increases it would have an additional effect in encouraging people to give up smoking. Unfortunately the truth is that the Government has reduced its spending on those social marketing initiatives despite the fact that it is increasing its revenue from the sale of tobacco. 
There is a third area that needs to be covered as well and this perhaps does not get as much consideration or debate in the public. That is the fact that people who do get a disease that is related to smoking of tobacco products are less productive. They are less able to work. They therefore pay less tax. So there is a burden on the New Zealand taxpayer because of that loss of productivity that is related to tobacco smoking as well and that ought to be covered off by the money raised through tobacco taxation too. 
There is an important question that the Government ought to answer: what is it planning to do with this additional money? Is this just making up for its economic failures? Is this just a way of filling the hole created by its unaffordable income tax cuts as we have seen with the range of other levies and costs placed on the New Zealand taxpayer through indirect taxation that does not come through income tax and making up for that loss of revenue from income tax or will this money be used to get us closer to that goal of making New Zealand smoke-free by 2025? I would appreciate an answer from the Minister in the chair the Minister of Energy and Resources on those questions because I think they are important questions. 
People do accept that increasing the revenue that the Government takes from tobacco is an effective method for reducing the harm caused by tobacco but it does have an impact particularly on low-income people who are addicted to tobacco products. And I note that Treasury actually acknowledges in its regulatory impact statement that the nature of addiction is that even if a product becomes more unaffordable people may continue using it because they are addicted to it and they do not necessarily make what most people might consider a logical decision about their use of that product. So given that that is the situation it would be fair for the Government to do more in terms of supporting people to quit encouraging people to quit and making sure that the types of replacement therapies social marketing and all the other things that go along with encouraging less use of tobacco amongst the population of New Zealand would all be good things to be funded out of this money. So I do ask the Minister if he feels inclined to get to his feet to answer those questions on Part 1 of this bill. 
ANDREW WILLIAMS (NZ First) 
: 
 I rise to take a call on behalf of New Zealand First on the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill. We spoke on this bill yesterday and it is back in the House again today. Some of you will recall that yesterday on behalf of New Zealand First I expressed our concerns that this would be simply a tax take. As we have heard $528 million over 4 years—a huge amount of money over half a billion dollars—will be going into Government coffers. We certainly are hopeful and expect that it will be the case that a significant amount of the funding that comes out of this measure will go into the required health measures to actually help with the reduction of smoking in our country. 
 While I was sitting in for the Rt Hon Winston Peters on the Finance and Expenditure Committee on a few of the days we did actually flesh out some of the unknown factors in all this. One of the ones that somewhat surprised me was that this always does refer to New Zealand becoming smoke-free by 2025. So there is the feeling out there that there will be no more smoking in another 12 or so years. In actual fact the definition of “smoke-free” from the officials was that by that stage it would mean that where there is currently something like 16 percent of New Zealanders who smoke it would be slashed by about a third down to something like 5 or 6 percent of New Zealanders who smoke which would still leave 50000 or 60000 people in this country smoking. So it cannot really be called smoke-free because even at 2025 there will still be 50000-plus people who are defined as being smokers in this country. 
In that situation it is perhaps a little bit more levelling in terms of what the true situation is. But we do also have a situation with foreign tourists. Of course New Zealand is promoting itself heavily in markets like China Taiwan Japan Korea and all through the Asian countries and that is a potentially huge growth market for tourism to New Zealand. Of course they do have a high percentage of smokers coming from many of those Asian countries. So again New Zealand will always have a situation where we cannot become 100 percent smoke-free because if we are going to expect to have several million tourists a year coming to this country and a significant chunk of those tourists are coming out of many of those countries where there is still a reasonably high level of smoking then that will not be the case. If we were to turn it off flatly many of those tourists simply would not bother coming to New Zealand and that would be a huge problem. 
I think we have to be a little bit realistic here. It is an admirable aim but what we are basically saying is that we are trying to cut the rate of smoking of domestic residents in this country of New Zealanders in this country by about a third from 15 or 16 percent down to about 5 percent. At that point in time that would significantly reduce by more than 100000 people the amount of people who are smoking. In that respect I would certainly hope that if you multiply those 100000 people out across the health system and consider the effects of smoking—we have the chairman of the Health Committee here Dr Hutchison and I know that this is a subject dear to his heart—over the next decade and the next 12 years if that can be significantly reduced in terms of the effects on their health the reduction in what happens in terms of their health the extension of their lives and increasing their life expectancy then that certainly is a good thing. 
It did worry me a little bit too that this bill was being seen only by the Finance and Expenditure Committee and it seemed to be being seen only in terms of dollars but I certainly hope that Dr Hutchison and the Health Committee will take it on board. Actually I hope that his committee monitors this. I have known Dr Hutchison for many many years because he was a doctor in Mairangi Bay and I used to go to his practice. I know how he is committed to good health. So I certainly hope Dr Hutchison that you will follow this through and that you are fighting with your Minister of Finance Bill English for an allocation of increased funding—the increased funding that comes out of these taxes year on year 10 percent year on year—for the necessary health projects to reduce smoking. Thank you. 
Hon MARYAN STREET (Labour) 
: 
 I am pleased to contribute to this Committee stage debate on the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill. Yesterday when I spoke on this bill I talked about the numbers of New Zealanders who die from smoking-related illnesses or from passive smoking—the inhalation of other people’s smoke. It sits at somewhere around 4500 to 5000 people per year who die prematurely because of the effects of tobacco. So I applaud the Government’s efforts to make tobacco harder to purchase which is what this bill will do. 
This bill amends the Customs and Excise Act—and I am speaking to Part 1—to increase by 10 percent the excise on tobacco every year for the next 4 years. So effective from 1 January 2013 1 January 2014 1 January 2015 and 1 January 2016 there will be a 10 percent increase in the excise on tobacco. That will help to put the product itself further out of the reach of young people and that is an important step. 
But I have to go back to some points I made yesterday and which my colleague Iain Lees-Galloway has made again this evening that if this were truly a health measure with health-related objectives in mind perhaps the first objective in the regulatory impact statement written by Treasury would not read: “This analysis assesses options to increase tobacco excise to help achieve the objectives of responsibly managing Government’s finances to achieve its fiscal strategy goals;”. Objective number one: to achieve its fiscal strategy goals. This is a tax grab. This is not about health. Had it been about health it would have come to the Health Committee. It might have been introduced by the health Minister. It is in the name of an associate health Minister the Hon Tariana Turia but even she was not present. She was clearly involved in some other activity and was not able to move the second reading of the bill herself so it fell to the Hon Chester Borrows. 
There are a number of people in the National Government who will be hoodwinked tonight into getting up and saying how good this will be for the health of New Zealanders. I expect Dr Hutchison the chair of the Health Committee to be one such hoodwinked. I am anticipating Dr Hutchison’s speech. In fact I will be seriously disappointed if Dr Hutchison does not get up and tell us how good this is for people’s health. He used to be a doctor—he used to be a doctor. So I would expect him to get up and say that. 
I am very pleased for health reasons—and so is the Labour Party—to support this bill but the thing I find missing in Part 1 of this bill which is the part currently under discussion is the thing that might persuade me that the Government had health measures in mind and not simply managing the Government’s finances to achieve its fiscal strategy goals. Certainly secondly it does have “achieving the Government’s goal of making effectively New Zealand smoke-free by 2025;”. Treasury had such trouble with that sentence that it could not even express it properly. The syntax is all skew-whiff. But anyway the first objective clearly is about achieving the Government’s fiscal strategy goals. If it were not that if it were seriously a health measure—and I am pleased that Dr Hutchison is coming up to the Table to get a copy of the bill so that he can prepare his arguments in rebuttal of this—it would say in Part 1 of the bill surely would it not: “We are going to take this money which Treasury calculates will be a substantial amount”—that amount that my colleague quoted before and I am just struggling to find it— 
Dr David Clark 
: $528 million. 
Hon MARYAN STREET 
: It was $528 million over 4 years. It would say in Part 1 if it were serious: “A proportion”—I am not going to be greedy and say all of the $528 million over 4 years but a proportion; let us say a tenth—“would be dedicated to assisting people to give up smoking.” Assisting people to give up smoking—in other words putting money back into Quitline putting money back into the products that assist people who are addicted to nicotine to withdraw from it to manage it in the course of that withdrawal and to successfully give it up. That would be something to really praise the Government about had it been serious about this being a health measure. But for all my examination of Part 1 I cannot find anything that says that these four substantive 10 percent increases are going to be put back into health. They are not. They will be used to paper over the cracks of a disparate and an unsuccessful economic strategy. 
Although we support the bill for health reasons—and I am sure that there will be one or two well-intentioned members of the Government who support this bill for health reasons—there are others who are simply saying: “Here is a tax grab. Here is something that we can do because we are falling terribly short in our projections on what we are going to get from asset sales. So we are not going to get the money that we expected to get the market is low our assets are depreciating by the day and we are not going to get the funds that we thought we would get from asset sales and therefore we need additional forms of revenue. What can we do? We will hike up the cost of tobacco make cigarettes more expensive and we can do it under the guise of it being good for people.” 
This is a cynical measure. However having spotted the cynicism which one could spot at 500 paces—at 500 paces—we are prepared to support the bill for all the right reasons and in fact recognise that what should be in here is some mechanism for delivering the revenue gathered from these four 10 percent increases back into health and health protection for New Zealanders. 
There is more to be said about this. The bill is currently inadequate. It serves one purpose and one purpose only as a tax grab. If we are lucky it will have a by-product that will be good for New Zealanders but it was not drafted with that in mind. If it had been it would have been drafted differently. Thank you. 
PAUL GOLDSMITH (National) 
: 
 I am very happy to take a short call on this Committee stage of the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill and I am saddened that the Opposition think that members of the Government would be cynical about this in any way. This is a bill that is designed purely and simply to improve the health of New Zealanders by reducing smoking. This Government is committed to reducing smoking harm in this country. This is about increasing tobacco excise taxes by 10 percent as Part 1 of this bill outlines in detail. The increases over the next 4 years which altogether will add up to a very significant additional burden send a very clear message and a strong incentive to smokers in order to encourage them to quit. In the meantime the Government is providing in Budget 2012 $20 million over the next 4 years for the Pathway to Smoke-Free 2025 fund which helps fund programmes to discourage smoking and help smokers quit. I think that what we are hearing from the other side is— 
Scott Simpson 
: Claptrap. 
PAUL GOLDSMITH 
: —claptrap. It is time that we focus on some of the details. So I will be looking forward to some other speeches that focus more on the details of Part 1 coming forward. Thanks. 
KEVIN HAGUE (Green) 
: 
 It is a pleasure to take a call and in particular to follow up on the contribution from Paul Goldsmith because he did state—and he is the first Government member to speak in this debate—that the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill is a bill intended to improve the health of New Zealanders. That has been one of the topics that has been debated in this Committee stage of the bill and also in the second reading debate that we held earlier this week. 
I think it is interesting is it not that there does seem to be general support from the House for this bill. I think all parties will be voting for it—I am not sure about New Zealand First but all other parties will certainly be voting for it. 
Brendan Horan 
: Have to wait and see. 
KEVIN HAGUE 
: We will have to wait for someone to come back. But despite the general support for the bill none the less there are many suggestions about improvements to the bill that have been canvassed both in the debate and also by the Finance and Expenditure Committee and by many of the submitters. It is an unusual thing it seems to me that in the select committee’s report it refers to amendments to the bill that it would have made had they been in scope. I think that is an interesting point is it not because it suggests that there are further public policy measures that we as a nation ought to be taking around control of tobacco-related harm and that this bill does not do the things that we need it to do. Iain Lees-Galloway has mentioned that it is a better approach than has been used to excise tax increases in the past and I would agree with that. I think it is a step forward. But given the opportunity that the bill presented it is unfortunate that it did not go further. 
I quote again from the letter to the  
New Zealand Medical Journal  
from Associate Professor Nick Wilson and George Thomson from the Otago school of medicine from earlier this week. They very clearly raised the question that has been raised by several speakers over the debate in this stage and earlier about what the purpose is of the bill. In fact what they said in their letter was: “We suggest that Parliament makes it explicit in the tobacco tax legislation that: the primary purpose of the current Bill is to reduce smoking so as to prevent harm to health and to prevent premature deaths rather than to increase Government revenue.” They also say that the purpose clause that they suggest would say that “The Bill is a key part of the Government plans for achieving a smokefree nation in 2025.” So that is placing into statute in fact that goal. 
If indeed the linkage that Paul Goldsmith has mentioned tonight is the Government’s intention—that that is what this Government is about—then I invite the Minister in the chair to bring a Supplementary Order Paper to the floor of the House to add exactly that kind of purpose clause. It has been drafted for the Government by the professors at Otago medical school. 
I think it is apparent is it not why that confusion has arisen. Those who believe that the bill is or ought to be about reducing smoking-related harm would then look at the options that were canvassed by the various agencies who were supporting the select committee on this bill and note that the option that was selected for inclusion in the bill and which is reflected in the bill that has been reported back was the option that actually had the least positive impact on improving New Zealanders’ health. So either there is some kind of goal confusion going on and one suspects that that may be the case—and if that is the case then perhaps a purpose clause along the lines suggested by those Otago professors would be helpful to everyone to the public and to the Government and would be clear about what it was that it is trying to achieve—or else there is something more insidious and that is certainly the theory that we have heard espoused in the debate tonight. The Government is able to settle that point if it was to take up that suggestion about inserting a purpose clause. 
The select committee rejected the more aggressive measures that would have had a more positive effect on health and in doing so it also made some further comment in its report to this House about in fact its doubt about whether the measures that were being passed into law would be adequate to meet that 2025 goal. It suggested that there should be some ongoing monitoring by the Government of progress towards that goal with a view to determining whether further measures are required. Again the Minister in the chair may or may not be in a position tonight to indicate what the monitoring regime is that the Government intends to put in place to determine whether or not progress is adequate towards that goal. Again that would be a useful insertion into the bill by the Government—the monitoring regime that it intends to use to determine whether or not these measures are achieving the goal. There is certainly a lot of doubt about that point. It was raised by virtually every submitter to the select committee and certainly all of the experts. Indeed the advice from the officials themselves suggests that the measures in this bill will not be adequate to achieve that purpose. I am certainly very keen to hear from the Minister about what that monitoring regime will be. 
I also want to touch on one other point in relation to Part 1 and that is the matter of duty-free tobacco concessions. This is the issue on which the select committee said that had it been in scope it would have recommended an amendment to the bill to change the duty-free concessions. I think what that suggests is that the recommendation that the select committee does make which is that the Government needs to consider this matter—to consider the consistency of the duty-free concessions with that smoke-free Aotearoa goal—is clearly another point that we want to hear from the Minister on. What is it that the Government is going to do to assess that consistency? What is the legislative programme that we might expect to see to close that gap? 
I think the evidence is pretty clear as New Zealanders move through airports or otherwise access duty-free stores or duty-free supplies that the availability of duty-free tobacco and tobacco products is increasingly an anachronism in an environment where our strategy as a nation is to denormalise tobacco. Well the massive stands of cigarettes that we see in duty-free stores—I guess we do not see them now but that we are used to seeing—actually are the epitome of the normalisation of that product. This is a point that does not perhaps affect very large numbers of people but it is an important symbolic step towards the goal that the Government has adopted of having a smoke-free nation. I look forward to the comments from the Minister in the chair on exactly what it is that the Government will do to close that gap. 
Hon PAREKURA HOROMIA (Labour—Ikaroa-Rawhiti) 
: 
 This Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill is a tax-grab. The Government needs to be commended for sticking with this and coming this far. 
Certainly what is interesting is the regulatory impact statement by Treasury. It is quite fascinating. It says: “It does not assess and compare tobacco excise increases with other revenue savings and expenditure options Ministers have considered in preparing the 2012 Budget.” That clearly tells you that they do not want to measure it or benchmark it against anything. Two other parts are very interesting: “Analysis to inform a decision on tobacco excise increases for Budget 2012 has included: the impact of recent excise increases on Crown revenue and on consumption patterns; likely revenues from options to increase tobacco excise; initial information on likely distributional impacts … The analysis has not included”—has not included—“a range of other issues due to time and resource constraints.” 
I wonder how serious the Government is about this. It has no information here on the “overall economic and fiscal impacts of smoking (eg: health and other welfare effects on smokers their families” and other impacts and so on and so forth and “disability services linked to smoking … impact on the economic welfare” and so on and so forth. We know full well that there are screeds and screeds and summaries of information on the impacts of smoking. So the Government is just clearly trying to offset this take the money and run—$528 million. 
We heard the “Minister of Prisons” today going on about saving $170 million. I am not too sure how you comprehend not expending money on people’s welfare and trying to avoid smoking and going and building new prisons. 
Hon Simon Bridges 
: Rubbish! 
Hon PAREKURA HOROMIA 
: It is more than rubbish. It is this new edict of the right expecting that they can take money off the working class and just do what they like with it. 
Tobacco in this country was a tool of the colonisers—that is what it was—and it has continued to be a tool of the colonisers of the Government. It seriously was—it was. I say to this person over here Andrew Williams who was talking about the Asians that it is well known and scripted if you are enough of an international scholar and understand what happens to indigenous peoples that when people in a settler society are being oppressed or dominated by the majority they do three things: they drink beer they go for sugar and they smoke. That is the poor man’s correction the working class’s correction. The big-time colonisers grew bigger cigars and they smoked cigars because it was a pecking order thing. And I can assure you that in a lot of these modern countries that are coming into their own that is the first thing they do—they chase sugar they smoke and they drink beer—because it is the poor man’s way to say that they are going up in society. And we would be damned by a Government that does not recognise that and wants to stop you know any brave movers. 
I want to commend the great doctor over there Dr Hutchison because he stuck with us when we knocked the smoking out of those restaurants and bars when Simon Bridges wanted to carry on smoking in restaurants in Tauranga. 
Hon Simon Bridges 
: Oh! 
Hon PAREKURA HOROMIA 
: Yes you did. I remember you saying that. And does it matter now? It is a great thing. So why do we not get serious about Part 1 and ensure that it is knocked right out. We should be working towards that. 
You know Quitline and Auahi Kore cannot even pay their phone bills and you are going to flog the money off them—$528 million. Auahi Kore—there are a lot of volunteers who run around in those cars. They tell me that it takes 4 weeks to disconnect a heavy smoker and for them to even start to practise and be honest about not smoking—4 weeks. It takes a lot of money. But you take it from me sonny—that is what happens. 
The CHAIRPERSON (Eric Roy) 
: Order! [ 
Interruption 
] Order! 
Hon PAREKURA HOROMIA 
: Oh sorry Mr Chair. Kia ora Mr Chair. Dear sir be assured that that is what people do when they come out from the boondocks: they chase beer they eat sugar and they smoke cigarettes—and we should be aware of it. There are more than enough Maori and Pasifika people who have respiratory diseases and who have smoked themselves to death and it will continue—it will continue. The worst situation in relation to this bill is that there is not any money being put back in to help correct it and to help support the correction. The doctor knows that. That is why he is chewing on his glasses. 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 It is a delight to follow my colleague the Hon Parekura Horomia who has put his finger on a number of important issues addressed in the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill. He has really brought home some of the issues that continue to affect many members of our population and he has drawn attention to the need to have those issues addressed more seriously than in the kind of haphazard way that the National Party has sought to address them over the years—or not address them. I remind us all that it is not so long ago that Bill English himself opposed such a revenue increase by the then Labour Government saying that “the Government did not ever say it would do it … that is the Government’s standard not ours.” He washed his hands of it. He labelled it a tax increase and said that “It is a tax on the poorest people of New Zealand it is an increase that is far too large and that is why we voted against it.” So the finance Minister not so long ago was voting against this kind of measure. There is a certain irony in his supporting it now. 
We see it for what it is: it is a cynical tax grab—$528 million over the next 4 years Treasury says will go into the Treasury coffers. We know that is why the Government is doing it. We know it is concerned about the revenue hole left by the 4 percent revenue drop during its term in office which is largely due to economic conditions being poor. This Government has the worst economic record of any Government in 50 years. It had hoped for better. It described its 2010 package as broadly fiscally neutral and it has proven to be anything but unless one uses the term “broad” in the broadest sense. 
We know that smoking remains the single biggest cause of preventable morbidity and mortality in New Zealand. Around one in five adults currently smoke. The Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill directly affects a significant portion of our population. It is an issue that needs to be tackled. Labour will be supporting the bill because this is a measure in the right direction. We have had a principled stance on this right the way through. It is not about a tax grab as far as we are concerned; it is actually about addressing the health issue that lies behind it. 
Maggie Barry 
: Holier than thou. 
Dr DAVID CLARK 
: Labour continues to support this we continue to be consistent in this regard and Maggie Barry will acknowledge that this is the right thing to do. I do not think she would say it is the wrong thing to do. Her Government is now supporting this measure. 
What we see is that equally in the papers that we have had before us in the Finance and Expenditure Committee the regulatory impact statement from Treasury explains the effect of this legislation on smokers. In 2010 Cabinet favoured the sequence of three 10 percent steps rather than a one-off 30 percent increase because it considered that it would offer a repeated set of messages to smokers. That is what is contained in the regulatory impact statement. It goes on to say that “The Treasury does not have any evidence available to support one approach over the other as being more likely to be effective in prompting sustained reductions in smoking.” I think that what sits behind this particular choice is that this Government does not want to deal with it on multiple occasions. It wants to get this dirty Act over with. It wants to get the revenue banked in the coffers. It does not want to address the health issue too many times so that is why it has chosen the 30 percent over the 10 percent when it has had direct advice from Treasury that it makes no difference whatsoever. 
The effect on smokers of course is significant. An average smoker smokes 12 cigarettes a day we are told. Assuming a current price of $16 for a packet of 20 that amounts to $3500 per year. Continuing to smoke those 12 cigarettes per day we are told will cost the average smoker an additional $1130 more per year. This is a significant measure. It will affect behaviour. It will make a difference because we know that price and marketing is the most effective way of dealing with addictions. We know that from the alcohol sphere. We see the Government avoiding those measures in the alcohol sphere currently but to its credit it is taking on the price issue here albeit for perhaps the wrong reasons. 
Certainly the University of Otago presenters who came to our select committee identified that. They portrayed this bill although in more polite and academic terms as a naked revenue grab. They advocated for some changes in the bill. The first was to clearly establish that the purpose of the bill is to save lives rather than to increase Government revenue—to make the purpose absolutely clear. Secondly they advocated for clearly establishing the bill as part of the Government’s plans for a smoke-free nation in 2025. That is an interesting point that I will come back to because if it were adopted as part of the Government’s plan for a smoke-free nation in 2025 we might see some additional measures because Treasury also tells us that this measure alone is unlikely to achieve that goal. They also advocate for increasing the tax rises to 40 percent in the first instance and at least 20 percent in subsequent rises. 
The researchers from the University of Otago—whose specialist topic this is who have done the research who understand what would make a change and who are people based and educated largely in New Zealand’s finest city—would recommend that we also reduce duty-free allowances for tobacco products to one pack of 20 cigarettes or the equivalent. They would also urgently investigate establishing a minimum price for tobacco. These are measures that the select committee did not decide to adopt. They would further suggest that we ensure tax increases are implemented with co-interventions and they outline a series of ways in which that could be done effectively hypothecating the additional tax take. Perhaps it is a dirty word to Treasury—the “h” bomb hypothecation—but it is actually a way of having the changes accepted by the public. We know that the public will accept positive changes and particularly smokers in the general public when they know that they will be provided with assistance to help break the habit as a part of that package. These researchers note that the overwhelming evidence is that tax increases are one of the most effective means to reduce smoking prevalence. They cite the modelling work carried out by the New Zealand Institute of Economic Research for the Ministry of Health that demonstrated that substantial tax increases would be an important component of achieving the 2025 smoke-free goal. Treasury advises that the increases proposed will not be sufficient to achieve that goal on their own. 
We note that there is a paucity of other policy being brought forward by the Government and all of that of course highlights the fact that as far as the Government is concerned this is an attempt to fill its revenue hole the 4 percent loss of revenue in the Government books—1.5 percent of which is attributed by the Inland Revenue Department to the global financial crisis but 2.5 percent of which is attributed directly to Government policy changes. This is an attempt to begin to fill that revenue hole because the economy has not grown. The policies the Government has adopted the tax policies we are discussing here and other policies the Government has adopted have not grown the economy sufficiently that the revenue is there to afford the public services that we all value. We see this bill as a tax grab. Unfortunately it is not achieving the 2025 goal that we would hope it would. 
We also note that Treasury’s advice is that the social policy objectives will not be met because excise increases should be considered as part of a broader package. They also note that the stock of current smokers will still be the majority of smokers in 2025. Even aggressive increases in tobacco excise rates alone are unlikely to be sufficient to achieve the smoke-free goal in this time frame. I put it to you that this is clearly a measure that is a tax grab. It is going to achieve positive results so we will support it. We do wish the Government would go further and I look forward to hearing from the next member who will speak and I hope it is Maggie Barry. I hope she will enlighten us as to the wider Government policy on this issue and not just tell us about the naked tax grab which this current bill represents. Thank you. 
MAGGIE BARRY (National—North Shore) 
: 
 I move  
That the question be now put 
. 
Hon SHANE JONES (Labour) 
: 
 Tena koe Mr Chair. I rise knowing that that botanical expert could visit upon me a form of mother-in-law’s tongue a well-known weed that grows up in and around the gardens of Auckland. But I want to talk about a far more serious subject. 
Maggie Barry 
: Don’t be so prickly Shane. 
Hon SHANE JONES 
: I was relying only on the modest botanical knowledge I inherited from the Anglican Church while I was at St Stephen’s College. Then I went to the various Anglican churches around Auckland—and I must say the padre did smoke so it is actually relevant—and I recalled that line. I am not entirely sure whether that member actually spoke about that botanical pest otherwise known as the mother-in-law’s tongue but from time to time she evinces those qualities. That is reflective of how much botanical knowledge she had inversely related to some of her political contributions. Kei te pai. 
I would like to start with a small story—very instructive. I come from the very far north Ninety Mile Beach and the name of our tribe is Te Aupouri. It means the dense smoke. How it arose was that we were surrounded by some of Hone Harawira’s relations and we were a far more modest humble sort. In order for us to escape the ravages of their foul designs we lit a big fire. We waited for the smoke. It was early in the morning and it settled just above the current of the water. We managed with a level of sleekness and a sort of waka that was not a “Tupperwaka” to sneak away. 
 Unfortunately in more recent times that story—a grand story about pre-colonial times—is visited upon us as more and more of my own matuas have died with a cigarette Park Drive in the mangai one in the damn hands and one in the ear. Those images—unfortunately they were Maori Battalion returnees so it is probably not the most sensible contribution in terms of the rather romantic image we have about our matuas who went to the Maori Battalion—were a feature. 
When we went to hui because I grew up right next to the marae—my dad was a dairy farmer which may cause some of the members on the other side of the Chamber to ponder as to how I ended up where I am. Well it was truth in justice it was truth in justice—truth in justice. However part of what we contributed on the marae with our old grandmother who whangai-ed me brought me up with my parents etc.—she was born in 1892—was that we used to go and get bales of hay and spread this hay out because there were very few mattresses etc. We would spread this hay out and put out a thing called a kuta mat made out of this golden reed growing in the lakes; our whaeas used to make these mats out of it. So that was the mattress. Well I have vivid memories of these Maori Battalion returnees sitting there with their Park Drive with a small flask of whisky arguing about land. 
Unfortunately not much has changed but at least there has been an improvement. The tone has changed and the norms have changed. There is no more smoking in that particular marae. We actually have mattresses. I think they come from “The Ware-whare” otherwise known as The Warehouse. Unfortunately fewer of us actually know how to make those mats. They are one or three long-suffering individuals who from time to time have been misguided enough to support the Maori Party in the mistaken belief that its politics are going to revive our culture but that is another matter. 
So this is just another step on a long-term journey. Yes the tax is regressive and yes I have been out once or thrice with my matamua the matua of Aotearoa Tuatahi and yes I have seen him with my partner enjoying a cigarette now and again. It is free will it is everyone’s choice etc. and may they enjoy the opportunities that smoking and drinking afford them. I enjoy drinking and something else but not smoking but it is a free life and it is free will. It is free will. 
It is regressive and a lot of our Maori voters they are hoha. They are hoha that we are supporting this but we have to say to them: “It is in your best interests and please reward us appropriately when voting comes around.” So we know that there are occasional difficulties. I think it is inevitable that the flinty rather mean-spirited side of the Chamber—that side of the Chamber—will remind us that this is about tax and revenue but it is how it is applied. I would actually like to see a hypothecation model—a rather sensible word brought to the fore by Annette King as she reformed our transport policy which is currently being squandered by that side of the Chamber. So this revenue is dedicated to working with young parents. In our world in Te Ao Maori unfortunately a young parent of 16 17 18 or 19 in “Strugglers’ Gully” is often very stressed so the challenge that Treasury— 
IAIN LEES-GALLOWAY (Labour—Palmerston North) 
: 
 I raise a point of order Mr Chairperson. This relates to an incident that occurred early in Mr Jones’ speech. I did not want to interrupt his speech so I ask you just to reflect on it. There are a number of Speakers’ rulings relating to interjections but I could not find one that actually relates to the matter of a member standing whilst another member has the call in order to interject in the way that Maggie Barry did during the previous member’s call. The nearest one I can get to is Speakers’ ruling 61/5 which says: “A member may not make interjections while standing or leaving the member’s seat.” although I assume that means getting up and walking around and making interjections. I just wonder whether we could get a ruling from you on the practice of standing in order to make an interjection on a member who has the call. 
The CHAIRPERSON (Eric Roy) 
: I shall reflect on the matter. I think that in general interjections are to be discouraged and anything that gives the interjector or interjectee—the person doing it—any kind of advantage is to be seriously discouraged. 
Dr PAUL HUTCHISON (National—Hunua) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 71 
New Zealand National 59; New Zealand First 8; Maori Party 2; ACT New Zealand 1; United Future 1. 
Noes 49 
New Zealand Labour 34; Green Party 14; Mana 1. 
Motion agreed to. 
Part 1 agreed to. 
Part 2 Excluding price increases from required CPI indexation of or related to social assistance 
IAIN LEES-GALLOWAY (Labour—Palmerston North) 
: 
 Part 2 of the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill relates to excluding price increases from required CPI indexation of or related to social assistance. I was not on the select committee that considered this bill being a member of the Health Committee not the Finance and Expenditure Committee and I have to say it is a pity that the chair of the Health Committee used his call to take a closure motion rather than to offer a substantive contribution to the debate on Part 1. Maybe he will offer more substance on Part 2. 
What I understand the point of Part 2 to be is to ensure that the excise tax increases result in a significant real-term increase in the cost of tobacco for the people who receive income in any of the ways captured by Part 2 of this bill. The income that we are talking about here concerns people who receive income that is related to the Children Young Persons and Their Families Act or to the Education Act 1989 with that being student allowances; people who receive money through Working for Families; people who receive money through New Zealand superannuation and retirement income; people who receive social security money; and people who receive money through the War Pensions Act. 
So what this aims to do is to ensure that the increase in the cost of tobacco is not factored into any increases in those benefits or allowances and thus will not offset the increase of the tobacco so that in real terms the price of tobacco goes up. That is a perfectly fine concept except for the fact as Treasury points out that one of the unfortunate aspects of a tobacco tax increase is that it is regressive. It affects the people on the lowest incomes the most and indeed it will certainly affect the people who receive their income through any of these measures. 
However it will also affect people who receive their income through wages but who are also on low income. However people who receive their income through wages will be able to argue that the increase in tobacco excise results in an increase in the Consumers Price Index and they will be able to bargain for a wage rise as a result. It will certainly be factored into wage bargaining around the country. So what you get in effect— 
Dr David Clark 
: Two tiers. 
IAIN LEES-GALLOWAY 
: —is a two-tiered system. Exactly—thank you Dr Clark; you knew what I was going to say. It is a two-tier system whereby people who receive an allowance or a benefit or a pension that is funded through taxes are going to have their ability to offset this increase in the cost of living reduced or in fact negated whereas those people who earn wages are not. 
I guess it is similar it is analogous in a way to the way the Government is behaving around other people who receive a benefit. So for instance the Government has said that women who receive a benefit will be able to get free contraception. In fact in an interesting act of eugenics their daughters will also be able to get free contraception. But it is not all women on a low income or indeed all women. It is singling out people who receive a benefit. Likewise parents who receive a benefit will now be required to send their children to early childhood education. It is not everybody. It is not making early childhood education compulsory for everybody but it is singling out for special treatment people who receive a benefit and this is another instance of the Government doing that. It is singling out people who receive a benefit stigmatising the fact that they receive a benefit by treating them differently from everybody else. It is unfortunate that this bill continues that theme that we have seen from this Government. 
One thing that I find particularly interesting is the fact that this bill will pick on our veterans who receive a pension by way of the War Pensions Act. Interestingly the Minister of Veterans’ Affairs is in the chair at the moment and he might have some thoughts on this. This amendment to the War Pensions Act precedes much more significant amendments to the War Pensions Act that veterans have been calling for for some years now. In fact the Government has had a report in its hands for more than 2 years indicating how it could carry out the amendments to the War Pensions Act that are required in order to make it more equitable and fair on those veterans who served before 1974 when ACC was introduced. Those are the types of amendments that veterans want to see made to the War Pensions Act not this amendment which will curtail any increase that they might get to their pension to offset the increase in tobacco taxation—the increase in cost for their cigarettes. 
I understand what this part is about what it is trying to achieve. It is trying to ensure that these tax increases result in a real price increase. I appreciate that but once again rather than ensuring that is the case for everybody this Government is ensuring that it particularly picks on the people who receive a benefit—not just the people who receive an unemployment benefit or a sickness benefit or an invalids benefit but even the people who receive New Zealand superannuation and even the veterans who have served our nation overseas put themselves in harm’s way and received injuries or illnesses as a result of serving our nation over many decades and in many conflicts around the world. This Government is going to pick on them by telling them it is going to make sure that their pension cannot be increased as a result of the Consumers Price Index indexing that would be linked to this bill. It comes as no surprise—no surprise—that once again this Government picks on anybody who receives their income in that way. It is stigmatising them and singling them out in the way that this Government knows how. 
Although we understand the point behind this part we have to point out the inadequacy of the way the Government has done it and the fact that once again people who receive a benefit or Government assistance are being singled out by this National-led Government. 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 I want to start by labelling this part of the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill as what it is: it is a cynical political move. It is a very very cynical political move. Part 2 of the bill is shameful. Government members should be embarrassed by this. We know they are embarrassed because they have not taken any calls. We have not heard a word out of the Minister in the chair all evening. We have not heard a word about this part of the bill. We saw no one attempt to get up to speak to it from the Government benches. They know that this is simply cynical politics and that it is difficult to defend. 
How do we know that it is cynical politics? Well we need look no further than the regulatory impact statement which was published in April 2012 in order for Ministers to consider this legislation. In April 2012 the advice was written and the policy that the Cabinet considered appears to have no mention—no mention at all as far as we can see—in the regulatory impact statement of this measure to target those who are dependent on welfare to feed their families and to go about their daily business. We know that this has been added on subsequently. It has been put in place to make sure that an extra kick is put in to distract from the wider impact of this bill. 
This is not atypical of the Government. We know that this is a pattern. We have seen it happening. We know that whenever bad news comes around there is more drug testing for beneficiaries there is compulsory early childhood education and there is a range of other measures which the Government has subsequently admitted it cannot actually put into place but it uses as a distraction. Here again we have a targeting measure for beneficiaries one that makes sure they will suffer the most. They will suffer the most. All of those who are smokers will suffer as a result of this legislation. All of them will face increased prices. But this Government is determined to make sure that those who are on hard times are kicked while they are down because it believes that that is what is necessary in order to change the world. 
Well we disagree. We on this side of the Chamber have a more optimistic view of human nature. We think people actually want jobs and if this Government had not lost so many jobs if it was not sending 50000 New Zealanders a year to Australia then actually people would have jobs and they would not be affected by this Draconian measure which will make it much harder for those on benefits than for anybody else to afford the substantial increases in tobacco prices that are proposed in this bill. 
Treasury in its regulatory impact statement recommends the revenue grab of $528 million which the Government conveniently wants to adopt because it is well aware that there is a hole in the books as a result of the worst economic record in 50 years which this Government has perpetrated. The regulatory impact statement says that “The Treasury favours a sequence of regular modest and well-signalled increases in tobacco excise. This is likely to contribute most to a long-term and sustainable strategy to reduce smoking rates.” There is a little bit of inconsistency with an earlier part of the advice but for the greater part this is good Treasury advice. The regulatory impact statement does say that “In taxing a group of consumers that are addicted and disproportionately drawn from Maori and lower-socio economic communities the Government should ensure that programmes to educate and support smokers to make successful quit attempts are adequately resourced well implemented and effectively designed and targeted to reach high-risk groups.” 
That is not what we see here in this bill. We do not see anything here going towards meeting the needs of those most affected. In this bill which is cynically targeted at those who are struggling the most we do not see any additional measures signalled—none whatsoever—to make sure that those groups that are targeted are given assistance to give up smoking which we all know and accept is so harmful. So that is why I say that this is a cynical political move. We have seen so much of it from this Government. It is very good at sideshows and distractions because it is very nervous. It is very nervous about what the polls are showing. The polls are showing that its poor economic record the scandals around the Dotcom affair the scandals in the ACC system the inability to tackle the big issues and the focus on tinkering are doing it no good—doing the Government no good whatsoever. That is why it is coming back to these cynical strategies which target and kick those who are down. 
The Treasury advice was to put additional measures to support those— 
KRIS FAAFOI (Labour—Mana) 
: 
 Malo ni Mr Chair. To use a word that David Clark used Part 2 is a cynical and poor attempt by the Government to make it look like it is trying to do something for the public good in this bill the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill to stop New Zealanders smoking. It is a poor and cynical attempt at trying to make the Government look like it is trying to do something to cut down smoking within New Zealand. 
It was an honour and a privilege to sit in the 49th Parliament on the Health Committee chaired by Dr Paul Hutchison—I look around me and I see Iain Lees-Galloway who was on that committee and Kevin Hague who was on that committee—and to take some real action against tobacco companies and actually remove tobacco displays from our shops. As you see if you go to a service station or a dairy today you will notice that there are no longer any displays for tobacco or for cigarettes. It was an absolute pleasure to be on that committee as we worked across this Parliament—apart from the exception of maybe a couple of ACT MPs who voted against that legislation—to take some real action to reduce the number of Kiwis starting to smoke and to make sure we get as many Kiwis quitting smoking as we possibly could. 
But this bill and especially Part 2 of it is not motivated by trying to reduce the number of smokers or to stop people starting smoking. As a number of my colleagues have said this is simply a cash grab. It was said that this Government is trying to get its mitts on $528 million over the next 4 years because of its failed economic policies and the fact that it could not and has not raised enough money to come through with its policies. So that is what this part Part 2 and what this bill is really about. Is it motivated by cash revenue by trying to raise revenue or is it motivated by trying to reduce the harm that smoking causes in our communities? 
I want to take a quick look at the Pacific smoking numbers. As Iain Lees-Galloway said in Part 1 of the debate just below one in five New Zealanders are smoking and unfortunately for the Pacific community it is over-represented in the smoking statistics because 27 percent of Pacific adults are smokers. Unfortunately for Pacific men that number is 34.5 percent so one-third of Pacific men smoke and one in five—just over 20 percent—of Pacific women smoke. In terms of the revenue that is going to be gathered from this bill it is surely the Pacific community by its over-representation in the numbers of smokers that is going to be over-represented in this. Every year 100 Pacific people die because of heart disease come about because of smoking in that community 30 die of lung cancer because of their smoking and 23 Pacific people die from strokes because of the fact that they have been smoking. So smoking does have a disproportionate effect on the Pacific community and that is why we want this bill to actually take some strong measures motivated by public good—public health good—to make sure it takes some swift action and decisive action to make sure at least from the Pacific perspective that those numbers could be reduced. 
We could actually use some of the $528 million that is going to come via this bill by increasing the excise tax by 10 percent in those 4 years and hypothecate it to make sure it is going into smoking cessation programmes and into preventing young Pacific Islanders taking up smoking. Those statistics that I pointed out before are just awful. Being a Tokelauan it is the worst of all Pacific nations in terms of smoking because 42 percent of the Tokelauan population are smokers. So as someone from that community I think we really need to make sure we are targeting our Pacific people—a large and growing population in New Zealand—to make sure we are doing as much as we can to use some of this money that we are raising to target them to say “Don’t start smoking.” or to take steps to reduce or stop smoking. I do not think that this bill is motivated by trying to decrease those numbers. 
Dr PAUL HUTCHISON (National—Hunua) 
: 
 It is a great pleasure to have a short call on this Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill. I would think that every perceptive member of Parliament would be celebrating the quick passage of this bill Parts 1 and 2 rather than being cynical about it. 
I want to talk just on Part 2 for a moment. If one looks at the general policy statement it says this: “Continuing these exclusions ensures that recipients of social assistance are not reimbursed for the increases in tobacco duties. Any reimbursement for those increases would contradict the reason for making them which is to discourage smoking.” And we all know that an excise tax is probably the most effective measure in diminishing smoking in this country. 
But I want to say a little bit more. This bill is just another step forward in many steps towards achieving a smoke-free New Zealand and under National there have been some very significant steps. Firstly there is the fact that we have made diminishing smoking one of the very successful health targets. This has had a huge impact over the last 2 to 3 years. Secondly we have put more money into Quitline funding and counselling. Thirdly as I speak tobacco displays are disappearing throughout the shops and supermarkets of New Zealand. And fourthly of course we have backed that up with 4 years—one year after another—of 10 percent increases in the excise tax which will be a hugely significant step towards diminishing smoking in this country. 
This bill is not to be viewed cynically; it is to be celebrated as a great public health measure. 
Hon MARYAN STREET (Labour) 
: 
 Part 2 of this Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill is what is currently under debate at the moment in this Chamber and I need to raise some questions about Part 2 because my colleagues have raised some significant points in previous contributions but I am not sure that everybody watching this debate understands what the significance of Part 2 is. 
Part 2 of this bill excludes the price increases on tobacco—these ones that happen the 10 percent increase on 1 January every year for the next 4 years. It excludes that price increase from the basket of goods that are considered when calculating the Consumers Price Index. When calculating how much the cost of everything has gone up this year and therefore what the Consumers Price Index should be in order to bring up people who are on benefits whose benefits are CPI indexed people go out and they work out what people spend their money on. What do people spend most of their money on? Well they might spend most of their money on food they might spend some money on petrol they might spend some money on childcare they might spend some money on clothing they might spend some money on alcohol and they might spend some money on tobacco. And so in this legislation the basket of goods whether it is fruit and vegetables chicken or meat or all those other things that are put together in order to calculate what the Consumers Price Index should be will leave out the expenditure on tobacco. And who for? For people who are receiving payments under the Children Young Persons and Their Families Act—payments to the people or organisations that are providing care for children—so that is the caregivers. It will take out anybody who is on a student allowance. It will take out anybody who is getting Working for Families entitlements. It will take out anybody getting New Zealand superannuation. It will take out anybody who is receiving any of the main social security benefits. It will take out anybody in long-term residential care and it will take out people whose income comes from veterans pensions. 
So the point of this if I understand it correctly—I am just looking in the direction of the officials for a moment—is that the CPI basket of goods that is assessed on what most people spend their money on and how much that has gone up compared with last year will exclude tobacco for people on benefits those benefits I have outlined and those other payments and entitlements I have just described. In other words if you spend a lot of money on tobacco or if people generally spend a proportion of their income on tobacco that will not be taken into account for the purposes of calculating the CPI and thereby raising people’s benefits. 
This is a device. It is something that could be excused that could even be justified but my question to the Government is where is the consistency? Where is the consistency? If tobacco is bad for people and this is a health measure then why not exclude it from the CPI indexation across everything not just the benefits that people are going to have to live on in order to survive? 
The CPI is important for wage negotiations. Unions go into wage negotiations on behalf of their members wanting to compensate for the Consumers Price Index and the increase in prices that have happened in the previous year because unions do not want their members’ incomes—wages and salary—to fall behind prices. Therefore the Consumers Price Index is important. It is important to wage and salary earners as well. So why is this tobacco provision being applied to beneficiaries only? I ask the Minister in the chair Anne Tolley if it is a good thing to do then is it not a good thing to do for everybody? If this is a health measure would it not benefit everybody’s health? 
I can understand the import of excluding it from the CPI calculation but what I cannot understand is simply targeting benefits in that respect. That to me does not make sense. If any member opposite says that I am wrong about this that I have got the wrong end of the stick would they please get up and take a call because it needs explaining. I ask whether the Minister who moved this bill Tariana Turia could get up and make some explanation as to why only beneficiaries are going to have this item excluded from the basket of things that go into a CPI calculation—in other words their benefit will go up by the CPI but not by as much as it would if it were taking tobacco into account. 
So I can see that the Government saves money in the process but why is this being applied only to beneficiaries? This is the kind of discrimination that I thought we were not tolerating in this country but now perhaps that the gap between the rich and the poor in New Zealand has become so pronounced and the people on benefits are so much at the bottom of the heap these days the Government has decided that it does not really matter how they are treated any longer. All we hear about is social obligation; all we hear is what people ought to be doing for themselves. When their lives hit some rough patches the Government’s expectation is that they will pull themselves up by their own bootstraps and correct their own circumstances which is not always possible. 
However the Government is blind to that kind of consideration and simply makes this exclusion of the price increases from the required CPI indexation related to social assistance. In fact those are the words on the page “related to social assistance”. If a member opposite can contradict that for me please get up and tell me I have got it wrong but that is what I read on the page. I see all the members opposite studiously looking down and busy doing work so that they do not have to look as if they are responding or listening. I would like somebody a Minister any Minister— 
Hon Judith Collins 
: Are you voting for or are you voting against it? 
Hon MARYAN STREET 
: —Mrs Collins—any Minister not just the Minister in the chair although I would welcome her participation but also the Minister interjecting I would welcome her clarification around this as well. It seems to me that it is discriminatory. It is not fair. It is bashing the people at the bottom of the heap again and somehow this Government is going to turn it into a health measure. When you are at the bottom of the heap and you are struggling to survive on care payments or benefits then quite frankly the health inequalities that descend upon you are insurmountable and they become almost the last thing you are able to contend with as you are busy trying to make ends meet. 
I would welcome the intervention of any National member here to correct me in this respect. If I am not wrong then this is discriminatory. This is not reasonable and it is simply another example of this bill being a tax grab and not a health measure. Thank you. 
Hon PAREKURA HOROMIA (Labour—Ikaroa-Rawhiti) 
: 
 I just want to follow on as I said in Part 1 from that great speech from Maryan Street by saying that this measure is more than cynical it is one of the most outrageous alignments of officials under Ministers’ directions in not recognising that. I want to go with what I read out in debate on Part 1 in relation to this: “The analysis has not included a range of other issues due to time and resource constraints. Key gaps in the information include—overall economic and fiscal impacts on smoking (eg: health …” and it goes down to “the fiscal costs of publicly funded health and disability services linked to smoking; or fiscal offsets such as reduced superannuation and aged-care expenditures due to the lower life expectancy of smokers)—impact on the economic welfare of smokers and their families;”. 
As Maryan Street says and suggested this is an incredible situation where beneficiaries are being more than bullied they are being separated out. Why do we not do the same thing to the lawyers and accountants in this country? They all have lips and lungs that suck in the smoke. Why is it so different that it should be left to beneficiaries? In the sense of the redistribution if you are going to hold $528 million and the $170 million that the Minister in the chair Anne Tolley said in a speech today that she saved from building the big prison where the hang are we going? That is nearly $700 million. Where is that going to? Is it going to fill up the potholes on the way to the golden mile above Auckland? Is it going to do other things? I join with Maryan Street and say that this is callous— 
Todd McClay 
: That’s not a picture I would like to see Pare. 
Hon PAREKURA HOROMIA 
: No no there are people in Rotorua who smoke and people down in Clendon who smoke. There are a lot of people there who are beneficiaries and you have not done too well as— 
The CHAIRPERSON (H V Ross Robertson) 
: Order! 
Hon PAREKURA HOROMIA 
: Those people there have not done very well. When you are running at an unemployment rate of 15 percent for Maori and Pasifika people and 74 percent of them are smokers where do you get the relief or the recognition in relation to ensuring that the tax grab is at least redistributed amongst some of those people? 
Hon Judith Collins 
: Are you for it or against it? Which one? I’m just checking. 
Hon PAREKURA HOROMIA 
: That member over there can chortle and laugh and chatter and clatter but at the end of the day this is outrageous. This is terrible. 
I want just one of them including the Minister to take a call and tell me why—as Dr Hutchison will always suggest—beneficiaries and superannuitants are sorted out in isolation. Why not the other people? Why not the lawyers and accountants in Parnell? Why not the ones who live around Massey University all those academics? Why not them? Why just the beneficiaries? Their life is so tortured anyway that they jump on the plane and they go to Australia. You just slip this through. 
 I want to mihi to the officials. They are hard-working people but they are clearly under the Minister’s directions because that is the same Minister who said that he did not support this—“Wiremu Pakeha”. That is what he said. He did not support the smoking issue when we were trying to put it through. I want to thank the past Labour Government for ensuring that all those people who puffed smoke around you in restaurants and bars had to comply and we were bold and game enough to do it to everybody not just the beneficiaries. We made sure that everybody who went in there had to comply and it was recognised that this was everybody—as the great preacher says all the sinners. So let us not deny it and say that some are and some are not. That is what is happening in this Part 2. 
It is outrageous. Poor old beneficiaries poor old solo mums and poor old superannuitants. And then there is this callous statement that there could be some fiscal adjustments because of lower life expectancy. What the hang do you think if you let people carry on smoking? You cannot have Quitline when you run around the country saying: “Yeah we’ve got broadband in.” but it cannot even pay for its phone bill. That is the free 0800 number that these people have. So I think Part 2 of this bill is one of the most— 
Todd McClay 
: Dastardly. 
Hon PAREKURA HOROMIA 
: —interesting parts—advance your vocabulary “Mr Dastardly”—in relation to setting to on those who have— 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 Kia ora Mr Chairperson. Ka pai. It is an honour again to follow the Hon Parekura Horomia. I have certainly drawn the long straw tonight in getting to follow his fabulous speeches which get to the nub of the matter and the discrimination that is being put forward in this particular part of the bill the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill. Of course we should not lose sight of the fact that this is actually a step in the right direction in terms of the overall bill. But this part for those who are listening at home is a part of the bill that is aimed at targeting beneficiaries and making sure that life is tougher for them than for anybody else. 
The overall bill of course attempts to make sure that the increases in tobacco pricing reduce the incidence of tobacco-related harm and that is the good part of the bill. We know that National opposed such measures when it was in Opposition so we are a little bit suspicious of course of the timing now that it has a great big fat revenue hole that it is trying to fill. We have heard no word at all from the Minister in the chair through the whole debate and we are beginning to wonder whether there is no response to the accusation that this is a revenue grab. It seems to be pretty jolly clear that it is and I guess the Government is too embarrassed to even try to argue otherwise and that is consistent with what this Government is doing. 
We have heard about the tax on paper boys the tax on cleaners in schools and so on which are the moves the Government has taken in order to make sure that it is grabbing taxes wherever it can because it does not have a plan for the economy. The Government does not have pro-growth tax policy proposals. It is not proposing to put taxes in place that would support manufacturing industries and would support our exporters. Instead the Government is determined to get tax where it can off the vulnerable and to run down our public services through a reduced tax take and ever-reducing budgets. We know that the Government has the worst economic record in 50 years and so it is no surprise in some ways that this tinkering bill is a little bit cynical and nasty at points. 
We know also and this is in some advice that we received in the Finance and Expenditure Committee that the tobacco industry of course will find ways to mitigate the impact of tobacco tax increases. It will smooth the transition to higher prices introduce lower price brands and so on. It is documented behaviour that the researchers put in front of us in the select committee hearings. Unfortunately those on the very lowest incomes those who are beneficiaries whom this part of the bill targets will not have the luxury of riding out price increases in the same way. We know it is likely that some families will suffer. When we live in a situation where a large portion—25 percent—of the children in this country are living in poverty it is disastrous that no commensurate measures are put in place to address this issue in the beneficiary population. The fact is that the budget will be tighter again for them but no additional measures are put in place to ensure that they have the tools and support necessary to kick this damaging habit. 
I want to put on record again that the Labour Party does support this bill overall because it is important that we reduce tobacco-related harm. We are glad that the scales have fallen from the Government’s eyes. It is a shame that it took a great big revenue hole to make that happen but the scales fell from its eyes in order to see the need to increase the excise on tobacco thereby reducing over time as the research tells us the incidence of tobacco-related harm. We know that where there are support measures in place the public and those affected by this kind of legislation will support it. We know that the Government is choosing in Part 2 to put an additional burden on those who are struggling the most but choosing not at the same time to put additional support measures in place. That is why this part of the bill is an embarrassment. We know it was a late political fix a late political addition because it is not spoken about in the regulatory impact statement that was considered by Cabinet. It is not considered in there. It is a cynical move to target the most vulnerable. 
I would really like to hear some attempt at justification from the Minister in the chair. We have heard nothing all evening from the Minister in the chair about this measure. We have heard very little from the Minister in the chair indeed— 
TODD McCLAY (National—Rotorua) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 63 
New Zealand National 59; Maori Party 2; ACT New Zealand 1; United Future 1. 
Noes 57 
New Zealand Labour 34; Green Party 14; New Zealand First 8; Mana 1. 
Motion agreed to. 
Part 2 agreed to. 
Clauses 1 to 3 
IAIN LEES-GALLOWAY (Labour—Palmerston North) 
: 
 The title of this bill is the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill. Actually often what the Opposition does in these debates is we offer alternative titles to the bill—what it might more appropriately be named. But in this case I think this is an appropriate title. In fact the title reveals what the actual intentions of the Government are in this bill because specifically it is about excise tobacco products and Budget measures. It is a Budget measure. The Budget measure of course that this bill relates to is trying to find ways to fill the hole left in the Government’s revenue sources both through its inadequate work on the economy and through its unaffordable income tax cuts that it made which it told the nation were going to be fiscally neutral but have actually left a huge hole in the Government’s revenue. As the debate has gone on tonight we have come to understand the real significance of this legislation because it does two things—in Part 1 and Part 2. 
 The first part is a massive increase in revenue for the Government to make up for some of that lost revenue with no hypothecation into any smoking cessation measures or any treatment of diseases that are related to smoking. Part 2 of course limits the Government’s liability for paying out benefits not just the sickness benefit and invalids benefit but also pensions also payments to people who are caregivers and also to people who receive a veterans pension. So actually as much as we on this side of the House are really pleased to see the Government doing something—we know one of the results of this bill will be to have an impact on the number of people who are smoking and the amount that they smoke—the more and more that we analyse this piece of legislation the more it is revealed that this has got more to do with trying to increase revenue for the Government and limit its costs than it has with anything to do with health. 
Let us look at the facts. It was not introduced by the Minister of Health. It did not go to the Health Committee. In fact if it had gone to the Health Committee perhaps some more of the changes that would be useful in this bill would have been recommended because it would have been viewed through the lens of a health initiative rather than a financial initiative and rather than a tax bill which is simply about increasing revenue and limiting liabilities and costs for the Government. So indeed the title of this bill and in fact the purpose of this bill as well are absolutely accurate—they are absolutely accurate—because the bill makes no mention of health measures it makes no mention of trying to reduce the incidence of smoking it makes no mention of trying to ensure that fewer people die of tobacco-related diseases every year it makes no mention of improved funding for tobacco health initiatives—it makes no mention of any of that. All this bill does is increase revenue and reduce costs. 
Also if this was a health initiative and the Government was focused on ensuring that everybody every smoker was going to be properly impacted on by this legislation then we would not see the deliberate targeting of people who receive a benefit in the way that we see in Part 2 of this legislation. The Government had an option. It had the option to remove the tobacco excise increase from the CPI calculation for everybody but it did not do that. It could have but it did not. It chose instead to deliberately pick on people who get some form of Government assistance whether it be through Working for Families whether it be through a veterans pension whether it be through superannuation or whether it be because that person is a caregiver. For a whole host of reasons if that money came from the Government then that is the person that the Government has chosen to pick on. It did not need to do that—it did not need to do that—and that is what this bill is all about. 
The CHAIRPERSON (H V Ross Robertson) 
: I call the honourable member Dr David Parker. 
Dr David Clark 
: David Parker? That’s new to me. 
The CHAIRPERSON (H V Ross Robertson) 
: David Clark. 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 Mr Chair I hope you will excuse me. I am working under a pseudonym. I rise to speak to the—perhaps appropriately addressed—title debate. I want to go a step further than my colleague Iain Lees-Galloway although I support the sentiment entirely in his address on this topic. He suggests that the bill the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill is perfectly named because it does not mention the health benefits. It is a tax bill so therefore we might well view it as an appropriately labelled bill. 
I think I would want to go one step further to make a little more explicit what the purpose of this bill is. I would like to see it renamed. I guess we will ask the Government to consider this suggestion and you know present its argument as to whether it is a useful one or not. My suggestion is that we rename it the “Fill the Revenue Hole but Decrease Smoking as an Unintended Consequence Bill’ because I believe that that is what the bill actually does—that is what the bill actually achieves. 
The reason why the bill is an unintended consequence is that the facts line up and say that increases in revenue actually do discourage smoking and we know that smoking remains the single biggest cause of preventable morbidity and mortality in New Zealand. There is good reason to address this problem especially when half of all long-term smokers die as a result of smoking-related illness. That is about 5000 deaths each year that are attributable to smoking either directly or through an indirect route like second-hand smoke. But unlike National when it was in Opposition Labour has supported Government moves to reduce smoking in New Zealand. Labour has been consistent in supporting moves to reduce smoking in New Zealand and that is why we see if we look back that this title highlights I guess the irony in the National Government moving this bill. It says that the decreasing of smoking is an unintended consequence and that it really is about the revenue-grabbing. 
How do we know that? We know that because when in Opposition Bill English who is now obviously concerned about the revenue hole that this Government is facing said that it was a tax increase when Labour moved measures. When Labour moved extraordinary urgency to increase the excise on tobacco in the early 2000s Bill English said “It is a tax on the poorest people in New Zealand. It is an increase that is far too large.” So he labelled it a tax increase. That is what he thought it was nothing more nothing less—nothing more nothing less. So that is why we know that it is an unintended consequence that it is actually addressing smoking and why the title “Fill the Revenue Hole but Decrease Smoking as an Unintended Consequence Bill” is a far more fitting title than the one that the Government has proposed. 
So I move that we consider that title. I do not formally move it. I move it in the sense of having a debate about it and inviting the Government to consider that as a more fitting title a more honest title and as a title that would reflect the content of the bill which is presumably what a title is designed to achieve so that we could have a bill that reflects the Government’s real intention which is about filling this revenue hole which it has no other plans or means to do so. 
ANDREW WILLIAMS (NZ First) 
: 
 I will take a call on behalf of New Zealand First in relation to Part 2 of this bill the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill. This does come as— 
The CHAIRPERSON (H V Ross Robertson) 
: Sorry the member cannot refer to Part 2. That debate has gone. We are now debating clauses 1 2 and 3. 
ANDREW WILLIAMS 
: Yeah. OK Mr Chairman. OK. Sorry Mr Chairman. 
The CHAIRPERSON (H V Ross Robertson) 
: It is wide-ranging—title and commencement clauses. 
ANDREW WILLIAMS 
: It does concern us what has been dropped on us here in terms of this bill in relation to beneficiaries superannuitants and those in the country. This is a pretty miserable late-minute thing that the Government is doing here in terms of just sliding something through that is again an attack on beneficiaries and those who are in need of support from the State. 
The reason I was a bit slow getting to my feet was that I was just doing some calculations on this in terms of the CPI and was looking at the effects of the CPI on superannuitants and on beneficiaries. When you are looking at a single-income beneficiary on about $400 a week or a couple on a bit over $600 a week and if you are looking at the difference in the CPI effect because of taking tobacco out of the CPI or keeping it in it is such a small amount of money from the point of view of the Government’s revenue but it can actually have an impact on the beneficiaries. Although to us it might not appear a lot of money every few dollars every week adds up. I think it is really very much a situation of penny-pinching again on the part of the Government that a few dollars out of every beneficiary’s pockets could be affected through the adjustment in the CPI by not including tobacco in the CPI. 
 It really is back to the “Fagin Budget” that I have mentioned in Parliament on a few previous occasions. The Government has already taken money off the paper boys and the paper girls—taken $14 million off them. Having taken $14 million off the children of this country now it is going to adjust the CPI so that the CPI also reflects that tobacco is not included in the CPI. It is really getting down to real miserable penny-pinching - type budgetary constraints. In that regard it is creating a situation in New Zealand where you have a CPI for some and you have a CPI for others and where the CPI applies to those with money on a higher level of CPI and those who are on welfare support have a different CPI adjustment. 
In particular in regard to the senior citizens in this country and those on superannuation—many of whom are not smokers; many of whom have not smoked—why should they be penalised and have some sort of alteration to the CPI adjustment and an increase simply because this Government wants to be miserable and claw back some money because of the 10 percent annual increase each year for the next 4 years on cigarettes? You know it really is starting to bite close to the bone in terms of our senior citizens in particular and those with disabilities and those on welfare who through no fault of their own and in times of difficulty due to ill health or disability or because they are aged are requiring support from the State. 
New Zealand First will not be supporting this part of the bill. We do support the overall thrust of the bill in terms of the health aspects and reducing cigarette smoking and tobacco consumption but when it gets down to starting to penny-pinch to attack those who are the most vulnerable in New Zealand society— 
Denis O’Rourke 
: And the elderly. 
ANDREW WILLIAMS 
: —and in particular the elderly who would be affected by a reduced adjustment on their superannuation increases from the CPI being cut back in terms of beneficiaries—then I am sorry but this is another case of the Tory Government being very miserable to people who deserve better. So New Zealand First will not be supporting this part of the bill. 
Clause 1 agreed to. 
A party vote was called for on the question  
That clause 2 be agreed to. 
Ayes 112 
New Zealand National 59; New Zealand Labour 34; Green Party 14; Maori Party 2; ACT New Zealand 1; Mana 1; United Future 1. 
Noes 8 
New Zealand First 8. 
Clause 2 agreed to. 
Clause 3 agreed to. 
Hon ANNE TOLLEY (Deputy Leader of the House) 
on behalf of the Associate Minister of Health: I move  
That the Committee divide the bill into the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill the Children Young Persons and Their Families (Indexation—Budget Measures) Amendment Bill the Education (Student Allowances Indexation—Budget Measures) Amendment Bill the Income Tax (Working for Families Indexation—Budget Measures) Amendment Bill the New Zealand Superannuation and Retirement Income (Indexation—Budget Measures) Amendment Bill the Social Security (Indexation—Budget Measures) Amendment Bill and the War Pensions (Indexation—Budget Measures) Amendment Bill pursuant 
 to Supplementary Order Paper 129. 
IAIN LEES-GALLOWAY (Labour—Palmerston North) 
: 
 It is a pleasure to speak to Supplementary Order Paper 129 moved on behalf of the Hon Tariana Turia. What this Supplementary Order Paper does is that it divides the Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill into a number of bills. This will separate out all those separate pieces of legislation that need to be amended in order to discriminate against different people who receive income from the Government. 
The Labour Party will be voting in favour of this Supplementary Order Paper to separate the legislation but I would like to indicate at this point that it will be our intention when it comes time to vote on those separate pieces of legislation to vote against the individual bills that will relate to that specific measure that the Government is taking. We will vote in favour of the new Customs and Excise (Tobacco Products—Budget Measures) Amendment Bill but we will vote against the Children Young Persons and Their Families (Indexation—Budget Measures) Amendment Bill the Education (Student Allowances Indexation—Budget Measures) Amendment Bill the Income Tax (Working for Families Indexation—Budget Measures) Amendment Bill the New Zealand Superannuation and Retirement Income (Indexation—Budget Measures) Amendment Bill the Social Security (Indexation—Budget Measures) Amendment Bill and the War Pensions (Indexation—Budget Measures) Amendment Bill because we believe that the Government has taken completely the wrong approach in discriminating against a certain set of New Zealanders who will not have the ability to be reimbursed I suppose for this increase whilst allowing others to be able to do so. 
We understand what the Government is trying to achieve in increasing the cost of tobacco in real terms and ensuring that there are fewer opportunities to offset that. However if the Government’s true intention was for that impact to be spread fairly across all smokers then it would have taken an approach whereby the CPI calculation for all smokers would not include the tobacco tax increase. Rather it has taken the approach that only those who receive some form of income from the Government will be affected. That is why the Labour Party is certainly happy to see the separation of these bills because we want to be able to vote for the parts of this bill that we think make sense. 
We agree that increasing tobacco taxation is one way of reducing the harm caused by tobacco. We suspect that the Government’s real motivation behind doing that is to make up for its lost revenue but we do appreciate the perhaps unintended consequence for the Government of doing so—that it will reduce tobacco-related harm. So we want to be able to vote for that aspect of the bill but we actually appreciate that this amendment will allow us to vote against those measures that we think are rather insidious and create just one more division between people who receive income from the Government and other New Zealanders. That is certainly what this Government’s approach has been over the last few weeks: to drive that wedge between some New Zealanders and others as hard as it can. It wants to see people fighting amongst themselves. It wants to see people pointing the finger of blame at the victims of poverty rather than trying to do something about it. This bill in its own small way has been found out tonight as being part of that Government programme to continue to discriminate against anybody—anybody. It is a broad brush in this bill; even the poor veterans are getting hit with this bill. So we certainly support— 
Denis O’Rourke 
: Superannuitants. 
IAIN LEES-GALLOWAY 
: And the superannuitants—you are absolutely right. The superannuitants the families who receive Working for Families—a whole range of people are going to be unnecessarily discriminated against with this legislation. So it is good that this bill will be separated out into its component parts by this Supplementary Order Paper in the name of the Hon Tariana Turia. That will give the right-minded parties in this Chamber the opportunity to vote for those aspects of the legislation that will do good and against those aspects of the legislation that will do harm. 
It is a noble idea to ensure that the excise tax increase results in an increase in real terms in the cost of tobacco but it is not noble at all—it is as far from noble as is humanly possible to be—to determine that one group of New Zealanders will be hit by that methodology and others will escape from it. 
The Labour Opposition is very happy to support this Supplementary Order Paper in the name of the Hon Tariana Turia. We think it will be useful—it will be quite useful—because it actually will allow Parliament to reveal what some of these measures really are what their true intended purpose is and will give Opposition parties the opportunity to cast their votes accordingly. As I have said I want to signal that tomorrow during the third reading debate on these bills as they will be by then the Labour Opposition will certainly be voting against those measures that discriminate against people who receive a benefit or an allowance from the Government. 
Motion agreed to. 
Bill to be reported without amendment presently.