Norman Russel: Third Readings — 
Text is incorporated into the Bound Volume 
Norman Russel: Third Readings — 
[Sitting date: 20 May 2010. Volume:663;Page:11184. Text is incorporated into the Bound Volume.] 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I stand to speak on the third reading of the Government’s tax legislation. This is a rather sad day for our country. The reason it is a sad day is that there is in our country a dream of equality. There is a dream of egalitarianism which runs as a thick current right through our history. It goes back to our most famous and our best Prime Minister Michael Joseph Savage who was a champion of egalitarianism. He dedicated his Government to making New Zealand a better place for everyone. The idea at the centre of egalitarianism is that people are judged on their moral character rather than on how much is in their wallet or on how much was in their father’s wallet. The tragedy of this Budget is that it turns us back to the day when people were judged on how much money was in their wallets rather than on the nature of their characters. 
One of the revealing facts that came out very clearly during this debate was the Prime Minister’s comments about envy. The Prime Minister said he did not think that ordinary middle-income earners should envy those at the top. What this reveals about the Prime Minister’s character and the Prime Minister’s view of the world is that he thinks we should judge people on how much money they have. What it reveals about the Prime Minister’s and the National Government’s view of the world is that people should be judged on how much money they have. 
In this Budget the Government is turning its back on decades and decades of egalitarian tradition in our country. For many years along with the trade union movement and the Labour Party in earlier days—except for a rather unpleasant middle period during the Roger Douglas period—we have had a tradition of fighting for egalitarianism and making our country more egalitarian. Yet this Budget turns its back on that tradition. For me it is a sad day in our country when we turn our back on one of the central traditions that is part of our identity which is a commitment to egalitarianism: the commitment to the idea that people should not be judged on the size of their wallets but on their moral character—on the nature of their character. People should not be judged on which private school they attended but on the kind of person that they are. That is one of the central themes in our history and in our identity but with this Budget we are turning our backs on that tradition. 
By making our tax system far more regressive than it currently is by flattening the income tax rate and by adding to GST which is by its nature a regressive tax we are sending our country down a path that is different from the one we were travelling on before. We are sending our country down a path on which there will be more haves because there will be some people who get richer. But there will be an awful lot more have-nots because the impact of the tax system will be to increase inequality in our country. It is also important I think to remember the history of inequality in our country. Up until the fourth Labour Government we had a relatively egalitarian structure but during the period of the fourth Labour Government and in the Bolger years inequality in our country increased dramatically. Moves to address inequality flat-lined relatively speaking during the last Labour Government; the only significant difference was made by Working for Families where there was some reduction in inequality. But we have still ended up in the situation of having a dramatically unequal society and this Budget will make it only worse. 
The other aspect of this Budget that is perhaps surprising coming from a National Government that prides itself on its fiscal probity is that it borrows for tax cuts. There is an extra $660 million in borrowing this coming financial year in order to pay for tax cuts. That means we will have to borrow an extra $660 million—about a billion dollars over 4 years—in order to pay for these tax cuts in order to pay for motorways that make us more dependent on oil and in order to pay for climate pollution subsidies. It seems to me absolutely irresponsible that a Government that is already borrowing heavily should borrow further for tax cuts that mostly go to the wealthy to motorways that increase our dependence on oil and to climate change subsidies. 
Two parts of the triple deficit of this Budget are the fiscal deficit and the social deficit and the third deficit is the environmental deficit. Part of that deficit of course is the subsidies to greenhouse gases and part of it is the increased subsidy to irrigation schemes. We live in a country now where some of our groundwater is so polluted that it is dangerous for babies to drink because it causes blue babies down in Canterbury but that subsidy is a subsidy to allow further destruction of biodiversity. New Zealand is in the middle of a biodiversity crisis. We are losing native vegetation at present at the fastest rate since European colonisation but this Budget has more subsidies for irrigation schemes which will drive that loss further. The Budget also lacks a capital gains tax which could have put some downward pressure on the escalation in rural land prices that is driving a lot of the biodiversity loss. So the Budget has a triple deficit at its heart: a fiscal social and environmental deficit. 
Another aspect of this Budget that I think is quite worrying concerns the fact that we know that the National Government has said very clearly that in this term it will not privatise. In that regard accident compensation might be a debate but within limits National has kept to that promise to some degree. However it is clear that in the Government’s next term in office it wants to privatise; that is in its genes so to speak. It is also clear that the Government will use public debt as the rationale for more privatisation. So by adding to public debt by driving out public debt further than it would have been driven as a result of paying for these tax cuts the Government is creating the justification that it will use at the next election campaign for the privatisation debate. There will be a privatisation debate at the next election campaign because National has made it clear that it plans to put privatisation on the agenda at the next election. It will use public debt as the justification for privatisation—mark my words. 
The rationale for tax cuts in the legislation before us needs to be challenged. It has been given on the basis that it will reduce tax avoidance. Of course the other way to reduce tax avoidance is to close the loopholes. But this Budget rewards tax avoidance so that argument is a specious one. The Government also argued that we had to have tax cuts for migration reasons—that is to reduce outward migration. We know that that is false from previous times such as in 1986 when we had big tax cuts and there was a large outward migration from New Zealand. When taxes increased in 2000 after that period a lot of people came into our country so the migration argument does not hold. 
In terms of GDP growth the argument does not hold either. There is an awful lot of evidence just from the New Zealand experience that there is not much of a close relationship between the top rate of income tax and GDP growth. So that argument does not really hold either. 
One of the things that was interesting and was a surprise of course was the company tax rate cut. I think two things are worth talking about in terms of the company tax rate cut. The first is that when the whole new-right embrace of globalisation was adopted by Labour and National the Green Party amongst others said the problem was that it would create a race to the bottom. It would create a race to the bottom in terms of standards and taxes. The arguments about cutting the company tax rate have proved how right the Green Party was about the race to the bottom. We are now in a race to the bottom on tax rates and company tax is part of that. The other part of dropping the company tax rate is that we have now opened a 5 percent gap between the company rate and the top personal rate. I ask members to remember that part of the rationale for why we had to cut the top personal rate from 38 percent to 33 percent was the 5 percent gap between the top personal rate and the trustee rate. Companies were also being used to minimise tax. We have now opened a 5 percent gap between the top personal income tax rate and the company tax rate. There will be people—tax advisers—out there right now sitting down and figuring out how they can arrange their affairs in order to take advantage of the 5 percent gap that this bill opens up. So on the one hand the Government says it wants to reduce tax avoidance but on the other hand it has opened up a new loophole. 
Finally I come back to climate change. It is hard to believe that we are sitting in this Parliament debating this tax legislation but not putting climate change at the centre of it. Climate change is the central greatest challenge facing our planet right now; it is the central greatest challenge facing our country right now. I had the privilege of going to a talk by Dr Robert Bindschadler who is the former Chief Scientist of the National Aeronautics and Space Administration’s Hydrospheric and Biospheric Sciences Laboratory earlier this week. We are facing at least 1 metre of sea level rise this century. There is little doubt that we will have at least 1 metre of sea level rise this century and that will require the displacement of 145 million people globally. It will have a dramatic effect on our country and on the rest of the world. Yet this Budget provides subsidies to greenhouse polluters. It does not make any sense. What kind of Budget is it that does not put climate change at its centre? Instead it provides subsidies for greenhouse polluters. Climate change should be at the centre of this Budget.