Brash Don: Budget Debate 
Brash Don: Budget Debate 
[Volume:617;Page:13398] 
Dr DON BRASH (Leader of the Opposition) 
: 
 I move  
That all the words after “That” be omitted and the following inserted: “this House has no confidence in the Labour-led Government because it has squandered New Zealand’s greatest ever opportunity to invest in policies which would restore this country to the levels of prosperity enjoyed by Australians; because it has chosen for New Zealanders policies which promote dependence rather than independence; and because after five years of over-taxing hard-working New Zealanders it has embarked on a programme of cynically-timed election year giveaways to many of those same New Zealanders funded by their own taxes.” 
Perhaps unusually for a Leader of the Opposition I want to begin my speech by saying there are some things in this Budget with which the National Party agrees. For months we have called for relief for low and middle income New Zealanders. For months we have called for the encouraging of people off benefits into employment. For months we have recognised that providing more support for childcare and early childhood education would be highly desirable. For months it has been clear that we need more vigorous steps to reduce waiting lists for elective surgery. To the extent that those priorities have been addressed by this Budget we agree with the objective if not always with the method of delivery. 
But beyond that we can see little of merit. This Budget is at its core a belated series of bribes cynically timed for maximum political effect which fails totally to lift New Zealand’s living standards towards those in Australia. To begin with it is worth noting that the relief for low and middle income families has come in the second Budget of this Government’s second term—in Dr Cullen’s fifth Budget. All through that period New Zealanders have been over-taxed so that Dr Cullen could boast of ever-larger surpluses. Those surpluses represent the extent to which New Zealanders have been over-taxed. Not until this fifth Budget has he seen any merit in providing some relief from that over-taxation. 
Why the long delay? It was because until a few months ago the Government was confident that it could win another term without providing help to the families that need it. Suddenly the Government is contemplating the possibility that it might lose the next election and it thinks that dishing out the dosh is the best way of trying to shore up its diminishing electoral support. But it is even more cynical because much of the dosh will not be delivered until shortly after the election. So the Government is trying to imply that people who want to have that extra help will need to vote Labour in case a National Government comes to power and blocks that extra help. This is a vote-buying exercise of the same character as the policy U-turns that have been typical of this Government in the last few months with school closures the Resource Management Act treaty issues the seabed and foreshore and the age of consent. 
Secondly it is important to remember that the Government itself has no resources to assist anybody. Any assistance it provides to some New Zealanders first has to be taken away from other New Zealanders. Of course for the last 5 years the Government has been taking it away from most of us. Over that period the Government has increased the top tax rate and has increased taxes on cigarettes alcohol and petrol. These and other tax increases now raise more than $1 billion a year and as a result the average household has paid an extra $2600 in tax since this Government came to power late in 1999. In addition the gradual inflation of money incomes into higher tax brackets has added a further half a billion dollars a year to the Government’s coffers. 
For the 1999 election the Labour Party promised that only 5 percent of taxpayers would be adversely affected by its proposal to raise the top tax rate from 33 to 39 percent. Today some 12 percent of all taxpayers are paying tax at the rate of 39 percent including almost 20 percent of full-time taxpayers. One-third of all taxpayers are already into at least the 33 percent tax bracket and more than half of all full-time taxpayers are in that situation. 
 When GST is taken into account more than half of all full-time taxpayers face tax of over 40 percent on additional income. At last low and middle income families with children have some prospect of relief—300000 families in all—but only by 2007. What about all the other hard-working New Zealanders? What about the young couples who are working hard saving hard towards their first home and deferring having children so that they can get the mortgage down—doing the responsible thing? There is nothing for them. 
What about the middle-aged couples who having raised and educated their children are trying to put something aside for their retirement? There is nothing for them. What about the single person who is trying to get a small business off the ground who employs three people and would like to employ one more? There is nothing for him or her. 
There are 1.5 million households in New Zealand. The Budget tries to buy the support of just 300000 of them—one household in five. The other 1.2 million households keep on paying tax and are not even asked to be patient. There is no suggestion at all that this Government has the slightest intention of reducing personal tax rates or the company tax rate at any stage at all. The Government just intends to keep on raking it in and dishing it out to those who it hopes will vote it back into office. In the fundamental sense this is a Budget that punishes the most hard-working the most responsible and precisely those citizens who are determined to ensure that they stand on their own two feet. 
It is perhaps most worrying of all that there is no indication that the Government expects any increase in New Zealand’s trend growth rate. Dr Cullen is fiddling while growth slows. When the Government was first elected it talked about getting New Zealand’s per capita income back into the top half of the OECD within 10 years. In the Speech from the Throne in August 2002 the Government again indicated that it saw “its most important task as building the conditions for increasing New Zealand’s long term sustainable rate of economic growth.” The Government no longer talks of getting to the top half of the OECD within 10 years. It suggests it will do it “over time”. The reality is that it has abandoned the objective as too hard but has not had the intestinal fortitude to tell New Zealanders. 
The Budget documents project that growth will be markedly slower on average over the next 10 years than it was over the last 10 years. This has to be the great tragedy of the fifth Labour Government. It has squandered a unique opportunity to lift our relative living standards to close the gap with Australia and to create a place that our most able innovative and enterprising people want to return to. When the history of this Government is told this will surely be its epitaph: “They dropped the ball.” 
This Government has been the beneficiary of some of the best growth in the last 40 years. That good growth has nothing whatsoever to do with anything the Government itself has done. In part the good growth has been the result of the economic reforms of previous Governments—the policies that this Government has tried desperately to brand as failed. When talking to overseas fund managers Dr Cullen usually admits this himself. In addition the Government came to office at the end of 1999 at a time when the economy was already growing at almost 5 percent per annum. The exchange rate which had started falling in 1997 was falling towards its lowest level in history in late 2000 providing a huge boost to provincial New Zealand and indeed to all export industries. 
Then just as the exchange rate was stabilising and beginning to appreciate the world witnessed the tragic events of September 11 2001. What had been a net outflow of long-term migrants from the country of some 10000 people a year in the 2 years to June 2001 turned into a huge net inflow in the next 2 years. So a domestic building boom followed the strong growth in export industries. On top of this central banks around the world dropped interest rates to levels never seen before sparking a worldwide boom in property prices with New Zealand included. So none of the reasons for recent strong growth had anything to do with policies adopted by this Government. It just reaped the benefits in the form of unprecedented Budget surpluses and strong employment. 
So what does the Government do? It sprays money around to a small minority of households that it hopes will vote for it in the next election. By doing so it converts families that earn as much as $70000 into beneficiaries dependent for part of their income on the grace and favour of the Government thereby further entrenching a debilitating culture of dependency. 
The Government has promised to spend more on health while providing no assurance that further spending on health will actually deliver the shorter waiting lists improved medical services or the improved medicines that all New Zealanders deserve. We know that in the 3 years to 2002-03 Government spending on health rose by 22 percent. 
 Over the same period the number of elective operations and the number of total operations actually fell by 3 to 4 percent. Between December 1999 and April this year the number of people drawing the sickness benefit and invalids benefit has gone from 86000 to 113000—an increase of 31 percent. Simply adding more money to a centrally directed bureaucratic and top-heavy health sector will not deliver the outcomes that all of us want to see. The Government proposes to spend money on a whole raft of programmes designed it says to help business and exporters and to help grow the economy. But in every survey of business opinion the business community gives the Government the same message: it should get rid of the obstacles to growth reduce compliance costs fix the Resource Management Act stop pushing up the costs of operating a business through passing legislation like the Holidays Act and the Employment Relations Law Reform Bill and cut the company tax rate so that all businesses—and not just those favoured by Mr Anderton—can grow and prosper. 
The business community can see that in the last 5 years 21 of the 30 OECD countries have reduced their company tax rate—but not this Government. Back in April 2000—more than 4 years ago—Dr Cullen said that his Government would like to reduce the company tax rate “as fiscal conditions permit”. Perhaps he thought he had to say that to his audience which was in Hong Kong and for whom a 33 percent tax rate seemed inordinately high. Perhaps he thought he could say that in Hong Kong without anybody reporting it back in New Zealand. 
The Government’s Budget seems likely to do nothing to curb the culture of extravagance and waste that has grown up in the last few years: the hip hop tours the gross abuses of the tertiary education funding system that my colleague Bill English has highlighted in recent days and all the rest. There is plenty of money for dopey polytechc courses a bigger bureaucracy and to bribe public servants into joining unions but not enough money to clear the backlog of drug-testing so that the makers of methamphetamine can be prosecuted. There is not enough money to clear the growing backlog of court cases and not enough money—or the will—to keep violent offenders in jail. There is not enough money to treat cancer patients in New Zealand. 
We know that between 1997 and 2000 the number of people employed in what Statistics New Zealand calls “Government administration and defence” decreased by nearly 8 percent. In the 3 years from 2000 to 2003 on the other hand the number increased by over 10 percent and we know that the extra people were not employed in the armed services. The Government is employing more public servants to take money from us so that it can employ more public servants to give it back to us. 
Tragically for hundreds of thousands of New Zealanders and their children the Government is giving it back to us with no expectation or no insistence that we will help ourselves. The Government has provided some carrot to encourage people off benefits but has removed the stick. There is no strong pressure for people to get off their backsides and get jobs despite a desperate shortage of employees in most parts of the country. There is no adequate policing of people moving from the unemployment benefit to the sickness benefit. There is no adequate policing of the domestic purposes benefit; a situation that creates strong financial incentives for a woman not to name the father of her child or children and not to get married. 
Being soft on welfare may sound a kind and compassionate thing to do and it may make the Government feel good but it certainly does not help those locked into a life of dependency deprivation and degradation. 
Two years ago Dr Cullen said that it would be clear by the middle of this year whether New Zealand was on track to lift its growth rate so that it could gradually get back into the top half of the OECD. Well the middle of 2004 is just 1 month away and this Budget makes it clear that Treasury sees no prospect of any lift in our growth rate. In its report last December the OECD suggested that the slide in our relative living standards which was a feature of the 1970s and 1980s had been arrested but “a further acceleration—necessary if New Zealand is to move back into the top half of the OECD ranking as the government is intent on doing—is still not in sight.” 
Dr Cullen cannot be expected to carry all the blame for this deplorable situation. The Prime Minister and other Ministers must share the blame. But as Minister of Finance he must bear primary responsibility for the Budget’s failure to give most hard-working New Zealanders any tax relief its failure to reduce the company tax rate and its continued waste of taxpayers’ money on extravagant and possibly fraudulent programmes. 
 It is little wonder that that same document itself makes it clear that there is no prospect whatsoever of achieving what the Government claims to be its highest priority: namely raising the living standards of all New Zealanders to those enjoyed in other developed countries. Never before had a Minister of Finance and a Government faced such an opportunity to invest wisely in the future of our country. Never before had a Minister enjoyed such capacity to say to hard-working innovative New Zealanders that he saw them as the key to unlocking the country’s potential and that the Government would back them. Never before had a Government enjoyed such an opportunity to say to the half million New Zealanders living abroad—the children and grandchildren of those still living here—that they could have a great future back home. But this Government did not see this Budget as a Budget of opportunity. Asked to choose between self-reliance and dependency it chose the latter. Given the chance to chart a bold and better way forward it had no answers. The clear and overwhelming message in this Budget to all those who believe New Zealand can do better is that the only way to achieve that is to bring about a change of Government in the next election.