English Bill: General Debate 
English Bill: General Debate 
[Volume:673;Page:19820] 
Hon BILL ENGLISH (Minister of Finance) 
: 
 I move  
That the House take note of miscellaneous business 
. So we now have Labour’s grand plan to walk backwards into the future on the crutch of a new tax. Nothing has changed. They have not apologised. It is the same stuff as they got thrown out for—tax and spend. Nothing has changed. It is more spending that then needs more tax which is bad for the economy and means less growth and lower incomes. Last time Labour was in Government it took until 2004 but it nailed it. After 2004 that is what happened. It was all set out in the Budget: more spending more tax slower growth and lower incomes. 
There will be a choice: National which wants to grow the economy and lift incomes by selling more of our excellent and competitive products to the rest of the world and Labour which just wants more tax so it can grow the Government. We want to grow the economy and the country and Labour wants to grow the Government just like it did last time. Until Labour members apologise for that New Zealand is not going to listen. 
Let us go through the numbers. Labour has a very big fiscal hole to fill. What creates this huge hole is the tax-free zone taking GST off fruit and vegetables and having no mixed-ownership model. One can take a guess but it is somewhere between $10 billion or $12 billion and $15 billion. Labour members say they will come back with the details but it is somewhere between $10 billion and $15 billion because they have also said they will reduce debt at the same rate as the 2011 Budget. So they have to find $10 billion to $15 billion to fill the hole and they are arguing that Phil Goff’s capital gains tax will find $4 billion. 
Well let us go through the $4 billion figure first. It was from the Tax Working Group and was based on normal income tax rates. Labour is proposing 15 percent so that cuts the revenue almost in half. It will not be taxed at 33c and 24c; it will be taxed at 15c. That drops the figure of $4 billion to almost half. Then that figure was based on an accruals regime where one pays as the asset’s capital value goes up—unrealised gains—not when one sells the asset. Labour will be forced to a realisation model because low-income owners cannot pay capital gains tax if they have no money. This applies particularly to older New Zealanders who invest in investment housing and who need the income to live on. Labour will be forced to a realisation model and that will cut the revenue even further. So Labour has got it from $4 billion down to $2 billion and we have not done the work on that yet in detail but we will. 
Then there is the very simple problem that the current Government’s property tax measures have been so effective that there is no capital gain in the housing market. So even if Labour could implement this tax it is quite possible that because of the Government’s tax measures taken so far which we talked about in detail in question time and because the world has changed with regard to the availability of credit—that is the ability to borrow to fuel a speculation bubble—there will be no capital gain in the next 5 years. Labour may have taken account of that because the $4 billion figure actually takes 15 years to happen. Even if it is taxed at normal income rates on an accrual basis where people pay every year and there is a historical average increase in capital value it would take 15 years to get to $4 billion. 
So how will Labour fill the $12 billion hole? They say they will fill it with a tax on something that might not happen and even if it did it would take 15 years to get to $4 billion to fill next year’s $12 billion hole.