Budget Statement — Budget Debate 
Budget Statement — Budget Debate 
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Budget Statement 
Budget Debate 
Hon BILL ENGLISH (Minister of Finance) 
: 
 I move  
That the Appropriation (2010/11 Estimates) Bill be now read a second time 
. 
Mr Speaker 
I move that the Appropriation (2010/11 Estimates) Bill be now read a second time. 
On election day 2008 New Zealanders voted for a more prosperous ambitious New Zealand where Kiwis have opportunities to get ahead. 
The National-led Government came into office with the New Zealand economy well into recession and with the world’s financial system experiencing its worst crisis since the Great Depression. 
By necessity last year’s Budget was focused on getting New Zealand through the global crisis. Budget 2009 maintained the nation’s credit rating preserved income support entitlements and fulfilled commitments from the 2008 election. 
To help sustain economic activity and support jobs the Government absorbed much of the shock of the recession on its own balance sheet thereby significantly increasing its borrowing. 
The worst of the global crisis has for now passed and the economy has begun to grow again. In fact New Zealand has weathered the economic storm better than many other developed economies. 
Government policy struck the right balance between blunting the sharp edges of recession and maintaining control of public finances. 
But we have work to do. That’s why Budget 2010 is about building the recovery creating jobs and helping Kiwi families get ahead. 
Creating and passing through this House a budget each year is at the heart of stable government. I want to especially thank the Government’s support parties ACT the Maori Party and United Future for their contributions. 
I am pleased to tell the House that this Budget will fund improved services to the public will produce a lower track for future debt and will deliver a tax package that will be good for the economy and good for families. 
Mr Speaker 
I now turn to four main objectives of this Budget. 
The first is lifting the long-term performance of the economy. 
The second is reform of the tax system to make it fairer more sustainable and more supporting of economic growth. 
The third is better delivery of public services to make them better for users of those services and better for taxpayers. 
The fourth is to maintain firm control of the Government’s finances so we can return to budget surpluses and pull back our rising debt. 
Mr Speaker 
Growth matters. It is the only way that we can lift incomes create permanent jobs and build the kind of country we aspire to be. 
Lifting the long term performance of the economy will require considered and consistent change over the next decade because the challenges are significant. 
It is convenient to blame sluggish growth on the global recession but that is not the sole cause. 
Our economy entered recession well before the financial crisis began in late 2008. 
Growth in the three years prior was below one per cent per annum. This was less than half our trading partner average and less than one-third of Australia’s growth rate. 
From mid-decade on growth had been fuelled by a mix of rising household debt and ballooning Government expenditure which grew 50 per cent in the five years to 2009. 
By contrast output from exporters and import competing industries had been in decline since 2005. 
These include sectors such as agriculture horticulture mining and resources forestry fishing food manufacturing and tourism all areas where New Zealand should be benefiting from its natural advantages. 
Too many New Zealanders have discovered that growth driven by debt Government spending and property speculation does not create permanent worthwhile jobs. 
The consequences of this decline in our earning capacity are now clear: too few jobs created a balance of payments deficit over 8 per cent of GDP until its recent decline and negative productivity growth between 2000 and 2009. 
The economy has spent more than it earned and borrowed to make up the difference. 
New Zealand’s largest single vulnerability is now its large and growing net external liabilities. New Zealand owes the world $168 billion or around 90 per cent of GDP. 
Private sector debt to foreign lenders has grown steadily over the last decade and our vulnerability will be increased by growth in government debt to foreign lenders over the next five years. 
The dangers of too much debt are well illustrated by a number of European nations who are currently undergoing painful changes involving increasing taxes cutting public services or both. 
The Government is committed to policies that will reduce our vulnerabilities by tilting our economy away from debt and consumption toward savings investment and exports. 
Mr Speaker 
These policies underpin the updated Treasury forecasts showing steady growth of around 3 per cent over each of the next four years. 
The forecasts also show that this growth will raise real incomes of the average household by about $7000 over the next four years and create 170000 jobs. 
Unemployment has already fallen to 6 per cent. We share with both ACT and the Maori Party a common desire to help New Zealanders move off welfare and get ahead under their own steam. 
Global developments highlight the opportunity for New Zealand to stand out. We will emerge from recession with sound finances quality public services and low and stable tax rates. 
We will naturally appeal as a place people want to live and do business. 
Mr Speaker 
The Government’s growth strategy has identified six key drivers of stronger economic performance—a better regulatory environment for business; skills and education; quality infrastructure; science innovation and trade; improved public sector performance; and tax reform. 
These jointly form a programme to address economic imbalances and lift growth. 
The Government is making progress in all six areas. 
Mr Speaker 
I now turn to the Budget’s second objective that of improving the tax system. 
Tax reform is a centrepiece of this Budget. 
We want a system that rewards effort and helps families get ahead. 
One that attracts and retain skilled people in New Zealand. 
One that encourages savings and productive investment. 
And we want to make the tax system fairer. 
Mr Speaker 
Tax has a powerful influence on savings and investment decisions. Uneven tax rates have been a major drag on growth. Sectors with low effective tax rates have expanded at the expense of the rest of the economy. 
The Government is strongly of the view that investments should stand on their own merits and not be unduly influenced by tax. 
There is also compelling evidence of widespread avoidance mostly brought about by taxpayers exploiting differing effective tax rates. The system lacks integrity and fairness. 
The Tax Working Group of 2010 echoed the findings of the earlier McLeod Tax Review of 2001 on these matters. 
We also required any changes to be broadly fiscally neutral. Given the increase in public debt of recent years it would be irresponsible to saddle the next generation to pay for tax cuts now. 
Over four years the package delivers around $15 billion of tax cuts. This is matched by a similar level of revenue increases from less economically damaging sources. 
The total package has a cost of $460 million in the first year due to some revenue initiatives which cannot be immediately implemented. 
The main elements of the tax package are a shift towards lower and more uniform rates of income tax more indirect taxation and broadening the existing tax bases. 
It represents the most thorough and beneficial overhaul of the tax system in 25 years. 
From 1 October 2010 we will lower personal income tax rates and increase the rate of GST to 15 per cent. 
The increase in GST has been estimated by Statistics New Zealand to raise the level of prices by about 2 per cent. 
To put this in perspective this is less than actual CPI inflation in each of the past six years. 
The Government is concerned to protect the vulnerable and those less well off from this one-off rise in the general level of prices. 
This continues the approach taken in last year’s Budget which preserved income support and entitlements in the face of the global recession. 
The tax package will protect the incomes of New Zealanders in two ways. 
First for income earners at all taxable income levels the reduction in personal income tax will be sufficient to match the increase in GST. 
Second the package will provide from 1 October 2010 an immediate lift in the levels of New Zealand Superannuation all main benefits student allowances and Working for Families payments. This will be sufficient to offset the estimated impact on prices due to the rise in GST. 
The payments will be adjusted to ensure the full CPI effect is captured excluding the CPI impact of the tobacco excise increase. 
Revenue raised from GST and other base broadening measures will be used to fund an across the board reduction in all income tax rates. 
The changes to personal income tax rates to apply from 1 October 2010 will be as follows: 
The initial income tax rate applying up to income of $14000 will reduce from 12.5 per cent to 10.5 per cent. 
The tax rate applying to income between $14000 and $48000 will reduce from 21 per cent to 17.5 per cent. 
The tax rate applying to income between $48000 and $70000 will reduce from 33 per cent to 30 per cent. 
The tax rate applying to income over $70000 will reduce from 38 per cent to 33 per cent. 
These are substantial and worthwhile tax reductions. 
They mean that for example a typical two earner family with two children who earns the average household income will after allowing for the increase in GST be better off by $25 per week or $1285 per year. 
When combined with the tax cuts already delivered from 1 April 2009 that family will be better off by over $43 per week or $2245 per year. 
The changes also mean that since March 2009 the marginal rate of income tax faced by taxpayers earning between $40000 and $48000 just below the average wage will have almost halved from 33 per cent to 17.5 per cent. 
Taxpayers wanting to know how their own position is changed by today’s tax package can consult our website www.taxguide.govt.nz and make this calculation. 
Mr Speaker 
The Government believes that in a world of mobile capital business income is particularly sensitive to tax rates. 
When New Zealand’s company tax rate was set at 33 per cent more than 20 years ago that rate was competitive by world standards. 
Since then company tax rates show strong downward momentum around the globe. 
The tax rate applying to New Zealand companies will reduce from 30 per cent to 28 per cent. This will apply from the start of the 2011/12 income year. 
28 per cent will also become the standard tax rate applying to most savings vehicles. 
It will apply to vehicles taxed as companies including Group Investment Funds unit trusts life insurance and superannuation funds. It will also be the maximum tax rate applicable to Portfolio Investment Entities known as PIEs. 
Lower income taxpayers will still have access to lower rates via imputation credits from companies and electing lower PIE rates. 
The tax rate applying to trusts will remain at 33 per cent the same as the new top personal rate of income tax. 
The previous gap between the 33 per cent tax rate for trusts and the 38 per cent rate for higher income individuals has spawned widespread use of trusts as tax planning vehicles. Trusts have an important role in our economy but this should not be driven by tax advantages. 
Applying a lower and more uniform tax rate to most forms of capital income will improve the durability and integrity of the tax system. It will encourage individuals to save and companies to invest. 
Mr Speaker 
The Tax Working Group also reported that anomalies arise through the use of taxable income as a means of determining eligibility for certain Government assistance. Taxable income may not always be a good measure of true economic circumstances. 
As an initial step from 1 April 2011 investment losses will be added back to taxable income for the purpose of determining a family’s eligibility for Working for Families assistance. 
Further changes of eligibility for Government assistance including student allowances covering areas such as distributions from trusts and income from cash PIEs will follow after the Budget. Officials will release a paper setting out the issues and proposed solutions later this year for implementation from 1 April 2011. 
Mr Speaker 
The Budget will also introduce a range of measures to broaden tax bases. These measures are being introduced to improve the fairness and efficiency of the tax system and to improve the economy. 
The existing 20 per cent loading on depreciation for new investments will be removed for assets acquired after today. Assets already purchased will continue to receive the loading. 
This allowance explicitly departed from the principle of allowing deductions for true economic depreciation. It results in other taxpayers effectively supporting investments that might not stand up on their own merits. 
In addition the Government is not convinced that all buildings actually depreciate. 
It is clear that some do. But many New Zealanders live happily in houses constructed over 100 years ago. 
Allowing tax deductions for depreciation provides an unfair tax advantage for these assets. 
Accordingly the depreciation rate for most buildings with an expected life of 50 years or more will be set to zero from the start of the 2011/12 income year. 
Those buildings where the current depreciation schedule is consistent with a useful life of less than 50 years will be unaffected. 
Building owners who believe that under these rules a class of buildings should qualify for depreciation may seek a provisional rate from Inland Revenue as they do at present. 
Following the Budget the treatment of commercial building fitout will be reviewed and if necessary amended prior to 1 April 2011 to clarify the law on the split between buildings which will not be depreciable and separate assets which will continue to be depreciable. 
Taxpayers will of course still be able to claim deductions for repairs and maintenance. 
Many investors hold property through Loss Attributing Qualifying Companies or LAQCs. After a short period of consultation legislation will be proposed so that from 1 April 2011 all LAQCs will be taxed as limited partnerships. 
The main impact of this change will be to ensure both profits and losses are assessed at the marginal tax rate of the investor. 
The Government has also reviewed taxation of inward investment into New Zealand. International tax law generally provides that income should be taxed in the jurisdiction where it is earned. 
However it is relatively easy to transfer income between jurisdictions by use of debt often between related parties. 
New Zealand like most countries operates “thin capitalisation” rules to limit this practice. The current “safe harbour” limit for gearing on foreign owned investments will be reduced from 75 per cent to 60 per cent from the 2011/12 income year. 
Mr Speaker 
This package of tax changes represents a major step forward. By improving incentives to save and evening up effective tax rates across sectors and across vehicles it directly addresses some of the problems that have beset the economy in recent years. 
The package improves fairness and the integrity of the tax system. It ensures that taxpayers with similar circumstances and true economic incomes will have similar tax positions. 
The package is broadly neutral in terms of income distribution. 
While higher income earners pay more tax and therefore receive larger personal income tax reductions these groups also bear most of the impact of the tax base broadening measures. 
In addition the compensation package is targeted to those on lower incomes. 
On average most New Zealanders receive roughly a half to one per cent average increase in real disposable income. 
The impact of the tax changes on economic growth will be positive though only a small allowance has been made for this in the fiscal projections. 
Finally I thank my colleague the Hon Peter Dunne who as Minister of Revenue has worked tirelessly to help deliver the tax package before the House today. 
Mr Speaker 
Budget 2010 also contains a range of other initiatives that will promote growth. 
We have focused funding on investing in innovation and encouraging growth in selected productive sectors. 
The Budget allocates $321 million over four years for a range of science and R&D incentives lifting total spending to $750 million per annum. 
This includes business R&D grants and assistance for firms to access new ideas science and technology from Public Research Organisations stronger commercialisation within CRIs and universities and research infrastructure. 
The global financial crisis was a setback for tourism. The Budget allocates $30 million of new spending in 2010/11 mostly to increase the marketing of New Zealand as a tourism destination internationally. 
The Government will legislate this year to support the aquaculture sector’s objective of becoming a billion dollar industry by 2025 working with industry and other stakeholders to lift regulatory barriers. 
Late last year the Government agreed to most of the recommendations of the Capital Market Development Taskforce and is in the process of implementing them. 
The Government released a plan to unlock New Zealand’s petroleum and mineral potential in November 2009 and has begun implementing it. This Budget funds implementation of that plan. 
Water is also a key strategic resource. The Government is currently working on improving the regulatory regime including those parts that impact storage and irrigation as part of an efficient and sustainable water management programme. 
Mr Speaker 
Another important leg of our growth plan is to improve access for New Zealand exporters to world markets. 
China has recently and rapidly become our second largest trading partner. 
Given the increasing importance to New Zealand of trade with Asia and the Pacific Rim we have also recently signed Free Trade Agreements with Hong Kong and Malaysia and are negotiating with Korea and India. 
Our Agreement with the 10 countries of ASEAN recently came into force. 
We are working with the Trans-Pacific Partnership regional grouping including the United States to open further markets and opportunities for New Zealand exporters. 
Mr Speaker 
To ensure that these and related initiatives continue to benefit the economy we have established the Productivity Commission. This will be a standing body with high level expertise operating independently with a wide brief to undertake inquiries into productivity-related matters. It will be in place by April 2011. 
The Government also intends to release a discussion document on ways to ensure that all new and existing regulation is subject to proper scrutiny. This will help avoid proliferation of red tape. 
For both of these initiatives the Government is grateful for the leadership shown by the Hon Rodney Hide and the ACT Party. 
Mr Speaker 
I now turn to how the Government can ensure better delivery of services to the public. 
A more efficient public sector will deliver better quality services while reducing fiscal and tax pressures on the rest of the economy. 
The Government determined that rather than spread new spending resources thinly it would focus on those few high priority areas that really mattered. 
Three quarters of the new spending allowance has been allocated to improving health and education services and to lifting science and innovation. Most of the other votes received either small or no increases. Many will see no additional funding for several years. 
The Government is working with public sector chief executives to deliver higher quality services more efficiently as every other organisation in the community has had to do over the past two years and I thank them for their efforts. We will continue to scrutinise every dollar of public spending. 
As we committed a year ago Budget 2010 lives within a new operating spending allowance of $1.1 billion per year. In addition a further $1.8 billion has been made available between now and 2014 by redirecting resources into higher priority areas including within health and education spending. 
Core Crown expenditure also increases due to rising benefit and superannuation costs increased finance costs and expenditure on the emissions trading scheme. 
In total core Crown expenditure is forecast to increase by $5.9 billion to over $70 billion in 2010/11. 
Mr Speaker 
The largest share of new spending has been dedicated to improving core Government services. 
In total Health has been allocated an additional $2.1 billion over the next four years including an extra $512 million in 2010/11 to cater for ongoing demographic and price pressures. 
This includes $93 million for disability support and $60 million to boost elective surgery over the next four years. 
The Government’s commitment to education remains strong. This Government wants all young New Zealanders to reach their potential and be given the opportunity to succeed. 
The Budget provides an extra $1.6 billion for education over four years. 
This will fund a 4 per cent increase in operating expenditure for schools. It also includes $349 million for school property $92 million to raise participation in Early Childhood Education for families in areas currently under-represented and $48 million to extend the Youth Guarantee. 
Social services are also a priority. Building on the success of the Government’s Community Response Fund the Budget provides $91 million over the next four years for Non-Government Organisations to deliver extra services. 
Justice receives $147 million in new operating expenditure as well as significant capital expenditure. This will fund a lift in prison capacity legal aid restructuring and increase Family and Youth Court professional services. 
Our commitment to Whanau Ora is matched by funding of $134 million over four years. The first wave of 20 Whanau Ora providers will be selected through an Expressions of Interest process that begins next month. 
The Budget provides almost $20 million for two new Whare Oranga Ake reintegration units. 
I particularly thank the Hon Dr Pita Sharples and the Hon Tariana Turia as the Ministers responsible together with the rest of the Maori Party. 
The Government retains an on-going commitment to growing the supply of affordable housing for New Zealanders and their families. $20 million has been provided to extend Housing New Zealand’s Housing Innovation Fund for another year. 
Mr Speaker 
The Government is determined to improve management of government owned assets. Too often Government assets have been poorly managed and liabilities poorly monitored. 
As at 30 June 2009 the Crown balance sheet showed $217 billion of assets and $118 billion of liabilities. 
The Crown has a wide range of holdings and is by far the largest asset owner in the country. 
It holds around $100 billion of what could be termed social assets including roads national parks state housing schools and hospitals. 
It holds around $70 billion of financial assets comprising a wide range of local and overseas investments all of which produce commercial returns. 
And it holds over $50 billion worth of commercial assets comprising mainly SOEs and KiwiRail. 
These assets have been funded by New Zealanders paying taxes and fees over decades. 
The Budget forecasts show that over the next four years the value of Government owned assets is expected to increase by some $32 billion. This represents growth in taxpayer wealth. 
This level of investment demands a high standard of stewardship by Government. 
Since taking office the Government has been working hard to understand the capital demands of its operations and to allocate capital to where it can best be used. 
We have produced the first National Infrastructure Plan tightened commercial disciplines on SOEs and started to introduce better disciplines on procurement processes. 
New capital spending decisions in this Budget reflect this increased emphasis on managing the public’s resources to promote growth. 
We continue to invest in our $7.5 billion infrastructure programme over the next four years. 
The Budget funds major investment in the rail network. 
The Government has committed in principle to investing $750 million over the next three years as its contribution to KiwiRail’s $4.6 billion turnaround plan. 
This is in addition to $500 million over four years to purchase electric commuter trains. 
Another major investment is the Government’s ongoing investment in ultra-fast broadband infrastructure through Crown Fibre Holdings. 
Budget 2010 allocates a further $200 million of capital funding in addition to the $248 million allocated last year as part of a total expected investment of $1.5 billion. 
This funding will enable Crown Fibre Holdings to start making substantial contract commitments with the private sector to start rolling out the new fibre network. 
A further $48 million has been allocated for ultra-fast broadband in schools. 
Funding has been set aside for a new prison potentially delivered via a Public Private Partnership. 
Mr Speaker 
I now turn to the Government’s fourth objective that of maintaining firm control of the government’s finances so we can return the budget to surplus and reduce our rising debt. 
The fiscal outlook has improved from last year due to the economy returning to growth and the positive impact of Budget 2009 decisions. 
The projected operating deficit for the next financial year is $8.6 billion or 4.2 per cent of GDP. 
It is projected to improve steadily in each subsequent year and to reach surplus in 2015/16 three years ahead of last year’s projection. 
As a result of this improved outlook the debt projections have also become more favourable. 
Net core Crown debt is now projected to peak at 27 per cent of GDP in 2014/15 and then decline steadily. This is both a lower and earlier peak than was projected in last year’s Budget. It contrasts strongly with the outlook of ever rising debt which the Government was presented with in late 2008. 
By 2024 net core Crown debt is projected to be back to 14 per cent of GDP or about the level before the crisis struck. 
However it will require at least a further decade of disciplined fiscal management to deal with the effects of the global financial crisis and the huge lift in Government spending during the boom years leading up to that crisis. 
Financing new and maturing debt will require the Government to borrow around $240 million every week over the next three years. Debt is projected to reach $68 billion by 2014/15. 
This substantial rise in debt will mean that interest costs more than double. 
Our long term fiscal objective remains to ensure that net debt is brought back to no more than 20 per cent of GDP by the mid 2020s. The current projections show this being achieved by 2022. 
If possible it would be preferable to return to this low level of debt earlier. 
Mr Speaker 
The improvement in the debt outlook gives the Government some flexibility to absorb part of any future shocks as it did in the last recession. 
Our intention is that any favourable surprises will be used for deficit reduction and debt consolidation. 
When the books are balanced and debt has stopped rising the Government will have more choices about where to invest spend or reduce taxes. 
Mr Speaker 
Budget 2010 is about building the recovery and helping New Zealanders prosper. 
The Prime Minister has made clear this Government’s aspirations for an economy that values enterprise rewards people for effort and encourages them to get ahead. 
New Zealand has successfully navigated the worst global crisis in a generation. The challenge now is to build growth and create new jobs. Sustained growth provides opportunities for New Zealanders to achieve their aspirations. 
Budget 2010 drives the New Zealand economy forward moving away from debt and consumption while increasing investment and exports. 
We set a path for responsible Government spending last year and we maintain that path in this Budget. 
We have changed the tax system to rebalance the economy to put cash into people’s hands and to encourage them to save more and consume less. This will have a long term benefit. 
We now have our debt under control and unemployment is beginning to fall. We will emerge as one of the countries that other nations aspire to be more like. 
There are risks to the recovery. A mountain of debt hangs over a number of our export destinations and will also influence the markets that lend to New Zealand. 
We cannot take for granted the contribution that the Australian and Chinese economies have made to our growth. 
However we are on track to a position most developed economies will envy. 
This includes more new jobs falling unemployment rising family incomes quality public services and sound public finances. 
Mr Speaker 
This Budget continues to build a platform for a much more ambitious New Zealand. 
Mr Speaker 
I commend this Budget to the House. 
Hon PHIL GOFF (Leader of the Opposition) 
: 
 I move  
That the words after “That” be omitted and the following substituted: “this House has no confidence in the National Government led by John Key which has blatantly broken its clear promise not to raise the Goods and Services Tax has pushed up prices when working people have had their lowest wage rises in more than a decade has failed to implement a plan for jobs lacks any vision for a smart high-skill high-tech and high-wage economy has cut services and assistance to the most needy in our community and has rewarded the most wealthy at the expense of middle and low income New Zealanders.” 
Today the National Government had the opportunity to deliver a Budget that was fair for all New Zealanders—a Budget for the many not the few. Today the National Government had the chance to produce a Budget that invested in the future a Budget that promoted a modern smart economy with more and better jobs and higher wages. This National-led Government has failed absolutely in those objectives. There were no new ideas to create jobs and the future that they need. Instead the Government has pushed up the price of just about every good or service that New Zealanders buy. It has borrowed extra to give a windfall to the most wealthy people in this country. It has broken its promises to senior citizens. It has created the highest level of inflation in decades—nearly a 6 percent rate of inflation. In the time that we have had our estimate is that average earners will be $30 a week worse off after inflation—$30 a week worse off after inflation. Those on the average wage will get a $15 a week tax cut. Goods and services will go up by $45 a week. That leaves them $30 a week worse off by Mr English’s own figures. The top 1 percent of income earners will get 12 times the cut in their income tax of the average earner—12 times the cut of the average earner. 
This Budget is a short-term plan that will look after the interests of the highest-income earners which this National Government represents but it is a Budget that comes with a huge cost. It was ironic to listen to the National backbenchers cheering the figures on health. Why would they cheer the figures on health when those figures left a $300 million gap in maintaining health services even at the current level? That is a $300 million hole in the health budget. 
When we look at the education budget we see that there is not the additional funding in education that will come even near to meeting the cost of extra inflation. If we take the critical area of education where the foundation is laid for our children to learn early childhood education we see a slashing of $400 million over 4 years—$400 million over 4 years. My challenge to the Prime Minister is to ask how that cut will be met. Will it be met with additional fees on all of those who are trying to get a quality early childhood education for their families or will it mean a cut to the quality of early childhood education? Either way that is a disastrous failure to invest in the future of our country—our children. 
Before the election Mr Key promised that the average wage earner would get a tax cut of $50 a week. That has not eventuated. There is no $50 a week tax cut for the average income earner. The Government promised tax cuts. Last year it cancelled the tax cuts and it talked about a tax switch. But this year they have actually delivered a tax swindle—a tax swindle. There is no $50 a week tax cut for those on the average wage. National has done what it never told New Zealanders it would do. It promised income tax cuts but it never told New Zealanders that they would be paying for those cuts themselves through the increase in GST. In fact 2 weeks before the election Mr Key stood up looked down the barrel of the camera and said that National would not increase GST. Every time he denies or tries to qualify that his credibility goes down. That is a broken promise by the National Government. 
This Budget will do nothing to create jobs or fix the problems that need to be fixed for New Zealand. 
Hon Bill English 
: Tell us your GST position. 
Hon PHIL GOFF 
: Bill English has given himself $240 extra a week not to mention doubling his housing allowance until he was caught out. I say to Mr English that this not a Budget that looks after the middle and low income earners; this is a Budget that looks after him and his mates on his level of income but it is unfair to ordinary New Zealanders. 
The cuts in income tax were designed to compensate for GST going up by 2.5 percent but they will not compensate for the rise in the cost of living. Bill English never told New Zealand that he would be pushing up inflation to 6 percent after his second Budget—6 percent. That is the highest rate of inflation that we have seen in decades in this country and it will eat into the living standards and the wellbeing of our people. 
National has increased consumption tax by 20 percent. I say to Mr Key that that consumption tax is regressive. Mr Key might have said that the wealthy will pay more GST in dollar terms but a far higher percentage of the income of low-income earners will be consumed by the GST increase than that of high-income earners. Make no mistake—that is a regressive tax and it is not being adequately compensated for by the cuts in income tax. The big cuts in income tax go to the wealthy; the big increases in income being spent on consumption taxes land on the lower and middle income earners. This country now has one of the highest rates of consumption tax in the world because there are no exemptions to GST. We have the fourth or fifth highest consumption tax in the OECD. Consumers never voted for GST to go up because John Key promised them that it would not go up. 
Businesses are not in favour of GST going up. In a recent survey of small businesses across New Zealand 8 percent supported an increase in GST—8 percent I say to Mr English. Businesses know that the increase will be bad for them and bad for New Zealand. In this Budget we were going to have a rebalancing of incentives to invest in the productive economy rather than the property speculation part of the economy. 
Hon David Cunliffe 
: Wimped out! 
Hon PHIL GOFF 
: This Government wimped out because so many of its supporters are the very property investors that that rebalancing would have hurt. 
Hon Gerry Brownlee 
: Not correct. 
Hon PHIL GOFF 
: That is correct and I say to Mr Brownlee that it would have included a lot on that side of the House. The Minister should know that nothing in this Budget will be effective in rebalancing investment from the property investment sector to the productive economy. This Budget fails absolutely on that count. 
The income tax cuts such as they were were designed to compensate for GST but I ask what the Minister of Finance has done for the lower and middle income earners of this country to compensate for all the other taxes that have been imposed. There is the tax on business and innovation in Mr Brownlee’s portfolio. They cut the 15 percent research and development credit and a year later put 39 percent of that money back into research and development. It is too little too late and an embarrassing acknowledgment that they got it wrong in the first place. 
There is the $200 million windfall in tobacco tax. I would have thought that a Government introducing that for reasons other than simply gaining the windfall revenue might put some of that money back into tobacco-use prevention programmes or addiction treatment programmes. But no that money is being taken as a windfall the cost will fall disproportionately on some in the community and there is nothing in a positive sense that will lead people to break that addiction with the assistance of at least some of that $200 million. 
National promised that it would cut taxes and not increase them. It has not delivered on that; the net position of average New Zealanders will be worse as a result of the costs imposed on New Zealanders compared with the so-called cut-the-tax swindle. The costs facing New Zealanders will go up dramatically in the next year and this Government has done nothing to protect middle and low income earners against that. Homeowners will face three or four hikes in the interest rate they pay as the official cash rate goes up in the next 18 months. Inflation at 6 percent is higher than even the banks estimated would be the result of the impact of National’s actions. The only people who come out of this Budget better off in net terms are the wealthy. Mr Key as Prime Minister will get $350 a week the average Cabinet Minister will get over $200 a week and the average New Zealander will be struggling to get $13 a week—and that will be totally consumed by the additional inflation. 
We heard a lot earlier in the week about closing the loopholes where the wealthy were escaping their obligations to pay even their share of the tax. I ask Mr English where the evidence is that that Minister has made any difference at all to those loopholes. Options were put up by the Tax Working Group and that Government has lacked the courage of its convictions to implement the recommendations that were made. The wealthy will not be paying more tax as a result of this Budget but the 40 percent of New Zealanders at the bottom who Mr Key said were not pulling their weight will be paying more because they will be paying more GST on everything they buy. 
Mr Key said earlier in the week that New Zealanders should not be jealous of the fact that the wealthy were getting the biggest share. They are not jealous I say to Mr Key but they are angry that this Budget does not give ordinary New Zealanders on low and middle incomes a fair go. Some of those New Zealanders who will be angry are people like Henry Lindsay and Vicky Drew and the thousands of other elderly frail New Zealanders who have paid taxes all of their life only to find that when they are elderly and in need and need some help—a very small amount of help $30 a week in home care—that has been cut. Mr English should explain to those people why that small amount of assistance to enable them to maintain their independence is regarded as low-quality expenditure while $700 a week extra in tax cuts to chief executives is regarded as high-quality expenditure. The people who were given a wage rise or a salary rise last year of $1000 a week who were given the big tax cuts last year have again benefited from the big tax cuts this year. I ask Mr English where the fairness is where the equity is in hammering people who are the most needy to reward those who are the most privileged. 
This Budget is not just a Budget of broken promises; it is a Budget of lost opportunities. We need an export-led recovery but where is the evidence in this Budget of anything that will stop the continuation of the cycle of higher interest rates and inflated exchange rates that stop the export sector being able to do as well as it should? Where is the evidence of assistance to savings? The Government cut KiwiSaver contributions from 4 percent to 2 percent while Australia increased its superannuation contributions from 9 percent to 12 percent. Then Mr English wonders why he does not have the investment capital to invest in growth so New Zealanders can have ownership of their own future. 
The Minister of Finance has not put back the additional payments into the superannuation fund. In the last year since Mr English gave his last Budget the superannuation fund increased in value by $3.5 billion. We are losing a million dollars a week in forgone interest alone because of the short-sightedness of that Minister. 
Where is the evidence in this Budget of increasing skills? What is being done about the 70000 young New Zealanders who are not in work not in training and not in education? That is a social and economic disaster for the future. Where are the additional apprenticeships when we know that once the economy recovers there will be a major skills shortage this year? Where is the help for the thousands of young New Zealanders who are being turned away from polytechnics and universities because the Minister of Education has capped entry to those institutions? Where is the investment in research and development to get the smart economy so that New Zealand can be innovative and create jobs? This Government has cut research and development. It cut 2 billion from the Fast Forward fund and the 15 percent research and development tax credit. This Government has failed to put in place a vision and a plan to build a stronger New Zealand for tomorrow. Where is the evidence that this Government has responded to the Top 100 business people in the country who have talked about a cleantech added-value economy? Their pleas have been ignored. 
This is a Budget of missed opportunities. This is a Budget that promotes inequality in a way that no Budget has since 1991—the “mother of all Budgets”. This is a Budget of unfairness. This is a Budget of more new taxes. This is a Budget that will damage hard-pressed New Zealand families to reward the few instead of looking after the many. This Government has failed in its obligation to the people of this country. 
Hon JOHN KEY (Prime Minister) 
: 
 Shane Jones was happy with that speech I have to tell you. The one conclusion we can draw from Phil Goff’s speech is that he has to stop reading those Greek economic textbooks because that speech was about borrow and hope. It was Greek economics Labour Party style. That is all Labour knows how to do. 
When I went to bed last night at 12.30 I read the  
Dominion Post 
. In the  
Dominion Post  
Vernon Small listed 10 things that are highly predictable about today’s Budget and one was a vein-popping speech from Phil Goff. 
Chris Tremain 
: He got that right. 
Hon JOHN KEY 
: No actually he did not get it right. That was not a vein-popping speech from Phil Goff. Do members know why? Other than Labour wanting us to borrow we did not hear one suggestion one policy or one good idea from Labour because Phil Goff does not know what his policies are. He does not know whether GST is going up. He does not know whether GST is going down. He does not know whether GST is coming off a cooked chicken or an uncooked chicken. Neither does the rest of the Labour front bench after that speech. Labour members do not have a clue. 
Interestingly enough in Phil Goff’s speech I did hear—[ 
Interruption 
] It is interesting that members opposite are paying more attention to my speech than they did to their own leader’s speech. But I digress. There were crocodile tears in that speech from Phil Goff but the question is this and it is a good one: did they ring true? That is an honest question that any New Zealander might ask. Let us wind the clock back to 1988 when Phil Goff was in Cabinet. The then Labour Government dropped the top personal tax rate to 33c—exactly as it is in today’s Budget. Did Phil Goff resign? No. Did he protest? No. He came down to the House and said that that reduction would allow Kiwis to keep more of their own money. I say: “Right on Phil!”; I agree with him. In 1988 that Cabinet—wait for this and Roger Douglas knows exactly what I am talking about—dropped the company tax rate to 28 percent—exactly what it is today. Did Phil Goff resign? No. Did he quit? No. He came down to the House and said this: “That will create an environment in which enterprises can succeed—both New Zealand enterprises and those attracted from overseas.” [ 
Interruption 
] Yes it is a good Budget. But wait it gets better. 
Mr SPEAKER 
: I hesitate to interrupt. The debate has been robust and that is fine but the noise has reached such a level that I am sure no one in the gallery can hear what on earth is going on because I cannot either. I have no problem with it being a robust debate and I do apologise for interrupting the Prime Minister but we cannot let it just become bedlam. 
Hon JOHN KEY 
: The truth is I have never seen so much support from Labour for a National Budget! In 1989—wait for this—Phil Goff was in Cabinet. Guess what Labour did? It raised GST by 2.5 percent. Guess what? It was with no compensation—nothing for those on benefits nothing for those on pensions nothing for anyone. Did Phil Goff resign? 
Hon Members 
: No! 
Hon JOHN KEY 
: Did he protest? 
Hon Members 
: No! 
Hon JOHN KEY 
: Did he get in a bus paint “Axe the Tax” on it and wander round New Zealand? No he did not. He said the virtues of it were great. 
Last week I read in the  
New Zealand Herald 
 something very interesting. It was Phil Goff talking to Labour supporters. He said: “should Labour regain the Treasury benches …”—note to self: the operative word in that statement is “should”—“we are going to be doing a lot of reversing.” That is what Phil Goff said—“we are going to be doing a lot of reversing.”—and we will hear about that in a moment. Well ain’t that the truth! Phil Goff has been doing a lot of reversing throughout his whole political career. But this is what he will be reversing. Today Bill English delivered control of Government spending. Well under Labour’s spending-type matters that would be reversed under a Labour Government. Bill English today delivered Government debt under control and falling. That would be reversing under Labour’s borrow and hope. Today Bill English carried on with orthodox monetary policy which is something Labour has supported since 1989. According to Phil Goff that would be reversing. Today Bill English delivered a comprehensive GST system something Labour has supported since 1985. According to Phil Goff that would be reversing. I give him one hint: he should have told Trevor Mallard before he wrote the blog in April of this year in which he had a go at the Maori Party. That is what he should have done. There has been a lot of reversing in that thing. 
It is as simple as this: if New Zealanders want to see debt go up and their country get into worse shape they should vote Labour. 
Mr SPEAKER 
: I apologise to the Prime Minister again but I cannot hear a thing. I think the Government benches need to be a little more reasonable. OK the noise at the final point was from both sides but the Opposition has actually not been as noisy as the Government benches in the last few minutes. We have to be able to hear. It is no use if we cannot hear what the Prime Minister is saying. 
Hon JOHN KEY 
: It is time to leave Labour behind but I can only make this observation: if the only thing Labour has learnt in the last 18 months is to borrow more money then those members need to go and have a good look at Greece. The only assumption I can draw is that the bus they have been on for the last 18 months has spent a lot more time on Mykonos than it has in Masterton! They need to get in the real world. 
This is a great Budget. It will get our economy going. This Budget will create 170000 jobs—170000 jobs. It is tackling the long-term issues that our economy and our country face. There will be some fairness in the New Zealand tax system. There are a lot of things in this Budget and we have delivered on many many important issues. Let us take just one of them: $1 billion for leaky homes. It is a problem we inherited from a Labour Government that spent 9 years ignoring the problem. We will see whether homeowners up and down the country who will have access to a solution to their leaky homes who are currently living in rotting dwellings and who now can see light at the end of the tunnel think this is a good Budget. 
We are living in very difficult economic conditions but today this Government delivered a record amount of expenditure on health care—$2.1 billion more over 4 years. But I want to make a very important point: it is not just about more money; it is actually about how we spend that money. It is about value for money. It is about putting more money on the front line. It is about more money for nurses and doctors and for retaining people in our system. It is about more money for subsidised drugs not just more money for the sake of it. 
The same is true of education. There is a record spend-up on education. There is 4 percent extra for operations grants for schools up and down the country. 
We need to put science at the heart of our economy. This Budget makes a step in that direction. When Labour had billions and billions of dollars to spend it did not spend it on science research and development. Labour members will want to talk about their rinky-dinky little fund which never actually got off the ground. Not one dollar of that fund was spent because it was 9 years too late. What have we done in science research and development? Well we have given a huge amount of money to those companies that want to use that technology. We are linking the Crown research institutes universities and private institutes to our businesses so that those businesses can be smarter. 
When it comes to infrastructure this Government is investing in the future of New Zealand though infrastructure even if we are having to bail out KiwiRail which Labour bought for far too much simply for political and ideological gain. We campaigned on ultra-fast broadband as a device to change New Zealand. 
Hon David Cunliffe 
: Where is it? Where is it? 
Hon JOHN KEY 
: Well actually in the Budget—hundreds of millions of dollars of expenditure. The Crown Fibre Holdings board is making tremendous progress. This is a country getting ready to be wired so that we can deliver to New Zealanders their opportunities to connect with the world through a low-cost highly efficient world-class leading technology; we are letting small businesses in New Zealand all of a sudden connect to the world. 
But in the end this Budget with not a lot of money to go around has tackled one very core thing which is the unfair and inappropriate way in which the tax system has evolved in this country. Today that is what we have done. Let us forget about the rhetoric from the Labour Party and go to what Treasury is telling us: there will be 170000 new jobs and nearly 1 percent growth. Even at Treasury’s most pessimistic view this Budget will grow our economy by 1 percent extra. That is thousands of dollars to everyday Kiwis in their pockets in their households and in job security. That is what a good tax system does. 
Let us have a look at some of those taxpayers. Under the previous Labour Government someone earning $39000 a year paid tax at the rate of 33c in the dollar. Has the National Government stood back and accepted that? No it has not. It has effectively halved that rate to 17.5 percent. But that lower rate is not for just a few New Zealanders; three-quarters of all New Zealanders will face a top statutory rate in this country of 17.5 percent. Let us put that another way: three-quarters of New Zealanders will get to keep 82.5c in the dollar. That is about an incentive to get out there and train work and get ahead. That is two-thirds of the tax package. Let us understand the size and scale of this tax package. Four billion dollars of personal tax cuts are being delivered from a Government that is struggling with an economic environment that is difficult. That is commitment. Those cuts are worth $15 billion over a 4-year period. Where will that money go? Two-thirds of it will go to those on the bottom two personal tax rates. That is fairness. 
What will this package do? Let us think about the young couple that have recently got married. They earn $50000 each. As a result of this package they will have choices because they will have thousands of extra dollars in their hands. Even if they decide to consume the lot they will still be better off to the tune of thousands of dollars and if they want to save if they want to buy a house they will now have the choice to do that. We in National are believers in a property-owning democracy; if people want to live in their own homes if they aspire to own their own homes National is the party that believes in that. Today through this Budget we have delivered the opportunity for New Zealanders to live up to that dream to have that opportunity and to get out there and build their own homes. 
There are many other component parts of this package but one of them is about making sure there is fairness in the system fairness to all New Zealanders. Labour members will spend a lot of time talking about tax cuts for the rich but they have missed a simple point: the rich in New Zealand largely do not pay the top personal rate. The rich funnel their incomes through trusts and today we have essentially aligned all of those incentives. We have made sure that when people who are well off go to their accountants it is to talk about how to grow their businesses it is to talk about how they can do better in their lives not to work out ways in which to get round an “envy tax” that was put on by the Labour Government for no good reason. 
National has been fair across the board which is unlike Labour when it increased GST with no compensation. We have recognised the cost on low-income and fixed-income New Zealanders and have done something about it. Let us take the married superannuitant couple who have no other income—no other income. As a result of this Budget even if they consume every dollar they receive through superannuation they will be over $500 a year better off. 
In the months and years ahead I guess that Labour members will have to consider what they would do. If they decide to put on a high personal tax rate—for those on let us say more than $100000—will they be getting the rich to pay more tax? No the rich will continue to funnel their incomes through trusts. 
What we have delivered today is extreme efficiency in the tax system. We have lowered taxes on savings—we have aligned them at 28 percent—and we have done something very special: we have given New Zealand companies a head start over their Australian counterparts by cutting the company tax rate to 28 percent. A lot has been made of Australia but here are the facts. Before this Budget only those who earned more than $228000 paid less tax here than they would have paid in Australia. Do members know what the result of this Budget is? It takes that amount from $228000 to $55000. That is about competitiveness with Australia! 
In the end this was a Budget about growth a Budget about jobs a Budget about the future of New Zealand a Budget about getting on top of debt a Budget about keeping our expenditure in order and a Budget about fairness. When I look at the millions of New Zealand who will be better off after this Budget I am left with only one conclusion: this was a Budget for the many not the few. 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 This Budget is a triple deficit Budget. It runs a fiscal deficit it runs an environmental deficit and it runs a social deficit. Perhaps most sadly it portrays a deficit of vision for New Zealand. This Budget takes money from overseas creditors to fund its fiscal deficit. 
Mr SPEAKER 
: I apologise to Dr Russel Norman. I ask members leaving the House to please do so quietly and I ask people in the galleries to please not talk because the noise volume just escalates here in the House and it is so hard to hear. It is totally unfair to Dr Russel Norman. I apologise for that. 
Dr RUSSEL NORMAN 
: Shall I start again? 
Mr SPEAKER 
: I think just carry on. 
Dr RUSSEL NORMAN 
: This Budget takes money from overseas creditors to fund its fiscal deficit. This Budget takes away the dreams of our young people with its social deficit. This Budget takes away the chance for our kids to love New Zealand as we do with its environmental deficit. This Budget adds to the deficit of vision that has so far marked this photo opportunity Government. 
New Zealanders believe in more than just money. New Zealanders want prosperity which is enough money to live comfortably but also warm homes; safe healthy food for their kids; a transport system that works; and an Aotearoa that they can love for ever—not mine for a quick buck. The Green Party supports this vision and therefore cannot vote for this Budget. 
Mr SPEAKER 
: I apologise to the honourable member speaking. No member in the gallery may take part in the debate in any shape or form. I make that very clear to members in the gallery. They will not interfere in the debate or they will be removed from the gallery. I apologise to the member. 
Dr RUSSEL NORMAN 
: This Budget was an opportunity to take Aotearoa down a new smarter economic path. This Budget could have provided the map and the funding to transform the New Zealand economy from one based on commodities and extractive industries towards one that rides the clean technology wave and has a reputation for high-quality sustainable commodities and for knowledge-intensive high-tech cleantech industries. 
New Zealand could be a brand of integrity. Our country can be more than just extractive industries—cow faeces in our water and national parks desecrated by mining. We can be more than a quick buck more than what we can dig up suck up and sell off. Indeed this Budget from National ACT and the Maori Party proposes to consume our capital—our financial natural and social capital. We should pass on wisdom to the next generation but we are passing on financial environmental and social debt. Most of all this Budget makes manifest the contradiction at the heart of our age. We live in a society whose central rationale is maximum economic growth at any cost yet we know that this growth threatens our well-being and even our long-term survival. 
I start by addressing the fiscal deficit. This Budget borrows to fund tax cuts more motorways and climate pollution subsidies. We are already borrowing $240 million every week for new and roll-over loans yet this Government has introduced huge tax cuts that will cost $4.6 billion in the 2011-12 financial year. We are already borrowing yet this Government is spending $9.5 billion on holiday highways and other pet motorway projects that even the Government’s figures show will cost us more than they will deliver in benefits. We are already borrowing yet this Government will spend $630 million in 2011 on subsidies to climate polluters. This is fiscally irresponsible. The impact of these measures will mean that Government debt balloons out to 26.5 percent of GDP that annual finance costs will go up to nearly $6 billion in 7 years’ time and that we will not return to pre-crisis debt levels until 2024. 
This unnecessary public debt when piled on top of the mass of private debt in our country reduces our economic sovereignty. Future generations will bear the burden of this debt and will be beholden to the international lenders who own so much of our economy. This is not freedom and this is not the sovereignty New Zealanders seek. The build-up of national debt will also provide an excuse to privatise public assets after the next election. John Bill and Gerry plan in 2012 to sell off what is left of New Zealand’s public assets. The so-called mineral stocktake which prepares the very best of our conservation estate for mining is not the only stocktake in town. Mark my words: John Key will use Government debt to justify a “For Sale” sign over our State-owned assets such as Air New Zealand Television New Zealand Solid Energy Meridian Energy Genesis New Zealand Post and the Accident Compensation Corporation. 
John Key blames tax loopholes for his decision to increase GST and cut tax rates. He could have closed the tax loopholes but he has legalised them instead. He has rewarded tax avoidance with a tax cut. That is not smart and it is not fair. 
A capital gains tax is smart and we can make it fair by excluding the family home. Sam Morgan does not think it is fair that he pays less tax than his secretary; nor do I. A capital gains tax is part of the solution to our property crisis. It can broaden our tax base and strengthen our economy. A capital gains tax is sharply progressive because income derived from capital gains is concentrated amongst the wealthiest. The United States uses a capital gains tax. It shows that those earning more than $1 million a year get around 40 percent of their income from capital gains. Meanwhile those earning less than $75000 per year get less than 2 percent of their income from capital gains. Capital gains taxes are sharply progressive because the tax falls on those who can afford it most whereas GST is regressive because the tax falls on those who can afford it the least. 
The Green Party stands for smart fair taxes and it has the courage to say what National and Labour both know—that a comprehensive capital gains tax excluding the family home would help protect New Zealanders from property speculation. It would help make the dream of homeownership a reality for more Kiwis and it would feed much-needed capital to the starved productive sector. We also know that there is a need to increase housing supply at the same time. Building more State housing can counter upward pressure on rents and boost the building sector of our economy while helping our most needy families. 
John Key may talk about taking a balanced approach but when it comes to rebalancing our economy there is little action. Our tax system remains skewed. The tax treatment of property changes to loss attributing qualifying companies and depreciation measures are a step in the right direction but it is a timid step. The time for a capital gains tax is right now—this year in this Budget—and the Government has missed the moment to strengthen our economy just as it has missed the chance to tighten foreign investment rules on property. To ignore those opportunities fails the fortitude test. 
The tax cuts in this Budget from National ACT and the Maori Party will go mostly to the well-off while raising GST hits those on low incomes disproportionately. This widens the gap between the haves and have-nots. It punishes those who already struggle to make ends meet and the punishment falls most heavily on Maori and Pacific peoples. This Budget will increase inequality the social deficit and ultimately the fiscal deficit. 
Looking after our most vulnerable children should be at the heart of any Budget because one day those kids will fill either our workforce or our prisons. The Budget from National ACT and the Maori Party increases the money for prison beds adding to the fiscal deficit and betting on which direction the social deficit is heading. New Zealand is one of the most unequal countries in the OECD and that inequality drives crime illness violence poor educational outcomes and so much more. The cost of prisons courts and the police in this Budget alone has increased to $3.7 billion from $1.7 billion just 10 years ago. 
Inequality costs everyone. Because some New Zealand families cannot afford to heat their draughty homes it costs taxpayers $54 million each year to treat respiratory illness. It costs businesses 180000 sick days and it costs $400 million in electricity that we do not need to use doing untold unnecessary environmental harm along the way. There are many more examples of how inequality hurts everybody. 
Earlier this week my colleague Metiria Turei launched a plan to reduce inequality and to help make New Zealand a place where everyone gets a fair go—a plan called Mind the Gap. It includes a tax-free threshold of $10000 which would benefit everyone but it would give the most help to the New Zealanders who need it the most: the low-income earners. Mind the Gap also suggests giving every family a reasonable amount of electricity at a fixed low rate so that they can stay warm and healthy. Under a progressive pricing plan additional power would be charged at a higher rate so it would still pay to save power. Again this measure helps all of us but it has the biggest positive impact on our poorest families. 
Those are just two of eight practical and fiscally responsible steps described in Mind the Gap. Measures such as those can address the social deficit that this Government has inherited. Instead John Key chooses to concentrate on tax cuts that help the wealthiest ahead of the neediest. John Key’s Government chooses to dishonour the Treaty of Waitangi by ensuring that Maori remain in poverty. 
The eight-point plan in our Mind the Gap package is part of what we have called a Green New Deal for New Zealand. It sits alongside two economic stimulus packages that the Green Party released last year—packages that offer practical solutions to our economic environmental and climate crises. Green New Deal solutions tackle all these pressing problems at the same time. Green New Deal solutions account for the fact that these challenges are global in nature. Green New Deal solutions see opportunity and lay out a practical path to prosperity. The most high-profile of our Green New Deal solutions is the $323 million home insulation fund which has already made 40000 New Zealand homes warmer and healthier. It is evidence that we offer practical answers to New Zealand’s problems. Indeed we have a surplus of solutions to offer to a Government in deficit. 
As well as having a vision deficit a fiscal deficit and a social deficit the Budget deepens our environmental deficit. We are currently clearing native vegetation at the fastest rate since European colonisation which is an extraordinary fact. We are in the middle of a biodiversity crisis in this country a crisis caused by us. The key reason for that loss of native vegetation is agricultural intensification according to Landcare Research. We know that a key driver of agricultural intensification is the rapid increase in rural land values. Rural developers are seeking the tax-free capital gains that come with dairy conversions and dairy corporations are pushing land harder in order to make the interest payments on the big loans. A capital gains tax would put downward pressure on rural land prices and it would take some of the pressure off our land and off our biodiversity. 
Agricultural intensification is also driving the desperate decline in water quality across our country. Drinking water for rural towns like Dunsandel is polluted by dairy corporations. Rivers are being dammed and drained for irrigation and the water is being replaced with runoff thick with faeces and fertiliser. We have health warnings now that newborns are at risk of nitrate pollution. 
Hon Maurice Williamson 
: This speech should have a health warning. 
Dr RUSSEL NORMAN 
: The Government members think it is funny that our infants are now at risk of nitrate pollution because the water has been so polluted by nitrate from dairy corporations. Well the Green Party does not think it is funny. The Government might think it is funny that they are polluting our waterways to such an extent that it is dangerous for our children and infants to drink that water. The Green Party does not think it is funny; we think that we should do something about it. The Government does not care. The Government is giving funds to irrigation companies in order to expand irrigation in New Zealand so that we can pollute our groundwater even further. Well the Green Party does not think that is funny; the Green Party thinks that is wrong. 
This Budget does nothing to address New Zealand’s environmental deficit. There is no capital gains tax there is no charge for using the public’s water for private profit and there is no charge for pollution. In fact the Government grants for irrigation schemes subsidise the destruction of our rivers and aquifers. How about that? We are now passing a Budget where taxpayers’ money will be used to subsidise the destruction of rivers and aquifers. This is environmentally tragic and it is economically stupid. Likewise the Government’s plan to subsidise greenhouse pollution to the tune of $100 billion over the next 40 years according to Treasury estimates is also environmentally tragic and economically stupid. 
The Greens have shown how we can make a 30 percent reduction in our greenhouse emissions put our economy on a competitive footing to trade in a global economy where carbon matters and do our bit to secure a safe future for our children. Instead John Key’s Government has locked New Zealanders into subsidising our biggest polluters. The more they pollute the more we pay. We teach our children that if they make a mess they should clean it up. But John Key’s lesson to industrial polluters is that there is no accountability for them. Their mess is our problem. They have little incentive to cut emissions through smarter technology. National will keep hidden how much taxpayer money subsidises each individual polluting company. National will publish the welfare details of a couple of mums on the domestic purposes benefit who upset Paula Bennett but it will not publish the details of billions of dollars worth of corporate welfare handed out to greenhouse polluters. John Key’s Government will no doubt also remain silent on the 27 percent cut to environmental research in this Budget. 
The Green Party will not vote for this Budget but we respect the Minister of Finance and acknowledge his hard work. As a Minister who takes his responsibilities very seriously he no doubt argued for a capital gains tax. We extend our sympathies that he lost out to his Cabinet’s more conservative instincts. The result is a Budget that takes our country in the wrong direction. It adds to the nation’s fiscal environmental and social deficit and has a terrible deficit of vision at its heart. It adds to the fiscal deficit and takes away the sovereignty of future generations by borrowing to pay for tax cuts that heavily favour the wealthy borrowing for Steven Joyce’s pet holiday highway projects and borrowing to subsidise polluters. It adds to the social deficit by entrenching inequality and locking our society into a further cycle of poverty crime and illness. It adds to the environmental deficit and takes away the chance to enjoy the wilderness of Aotearoa New Zealand. The Green Party will not vote for this deficit Budget. 
Hon RODNEY HIDE (Leader—ACT) 
: 
 The ACT Party is proud to be part of this Government. We are proud to support it on confidence and supply and we are pleased to vote for this Budget. Along with the majority of all Kiwis we are pleased that we have a Government that is addressing the scandalous abuse of taxpayers that we saw over the past decade. 
We are pleased that we finally have a Government that understands that every dollar that it spends either comes from some hard-working taxpayer or is an attempt to put the tab on our children and grandchildren. We are staggered that after 9 years of grotesque wasteful spending Labour members Phil Goff and Darren Hughes have the cheek to stand in this House and urge yet more spending and more borrowing. 
Hon Darren Hughes 
: A picture of restraint! 
Hon RODNEY HIDE 
: The answer to the debt problem I say to Mr Hughes is not more debt yet that is Labour’s only solution. 
We are pleased that we are seeing action across a wide range of portfolios. The previous Government did nothing about leaky homes even when the global boom blessed us with fiscal surpluses but the current Government is addressing this problem. We are fixing the financial crisis in accident compensation we are getting better value for money in health and we are addressing our poor infrastructure building the roads that are essential to moving our people and our products around. We are looking at common-sense options to utilise our mineral resources better to give jobs and wealth to New Zealanders and to help fund essential social services and we are cutting red tape. We are getting more transparency and more accountability in local government and the Government is addressing longstanding problems in Auckland—issues that the previous Government ducked. We are creating one strong voice for Auckland. Because of ACT’s “three strikes” legislation we are sending a message as a Government that repeat violent crime will not be tolerated. This Government will work to keep our communities safe from the violent predators. 
This Budget is a welcome attempt to get New Zealand’s fiscal problems under control. The Minister of Finance is to be commended for his attempts to restrain Government spending. In just one term of Government he will leave New Zealand in much better shape. We should contrast that with the previous Minister of Finance’s legacy which turned out to be a tsunami of debt. As the cyclical economic decline came Labour increased spending at an even more frantic rate to forestall its political decline. It was irresponsible foolish reckless and entirely typical of Labour. 
I commend the moves to structure the tax system to encourage work and savings but I have to say that the ACT Party would prefer to do more. We would prefer to attack wasteful spending more vigorously because there is still plenty of it. If we did so we would not have to match income tax cuts with tax increases elsewhere and all New Zealand households would be better off. We need more competition and choice within the vast creaking and crumbling State monopolies that dominate our health and education sectors. We could look to the new British Government which is about to introduce ACT’s education policies. 
Although there is much to commend in this Budget and much more yet to do there is one gross and glaring failure. There is one elephant in the room which threatens to undo all the good work that is being done by Government Ministers. We are tuning up the car for peak performance—putting on new tyres getting a tank full of gas and removing any aerodynamic impediments—but someone has locked the handbrake in place. That handbrake is the emissions trading scheme. The rest of the world—every one of our trading partners—has that handbrake off but we have it locked firmly on. We are the only country with an “all gases all sectors” emissions trading scheme. 
Hon Dr Nick Smith 
: What about the European Union? 
Hon RODNEY HIDE 
: Dr Smith calls out: “What about the European Union?”. Well he knows that that applies only to carbon dioxide. He knows that it does not apply to agriculture. He knows that it does not apply to households. He knows that it does not apply to small business. He knows that it is riven with so many exceptions and so many outs that it is hardly an emissions trading scheme at all in practical effect. 
Hon Georgina te Heuheu 
: Why are you worried about it? 
Hon RODNEY HIDE 
: Well I am not worried about the European emissions trading scheme; it is the one here that worries me. Our emissions trading scheme worries me. Georgina te Heuheu is absolutely right. 
The only thing that we can say about the National Government’s emissions trading scheme is that it is not as stupid as the one that Labour had but it is still a damaging and incomprehensibly foolish imposition on our fragile economy and our hard-working export sector. It is stifling our ability to create jobs and to generate higher incomes for working people. Having an emissions trading scheme here but not in Australia will stop our ability to catch Australia and will see more of our young people depart across the Tasman. The emissions trading scheme is a folly on the scale of past National-inspired disasters. This is up there with Rob Muldoon’s attempts at central planning and it matches and surpasses Bill Birch’s disastrous Think Big. 
The emission trading scheme is an act of total financial economic and environmental folly. It will take over $1 billion from struggling households and businesses and bestow that wealth on forest owners whose forests were planted long before the emissions trading scheme was ever contemplated. Have the foresters had too much of an influence? Absolutely. Has the fox been in the hen house? Yes and we know for sure that farmers and other hard-working Kiwis have been in the outhouse. The costs are about to hit on 1 July this year. The emissions trading scheme is an assault on the agricultural sector. We will have higher energy costs and it will bite into the profitability of all our processing industries. It is a bigger hit than the increase in GST. 
The ACT Party opposes the emissions trading scheme and will continue to oppose the emissions trading scheme. I am pleased to say that the membership of the National Party from one end of the country to the other opposes it. Two Saturdays ago the central North Island National Party conference was attended by 300 delegates. They passed a remit to defer the emissions trading scheme. The Manurewa and Tamaki electorates are proposing a joint remit for the northern regional conference of the National Party to defer the emissions trading scheme and I say to those National Party members: “Good on you! Keep at it!”. They should make their employees particularly Dr Nick Smith listen. They pay his wages; they support him in this Parliament. 
We can stop this madness we can stop this self-inflicted wound and we can stop the handbrake on growth jobs and incomes. I say to the brave decent and honest National supporters who are simply urging their party to do in Government what it promised in Opposition—to align with Australia’s policy on climate change but not get ahead of it—that we in the ACT Party are for them. In fact if those members gave their support to the ACT Party they would get the National Party that they thought they voted for. 
Hon TARIANA TURIA (Co-Leader—Maori Party) 
: 
 If ever a political speech was made to get the votes away from National I would have to say that was one of them. 
The Maori Party joins with the Government today to congratulate the Minister of Finance on his leadership in trying to chart a pathway forward in this 2010 Budget statement. A challenge that we in the Maori Party face every day in this House is to lay the w’ariki for the long term and to create the foundation for the generations to come. We have every reason to believe with this Budget and the emphasis accorded to Whanau Ora that this Government is prepared to invest in that foundation. 
Whanau Ora is evidence of a Government prepared to back w’anau families and prepared to let the people determine their own solutions. This Budget has given a clear direction to providers and agencies alike that we want to see outcomes that derive from families having real ownership of their solutions. The transformation that we seek through this approach is that in building w’anau capability and nurturing resilience we are restoring to families that sense of collective responsibility to take care of their own. From the Government’s perspective $134 million is an investment in outcomes achieved for w’anau for providers and we believe for the nation as a whole. But most of all this is an investment in how they do it—how we make the difference by placing trust in people. The Minister of Finance has laid out the challenge for Aotearoa which is emerging from the sharper edges of a global recession. We have an opportunity as a Parliament either to sink further into a cycle of ever-spiralling debt or to take some initiatives to back ourselves. 
The changes that the Budget brings with it—and I am thinking particularly of the tax impact—will not be universally popular despite the acknowledgment from Mr English that at all taxable income levels tax cuts will more than offset the GST rise. We know that the biggest challenge will be encouraging our constituency to look more broadly at the whole picture of the Budget rather than focusing on one measure in isolation. I am reminded of the wisdom of our rangatira from Whanganui Dr Whakaari Rangitakuku Metekingi who told us “Ko te pae tawhiti whaia kia tata ko te pae tata whakamaua kia tina”. It means “Seek out the distant horizons; cherish those that you attain”. The grim reality is that we are in a situation in which we have been spending more than we earn. If the horizons we seek are a stronger economic outlook—a future in which our tamariki and our mokopuna will achieve the jobs the incomes and the living standards that they aspire to—then we must be prepared to take bold action now. 
Lifting long-term economic performance will require a careful balancing of measures of restraint and of support. But it is not as if w’anau Maori are not used to the concept of making the most of meagre resources. The mastery of Maori in managing massive crowds through tangi w’anau reunions or events such as the koroneihana poukai iwi festivals and the Ratana Church celebrations is legendary. Our Maori incorporations have acquired a distinctive reputation for being conservative by nature and at a w’anau level making do with what we have is part of our history. 
But we do not resile from a major issue that neither National nor Labour have ever responded to well which is the challenge to close the gaps. We have constantly argued for a more equitable society where social and economic justice count for something. In our coalition agreement we made the call to eliminate poverty and we will not resile from that challenge either. So we have advocated ferociously for this Budget to protect the most vulnerable and for an immediate lift in benefits superannuation student allowances and Working for Families to offset the GST increase. 
Some aspects of this Budget will help to focus on growth to help our families to get ahead. There is allocation of new funding to grow Maori productivity and export growth and support Maori innovation. The $4.5 million allocated for skills and training for Maori in the primary sector and Maori innovation and the $4.5 million to support initiatives to strengthen and promote Maori tourism are key achievements for the Minister of Maori Affairs and will help to build the recovery that we need. There is $20 million over 4 years for the Maori Innovations Fund in Vote Health which will support Maori service providers with funding and resources that they need to build and implement innovative Whanau Ora services. 
The Housing Innovation Fund has been lifted with another boost of $20 million to extend the fund for another year thereby growing the supply of affordable housing for w’anau. The emphasis on the building blocks for families is also evident with an additional $16 million for grants and loans to support social and affordable housing. The additional $24 million to grow the Warm Up New Zealand: Heat Smart home insulation programme is immensely important to our families. The Maori Party is very proud that we were able to increase the number of low-income households that will benefit from this scheme by at least 8500 families. That is about making a lifetime difference to every aspect of w’anau well-being including health education and employment participation. 
In the disability sector the lifetime difference has been supported through the $1.5 million invested in promoting accessible housing for disabled people through the Lifetime Design Standard. It will also be supported through the $3 million that has been allocated to improving attitudes towards disabled persons and the $2.34 million invested in promoting protecting and monitoring the rights of disabled persons. A key priority for me and this Government is to ensure that the voice of disabled persons is heard and this Budget does that. Although there is $93 million more for disability support I particularly draw attention to the very substantial injection of an additional $20 million over the next 2 years for home modifications and equipment. This funding will have a considerable impact on the waiting lists and will mean that people can access equipment and home modifications much sooner than they can now. Although this is fantastic there is so much more that we need to do and it will remain a key priority for me to continue this work. 
We welcome the injection of $90 million into community-led participation in early childhood education. We believe that this will have particular relevance for Maori and Pasifika families. The increase of $48 million for the Youth Guarantee scheme will help our rangatahi to go forward on a more secure footing. I know that Dr Sharples is particularly pleased about the $12.6 million that will enable kura to benefit from specific and specialised Maori medium assessment tools which will tell us whether any difference has been made. I am particularly pleased with an initiative within the community and voluntary sector to support w’anau to access the information highway through $7.9 million to increase the Computers in Homes and the Computer Clubhouse initiatives. 
Finally Budget 2010 is about putting the support where it is most needed and so I also acknowledge the initiative pioneered by Dr Sharples with close to $20 million set aside for Whare Oranga Ake—rehabilitation centres that have been founded on kaupapa Maori which are available to everybody to help pre-release prisoners with their re-entry into their communities. The Minister of Finance has talked about the goals of economic transformation. For the Maori Party we see this Budget as about a transformation of another kind: the transformation of attitudes. It is about an attitude that backs ourselves an attitude that supports potential an attitude that is about being self-sustaining and in charge of our own destiny and a Government attitude that trusts family and community to know best what their needs are. We are in this for the long haul. It is in that context that we the Maori Party support Budget 2010 for investing in the future for the next generation nga taonga tukunga iho. 
Hon JIM ANDERTON (Leader—Progressive) 
: 
 What is the Government saying with today’s Budget to families on low incomes? Let them eat cake—that is what it is saying. It says not to worry about an increase in GST and rising food prices because the rich eat more than the poor so they will pay more in GST. Is that meant to make low-income families feel better? They might not be able to afford to buy food but just think of the GST they are saving by not eating! The rich have a choice if they want to spend more money and pay more GST; they can choose whether to upgrade the Mercedes or to buy another boat. Those on lower incomes cannot choose whether to eat. What is John Key saying to New Zealand families struggling to pay the bills and to make ends meet on low incomes? He tells them to stop being envious. Well I say to Mr Key that they will not be envious; they will be angry like I am. 
Are New Zealand families more or less equal after this Budget? They are less equal and shame on the Prime Minister and the Minister of Finance and on all those who support those Ministers. After today’s Budget the wealthiest New Zealanders will take home thousands of extra dollars a week compared with those on average incomes. People like Telecom’s chief executive officer who earned $7 million last year will get a tax cut of $6608 per week. State sector chief executive officers who earn more than $600000 in some cases will get a tax cut of nearly $500 a week. However if one earns $50000 after one pays more in GST at the supermarket alone one will take home about $5 a week. The chances are that that $5 will be wiped out by inflation any time soon. Is a chief executive officer who got a $1000 a week pay rise last year really the highest priority for a $700-a-week tax cut this year? 
New Zealand is now on a par with the United Kingdom which has one of the most entrenched income gaps between rich and poor in the world. Our ancestors came to this country to get away from that kind of inequality. John Key is determined to bring it back from his speculating years overseas. Others might be taken in by the Prime Minister’s rags-to-riches story but not me. I remember that he helped to make a pot of money speculating against the New Zealand dollar in the 1980s at a cost to New Zealand of $700 million. Guess what! At the same time New Zealand’s increasing rate of income inequality became one of the worst in the OECD. Over the same period Australia closed the income gap between rich and poor. Mr Key wants us to emulate Australia but he goes in exactly the opposite direction. 
Income inequality widened again under National Governments in the 1990s—I will not mention the Governments in the 1980s—and it started to get better during the period of the Labour-led Governments in the 1999-2008 period. Mr Key misled the House yesterday when he said that income gaps between rich and poor “became worse under the previous Labour Government”. I say to Mr Key that they actually became better and they are set to become worse under this National Government. I will table the facts after this speech to prove just that. Here they are: under a Labour-Progressive Government between 2001 and 2008 everyone became richer even Mr Key but those on low and middle incomes increased their wealth the most thanks to the Working for Families tax break. We closed the gap; National will again widen it. 
The Prime Minister also said yesterday that it was a terrible injustice that 10 percent of the wealthiest New Zealanders pay 44 percent of the tax. He used to invite New Zealanders to go to Australia to pay less. But what is the truth of that? In Australia the top 10 percent do not pay 44 percent of the tax; they pay 46 percent of the tax. Should we all go to Australia and pay some more tax? Where does Mr Key come from? Does he read anything? It turns out that most countries do exactly that: those who earn more pay more tax because they earn a higher share of income. That is what is called a progressive fair tax system. I do not think that Mr Key has ever heard of it. 
John Key is no Robin Hood. I saw  
Robin Hood 
 the other night; John Key looks more like the Sheriff of Nottingham to me and this is the Sheriff of Nottingham’s Budget. Will the average New Zealander be better off after this Budget from the “Sheriff”? No because they will not be getting the lion’s share of the tax cut; the top 10 percent of income earners will. Can members guess who got the lion’s share from the last round of tax cuts by the National Government? The same top tax earners. Has the penny dropped yet? If people are not on a high income this Government is not interested and will not help. Some might have voted for them in 2008 but in 2011 they can make this National-led Government a one-term Government—the first one since 1975—and I say good riddance to them. If New Zealanders are on an average income and have aspirations to do better they can forget it. This Budget puts reinforced glass into the glass ceiling. This Government is showing its true colours today. It does not want our people to prosper; it wants them to know their place. It does not want them to be envious; it does not want them to worry about buying any food because they will be saving some GST for goodness’ sake! This Government is out of touch with the way in which poorer and low-income people live in this country. 
Will more children be lifted out of poverty after today’s Budget? The answer is no. A recent Unicef survey of the well-being of children put New Zealand almost last—24th out of 25 countries. It measured immunisation levels infant deaths and early death from injury and illness. The Ministers have laughed at Greece over recent times. It is collapsing the streets are on fire and the people protest. But do members know what? It is way ahead of New Zealand when it comes to looking after its kids—way ahead. A respected professor of epidemiology in New Zealand said recently that “ … in New Zealand social injustice” which means income inequality “is killing and maiming our kids on a grand scale.” What do we mean by that? We top the scales for OECD rates of whooping cough rheumatic fever pneumonia and other diseases in children. 
I ask whether these tax cuts to the richest New Zealanders help any of that. The answer is that they do not; they make it worse because the Government denudes itself of income to do it. We spend less than the OECD average on child health and the only thing that will change as a result of this Budget is that this appalling situation will get worse. Twenty-eight percent of our children still live in poverty. The Government that I was proud to be associated with lifted 100000 kids out of poverty and we were heading in the right direction. This Budget goes in exactly the opposite direction. I was disgusted to hear the backbenchers in National clap for the Budget. They do not understand what they are doing. It is absolutely disgraceful. This rate started to decline under the last Labour-Progressive Government for the first time in decades. As I said Working for Families lifted 100000 children out of poverty. 
Senior people in the medical profession know what the problem is. Two professors of child health wrote to me yesterday—and I think they wrote to all other parliamentarians—saying that they were absolutely embarrassed by the fact that things have got worse for kids on their watch. They were begging the Government not to make them worse this time but they will be deeply disappointed. I was touched by that letter. 
How do we get rid of poverty? We increase people’s incomes. We give people decent wages and jobs. Will there be more jobs after today? Will there what! There is nothing in this Budget to create new jobs. Where on earth does the Minister of Finance gets his figures from? How many jobs were created by the Prime Minister’s great cycleway from the north to Bluff? The answer is none—not one single job. How many jobs have been created by the amount of money invested in research science and technology which we provided $2 billion for through Fast Forward? The answer is not one cent in the 18 months since this Government was elected. 
This country does not have a tax problem as we have one of the most modest income rates for low to middle-income earners in the world; it has a wage problem. There is nothing in this Budget to fix that at all. If John Key thinks that cutting the top tax rate will stop young doctors and entrepreneurs from going overseas he is dreaming. Australia’s top tax rate in 45c in the dollar and we have already discovered that the top 10 percent pay more tax there than they do here. Yet is that a disincentive? John Key should ask himself why he left the country to go into the world of international speculation. Did he leave to avoid our high taxes? I do not think so. I think he left to get more money. He succeeded and I say: “Good on him.” But tax cuts for the wealthy will not increase the wage or incomes of ordinary New Zealanders. Will the economy grow as a result of this Budget from the “Sheriff” today? No. There is nothing in this Budget for increased exports. The Government is dreaming if it thinks otherwise. 
I will wind up. This Budget has not turned out to be a smiley Robin Hood Budget; it has turned out to be a nasty Sheriff of Nottingham Budget. This Parliament should be ashamed to have received it today. 
Hon PETER DUNNE (Leader—United Future) 
: 
 The best way to create a sustainable economy that deals with poverty that deals with disadvantage and that gives all the things that the previous speaker Jim Anderton and others have said we ought to be providing to people is to have one that is funded on a sound basis. The reality is that until this Budget there were real questions raised first by the Tax Working Group and second by some of the actions taken in years gone by that put the long-term viability of our tax base at risk. 
Let me give the House an example. With the benefit of hindsight what some of us suspected at the time to be true has been proven to be correct. The most disastrous tax decision in the last decade was the previous Government’s decision to hike the top tax rate in December 1999. The consequence of that has been as follows. We have seen a huge explosion in the use of trusts for income-sheltering purposes. The calculation has been that that move alone driven by that differential in the tax rate has cost the revenue around $300 million a year. That is $2.7 billion lost over the last decade as a consequence of that policy shift. But it gets worse. A lot has been said about loss attributing qualifying companies and how they have become another diversionary tactic along the way. The growth in loss attributing qualifying companies in the same period has been over 240 percent. We now have in the order of 130000 loss attributing qualifying companies in New Zealand. The value of their tax losses is now $2.3 billion which is 400 percent higher than it was at the start of the decade. If we put those two figures together we can draw the reasonable conclusion that the net consequence of Labour’s hiking of the top tax rate in 1999 has been a $5 billion revenue hole for the New Zealand taxpayer. 
The speaker who preceded me Jim Anderton asked why we were not doing more to alleviate poverty. I would love to do more to alleviate poverty. I would love to give a bigger boost to child health. But when we have a $5 billion hole to fill it becomes a little difficult. And it gets worse. If members listened to the Leader of the Opposition this afternoon they would have heard that he proposes to restore the hole. He is opposed to the cut in the top tax rate. He would restore it to what it was and set the whole process off again. We heard him and also Russel Norman the co-leader of the Greens say that coming in alongside that would be a capital gains tax. We have a situation where members on that side of the House say that this Budget is all doom and gloom it is terrible people will be punished etc. and to vote for them to have the top tax rate go up a $5 billion hole in our revenue and a capital gains tax as well. That is what does not add up; that is what does not make sense. 
I say to those who advocate a capital gains tax because it is efficient that it is efficient in the sense that it captures just about everything but it is not efficient in terms of producing revenue. I heard the Greens say the other day that with the $4.5 billion we would gain from a capital gains tax we could do all sorts of marvellous things. I have a couple of points about that. That would probably be over a 10-year period because it assumes that assets are moving all at the same time and actually at a maximum of about $450 million a year it is not the huge windfall that people make it out to be. 
As a result of the tax package in this Budget we have a dramatic change in the arrangements that will affect the average New Zealand family. For nearly three-quarters of taxpayers in New Zealand as a result of this Budget’s changes their maximum tax rate will be 17.5 percent. That compares more than favourably with the situation in any other jurisdiction we like to compare ourselves with. We also see a package that supposedly gives more to the rich but actually two-thirds of the cost of the package is dedicated to lowering the bottom two rates of tax. Those rates of decrease are greater than the rates of decrease for the higher rates of tax. So we are seeing a significant shift. 
Let us talk about the GST increase. Yes it goes up to 15 percent from 1 October. Let us contrast that with what happened the last time GST was raised. I was part of the Government that did that too. Unlike now at that time GST was raised with 6 weeks’ notice. 
Chris Tremain 
: 6 weeks? 
Hon PETER DUNNE 
: Six weeks’ notice with no compensation. Members can talk about people being adversely affected by a change that is 3½ months away with compensation and tax cuts on the day it comes into force but compare that with 6 weeks’ notice with no compensation I think it is reasonable to draw a conclusion about who is better off as a consequence. 
I am particularly pleased that the changes that will take effect from 1 October include full compensation for contributors to the Government Superannuation Fund and to the National Provident Fund as well because they are a group that has often missed out in the past when tax changes have occurred. I am pleased they will be addressed in the context of this Budget. 
So there we have it. We have a Budget that makes some significant changes in the disposition of taxes and that gives people more ability to make some choices for themselves about how they spend their income. Surely that is a reasonable proposition. Some may well spend more on food than others; that is a matter of choice. Some may well choose to do other things; again it is a matter of choice as to how one spends one’s income. 
We have heard the suggestion from those opposite that one way of compensating people for an increase in GST is to take fresh fruit and vegetables out of the mix. Let us have a look at that. It is a very arbitrary consideration. It probably would cost about $150 million to do but there are practical problems about how it would apply. Most retailers operate their GST return off their cash register returns. For a start every cash register in New Zealand would have to be recalibrated to take out a fresh fruit or vegetable item. There would be a growing industry in that respect. Also no account is taken of the cost of claiming a GST refund to produce those tax-free items. And it is so arbitrary that other unprocessed items like meat poultry fish and eggs would somehow be in the tax net but not fresh fruit and vegetables. One has only to look at what happened in Australia when this was tried. The great example was that of John Hewson Paul Keating and the ham sandwich. The ham by itself was exempt of GST and the bread by itself was exempt from GST but the sandwich was subject to GST. That is what the Labour Party is proposing to give us as an alternative to a very clear and straightforward system where everyone ends up better off as a result of these changes than they were beforehand. That is the line that cannot be surpassed. 
It is interesting to assess what the public reaction to this has been. At the lock-up this morning and in the various media commentaries subsequent to the presentation of the Budget there has been a generally favourable reaction and it comes around two key points. Firstly there has been surprise at the extent of the movement on the lower two tax rates; people did not expect as big a reduction and they certainly did not expect the move to reduce the company tax rate. Both of those things are positive for New Zealand: they certainly boost our competitiveness; they certainly make it easier for those New Zealanders contemplating a shift offshore to make the choice to stay here; they position our economy well for the future in terms of the uptake that will come from the international recovery; they position our economy well in respect of our traditional major partner and competitor Australia; they send a very clear signal to New Zealanders that what we are about is a better fairer tax system that removes the distortions that have nobbled it for a long time; and they get away from the envy politics that have actually made it more difficult to deliver quality policies in terms of the areas of traditional concern of members opposite. 
So this is a good Budget. It does not do all the dastardly things that were predicted for it; it does a lot of good for New Zealand families and I suspect that it will be well welcomed and positively accepted. 
Hon GERRY BROWNLEE (Leader of the House) 
: 
 I move  
That this debate be now adjourned 
. 
Motion agreed to.