Taxation (Budget Measures) Bill — First Reading Second Reading In Committee 
Taxation (Budget Measures) Bill — First Reading Second Reading In Committee 
[Volume:663;Page:11072] 
Taxation (Budget Measures) Bill 
First Reading 
Debate resumed. 
Hon CLAYTON COSGROVE (Labour—Waimakariri) 
: 
 That speech by the chair of the Finance and Expenditure Committee Mr Foss was— 
Nicky Wagner 
: It was fantastic. 
Hon CLAYTON COSGROVE 
: No it was not fantastic; it was insightful because of what it said and what it did not say. That member started his speech by talking about this Budget and the Taxation (Budget Measures) Bill being fair and equitable. Let us examine what this bill does. My colleague David Cunliffe said a person on the average wage after we factor in the increased GST and inflation at 5.9 percent will be $30 a week worse off than at present. A millionaire earning $1 million a year will be $1000 a week better off. Now I do not know how Mr Foss in his little world explains and defines fairness and equity but in my world that is not fair is not equitable and is not right. 
A person on the average wage apparently—Mr Key said this to every New Zealander and there are many people who are worse off today—should not be jealous of the guys on the top of the heap the super-wealthy. They should not look up at the super-wealthy and be jealous. Well Kiwis in my view are not generally jealous creatures. They will not be jealous; they will feel let down angry and disappointed. I wonder what people on the average wage will think tonight about being $30 a week worse off because at the hands of that crew and its mismanagement of the economy we are about to see some of the worst inflation that we have experienced and the increase in GST. Will people hang on the words of Mr Foss who says this is fair and equitable when they realise that if they were earning a million bucks a year they would get $1000 a week back? I wonder what Mr Foss on the campaign stump will say to those people in his constituency or where he resides who are on the average wage. They will come to his office and say to him that they do not think it is fair or equitable that they are 30 bucks a week worse off because of his mismanagement of inflation and his GST hike. What will he say to them? Silence—silence is deafening. What will he say to them? He will not have an answer because he knows—and if he does not know there is a word that I will not use but it is the word for what he is—that this is not fair and is not equitable. He knows that this is not fair and is not equitable. 
When we look at this Budget we can see what we get. We get inflation going up by 5.9 percent. We get debt skyrocketing. If we look at page— 
Amy Adams 
: What? Skyrocketing—unbelievable! 
Nicky Wagner 
: That’s amazing. How does he get away with it? 
Hon CLAYTON COSGROVE 
: Oh hang on; the squawk-boxes are going over there. Well I invite those members to look at page 30 of volume B.2 and B.3 of the Budget documents. The report states: “Financing new and maturing debt will require the Government to borrow around $240 million every week over the next three years.” 
Amy Adams 
: It’s your mismanagement. 
Hon CLAYTON COSGROVE 
: Hang on; is there a squawk over there? I say to Amy Adams that she should look at page 30. Then the report states: “Debt is projected to reach $68 billion”—that is billion with a “b” for the benefit of the uninformed over there—“by 2014/15.” If we look at the next sentence we see that it is a cracker: “This substantial rise in debt will mean that interest costs more than double.” So inflation is going up debt is going up and interest is going up. What effect will that have on the average Kiwi? 
If we turn over to page 40 of the same document and look at “Figure 2—Finance costs” we see that the financing costs the interest on that massive debt will not even start to decline until about 2021. So we know— 
Amy Adams 
: That’s from the party that wants us to borrow more. 
Hon CLAYTON COSGROVE 
: I invite the member to read her own Budget documents because that is what they say. Debt will be going up inflation will be going up and interest costs will be massively exploding which will effectively mortgage our kids’ future. What is fair and equitable about that of course is that the person on the average wage will be 30 bucks a week worse off but a millionaire someone who earns a million bucks a year will get back a thousand bucks a week. 
So I ask the members opposite to explain their definition of fairness and equity today. I ask them to tell us in the coming days and in the coming hours of this debate how it is possible for people on the average wage to feel that they have been treated fairly or equitably when they are 30 bucks a week worse off which is what the documents show. I would like Government members to explain how they will justify that to average New Zealanders. 
It was said—I think in Muldoon’s time when we had an explosion in inflation —that the biggest thief taking money from our wage pocket was inflation. The biggest thief taking money from the pockets of working men and women was at that time said to be the spectre of inflation. Now inflation is projected to go to 6 percent. So interest is going up debt is going up inflation is going up and the average Joe in the street will be worse off. I would like those members— 
Nicky Wagner 
: Not true. 
Hon CLAYTON COSGROVE 
: Nicky Wagner says no and shakes her head. I doubt whether she has got past the contents page of most of the Budget documents but I give her an invitation. I know that members on this side of the House are quite happy to go out to their constituencies have a group of average New Zealanders on the average wage come in and debate the Budget with the National crew. Let us have a meeting about it. Let us get the responses of people who are on the average wage to the Budget in a hall anywhere in this country—in Otaki in Dunedin in Rimutaka or in Auckland. Let us get a group of them together in a room and ask them whether they feel they have been dealt to fairly and equitably by that crew over there. 
Phil Twyford 
: They’ve been dealt to all right. 
Hon CLAYTON COSGROVE 
: They have been dealt to my colleague said—absolutely; they have been dealt to. 
The only rooms that the members opposite the National crew will be happy and comfortable in are the cabins of the yachts parked in the Viaduct Basin harbour which belong to the people who will be a thousand bucks a week better off. I can see Gerry Brownlee in the galley with his mates who are on a million bucks a year. They will be congratulating Mr Brownlee and saying how wonderful it is that he is giving a thousand dollars a week back to them. But we will not see Gerry Brownlee at the food bank—well we might but for different reasons—talking with ordinary New Zealanders. The food banks in my electorate and around this country are chocker but we will not see Gerry Brownlee and Bill English at the Salvation Army at Presbyterian Support or at the Methodist Central Mission as people rock up day after day trying to make—[ 
Interruption 
] “Evidence” Mr Bennett says. He wants to be given evidence. Well I invite him to come to Kaiapoi and visit Kaiapoi Community Services—old “Cue-ball” in the back row over there—where I will introduce him to some of the lost and lonely people in my electorate. I will introduce him to them and they will be very happy to sit down with that member Mr Bennett and explain to him how life goes for people who are on the bottom of the heap. 
It might be instructive for Mr Bennett to actually meet somebody who is scratching for it. It might be instructive for Mr Bennett to meet a couple of constituents in my electorate one of whom is a builder who lost his job. His wife is in two part-time jobs. They have a vegetable garden and grow produce that is better than that of Turners and Growers. They preserve that produce freeze it and do everything else that they can to make ends meet. They have a couple of kids. But that family cannot make it and their mortgage may well be foreclosed. I can tell members that after the Budget today that family of four will not be any better off. They will not feel that they have been treated fairly. They will not feel that the veil has been lifted from politics in New Zealand that there has suddenly been a redistribution of wealth and that they will be looked after. Oh no! 
Nicky Wagner 
: They are. 
Hon CLAYTON COSGROVE 
: So if Mr Bennett and the other member over there whose name I cannot remember want to come to my electorate and meet some of the lost and lonely people—those who live on income that is below the average wage—let alone the people on the average wage who will be $30 a week worse off then I am quite happy to take them around. But they just squawk over there. 
I am sure that Kate Wilkinson a Cabinet Minister who resides in my electorate would not know a poor person if she fell over one. I wonder whether she is prepared to have a public meeting with a group of people on the average wage and to front up and explain to them that she is a Cabinet Minister and that she sat in Cabinet and voted for this package. I wonder whether she is prepared to say that she sold out Waimakariri and the rest of New Zealand and that she did not oppose a thing. I wonder whether she will tell that to the people on the average wage or whether she will swan around the various public houses and clubs in New Zealand where those members over there enjoy the finer things of life. She will feel very comfortable in those places I am sure because she will not be challenged there; she will be congratulated. 
I say to Government members that they should have a good look in the dictionary and see what “fairness” and “equity” mean. They should go and talk to a few ordinary people who are scratching for that now. They should not go and talk in the fashion-ways of Christchurch—no no—but should go and talk to some ordinary people and ask them whether they feel equitably and fairly treated today. Those members should ask ordinary people whether they feel ambitious for New Zealand or inspired by this Budget. Oh no! They feel let down angry and disappointed. 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I stand to speak on the first reading of the Taxation (Budget Measures) Bill. This bill is part of the Government’s overall Budget package and part of the Government’s overall fiscal strategy. I said earlier today in reference to the Budget that in many ways this Budget is a triple-deficit Budget. It runs a fiscal deficit it adds to the social deficit and it adds to the environmental deficit. I appreciate that the Government inherited some deficits; there is no question about it. It inherited a fiscal deficit and with this Budget it is making it worse. It inherited a social deficit and with this Budget it is making it worse; and it inherited an environmental deficit and with this Budget and this bill the Government is making it worse. But it is worth examining some of the particular measures that are being proposed in this combination of tax changes. 
I think that when the Minister of Finance said we should look at the tax changes as a whole he has a point. We should look at the tax changes as a whole. When we look at the impact of the income tax changes which lower the tax rates very significantly and combine that impact with the impact of a GST change we see that the two tax changes together are doubly regressive. When the two elements of them are incorporated—one of which lowers the top tax rates and the other of which increases GST—we get a doubly regressive tax policy and the tax changes announced in this bill will be doubly regressive for that reason. 
We know that GST is a regressive tax because those on the bottom decile spend about 14 percent of their incomes on GST whereas those at the top spend about 4 percent. So GST acts as a regressive tax because it punishes the poor more than the rich. At the same time we know that the changes to income tax will make the tax scale flatter and not as progressive as it currently is. So when we combine the two elements together—the changes to GST and the changes to income tax—we end up with a more regressive tax system. 
That might not be the worst thing in the world if New Zealand did not already start from a position of being one of the most unequal countries in the whole OECD. If we started from a position of massive equity from a very flat income scale then it would not necessarily be a big deal that we flatten the progressivity of the tax system and that we increase GST. It would be a problem but it would not be a big deal. But when our starting point is that New Zealand is one of the most grossly unequal countries within all of the advanced industrialised countries on the planet it does not make any sense to introduce a combined tax package that put together is highly regressive. It is hard to fathom why a Government that is governing a country that is already grossly unequal would introduce a package that increases inequality. 
It is important to understand just how grossly unequal our country is. For example we know that the top 50 percent of income earners earn 84 percent of all the income and the bottom half of income earners earn 16 percent of all the income. Eighty-four percent of all income goes to the top half and 16 percent of all income goes to the bottom half. When we look at those numbers we get a sense of how out of touch the people in this Chamber are. Almost all the people in this Chamber are paid well above the average wage. They have no idea that half of the country earns 16 percent of the income. How else could we pass a tax package that adds to inequality? How could we possibly pass that tax package which National ACT and the Maori Party are proposing to do today? How could those three parties support a tax package that will increase inequality in New Zealand when we already start from a position of being one of the most grossly unequal countries in the OECD? Why would we add to that inequality? 
One of the justifications the Government gives is that it will increase GDP growth. The Green Party is a bit sceptical about GDP growth. We recognise that we live on a finite planet and we cannot continue to grow the use of resources and the use of pollution when we live on a finite planet. There is that small issue that there is only one planet which pretty much every other party in the House struggles to come to terms with. Let us put that to one side in order to just indulge the Government’s argument that it will grow GDP. 
We know that in 1986 the last time there were very significant tax cuts the New Zealand economy in terms of GDP per capita absolutely flat-lined. It flat-lined straight after the biggest tax cut package this country has ever seen. It was a huge cut. We cut it from I think 66 percent down to 33 percent or something like that. We went from a very high percentage down to 33 percent. That was during Labour’s term when Roger Douglas introduced the package. I know that colleagues in the Labour Party do not agree with that any more and recognise the wrongs of their ways back then when Roger Douglas was in charge. What happened after Labour cut the taxes so significantly? GDP flat-lined; it absolutely flat-lined. That was the impact. I am not saying there is cause and effect because there are so many more complicated factors—the relationship between GDP change and income tax rates is very complicated—but we certainly cannot walk away from that and say that if we cut personal income tax rates it results in an increase in GDP because the exact opposite happened. 
Of course the other thing that happened in 2000 was that we increased tax rates. The top tax rate went from 33 percent to 39 percent and what happened? Did the economy in terms of GDP flat-line? No it grew. We had the situation that after the increase in income tax rates the economy grew and after the drop in income tax rates overseen by Roger Douglas who is sitting to my left the economy flat-lined. The evidence is compellingly against the argument that the Government is putting forward. 
The second argument that is put forward is the one around tax avoidance. That is a really interesting argument. The tax avoidance argument says that there are all these people who are using the loopholes in the tax system to avoid tax. Did it never occur to the Government that maybe it should close the loopholes? If there are loopholes in the tax system maybe the Government should close the loopholes. Let us take the example of people avoiding other laws such as the laws around shoplifting. If a whole bunch of people are coming into a shop and shoplifting all the time does the proprietor say: “Well that’s a bit of problem. What we need to do is to drop all the prices and put a fixed charge on everyone who comes into the shop in order to cover the difference.”? Instead of saying we will enforce the rules against shoplifting the opposite is that we say no obviously our prices are too high so we will cut the top prices and because there will be less income every person now coming into the shop will have to pay a little fee at the door. That is effectively what the Government is doing. That is the Government’s argument around tax avoidance. The Government’s argument is that there are people avoiding the tax so what it needs to do is to cut the top tax rate rather than enforce the rules. There was another option here. The Government—the National Party the ACT Party and the Maori Party—had an option other than making our tax system more regressive. The option was to enforce the tax rules as they currently exist. That is an option the Government has chosen not to take. 
I would like to talk briefly about the property tax changes. The Green Party obviously has been a supporter of trying to direct a lot of our savings away from investment property because we have had a speculative boom in investment property. The obvious solution to it is a capital gains tax excluding the family home—we all know that—even though the Government does not have the political courage to do what it knows should be done. There are two parts to the problem with the way the Government has addressed investment property. It is far too weak and will not have the effect we are talking about. David Cunliffe said earlier that loss attributing qualifying companies will be only marginally affected. The other part is that to the extent it puts an impact on rent—and to the extent that it is effective it will have some upward pressure on rent prices—what we have to do is make sure there is a supply of affordable rental properties to account for that. 
The Green Party has a programme for example of massively increasing the number of affordable State houses so that we can deal with the fact that the Government is putting upward pressure on rents which is what this package will do and make sure that there is more affordable housing available through State housing through non-governmental organisation housing and through council housing. Unfortunately in this Budget the Government has slashed to almost zero the amount of money that is going towards new State housing. At the time that the Government is proposing to put upward pressure on rents it has cut all new building of or acquiring of affordable State rental housing. That is just damn wrong. The Government cannot do that. At the one time that upward pressure is going to be put on people’s rental prices to the extent that the Government’s changes in property will do that we should make sure that affordable rental properties are available. This Budget is inequitable. It leaves a social deficit an environmental deficit and a fiscal deficit and this bill is part of the problem. 
Hon Sir ROGER DOUGLAS (ACT) 
: 
 I have recently been reported in the newspapers as giving National three out of 10 for this Budget. 
Amy Adams 
: A bit tough Roger—a bit miserly. 
Hon Sir ROGER DOUGLAS 
: Well it is slightly tough I think but in fact it was not quite what I said. I said that this Budget was being prepared against three trends. The first trend was the fact that New Zealand relative to other countries had been in decline for 40 years and I gave the Government three out of 10 in terms of whether I felt it would make the changes that were necessary. The changes that I felt were necessary were very low taxes—and the Government has gone some way towards that—and the need to introduce competition and private enterprise into the areas of health welfare and education. I knew that would not happen so I gave the Government three out of 10. 
I said on the expenditure front that frankly for 13 years successive Governments have spent way above the rate of inflation. I thought that probably the Government would get a score of six or maybe even seven. I have had to revise that score down to five I am afraid. But on the other hand in terms of the Government’s tax proposals I said that I thought the Government would get maybe four or five and I would certainly revise that up to six or seven. Just what it is overall whether it is 3½ or four I am not sure. Maybe on Tuesday when I speak in the Budget debate I will make that decision. 
If I look at this particular tax bill and at what is in it I would say that there are some good measures. But I think it could have been improved considerably from where it is. I will touch on where I believe it could have been improved. 
The first point I will make is that I do not believe there was any necessity whatsoever to increase GST. I believe that it was possible to have reduced Government expenditure by at least the net amount of revenue that GST will bring after compensating superannuitants and welfare beneficiaries. I say that for a number of reasons and I will give some examples. First of all in a paper that I put out the other day I identified about $3 billion worth of possible expenditure savings which is double what GST net will bring in. If I look at this particular Budget and at items of what I would call corporate welfare—handouts to various businesses organisations and the like—I can see that that comes to about $2.6 billion and I am sure that over the weekend I will find other costs that will take it to over $3 billion. So handouts to corporates subsidies for this and that the emissions trading scheme etc. come to over $3 billion. Again that is double what will come in in terms of the net return from GST. 
The next point I will make is that if I look at page 15 of the Minister’s executive summary in the Budget documents—and this is why I marked the Government down from seven to five—I see that Government expenditure this year rather than flat-lining as I thought it would has actually increased by 9 percent. It has gone up from $64.79 billion to over $70 billion. It has increased by just over 9 percent. I accept and I think it is being fair to the Government to say that almost 2 percent of that 9 percent increase is compensation for the GST increase but even allowing for that the increase in Government expenditure in this Budget is 3½ times the current rate of inflation. I have to say that this country cannot continue to increase Government expenditure at 3½ times the rate of inflation. At some point in time that has to stop. It has been going on for 13 years. We had a Labour Government that simply did not care and got us in a hell of a mess and we need to stop that. That is the first point I would make. I do not believe that GST needed to go up from 12.5 percent to 15 percent. 
What were the other parts of the tax package that I personally do not really agree with? I would not have reduced the 12.5 percent rate down to 10.5 percent on the first $14000 of income. The thing that impacts on people’s behaviour is the rate they pay at the margins—what they earn on their extra few hours of overtime. The rate that is paid is what determines whether a person will do overtime; that final rate is what determines whether people will invest etc. We know that those people who earn under $14000 actually come from the wealthy families of this country so when we reduce the tax rate from 12.5 percent to 10.5 percent we are not in fact helping the low-income earner; we are helping the more affluent—the person who is able to income split etc. I remember that vividly from the time I tried to put in a flat tax rate of 23c and we were concerned about lifting everyone from 15c to 23c. The fact was that 90 percent of the people who were paying simply the 15 percent came from wealthy families. They were the wives husbands or children of people who were earning high incomes. Their families had high incomes. So I would not have done that. 
The other thing that I would have tried to do—and I really do not understand why the Government did not do it—was to align tax rates. I believe that the Government should have aligned the various rates whether of personal income tax corporate tax or tax on trusts at a rate of 30c and then maybe next year it should move the rate down to 29c and move it in the following year to 28c. But at some point in time it is important that the corporate and the top personal income tax rates are aligned otherwise we are simply encouraging people to try to dodge tax payments. 
AMY ADAMS (National—Selwyn) 
: 
 I am delighted to have the chance to stand here on Budget day and speak to the Taxation (Budget Measures) Bill. Today Bill English delivered a Budget that will move our economy from the sluggish underperforming unbalanced debt-driven and consumption-focused economy that the previous Government encouraged and presided over. It sat by with its head in the sand for 9 years while our productive sector went down the toilet. This Budget will move us from that position where we were consistently living beyond our means and put us back on the track to becoming an economy focused on growth. That is what this Budget is about. It is about having an economy focused on growth. 
Why is growth so important? Well for the benefit of members in the House who do not seem to grasp it I say that growth is important because through growth we will see jobs. Growth will create real jobs in this country. Members should not tell me that there is nothing in this Budget about jobs. Growth is what will gives us jobs and this whole Budget is about delivering growth to the New Zealand economy. It will give us not only jobs—and not just jobs in the public sector but real jobs in the productive economy—but better incomes and a higher standard of living. That is what we in the National-led Government want for this country and that is what this Budget is moving us towards achieving. 
Let us look at some of the projections that we have heard today. They are stunning—they are stunning. We have 3 percent projected growth every year for the next 4 years. That is a staggering turn-round for this economy and it is a mark of the success of John Key and this National-led Government. Growth of 3 percent every year for the next 4 years will mean 170000 new jobs—170000 new jobs. That is what Treasury is telling us. That is Treasury’s conservative estimate of what that sort of growth means to this economy. Not only that it also means an average of $7000 a year of extra income for New Zealand families. That is what I came into Parliament to help deliver and I am incredibly proud to be part of a Government that has delivered a Budget like the one we have seen today which will give that sort of growth that number of new jobs and that level of lift in income to all New Zealand families. 
That growth comes about from a couple of very important aspects of this Budget. It comes about through controlling our national debt. Debt is a massive issue as Greece and the UK know. It is their No. 1 issue. Let us just remember that without the changes that this Government made in last year’s Budget and in this Budget by 2020 we would have been looking at net Crown debt of 60 percent of GDP. Now it is projected at that stage to be 20 percent. From 60 percent under Labour’s policies to 20 percent under National’s policies—that is the sort of control that will make a difference in this country. 
That growth comes from supporting business. All we have heard today particularly from the Green Party is how those members would shut down and kill the productive sector. They do not like farming they do not like the productive sector; all they want to do is to shut it down. We are about supporting our industry and supporting growth because that is where jobs will come from. Importantly in respect of this bill growth is about getting the incentives right. It is about ensuring that through our tax system we say to New Zealanders that we will get behind them if they are going out there to work hard and get ahead. We will not be getting behind the consumptive debt-driven economy; we will support Kiwis who are trying to work hard and get ahead. 
Labour spent most of the afternoon trying to tell us that this Budget is about favouring the rich—talk about last resort of the desperate! Let us look at what is really happening. Two-thirds of all the tax cuts delivered in today’s Budget will go to reducing the bottom two income tax brackets. Two-thirds of everything will go to the bottom two income tax brackets. After the passage of this bill 73 percent of New Zealanders will face a top tax rate of no more than 17.5 percent. Nearly three-quarters of all New Zealanders will face a tax rate of 17.5 percent or less. Labour is trying to tell us that it is about a few rich pricks at the top; well it is not. This is about fairness. It is about equity. The only reason that Labour is so angry is that this Budget has left it with nowhere to go. National is delivering to all New Zealanders. We are delivering to low and middle income New Zealanders and Labour knows it. Labour knows it the public knows it and the commentators know it. 
Let us took at what the commentators say. Bernard Hickey today reported that “Labour cannot accuse the Government of delivering a budget for the rich because rich property investors and foreign investors will be hit most by this Budget.” He is right. Tracy Watkins commented: “If the holy grail of budgets is that they under promise and over deliver Finance Minister Bill English can score Budget 2010 as a win. … everyone will be better off.” I encourage anyone listening to this debate not to buy into the histrionics and crocodile tears from across the House because those who know economics know that this Budget today is delivering a fairer more equitable tax system and a stronger growing economy for all New Zealanders and I am very proud to commend it. 
Hon DAVID PARKER (Labour) 
: 
 How one values this Budget depends on how much one values one’s word. On this side of the House members value their word but this Budget has been built on three broken promises which the National Party cannot deny. The first promise was that National would not increase GST. John Key was on camera immediately before the election promising that there would be no increase in GST. That is the first broken promise of this Budget. How does one value that? Well National does not put much value on its word. It lacks integrity. It lacks integrity— 
Craig Foss 
: I raise a point of order Mr Speaker. I believe that under the Standing Orders a member cannot question the integrity of other members in the House. As well as that I take offence at the accusation made by the member opposite. 
Mr DEPUTY SPEAKER 
: The Speakers’ rulings are quite clear that one cannot challenge members’ integrity. I am sure that the member will be able to use some other phrase and I ask him to continue. 
Hon Clayton Cosgrove 
: I raise a point of order Mr Speaker. This is not to challenge your ruling but as I understand it Mr Parker was talking about the National Party— 
Mr DEPUTY SPEAKER 
: I have already ruled and I invite the member to continue. 
Hon DAVID PARKER 
: How does one value one’s word? I value my word highly. National obviously does not value its word. It promised before the election that it would not increase GST but this Budget increases GST. 
National’s second promise was that it would not increase borrowing for tax cuts. That promise has been broken. The Government’s borrowing has increased as a consequence of the tax cuts in this Budget. That is the second broken promise. 
The third broken promise is that National would not cut public services. In particular it promised explicitly that it would not cut early childhood education—in fact it would have made it free. What did National do in this Budget? Audrey Young picked up on this issue in her column today. She stated that it will “save about $400 million over four years in abolishing the top two funding rates for early childhood centres”. That means in those cases a decrease in the subsidy that parents get for their children of about $25 per child per week—$25 per child per week. That is the third broken promise. 
Amy Adams 
: No it’s not. 
Hon DAVID PARKER 
: Amy Adams says that that is not a broken promise. She does not know what a promise is. 
The other thing that needs to be said in respect of the changes to income tax is that we know the projection of the rate of inflation as a consequence of these changes is that next year inflation will be 5.9 percent. As for the income tax cuts that people will get to compensate them for the increase in GST all but the most wealthy people will have them eaten up as a consequence of the increase in the prices they will pay when they go to the supermarket. Rather than being some great boon to people the money will be gobbled up by an increase in their cost of living. Their rents will go up their supermarket costs will go up all of their costs will go up. 
We heard Amy Adams say that the income tax cuts are being fairly distributed but 41 percent of the income tax benefits will go to the top 10 percent of income earners—41 percent goes to the people who already earn the most. New Zealand already has low income tax rates for high earners. That is set out in the Tax Working Group paper that was produced on behalf of the Government. It stated: “The current New Zealand top personal tax rate at 38% is not especially high by OECD standards”. It was already low by OECD standards and this Government is cutting it further for the top 10 percent of income earners. The top 10 percent of income earners will pick up 41 percent of the decrease in income tax. That is just not fair. 
I will say something about the rebalancing of the economy. The Government said that this Budget is all about rebalancing the economy. The Tax Working Group stated that we needed to rebalance the economy away from speculative investment in housing towards the productive sector. Labour agrees with that as an ambition. Until today we were all expecting that there would be ring-fencing of losses so that people would not be able to buy some residential property and offset the interest costs on the loss they make on that rental property in order to decrease their personal income overall. What has the Government done? It has backed away from that. One of the disappointments that Bernard Hickey has with this Budget—and he is right—is it does not properly rebalance the economy away from speculative investment in the housing sector. People can still make those investments in the residential property sector incur a big mortgage cost and offset that against their personal income tax. Rather than closing that loophole the Government has gone a little bit of the way and said that people cannot deduct depreciation costs on buildings that will last for more than 50 years. That is a fair enough step and I do not criticise that but the Government has not taken the more important step of ring-fencing those losses. 
What has the Government done about catching up with Australia? Well the answer is nothing. The growth rates in New Zealand projected for the years out are lower than the growth rates predicted in Australia so the gap continues to grow between New Zealand and Australia. The wage gap between New Zealand and Australia will continue to grow ever bigger and this Budget does absolutely nothing to reverse that trend. 
What has the Government done in terms of encouraging smart business? It has cut the depreciation rates that businesses can claim for investments in high-tech plant and equipment. It has cut depreciation rates so it is going in exactly the opposite way there. 
Fran O’Sullivan wrote a very good column in the  
New Zealand Herald 
 a couple of weeks ago I thought or it might be about a month ago now. She stated that given the high rates of youth unemployment in New Zealand and given our experience last time we had high rates of youth unemployment particularly Maori and Pacific Island unemployment—and the last time we had that in New Zealand was in the 1990s under the Bolger Government and then the Shipley Government—a big mistake made then was that we did not spend enough on training and the people who were on the dole queue ended that period of unemployment without further skills and had got into the habit of sitting on their bums at home. They did not have a work habit. She said that this Budget needed to be judged in terms of what it would do for the training of the large cohort of young people in New Zealand who are currently unemployed. What this Budget does about that is just about nothing. Rather than increasing the amount of funding that is going into training the Government is setting quotas on the number of people who can go to university. People are being excluded from university and we do not have an increase in funding for training for those people who because of the state of the economy and through no fault of their own are stuck on the dole. 
What does this Budget do in terms of debt? It stated that the amount that will be spent on the interest on Government debt goes from $2.5 billion per annum to $5.5 billion per annum. That is a big increase in the amount of our taxes that is being spent on interest. 
What it does in terms of the current account deficit is woeful. We heard the Government say that it will rebalance the economy towards exports. What does this Budget show? It shows the current account deficit going up every year from now on—the current account deficit goes up to 7 percent of GDP. How is that proof of rebalancing the economy? It is not. It is proof of a return to a deficit-based economy so much weighted towards the property sector with not enough exporting. This Budget does not solve that problem. The effect is that by 2014 New Zealand’s total net assets as a country including both Government and private debt will rise to negative 100 percent of GDP—100 percent of GDP. Rather than going in the right direction the deficits from the Government and the lack of movement of the economy towards the productive sector and exports will mean that total net assets will go to negative 100 percent of GDP. 
Lastly I will mention the fact that the position of the Government and the country would have been even worse were it not for the fact that the previous Government reduced debt. Bill English and John Key every time said the previous Government should have had tax cuts not surpluses but that would have led to more inflation. It would have to led to higher interest rates and to a higher level of debt than the current Government has inherited. New Zealand would have been closer to the position that Greece and Great Britain are in and closer to the position that the National Government under Muldoon left the country in with debt at 80 percent of GDP. Instead we reduced gross debt to 17 percent of GDP and reduced net debt to 0 percent of GDP. This Government has got it going in the other direction. 
The Government has not rebalanced the economy. The tax cuts will be eaten up for all but the most wealthy people in the extra costs that people face in rent and in inflation on their food costs. But overall the worst thing about this Budget is that it breaks three promises. 
Hon TARIANA TURIA (Co-Leader—Maori Party) 
: 
 In Maoridom we say “Te po uriuri me te ao marama” which basically means “In the darkest of dark and the lightest of light”. The general concept is like the Chinese version of the yin and the yang—the need to balance and achieve a sense of equilibrium as we take a steady foot forward. It is with this sense of balance that I stand to speak to the Taxation (Budget Measures) Bill. 
The previous speaker David Parker talked about the high unemployment rate amongst Maori and Pasifika and the need for more training. Some in the room will remember that in the 1980s when we had really high unemployment our people knew what it was like to be on the “training-go-round” through access training steps programmes you name it. Did any of those young people get trained in real job skills? No they did not. Why did they not? The union movement would not allow the kind of skills training that needed to take place for those young people—training that would have given them really employable skills in the workforce—because it was afraid that by training these young people in those skills they would take jobs away from those who were working. It is one thing to get into the whole notion of Maori unemployment and talk about skills training and development but our young people want training that will get them into the workforce. They want training and education that will give them the opportunity to improve their life chances and their educational opportunities so that they will not end up always being the last on and the first off in the job market. 
I think it is really important that we had 9 years of plenty yet Maori youth unemployment rates and Pasifika youth unemployment rates were still incredibly high during those years. 
Hon Clayton Cosgrove 
: What a load of rubbish. 
Hon TARIANA TURIA 
: It is not a load of rubbish. I think it is probably a really good opportunity for those who are shouting at me in the House to go back and look at those figures. Maori youth under 24 years of age had a high unemployment rate in a time of plenty. It is manifestly evident that something is wrong with the state of the nation when we can sit back and think that really a high unemployment rate amongst young Maori people is OK. It is not OK. If we do not have those young people contributing to the economy in the way that they should be in productive work we will be in serious trouble with this ageing population so that needs to happen as quickly as possible. 
I will move off that take. Something is wrong when New Zealanders are crowding the property market and feeding their own wealth yet no new jobs are resulting from it. Something is wrong when our economy is trapped in excessive debt and cycles of long-term borrowing and business and investment confidence is declining with it. We do not want to pass on this history of unmitigated spending and debt to our young. 
We will be supporting this bill in its entirety as is the expectation of our coalition agreement with National and in doing so we will seek to promote two particular priorities throughout the passage of the debate. The first is that we want to be sure that new tax rates for companies and savings the depreciation in capital contributions the personal tax cuts and the other tax changes proposed in this bill give confidence to people to invest in businesses which can then grow and strengthen the economy and give confidence to employers to employ more people. 
Hon Clayton Cosgrove 
: You sold out your electorate. 
Hon TARIANA TURIA 
: Mr Deputy Speaker I object to the person across the House making the comment that the Maori Party has sold out. I object in the strongest terms possible. 
Mr DEPUTY SPEAKER 
: Is the member bringing a point of order? 
Hon TARIANA TURIA 
: Absolutely. I want an apology. 
Mr DEPUTY SPEAKER 
: The member has taken offence under Standing Order 116; it is a personal reflection on the member. I ask the member to withdraw that comment and apologise. 
Hon Clayton Cosgrove 
: I withdraw. I raise a point of order Mr Deputy Speaker. I think other speakers have ruled on these sorts— 
Mr DEPUTY SPEAKER 
: I have ruled. The member took offence and we take her word for that. She was offended by the comment. I have ruled and that is the end of the matter. 
Hon TARIANA TURIA 
: The second priority is the vital need to guarantee that poverty will be addressed and that household income standards of living and economic performance will indeed be lifted. It is vitally important to us that we do what we can to build our economic recovery and to provide more opportunities for New Zealanders to back themselves. We need incentives in place to strengthen the economy and make a brighter future. But this is not just about the Government tipping the scales to create the balance that we need. This is also about us—about our people and our nation preparing for our future. 
If my colleague Rahui Katene were here she would talk to the House about Whai Rawa. Whai Rawa is designed to provide a base level of savings for all registered Ngai Tahu to support a culture of savings and asset building to encourage and assist Ngai Tahu w’anui to improve their financial situation and knowledge. Whai Rawa is about empowerment and giving Ngai Tahu the ability to create a better tomorrow for themselves and for their children. It is about rebuilding the savings culture that we once believed in. Maori are phenomenally thrifty people who can make a meal spread to feed a crowd. They know how to make the best of what they have in front of them. But also we are a people who focus on the future for the generations to come. In this sense although our people did not like the proposal to increase GST they are also not happy with the concept of leaving our grandchildren burdened by the heavy price of debt. 
The Maori Party entered into coalition with National with the explicit focus that we seek significant outcomes in Whanau Ora through eliminating poverty advocating for social justice and advancing Maori social cultural economic and community development in the best interests of this nation. These are ideals that we hold true to as much today as we did when we signed up to that agreement. Unlike the two major parties of this Parliament we are not afraid to say the word “poverty”. Indeed in our policy manifesto we made the explicit commitment to set a deadline to eliminate child poverty by 2020 and to designate an official poverty line. We will not resile from the challenge of preventing poverty. 
In today’s Budget an additional $1 million is being invested in Maara Kai recognising that community gardens are a key means of encouraging us to live more collectively and to live alongside one another restoring our families to being the gardeners the hunters and the gatherers that they once were. In today’s Budget we also have seen honoured one of our policy goals to raise core benefit levels. 
Over the past few months as the policy thinking around this Budget has evolved all of our MPs have hit the road taking the challenge of the tax question to our constituency. I have to say that no one in our electorates was pleased about the proposed rise but there was a general acceptance of the rationale for why we needed to support the tax changes. Primarily this issue is a condition of our coalition agreement and to that extent our constituency told us clearly that they want us to continue to have the influence that we do. But other members can understand the precarious financial position that we are in: the situation that on average New Zealanders are spending more than they earn—some 22c more than every dollar we make. 
I come back to the notion of “Te po uriuri me te ao marama”. We believe in balancing up the scales and making things spread. It is in this light that we support this bill. 
DAVID BENNETT (National—Hamilton East) 
: 
 I congratulate the Minister of Finance and the Prime Minister today on an excellent Budget. It has been well received by the public and the commentators of New Zealand. It is a Budget that shows leadership in the economic and the political fields that this country has lacked for many years. I bet members that the headlines in the  
Sydney Morning Herald  
will read “Why haven’t we got a John Key and a Bill English to take our country forward?” like this country has been taken forward today. People around the world will be looking at New Zealand as an example of how to build a stronger country of how to create economic management and of how to have reform in our tax system which has been long overdue. It seems crazy that in this place Labour with its position of looking after the downtrodden and those on low incomes did nothing about property investors for 9 years. They did nothing about that and it came only to us. We had to make that change to taxation which delivered the right incentives for New Zealanders. 
I look forward to the young people of New Zealand knowing that they need to get an education that they need to work hard and that the opportunities are there. We will give them the rewards. We will make it worth their while to do the right things in life. That is the signal and the incentive this Budget sets. 
I thank our coalition partners because they see the big picture. They do not see the small petty-mindedness of what one needs to do to win elections; they see that we need to build a stronger people so that we can have a stronger country and that their success will be our success in building that country in the future. We look forward to that. This is a tremendous day for New Zealand. It shows that we can get out of recession quicker than we thought that we can create tax change that is meaningful and that delivers the future and that we can look after our public services and health and education which need investment. This is a great day for New Zealand a great day for National and something that all New Zealanders can be very proud of. Thank you. 
STUART NASH (Labour) 
: 
 I want to deal with some facts. The Maori Party member Tariana Turia has sold Maori out. Seventy-three percent of the people in that member’s electorate earn under $40000 a year. If her support for the Budget is not regarded as selling Maori out then I do not know what would be. That party is about to vote in a Budget that will increase GST from 12.5 percent to 15 percent whilst it has a member’s bill which was just pulled out of the ballot that proposes removing GST from healthy food. Now that is hypocrisy if I have ever heard it. 
Mr DEPUTY SPEAKER 
: The member cannot use that word. I ask him to withdraw it. 
STUART NASH 
: I withdraw. 
Tariana Turia talked about high Maori unemployment. Well let me tell her about high Maori unemployment. When Labour took over in 1999 the Maori unemployment rate sat at just about 30 percent. The previous Labour Government took it down to a 32-year low of 12 percent. Does the member know what the Maori unemployment is at the moment? It sits at 20 percent—it sits at 20 percent. The previous Labour Government was the first Government to bring down the Maori unemployment rate to a level that was even close to becoming acceptable—in fact it was not acceptable at all. Does that member know what this Budget will do? This Budget will be the worst Budget for Maori since the “mother of all Budgets” in 1991. This Budget is a travesty and for that member to stand up and say it is a wonderful Budget is a complete sell-out of Maori. Seventy-three percent of the people in her electorate earn under $40000 a year. 
Mr Bennett over there talked about the downtrodden corporate property investor. The downtrodden corporate property investor—now that is a strange one. I do not know what sort of electorate he lives in or where his downtrodden people are but I can tell members that the really downtrodden people in this country will be sitting back and asking how this Budget will help them when all it delivers is an extra $16 a week or a mere $5 a week extra to those on the median wage after the GST hike has been taken into account. I ask members to remember that 50 percent of Kiwis still earn under the median wage. Those people will receive less than an extra $5 a week in the hand when the Prime Minister will receive $350 a week more in the hand. The chief executive officer of Telecom will receive $1600 a week more in the hand. That is 100 times more—100 times more—than the increase for a person on the median wage. That does not take into account the inflation rate of nearly 6 percent that this Budget creates. This is not a Labour Party figure; this is not scaremongering. This figure is in the Budget documents. It is the Minister of Finance’s figure this 6 percent inflation. That is the bogeyman that Mr English does not want to talk about because he knows that it not only erodes but eradicates the effect of the tax cuts. 
Phil Goff the next Labour Prime Minister and the next Prime Minister of this country has pointed that out. Mr English informed a horrified National caucus—[ 
Interruption 
] We can see them. He talked about inflation. The National members had their statements. The National members were ready to go out and tell people how much better off they were going to be but then Phil Goff told them what inflation would do to the tax cuts. I saw the reaction of the National members in the back row. Those members over there were saying “Oh goodness me. How will I counter this?”. I ask those members whether Mr English told them about the rise in inflation. No he did not tell them about it at all because those members were sitting back saying “Oh goodness me.” As Mr Cosgrove said those members should go to halls full of their constituents and tell them that their Prime Minister will be about $350 a week better off and that they will be worse off but that that is OK. I ask those members how they will sell that. How will they sell that? I would like to see them do that. 
I think the theme song for this Budget should be “(I Can’t Get No) Satisfaction”. That song was about a young man who no matter what he did could not get ahead. People kept telling him that everything was better; there were mixed messages but still there was no joy. That is what this Budget is about: mixed messages from Mr English and Mr Key. They told Kiwis that they would all be better off under this Budget—that this would be a Budget for all Kiwis. It does not matter to Mr English and Mr Key that there is to be $11 billion—$11 billion—in extra revenue from GST over 4 years. They are giving the lion’s share of the tax cuts to the very wealthy to the likes of Mr Key and the chief executive officer of Telecom who will receive $1600 in the hand every week. That money is coming from the 50 percent of Kiwis who earn under $30000 a year or the 75 percent of Kiwis who earn the average wage. But those members say that is OK because Mr Key will receive $350 a week in the hand! 
I do not think there will be feelings of envy from Kiwis about that as Mr Key suggested there would be. I think there will be feelings of anger. They will be thinking “Oh my God we’re being let down again”. Mr Key promised—he looked into the camera and promised—prior to the election that he would not raise GST but he has done that. He said he would not do that but he has done so. That is not nice. It is not fair and it certainly is not what people voted for. 
The first principle of tax legislation is that there should be equity. This is about who carries the burden of tax. I argue that those who are less well off will carry the significant burden of tax through the increase in GST. That is a regressive tax because it is a tax on petrol food electricity and all the items that people need in order to lead a decent life—a life with dignity. GST is increasing at a time when most people are struggling with rising costs and falling real wages. What we have not heard is that Mr English has said to Mr Brownlee that he wants to have increased dividends from the State-owned enterprises. Do members know what that means? 
Brendon Burns 
: Power prices. 
STUART NASH 
: Mr Burns is right. This will be a real winter of discontent. People will look at the Budget tomorrow and think that they have a bit of extra money but they will realise that their power bill will go up by 10 percent. Inflation will erode their tax cuts and their real wages will be eroded. This is not a Budget for the many at all; it is a Budget for the very very few. 
The Reserve Bank Governor Alan Bollard wrote a paper in 1992 entitled  
New Zealand’s Experience with Consumption Tax 
. It dealt with the implementation of GST in New Zealand. He wrote: “in 1989 when GST was increased to 12½% the effect on retail sales and subsequently on growth was marked; after experiencing signs of a pick-up the economy dropped back to recession the following year.” Let us remember that when GST was increased by 2.5 percent in 1998 Kiwis at the top end had received massive tax cuts in 1988. Less than 12 months beforehand the top marginal tax rate had dropped from 48 percent to 33 percent. I wonder whether anyone has asked Dr Bollard what he thinks about the idea of increasing GST. Just as he is managing the economy out of recession this increase comes along. He probably read through the history books and reread his paper with a sense of impending dread. We are borrowing $1.1 billion over 4 years in order to fund tax cuts for the very wealthy at the expense of the many and in all probability at the expense of the economy. It is a dreadful legacy for those who are at school at the moment. 
I would like to point out that last year’s Budget focused on three objectives. The first was to help Kiwis through the recession and support jobs. The Government had a Job Summit and what did that throw up? The cycleway. How many jobs came from that cycleway? Six. Let us forget about that objective because the jobs thing seems to have petered out with a whimper. The second objective was to lift productivity. I understand that a report released today says we have dropped five places in productivity down to 20 percent while Australia has increased its ranking. That one is a failure. The third objective was to keep future Government debt under control. I can tell members that Labour got rid of debt through 9 years of prudent fiscal management. Even Dr Bollard said in his latest statement that the reason that this recession was not as bad in New Zealand as it was overseas was due to the prudent management of the previous Government and the way that Labour left the finances. Dr Cullen’s legacy was set but it has been destroyed in 18 months by this Government. 
I will make one final point in which I will give the perspective of an entrepreneur. This is a case study—a real-world example. I spoke to a very good friend of mine who is one of New Zealand’s most successful entrepreneurs. He is worth $100 million give or take a little. He does not like those guys over there in National by the way. His comment was that the tax rates do not even come into the equation when he is considering a business venture. So Mr Key and Mr English should not tell me that the National Government is cutting taxes in order to stimulate economic growth because that is just not the case. This is a Budget for the very few not the many at all. Thank you. 
PESETA SAM LOTU-IIGA (National—Maungakiekie) 
: 
 I rise to support the Taxation (Budget Measures) Bill for 2010. The previous speaker Stuart Nash asked about facts. I tell that member that the one fact he has not got quite clear in his head is that his tie is an ugly detestable tie and he should not wear it 2 days in a row in this House. 
The member talked about electricity prices going up. 
Hon Trevor Mallard 
: I raise a point of order Mr Speaker. I was waiting for you to intervene on the personal nature of the comments just made by that member about the dress of a member on this side. If we started criticising members opposite for their dress sense you would intervene pretty quickly. 
Mr DEPUTY SPEAKER 
: I am actually quite fashion conscious on some of these matters so I did not take offence. I did not take offence myself but if the member took offence I apologise for not interrupting earlier. Possibly if someone has taken offence our clothing might be something to be mindful of. 
PESETA SAM LOTU-IIGA 
: I apologise to the member. I described his tie in such a way only because he— 
Mr DEPUTY SPEAKER 
: No I have already ruled on this. It has been very clear that exception was taken and I ruled on it. Do not mention it again. 
PESETA SAM LOTU-IIGA 
: This tax bill is about compensating ordinary Kiwis for a rise in GST by cutting personal income tax rates increasing superannuation payments and increasing Working for Families payments and benefits—something Labour did not do last time it increased GST. Labour says that this bill compensates only the rich. The previous speaker wanted facts; I will give him facts. Seventy-three percent of income earners will have a top tax rate of 17.5 percent or less. Two-thirds of the tax cuts will apply to people on an income below $48000—two-thirds. They are low to middle income earners. 
This is a Budget that has delivered for New Zealanders. It builds on the good work that has been done in the past 18 months of this Government. It will secure prosperity for New Zealanders. It lowers tax rates. It allows exporters to get on with producing and selling goods and services overseas. The company tax rate is being decreased from 30 percent to 28 percent. We are encouraging savings through various changes in portfolio investment entity rates and personal income tax rates. This Budget will deliver surpluses sooner rather than later. We inherited a bad economy and a bad recession from the previous Government. This Government is about taking action about investing in New Zealanders’ future and about the prosperity of our people. I support this bill and I look forward to the second and third readings. Thank you. 
A party vote was called for on the question  
That the Taxation (Budget Measures) Bill be now read a first time. 
Ayes 69 
New Zealand National 58; ACT New Zealand 5; Maori Party 5; United Future 1. 
Noes 53 
New Zealand Labour 43; Green Party 9; Progressive 1. 
Bill read a first time. 
Second Reading 
Hon PETER DUNNE (Minister of Revenue) 
 on behalf of the  
Minister of Finance 
: I move  
That the Taxation (Budget Measures) Bill be now read a second time 
. I will not traverse the ground that I covered in my first reading speech; I simply make the observation that over the last year there has been a great deal of public debate about our tax system. The Government has responded to that debate with the measures announced in the Budget this afternoon. It is now time to put the results of that into action so that we have a tax system that supports growth encourages productivity and moves us away from the consumption and distorted investment decisions of the past. 
In order to achieve those purposes this bill introduces what we describe as a balanced packet of changes. Lower income tax rates not only will provide greater incentives for people to work and save but also will help to attract skilled people to our workforce and encourage New Zealanders to stay and contribute to our economy. In this regard it is interesting to note that outside Ireland and Luxembourg we among OECD countries have the highest rate of skilled citizenry living overseas—about one in five New Zealanders. 
Hon Trevor Mallard 
: Why? Why! 
Hon PETER DUNNE 
: There are a number of reasons for that but the fact is that if we want to attract those citizens back we have to have a competitive tax environment in this country and that is what this bill is seeking to establish. The lower company tax rate that it ushers in will encourage productive investment throughout New Zealand thereby increasing productivity and contributing to raising wage levels. Lifting the amount of GST will help shift the current economic balance away from consumption and spending and will channel efforts towards saving and investment. As part of the rebalancing of the tax system certain rules will be tightened and strengthened to make the system more equitable so that everyone pays his or her fair share of tax. In making these substantial changes to our tax system the Government has been mindful of those New Zealanders who will need support as a result of the rise in the GST rate. As has been indicated compensation will be an immediate and permanent part of these changes. 
In summary these are the main features of the tax reforms proposed in the bill. They were well aired in the earlier debate and in the Budget presentation this afternoon. Taken together they offer a fairer more balanced system which will better support the efforts of New Zealanders to get ahead and for that reason I am very happy to commend this bill to the House. 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 I think we can tell when there is real enthusiasm behind the speeches made by the Hon Peter Dunne. He is not one to sit down early especially a third of the way into his speech if he is truly enthusiastic about legislation he is promoting. He knows that the good people of Ohariu will not be happy about the Taxation (Budget Measures) Bill. He knows that the good people of Ohariu know the effect of inflation on their assets. They know that 5.9 percent inflation will not be covered by the extra that they will get as part of this package of measures. The people of Ohariu know that the person who gets $1 million a year and a $985 a week tax cut will be much better off than they are as a result of that. 
The Hon Peter Dunne is sitting next to the co-leader of the Maori Party. I say to Tariana Turia that I have some sympathy with her and the position her caucus is in with regard to this Budget especially the increases in GST. Because those increases are so regressive they will proportionately hit Maori much harder than the Pakeha population generally. There is no doubt that what Mr Harawira was reported in the newspaper this morning as saying was right. I disagree with the fact that he did not front and that his vote did not follow his voice. I had always thought of him as a warrior who would be here who would be around and who would not scuttle off after making comments like that. 
But going back to the legislation I can see the hand of Peter Dunne in it. I think it is fair to say that there is a change to do with middle incomes that he would have had much more responsibility for than John Key or people such as that. I am sure there will be people who appreciate that part of the changes. But what people will see in the end is something that benefits rich people and high-income people much more than those who are on middle incomes. It will be especially bad once Dr Bollard has a look at the inflation. Having myself been involved in a few meetings on this subject with the good doctor over the years I can accept that he will almost certainly accept the 2.02 percent increase in inflation arising from the increase in GST but the other 3 percent or 4 percent is something that he will look at and it will be well outside the requirements for tightening. I have not had a look at iPredict this afternoon but I would be pretty sure that betting on interest rate increases in the middle of this year later this year and early next year has gone up substantially as Dr Bollard has a look at the inflationary effects of this Budget and what it will do to the economy. 
What do we need now? What we do not need now is the choking off of business even more through the increased interest rates that will flow from this taxation bill. The Labour Party’s view on the GST increases has been made very very clear. GST is a regressive tax. It is a tax that disproportionately hurts poorer people. Increasing it hurts them more than it hurts anyone else and these increases will therefore hurt lower-income and middle-income people much more than they do people on higher incomes and people who have a higher proportion of discretionary income. It is sad because I thought there was general consensus across the House that the current GST was a good comprehensive tax. At 12.5 percent it is relatively high by OECD standards. I think we have the sixth-highest level of consumption tax in the OECD. If there was a debate it would have been that at 12.5 percent it is higher than most countries would think reasonable. But I think its comprehensive nature is something that has got support because it is seen to be relatively low and fair. What the Minister of Revenue has done in the legislation he has promoted is start to unravel that. As people see GST going up as they see us heading right to the very top of the developed world for the level of this type of tax we will see the support for it beginning to unravel. 
Clearly the Maori Party led the way on that. I have made my views clear on the Maori Party’s approach. The idea that we exempt all poultry and all vegetables would mean that Kentucky Fried Chicken and chips would become GST-free as healthy food— 
Hon Tariana Turia 
: No. 
Hon TREVOR MALLARD 
: It would under the definition in the Maori Party bill that is on the Table of the House. Kentucky Fried Chicken and chips would be healthy food under its definition. I say to Peter Dunne that the problem is that as he puts up the rate he opens it up to that sort of approach which I think undermines the tax. I accept what the member says—that as he puts up the tax level he opens it up to a number of other suggestions that would not have arisen if he had not taken the leadership in the way in which he has done in promoting this bill. I think it would be better to stay with the 12.5 percent GST rate and to stay comprehensive but the member knows my views on that. 
I think we have three things happening here—and I would be interested in the Minister’s views when he makes his reply. We have some loopholes being closed. I say to the Minister that no one can argue against closing the depreciation loophole; we all know that it is a rort. The changes made to thin capitalisation are again a good thing. I am not there yet on the company tax changes; my view is that the major beneficiaries of those are the Australian banks because for New Zealand companies of course company taxation is effectively a withholding tax and with the imputation credits it is a matter of timing rather than absolute amounts—and I am glad Mr Woodhouse is agreeing with me. So there is not a lot of benefit to New Zealand companies from these changes. The end benefit of the taxation changes is to overseas owners of New Zealand companies. 
In my view the closing of those rorts has effectively given some money to lower-income and middle-income earners in order to offset the increase in GST for them. But the revenue from the GST is what is effectively paying for the massive tax reductions for high-income earners. People on incomes similar to the Prime Minister’s full income will get about $1000 a week. People like the Prime Minister will get about $1000 a week in the hand as a result of these changes. I ask whether we as Kiwis think that is fair. I say to Paul Hutchison that most of his voters would have been happy if the Government had raised the threshold for the 38c rate to say $150000 or $120000. I think his voters would have said that yes they liked that and thought it was fair. When people such as the Prime Minister and a number of his mates are earning—or receiving; I do not want to say that the Prime Minister is earning it—$1 million of taxable income a year do most Kiwis really think that those people should have an extra $1000 a week? No we do not; we think it is fair for them to make a contribution to our system. This is a tax switch bill; it is a switch from the poor to the rich. 
Dr PAUL HUTCHISON (National—Hunua) 
: 
 The Hon Trevor Mallard really does display the huge muddle that Labour members are in. After all what did their leader say about vegetables and GST? Well this is what Trevor Mallard said in April. He said that it was a very silly idea to take GST off healthy food. He said on his blog: “Just imagine trying to define that. And how much of each we are allowed each hour/day/week before GST kicks in. And the army of inspectors to check the food. And increase the GST or other tax to cover the diff.” It is quite obvious that Labour will be in Opposition for a long long time; its members have very very muddled thinking. 
It is a huge pleasure to speak on this Taxation (Budget Measures) Bill because the purpose of this bill is to implement the extremely well-researched well-reasoned and well-received Budget decisions announced today. I say “well-received” because within about 30 minutes employers and manufacturers had said that it was the fairest Budget for many years and that it contained the biggest tax reforms in many years. Just listening to the news tonight I heard that five out of five commentators gave it seven points or higher. Even Guyon Espiner gave seven points for this Budget; that has to be pretty good. 
Hon Member 
: 7.5. 
Dr PAUL HUTCHISON 
: That is even better. But it is important to put this Budget in context because if one thinks back to 2001—if Labour members can think back that far—one can ask what the Labour Government did after organising a highly respected report the McLeod Tax Review. That Government totally ignored it. If it had actually implemented some of the report’s recommendations we would not have been in the pickle we now are. In contrast after this National Government had organised in 2009-10 a highly respected report known as  
A 
Tax System for New Zealand’s Future 
 tonight the National Government is implementing its measures or the thrust of most of those measures. It is salutary to record in the House what the Tax Working Group report said. It said: “The current system”—this was after 9 years of Labour—“is incoherent unfair lacks integrity unduly discourages work participation and biases investment decisions.” Those are the things that have been corrected and are being corrected in this Taxation (Budget Measures) Bill tonight. The working group explained that due to New Zealand’s current financial circumstances it accepted the constraint to consider tax reform on a neutrally fiscal basis. That is absolutely correct. 
So what does this bill do? Firstly it rewards effort and helps families to get ahead. Just in case Labour members do not know let me tell them that people respond to incentives. People think that it is fair and equitable that if they work hard they are rewarded. The great thing about this Taxation (Budget Measures) Bill is that it decreases taxes right across the board. These measures certainly make the system fairer. At all taxable income levels tax cuts more than affect the GST rise; furthermore two-thirds of the cost of the income tax cuts goes to reducing the bottom two rates. Two-thirds of these reductions go to addressing the bottom two rates. They are Labour’s people that this Government is looking after. 
The third thing this Taxation (Budget Measures) Bill does is help attract and retain skilled people. I was over in Australia a few weeks ago with the Health Committee and we were deeply concerned by the number of research institutes that had skilled New Zealanders in them. But those New Zealanders wanted to be here and the measures in the Budget are the very sorts of things that will attract and retain skilled New Zealanders here. 
The other important thing is that this Budget encourages savings and productive investment instead of the Labour Government’s 9 years of vacuuming up hard-working Kiwis’ important earnings and redistributing them in a nanny State manner. Kiwis had got so used to that that they had forgotten about it. But as Peter Dunne said earlier this afternoon when Labour put up the tax rate in 1999 it was a disaster. There are now 130000 loss attributing qualifying companies in New Zealand which is four times as many as there were in 1999. Gross distortion has occurred over the last 9 years. 
This bill is an extraordinarily great suite of measures to correct the disasters of the past. It will cement in a bright future for New Zealand and economic growth to ensure that New Zealanders get sustainable world-class health education and welfare. 
Hon RUTH DYSON (Labour—Port Hills) 
: 
 For members and those of the public who may have been listening to the contribution from the member who has just resumed his seat that was Dr Paul Hutchison— 
Hon Trevor Mallard 
: Who? 
Hon RUTH DYSON 
: Dr Paul Hutchison who is a National member of Parliament. Dr Paul Hutchison is from somewhere just out of Auckland and is also the chair of the Health Committee. I find it extraordinary that in a 10-minute contribution on a tax bill he did not mention the Taxation Budget Measures Bill. I am not all that surprised; I would be ashamed too if I were the member. Also despite being a doctor and the chair of the Health Committee he did not mention the $300 million hole that today’s Budget has left in our health budget. Any basic calculation will show that with inflation at the level it is and with the 2.5 percent increase in GST which came in with the Budget there is now a $300 million hole in the health budget. I could say that this makes the job of an Opposition health spokesperson a dream come true in many ways because all we have seen over the last few months is health cuts. That may make an Opposition health spokesperson’s job easier but they do not make the lives of good hard-working ordinary New Zealanders any easier. It has not made the lives of people in Otago and Southland who have had their home support cut very easy. It has not made life any easier for the people in Palmerston North who are terminally ill and who will have 8 hours a day cut from the district nursing services they were receiving. It does not make their lives any easier either. 
So I am not surprised that Dr Paul Hutchison is so embarrassed that during a 10-minute speech he not once mentioned the tax cuts or the $300 million gaping hole in the health budget that was announced today. Nor did he did not mention that the Budget was a Budget of broken promises. The first broken promise was a promise made by John Key before the last election that GST would not be increased; today we saw it increased to 15 percent. Before the election John Key categorically denied that there would be an increase in GST but today in the House we saw him as Prime Minister break that personal promise. 
The second broken promise from the Prime Minister Bill English and National was an earlier promise that they would not increase borrowing for tax cuts. What did we see in the Budget today? We saw exactly that; there is increased borrowing for tax cuts and not even fair tax cuts. [ 
Interruption 
] The woman from Christchurch who has taught Aaron Gilmore everything he knows about economics says that that cannot be right. But one just has to read the Budget to see that we now have increased borrowing in order to deliver tax cuts. That is another broken promise from John Key Bill English and National. 
The third broken promise was that there would be no cuts to public services and I am sure my friend and colleague the member of Parliament for Wellington Central will have further contributions on this later. What are the services that are delivered through our education system and our health system? Are they front-line services are they public services and are they being cut now? They certainly are. That was the third broken promise. 
New Zealanders are pretty tolerant; they understand when we are going through hard times. They understand when we all need to work together—central government local government and members of our community. They understand the need for people to tighten their belts and do a little bit more in hard times so that our country can get ahead. However what they will not and do not understand and what is making them very angry is that this Budget and this legislation that we are debating had an opportunity to lift New Zealand out of the recession to give people an opportunity for jobs and to create a fairer tax system in any changes that were being introduced. But that is not what happened at all. We see that the people who are doing OK still despite everything—the people who are in the very very top income bracket in New Zealand—are doing the best out of tax cuts while people who are on the average wage or below doing very very badly. 
Yesterday in the House I heard the Prime Minister announce—it certainly was an announcement and news to everyone including Treasury—that Treasury had told him that GST was a progressive tax. Well it is not. It is a regressive tax. It means that people who have less income spend a higher proportion of that income on items that have GST attached to them. Those people do not have a lot of spare money so a higher percentage of their income goes on items that attract GST so when GST goes up it is harsher on people who are low and middle income earners. On the Government’s own figures now we know that most people will not be compensated for the GST increase. Many people will be worse off. People on $70000 a year and that is well above the average will be $45 a week worse off with the tax cuts and GST increases. That does not factor in some other situations—for example people in an income-related rental house whose income goes up as it will for many people who are beneficiaries or on superannuation. Their rent will go up as well. So as their income goes up their rent goes up. That means they will not be better off but when they go into the supermarket they will not get a discount; they will pay an increased level of GST. 
We see that 41 percent of the tax cuts go to the top 10 percent of income earners and 15 percent of Bill English’s tax cuts go to the top 1 percent of income earners. How can that be fair on people who are just getting through a recession many of whom have lost their jobs and have had to get another job at a lower income. They work as hard as people on the top income bracket. I was appalled when John Key said to them to wait for the Budget and the Government would give the biggest tax cuts to the highest income earners but not to get jealous because those very very wealthy people are the backbone of the country; they are the people who are important to New Zealand! 
I think those people are important to New Zealand but I think the cleaners who work in this building are important to New Zealand and as much of importance to our country as the people who are on the highest income. The average-income earner and people earning right up to $70000 a year will be worse off under this legislation. Today the National-led Government squandered an opportunity to put a fairer tax system in place and create a more modern economy where people would have open opportunities. When we look into the other budgets—like the education budget and the health budget—we see more cuts to adult and community education introducing costs on people with children in early childhood education reducing the number of qualified teachers in early childhood centres and leaving a $300 million gaping hole in the health budget. 
The Government has not introduced a fair tax system as National promised. It is not the $50 a week tax cut that National promised before the election. This Government has introduced a tax swindle. It has broken three promises. It has increased GST when John Key promised personally to this nation that National would not increase the level of GST. It has cut public services and certainly it has not introduced a fair tax system. This legislation will be a huge disappointment. It will cause more unfairness in our community and a lot of anger. Labour will oppose this legislation. 
METIRIA TUREI (Co-Leader—Green) 
: 
 I enjoyed the contribution from my Labour colleague Ruth Dyson. She is quite right about the productivity of low-paid workers. I just inform the House that ACT disagrees completely. If members look at ACT’s alternative budget they will see that Roger Douglas has said very clearly that high-income earners are the most productive members of our society—not the nurses not the police not the people who clean Roger Douglas’ office so that it is nice and tidy for him in the morning and not the parents of this country. No the excessively and ridiculously wealthy are he says by virtue of their wealth alone obviously much more productive. That is the kind of extremist position that we see from ACT and that informs National policy. That is the attitude of John Key when he tells the country that low-income earners pensioners and solo parents struggling to make their way with kids and take good care of their kids should not be jealous that they will get virtually nothing out of this Budget while the very wealthy get the most. 
The Greens have a vision for a smart economy and a better society—a smart economy that will deliver real prosperity for our people for everyone and for our environment. A smart economy protects our environment. In Aotearoa particularly if we have no environment we have no economy. Upon our environment rests all of our security and our wealth. Whether it is our fresh water our oceans our forests our natural healthy soils or our most treasured places we are 100 percent dependent on our environment. 
A smart economy will sustain our natural capital rather than squander it as this Government intends to do. A smart economy includes smart taxes that fairly share the tax obligation and the tax burden across our community. A smart economy delivers real and new jobs and sustainable industries that will enhance rather than degrade our environment and our communities. The Taxation (Budget Measures) Bill and the Budget on which it is premised fail to meet all those criteria for a smart economy and it is a great shame for those families and their children who will bear the cost of that failure. 
On Monday the Green Party launched our Mind the Gap proposal a Green New Deal package of solutions that would create jobs generate Government income and combat the growing inequality that is a blight on our communities. We focused on inequality and its effects on children because income inequality has been shown to be the single most important cause of a wide range of social and economic problems. We chose to focus on children and the effects of inequality on children because they are the future of our planet and our society. 
Hon Steve Chadwick 
: Hear hear! 
METIRIA TUREI 
: I thank the member. All children are entitled to live in a safe sustainable society that protects their right to warm housing safe affordable food and quality public education and health care—all within a loving and supportive whanau. We know that inequality hurts every child and every family not just those people who are at the bottom. We know that New Zealand is one of the most unequal countries in the developed world: we are 23rd out of 30 in the recent OECD report. We were the sixth most unequal country among highly developed countries in last year’s  
United Nations Human Development Report 
. 
Simon Bridges 
: Shame on Labour! 
METIRIA TUREI 
: Shame on the Government. Shame on the Government for failing to do anything about it. Shame on John Key’s Government for making it worse which is exactly what its tax cuts and its GST increase do—they make inequality worse. 
New Zealanders like to think of ourselves as an egalitarian society where everyone gets a fair go but the truth is that we are not—the facts tell a very different story. The Green Party has the vision that we can be a more equal and more sustainable Aotearoa. It is within the choices that we make. But this Budget and this bill produced by the John Key Government choose not to pursue that vision. John Key’s Government has already initiated some very big spending: about $10 billion on new motorways an estimated $500 million from cutting the top tax rate and potentially hundreds of millions of dollars in taxpayer subsidies to polluters through the emissions trading scheme. Again it is always a question of priorities and the Green Party would prioritise our people and our environment. 
I will talk about the area of housing. There are some provisions in this bill for changes in property taxes and speculation. The Mind the Gap package produced by the Green Party recommended the introduction of a comprehensive capital gains tax excluding the family home. My fellow co-leader Russel Norman has talked about that tax in some detail today. We know that in the longer term a capital gains tax will provide a serious and significant part of the solution to New Zealand’s property crisis by broadening the tax base and protecting housing from what currently seems to be irrational property speculation intensity. A capital gains tax is necessary to strengthen our economy in the short and the long term. This bill makes some minor changes around property speculation and property taxes. They are a small step towards the changes we need to make but we also know that any changes in property taxes could lead to increases in rental prices particularly in the short term and particularly for those at the very bottom. 
In order to make sure that the spread is fair around the tax obligation and the tax benefit we need to make sure that for any changes in property tax there is also a comprehensive building programme of new State housing to help provide affordable housing for those who need it the most. That is absolutely an urgent priority in this country. We have severe homelessness in this country in different ways: primary secondary and tertiary levels of homelessness. It is incredibly important that families who live in overcrowded cold expensive housing have affordable alternatives but this Government will not be doing that because it has cut the budget for the building of new State homes. This Government has cut the budget for the building of new State houses by more than $100 million. So no State houses will be built under this Government. That is clear from the Budget cuts. In fact the Government’s only proposal is to sell off more State housing. It congratulates itself on having sold off 17 houses last year. There is no plan by this Government to increase the supply of affordable housing for those families who need it the most. 
The fact is that we must make that change because safe secure and sustainable housing is fundamental to the health and well-being of everyone and everyone should have access to housing that is suitable for their needs. It is a basic necessity and we know that being homeless or in overcrowded housing affects income employment attendance and truancy at schools and health. The Human Rights Commission has identified that crowding dampness and coldness are key issues for the New Zealand community. There is a State housing crisis with 10000 families on the waiting list. Many people are living in rental accommodation where they have to move regularly which has a huge impact on their education and employment. We know that about 30 percent of at-risk and vulnerable young people are in unsafe and insecure housing. It is a serious crisis. 
The cost of cold housing on families in the community cannot be allowed to continue. We know that we are losing about $1 billion per year in costs from cold housing whether it is in relation to hospitalisation the cost of respiratory illnesses or the cost of lost working hours. We have a package that would deal with that cost. The building of 6000 new State houses over 3 years at the cost of $2 billion would provide 28000 jobs. Housing is part of the bill. That is a way of providing access to affordable housing and creating 28000 new jobs so that people have employment as well. There is no employment strategy in this Budget. 
We would also introduce progressive pricing into the electricity market. That is a way of making sure that we can bring 70000 households that are currently living in energy poverty out of energy poverty by providing a fixed rate of electricity provision at a low cost; anything that is used above that fixed level of provision comes at a higher cost. It is an effective way of providing support to those who are in the worst energy poverty. For example pensioners who live on their own in old homes have a 97 percent chance of living in energy poverty. We can provide for them and support them out of that energy poverty if we simply choose to do so. The Green Party chooses to do so. 
JOHN BOSCAWEN (ACT) 
: 
 There is much to commend in the Budget. In particular the tax changes that are incorporated into the Taxation (Budget Measures) Bill which we are discussing this evening are to be commended. 
Let us start with the reduction in the marginal tax rates. There is a significant reduction in marginal tax rates. Those whose annual income is $14000 or less will see their marginal tax rate drop from 12.5c in the dollar to 10.5c in the dollar those earning from $14000 to $48000 will see a reduction from 21c to 17.5c those earning from $48000 to $70000 will see a reduction from 33c to 30c and finally those on incomes above $70000 will see their marginal tax rate go down to 33c. Much more was possible in terms of reduction in marginal tax rates but at least that is a good first start by the Government. 
The Government has also moved to close loopholes—in particular loopholes in relation to qualifying companies and the tax advantages available through investment in residential and commercial property. The restriction on depreciation claims on properties is a move to see a rebalancing of the economy and that has to be commended. 
We also have a reduction in company tax rates from 30 percent to 28 percent from the beginning of the 2011 tax year. Finally there are moves to incentivise savings with the setting of a new maximum tax rate of 28c in the dollar for portfolio investment entities or PIEs. 
One can look at the impact of the tax changes contained in this bill on page 9 of the Minister’s executive summary in the Budget documents. Those members who have that document might be interested to look at page 9. It shows the effect of the various changes whether they be the reductions in personal income tax the increases in GST or the changes to benefits for people on various incomes. In particular it shows that those households earning an annual income of $40000 or less will have a net impact from these tax changes of 0.7 percent—0.7 of 1 percent. Those earning between $40000 and $85000 will have a net benefit of 0.4 percent. I suspect that this bracket includes the great bulk of working households in New Zealand. Those earning in excess of $85000 will have a net impact of 0.7 percent. The Minister of Finance—I guess—summarises that very nicely when he states at the bottom of page 25 of the Budget speech: “On average most New Zealanders receive roughly a half to one per cent average increase in real disposable income.” That is not much but one could say that it is better than nothing. 
I wish that were the full story but it is not. What both the Government and the Labour Opposition are ignoring is that starting on 1 July we will have an emissions trading scheme tax. We will have a tax on energy a tax on electricity— 
Hon Members 
: Oh! 
JOHN BOSCAWEN 
: I am interested in the barracking from the Government members because they should be ashamed. The reason they should be ashamed is that New Zealand’s Treasury estimates that the impact of the emissions trading scheme will be to add 5 percent to the price of electricity and 4c per litre to the price of petrol from 1 July. Those costs will flow throughout the whole economy. They will flow into food prices and into everything that New Zealanders purchase. The Reserve Bank has calculated that the annual effect in the first year of the emissions trading scheme will be to add 0.4 percent to the CPI. 
Where does that leave this Budget? Where does that leave the Budget that Mr English and Mr Key are so very proud of—the Budget that says that on average most New Zealanders will receive roughly “a half to one per cent”? Well the people on incomes from $40000 to $85000 which the Budget document “B2 and B3” shows on page 9 will get a benefit of 0.4 percent will be left with absolutely nothing—zero. National members— 
Nicky Wagner 
: Whose side are you on? 
JOHN BOSCAWEN 
: Do I hear a comment asking whose side I am on? 
Nicky Wagner 
: Yes. 
JOHN BOSCAWEN 
: That is interesting. I am very pleased that the member has asked that question because I find myself more and more having to stand up and represent her constituents. Overwhelmingly National Party members are opposed to the emissions trading scheme. They tell me that at the meetings I have conducted up and down the country. I read with a great deal of interest that at the National Party’s central North Island regional conference in the weekend a subset of National Party members moved a resolution unanimously that the National Government should be delaying the introduction of the emissions trading scheme. 
How interesting it is also to hear Labour members talk about the impact of this Budget on working people’s incomes and their expenditure. I have heard Mr Goff and Mr Cunliffe talk about the increase in GST and of how inflation is going up. Well National members can be proud of one thing. They can be proud of the fact that they are putting electricity up by only 5 percent because the previous Labour Government would have put it up by 10 percent. That is right; that is the one thing and the only thing that the emissions trading scheme has to commend it. If there had not been a change of Government then from 1 January we would have had an emissions trading scheme that Treasury has said would have increased electricity prices by 10 percent. 
The National Government is confident and relaxed about the fact that it is increasing electricity and petrol prices and increasing the flow-on effect of those things by 5 percent from 1 July. The impact of that is there for all New Zealanders to see on page 9 of the Budget document. Households earning between $40000 and $85000 will get a net impact of 0.4 percent and the Reserve Bank tells us that the impact of the emissions trading scheme will be 0.4 percent. So everything that this Budget purports to give to those people will be taken away from 1 July which is 3 months before the tax changes we are debating in this bill will come into effect. 
It is actually worse than that. We can look at the position of superannuitants. The Minister of Finance goes on to state very generously on page 22: “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.” Well is that not generous of the Minister of Finance and the National Government to be making adjustments to superannuation that will be sufficient to compensate for the increase in GST? 
I ask about the increase in the price of electricity. What about the 5 percent increase in electricity? I ask about the flow-on effects throughout the whole New Zealand economy. I ask about the 0.4 percent increase in costs that the Reserve Bank of New Zealand said the emissions trading scheme will cause. What about that? There is no reference to compensation in the Budget speech. One thing I will say is that beneficiaries and those who have their benefits adjusted in line with the CPI will receive an adjustment which will be carried forward because those benefits are adjusted in line with the CPI. But superannuitants those people over 65 who rely substantially on New Zealand Superannuation—and who may be listening to this debate tonight—will receive no permanent compensation for those increases in electricity and petrol prices. 
Let us turn to page 15 of the Minister’s executive summary. We see that in 2011 the cost of the emissions trading scheme will be about $907 million. In the following year it will cost $275 million. I have heard the Minister for Climate Change Issues tell this Parliament that we have to proceed with those electricity increases because we have the massive cost of the emissions trading scheme. We heard Metiria Turei the co-leader of the Green Party talking tonight about subsidies for polluters. But this is not a subsidy for polluters. That $1.3 billion over 2011-12 is not a payment to polluters. I am sure that she is referring to the emitters of carbon dioxide and carbon dioxide is not a pollutant. But that is a totally separate argument. 
What is this sum? It is $1.3 billion that will be paid to the people who planted trees in the 1980s and 1990s. That is right. There were 70000 60000 70000 and 80000 hectares planted in trees every year through the 1990s. The people who planted those trees had no expectation of receiving a subsidy but that is what they are getting. They are getting it courtesy of the taxpayer so every single New Zealander will have to pay for that. It is a disgrace. If National’s politicians will not represent their members then the ACT Party certainly will. Thank you. 
RAHUI KATENE (Maori Party—Te Tai Tonga) 
: 
 There is a story to be told as one browses the Net to ascertain how the market and the press gallery are responding to Budget 2010. I want to share with the House an absolutely random selection of headlines gathered from cyberspace: “Budget woes for property investors” “Biggest tax reform in 25 years” “Major incentives for investment” “Headaches for retailers over GST rise” “Income tax slashed GST to 15 percent” “Tax changes will keep Kiwis home” “Dollar responds positively to Budget” “More in most pay packets” “Budget politically safe but economically timid” “Tax package will bump up deficit” “Higher economic activity picked” “Experts praise tax cuts for all” and so it goes on. This is just a random selection of headlines. 
Nowhere in that list of analyses did I read that this is a Budget that reflects the melodramatic hype we have heard in the House today. Sure we read the words “safe” and “timid” but we do not read that this Budget is a tax swindle or a lost opportunity as members on the Opposition benches might mutter. In actual fact we read the exact opposite—that this is a Budget that will crack down on property investors and tax evasion. We read that this is a Budget that will benefit all workers. So much for this being a Budget that privileges the rich and leaves all other New Zealanders out in the cold. The worst that could be levelled at the changes to the tax system would be that they are by and large fiscally neutral. In effect this means that the increase in GST is offset by cuts to all personal tax rates and the immediate rise of 2 percent in benefit payments. 
All payments including New Zealand Superannuation and Working for Families will increase by 2.02 percent to compensate for the increase in GST. Two percent might not sound a lot but it is 2 percent more than the previous Government ever put out there. This is something we argued for right throughout the lead-up to Budget day—that no one should be any worse off as a result of the Budget tabled today. It has been a hard slog to bring the need to protect our most vulnerable to the forefront of this debate. To be frank it has not been the easiest Budget to promote amongst our electorate. I have just come from a Maori Party film evening fund-raiser and there were about 120 people present who are really supportive of this Budget. I spoke to a couple who are superannuitants and they are just so pleased that they will be getting $10 a week extra in their superannuation payment. An amount of $10 may not sound a lot but to them it is mana from heaven and they are rapt; and so are the others. It is all about perspective about restoring balance and about taking a long cool look at what will make the difference in order to create the promising financial outlook we all seek. 
The Maori Party has spent many hours debating and debunking myths about the facts about tax. We know that in many respects this issue has much to do with perception—the perception of punters about whether a tax cut or a rise in GST will directly impact on their lives. We have been told by National that once all the measures are accounted for the Budget has almost exactly the same impact on the average incomes of low medium and high income households. When we looked at a range of different scenarios and all scenarios the GST increase was offset by the income tax decrease. In simple terms there was no loss of money. What might be the breaking news of the day is that the biggest losers in terms of this tax package are foreigners who lose through a combination of the tightening of tax on foreign investment and also because they own a lot of property. 
This is a policy goal that we in the Maori Party campaigned on to protect and preserve our land to keep it from falling into foreign ownership which is something the previous Government did nothing about. The Budget will tighten investment property tax rules. One of the immediate impacts that will be achieved is that wealthy families will not now be able to use losses from rental properties to become eligible for Working for Families. Some might call this practice morally bankrupt—a claim we could also throw at those rental property investors who manipulate the system to dodge tax. In that light another feature of this tax legislation is that it puts a stop to those who try to rort the system for their own benefit. It seems a pretty hefty amount of money $26.6 million for the next 4 years allocated to the Inland Revenue Department but if it can put a stop to what surely amounts to theft and deception then that has to be positive. In fact it is almost incredible to believe that these measures according to Minister of Revenue Peter Dunne are expected to generate an extra $2.48 billion in the next 4 years. 
I want to return to the concept around the redistribution of wealth to invest in well-being—the “pay it forward” mentality. Paying it forward is a concept of doing good for others to repay the good that has been done to oneself. In effect reforming the tax system can make our economy fairer more sustainable and able to provide a better support for economic growth. I think therefore that those who are hardest hit by this tax legislation are the commercial and industrial property owners. They are hurt the hardest by the new depreciation rules. 
I want to return to the discussion around Maori and Pasifika unemployment generated just before the dinner break. We know that in the population aged 18 to 25 years the number of Maori and Pasifika young people receiving the unemployment benefit demands that we take action. The figures are startling. Out of 19000 youth receiving the unemployment benefit 34.8 percent are Maori—that is 6500 of our rangatahi—and 13.4 percent are Pasifika which is another 2500 young people. We must do something to ensure that they have a future to look forward to. We need to be able to support those young people with skills work experience and the confidence to invest in our future. Paying it forward is all about helping us to regain our footing and in particular to help Maori and Pasifika youth to find employment as the economy continues to recover. We need the putea in the national accounts to help make that happen. I hope that part of the $2.48 billion that Mr Dunne promised can be set aside for just that. 
The Maori Party is supporting this bill in the interests of our young people in the interests of our economy and most of all in the interests of setting a strong pathway forward into our future. 
JACQUI DEAN (National—Waitaki) 
: 
 What a pleasure it is to follow that contribution from our colleague in the Maori Party who understands very clearly what matters in this country. I think this Budget delivers on what matters in this country which is putting the right incentives into the New Zealand economy and looking after all the people who live here. 
This Budget is about across-the-board tax cuts delivered to people in New Zealand. I will go through those tax cuts and tax rates because I think it is worth repeating them. People who have an income of under $14000 and who were paying a rate of 12.5 percent in tax will now get a tax rate cut down to 10.5 percent and that is significant. The tax rate for those people on an income between $14000 and $48000 goes from 21 percent down to 17.5 percent. That is significant for that range of members of our country. The tax rate for the people on an income between $48000 and $70000 goes from 33 percent down to 30 percent. That change has been welcomed across the board. The tax rate for the people on an income of over $70000 has gone down to 33 percent. This Budget is providing across-the-board tax cuts. 
It is interesting is it not that Opposition members are all at sea with this Budget. They are hardly putting up much of a fight and do not seem to have latched on to anything they really dislike about this Budget. In fact it was very interesting to hear the contribution of Trevor Mallard who has largely agreed with a number of the provisions that have been brought about in this Taxation (Budget Measures) Bill. 
There is a rise in the rate of GST to 15 percent from 12.5 percent and to balance that there will be an immediate rise of 2.2 percent in income for those on superannuation benefits and Working for Families. 
A number of spending boosts are contained in this Budget. In health there will be $2.1 billion more over 4 years. That will go into front-line health services. It is good-quality health spending. In education there will be $1.4 billion more over 4 years for better schooling and also for early childhood education. In research science and technology there will be $321 million over 4 years for new initiatives. That is all about growth in the New Zealand economy. And of course there is faster broadband—$248 million extra over 4 years. 
But I want to talk about a Budget initiative that has not been mentioned so far. It is a tiny initiative but it just goes to show that a very small amount in the Budget carefully placed can have a big impact on growing the New Zealand economy. The first initiative I will talk about is the $30 million to be used to promote New Zealand overseas as a tourism destination. That amount in the Budget is relatively small but in my view it is significant for tourism in New Zealand because we are an exciting tourism destination. With the Rugby World Cup proposed to be held here next year I believe that it is important that we promote ourselves overseas. 
The other example I will raise is comparatively minuscule at $5 million but I am excited that the Department of Conservation is to put $5 million into developing more cycle trails and camping grounds over the next year. Why do I think that is significant? Although $5 million is relatively small in the grand scheme of things I can tell members that in my electorate the Otago Central Rail Trail has had a huge impact on the economic well-being of the Otago region. I will focus on one very small provider of tourism services and that is the Chatto Creek Tavern. Before the rail trail came into being the Chatto Creek Tavern—which is at Chatto Creek just out of Alexandra—was struggling. It was one of those small businesses in one of those very tiny little towns that was struggling and facing closure. These days 5 or 6 years later the Chatto Creek Tavern not only is surviving but also is thriving. There are now 13 people working in the Chatto Creek Tavern. They serve 180 lunches in the high season and 100 lunches in the low season. Members opposite do not see the significance of that—and I do not blame them because they do not represent the provinces—but if we extrapolate that benefit out from Middlemarch down to Clyde and all along the length of the Otago Central Rail Trail we can quickly see the benefit that an initiative like the rail trail brings to the local region. Five million dollars is a very small Budget amount but it is significant. 
This Budget is about putting the right incentives into the economy. It is interesting to see how well it is being received. I will leave members with this one statistic. The  
Close Up  
poll returned a result of 80 percent of people being in favour of the Budget. That was on prime time television tonight. That is good news. I commend this taxation bill to the House. 
Hon CLAYTON COSGROVE (Labour—Waimakariri) 
: 
 For those who do not know the member who just resumed her seat was Jacqui Dean. 
Hon Trevor Mallard 
: I didn’t know. 
Hon CLAYTON COSGROVE 
: Mr Mallard did not know. She is a member who is famous for two things. First she is the member who thought that one should ban water. Secondly she is the member who during a public meeting with my colleague David Parker showed that her in-depth knowledge of economics rivals that of Aaron Gilmore. She said: “No we’re not going to borrow money. We’re going to get it from overseas.” 
Hon Trevor Mallard 
: Who said that? 
Hon CLAYTON COSGROVE 
: It was an economic theorist rivalling Aaron Gilmore. 
Let me say that it has been an interesting day today. This is a very prophetic day because on this day Mark Bryers the biggest crook in the Blue Chip scam got 75 hours’ community service. On the same day that Mark Bryers the biggest crook in the Blue Chip scam got 75 hours’ community service—he is a very wealthy man a multimillionaire—the National Government gave him a $1000 a week tax cut. In fact it would be more than that because he earns well over $1 million per year and we know that under this Budget if one earns $1 million per year one gets a $1000 tax cut. 
Hon Trevor Mallard 
: A week. 
Hon CLAYTON COSGROVE 
: I am sorry: it is a $1000 tax cut per week. Mr Bryers thanks to Mr Key will get that. I am sure Mr Bryers will send Mr Key a nice Christmas card saying: “Thanks very much. I have done my 75 hours’ community service.” There were tears in court today according to the media but Mr Key was good enough to give him 1000 bucks a week. 
Hon Trevor Mallard 
: And there’ll be a pensioner who will deliver the card. 
Hon CLAYTON COSGROVE 
: My colleague Mr Mallard said that a pensioner who was ripped off will deliver the card to Mr Key. It is a very very prophetic day today. Mr Bryers will have a lot to celebrate tonight as he contemplates his whole 75 hours of community service. 
Let us look at the Budget. What do we have? We have inflation. We have the highest inflation I believe since 1990—5.9 percent. I really enjoyed the Maori Party contribution especially the contribution of Tariana Turia. I said that she had sold out her electorate and a number of other members have said the same thing. Well those members are very proud of this Budget. I ask them how proud they can be when 72 percent of the constituents in Rahui Katene’s electorate earn under $40000 per year and when we factor in the increases in GST and inflation 72 percent of her electorate are going to be worse off. I say to Tariana Turia—and I am sure that she will take another call to try to justify this—that 73 percent of her electorate earns under $40000 and will be worse off when we factor in the increase in GST and a 5.9 percent inflation rate. 
Ms Dean and others have said that it is fantastic that people who earn $70000-plus will get a tax rate of 33 percent. Well here is the problem with that for the Maori Party which signed up to it today. In Ms Katene’s electorate the number of people who earn over $70000 equates to 5 percent—5 percent. In Mrs Turia’s electorate it is even worse; there they equate to 3 percent. So I say: “Well done!” to the Maori Party. Those members have done a wonderful job of getting gains in this Budget for their electorate because what they have got is some hocus-pocus and a couple of prisons which Pita Sharples has put on the deck tonight and which Judith Collins could not explain to the media and they have sold out 72 to 73 percent of their constituents. I invite them—the weekend warriors that they are—to get up in this House and justify that to their constituents. If they are so proud of this Budget then it will be very interesting during the hui on the campaign trail when their constituents get up and say to Ms Katene that they are part of the 73 percent who missed out and that she and her colleagues inside and outside Cabinet voted for this move never opposed it and ripped them off. That is what those constituents will say to the Maori Party. I do not know whether it is mana-enhancing when 73 percent of one’s electorate is worse off thanks to one’s vote and thanks to the fact that one is so proud of this legislation and this Budget. 
Then we come to the other aspect of this Budget: the broken promise about the New Zealand Superannuation Fund. Mr English had a history of breaking promises to our superannuitants when he was last in Government in the 1990s when under him their pension was cut three times. Last year he said: “Oh well we will suspend payments to the Cullen fund but when we get into surplus”—and the Budget documents show that allegedly that will be in 2016—“we will activate funding again.” Oh no that date is now 2019. 
National members and their leader went around the country with the second broken promise which was that they would not raise GST. I invite them to front up on a Saturday if they ever hold electorate clinics if they ever get off their backsides and go and talk to the 73 percent of the people in some electorates like the Maori electorates who are affected if they ever meet those folks who are worse off as we speak tonight. I invite them to go to Grey Power and explain why their leader broke that promise. Every last member opposite got his or her backside over the line in the vote and was elected on two false promises. 
Mr Gilmore should get off his chuff go to Grey Power members and explain to them why he broke his promise. They will not know who he is of course but he might get in the door. I am sure they would invite him in and he could justify the pay he gets by explaining to them why his leader said that he would not put up GST why Mr English said that he would not mess with superannuation and why Mr English said that he would pre-fund superannuation when the Government accounts moved into surplus. It is the same with Nicky Wagner. But we will never see them fronting when it is bad news. They stand up in here but none of them will front up out there. Well I challenge them. Let us have a meeting. Let us get every person in their electorate let us get 10 of them five of them three of them. Let us get Mr Gilmore who does not have a patch of course to talk to everyone in the area where he lives who is on the average wage. After we factor in National’s broken promise on GST and factor in record inflation of 5.9 percent let us hear Mr Gilmore explain to them why National has ripped them off and why they are worse off. They are the battlers the strugglers and the people who are trying to provide for their families. 
I remember polls about Budgets too—rolling out the 80 percent. Well I have always held the view as a member of Parliament that people are not stupid. I know this about Budgets: the Government might win on the night when the flashbulbs are flashing and certain people are tripping over camera cords but as the days go on and the pay packets are opened and the GST receipts are added up at the end of the week the people are not silly and it is very dumb and stupid politicians in this House who think they can hoodwink the ordinary folk in the street. I say to them that it is a simple equation: get up and explain why the Government will borrow $240 million per week for the next 3 years and get up and explain why the debt track and the interest costs do not start even declining until 2021. If we look in the Budget we see that those are important numbers. 
But National members will not do that; they will not explain and they will not justify. They hide in their various patches and constituencies and they will not explain to anyone why they broke their promises. Kate Wilkinson a Cabinet Minister who occasionally resides in my patch was told by the Prime Minister to go out and sell the increase in GST but there was not a meeting not a whimper not a press statement nothing. The invisible woman never ever fronts the bad news. Well in my patch of Waimakariri 72 percent of my electors earn under $40000 a year. Kate Wilkinson who sits in Cabinet who voted for every last measure in this legislation who never opposed it and who wants my job and everybody else’s has sold out that quadrant of the electorate. Seventy two percent of people in my patch are worse off as we sit tonight. They did not expect 5.9 percent inflation. I invite Ms Wilkinson Ms Wagner Mr Gilmore and the other tumbleweeds over there to get off their backsides get up in the House and tell us tonight why they broke their promises to the people of New Zealand and to their constituents. 
I ask why the member for Tauranga—the Perry Mason in his own lifetime; I forget his name—does not get up. He loves going on the  
Breakfast 
 TV show and waxing eloquent about his golf handicap and how he got gold membership of his local golf club. Well he will be able to afford a membership with his tax cuts but a pensioner in Tauranga will not and a person earning under $30000 will not. I invite the next speaker to show some intestinal fortitude and tell us why National members broke their promises. 
MICHAEL WOODHOUSE (National) 
: 
 I begin by congratulating the member Mr Boscawen on the aplomb with which he is able to build matters relating to the emissions trading scheme into every single call he takes in the House. Tonight was a bit easy because there was a little bit of that topic on the inflation figures. I think we need to make it a little bit harder for him. I propose a bit of Order Paper bingo and I hope that when the following bills come up he is able to mention the emissions trading scheme with the same aplomb: the Cultural Property (Protection in Armed Conflict) Bill the Gambling Amendment Bill and the Oaths Modernisation Bill. I look forward to those bills coming to the top of the Order Paper and hearing how he will handle mentioning the emissions trading scheme in debate on those bills. 
I look forward very much to talking about the many many good things in this Budget but I cannot resist addressing some of the nonsense that has been spoken by our friends on the other side of the House. Their response to this outstanding Budget has been frankly anaemic weak half-hearted and quite misleading. I will start with Mr Nash and his Rolling Stones tie. He said: “(I Can’t Get No) Satisfaction”. Well that is not what we have heard. I take the issue of the inflation rate. It has been mentioned and it is true— 
Hon Clayton Cosgrove 
: What goes around comes around. 
MICHAEL WOODHOUSE 
: That is right. I think that has been proven. Yes inflation is higher this year for reasons that are well understood by everybody but the Opposition. But the Opposition will not tell people that this is a one-off adjustment. Next year it will be 2.4 percent the year after it will be 2.4 percent and the year after that it will be 2.4 percent. What happens to the tax cuts? They stay and endure for a very very long time. 
Hon Clayton Cosgrove 
: Bad mistake tonight sonny boy. 
MICHAEL WOODHOUSE 
: That is not the mistake. We know that there is absolutely no doubt that the inflation figure would have been much much higher had this been a Labour Budget. It would have been materially higher. Labour’s spokesperson on finance Mr Cunliffe said as much in the  
New Zealand Herald 
 this morning: “If Labour were writing today’s Budget it would spend more than National to ensure the recovery from recession remained on track.” So there it is: Labour would spend its way out of recession and continue to tax the heck out of hard-working New Zealanders. Well that worked for Greece! It worked for Portugal! It worked for Italy and Spain! The UK is in a similar mire. Mr Cunliffe would take New Zealand down exactly the same tax-and-spend track that got those countries into trouble into the first place and it would not stop there. 
I will mention the emissions trading scheme. Labour’s emissions trading scheme would have imposed double the cost and it would have been introduced sooner than this Government’s scheme. That would have added to inflation. More consumption leads to higher borrowing and higher borrowing drives up interest rates. That is an unacceptable burden on hard-working New Zealanders. Electricity prices went up 72 percent under the 9 years of the previous Labour Government and I have no doubt that that would continue were Labour back in Government. 
Where is Labour’s alternative budget? It does not have one. Labour does not know what it would do. Labour members crusaded around the country in a bus that said “Axe the Tax”. They did not need a bus; they could have saved on gas and travelled in a two-door Morris Minor. That is about as much interest as they got. They would have had enough room for a suitcase and a six-pack. But the slogan did not ring true. Would they axe the tax? We do not know the public do not know and the commentators do not know. The reason is that even Labour members do not know. Labour members cannot even make up their minds on whether to axe the tax they said that they would axe. That confusion was still evident in Mr Cunliffe’s first call about loss attributing qualifying companies. He saw them as terrible things. I think he said that yes Labour put the system in place but it saw it used for purposes that were never intended. God forbid that loss attributing qualifying companies were used to attribute losses! That is consistent with the sort of confusion around the tax arbitrage that Labour created over 9 years. These arbitrage measures are being put down. 
I really want to focus on the last thing that unfortunately Labour members still do not get. Three-quarters of income earners will now have a top tax rate of 17.5 percent which is nearly half what they had when the previous Government came into office. For that reason alone this Budget will be applauded right around the country by all but the 20 percent of people who still support Labour. 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 I am very disappointed in this Taxation (Budget Measures) Bill because it is not ambitious for New Zealand. Nothing in this Budget is ambitious for New Zealand. The only step change that I could see in this Budget and in this bill is a step back not a step up. I would have thought that a step up was what the Government was talking about when it talked about a step change but no we find it is a step back. I found in the regulatory impact statement on this bill that the Government was looking to achieve a step up in economic growth by improving the incentives to work save and invest. Well that is not a very clear message to the people to whom I have been talking about the implications of this Budget in the lead-up to it today. 
This bill is not about providing a brighter future for the vast majority of New Zealanders who—I really would like the Prime Minister to hear this—contribute to the economic social cultural and environmental aspects of what defines us as a nation. The Prime Minister dismissed the entire significance of their contribution to our nation when he told them not to be envious of the huge decreases in tax that the wealthy were to face. He told them that those who earned the most would get major increases to their income increases beyond even the weekly earning capacity of some of the people who will receive the smallest additional amount. But he told people not to be envious of the wealthy and the reason that he told them not to be envious was that we had to do something to assist those people because we needed to keep them in New Zealand. 
Well the front page of the  
Dominion Post  
this morning had a very interesting article about who these valuable people were: lawyers and accountants. This is the first time that I have ever heard anyone describe lawyers and accountants as being major contributors to the productive economy. 
Hon Trevor Mallard 
: That’s you and me! 
Hon LIANNE DALZIEL 
: That is Trevor Mallard and Lianne Dalziel. We are among these major contributors to New Zealand’s economic capacity. How extraordinary! It is absolutely extraordinary. 
Hon Steve Chadwick 
: I’d be jealous. 
Hon LIANNE DALZIEL 
: Are you jealous of me? I think members should be jealous. They should be envious of me because I am a lawyer so I am one of the people who the Prime Minister thinks are so valuable that he wants to encourage us to stay in New Zealand. Well I am determined to stay in New Zealand and I am determined to make sure that we reclaim the Treasury benches in this country at the next general election. 
Scientists were also included in the list. Now I buy that. I agree with John Key that scientists are a valuable contributing factor with regard to our productive economy. The real economy needs more scientists to work in it. 
Moana Mackey 
: But they don’t earn over $70000. 
Hon LIANNE DALZIEL 
: No they do not earn over $70000 but I will come to wage rates in a minute. We actually get to the nub of the problem—and scientists are included in this—when we get to nurses. Nurses do not earn enough to put them into the extremely wealthy category. What is absolutely extraordinary is that—[ 
Interruption 
] I am listening to all of the National MPs because I want it to be recorded in  
Hansard 
 that the deputy chair of the Commerce Committee Aaron Gilmore the Dunedin list MP Nicky Wagner and Simon Bridges are saying when we are talking about nurses that yes they are in the extremely wealthy category. I said nurses had not been put into the extremely wealthy category and “Yes they are.” is what we heard back in a barrage of interjections from the National Party members. 
I make the point and put it on the record that nurses earn as much as they do because of the pay jolt that the previous Labour Government gave them because of the problems created by National. National opposed the pay jolt. In fact National criticised the previous Labour Government for spending what we did in the public health system and for giving the pay jolt to nurses. Anyway let us look at what National said. That pay jolt only works in the public health sector. How many nurses do members think are paid over $70000 a year to work in rest homes? How many do members think? I think it would not be many. So let us look at what the Nurses Organisation said on the front page of the  
Dominion Post  
this morning which was that nurses with 5 years’ experience earn on average $60000 per annum. So they do not even reach that category. 
Why have those professionals be singled out by National? It is to stop them leaving the country. But Statistics New Zealand tells us that workers across all sectors leave the country. Housekeepers restaurant workers drivers and labourers are also among the top 10 percent of occupations of people who leave New Zealand alongside nurses teachers and finance and sales professionals. I tell this House that these changes are not about reducing the tax paid by housekeepers. I am sure that Bill English has worked out exactly how much more he will receive in this pay packet each week but I bet he has not worked out how much his housekeeper will receive because that person will not receive very much at all. 
The issue is actually not just about low-paid wage earners as well. I know that we have talked about them tonight. But I have been talking to taxi drivers other self-employed people and small-business owners and they say they are gutted by the increase in GST. It will put their precarious businesses under a real threat of failure. I know that National does not give a toss about small to medium sized enterprises and certainly not about the self-employed. But when those businesses have to put 15 percent on their GST accounts they will know that their precarious businesses are really under threat of failure. I have had conversations leading up to this Budget day with many taxi drivers. We use taxis a lot these days and taxi drivers said they were very worried leading up to this Budget. 
I had my first post-Budget conversation with a taxi driver in the dinner break before I came back to the House. He said to me that when he had heard John Key say people should not be envious of the wealthy for receiving much bigger tax cuts then he was he was reminded of the expression “Let them eat cake.” He was a very very intelligent and capable taxi driver. Tonight he said that if there was a Bastille he would storm it; that is what he said to me tonight. That was absolutely extraordinary and I said to him that I would quote him in the House tonight. He said that was great and he would down tools and storm the Bastille—he would switch the key off in his taxi and he would storm the Bastille—if we had a Bastille to storm. That taxi driver gets something that John Key simply does not get: it is not tax that is holding back incomes in this country; it is wages and it is the income-earning potential of our small to medium sized enterprises sector. That is what holds New Zealand back yet this Budget does nothing to increase wages and it has nothing to do with improving the productive capacity and the earning ability of our small to medium sized enterprises sector. 
My taxi driver tonight knew the figures; he knew that Paul Reynolds was to receive over $6000 more in his pay packet every week. He knew that the Prime Minister and Cabinet Ministers were to receive hundreds of dollars extra a week in their pay packet. He did not know what the minimum wage earner would receive. He did not know that because the minimum wage earner— 
Hon Clayton Cosgrove 
: I raise a point of order Mr Speaker. I know this debate is robust; this is a tax debate. But inane endless barracking as the speaker is trying to speak even though the member tried to take advantage of the microphone to combat it is beyond the pale. Robustness is fair enough but inane barracking is for the street. 
The ASSISTANT SPEAKER (Hon Rick Barker) 
: I thank the member but I did call for order in the House. I say to people that this place can become a bit excitable on occasions but members have a right to free speech. Free speech should be able to be heard. Of course we invite interjections and I am sure the Lianne Dalziel responds to them and likes the cut and thrust of the debate but it should not drown her out. 
Hon LIANNE DALZIEL 
: What my taxi driver did not know was how much someone on the minimum wage would receive which is that such a person will receive an extra $4 a week. Someone who earns five times the minimum wage will receive over $50 a week. Five times $4 is $20 so why is someone in that position to receive over $50? My taxi driver has worked it out—this is a terribly unfair Budget and the bill that is before the House today is very unfair. 
The last thing that I ask is why this is being done under urgency. This legislation is to take effect from 1 October and today is only 20 May. We should have time for the bill to have a short period at the Finance and Expenditure Committee and for public feedback to be given on it. Why are we not to have any public feedback? The Government does not want it. It does not want to hear from the public on this issue; it does not want to hear a single word. This is a tax swindle not a tax switch. 
NICKY WAGNER (National) 
: 
 I am enormously pleased to be supporting the Taxation (Budget Measures) Bill in the second reading debate. Today’s Budget is a cracker. It promotes growth and competitiveness and provides the right incentives for Kiwis to work to save and to invest. This bill cements these gains. It is good for New Zealand and it is good for future generations of New Zealanders. There has been a whole heap of wide-eyed histrionics from the Opposition: overzealous shouting red-hot rhetoric and numerous claims that are totally without basis or fiscal common sense. 
I will inject into the debate some independent factual analysis from financial specialists. My comments will be based on the regulatory impact statement prepared by Treasury and the Inland Revenue Department. Treasury and the Inland Revenue Department understand our economy. Their job is to give independent financial advice to the Government. This is what they say in their regulatory report: “officials from Inland Revenue and Treasury both agree that … the … tax reform package as a whole will …”—contrary to Lianne Dalziel’s statement—“achieve a step up in economic growth by improving incentives to work save and invest”. New Zealand needs this. They said it will “improve the fairness coherence and integrity of the tax system by reducing opportunities to avoid tax”. New Zealand needs this. They say it will “result in a tax system that supports New Zealand’s competitiveness globally in a sustainable manner.” New Zealand certainly needs this. This is what Bill English and the National-led Government set out to achieve and we have been successful. 
It was great to see that 80 percent of New Zealanders in the  
Close Up  
poll tonight supported this Budget. It was also very interesting to hear from Colin Espiner who said that this Budget was better than last year’s effort and probably trumped anything Labour came up with in the past 9 years. 
Let us have a look at this regulatory report. This report provides an index that analyses each taxation measure as to how it affects taxpayers and how it supports increased efficiency of the system improves equity within the system and strengthens the integrity of the system. All measures were rated as increasing efficiency and some such as removing the depreciation loading were rated as having significant improvements in efficiency. All measures were rated for equity. Again removing the depreciation loading gave a significant improvement in equity as did addressing the GST base maintenance that closes the loopholes for largely fraudulent taxpayers. All measures were rated for integrity. In this case the 60 percent thin capitalisation threshold the management of loss attributing qualifying companies and the GST base maintenance have significantly improved the integrity of the tax system. 
I repeat: today’s Budget—and this bill which implements it—is a cracker. It promotes growth and competitiveness and provides the right incentives for Kiwis to work to save and to invest. It is good for New Zealand and it is good for future generations of New Zealanders. I congratulate Bill English on a job well done. 
A party vote was called for on the question  
That the Taxation (Budget Measures) Bill be now read a second time. 
Ayes 67 
New Zealand National 58; ACT New Zealand 5; Maori Party 3; United Future 1. 
Noes 52 
New Zealand Labour 43; Green Party 9. 
Bill read a second time. 
Result corrected after originally being announced as Ayes 67 Noes 53. 
In Committee 
Part 1 Personal tax cuts company tax cuts and GST rate increase: 1 October 2010 start 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 We are at the technical stages of this bill the Taxation (Budget Measures) Bill where there is an opportunity to go through part by part and within the parts. Part 1 is the most substantial although I think that it is fair to say that Part 2 reflects a lot of what is in Part 1 and some additional things. Part 3 may be described as a bit more technical and not quite as substantive in the way that these things work. There will be within Part 1 areas that the Opposition are supportive of and there will be areas within it that we are opposed to. I think probably in my first call that it is worth going through the areas that we are supportive of and asking the Minister in the chair the Hon Peter Dunne a couple of questions because there is room for some explanation. 
Starting off with that I ask the Minister whether he can give some explanation as to the reasons for the CPI treatment of tobacco price increases. I think these are being excluded from CPI adjustments for the purposes of the benefit of national superannuation and I understand of war pensions. That is something that I can vaguely remember the background to and quite a lot of discussion on. But I think that it would be good if members who had not focused on that issue had an explanation of it. 
On the question of depreciation again this at first glance is pretty technical and might not mean much. As far as depreciation on buildings for rental purposes is concerned it is fair to say that the Opposition is broadly supportive of this part although later when we focus more on short-life depreciation of assets there will be more debate on that area because the Government is yet to convince the Opposition that its plans in that area are appropriate. 
As far as thin capitalisation is concerned the changes in the rules are logical. I think that giving the ability to shift the “safe harbour” regime from 75 to 60 percent and the ability for the Inland Revenue Department to look more carefully at transactions under or over that threshold are matters that I do not think there will be much argument on from this side of the Chamber. 
If we look at two areas at personal tax cuts and the GST increase there will be substantial opposition from the Labour Party and I expect from the Greens as well. As far as company tax is concerned it is an area where we would like to have more discussion with the Minister to work the issue through. Members on this side want some reassurance that we are not just moving to further subsidies for Australian banks. I think the Minister is pretty aware of the views of some members on this side—that is for New Zealanders the company tax rate is essentially withholding tax. In the end the people to whom the dividends are paid or who sell the company effectively end up paying the tax. For overseas owners it is effectively the final tax—certainly for the New Zealand taxation system—that they pay. The likely major beneficiaries of this will be the Australian banks. 
As I move through I say that the Inland Revenue Department has done a good job with major litigation over recent years. I think the banks thought they would be able to see the department off and I am pleased they did not and are paying. That is not exactly part of this but the point I make is that the very people and institutions that have been forced by the courts to pay their tax appear to be being forgiven some of that tax in the future through the changes we are making here. Of course I am not asking the Minister of Revenue to identify individual taxpayers but I would like him to give an indication as to groups of taxpayers that are most likely to benefit from this change and where it is a withholding tax rather than washing out as part of a final taxation rate. 
I want to focus the major part of my speech on GST and personal income taxes. The more and more we look at the detail in this particular area the more uncomfortable the Opposition is getting. We see a change to the rates of income tax from 38 cents to 33 cents for people who earn above $70000. Frankly I would find it pretty hard to argue if there was a threshold increase to $100000 or even $120000. I would not find it that hard to argue with if the vast majority of people who voted for the National Party at the last election had their tax effectively cut from 38 cents to 33 cents at the margin. It is not something I would support or promote— 
Chris Tremain 
: The vast majority of people who voted for National were under that threshold. 
Hon TREVOR MALLARD 
: I tell that member because he may not understand this that at the margins we now have working families are paying the top marginal tax rate. That is what the Prime Minister told us. I know the Prime Minister gets a bit loose; he is a bit Abbott-like with the truth every now and again. He gets a bit enthusiastic and he is not always right on the facts but I believe— 
Chris Tremain 
: Three-quarters of New Zealand workers’ tax is capped at 17.5 percent. 
Hon TREVOR MALLARD 
: That member can tell me if I am wrong. Chris Tremain can tell me that the Prime Minister is a liar if he wants to. 
The CHAIRPERSON (Lindsay Tisch) 
: The member cannot use the word “liar”—[ 
Interruption 
] I am on my feet. The member said “the Prime Minister is a liar”. Under Speaker’s ruling 43/6 members cannot use the word “liar”. I ask the member to continue. 
Hon TREVOR MALLARD 
: I do not think the Prime Minister is a liar but Chris Tremain might be contradicting me— 
Chris Tremain 
: I raise a point of order Mr Chairperson. If you alleged that the member called the Prime Minister a liar— 
The CHAIRPERSON (Lindsay Tisch) 
: I have ruled and the member knows exactly what I said. Members cannot refer to anyone as being a liar nor to say that they are not a liar. I know that the member knows what I am saying. I do not need any help in this matter. I invite the member to continue. I know it will be a robust debate over the next few hours and I ask him to continue in that vein. 
Hon Clayton Cosgrove 
: I raise a point of order Mr Chairperson. It may be that we do not waste the time of the Committee with this but I invite you to very carefully consider your last ruling and I think I might be joined by some colleagues across the aisle. If it is the case that we are defending somebody by not calling them a liar or saying they are not a liar we are in difficulty. 
The CHAIRPERSON (Lindsay Tisch) 
: I am on my feet. Let me say this: the slate is clean. 
Hon TREVOR MALLARD 
: I thank the Chair; I am glad we got there. I want to really thank Chris Tremain for his intervention as it was particularly helpful to get the truth on to the table whichever way it went—whether he was right or the Prime Minister was right or whichever side of the National Party was accurate. We know that no one voted for the Prime Minister to get a $1000-a-week tax cut. That is what he has come to this House to promote and vote for. Some of his mates will get tax cuts that are seven times that size. Some of his mates— 
Paul Quinn 
: That’s exactly what they voted for. 
Hon TREVOR MALLARD 
: No one voted for that. I am saying that most decent Tories would have accepted a lifting of the threshold to $100000 or $120000. They would have thought that that was fair—[ 
Interruption 
] 
Hon Clayton Cosgrove 
: I raise a point of order Mr Chairperson. It is an absolute rule in the House that a member cannot move his or her seat to take advantage. “Mr What’s-his-name” sits right at the back in the cheap seats and he has moved his seat to interrupt my colleague. 
The CHAIRPERSON (Lindsay Tisch) 
: I thank the member for that; the member is correct. I say to Mr Quinn the member on my right that interjections are fine but he also brought me into the debate by saying “you” and he mentioned the member by his first name not his full name which one cannot do. I know that the member’s seat is usually at the back and he has moved forward. I am happy to accept interjections and I am happy to acknowledge that this is a robust debate but I ask the member to tone it down. 
Simon Bridges 
: Mr Speaker— 
The CHAIRPERSON (Lindsay Tisch) 
: I have ruled on this matter and I am inviting the member to continue. 
Hon TREVOR MALLARD 
: Thank you— 
Simon Bridges 
: I raise a point of order Mr Chairperson. Mr Cosgrove referred to “Mr What’s-his-name”. I thought we had to use correct names in this House. 
The CHAIRPERSON (Lindsay Tisch) 
: This is getting silly. I thank the member for that intervention. The member knows exactly what needs to be done. I am inviting Trevor Mallard to continue. He has 1 minute 34 seconds to do so. 
Hon TREVOR MALLARD 
: The point I am making is that these tax cuts are inherently unfair. They are absolutely unfair because in the end although some loopholes are being closed to give lower and middle-income people a little bit of relief a massive GST impost is being put on those people to give the Prime Minister and people on similar incomes $1000-a-week tax cuts. No one from the National Party and certainly no one who ran against me in Wainuiomata told the public that they would be voting for the Prime Minister to get a $1000-a-week tax cut. We know that if National members had said that the Prime Minister would get a $1000-a-week tax cut they would never have been elected. If they had told the truth if they had had integrity going into the election campaign they would not have been elected. 
I finish the way I started an earlier speech which is to congratulate Peter Dunne on the minor change he made to this legislation to make it slightly more palatable than it might have been. 
CRAIG FOSS (National—Tukituki) 
: 
 Part 1 of the Taxation (Budget Measures) Bill deals with some of the technical issues as the previous speaker Trevor Mallard said. They were probably the only couple of words he got right. From there he departed a bit but he was right in saying that Part 1 is the technical part that addresses the schedules the changes in the income tax rate the changes in the portfolio investment entity rates the changes in company rates and of course changes in GST rates. It also provides the mechanism for amendments to the Income Tax Act 2007 and their wording so that we can have transitional rates because much of these proposals move in halfway through the financial year. 
Part 1 is quite substantial and I look forward to the Greens speaking on it because it proposes an increase in GST. As members opposite have said GST is a tax on consumption. I note that in many speeches in this House the Greens say that they are opposed to consumption so presumably they will be speaking for this part of the bill putting a tax on consumption and perhaps even slowing down consumption. 
Other clauses in this part point to an encouragement in relation to financial assets where portfolio investment entity rates go down from 30 percent to 28 percent. So for once I am looking forward to the contribution of Green members to see whether they would encourage an increased tax on consumption a movement to more financial assets. 
This is a technical part and I have been reading some of the provisions to do with GST. I was trying to figure out how on earth one would write this bill if the GST clauses included exemptions for fresh fruit and veges. In the whole bill there are 50-odd pages dealing with GST. Apparently that absurd suggestion in relation to fresh fruit and veges was an opinion from the Labour caucus but not from the leader I understand—and I am sure other members may correct me on that. We have a world-renowned tax on consumption in New Zealand. In fact this very clean and crisp tax was brought in by the party now in Opposition—some of its current members were either near or in Cabinet at that time; they were definitely in Cabinet when the rate was increased from 10 percent to 12.5 percent without any compensation—so I will be interested to hear their comments about that. There are no exceptions to GST; it is an across-the-board goods and services tax. 
One point seemed to be missed in some of the earlier speeches related to tilting New Zealand’s economy away from consumption towards saving or reducing debt. Of course if people want to go out and spend their entire after-tax income that is fine and 15 percent of that as proposed in this bill would attract GST. But if people pay off their mortgage with their higher after-tax income which would increase their home affordability they will get a better bang for their bucks so their net debt position would improve because of this Budget. If people have positive savings they will attract tax at 28c in the dollar on their portfolio entity investment regime as Part 1 changes those rates. 
To be fair I acknowledge that it was the previous administration that brought in the portfolio investment entity regime in recognition of the imbalances in the New Zealand economy. So I find it curious that members opposite seem to be attacking some of the moves in the bill before us and I will be interested to hear their justifications for that. 
To go back to the GST side of things can you imagine what would have to be in this bill if it included the proposals from the other side? Essentially a cabbage that is dug out of the ground and an apple that is picked off the tree would not attract GST but an apple that has gone through the pack-house and been washed and bagged or a cabbage that has been chopped up would attract GST. Can you imagine the legislation the regulation the holes and the arbitrage you would have under that regime? The administration of it would far outweigh any gain to the Crown or any perceived gain to the consumer because they would have— 
The CHAIRPERSON (Lindsay Tisch) 
: I remind the member that he is continually bringing me into the debate. 
CRAIG FOSS 
: I apologise Mr Chairperson. Someone somewhere would have to pay the impost on that. It would fall on the taxpayer or on small businesses which a previous speaker was so concerned about earlier. The previous speaker contradicted another speaker on his side when he talked about some court cases today totally forgetting the outcome of some cases that are now no longer before the court. The other Opposition speaker who was the Minister of Commerce at the time when all that mischief happened started to justify them so again we have contradictions. 
Clause 36 is one of the highlights of this part because it contains the changes to schedule 2 which includes the basic tax rates of PAYE income payments. Subsections (a) (b) (c) (d) and (e) are identified in that clause and I would like to read them for members opposite because they contain some highlights. In fact they highlight the changes not the transitional rates. 
Clause 36(a) states: “in clause 4 ‘0.21’ is replaced by ‘0.175’;” being the PAYE rate. That is interesting because three-quarters of New Zealand taxpayers will be attracting that rate or less. Three-quarters of New Zealand taxpayers will be facing a rate of only 0.175 or 17.5 percent as they make their PAYE payments. At the next levels “0.33” goes to “0.300” and “0.38” goes down to “0.330” which seems to be causing so much concern to Labour members opposite. There does not seem to be any acknowledgment whatsoever that it was that particular party that took the rate from 33 percent to 38 or 39 percent. It was the first thing Labour members did in regard to tax when they became the Government in 1999. I will be interested to hear their comments on that. If they are opposed to this it implies that with the $7 billion of extra spending announcements they have already made they would have to increase personal tax rates corporate tax rates savings PAYE tax rates or GST rates. I thought they were going to axe the tax but I do not know what they are doing now. I look forward to those members as we talk about the clauses in Part 1 in particular telling us what they would do if this Taxation (Budget Measures) Bill were their bill. 
Hon Clayton Cosgrove 
: No no you’re in Government you’re responsible you explain. 
CRAIG FOSS 
: No I say to the gentleman from the South Island that the Chairperson is not responsible. I look forward to the comments from the Greens in relation to the increase in the consumption tax which I believe aligns with their core philosophy. At least the Greens are consistent in their advocacy of a capital gains tax. If I look at the material from Labour when in Opposition and when in Government there are huge inconsistencies and we heard that in earlier speeches on the Budget itself. I look forward to those speeches and to this bill being robustly debated but overall Part 1 is the real detail and the real thrust of the bill and it is that which is getting the nod from New Zealand as we speak. I will be particularly proud to go on the hustings next year and debate and discuss these points. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 Sometimes people watching Parliament wonder why we appear to disagree all the time. It is certainly true that there are some things in the Tax (Budget Measures) Bill that we agree on. For example I think both sides of the Committee agree on the need to improve New Zealand’s parlous savings rate. The debate on the savings and tax interface is about whether the measures in the bill will get us there or whether some alternative measures would be better. Likewise both sides of the Committee agree very strongly on the need to rebalance our economy away from the tax privileges of the property sector towards a more neutral tax playing field. Again the question is whether the measures in the bill get us to that objective. 
Hon David Parker 
: They say they want that. 
Hon DAVID CUNLIFFE 
: They say they want that but in fact the measures do not get us very far and we will come to that. 
The previous speaker the member for Tukituki said that three-quarters of taxpayers will be on the 17.5c tax rate. I wonder whether the taxpayers who go to the Government’s online calculator to see whether they will be better off or worse off have factored in what that calculator rather sneakily leaves out: that next year they will face 6 percent inflation. That means that everybody has to take 6 percent off his or her gross income before working out whether he or she is better off or worse off. For example by the time a family earning as much as $78000 with two kids in preschool gets their great tax benefit they face higher GST paying more for childcare and inflation and they will be 55 bucks a week worse off. So Labour members will be working with the public—the listeners and the viewers—over the next week or so during this debate to uncover some of the hidden traps the fine print and the places where the gloss is not as good as people were led to believe it would be. 
There has been some discussion of whether GST should be on or off fruit and vegetables. Labour has not taken a position on it but we think it is worth having the debate. The reason it is worth having the debate is that it is easier to have a comprehensive GST programme when GST is at a low rate but the higher we raise the rate the stronger we make the case for a possible—note “possible”—exemption. At the moment prior to the increase in GST New Zealand has—wait for it—the fifth-highest level of indirect tax in the developed world. And that is before the increase in GST. The arguments against taking GST off fruit and vegetables are partly based on compliance and partly on definition. But I do not believe that New Zealanders in their hearts would actually find it very difficult to say what a vegetable was. They might look at the members opposite. They might look at say the member for Maungakiekie and ask what he has done since he got to Parliament and whether he would qualify. But that is not very nice so I will back right off it. 
Mr Foss made another point about how fair this measure is. The word “fair” keeps coming up almost as often as Craig Foss saying “Mr Chairman”. What does he say? He says: “Mr Chair Mr Chair.” The word “fair” keeps coming up but here is something that is not fair in this bill: 14 percent of the tax refund goes to the top 1 percent of the population. Trevor Mallard is absolutely right: if you are earning a million bucks you will get $1000 a week extra in your hand. If you are earning a million bucks do you need anything extra in your hand? I am not asking you Mr Chair; I am sure you earn much more than that—I am sure you do. But if a person in the real world the member Mr Foss for example earned $1 million he would get $1000 in his hand. That is not a matter of need. If the Government is to be believed that the country needs to move forward and to address the structural challenges then the country’s needs should be put ahead of the need of millionaires to get another $1000 a week in the hand especially when a family with two kids on $78000 is $55 a week in the red. That is not fair. 
On the question of rebalancing both sides of the Committee—I think all sides of the Committee—agree with the need to rebalance. What we are wondering is why the Government has lost its nerve. It has taken away only a part of the building depreciation tax allowance. The Tax Working Group said that $1.1 billion a year was sitting there; the Government has taken about $600 million. But it did not touch ring-fencing which is worth $2.5 billion—it did not touch that. What it did do rather stupidly is take $200 million off the depreciation of short-lived assets which is technology which is needed for innovation and growth. It is running against the growth objective in order to raise funds because it did not have the bottle to really take some parts of the property industry to task. So the Government has not achieved the goal. It has not achieved the goal of comprehensive reform to achieve rebalancing. 
Let us sum up. In this Committee stage Labour members will be going through the detail of the “how”—not so much the “why” which we will get back to in the third reading debate but the “how”. Are the measures in the bill going to deliver on the stated objectives of the bill? Will they encourage savings? Frankly the Government has got a nerve to ask the question. 
Hon Clayton Cosgrove 
: Gutted KiwiSaver. 
Hon DAVID CUNLIFFE 
: It is the same Government that gutted KiwiSaver as Mr Cosgrove said. Its members said they will return to pre-funding New Zealand superannuation when the country is back in surplus except they have changed their mind done a Tuhoe call it what one likes— 
Hon Clayton Cosgrove 
: Broken their promise. 
Hon DAVID CUNLIFFE 
: They have broken another promise. The country will be back in surplus in 2016 but pre-funding does not resume until 2019. When will the Government have the courage to say to senior citizens that it is sorry but superannuation as they know it is for a limited time? Do they have the bottle to do that? I do not know. And if they do not why not resume pre-funding? 
Hon Gerry Brownlee 
: I raise a point of order Mr Chairperson. I am surprised that you did not pick up on the unparliamentary comment from the Hon David Cunliffe. Perhaps it is because his rhetoric is normally so filled with unparliamentary comments— 
The CHAIRPERSON (Lindsay Tisch) 
: I want the member to state exactly what the point of order is and not make a speech. 
Hon Gerry Brownlee 
: To refer to another member or to any number of members as lacking courage is completely unparliamentary. 
The CHAIRPERSON (Lindsay Tisch) 
: I say sorry to the member. I did not hear that comment. If David Cunliffe did say that I say to him that in future he must not say that someone lacks courage. 
Hon DAVID CUNLIFFE 
: Thank you Mr Chairperson. It is certainly good to have Gerry Brownlee back early from his dinner break at a quarter to 10. We are summing up this part of the debate by showing that there is some common ground between the parties. We agree on the need to encourage savings; we are rather surprised that National has come late to that but it is good that it has. We agree on the need to rebalance the economy but we have serious doubts that this bill will get us there. What we disagree with is the “Robin Hood in reverse” of this Budget which takes from the poor takes from the forgotten middle class and gives $1000 a week to millionaires who do not need it and probably did not ask for it—and it is being done at the expense of the country. 
To make matters worse this Government is borrowing extra to give millionaires a handout. Next year it will borrow $450 million extra for the millionaire handouts and that is $1.1 billion extra borrowing over 4 years for the millionaire handouts. Gross debt goes up and interest payments double and do not come down till 2021. This is not a Government that has got its priorities right. This Budget neither is fair nor fixes the problems. 
As this debate continues Labour members will be showing for each of the portfolios represented by members of our team where the sneaky cuts have come where the loopholes are where the rules are wrong and the better way that we could have achieved those objectives that are sensible and that are agreed across the House. We challenge the Government to be open-minded. It is not too late for it to accept sensible amendments. There is a very sensible Minister in the chair. The Hon Peter Dunne looks great on TV without his tie on. We hope that he will accept the odd amendment as the Committee stage goes on. Thank you. 
Hon PETER DUNNE (Minister of Revenue) 
: 
 I was not going to intervene in the discussion as early as this but given that some measures have been put on the Table that there seems to be a measure of agreement about I thought I would address those now so we could then move on to the more substantive debate about the areas where we disagree on. 
Hon David Cunliffe 
: We were just warming up. 
Hon PETER DUNNE 
: I appreciate that the member may be just warming up and we have a long way to go yet and it can get very hot before it is all over. Mr Mallard raised a question earlier on about the reasons why the tobacco excise increase had been excluded from the CPI calculations in respect of changes to veterans pensions and New Zealand superannuation. The reason is quite simple: it is not a taxation argument; it is simply because compensation would be made available in due course in the normal course of events for that increase. That increase was made to encourage people to desist from smoking; it seems somewhat perverse to then factor in what would effectively be compensation for that decision that had been made. 
Hon David Cunliffe 
: What about the broader 5.9 percent? 
Hon PETER DUNNE 
: That is a question we will come to separately. I am answering questions that have been raised by other speakers. I will come to that point in a moment. But let me just say that when GST was introduced in 1986 the rate of inflation post-introduction rose to about 18 percent. The effect of that was comparatively short term. It is exactly the same here; if we look at the underlying track for inflation over next year the year beyond and the year after it is around 2.5 percent flat. That in fact will mean that the tax changes will not have the negative effect that the member claimed in his address; they will be very beneficial by comparison. One cannot make an omelette without breaking some eggs. The change here gives that short-term boost but in the long term as I say it will even out. 
Let me come to the question of depreciation and the issue Mr Cunliffe raised which I want to pick up on because it is quite critical. The Tax Working Group costed depreciation changes at around $1.3 billion. In fact when officials retested that calculation the figure came out at around half that. So when the member says that we picked up on only half the recommendation in fact we picked up the actual cost if he follows what I am saying. [ 
Interruption 
] Let me just work my way through it. The issue there was not so much of saying we would go with only half the figure; when we looked at the size of a figure it was only half of what the Tax Working Group had set it as being. 
The issue then came down to the introduction of the 50-year limit. That is a very practical exercise given the nature of the buildings that will be categorised as being under 50 years. One may say that that is very easy to get around; I know that one or two colleagues had discussions earlier on about fit-outs and renovations and I think we had given a pretty clear signal that that is on our agenda. There will be a discussion paper issued by the Inland Revenue Department in due course about how those issues will be handled. 
I wanted to talk about the depreciation loading particularly the 20 percent excess. The reason for the change is a twofold one: it is picking up on a recommendation from the Tax Working Group and it is also aligning the rate of depreciation to the actual economic rate of depreciation not the accelerated 20 percent that was there previously. So this is really a streamlining given the recommendation from the Tax Working Group. 
Mr Mallard also raised a question relating to company tax and I am tempted to remind him of his arguments which he knows in reverse very well because they were rehearsed at the time of the 2007 company tax changes. But the reality is this: we live in as members know—I am not going to lecture on this point—a competitive international environment. Our company tax rate was even at 30c out of line with a number of jurisdictions. The international average is around 26.3 percent. We were cognisant of the fact that the Henry review in Australia was likely to recommend a company tax change. In fact it did. The time frame has been a slightly more elongated one. We felt that given the scope of this package it was prudent to make this change now. It certainly gives New Zealand a short-term competitive advantage. It preserves if you like the gain that we had when we cut the tax rate to 30 percent a couple of years ago. 
On the point about who benefits Mr Mallard is correct when he talks about the banks to some extent. But I think the point needs to be made that a lot of New Zealand businesses pitch themselves against that company tax rate. In fact many of those smaller businesses will be more advantaged by the change in the marginal tax rates than they will be by the change in the company tax rate. Some of the very small sole traders I think will do quite well out of that 17.5 percent rate. 
I simply wanted to take a call at this point to cover those points. I appreciate that issues relating to the imposition of the GST and the changes in personal tax rates will excite more debate and I will come back in due course and take part in that. 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I take a call to speak on Part 1 of the Taxation (Budget Measures) Bill and in particular some of the rationale for the tax cuts that are outlined in this part. We have heard some arguments from the Government as to why it is so important that it makes these tax cuts so I think it is important to examine its reasoning. 
One of the reasons given and probably the predominant one concerns growth. The Government argues that as a result of these changes we will get increased growth so it is important to look at some of the historical record and what we know in New Zealand about the relationship between tax rates and growth. We can draw on some case studies. For example we know that in 1986 we cut the top rate from 66 to 33 percent. If the argument for this tax cut was correct—that it results in increased GDP growth—then one would expect that if there is some relationship there would have been an increase in GDP per capita growth after that tax cut in 1986. In fact from the period 1984 to 1992 the average GDP per capita growth was 0.4 percent. After the tax cuts of 1986 the New Zealand economy flat-lined. So in spite of the rhetoric of the Government the evidence in fact is extremely hard to find. Many many studies from numerous countries will repeat that evidence: there is a very poor relationship between the top rate of income tax and GDP per capita growth. 
We can compare that case to the year 2000 when we increased the top rate back up from 33 to 39 percent. In the 5 years after the increase in the tax rate compared to the 5 years before GDP growth per capita doubled. So we see that the evidence for the central argument being made by the Government regarding growth is extremely thin. That evidence is not just from New Zealand; it is from the United States and many other countries. If the Government is to rely on that piece of evidence for its argument then the Government does not really seem to have a leg to stand on. 
The other argument that has been promoted by the Government is labour mobility. One of the key arguments relates in particular to Australia. The Government argues that our tax rates in relation to Australia’s result in people moving to Australia. They also argue that that is the case in relation to wages. I will get to wages in a second. If we look again at the two examples of changes in the top tax rate we see that we actually get the complete opposite result of what the Government would argue. In 1986 we cut the top rate from 66 to 33 percent. In the 5 years after we cut that top tax rate we had a net migration of 65900 people. So in the 5 years after we cut the top tax rate on a net basis we lost about 66000 people through their moving overseas. In 2000 we increased the tax rate from 33 to 39 percent. We actually had in the 5 years that followed that a net migration gain of about 84000. So if the argument is that we have to cut the top tax rate in order to keep more people in New Zealand and to attract more people to New Zealand—the labour mobility argument which is obviously an interesting argument to have—the problem is that the evidence goes in completely the opposite direction. 
Whether we look at GDP per capita or whether we look at labour mobility the evidence for the arguments that the Government is putting on the table for the cut in the top tax rate is actually in the opposite direction. That is odd. We would think that the Government with all its resources and the entire monolith of Treasury behind it in looking at tax rates and legitimising a cut in the top tax rate would make two arguments in relation to GDP per capita growth and labour mobility but the evidence in New Zealand is the opposite. The evidence is as plain as day. Anybody can go and look at that evidence; it is freely available. 
Part of the reason for all of this argument is that there is actually not a strong relationship at all. I am not arguing that if we increase tax rates we increase GDP per capita or that if we increase tax rates we increase net migration into New Zealand. In fact the relationship is not very strong. That is the fundamental truth. None of us here would be able to prove that the relationship is very strong. The relationship is not very strong so in making this argument there is not very strong evidence for the Government to rely on. 
I think that one of the arguments that ties into both of these relationships is about relative tax rates. The Minister spoke for example about the international environment and that is a legitimate argument. We have seen a race to the bottom with tax rates and particularly with company tax rates around the world but also with personal income tax rates labour has theoretically been competing and playing countries off one against the other. Supposedly we have been seeing that race to the bottom and New Zealand has had to lead that race to the bottom. We are leading that race to the bottom. That reality is unfortunate for the Government’s argument. 
PricewaterhouseCoopers and the World Bank in their  
Paying Taxes 2010 
 report compared the total tax take. When we look at the headline “Income tax rates” we know that it does not take into account everything else that goes with it. We do not know whether it takes into account a Medicare levy as in Australia; state taxes; or all the different taxes that are allocated. When we look at Australia we find that the total tax rate that PricewaterhouseCoopers and the World Bank came up with was 48 percent. When we look at New Zealand and at all of its taxes together we find that the total tax rate is 32.8 percent. So the New Zealand total tax rate is already dramatically lower than that of Australia. The problem with the Government’s rhetoric—rhetoric we hear constantly telling us that we have to do all of this to compete with Australia—is that it does not stand up against the evidence. The evidence is that Australia is much more highly taxed than New Zealand and if we look at the World Bank’s  
Ease of Doing Business 
 report which is linked into tax rates we find that New Zealand is rated right at the top of that report. 
In relation to both of the key levers that the Government wants to use to promote economic growth—tax rates and regulation—Australia is both much more highly regulated and much more highly taxed. One could make an argument if one wished to that there seems to be a correlation—if we compare Australia with New Zealand—between higher rates of GDP growth more regulation and higher tax rates. 
This part of the bill is justified on the basis that lower tax rates will result in higher GDP growth but we see very poor evidence for it. To the extent that there is evidence if we compare ourselves with Australia we know that New Zealand has much lower tax rates than Australia does. Some of the members opposite disagree with that but I ask them to go and read the PricewaterhouseCoopers and World Bank report  
Paying Taxes 2010 
 which compares the numbers. It may be that the Government does not believe the World Bank and PricewaterhouseCoopers but although I do not agree with them on everything I think they do have a point: compared with Australia New Zealand is a much lower taxed environment. So the arguments for this part—the arguments based on GDP growth labour mobility and international comparisons—do not have strong evidence. 
We have to wonder why this bill is being brought into the House with justifications for which there is not strong evidence. Surely we should have an evidence-based approach to legislating. Just as we should have an evidence-based approach to medicine or to any other field we should have an evidence-based approach to making decisions about taxation. But the truth sadly is that the evidence does not support the Government’s position. 
The CHAIRPERSON (Lindsay Tisch) 
: I am sorry to interrupt the member. There is a lot of noise over on the Government benches. It is difficult for me to concentrate on hearing what is being said. If members want to talk that is what the lobbies are for. 
Dr RUSSEL NORMAN 
: Those arguments go on top of the other arguments in respect of this part which of course are about equity and avoidance. I have already addressed those issues. The issue of equity particularly has been done to death in this debate; clearly these are regressive tax changes. The issue of avoidance is basically about rewarding avoidance behaviour rather than closing loopholes. Thank you. 
SIMON BRIDGES (National—Tauranga) 
: 
 This Budget and this bill are about tax cuts for the many. This is the people’s Budget and I think that is why Labour members do not like it. That is why they are angry. Actually I think they were a bit embarrassed when their leader was speaking this afternoon. Labour members had come to the Chamber prepared for a Budget that was about tax cuts for the rich; that is what they thought they were getting. They had done all their sums and Phil Goff had a pre-prepared speech that he was to give on all of that. But what we have found is that this Budget has tax cuts for the many. Whether one is an employee at any level he or she is getting a tax cut. In fact the bulk of the tax cuts are going to those on lower incomes. 
Let me give a few I think remarkable facts that show very clearly why this is tax cuts for the many. This is not about doctors lawyers and people in those kinds of professions. It is also about cleaners and the people whom the Labour Party says it thinks it is about. Two-thirds of the tax cuts apply to people on incomes below $48000 and 73 percent of income earners will now face a statutory income tax rate of 17.5 percent or less. The tax changes that we are seeing in Part 1 are not about the rich. The effect will be felt by those people on low and middle incomes. 
It is remarkable as well when we look at these tax changes and tax cuts. Of course we know that and I will not go through the various rates. The tax rate of 12.5 percent for people in the bottom income bracket zero to $14000 has gone down to 10.5 percent. We know all that. But what is also very interesting is that when we go through the various average tax rates we find that the rates are even lower than that. The average tax rate—I suppose we could say the actual tax rate—on an income of $48000 is 15.46 percent. It is not 17.5 percent but 15.46 percent. For someone on an income of $40000 the tax rate is 15.05 percent. People earning $35000 have a 14.7 percent tax rate people earning $30000 have a 14.23 percent tax rate and those on twenty-five grand have a 13.58 percent tax rate. We have not brought a bill to this Parliament—Bill English has not given a Budget today—that is about the rich. The Budget has been about the many. It has been the people’s Budget. We have the people’s princess over there the people’s daffodil but this is the people’s Budget. It has not been about just doctors lawyers engineers and consultants. It has been about ordinary Kiwi jokers such as cleaners and house workers. 
I can understand why Labour members are quite angry tonight. They thought they were getting something else. They had a caricature of the Budget ready to present and to hoe into. But they have had the rug pulled out from underneath them. We are giving these people—the cleaners the street workers—an incentive to get ahead. But we are giving them more than incentive to get ahead; we are not doing just that. We are giving them future options and a desire to get ahead to make more money and yes to get into the top tax bracket. I am not one of those members who think that earning $100000 is evil. 
Debate interrupted.