Third Readings — 
Text is incorporated into the Bound Volume 
Third Readings — 
[Sitting date: 20 May 2010. Volume:663;Page:11179. Text is incorporated into the Bound Volume.] 
Third Readings 
Hon PETER DUNNE (Minister of Revenue) 
 on behalf of the  
Minister of Finance 
: I move  
That the Taxation (Budget Measures) Bill the Government Superannuation Fund Amendment Act 1969 Amendment Bill the National Provident Fund Restructuring Amendment Bill the Social Security Amendment Bill the War Pensions Amendment Bill (No 2) and the New Zealand Superannuation and Retirement Income Amendment Bill (No 2) be now read a third time 
. 
These bills give effect to the decisions in the Budget yesterday regarding the most radical restructuring of taxation in New Zealand probably since the 1980s. The Committee has spent some time discussing the impact of those changes: the dramatic changes to personal tax rates; the reduction in the company tax rate; the lift in the rate of GST and the associated compensation made available to all those in receipt of superannuation welfare benefits Government superannuation veterans pensions etc.; and the changes to the company tax to help create a more balanced and rational tax system in New Zealand. 
The Committee spent time considering the contention made by the Minister of Finance in the Budget speech that these measures as a package were designed to strengthen growth by rebalancing our tax system so that it better supports and promotes productivity savings and investment. I have to tell the House that although there was a lot of debate during that period of consideration the legislation has emerged unaltered. The position that the Government advanced in the legislation has been held intact by the Committee and as a consequence we have legislation that will give people greater incentives to work save and invest. It makes our tax system fairer and more coherent and it makes it a more integrated system with more integrity. It will also encourage productive investment in New Zealand. 
There was widespread agreement during the Committee stage that those aims were laudable aims for New Zealand and the fact that this legislation emerges with majority support at the end of that debate demonstrates that this House like the country as a whole accepts the validity of these measures accepts that they are the right course to follow and looks forward to their early implementation. I am delighted to commend these bills to the House because they give good tax reform for all New Zealanders. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 In relation to this tax legislation we have seen the Government bring down a Budget of broken promises. The promise not to raise GST has obviously been broken by this legislation. The promise to make everybody better off has been broken by inflation and by the skewing of this tax package to the wealthy who need it not. The promise to protect the elderly and restore superannuation pre-funding has been broken. The promise to protect front-line services and the funding of entitlements that the public of New Zealand expected under the previous Government has been broken. The promise to rebalance the economy and put it on a sustainable path to growth has been broken by Treasury’s own calculations. We will prove all of these things in this third reading of the debate. 
At this stage of the proceedings I guess some people over there will be feeling a bit in need of a Berocca. They will be feeling that the champagne has worn off after their orgy of self-congratulation last night. Like a lot of New Zealanders they will be asking to be told again how this Budget leaves them better off. The Labour Opposition can tell New Zealanders that it will not leave them better off. 
The first reason is that 6 percent inflation will deal in short order to the small crumbs that fell from the rich folks’ table. Middle New Zealand will see no benefit from this Budget until at least 2012 or 2013. We believe that New Zealanders will be worse off in the medium term because those upper-income tax cuts are funded in part by extra debt and extra borrowing but the Minister of Finance has the nerve—the gall—to lecture the Labour Party about fiscal prudence. He is borrowing more to give tax cuts to the wealthy while old people go without; he should be ashamed. Inflation will feed into mortgage rises and interest rate rises. If there is one sure way to kill off a recovery as we all know it is to raise interest rates. Alan Bollard’s job just got harder and New Zealanders will pay for it. 
It is OK that the middle-income brackets got some income tax relief; members can bet that Labour would have done that too—and raised tax thresholds as our leader has already said. But it is not OK—and members on this side cannot see past this—that people on a million dollars a year get a thousand dollars a week extra in the hand that they do not need and did not ask for. 
Hon Tau Henare 
: They can go and spend it on the economy. 
Hon DAVID CUNLIFFE 
: Well that member says they will spend it but his leader says they will save it. Would somebody please pass the key lines to Tau Henare because he is off the song sheet again. 
Hon Tau Henare 
: Let them have their own money; stop stealing their money. 
Hon DAVID CUNLIFFE 
: I say to the member “Same to you with bells on.” Underneath all of that is the underlying agenda that National is proposing over time of progressively shrinking the State by strangling revenue flows. Then National will tell New Zealanders that they will have to do without the services they have counted on. As my colleague Grant Robinson pointed out New Zealanders will not have enough for the paper and crayons in their sons’ and daughters’ schools let alone in their preschools. There will not be money for the hip knee or cataract operation for granny because National will be underfunding hospitals by $300 million in the next year. As my colleague the Hon Ruth Dyson so eloquently put it on the radio today the health system has been on life support and somebody has just turned off the switch. Who has done that? Bill English and John Key have done that and senior citizens on waiting lists for a hip operation will remember this day—$300 million short. Waiting lists are growing longer but National is shrinking the State out of pure ideology. 
National also said it would be rebalancing the economy and fixing the tax preference towards the binge-bust property cycle but that has not happened. National has tinkered with depreciation and it has mingled around the edges in relation to qualifying companies but it has not solved the problem. It has not offered for the economy a clear path forward that rebalances a tax system that has got out of whack. National will be condemned by that in the years ahead when Kiwi businesses especially small businesses cannot borrow or access the debt and equity finance that they need in order to grow and create good jobs create higher incomes and drive New Zealand forward in an evermore complex world. 
The Government said the bottom line was that it would create growth when it cut taxes for our best and brightest but it told mainstream New Zealanders not to get jealous: “We need those people; they are better than you.” Well here are the Budget’s numbers on the growth forecast. There has been no manipulation; this is a straight quote. By the Government’s own calculation it is shown that in fiscal year 2012 growth will go down in fiscal year 2013 growth will go down and in fiscal year 2014 growth will go up by less than one-tenth of one percent. That is the step change. After the high-income tax cut growth will go down in 2 years out of 3 and will hardly budge in the third. So New Zealanders are being told to put aside—if they can—the fact that granny will get her home help cut and have to wait for her hip operation put aside the fact that they cannot get a subsidy in the early childhood sector and put aside the fact that millionaires do not need an extra thousand dollars a week and judge the Budget by whether it will deliver in the future in terms of jobs incomes and growth. 
Here is the proof: in Treasury’s own numbers the Budget fails. On its own objectives and its own numbers the Budget is a waste of time. It was a waste of ink; it should not have been printed. It takes New Zealand backwards it does not rebalance the economy it is not socially just and it does not leave New Zealanders better off. 
When the rosy glow of Beehive spin wears off New Zealanders will know that they have been swindled. They were promised a step change but they did not even get baby steps. They got a step back in time to the failed policies of an old-fashioned National Government Budget that rewards the rich at the expense of the poor and in which the forgotten middle class is forgotten again. But this time what is different is that the middle class is being told not to be envious because the upper class deserves it! Thank you. 
AARON GILMORE (National) 
: 
 It gives me enormous pleasure to stand and speak in the third reading of these various bills. Today I was phoned up by my brother in Christchurch. He said the shopkeepers the taxi drivers and the rubbish collectors are happy. In straw polls up and down the country about 80 percent of people are happy with this Budget. The only people who are not happy are those Labour Party members over there because in 18 months’ time when we get on the hustings they will all be sad and depressed. 
Labour members cannot count and they cannot read. We have heard time and time again from those members about the hairy scary things regarding 5.9 percent inflation. I do not think those members read the Budget to page 63. I do not think they got as far as that; they got to about page 5 and gave up. On page 63 of (B.2) (B.3) in the Economic and Fiscal Update a whole lot of numbers are outlined and it might be a bit too tricky for some members over there. It says that yes the CPI will go up—as it normally does—but so will nominal wages. Low and behold wages go up the CPI goes up the world is a better place and the people are better off. We have heard all the rhetoric from the other side of the House and we have heard all their discussions but here it is in black and white. I encourage those members to look at page 63— 
Hon David Cunliffe 
: I raise a point of order Mr Speaker. There has obviously been some dispute about Treasury’s numbers. Therefore I seek leave to table— 
The ASSISTANT SPEAKER (Hon Rick Barker) 
: The member will sit down. It is the accepted practice in this House that members do not interrupt a member who is speaking to table a document. Mr Gilmore was on his feet and there is no need for the member to table a document at this point. Should the member wish to table it he can do so at another stage. I advise members that we will wind up this debate with some semblance of decorum and we will let members give their speeches. 
AARON GILMORE 
: On page 63 it is there in black and white. I encourage the Opposition members to actually read it because they did not get as far as that. However some of the journalists have read it and I encourage them. 
The shopkeepers up and down the country and the people visiting their shops are all very happy. I look forward to standing up against whomever I am running against in 18 months’ time in any meeting up and down the country and talking about this and pointing out what has happened. People are happy. Every school up and down the country is getting $10000. Every school will have more money to spend—that buys a lot of pens and paper. I think that is great. 
This legislation is wonderful legislation by a wonderful Minister of Finance led by our wonderful Prime Minister John Key. I look forward to selling it up and down the country time and time again. Thank you very much. 
Hon SHANE JONES (Labour) 
: 
 The previous speaker Mr Gilmore makes Paul Quinn sound and look clever. The previous speaker Mr Gilmore shares the name of a bikie from Wanganui who is known as Shagger and that was the nature of his contribution to this debate in the budgetary session. Mr Mallard has suggested that he is not actually to be referred to in that fashion because he resembles the janitor and that is why the nature of his speech and the volume of Paul Quinn’s noise show that every Kiwi knows this Budget will put the cost of living up. There is all the brouhaha about the Budget; it will pass and in October November December when interest rates are up at 9 percent or 10 percent property developers will realise that they have been given a “get out of jail free” card and rents will rise and that is when people will come to us. As day follows night the cost of living is definitely going to go up. 
This Budget was designed by the Prime Minister the “Prince of Parnell” to create a caste society—a society where if people have wealth either inherited or from protected areas of the economy then their mobility and their kids’ prospects are protected but that is not the vast majority of New Zealanders. This is not a Budget that will advance social mobility. A society that is riddled with the absence of social mobility breeds resentment. It breeds fear and society does not like being told to shut up and not be envious. That is the view of someone who is embedding a caste-like structure in our economy and forcing people to eke out an existence; in the absence of collective investment they do not have the opportunity to advance. 
The Aussies have a vision that 40 percent of their workforce will be either tertiary or advanced post-secondary qualified. Nothing in this Budget advances those people as shown by Victoria University’s need to cut university spaces. I ask members to point out to me one single page that narrows the gap between our country and Aussie. There is not one single page. The entire Budget rests on the assumption that the only lever this Government has at its disposal to effect economic development is taxation. That is exactly the recipe used by Bill Birch and indeed goes back to Ruth Richardson. What sort of economic growth or closing of disparities did we see during that period of time? We saw a worsening. 
This Budget has an assumption that if we give more money to people who are already wealthy somehow it will unleash a level of dynamism. That will not happen. In that sense this Budget will not narrow the gap—this is the test the Government set for itself. It has said “New Zealand judge us on how we can narrow the gap of the Tasman Sea between Aotearoa and Aussie.” It fails in every measurable form. 
It needs to be said that when we change the tax system and move it more to consumption there are some valid arguments in public policy as to why that would be done. But why would we do it in order to enrich a tiny narrow caste of people who already exercise an inordinate amount of power through their vested interests? All it does is deepen the roots of their ascendancy; it is almost as if a group of aristocrats have seized control of the fiscal levers and are enriching themselves. So it will take a while for the average family to work it out but as day follows night come 2011 when families go to buy the basic necessities they will find that they are more expensive rents will have gone up and those who are trying to encourage nieces nephews and children to buy a house will feel that 10 percent interest rate. They can look forward to that. It will hurt the people who are currently silent not the lobbyists who toppled this Government from the property sector. If they did not like the depreciation changes it is no wonder that the Government is afraid to take a capital gains tax to them. The lobbyists have triumphed. 
There was an invitation on this side of the House at our most senior level to have an open discussion but we learnt the lesson after we made a similar response to the emissions trading scheme—we did not want anything—that we cannot rely on the integrity. We made a similar request that if it was going to effect a substantial change and look at both income and capital we were willing to talk. There was not a single response. The lobbyists have conquered this Government. 
Where are those lobbyists coming from? They are coming from a narrow range of people. There are a host of other advocates and we will hear about them. Where are the interventions to change the structure and the nature of our wealth generation? We all know that we have soil we have water we have climate we have fibre we have food we have fish and we have agriculture. But other than the filching of Jim Anderton’s scheme and its anaemic current example reflected in the Government’s research and development policies nothing in this Budget moves our wealth up from commodity production into value added. It is probably the case that the Government does not know how to do it. The reason it does not know how to do it is that it is listening to a narrow group who feel that far too much has been done for everyone but their narrow interest. That is not a recipe for advancing a prosperous or cohesive society. 
In 2011 there will be a very simple choice to be made. The choice will be made for those of us who unashamedly believe in and want to harness the power of collective power not atomise individual base approaches to human welfare. That is what this is based on and we will have that debate and we will show that the vast majority of New Zealanders who have been caught in a wage economy for way too long will not vote for the effects or the architects of this Budget. There will be people who are willing to give the Prime Minister the benefit of the doubt—we accept that. He will get the benefit of the doubt but that doubt will be eclipsed by poverty. We should look at the statistics of the children and the grandchildren in the vulnerable parts of society where people’s ability to pay their way goes right down. That is the first point. 
The second point is to look at the institutions that are designed to enable future generations of New Zealand to do better than their parents and grandparents—they are being starved. We should look at the shape and the form of the firms that currently earn our export earnings and at how many of them have been given a recipe for a step change in collaboration with the Government. None of them have. There is a forlorn belief that by exclusively pulling on the levers of the Inland Revenue Department a whole new entrepreneurial flow of wealth will be unleashed. 
Not only did the Prime Minister break the GST promise but he has sent garden-variety hard-working Kiwi families out of the workforce—because they will not be able to put the mokopuna into early childhood education; but in addition to that broken promise it reflects a narrow quite frightening focus on the caste defined by the amount of money one can deny others enjoying just to enrich oneself. That is why this Budget after all the puffery has passed will be seen as having driven up poverty in New Zealand. Kia ora tatou. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I apologise. I should have sought leave prior to my colleague’s very eloquent speech after the architect— 
The ASSISTANT SPEAKER (Hon Rick Barker) 
: The member knows that when he seeks leave he is to be succinct and to the point. It is not the time to have a preamble of a speech—to offer congratulations and so on. If the member wishes to seek leave he should raise the Standing Order and say what he is seeking leave for. 
Hon DAVID CUNLIFFE 
: I seek leave to table the statistics on growth expectations resulting from the Budget. 
The ASSISTANT SPEAKER (Hon Rick Barker) 
: I will not accept that document. It is a published document and it is on the Table of the House. It has been given to everybody else. 
Hon DAVID CUNLIFFE 
: The actual graph is not a published document. The data— 
The ASSISTANT SPEAKER (Hon Rick Barker) 
: The graph is not? 
Hon DAVID CUNLIFFE 
: The graph is not. It is new material. 
The ASSISTANT SPEAKER (Hon Rick Barker) 
: It is new material; OK. Leave is sought for that purpose. Is there any objection? There is objection. 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I stand to speak on the third reading of the Government’s tax legislation. This is a rather sad day for our country. The reason it is a sad day is that there is in our country a dream of equality. There is a dream of egalitarianism which runs as a thick current right through our history. It goes back to our most famous and our best Prime Minister Michael Joseph Savage who was a champion of egalitarianism. He dedicated his Government to making New Zealand a better place for everyone. The idea at the centre of egalitarianism is that people are judged on their moral character rather than on how much is in their wallet or on how much was in their father’s wallet. The tragedy of this Budget is that it turns us back to the day when people were judged on how much money was in their wallets rather than on the nature of their characters. 
One of the revealing facts that came out very clearly during this debate was the Prime Minister’s comments about envy. The Prime Minister said he did not think that ordinary middle-income earners should envy those at the top. What this reveals about the Prime Minister’s character and the Prime Minister’s view of the world is that he thinks we should judge people on how much money they have. What it reveals about the Prime Minister’s and the National Government’s view of the world is that people should be judged on how much money they have. 
In this Budget the Government is turning its back on decades and decades of egalitarian tradition in our country. For many years along with the trade union movement and the Labour Party in earlier days—except for a rather unpleasant middle period during the Roger Douglas period—we have had a tradition of fighting for egalitarianism and making our country more egalitarian. Yet this Budget turns its back on that tradition. For me it is a sad day in our country when we turn our back on one of the central traditions that is part of our identity which is a commitment to egalitarianism: the commitment to the idea that people should not be judged on the size of their wallets but on their moral character—on the nature of their character. People should not be judged on which private school they attended but on the kind of person that they are. That is one of the central themes in our history and in our identity but with this Budget we are turning our backs on that tradition. 
By making our tax system far more regressive than it currently is by flattening the income tax rate and by adding to GST which is by its nature a regressive tax we are sending our country down a path that is different from the one we were travelling on before. We are sending our country down a path on which there will be more haves because there will be some people who get richer. But there will be an awful lot more have-nots because the impact of the tax system will be to increase inequality in our country. It is also important I think to remember the history of inequality in our country. Up until the fourth Labour Government we had a relatively egalitarian structure but during the period of the fourth Labour Government and in the Bolger years inequality in our country increased dramatically. Moves to address inequality flat-lined relatively speaking during the last Labour Government; the only significant difference was made by Working for Families where there was some reduction in inequality. But we have still ended up in the situation of having a dramatically unequal society and this Budget will make it only worse. 
The other aspect of this Budget that is perhaps surprising coming from a National Government that prides itself on its fiscal probity is that it borrows for tax cuts. There is an extra $660 million in borrowing this coming financial year in order to pay for tax cuts. That means we will have to borrow an extra $660 million—about a billion dollars over 4 years—in order to pay for these tax cuts in order to pay for motorways that make us more dependent on oil and in order to pay for climate pollution subsidies. It seems to me absolutely irresponsible that a Government that is already borrowing heavily should borrow further for tax cuts that mostly go to the wealthy to motorways that increase our dependence on oil and to climate change subsidies. 
Two parts of the triple deficit of this Budget are the fiscal deficit and the social deficit and the third deficit is the environmental deficit. Part of that deficit of course is the subsidies to greenhouse gases and part of it is the increased subsidy to irrigation schemes. We live in a country now where some of our groundwater is so polluted that it is dangerous for babies to drink because it causes blue babies down in Canterbury but that subsidy is a subsidy to allow further destruction of biodiversity. New Zealand is in the middle of a biodiversity crisis. We are losing native vegetation at present at the fastest rate since European colonisation but this Budget has more subsidies for irrigation schemes which will drive that loss further. The Budget also lacks a capital gains tax which could have put some downward pressure on the escalation in rural land prices that is driving a lot of the biodiversity loss. So the Budget has a triple deficit at its heart: a fiscal social and environmental deficit. 
Another aspect of this Budget that I think is quite worrying concerns the fact that we know that the National Government has said very clearly that in this term it will not privatise. In that regard accident compensation might be a debate but within limits National has kept to that promise to some degree. However it is clear that in the Government’s next term in office it wants to privatise; that is in its genes so to speak. It is also clear that the Government will use public debt as the rationale for more privatisation. So by adding to public debt by driving out public debt further than it would have been driven as a result of paying for these tax cuts the Government is creating the justification that it will use at the next election campaign for the privatisation debate. There will be a privatisation debate at the next election campaign because National has made it clear that it plans to put privatisation on the agenda at the next election. It will use public debt as the justification for privatisation—mark my words. 
The rationale for tax cuts in the legislation before us needs to be challenged. It has been given on the basis that it will reduce tax avoidance. Of course the other way to reduce tax avoidance is to close the loopholes. But this Budget rewards tax avoidance so that argument is a specious one. The Government also argued that we had to have tax cuts for migration reasons—that is to reduce outward migration. We know that that is false from previous times such as in 1986 when we had big tax cuts and there was a large outward migration from New Zealand. When taxes increased in 2000 after that period a lot of people came into our country so the migration argument does not hold. 
In terms of GDP growth the argument does not hold either. There is an awful lot of evidence just from the New Zealand experience that there is not much of a close relationship between the top rate of income tax and GDP growth. So that argument does not really hold either. 
One of the things that was interesting and was a surprise of course was the company tax rate cut. I think two things are worth talking about in terms of the company tax rate cut. The first is that when the whole new-right embrace of globalisation was adopted by Labour and National the Green Party amongst others said the problem was that it would create a race to the bottom. It would create a race to the bottom in terms of standards and taxes. The arguments about cutting the company tax rate have proved how right the Green Party was about the race to the bottom. We are now in a race to the bottom on tax rates and company tax is part of that. The other part of dropping the company tax rate is that we have now opened a 5 percent gap between the company rate and the top personal rate. I ask members to remember that part of the rationale for why we had to cut the top personal rate from 38 percent to 33 percent was the 5 percent gap between the top personal rate and the trustee rate. Companies were also being used to minimise tax. We have now opened a 5 percent gap between the top personal income tax rate and the company tax rate. There will be people—tax advisers—out there right now sitting down and figuring out how they can arrange their affairs in order to take advantage of the 5 percent gap that this bill opens up. So on the one hand the Government says it wants to reduce tax avoidance but on the other hand it has opened up a new loophole. 
Finally I come back to climate change. It is hard to believe that we are sitting in this Parliament debating this tax legislation but not putting climate change at the centre of it. Climate change is the central greatest challenge facing our planet right now; it is the central greatest challenge facing our country right now. I had the privilege of going to a talk by Dr Robert Bindschadler who is the former Chief Scientist of the National Aeronautics and Space Administration’s Hydrospheric and Biospheric Sciences Laboratory earlier this week. We are facing at least 1 metre of sea level rise this century. There is little doubt that we will have at least 1 metre of sea level rise this century and that will require the displacement of 145 million people globally. It will have a dramatic effect on our country and on the rest of the world. Yet this Budget provides subsidies to greenhouse polluters. It does not make any sense. What kind of Budget is it that does not put climate change at its centre? Instead it provides subsidies for greenhouse polluters. Climate change should be at the centre of this Budget. 
JOHN BOSCAWEN (ACT) 
: 
 What a great place that is to start from because we have just heard from Mr Norman that the central greatest challenge that we face as a country is climate change. He reminds me of Kevin Rudd who said just last year that the greatest moral dilemma facing the world was climate change. That is what Kevin Rudd said. And what did he do? He planned to introduce an emissions trading scheme then less than a month ago he said he would not introduce an emissions trading scheme until at least 2013. The impact of that is to put New Zealand right out in front; we are the first and the only country to have an emissions trading scheme which will put our businesses and our exporters at risk when our three largest trading partners Australia China and the United States do not have an emissions trading scheme and do not put a tax on electricity and petrol in the same way that we will be doing. I challenge Mr Smith to name one country in Europe with those same costs in relation to its three largest trading partners. I say to Mr Norman that to suggest that the great challenge is climate change puts him in the same place as Kevin Rudd. 
There is much to commend in this Budget. One of the great tragedies of the last 10 years is that it has been a period of wasted opportunity. It started off in December 1999 when the then new Prime Minister Helen Clark imposed an envy tax. She increased the top marginal rate from 33c in the dollar to 39c in the dollar and what did that do? That spurred out best and our brightest to commit their time and resources to tax evasion and tax restructuring. We had a whole growth in trust developments and tens of thousands of new family trusts were formed to take advantage of that gap that opened up between the 33c and the 39c rates. On this occasion the National Government has moved to reduce that top marginal rate from 38c to 33c. That is one thing to congratulate this Government on. It has also moved to lower marginal tax rates. 
It has reduced the rate of company tax from 30c in the dollar to 28c in the dollar. The Prime Minister was very proud yesterday—indeed he should have been—that our company tax rate is now lower than Australia’s. What he did not say however was that we have an emissions trading scheme tax on electricity. Our electricity is already more expensive than electricity generated in Australia and we will make our electricity even more expensive. So it is little wonder that we need to reduce our company rate of tax from 30c to 28c to enable our businesses and our exporters to compete. 
I want to focus on just three groups of people affected by this Budget. I turn first to farmers because National has been very good at saying farmers are affected by this Budget or by the emissions trading scheme no more than the average New Zealander. That is simply not correct. Meat and Wool New Zealand has calculated that the cost of the emissions trading scheme for the average dairy farm will be $10200 by 2015. Those costs fall into three categories. First they fall into the cost of electricity and petrol which most New Zealanders would pay and Meat and Wool’s estimate of the cost to the average dairy farmer is $1300 from 1 July this year. 
Second dairy farmers are faced with the costs of Fonterra: Fonterra’s processing costs and the costs incurred by other dairy processors—that is electricity and the emissions they have to pay for on gas and coal that they purchase to create steam that is necessary for processing milk. The costs that Fonterra and other dairy processors are expected to incur come to $2600 from 1 July with a further $2600 coming in 2013 and those costs are borne by the dairy farmers. Fonterra is a cooperative of dairy farmers and those costs fall to dairy farmers. So the cost that dairy farmers will face in the first year of the emissions trading scheme is $3900. 
I notice that Mr Mallard was quoting from the tax tables in this morning’s  
Dominion Post. 
 The newspaper also states that dairy farmers would need to be earning in excess of $150000 for them not to be worse off as a combination of the emissions trading scheme tax and this Budget. The same can be said of beef and sheep farmers. They do not incur costs to the same extent but they certainly incur far more than the average New Zealander and they incur them not just for electricity and fuel—diesel and petrol. I say to the farmers of New Zealand that there is only one party here that is prepared to stand up to fight the emissions trading scheme because this Budget was a real opportunity for the Government— 
Hon Dr Nick Smith 
: What did you tell the foresters? 
JOHN BOSCAWEN 
: I say to Mr Smith that I will come to foresters. This Budget was a real opportunity to suspend the emissions trading scheme. I explained earlier that Australia has put off its emissions trading scheme until at least 2013 and the reason Mr Rudd gave for that was simply the fact that no other countries were following. Australia was not prepared to lead the world. Our Prime Minister promised that he would not lead the world and that is exactly what we have done; we have been catapulted into world leadership. Unlike the countries of Europe unlike the countries of the European Union which put costs on themselves to equally disadvantage each other this country has put costs on businesses and exporters that none of our three largest trading partners are incurring. 
Let us look at foresters. Mr Smith asks what we are going to do with regard to foresters. 
Hon Clayton Cosgrove 
: Dr Smith. 
JOHN BOSCAWEN 
: Dr Smith told this House if I heard him correctly less than a month ago that this Government will allocate $1.1 billion of credits to foresters who have planted trees since 1989—$1.1 billion. I spoke to Dr Smith’s officials the day after that and I am very grateful to him for making his officials available to me. They explained to me that it was actually not $1.1 billion for forests planted since 1989; it was $685 million for forests planted since 1989 and some $400-odd million for forests planted before 1990. 
That is a very important distinction because foresters who have planted trees since 1990—and there have been hundreds and hundreds of hectares of New Zealand planted in forest since 1990—did not plant those forests in the expectation of subsidies from this Government. They did not plant them in the expectation of $1.1 billion worth of subsidies. Let me quote what a newsletter from Greenplan a company based in the Taumarunui - Te Kuiti area says to its investors: “When most of you invested in Greenplan the ETS wasn’t known about and global warming had just started to become a buzz word. The prospectus didn’t mention who would get what if ever we sold carbon credits. In fact carbon credits didn’t become common jargon until after the turn of the century.” 
There is a real reason that the income tax cuts in this Budget are not greater and that we have to have a 2.5 percent increase in GST and it is that this Government is determined to give $1.1 billion of credits to people who were not even expecting them. By their very own words Greenplan’s newsletter to its forest investors says: “You guys have never had such a good deal. You will get a windfall gain and all we ask is that you give us 10 percent and you as clients can keep 90 percent.” It is an absolute tragedy because unless this emissions trading scheme is suspended before 30 June we will give up $1 billion to $2 billion. 
I see Mr Mallard listen interestingly. I ask him whether there is anything that the Labour Opposition can do to stop this massive transfer of wealth—not to millionaires so that they can buy more property but to owners of forests so that they can plant more forests. I understand that Dr Smith is concerned about our Kyoto Protocol obligations and there is a very real way we can ensure that we keep within our limits. The trees that are being harvested right now at the end of their 28-year growing life are trees that were planted in 1982 1983 and 1984. There may be some smaller trees that have been taken for thinning but essentially they are trees planted in the early 1980s. There is a financial disincentive on foresters to harvest those trees without replanting them. It would be absolutely possible to amend the emissions trading scheme so that those people continue to have that financial disincentive. 
I could go on to talk about the fact that there are superannuitants who will not be fully compensated. This Budget which has achieved so much could have done so much more. 
RAHUI KATENE (Maori Party—Te Tai Tonga) 
: 
 The confidence and supply agreement the Maori Party has with the Government requires us to vote in support of the tax changes that the Government proposes. We well know that without the supply of funds the Government cannot function so from the outset of this legislation it was always quite simple: if we voted against the legislation we would effectively be voting against the hefty achievements that were announced yesterday. Amongst them are Whanau Ora Whare Oranga Ake Maori tourism and enterprise and the Youth Guarantee for 16 and 17-year-olds as well as other generic initiatives such as the $91.8 million worth of support to the early childhood sector targeting low socio-economic communities—of which many will be Maori and Pasifika—or the $90 million allocated to the Community Response Fund. That was a price too dear for our constituents to pay. 
As a party we have been talking with our members and our constituents ever since the Prime Minister mooted the increase in GST. We have received back a very clear very strong message to honour the agreement we made with the Government to vote in favour of the changes and to continue to get all the wins we can. No matter how strongly we feel as individuals ultimately as a party built on kaupapa Maori the wishes of the group prevail over those of any individual. That is the expression of kotahitanga. 
As we have said throughout this debate we appreciate the rationale for why tax changes are necessary and we have some sympathy with that view. We support the notion that it is our collective responsibility to clear the heavy burden of debt that our generation has built up and not leave it to the next generation to clean up. This is consistent with our kaupapa of manaakitanga whanaungatanga and kaitiakitanga. 
There are three key planks to the Maori Party’s economic policies: tax relief for those on the lowest incomes small business development and better targeting of Government funding to achieve positive outcomes for Maori. With Whanau Ora and an additional $9 million invested into Maori exporter firms and tourism operators to grow their businesses we are confident that two of those three key planks are well on the way. But we are not a “two out of three” party. We are not satisfied that the Taxation (Budget Measures) Bill has delivered what we needed it to deliver to close the gap and support those on lower incomes. 
I am proud to confirm that we will not shirk the responsibility of continuing to promote the need for protection for those on the lowest incomes and in particular addressing the unacceptable levels of child poverty evident in Aotearoa. The entire country will suffer if the number of children living in poverty continues to rise. We agree with the Child Poverty Action Group that the Government could have used the opportunity of the tax reforms to improve incomes for beneficiaries with children by immediately extending the in-work tax credit to all low-income families. That did not happen despite the 2 percent lift in spending on benefits superannuation Working for Families and the student allowance. The problem is that no matter how the other side of the House may paint it up the Working for Families package has always been highly selective and in doing so it leaves about 220000 children behind. These are largely the children whose parents do not meet the paid work hours requirement and/or are on benefits. No matter the crocodile tears shed now by that side this decision was made by the previous Government. Of these children about 150000 live in families experiencing severe and significant hardship. These families miss out on at least $60 a week for their children. Labour had 9 years to clear it up and it did not. 
It gets worse. The costs of poverty-related disease afflict the nation in many ways. Estimates suggest that up to $136 million is spent every year on the costs of hospitalisation and deaths from diseases such as rheumatic fever meningococcal disease whooping cough viral hepatitis and tuberculosis which are all preventable and were not dealt with under the previous Government. 
In this context I assure the House that we in the Maori Party will continue to advocate hard for taking GST off healthy food. I want to let the House know that there has been a tremendous groundswell of support for my bill to remove the goods and services tax from healthy food. I have received letters of support from amongst others the Maori Women’s Welfare League and the Federation of Country Women’s Institutes. I believe that all members will have this week received a letter of endorsement for my bill from Dr Gay Keating the chief executive of the Public Health Association of New Zealand. She alerts MPs to the research from the University of Auckland that showed that when GST was removed there was an 11 percent increase in the buying of healthy food. She went on to say— 
Brendon Burns 
: I raise a point of order Mr Speaker. 
The ASSISTANT SPEAKER (Hon Rick Barker) 
: I hope this is a point of order about the order of the House. 
Brendon Burns 
: I thought we were talking about the Taxation (Budget Measures) Bill not a GST reduction. 
The ASSISTANT SPEAKER (Hon Rick Barker) 
: I say to the member that it is unacceptable to this House to take a point of order to interrupt the flow of a speech. We have already had one example of that. The speeches in this debate have been quite broad ranging and if the member is going to raise points of order on Government members about the wide-ranging nature of speeches the member should also do so on his own benches. I just want to say—[ 
Interruption 
] I have not finished yet. It is unacceptable to take points of order to interrupt a member’s flow of speech. I find that that point of order is in that particular category. I say to members that they are entitled to have their speech of 10 minutes. If they break the rules of the House that is fair enough. But if they are speaking in the same tenor as that member’s own party has spoken without complaint then the point of order is not fair enough. 
Hon Dr Nick Smith 
: I raise a point of order Mr Speaker. When you came into the House and took the Chair you made the point that you wanted a higher level of decorum in the debate. I have been with a great deal of interest trying my best at short range to listen to the member’s contribution. But continuous barracking—for instance from Mr Darren Hughes—has made it near impossible to hear the member’s speech. I think the House owes the member concerned the dignity of its actually being able to hear the rest of her speech. 
Hon Trevor Mallard 
: Speaking to the point of order. 
The ASSISTANT SPEAKER (Hon Rick Barker) 
: No I will not take any more points of order on this matter. I say to the member that I could hear the member speaking. Yes I said that about the decorum of the House. The member you referred to was not barracking; he was asking a line of disjointed questions but they were questions. Barracking is something different. Had he been engaged in simply barracking I would have stopped him but he was not. Whether or not the member thought they were good questions is another matter. That is the point. I say that the point has been well made. 
Brendon Burns 
: I raise a point of order Mr Speaker. I am not wishing to challenge your ruling but I ask you to just consider this point: as I heard it the member opposite was starting to traverse another bill which will be coming before Parliament quite soon. I think that when we are debating the Budget that is the issue that should be before the House. 
The ASSISTANT SPEAKER (Hon Rick Barker) 
: I say to the member that whenever members stand up and say that they are not going to challenge my ruling the fact is that they do exactly that. When you concluded your comments I thought: “QED my case is proved beyond all doubt.” You were challenging my ruling. I say to the member that if a member is speaking about a bill and there are other related issues I think it is fair enough for the member to pull those issues in as long as it is not the substance of their speech. The member made a few references to it— 
Hon Trevor Mallard 
: We’re all going to be doing that don’t worry. 
The ASSISTANT SPEAKER (Hon Rick Barker) 
: The member can get picky about it but I am not going to be as picky as that about it. If the member Mr Mallard wants to get up I would say to him that nearly every contribution that he made during the Committee stage was outside of the strict Standing Orders of the Committee stage. He made no reference at all to the actual substance the nuts and bolts of the bill. Instead— 
Hon Trevor Mallard 
: Oh read the  
Hansard 
. 
The ASSISTANT SPEAKER (Hon Rick Barker) 
: I will. We had great dissertations about 1984 and Roger Douglas I heard with much interest and a personal reflection. Let us not get too prissy about this. We have had what I think is a very good debate; it has been quite wide ranging. We have had rewrites of history we have traversed economies around the world we have had various reviews of 1984 and it has all been pretty good stuff. Let the member continue with her speech. 
RAHUI KATENE 
: Dr Keating spoke about taking GST off healthy food by saying: “Those benefits include helping all New Zealanders improve their diet particularly families on lower incomes which are likely to be harder hit by any increase in GST. Supporting Ms Katene’s bill would be a great move towards increased fairness. It would also be a great start towards lowering the high rate of avoidable disease hospital admissions and premature deaths that plague lower-income families.” 
This proposal is part of the long-term economic outlook that we believe any responsible Government must plan for. We advocate for taking GST off food on the grounds that GST hits low-income people disproportionately. Removing GST from healthy foods may be one way of encouraging healthier living as well as supporting the many families who are currently struggling to provide just the basics. I know that some concerns have been raised about the cost of such a proposal but I think those who are sceptical need to look closer at the figures before they judge. Analysis of the Statistics New Zealand  
Household Economic Survey (Income): Year Ended June 2008  
estimated that annual GST on all fruits and vegetables sold to New Zealand households was just $167 million. If we were to take off GST from all dairy products fresh fruit and vegetables the total cost would be $302 million. Either way it is not insurmountable. 
If members are still in any doubt about the value of taking GST off food I think they would benefit from a close reading of a recent article by Gordon Campbell. He debunks some of the prevalent myths that have built up reassuring cynics that if compliance is an issue we should look to Australia which operates its food exemptions so smoothly and cost-effectively that compliance is no longer an issue. He also identified the fact that the Australian Taxation Office has established a computerised model that makes GST food and beverage compliance extremely easy to manage. It would be great if the GST advisory panel that Mr Dunne has announced today could be asked to look at this model and to provide us with some advice about how the model could work in our setting. 
The other finding that the Campbell article reported on was the results of a major New Zealand research study released in March. The research proved that if supermarket customers were given a 12.5 percent price discount an almost dollar for dollar higher investment in healthy food will result and will still be observable 6 months later. In other words cutting GST on food will result in lasting health benefits. To quote Mr Campbell: “The question then is not why do it—but why not do something so easy so readily manageable by business so justifiable on grounds of social justice and so likely to deliver practical health benefits to the community?”. I cannot help but be thrilled about the strength of support that is building for the move to take GST off food. 
JOHN BOSCAWEN (ACT) 
: 
 I seek leave to table the Greenplan Forestry Investments newsletter dated December 2009 which refers to the windfall gains to 1990 foresters. 
Mr DEPUTY SPEAKER 
: Is this document in circulation? 
JOHN BOSCAWEN 
: It is a— 
Mr DEPUTY SPEAKER 
: Is this a public document in circulation? 
JOHN BOSCAWEN 
: Well it is a newsletter to the people who invested in forests in Taumarunui. It is not readily available. 
Mr DEPUTY SPEAKER 
: Leave is sought to table that document. Is there any objection? There is no objection. 
Document by leave laid on the Table of the House. 
Hon Dr NICK SMITH (Minister for the Environment) 
: 
 I seek leave to table the  
New Zealand 
Environment and Energy Business Week 
 in which Mr Rodney Hide said he supported carbon credits going to foresters. 
Mr DEPUTY SPEAKER 
: Leave is sought for that purpose. Is there any objection? There is objection. 
JOHN BOSCAWEN (ACT) 
: 
 I seek leave to table the Meat and Wool New Zealand calculations of the cost of the emissions trading scheme on beef farmers sheep farmers and dairy farmers. 
Mr DEPUTY SPEAKER 
: This document is definitely in the public domain because I have read it. I will not accept that document. 
JONATHAN YOUNG (National—New Plymouth) 
: 
 We are gratified to hear of the concerns that the Opposition has in regard to inflation in this country. Its members must be very happy that we repealed their emissions trading scheme which would have seen 10 percent added to power prices on 1 January as well as an increase of 7c a litre in fuel prices. 
Looking at the third readings of the bills arising from the Taxation (Budget Measures) Bill we understand that the legitimate increase of wealth essentially comes in two ways in this country: either by what people earn or by what the Government gives them—or in the case of tax cuts what the Government gives back. We need to be reminded that the previous Labour Government gave nothing back—oh of course 1 month out from the last election it gave us a tax cut. After 108 months of Government what a coincidence that in the last month we got a tax cut! Well it was because Labour could never afford to give tax cuts for a number of reasons. One them was that it just could not afford to. The previous Labour Government’s expenditure grew by 50 percent in its last 5 years a bureaucratic blowout to regulate and control New Zealanders. 
In fact the 2007 Budget papers released under the Official Information Act show that the previous Labour Government Ministers were well aware of the contribution overspending would make to higher interest rates and higher exchange rates. Treasury warned them that they needed to stay close to previously agreed limits otherwise the Government would risk an interest rate response from the Reserve Bank an exchange rate staying higher for longer and a more pronounced economic slow down. And that is exactly what happened. 
National came into Government at a time of dire financial circumstances. It was great to read what John Armstrong from the  
New Zealand Herald  
said about yesterday’s Budget announcement. He said: “It has turned those muddy economic waters into wine by constructing a clever package of significant tax cuts when the Government’s books are written in deep dark red.”—just like Mr Mallard’s tie. 
New Zealanders should know what Phil Goff said should they ever consider returning Labour to the Treasury benches. He said that he would lift the highest marginal tax rate back up to 38c he made no commitment to reduce GST back to 12.5 percent and Shane Jones said today that Labour would consider a capital gains tax. New Zealanders see the economic futility of the type of Government that Phil Goff wants to go back to. True wealth generation in essence is not about what the Government gives or gives back. Stimulus packages can assist and it is important for the Government to prime the pump at times but true wealth generation is when New Zealanders can with confidence invest their money into businesses big or small which will in turn earn them a profit. They can then employ other New Zealanders. 
Our incomes are below those of countries we like to compare ourselves with including Australia. It is important that the legislation arising from the Taxation (Budget Measures) Bill sends a signal to all New Zealanders that this Government has confidence in the country’s future and confidence in New Zealanders to be able to build true wealth given the right environment. As I close I congratulate the Minister of Finance the Hon Bill English and his team and the Prime Minister on their great leadership of this nation. Thank you. 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 I raise a point of order Mr Speaker. I put on the record the fact that Mr Quinn has accepted my donation to his campaign for Hutt South on the basis that he will be my candidate. I want to put that on the record. Thank you very much. 
Mr DEPUTY SPEAKER 
: Although we can have a bit of a laugh at this time in the proceedings with not much time to go that is really just interrupting things. 
STUART NASH (Labour) 
: 
 It is easy to have a bit of a laugh but it is not easy to have a bit of a laugh when I look at this tax package and see that it delivers absolutely nothing. It was interesting that the gentleman who last spoke Jonathan Young asked whether we wanted to return to the sort of Government that we had had. I will tell him about the sort of Government that we had. We had a Minister of Finance who completely eradicated Government debt. Our leader did not stand in front of a camera and say: “I will not increase GST.” then do that. What do we call that? The sort of leader we have in the Labour Party would not stand in front of a camera and say: “I will not borrow to pay for tax cuts.” then do that. What did the National leader do? He broke his promise. This is a Budget of broken promises and these bills are broken promises. It is a disgrace. 
Mr Gilmore stood up and said before that it was all going to be OK and we should not worry about it; the statistics on page 63 of the Economic and Fiscal Update say that it is all going to be OK. Well I can tell members that in the same document on page 65 Treasury says that it assumed that pre-tax wages would not respond fully to the price rises caused by the higher rate of GST. That is what Treasury says—that is what Treasury says. 
As for Ms Rahui Katene I cannot believe that she stood up and said that she is not satisfied with this legislation. I tell the House that we are not satisfied with this legislation either. What we do when we are not satisfied with legislation is vote against it—that is what we do. How dare that member opposite stand up and say that she is not happy with the legislation then vote for it! What is that called? 
Hon Darren Hughes 
: We can’t say what it’s called. 
STUART NASH 
: That is right. But worse still the member outlined why she was not satisfied with this legislation and it was because it increased GST. In that member’s electorate 72 percent of people earn under $40000. Those people will be worse off. 
Hon Darren Hughes 
: What’s she doing about it? 
STUART NASH 
: Well she is not voting against it. She is supporting this legislation. Then she had the nerve to talk about her member’s bill which she says will take GST off healthy food—of course it defines healthy food as fish and chips and Kentucky Fried Chicken. She says she wants to take GST off healthy food but she votes for this legislation! I think that is a travesty and I think the 72 percent of people in her electorate who earn under $40000 will think exactly the same thing. 
The last National speaker was right: this legislation does send a message to the people of New Zealand. The message it sends is that we cannot trust the Government because its leader promised us that he would not do what he has done in this Budget. This is not aspirational legislation for all of New Zealand at all. I cannot see how it drives growth because the economic theory behind it is outdated and that was highlighted by Tau Henare who stood up and said: “If you give money to the wealthy they will spend it.” That is the economics of Margaret Thatcher and Ronald Reagan. It is the economics of last century and it does not stack up in this day and age—it has been proven not to stack up in this day and age. I can tell members what the wealthy will do with this tax cut: they will either retire debt or they will save it. That is what economic theory has now proven. 
But there is one thing this legislation does do. It delivers tax cuts for the very wealthy. Paul Reynolds who is the head of a company called Telecom—and we all know what a fantastic service Telecom has provided recently—has a base salary of $1.7 million. 
Hon George Hawkins 
: How much? 
STUART NASH 
: About $1.7 million. He will get about an extra $1600 a week in the hand. That is about $88000 extra in his back pocket every single year. Very few Kiwis earn as much as that but that is going to be his tax cut. 
Louise Upston 
: Reynolds is great for our tax coffers. 
STUART NASH 
: I tell that member that the 73 percent of people in her electorate who are on the median wage will get about $5 a week. 
I also tell the member that the president of the New Zealand Property Investors Federation has now come out and said that the Treasury figures about rent going up about 1.5 percent are wrong. This man represents the people who own investment properties and rent them out to people who cannot afford to buy their own home. He has said that rents will go up between about 4.5 and 6.5 percent. Then he said there might be an inflationary effect thrown in there as well. Well Merry Christmas to the people of New Zealand. This is not a tax cut that delivers anything. It is a tax cut that delivers something to the very wealthy and nothing to the vast majority. It is a disgrace. 
The gap between Australian and New Zealand workers could not be starker. Yes Australia did lower the company tax rate. But do those members opposite know why it lowered the company tax rate? I will tell them. It lowered the company tax rate because it gave back to the workers. The Australian Government gave back 33 percent and said that it was going to increase the savings of Australian workers. That is why it gave a tax cut to Australian companies. What has this Government done? It has said there will be tax cuts for New Zealand companies but nothing for the workers—nothing for the workers. There will be tax cuts for the wealthy but nothing for the poor. That is not the way forward. 
It brings me back once again to Mr Key’s comment about people being jealous of the tax cuts for the rich in this bill. It shows his true colours. It shows that Mr Key judges people by the amount in their back pocket by how much they earn not by the sort of person they are. Many people in our communities contribute significantly. They do not earn as much as Mr Key or a law partner or an investment banker or a top scientist but that does not mean that they do not contribute. We all know that there are people in our community who give their time freely to help others less fortunate. In fact sometimes the opposite can be true; it is often the less well-off in our communities who contribute the most to the safety and the well-being of our fellow citizens. They often volunteer. What sort of message do they get from this tax legislation? The Prime Minister’s statement on envy did nothing to make them feel valued. In fact it did quite the opposite. They contribute in toil and hard work and they give their hours freely for the benefit of the whole community. I tell Mr Key to not treat them like they are worth less than someone who earns $500000. They are not lesser people and they deserve better. 
My beautiful daughter is taught by a teacher earning under $70000. My wonderful son is in a fantastic day-care centre—that industry has just been gutted—and is being taught and looked after by amazing staff who earn under $70000. A lot of our police who patrol our streets and keep us safe earn under $70000. The vast majority of the nurses who fix us up when we fall over earn under $70000. The people who make our communities tick are the people who receive nothing in the legislation we are now debating. Those people are just as valuable as—in fact I would argue that they are often more valuable than—a merchant banker who makes millions betting on our exchange rate but creates nothing and cares for no one. 
This is a Budget and this is legislation that do not deliver for New Zealand. This Government came in on the promise of a step change. That has not occurred. Paul Reynolds one of our wealthiest will get $1600 extra a week—$1600 a week in the hand. That is how much he will get. 
Hekia Parata 
: How much is he paying? 
STUART NASH 
: But someone on the median wage in that member’s electorate will get $5 extra a week—$5 a week. How is that aspirational? On top of that the rent will increase. This legislation will widen the gap between the very few who have the most in our society and the vast majority who are struggling and who will struggle with increases in GST increases in the price of power increases in the price of everything they buy and increases in rent. It is a sad day in this House for the vast majority of New Zealanders because they have received nothing from this Government except broken promises. Thank you. 
HEKIA PARATA (National) 
: 
 Tena koe Mr Deputy Speaker. Tena tatou e te Whare. Is it not terrible that we have to sit here and listen to a depressing outlook from people who are sent to this Parliament in the best interests of this country? We have been treated to a tired litany of lethargic arguments about what is wrong with the country. We on this side of the House are committed to a better New Zealand. We are committed to the politics of hope. We are committed to the politics of potential. Unlike members on the other side of the House we are not mired deep in the hope that things will go wrong. That is the wishful thinking that we have been treated to by the Opposition this afternoon. 
New Zealanders will be ashamed of the kind of sentiment that has been expressed by members on that side of the House. Their ambition is so low that it is below the lowest as we sit here and listen to the terrible hopes of members on that side of the House about what could possibly go wrong. It is our settled conviction that this Budget is transformational. It is transformational because it strikes the balance between giving immediate opportunity and gain to New Zealanders and restructuring for the long-term focus on how we get growth and productivity. Unlike members on that side of the House we do not focus on how we can get ever smaller slivers of the pie; we focus on how we can grow it bigger so that more people can enjoy a higher quality of living and have greater prospects for the future for themselves and for their children. This Budget is a transformation. 
From that side of the House we have heard quoted a figure of 72 percent. Well let me tell members a remarkable fact: 73 percent of income earners will now face a statutory income tax rate of 17.5 percent or less. For those near the top of that income range the tax rate has been halved—it is down from 33 percent in just 2 years—and this rate will apply to their incomes and savings including KiwiSaver. So there we are—three-quarters of New Zealanders paying tax will now be on the 17.5 percent rate. Do members know why? It is because this Government trusts New Zealanders to make better choices for themselves. 
Hon Trevor Mallard 
: She’s reading Jonathan Young’s speech. It was better the first time. 
HEKIA PARATA 
: Actually I tell Mr Mallard that is not so. I am quite capable of standing here for a couple of hours and not reading anything and still making sense. I am threatening to do that so perhaps the member could keep quiet. 
Two-thirds of the cost of personal income tax cuts has gone into reducing the lowest two tax rates. That means that two-thirds of the tax cuts apply to those earning $48000 or less. So although the Opposition wants to focus on a very small handful of people—who it is true will get tax cuts and who it is also true pay significant amounts of tax—two-thirds of tax cuts will apply to people on incomes below $48000. 
Opposition members do not have to take my word for it. They can read every headline in this country. They can listen to every radio and then they can go out and listen to New Zealanders who are very pleased with the opportunity for the potential they see to improve their lives not only immediately from 1 October but for the future. But what do we hear? There are cries of condemnation in the hope that no people will not improve their lives. Well that view is for that side of the House. This Budget is a historic document and we are proud of this document. We make policies for the many and we deliver for the many while members on that side of the House just talk about it. I commend this bill to the House. Kia ora tatou. 
BRENDON BURNS (Labour—Christchurch Central) 
: 
 It is interesting to follow the previous speaker Hekia Parata and her comments about this being a transformational Budget. A transformational Budget it will be all right; it will transform the wealthy into the super-wealthy—that is what this Budget is about. This is a shiny Budget but it is a hollow Budget. It is a Budget that has been designed to repay the shiny but hollow men. It has some sizzle in it but there is not much meat in the sausage. It is a cappuccino Budget with a lot of froth. 
What it exercises and what it shows is that the National Party in Government has only one raison d’être it has only one real tool in the economic toolbox and that is tax cuts. There is nothing new in that because the National Party promised tax cuts as the main plank of its election platform in 1999. It promised them as the main plank of its election platform in 2002. It promised them as the main plank of its election platform in 2005. It promised them as the main plank of its election platform in 2008. Here we are in 2010 and those at the top end of town are getting their third tax cut in 3 years and all the time we are being told that somehow cutting taxes will lead us out of the economic woods. Well where have we heard that before? I wonder whether that is a philosophy that Greece followed. Effectively it had tax cuts because nobody paid tax and now it is in economic meltdown. 
We are in a world that is still so precarious that somebody entering a wrong figure on to a Wall Street screen can take billions of dollars off the value of Wall Street. We are somehow meant to believe that all is well we have gone through the recession we are absolutely out of the woods and it is time to deliver the third set of tax cuts for the top end of town when we have just got through supposedly the worst economic situation the world has faced since the 1930s. I say to the National Party members opposite that you are supposed to be the conservatives. Where is the fiscal prudence in this Budget? Where is the party that was once the introducer of fiscal responsibility? You are supposed to be a conservative party; that means conserving. You accuse the Labour Party of being— 
Mr DEPUTY SPEAKER 
: You know what I am going to say. 
BRENDON BURNS 
: My apologies Mr Deputy Speaker; you are quite right. The National Party is supposed to be a conservative party. It accuses the Labour Party at times of being a tax-and-spend party yet this Budget represents a cut tax borrow-and-hope approach. The member opposite referred to hope; that is what is encapsulated in this bill. It is all about hope. This is a Budget that is all shine and no substance. 
At first glance the tax cuts—modest though they are—for low to middle income earners may look good. But people will soon work out the not so hidden costs in this Budget. They will take time to work them out. Once the tax cuts take effect people will rapidly see an inflationary tsunami. Nearly 6 percent is the Treasury prediction of what will engulf households budget as a result of this Budget—a 6 percent increase in inflation which is more than twice the rate we have had over previous years. We will see GST go up to 15 percent with this legislation. Well 76 percent of people in my electorate of Christchurch Central earn below $40000 a year. A poll in the  
Press 
 this morning indicated that the majority do not believe that that increase is appropriate no matter what promises this Government makes about compensating them because they are suspicious. They can see the writing on the wall. They know especially those on lower incomes who spend every dollar they get that a one-off compensatory move will not compensate them for the long-term inflationary impacts of this legislation and what it introduces. 
What about the people who will lose some of the funding they currently enjoy in terms of early childhood education support? The estimation is that that could mean adding $1.50 an hour on to the costs that some parents are meeting to place their children in early childhood facilities. If parents who have one child in early childhood education pay $1.50 extra an hour— 
Hekia Parata 
: What about the $91 million for those who aren’t participating at all? 
BRENDON BURNS 
: —I say that Hekia Parata should tell that to her constituents if she has any—that is $60 extra a week for one child. That is twice what the average income tax cut will be even before the GST increase takes effect. 
I understand that projections today from the Property Investors Federation show that the changes will mean a 6.5 percent increase in rents. A 6.5 percent increase in rents plus 15 percent GST will engulf any prospect people have of being better off as a result of this Budget. And that is before we start talking about rising interest rates which will be fed by this Budget as well. The inflationary boom that will follow this Budget will very very much erode the incomes of those on middle and low incomes. It will not worry Paul Reynolds a jot whether he rents or owns his own home because he will be getting $1650 a week extra as a result of this Budget as will many many others. 
The message if the Government would only listen to it is that tax cuts do not actually deliver prosperity. The Government should have taken account of the fact that the top Australian tax rate remains at 45c in the dollar which is 12c or 13c above the rate that we will see in this country from October if this legislation is passed. 
What this Budget should be about is higher productivity higher wages and higher skills. What is in this Budget to deliver any of those? Well we see that there is reference to a Productivity Commission being formed. I wonder whether it will pick up on the work of the task force led by Don Brash. He produced a wonderful report on productivity for this Government. 
David Garrett 
: It’s wonderful. 
BRENDON BURNS 
: It was absolutely wonderful said the member David Garrett from ACT; of course the Government took on board all the recommendations of that previous look at productivity! 
What is this Budget doing about savings? We have heard reference time and time again to Australia in comparison with New Zealand. Well the most recent Australian Budget moved to increase the employers’ contribution to superannuation to 12 percent. Where is the remedy in this Budget to the vicious venal cut to the KiwiSaver scheme introduced under Michael Cullen? He was a prudent Minister of Finance a Minister who paid off debt and a Minister who established savings regimes in terms of KiwiSaver and the Cullen fund. Where is the move in this Budget if we are to feed economic growth to use some of the supposed new surpluses that will be emerging to fund superannuation and savings? There is nothing in it about restoring the employer contribution to KiwiSaver to a very modest 4 percent while the Aussies go to a 12 percent contribution to their superannuation schemes—nothing whatsoever. 
The National Government has only one tool in its tool box and that is tax cuts. There will be huge gains for those earning over $100000 but in effect there is nothing in this Budget once we have taken into account all of the inflationary and other impacts for students low-income workers and battling families. 
I will comment on the matter of economic growth which supposedly is at the heart of this Budget. I am reading from page 78 of the volume containing the Minister’s Executive Summary and the Economic and Fiscal Update. I note that exports are this year supposed to increase by 2.8 percent but what are imports doing in the same period? Well they are increasing by 9.9 percent. Next year there will be a 2.4 percent increase in exports but what will imports do? There will be a 10.8 increase. That is the measure of this Budget. It will feed into import growth because some at the top end will be spending their money. There may be some modest increase in internal economic growth as a result but I ask where the productive sector will gain from this Budget. Where is the benefit for the productive sector? There is nothing for that sector. No wonder Business and Economic Research has commented—and has quoted the Minister in fact—that our single largest vulnerability as an economy and a nation is our net external liabilities and has said that we owe the world around 90 percent of our current GDP. What is this Budget doing? Well we will see the percentage of our Budget as a measure of our external liabilities grow over the next 3 to 4 years to 99 percent of GDP. So we are actually going backwards at the very time that we become increasingly vulnerable as a nation; our balance of payments goes further and further into debt. 
There is nothing in this Budget. It is framed around trying to ensure that the National Party is re-elected next term. It does nothing to improve the state of our economy. It does very little to improve the household incomes of moderate and low income New Zealanders. It is a payback Budget for the hollow men. It is a payback Budget for those who are in business class. It moves them up to first class and it means that those at the back end back in economy class are now paying for their lunch. It is a Budget that is shallow. It is hollow. It will not deliver for New Zealand. It will not make New Zealanders wealthier. It is actually illusionary and very very much a shallow shiny-but-hollow Budget. 
TODD McCLAY (National—Rotorua) 
: 
 Before coming to the House I asked my colleague Dr Cam Calder whether if I listened to Brendon Burns in the House I would live longer. He said I would not but it will certainly feel like that was the case. 
Hon Trevor Mallard 
: Well— 
TODD McCLAY 
: I say to Mr Mallard that it might be cold outside but it is definitely barbecue season. After the horrible speech made by the Leader of the Opposition yesterday it is certainly barbecue time. 
I have a piece of paper in front of me. Members opposite have spoken about GST going up and the effects that that will have. This piece of paper comes from the BBQ Factory. In fact that store has a special at the moment. It is a small red barbecue that few people would ever use with an adjustable cooking grid. It has a shield to protect the flame from the wind in winter and it is priced at $49.99. I guarantee that when GST goes up on 1 October there is a reasonable chance that that barbecue will still cost $49.99. Some members already know about this special because they have been out today looking for the closest BBQ Factory and they have bought one. 
Hon Darren Hughes 
: Sit down. 
TODD McCLAY 
: I say to the member opposite whom many have respect for that he is right: it is often better to be silent and be thought to be a fool than it is to speak and remove all doubt about that. I might have offered the member that advice earlier most certainly. 
What has this Budget done for New Zealanders? It is the biggest reform of our taxation system in 25 years: 73 percent of New Zealanders will now pay a tax rate of 17.5 percent. Is that not wonderful? What about some of the people out in the public who do not spend as much time here as we do? I received some messages overnight from people in Rotorua. Joe from Rotorua said: “Thank you Todd. I remember asking what you were going to do for me before the election. Thank you all. Finally something for those of us who work hard do overtime and want to get ahead.” Then we have John who is also from Rotorua. He said: “Great Budget Todd. Watching the debate now with Goff and Cosgrove etc. spitting tacks.” He corrected himself; he actually said they were spitting “tax”. He went on to say “It shows you guys have done well.” There is a final message that I will read out: “J K said yesterday middle-income earners have received nothing from Labour. In fact we have been shafted—in other words received nothing. Our kids three of them have all left home. We have two incomes and finally have a chance to keep a little more of what we earn.” 
Those people are real everyday New Zealanders not the people who write on Labour members’ blogs. 
Hon Steve Chadwick 
: What about the 70 percent of Rotorua citizens? Ask them in one year Todd. 
TODD McCLAY 
: Mrs Chadwick has just asked whether this Budget will be good for Rotorua. It would be pretty hard to know what is good for Rotorua when one sits in an office in Tauranga. But that is a debate to be had on another day; we will do that next year. 
The only thing that stands between the people of Rotorua and these tax cuts is the rest of my speech. This was to be a 10-minute speech. I say to members that those people have waited 10 long years for a tax cut. For the good of the people of Rotorua I will happily give up the rest of my time so that we can vote after this speech and give the people of New Zealand the tax cuts that they have wanted for a long time. I support this legislation. Thank you. 
A party vote was called for on the question  
That the Taxation (Budget Measures) Bill the Government Superannuation Fund Amendment Act 1969 Amendment Bill the National Provident Fund Restructuring Amendment Bill the Social Security Amendment Bill the War Pensions Amendment Bill (No 2) and the New Zealand Superannuation and Retirement Income Amendment Bill (No 2) be now read a third time.  
Ayes 67 
New Zealand National 58; ACT New Zealand 5; Maori Party 3; United Future 1. 
Noes 51 
New Zealand Labour 43; Green Party 8. 
Bills read a third time.