Taxation (Urgent Measures and Annual Rates) Bill — In Committee Third Reading 
Taxation (Urgent Measures and Annual Rates) Bill — In Committee Third Reading 
[Volume:651;Page:213] 
Taxation (Urgent Measures and Annual Rates) Bill 
In Committee 
Debate resumed. 
Clause 29 Rates of income tax for 2009-10 tax year ( 
continued 
)  
A party vote was called for on the question  
That clause 29 be agreed to. 
Ayes 68 
New Zealand National 57; ACT New Zealand 5; Maori Party 5; United Future 1. 
Noes 52 
New Zealand Labour 43; Green Party 8; Progressive 1. 
Clause 29 agreed to. 
Part 3 Annual rates independent earner tax credit and consequential personal tax cuts amendments (except clause 29)  
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 This part is a very interesting component of the bill and merits the close consideration of the Committee for some time. It is a misguided attempt to ensure that New Zealanders do not lose because of the clumsy and haphazard effects of this rushed and ill-conceived tax legislation. Unfortunately the Government has introduced the independent earner tax credit but is vetoing—on financial veto grounds I understand—an amendment proposed by my colleague Dr Michael Cullen that seeks to protect all income earners from exactly those effects. Dr Cullen took the Minister of Finance Bill English at his word when he said earlier in the Committee debate: “There are no losers under this bill.” 
Hon Ruth Dyson 
: That’s what he said. 
Hon DAVID CUNLIFFE 
: That is what he said and that is the Government’s position. The interesting thing of course is that it is just not true. As we have proven earlier in the debate anyone earning between $14000 and $20000 will by April 2011 face an 8.5c increase in their tax rate. 
Hon Ruth Dyson 
: Wouldn’t that make them worse off? 
Hon DAVID CUNLIFFE 
: That would make them worse off. Let me prove the point. Dr Cullen’s amendment simply provides for a compensatory tax credit for low-income earners and others who might find themselves “inadvertently” penalised. If we took the Government at its word nobody would be in that situation and the cost of the amendment would logically be zero. Nobody would lose so it would cost nothing to indemnify them. However the Minister of Finance has come along with a very blunt instrument called a financial veto. He has said that the actual cost of insulating low-income earners would be—wait for it—$730 million over 5 years. In other words he has made a $730 million change of mind—that is the nicest way I can put it. He told us earlier that the penalty would be zero but he went away and did his sums and found that—oops—he was out by another three-quarters of a billion dollars. Sorry! That is a hole he cannot blame on the outgoing Government. It is a $730 million kick in the guts for low-income New Zealanders. 
Who are the people who will pay this $730 million so that someone earning three-quarters of a million dollars can have an extra $260 a week? They are people who might have a second job cleaners people who are late in their careers and have a pre-retirement part-time job. They are people who earn well below the average wage. As admitted by the Government those kinds of people will be taxed in order to subsidise those who do not need a cut. This is Robin Hood in reverse except that Bill English is not playing the role of Robin; he is playing a rather venal Sheriff of Nottingham just before Christmas. It is not a good look for the Government let us all admit in its first week on the job. In particular it is not a good look because Government members told us there would be no such penalty and now they have quantified the real penalty in order to veto Dr Cullen’s rather elegant amendment. They have shot themselves in both feet at the same time. 
The particular irony of this rather interesting self-contradiction is that it stands in strong contrast to the so-called independent earner tax credit which seeks to improve the relative position of certain sectors of the community who felt a little brassed off because they did not get Working for Families payments. To enter that argument we need to think back and ask ourselves why Working for Families was brought in. It was brought in at a time when our families were under particular stress because of increased housing costs rising fuel prices and other things that we have all talked about and that we all understand are beyond our control. People who had the responsibility to bring up children faced huge costs so we prioritised; we targeted State assistance to those who needed it most. It was a pretty fair thing to do. 
Ah along came a little thing called politics. Some of my parliamentary colleagues from all sides of the Chamber have probably done what I do occasionally in an election campaign and that is stand on a traffic island. Jonathan Coleman does that—[ 
Interruption 
] Mr Coleman’s electorate is just north of the bridge and I recommend that he go back there sometime soon. [ 
Interruption 
] Labour won the party vote in New Lynn thank you very much. And that will be the high tide for the blue tide—let us not worry about that. I noticed while standing on the traffic islands of New Lynn that anybody with a non-Caucasian face would generally give two thumbs up as he or she drove past. But I always knew I was in trouble when I saw a four-wheel drive driven by an overweight white male with a No. 2 haircut. Those drivers would generally wave only one digit and it was not the thumb. That is the market segment that this independent earner tax credit is designed to assuage. The grumpy white male vote is in play here. OK that is fine; I think we can assume that the Government won the grumpy white male vote in the election. 
Hon Gerry Brownlee 
: He’s sitting behind you. 
Hon DAVID CUNLIFFE 
: No no. Here he comes. I said grumpy not bumbling. Mr Brownlee should read the Standing Orders; then he will be just fine in a year or two if he is still here. The independent earner tax credit is a remarkable achievement for this Government. This bill was predicated on the unevenness of the marginal tax rate effects throughout the tax scale. In some misbegotten attempt to solve that problem the Government has helicoptered in a tax credit for one particular section of the population. The net effect is that it makes the problem worse by singling out one small group of people who do not receive any of the other high-priority benefits and giving them a seemingly arbitrary gain. 
I come back to where I began. If the Government were serious about indemnifying New Zealanders at risk it would choose not this mechanism but the mechanism that my good colleague Dr Cullen thought of in 5 minutes during the tea break. It would indemnify the net losers whom Bill English said do not exist—except that he then changed his mind and said that they exist to the tune of $730 million. Merry Christmas New Zealanders! They thought they had voted for a benign kind of National Government one that would keep in place the things they appreciated from the last 9 years of a good Labour Government such as Working for Families KiwiSaver and the research and development tax credit that gave help to our innovators. The smiling face of Mr Key as a likable bloke bounced from cloud to cloud and told us it would all be OK. Then on the Government’s first day in the job it introduced legislation that kicks low-income New Zealanders in the guts. It kicks our innovators in the guts and kicks in the guts prudent New Zealanders who are saving for their future. Merry Christmas Mr Key. Merry Christmas Mr English. 
I say to New Zealand that unfortunately this is probably a foretaste of things to come. As one colleague said earlier today when we look back in history we can see that this week is remarkably similar to the first week of the Ruth Richardson economic reign when tax cuts to the wealthy punitive employment relations legislation and misguided intervention were the order of the day. 
It is interesting to see Sir Roger Douglas back in the House. He opposed that Government and now he is in favour of the same thing. He still holds to the same ideals; it is just that he has had an interesting policy evolution on the way to serve them. I look forward to nothing so much as his maiden speech so I am getting in early to see whether I can identify the contradiction before he gets the chance to underline it. That will be a precious moment in New Zealand’s economic history—when he justifies the full circle that he has travelled. We look forward to that with great anticipation. That kind of full circle that kind of logical OODA loop to use military technology is rather like the logical backflip that has been done here by the Government. It has put in an independent earner tax credit. It has singled out the grumpy white males with the No. 2 haircuts and chucked them $10 a week ignoring low-income families. 
CRAIG FOSS (National—Tukituki) 
: 
 When I look across to the other side of the Chamber I do indeed see some grumpy white males but not with No. 2 haircuts—not yet. The electorate became sick and tired of hearing a couple of grumpy white males telling them that their taxes could not be cut until those members were 15 points behind in the polls. 
Chris Tremain 
: Then there was the road to Damascus. 
CRAIG FOSS 
: That is right. The independent earner tax credit— 
Hon David Cunliffe 
: There are 9 billion reasons to be generous. 
CRAIG FOSS 
: Did the previous speaker say he was looking forward to Sir Roger Douglas’s maiden speech? 
Chris Tremain 
: He doesn’t get another one. 
CRAIG FOSS 
: He does not get another one. I think he is about 30 years too late. 
Hon David Cunliffe 
: I was giving the member the benefit of the doubt. He may have been deflowered a couple of times but he is still a maiden in our eyes. 
CRAIG FOSS 
: I did make the point to the member that we learnt the other day that Sir Roger Douglas never made a valedictory speech so I guess he had a premonition that he would be back. That is over to him. [ 
Interruption 
] “The Return”—whatever. There are a few speech notes there! 
The independent earner tax credit forms a cornerstone of one of National’s commitments that we are committed to pushing through in the first 100 days of our administration. Yes it will be pushed through before Christmas. I note that the previous member talked about a long night or a long speech— 
Hon David Cunliffe 
: I raise a point of order Mr Chairperson. I see Sir Roger Douglas is preparing to leave. If indeed he does not need to give a maiden speech I wonder whether the member who is on his feet would cede part of his time so that Sir Roger can illuminate us which we would very much like him to do. 
The CHAIRPERSON (Eric Roy) 
: That is not a point of order and it is not helpful to the debate. One of the things that is going to change somewhat is this habit of members raising points of order that are not points of order but some kind of interjection. The tolerance of that is going to diminish as the days go by let me assure that member and anybody else in the Chamber. Points of order will be points of order. 
CRAIG FOSS 
: Thank you for your guidance Mr Chair. The independent earner tax credit is a cornerstone of this legislation and of National’s commitment to the electorate. It will be very interesting because it seems obvious that the members on the other side of the Chamber will be voting against this part. 
Hon David Cunliffe 
: Better believe it. 
CRAIG FOSS 
: We had better believe it. They will be voting against it. They keep talking about the people in the electorate. They are going to rock up to 630000-odd New Zealanders—stand on traffic islands you name it; whatever the previous member said—who have not enjoyed any benefit whatsoever from the huge tax gains made over the last 9 years by the previous administration. They have not benefited one little bit. In fact they have been punished by fiscal drag over those years of 25 percent to 30 percent I guess. They have been dragged through higher prices etc. and have been taken into new tax brackets. The party opposite is going to tell those 630000 people who are eligible for $10 a week from 1 April 2009 moving to $15 a week from 1 April 2010 that they should not share in the tax cuts. 
The Opposition has been playing wedge politics. Its speeches are constantly about other parties in the Chamber and about the make-up of New Zealand. Those members are going to tell 630000 people that they should not share in the tax cuts that the National Party put before the country at the last election. That proposal led to our being resoundingly voted in. The previous administration refused to cut taxes and it refused to recognise this particular demographic who work just as hard as anybody else. They resoundingly voted the previous administration out. This group does not have children. The tax cuts are targeted. Many may have delayed having children. Whatever the reason what business is it of this House as to why people did or did not have children or when they did or did not have children? Goodness gracious! The previous administration tried to control light bulbs and shower heads and now it is trying to control even further what goes on in people’s personal lives. I will not elaborate. 
The members of the previous administration are being true to form. Every single speech made by those members shows their true colours. They will not be more clear and succinct than when they vote against this part whereby 630000 New Zealanders will enjoy $10 a week from 1 April 2009 in these tough economic times in this deep recession which began under the previous administration—prior to it beginning in any other country by the way. Those people will get $15 a week from 1 April 2010. 
It is a start. As I said in my first reading speech it is a start. The tax changes in this bill are part of a greater plan. They send a very special and very succinct message to the electorate. The message that these tax changes send is that Government members value New Zealanders’ hard work. We value the hard work that they do to help make our country great. We value the fact that they are still here in New Zealand and have not joined their friends and family overseas. We value the fact that they are choosing to make a better life for themselves in New Zealand. We value the fact that one day they may have children or maybe they will not—it is none of our business whatsoever. The message this bill sends is that hard work is hard work regardless of family status regardless of whether a person has children. Does someone who works on the factory floor who has two three or four children work harder than someone on the factory floor who does not have children? Yes or no? 
A previous speaker the Hon Clayton Cosgrove made some superfluous points about the cut-in at $23999 and argued how arbitrary it was. Yes in a really academic sense he may be right on that small point but we should look at it logically. Is hard work different because of who does it? Should not all New Zealanders enjoy the benefits of a positive taxation commitment from their Government? Should not they all enjoy it regardless of their status? Of course they should. 
I have just one other point—I think the next grumpy old man is ready to speak. Dr Cullen raised some interesting points and I believe he tried to table an amendment earlier. I look forward to it. It obviously is in the same realm as his other accusations about this bill—about pension portability and KiwiSaver—which have been blown out of the water but we will look forward to discussing it in the debate on Part 4. Thank you. 
Hon Dr MICHAEL CULLEN (Labour) 
: 
 One scarcely knows where to begin on this piece of nonsense. I said at the start of this debate that there were some incompetent and silly bits in this bill and this is certainly incompetent and silly and certainly unfair. We are told that this independent earner tax credit applies to 630000 people. There are 3 million taxpayers in New Zealand so 2.4 million taxpayers are getting nothing out of the independent earner tax credit. 
Chris Tremain 
: But they are in the tax threshold changes. 
Hon Dr MICHAEL CULLEN 
: No they are not in the tax threshold changes. The member has not listened at all today. Anybody earning $14000 to $24000 was getting a threshold change under Labour but it is taken away under National. They will be paying more tax under National by 2011 than they would have been paying under Labour. They will be paying $9 a week more if they are on $20000. Everybody believes that. It has been in the newspapers. My God—if we can convince the  
Dominion Post 
 and the  
New Zealand Herald  
then we have the Tory press on side and that is a pretty good start on winning that particular argument. 
We have this nonsense whereby if one is earning $23999 and one earns $1 more one will get a $750 bonus—a $780 bonus by 2010 with the independent earner tax credit. So for that $1 I guarantee that there will be an awful lot of people earning exactly $24000 a year by April 2010. Talk about rorts on research and development tax credits! It will be amazing. We will have businesses around the country saying: “If I slip you 20 bucks extra give me a couple of hundred back under the table because you will qualify for a $780 tax credit from the Government.” That will go on—it will be rorted up and down the country. It will not be all the clever guys in the glass towers who work this one out—small businesses will be working it out for themselves with their own employees. 
But who does not get the independent earner tax credit? Anyone who is receiving an income-tested benefit. So a solo mum who is struggling to bring up her kids going out to work—Paula Bennett’s ideal past—and earning say $8000 a year or $150 a week does not get the independent earner tax credit. She might be struggling to bring up three kids and the Government says to her: “Sorry about that. You’re bringing up kids so you don’t get the independent earner tax credit.” However the guy next door who is her ex-husband and walked out does get it. Members would feel pretty ticked off if they were that solo mum. They would say: “What kind of pro-family National Government is this one?”. This is pretty strange what they are doing here. Had they thought about that? Look at them—they never think about these things when they make up these policies. Why? Because it was made up on the hoof. They promised 50 bucks a week for those on the average wage—which of course was including what Labour was already doing. It was not 50 bucks a week on top of that although they led people to believe that. 
Then when they got the Pre-election Economic and Fiscal Update there was not a dry seat left in the National Party caucus and they said: “Somehow we have to save some money. So how do we deliver 50 bucks a week at $46000 a year?”. Then they had a bright idea. They would have a targeted tax credit that would start somewhere or other fade out by $50000 a year and just happen to add up to not quite $50 but $49.13 I think it was at $46000 a year. That is where this came from. This was a last-minute put-together job that looked as though it was Gerry Brownlee trying to assemble a Chinese bicycle from the parts. It did not work. The wheels were on top of the handlebars and nothing was going anywhere at the end of the day. 
Who else does not get the independent earner tax credit? Anybody who is receiving a veterans pension does not get it. We have heard about all the vets. My goodness have we not had hands on hearts from various people including during the Prime Minister’s speech. Well if one went to one of those places—say Malaya—and got injured and is on a veterans pension and one earns say 10000 bucks which is a couple of hundred dollars a week one does not get the independent earner tax credit. Because one is not independent. So here is a veteran 70 years old or whatever although he is probably a bit older if he went to Malaya. Say he went to Viet Nam and here he is at 60 years old with an injury and qualifying for a veterans pension and my goodness me! He will be cut out of the independent earner tax credit. So that is a thank you for his service to the nation—from the party that sent him there in the first place and did not honour him when he came back. And now it will not give him the independent earner tax credit. I am sure that person will say: “Well thank you very much—again.” 
The person concerned might not be receiving New Zealand superannuation. He or she might have the gall to go out and carry on working which is a good idea with an ageing population he said subtly. It is a good idea to carry on working in that situation. But no that person will not get the independent earner tax credit. And if the person gets Working for Families both partners both spouses do not qualify for the independent earner tax credit—not just one but both. How did Government members make that up in their minds? How do both people get cut out of the independent earner tax credit because of this? This is the first time I am aware of in any developed economy where somebody has developed a tax credit to discriminate against families with children. It is not in favour of families with children as Working for Families is but against them. It says it is a bad thing to have children and if people have children the Government will not say that they are working as hard. 
But what about a person on $23000 or $27000 who is a solo parent going out to work and slaving and probably working horrible shift hours probably paying for childcare and probably struggling to bring up their kids? Those people are being told according to Mr Foss that they are not working hard. Mr Foss who is lying on the great luxurious Government backbenches with no real job to do says: “I know you’re bringing up three kids. I know you’re working 25 or 30 hours a week but you are not working hard enough to qualify for”—what is it from this magnificent this munificent this great turbocharged New Zealand economy? It is $10 a week. When we had a tax cut that for a full-time earner was a minimum of $16 a week it was derided as being merely the cost of a block of cheese. But suddenly $10 a week providing a person does not buy the block of cheese presumably will drive this economy faster into a golden future. 
Hon Ruth Dyson 
: Turbocharge it. 
Hon Dr MICHAEL CULLEN 
: Yes turbocharge it into the future. Are we seriously meant to take this as an intelligent well-thought-through policy by a party that spent 9 years in Opposition planning what it wanted to do in Government? It is rickety put-together ramshackle and expensive. It is expensive to administer. One hundred extra bureaucrats— 
Hon Darren Hughes 
: What! 
Hon Dr MICHAEL CULLEN 
: Do members remember that word? Members opposite call them public servants now that they are in Government but they were called bureaucrats when those members were in Opposition only a few short weeks ago. One hundred extra bureaucrats are needed to administer this bill. It will cost ten million bucks a year which is easily about $100000 per bureaucrat by the time we take the overheads into account etc. etc. That is 100 fewer front-line staff somewhere else in the system delivering services. Well brilliant! It just shows what a brighter future looks like when one cannot think properly when one cannot work out policy and when one does not think about the kinds of individual examples that this applies to. 
I say to Mr Foss that he should go and tell his superannuitants if they work that they do not work hard. He should go and tell the solo mums who are working that they do not work hard. He should go and tell people on veterans pensions who are doing some work that they do not work hard. He should go and tell the struggling families with two income-earners that neither of them will qualify for the independent earner tax credit and then come back here and tell me what a great policy it was. People did not think that is what was happening. The Government might have had it in the fine print but that is not the message it sent to them. The message that National sent was tax credits tax cuts for everybody; that is what National would be doing. But that is not what this bill does and that is why we are voting against this part. 
DAVID BENNETT (National—Hamilton East) 
: 
 First I would like to congratulate the Chair on his very good ruling earlier which set the tone for his chairmanship which is something that the public and this Parliament have been looking forward to for a long time. 
Hon Dr Michael Cullen 
: I raise a point of order Mr Chairperson. It is out of order to comment on a presiding officer’s ruling. 
The CHAIRPERSON (Eric Roy) 
: Yes I know it is. I was hoping he was going to terminate. Will the member get on with his speech. 
Hon Ruth Dyson 
: I was hoping he was going to terminate as well. 
DAVID BENNETT 
: The only termination we have seen is the Labour Party at the last election about a month ago. They are sitting there now trying to work out what is going on are they not? 
The independent earner tax credit is an initiative that National and its coalition partners have put through in this great legislation the Taxation (Urgent Measures and Annual Rates) Bill. It is something many New Zealanders have looked forward to for a long time. They have looked forward to a signal from the Government of the day that it actually does reward hard work and that it sends the right signals to those people who are willing to go out there and make the most of their opportunities. That is what this legislation is about. It is about sending the signal to hard-working Kiwis that the Government does care that the Government does provide the circumstances so that people can provide for themselves and for their families in the future. 
That is what the tax credit for independent earners is all about. Its importance will develop over time as the individuals who take advantage of this tax credit become the families of the future of our country. A lot of young people starting off in their careers now find that they are in situations where they pay high taxes and they feel that they are not getting any support. They are the people who want to get married have children buy a house and set up what we consider to be the heart of the New Zealand community. We have not been looking after those people in this country. We have not been giving them the incentive to stay in New Zealand to actually do the things that develop their communities in this country. Well National is making a constructive step today to give them some kind of a signal that we want to reward their enterprise and their activity. We want to show them that there is a future in this country and that the Government of the day will look after them and will provide the platform for them to go ahead and achieve their dreams. 
That is fundamental to building a stronger economy. When we talk about this legislation as being part of a process of economic growth many people will ask how that will be part of that process. It is quite obvious now that if we look after the young people who are making their first steps in their career to encourage them to stay here and to deliver for this economy then we are building a stronger economic base for our country. That is the fundamental element of this legislation and the reason behind it. We want to give that future—that brighter future—for the next generation of New Zealanders. 
To do that we must give them the tools to invest in themselves and also give them the tools so that they get the reward for that investment. No other Government has done this in recent times but National has. We are not afraid of taking the steps to set out an agenda and a process for New Zealanders to succeed and prosper. We are not afraid to set out a process by which people can have hope and faith in their country and their future. This legislation gives hope and direction to young New Zealanders who want to make a better brighter future in this country. They need not go overseas to take advantage of their future and their careers. They can stay in New Zealand and take advantage because we will give them the reward for their hard work the reward for their education and the reward for their diligence and dedication to their job. 
That is an important signal for any Government to send. It is important that we as a Parliament send that signal especially at this time when we need young people in our country when we need people to feel that they have direction and motivation and that there is a way forward. National has provided that direction. We have provided the way forward. We are providing that brighter future. It is great legislation; its tax credits for independent earners will go down as something that will be one of the major steps and one of the first steps in providing a brighter future for all New Zealanders as we go forward. 
Hon RUTH DYSON (Labour—Port Hills) 
: 
 It is clear that when that member David Bennett makes his contribution in the House he has a soundtrack to a movie playing in his head. There could not have been more clichés packed into a 5-minute contribution than that member just demonstrated. I am assured that every National Party MP has been offered a dollar for every time he or she says “a brighter future” in the House. David Bennett will retire rich. That was an awful contribution if I may say so even by comparison with previous ones. 
I would like to make two points during my contribution to debate on Part 3 of the Taxation (Urgent Measures and Annual Rates) Bill. The first is to ask the Minister sitting in the chair some specific questions about what is clearly a misunderstanding on the bill. I was able to pose these questions to the Minister of Finance earlier. Unfortunately he was called away from the Chamber on urgent matters of public affair; he had to leave and was not able to give me an answer. So I ask the Minister in the chair the Hon Dr Jonathan Coleman to provide on public record the answers to these questions. His colleagues clearly do not know. 
Over the dinner break I witnessed another one of the new bewildered backbenchers of the National Government asking a senior colleague whether what Labour was saying was true; whether it was true that we are increasing taxes for low-income earners. That bewildered backbencher was told to just ignore what Labour is saying. [ 
Interruption 
] In my view that is a totally dishonest way of proceeding with any legislation let alone legislation that is being rammed through under urgency without any public input let alone public scrutiny. 
I ask the Minister in the chair what is—under existing law—the 20/11 marginal tax rate for a person who is earning between $14000 and $20000 a year? Does the Minister know the answer to that question; if so is he prepared to answer by interjection? Right. He probably does not know; I will help him. The answer is 12.5c. That is the current 20/11 marginal tax rate for a person earning between $14000 and $20000 a year. Under the bill that we are debating under urgency tonight what will be that same person’s marginal tax rate? The answer is 21c. I ask the Minister what is higher—21c or 12.5c? In my view increasing a person’s marginal tax rate from 12.5 percent to 21 percent is raising his or her tax rate. A person earning between $14000 and $20000 a year does not have excessive amounts of money to splash around. There is not much left over every week. So the Minister needs to say that either it is a typing or drafting mistake—and that is possible as it may well have been put together in a bit of a hurry—or that what Labour is saying is right and that what the Minister of Finance and his Acting Minister is saying is incorrect. This bill increases the tax rate for the lowest-income earners in our country and every member of the National Party who said that they would cut taxes for every single New Zealander should go back to where he or she campaigned and apologise to the public of New Zealand. 
If National members do not do that we will make sure that every single person who heard that dishonest commitment knows what actually happened during the process of this bill. It is just plain dishonest to say prior to the election that every single working New Zealander will benefit from tax cuts to make that commitment to the country and then come into this House and raise the tax rate of the most vulnerable people in our community. 
The second point I want to raise is in regard to the amendment that has been presented by Michael Cullen an amendment to insert a new clause 30A. The point of this amendment is quite simple and is explained as is appropriate in the explanatory note. It says that this amendment “will ensure nobody is made worse off as a result of the new rate and threshold changes.” It could not be more straightforward as outlined in that explanatory note. This “will ensure nobody is made worse off as a result of the new rate and threshold changes.” What National member would disagree with that? What National member would say that this only confirms what John Key said all through the campaign? It only confirms what Bill English said all through the campaign—“Nobody will be worse off in fact everybody will be better off.” In fact this amendment should confirm National’s commitment. But what has happened to it? What has happened to this amendment? 
I will leave the answer to that question for just a little moment because I want to quote what the Minister of Finance said during one of his earlier contributions in this debate tonight. On record in the House—recorded extraordinarily accurately by the Hansard stenographer and the tape—he specifically said: “There are no losers under this bill.” That to my mind means that nobody will be worse off. They may not be better off—I will accept that. But “no losers” means they cannot be worse off. He said: “There are no losers under this bill.” So if that is true if what the Minister of Finance said in this very debate in the Committee is true this amendment would get the total agreement of Parliament. [ 
Interruption 
] Sorry; with the exception of ACT members who may vote differently just because they are so inclined every thinking member of Parliament would support this amendment because it does nothing more than confirm what the Minister of Finance said. He said there were no losers so if this amendment confirms specifically in the legislation that there are no losers then it must be at no cost because the Minister of Finance has already confirmed it. Yet that same Minister of Finance has used an extraordinary process a financial veto on this amendment saying that it would cost $730 million over 5 years. Now how does that figure? I think even David Bennett might be able to work out that if there are no losers then an amendment to confirm that there are no losers cannot cost $730 million over 5 years. So where is that money? 
Hon Dr Michael Cullen 
: Unfortunately his teachers never told his parents anything. 
Hon RUTH DYSON 
: That is right. He probably did not have a literacy and numeracy test at 5 years of age. His parents never had his standards explained to them in plain English and that is why we have ended up with the situation that we have. If there are no losers under this bill then there is no way that Michael Cullen’s amendment can cost $730 million over 5 years but that is what the Minister of Finance has said. 
Where is that money now? We know that that money is in the wage packets of the lowest-income earners of New Zealand—the people who have either already had their tax reduced or who under the existing legislation are to have their tax rates cut over the coming 3 years. That is where that money either is going or would be going. For example the law as it is currently gives those people whom I mentioned earlier—the people earning between $14000 and $20000—a marginal tax rate of 12.5 percent. They are to lose that marginal tax rate and they will instead be paying over 20 percent. That is a loss. That is a tax increase. Bill English has confirmed in the House during this debate that keeping this bill honest to National’s commitment that there will be no losers would cost $730 million over 5 years. Well in my view it is now quite clear that it will cost a lot more than that to keep National honest. On this one bill we have had an absolute contradiction which was confirmed in the debate. 
CHRIS TREMAIN (Junior Whip—National) 
: 
 I move  
That the question be now put 
. 
Hon DARREN HUGHES (Labour) 
: 
 I appreciate the chance to take a call on Part 3 of the Taxation (Urgent Measures and Annual Rates) Bill. It is very important that the Opposition gets a chance to speak and to scrutinise this bill and particularly this part because throughout the debate on the items in the urgency motion the Opposition has not been given the chance to see the legislation until we start debating it. It is an absolute outrage that that is happening. 
Hon Maurice Williamson 
: Oh that never happened under you lot—outrageous! 
Hon DARREN HUGHES 
: The Hon Maurice Williamson says that that never happened under Labour and he is right. I want the Minister Maurice Williamson to tell me how often the previous Labour Government put the House into urgency and all the legislation in the urgency motion was not available to the House. How often was the legislation to be debated not available? How often was it made available bill by bill only even though the Leader of the House had said at 2 o’clock that he would make it available now? That was a quarter of a day ago which for Gerry Brownlee is pretty fast progress I concede but for most ordinary people a quarter of a day is quite a long time. If the Opposition is not given the chance to read a bill before we start debating it it is important that we are able to give our part by part analysis in the Committee stage. 
Clause 29 sets the tax rates for the financial year 2009-10. It is part of Part 3. Clause 29 has done that; it makes the whole thing quite clear. 
Hon Gerry Brownlee 
: I raise a point of order Mr Chairperson. Surely the rest of this contribution cannot be even slightly relevant if the man is not even aware of what he is debating. Quite clearly judging by his embarrassed look he has not read this particular part. 
The CHAIRPERSON (Eric Roy) 
: That is not a point of order. 
Hon DARREN HUGHES 
: Thank you very much Mr Chair. I assure the member that I always look this way regardless of whether I am in an embarrassed state. I was born looking this way and I have learnt to love myself in this shape unlike Mr Brownlee who always seems resentful and bitter about the way that mother Nature has him appear in the House of Representatives today. [ 
Interruption 
] That is right; he had to work very hard to look that way. I started off looking like this and that is the way it has to be. 
We have debated the tax rates for the coming year and as Ruth Dyson has already said for some people—particularly those on low incomes—their taxes go up quite substantially. Now we come to the independent earner tax credit which the Government is putting up as its major centrepiece to make sure that people get close to the $50 a week they were promised. But there is a problem with that because the $50 a week they were promised includes the tax cuts that were part of the Labour Government’s legislative programme in Budget 2008. But we have to take the argument even further because when we put that to Bill English the Minister of Finance he said we cannot say that there is a tax increase for people on low incomes because National is not counting Labour’s tax cuts—even though we know that when the legislation comes in it will be adverse for people—but when it comes to making up the $50 it cannot wait to get out the abacus and count Labour’s tax cuts as part of the programme that National is putting forward. 
The bridging policy is the independent earner tax credit but when one looks at it one sees how unfair it is. I ask the Minister in the chair the Hon Dr Jonathan Coleman a question. Is any single worker worse off as a result of the tax changes proposed in this part of the bill? The Minister’s colleagues are talking while he is trying to hear. He is now paid a quarter of a million dollars. He gets quite a good tax cut under this part of the bill. He does quite well out of it despite the fact that he is not an independent earner in that respect—he relies on nanny State to pay his wages. He can now tell us whether any workers will be worse off as a result of this part being passed by Parliament. The rising star of the National Cabinet cannot answer that question. We have to keep on debating this bill until we have a Government Minister in the chair who understands National’s policy. 
I ask Jonathan Coleman another question. What was the range of the independent earner tax credit that he campaigned on in the election? He does not know. He shakes his head. He does not know. He has no idea what the independent earner tax credit was that those members campaigned on. I ask him what range it has now that it is in the bill. Oh he does not know that either. To be fair to the man I tell him that it is on the piece of paper in front of him. I know what it is I tell Mr Coleman; it is on the page in front of me. He will find it on page 15. I will give him a few seconds to find it. It is a different figure from the figure quoted during the campaign when National members went around the country saying that they would put in an independent earner tax credit. They said that it would range from $24000 to $50000. That is not what the bill before Parliament right now states. Thank goodness we have the chance to go through the bill carefully in the Committee stage because under the bold brighter inclusive future that National MPs have been programmed to tell us about we did not get to see the bill before we started debating it. 
What it means is that there are people who get only $10 a week which is a pretty pathetic amount considering that Dr Cullen’s tax cuts were larger. One of the great ironies of this debate is that the largest tax cuts in this 3-year programme are Michael Cullen’s tax cuts not Bill English’s tax cuts. Oh the big man is now on the move towards the papers on the Table so we might learn what the non-independent earner has to say about it. Maybe he could sit in the chair and tell us what the range was. I know that he has pored over every detail of the legislation before the Committee. I know that the Leader of the House has not let a single page go unmarked as he makes sure that workers in this country get the best deal. I cannot believe that he allowed this $6000 figure to escape from the National Party manifesto. Gerry Brownlee was all over the detail so I cannot believe that there is a $6000 hole for working people in the bill before the Committee of the whole House this evening. 
I ask him to get into the chair now and relieve Jonathan Coleman because he will be able to tell us why people who get a benefit do not get the independent earner tax credit if they are earning money. We were told by Mrs Collins before her demotion that National wanted to raise the amount that beneficiaries could earn to $100 immediately on becoming Government because work was so important. Work would set people free. Katrina Shanks yawns at the mention of the word “work”; she is working at 7.50 in the evening on the third day of this Parliament. That is what those members are going to have to put up with. This Government which has barely taken office cannot tell us why it campaigned on beneficiaries being able to earn more money—because apparently that is an important philosophy that people have to learn—but if they get a job and earn money they are not entitled to the independent earner tax credit. I want the Minister in the chair to explain to me how he can reconcile that social policy with that economic policy. I think it is quite an important point which the Committee of the whole House does want to know about. It seems to me to be quite crucial. 
Dr Cullen talked about veterans pensions for people who have served our country in war. 
Hon Tau Henare 
: He would talk about veterans pensions. 
Hon DARREN HUGHES 
: Well Tau Henare knows about being in a few battles and a few wars. None of them were official ones but in every single one he was a victim. He is the walking wounded without ever having put on a uniform. He may well want to line up for the independent earner tax credit before he joins the Maori Party having been shunned and made to feel whakama by the National Party. That is what has happened there. 
For people on New Zealand superannuation I see the new member of Parliament for Otaki over there. I know that seat has the highest number of people over the age of 65 and I know that a lot of them still work. He is going to vote to make sure they do not get the independent earner tax credit. They will be worse off as a result of the bill being passed by Parliament tonight. Those people would have got a tax cut under Labour. I want to know what these bold new members of Parliament are going to do about the fact that they campaigned all around the country on letting people keep more of their money—that is what they said—yet when the legislation comes to Parliament they cannot wait to take money out of the pockets of pensioners and put it in their own back pockets. One of the first announcements from this Government was an increase in the pay of members of Parliament but those members cannot wait to take money out of the back pockets of pensioners which is what they are doing in clause 31. Very many people are going to be affected negatively by the independent earner tax credit particularly those who earn under $40000. 
I see the new member of Parliament for Te Tai Tonga over there. I congratulate Rahui Katene on her election to Parliament but 73 percent of her constituents earn less than $40000 a year which is way worse than the average for a lot of other electorates in the country—although for Otaki it is 60 percent. 
Hon Tau Henare 
: And what did you do about it for 9 years? 
Hon DARREN HUGHES 
: We increased the minimum wage every single year so that it went up by $5 over the 9 years that we were in Government. It went up by 70c in the 9 years that Tau Henare was part of a Government. So these figures are better than what they would have been if Labour had not been in Government. When 73 percent of a member’s constituents earn less than $40000 a year that member needs to read Part 3 of this bill really carefully because those people cannot by definition benefit from the changes that the National Government is introducing. This bill unpicks law that is already on the statute book and replaces it and that means they are worse off a second time because they will not get the benefit of what Parliament legislated for earlier on. That is the key point. 
When the Minister of Finance was in the chair before he tried to gloss over this point by not counting Labour’s legislated tax cuts but he has to count it in order to get to the $50 he promised. The $10 amount that he is putting in is an absolute sham. It is a disgraceful amount that will not make a difference for ordinary people. We have tried in the debate on this part to ameliorate the concerns we have as an Opposition party. We believe that National Party members were not up front with the public about this matter when they were campaigning. They said they were in favour of tax cuts. Tens of thousands of people right across the country will now find that their taxes are going up under National; they are not going down as they were meant to do. Craig Foss will not be too worried about that because Craig Foss is in Parliament for Craig Foss but those of us who are interested in making sure that New Zealanders do well say there is a problem with this part. Michael Cullen has a solution. His Supplementary Order Paper fixes this problem. 
Hon DAVID PARKER (Labour) 
: 
 Not so long ago when it was in Opposition the National Party came down to this House and repeatedly accused us of communism by stealth. That was about Working for Families. National opposed Working for Families. National members said it introduced too much complexity into the tax system that it made beneficiaries out of taxpayers who had to fill in a form in order to get some sort of entitlement. Now in Part 3 National introduces an independent earner tax credit which is probably the most difficult to administer wrinkle in the income tax system that any Government has been silly enough to put into the tax legislation for a long long time. It means more bureaucrats and more cost to taxpayers as they have to file tax returns to get their entitlements and less certainty for taxpayers who will not know what they are entitled to. This tax credit that National talks up ad infinitum has a very narrow ambit. It applies only to people who are earning between $24000 and $44000. The abatement rates are confusing for people. It will cause additional cost to the Inland Revenue Department and additional compliance costs to taxpayers—and this from the party that said it was all for tax simplification. 
Well if taxpayers want tax simplification that means they simply want to know whether they will go forwards or backwards as a consequence of legislation. Of course that is what Dr Cullen’s Supplementary Order Paper would give people. It would give them the certainty that this legislation would not reduce their incomes by increasing their taxes. It is a very simple Supplementary Order Paper. It says exactly that. The motion is “to ensure no taxpayer is disadvantaged by the new rate and threshold changes in this Bill.” This is exactly what the Government said not just in this House but during the election. No one would be worse off—those were National’s words. This is exactly what the Supplementary Order Paper would achieve. Bill English had the temerity to say that this should be vetoed. He would not even let it be put to the vote in this Chamber. He used the very rarely used veto powers that are able to be exercised if there is a substantial financial effect from the Supplementary Order Paper. 
National exercised the right of veto on this occasion because truth be known it now says it would cost $730 million over 4 years. In other words the effect of this tax bill is to take $730 million of tax off people. They are being taxed more not less to the tune of $730 million. If Working for Families was communism by stealth it appears that this bill is Robin Hood in reverse—taking from the poor and giving to the rich. That is the effect of this legislation. 
This legislation decreases the wealth of those who are most vulnerable and it is being voted upon by the Maori Party which is supporting the National Party in this legislation to raise taxes on the lowest income people in the country and that disproportionately affects Maoridom. 
Hon Tau Henare 
: The Maori Party the Maori Party. 
Hon DAVID PARKER 
: We have Tau Henare over there. Tau spent many years in a prior failed allegiance with the National Party which ended in tears for his members and which party spent lots of money on underpants but not much on the people he was meant to be representing. 
This legislation is an outrage. It increases compliance costs for taxpayers. There will be more money wasted within the Inland Revenue Department. It takes money from those who can least afford it. 
Hon Sir ROGER DOUGLAS (ACT) 
: 
 Mr Chairman— 
Hon Members 
: Hooray! 
Hon Sir ROGER DOUGLAS 
: Well I was not going to say anything but you know how could one resist after listening to the Labour Opposition. The Committee on this bill has spent a considerable amount of time this afternoon and this evening debating whether this taxation bill helps or hurts low-income taxpayers—whether it helps to restore the margin between low-income workers and those on benefits in order to encourage them to seek work. I believe that the bill does help achieve both of these objectives. 
Let us look at the issue of whether this bill in fact helps low-income earners or whether it helps the rich. The Opposition has claimed throughout this debate that the decision to hold the 12.5c rate to the $14000 tax bracket rather than raise it to $20000 was designed to hurt low-income people. Not so. Not so. If we put aside beneficiaries whose income in whole or in large proportion comes from the Government we come to realise that the people who are in the tax bracket zero to $20000 all—or a vast majority; 90-plus percent of them—come from high-income households or they are people with high assets. So the people who are in the zero to $20000 tax bracket come from high-income households. They are the sons and daughters of the rich or the partner the wife or the husband of a very high-income earner. In fact if we look at Michael Cullen’s 2008 Budget and the tax changes in it we see that it was an invitation to income split. He created a new industry with that Budget—accountants going to their clients and helping them income split. So the Michael Cullen Budget was designed to help the rich and the high-income earners by enabling them to income split—hardly the action of a party that wants to help those on low-incomes. So the reality is in fact a lot different from the rhetoric of those members. 
The group of taxpayers who need tax relief are those who fall within the 21c tax bracket. Anyone who is working full time is actually a taxpayer who falls within that tax bracket. So the people we want to help are the ones whose last dollar of income falls within that 21c tax bracket. It was this group of people who were in the 21c tax bracket that was disgracefully treated by the last Labour Government. A lot of the people in that tax bracket who in 2000 were paying $1 in $5 found when the Labour Government came along that for every extra dollar they earned $1 in $3—not $1 in $5 as it was in 2000—went to the Government. From that point on it was $1 in $3. Quite a lot of people found that they had to pay up to an extra $30 a week because the Labour Government did not want to help these low-income people. It did not want to help so it held the tax bracket where it was. If it had been inflation-proofed it would have gone to $50000. 
Hon Dr MICHAEL CULLEN (Labour) 
: 
 I am going to talk about high marginal tax rates and I think it is worth reminding the Committee of what probably almost everybody in this Chamber has forgotten. At one stage Sir Roger proposed a form of guaranteed minimum family income that was never put into place in its original form which up to an income at that time of $23000 a year—and this is the 1980s we are talking about; well over $40000 a year in modern money—had a 100 percent effective marginal tax rate. That is what Sir Roger actually wanted to be his legacy. But let us take this extraordinary argument. Sir Roger was always a wonderful person for making up figures and then expanding on them. Without the discipline of a whiteboard he gets terribly lost in the thicket of non-facts—90 percent of those earning less than $20000 a year are high-income earners! This is his kind of reverse logic. Of course 90 percent of those earning $200000 a year are poor whereas 90 percent of those earning less than $20000 a year are rich! 
Now of course some people on low incomes are well-off for two reasons. First they fiddle their taxable income. That is probably the most important reason why they are rich. Perhaps the most important reason why most people are rich is that they have managed at some point in their ancestry to fiddle their taxable incomes because most people who are rich have inherited their wealth not made it along the way and that also needs to be remembered. The second point— 
Hon Dr Richard Worth 
: That’s not right. 
Hon Dr MICHAEL CULLEN 
: That is right actually. Even in New Zealand that is true. The second point is that of course some second-income earners in families have low incomes. It may be a spouse who has a partial income or an investment income that is small and so on. But of course given what Sir Roger started with—ignoring beneficiaries and superannuitants—with one enormous expansive wave of the arm at least 800000 New Zealanders disappeared just like that. There were 500000 superannuitants as a start. They are not to be encouraged to work hard. He said that the purpose was to have the gap between earned incomes and benefits yet he will not reward those people who are trying to move off benefits and have partial additional income whilst maintaining family responsibilities. If one is a sole parent and the choice is between earning $10000 or $15000 a year part-time or $30000 to $35000 a year full-time and one is trying to bring up three kids what is actually the most socially desirable outcome in that situation? Will it always be the full-time job? In many instances it is better if that person can work part-time and receive some assistance from the State so as to spend sufficient time devoted to those children. I have to say that it is hard enough bringing up kids when there are two parents. When there is only one it is a very hard job indeed. We cannot just ignore those people. 
Even then if the worry that Sir Roger has is that some people on low incomes actually have high incomes in the wonderful sort of world in which Sir Roger moves where the people with whom he spends most of his time do not have high taxable incomes at all—indeed it is only when they have made a mistake that they have a taxable income at all by and large—then deal with that issue. This is complex enough already. Imagine the poor employer under the independent earner tax credit: “Madam have you got a partner?”—“Well I had one last week I’m not sure this week. We had a bit of an argument this morning.” If people have a partner and they have kids they do not get it; but if they do not they do. That will be a difficult one for employers because if they are deducting this off at source at 10 bucks a week they will have to ask an awful lot of penetrating questions. This party opposite that is so keen to take the State out of people’s homes is now putting the employers back into them and they will be asking questions in a world where life is very different from the old days of the married tax code and all the rest of it. And employers are going to have much-increased administration costs because of this and much-increased compliances. They are not going to thank the Government at all for the enormous complexity of this mechanism. 
What we do know is that it is going to take money off lower-income people because it is not quantified. The Government has had to quantify this. It told us clearly that $730 million over 5 fiscal years is the cost of making sure nobody is worse off but that is the next 5 fiscal years. That includes this year and next year when in fact it does not matter until 1 April 2010. The real cost is over $200 million a year. That is what is being taken off low-income earners earning between $14000 to $24000 year and families earning at least under $44000. But many are actually earning more than that. If they are two-income families they can be earning well over $44000. 
Hon JOHN CARTER (Minister of Civil Defence) 
: 
 I move  
That the question be now put 
. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I do want to begin this intervention by acknowledging Sir Roger Douglas. For many of us probably on both sides of the Chamber his earlier work in Parliament was the stuff of legend—or nightmare depending on one’s perspective. But he is one of the few people who have left an indelible imprint on this country’s history and it is certainly a matter of great moment to see him back. 
It is also very interesting to take this opportunity to reflect on the modus operandi that has been demonstrated in his first intervention. He started by redefining the question. The question we started with was: how do we make people better off through tax policy? He forgot that question and answered his own question which was: how do we narrow the gap between income bands or between income earners and beneficiaries? So that was step 1—redefine the question. It was done very quickly and done without drawing much attention to it. 
Step 2 was “put aside beneficiaries”. I think we should all frame that as a quote because 800000 people vote and they do not want to be put aside. They have families and they have needs and we are here to protect them with our Green colleagues to make sure that they are not put aside. But the ACT Party wants to put aside beneficiaries and let us only hope they cannot do too much damage to New Zealand before they are thrown out. 
Step 3 was to say that he wanted to help those within the 21c tax bracket. Yet that seemed to deliberately fly in the face of the fact that at the moment under existing law they will pay a marginal rate of 12.5c in the dollar. Under the Act the legislation that is being proposed that he is supporting they will pay 21c in the dollar. So he has ignored the contradiction and redefined the question. He wants to help people by almost doubling their marginal rate of tax! It is extraordinary but he moved so fast through the contradiction that I am glad I was taking notes. 
Step 4 of course is the fact that his argument is completely useless because Bill English has already contradicted it in writing. Bill English has answered the question—definitively and on the public record—that people are $750 million worse off because that is what it would cost to fund the motion that Dr Cullen put on the Table taking him at his word that no one would be a loser. So I guess that step 4 in Sir Roger’s mojo was to ignore the proof that was already lying on the Table. 
Step 5 of course was for us to recall that Sir Roger’s idea of a progressive policy was a 20c in the dollar flat tax. That was the high-water mark of ideology that got him thrown out of the Labour Party. The impact of that would be the same as the impact of elements of this tax bill. Raise the tax on the poor to 20c in the dollar and cut the tax on the well-off almost in half from 39c or 37c to 20c and somehow that makes everybody better off! The last time I read an argument like that was from Voltaire who said: “We live in the best of all possible worlds by definition.” Well I hope he had a good whiteboard because when one writes down the logic of the argument it ties itself in knots real quick. 
Hon Dr Michael Cullen 
: You can’t read Roger’s handwriting when he does it. 
Hon DAVID CUNLIFFE 
: Yes. We welcome him back. We are glad to have witnessed this extraordinary logical knot and we are happy to have the opportunity not only to untie this knot but to untie every other knot that he tries to tie New Zealand up in. 
But I will get back to this bill. What New Zealand knows definitively is that this is an ugly Christmas present for those working Kiwis who will be part of the $750 million bill that the Government itself tonight certified. I say merry Christmas to beneficiaries merry Christmas to part-time workers merry Christmas to 57-year-olds with a part-time income as they move towards retirement and to those over 65 who are keeping themselves going and putting a lesser burden on the State. Merry Christmas—the Grinch has arrived. 
The CHAIRPERSON (Hon Rick Barker) 
: I call the Hon Pete Hodgson. 
Hon John Carter 
: I raise a point of order Mr Chairperson. It is normal to alternate the calls from side to side and our very good member Katrina Shanks actually sought the call at the same time as Mr Hodgson and Mrs King and for some reason you chose not to do what is normal convention in this case and choose from the Government. I just draw your attention to the fact that Miss Shanks had called. You now have recognised Mr Hodgson and will no doubt have to proceed with that but I just draw your attention to the fact there was a call from this side of the House. 
The CHAIRPERSON (Hon Rick Barker) 
: The member is correct. I have already given the call to the Hon Pete Hodgson; the call will stand. 
Hon PETE HODGSON (Labour—Dunedin North) 
: 
 I want to bring the debate back to the tax credits for independent earners and just point out gently that the Government has broken a promise. National said in the course of the election that there would be a $10-a-week tax break for independent earners earning between $24000 and $50000 and that is not the case. The law that is being passed does not do what the rhetoric before the election said National would do. But it might—it might. It would be easy to amend this. It would be easy to amend it if the Minister in the chair would care to follow the debate follow the bill or follow anything at all really; he could indicate whether his Government would be prepared to support an amendment to section LC13(5) in clause 31 by changing the amount of $44000 to $50000 because this side of the Chamber would gladly draft such an amendment. It would take a matter of moments; we could put it to the Committee and the Government of the day could maintain its pre-election promise. 
It is not a big promise that is being broken—it is only $6000; it is only $10 a week over that $6000 range—but it is a broken promise. It can be corrected. We have picked it up and we are bringing it to the Government and asking whether it would like to fix it. We are happy to draft the amendment. Of course the Government could draft the amendment itself—we do not mind; we would vote for it if the Government wanted to put it on the Table or we could draft it for them. The Minister may want to take the call and indicate whether he would be prepared to support such an amendment. We can put it on the Table in no time at all. 
You see what has happened is that the $44000 is where the rebate starts to bleed out. It is bled out by $50000. That means that if one is on $49000 and thought that one was going to get an independent earner’s rebate of $10 a week the news is that it will actually be about $1.50 a week. So that is a broken promise for that person. 
Hon Member 
: How much? 
Hon PETE HODGSON 
: A dollar fifty a week. Someone on $48000 will be getting $3 a week instead of $10 a week and so on. So we have a Government that has managed to break a promise for every New Zealander who would be eligible for the independent earner’s tax credit who is earning between $44000 and $50000. They will not be getting $10 a week they will be getting less than that something between $10 and zero a week. So I am saying that to the Minister in the chair Jonathan Coleman to see whether he would like to contemplate receiving an amendment on the floor of the Committee from the Opposition. Indeed the Minister may wish to propose it. It is not difficult and it probably is not very expensive. It probably is nowhere as near as expensive as addressing the problem of the fact that we are going to have higher tax on very low-paid New Zealanders than we would otherwise have. That is the real crime in this legislation but this is a broken promise because National told us about the first amendment before the election. This amendment arrived this afternoon. This afternoon it became clear that the tax credit for independent earners was not as generous as National had promised in the course of the campaign and if it would like to correct this clear obvious and unmistakable broken promise then now is the time to do so. 
So I will just say to the Minister in the chair that if he would like to nod I will write the amendment. It will be just a pleasure if the Minister would just nod. I am just trying to get something. What did I get out of that Mr Carter? Did I get a nod? Is that a nod? Let me ask another Minister. Can I ask the Minister whether he would support an amendment to allow National for not any great price to not break an election promise? Are any National members prepared to agree to not break one of their election promises? Are any National members within the Chamber prepared to indicate to this Labour Opposition whether they would support any amendment that for not too much cost would stop them breaking an election promise? 
I am still not getting any answers. I ask Tau Henare whether he as an esteemed member of the National caucus will give me a nod of support that would be followed by his vote if I were to put forward an amendment to make sure that National did not break an election promise. We have picked it up we have pointed it out and there is still time. We are in the Committee stage and it can happen ladies and gentlemen. This Parliament can stop the governing party from breaking an election promise. We are here to help and we are very happy to offer this up. Would one member of the National Party indicate his or her preparedness? 
KATRINA SHANKS (National) 
: 
 I move  
That the question be now put 
. 
Hon ANNETTE KING (Deputy Leader—Labour) 
: 
 This Opposition is a very very fair one. We are very fair; we want to give the Government a fair go and a chance. So I want to start again. Let us start from the beginning of Part 3 and ask the Minister in the chair the Hon Dr Jonathan Coleman to answer this question—and he must take a call. We cannot have a Minister on his quarter-million-dollar salary sitting in the chair like a dried arrangement and doing nothing. He has to take some responsibility when he sits in that chair so I want the Minister to answer this simple question—it will not take long—will the Minister reaffirm the claim made today by Bill English that no New Zealander will be worse off under these tax changes? It is a yes or no question Minister. We are getting the Cheshire cat grin but no reply. 
Earlier today Bill English said that no New Zealander would be worse off under National’s tax changes. Well that is not true. That is not true and we want every New Zealander to know that within 3 days of forming a Government those members have reverted to form. They have gone back to the old Tory Government they were when they went out of office in 1999 and they have broken a promise within hours of being able to put legislation in this Chamber. 
I tell members why it has happened. It is because National members worked on their tax package for a long time. There were a lot of arguments and a lot of changes. Mr Key could not make up his mind and he could not agree with Mr English. There was a lot of division but finally they got it together. But did they release it to the people of New Zealand so that people could get a closer look at it? No they did not. In October this year they released their tax package within days of a general election. During the election campaign the National Party candidates could not even talk about their tax policy because they did not understand it. They had not had it explained to them. In fact their whole tax policy had been buried because what people did see of it was unpopular. 
You see those members hid so much of it and now today the truth is coming out. The truth is that if we look at Part 3 we will see that this is the nub of what they are doing. They promised that every New Zealander would be advantaged by their tax cuts—every New Zealander. The members opposite know they said that. That is what those members said to the public as they went into the election campaign: every New Zealander would be better off. Are New Zealanders better off under these tax changes? No they are not. Part 3 tells it all. This independent earners tax credit means that many New Zealanders will get nothing. 
Who are these people? Are these people rich? Are these people undeserving? Or are they hard-working independent taxpayers who do not have dependants who go to work do a 40 or 50-hour week’s work but do not earn the net $24000 a year? They actually earn $23999 but they do not qualify for this tax credit. They do not get anything. They are not good enough to get anything. But what did they think during the election campaign? What did they think when the National candidates said they would get a tax break? They thought it was them. They thought they were part of this tax package from the generous National Party. It is a fraud it is a hoax and many many New Zealanders have been tricked into thinking that the National Party was going to provide them with a tax break. Small as it was at $10 a week they now get nothing. 
Just think of the inequities of that. A good example would be two people who live together but they do not have their own independent income. One earns $24000 net and gets the independent earners tax credit but the other person earns less than that and does not. 
Hon TAU HENARE (National) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question now be put. 
Ayes 68 
New Zealand National 57; ACT New Zealand 5; Maori Party 5; United Future 1. 
Noes 52 
New Zealand Labour 43; Green Party 8; Progressive 1. 
Motion agreed to. 
The CHAIRPERSON (Hon Rick Barker) 
: The question is that new clause 30A in the name of the Hon Dr Michael Cullen be agreed to. 
Hon Dr MICHAEL CULLEN (Labour) 
: 
 I raise a point of order Mr Chairperson. Can I just be clear that this is the amendment in my name that ensures a compensatory tax credit so that nobody suffers in the difference between the current tax rates and the new tax rates if he or she makes a loss on it. 
The CHAIRPERSON (Hon Rick Barker) 
: The question I have here is the amendment in the name of the Hon Dr Michael Cullen. This is the one. We are all clear on the question? OK. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I raise a point of order Mr Chairperson. I think the Chamber finds itself in quite an interesting situation. As members are aware a document was presented on the Table and it was signed by the Minister of Finance; it was a signed declaration of a financial veto. Not only was it signed and distributed to Parliament and has since been distributed publicly but it also happened on the basis of a quantification of some $750 million. That is a large amount of money. If it were the case that the Minister signed that document it must be true because otherwise he would have signed an inappropriate document—and I am sure he would not have done that. If it is true it cannot be withdrawn because the Government would have grounds to apply the veto and the Chamber finds itself in an extraordinary situation. Is the Government now committing to fund the motion that the Minister has proposed? 
Hon Dr MICHAEL CULLEN (Labour) 
: 
 My understanding was that the veto can be withdrawn. One assumes that the Maori Party has now been persuaded to vote against the amendment. 
The CHAIRPERSON (Hon Rick Barker) 
: Can I just say to the Committee that I have been handed by the Clerk a handwritten note signed by the Hon Bill English Minister of Finance stating: “I hereby withdraw the financial veto”. 
The question was put that the following amendment in the name of the Hon Dr Michael Cullen to Part 3 be agreed to: 
To insert the following new clause: 
30A Section LC2A Compensatory Tax Credit for low-income earners and others. 
A person who under this Act would pay more tax than they would have done under the provisions of the Taxation (Personal Tax Cuts Annual Rates and Remedial matters) Act 2008 shall be entitled to a Compensatory Tax Credit equal to the difference between the tax otherwise payable under this Act and the tax payable under the Taxation (Personal Tax Cuts Annual Rates and Remedial Matters) Act 2008. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 52 
New Zealand Labour 43; Green Party 8; Progressive 1. 
Noes 68 
New Zealand National 57; ACT New Zealand 5; Maori Party 5; United Future 1. 
Amendment not agreed to. 
A party vote was called for on the question  
That Part 3 excluding clause 29 be agreed to. 
Ayes 68 
New Zealand National 57; ACT New Zealand 5; Maori Party 5; United Future 1. 
Noes 52 
New Zealand Labour 43; Green Party 8; Progressive 1. 
Part 3 excluding clause 29 agreed to. 
Part 4 KiwiSaver: 2% employee and employer contribution rates and repeal of employer tax credits 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 May I comment in passing that that was the most extraordinary vote I have seen in many a year: that the Government of the day would put on a “hugely justified” financial veto told the Parliament and the public that it would cost three-quarters of a billion dollars to protect poor New Zealanders—overwhelmingly and disproportionately Maori New Zealanders—from the negative consequences of this bill and then once it had secured the support of the Maori Party to ditch the interests of— 
Craig Foss 
: I raise a point of order Mr Chairperson. We have moved on from Part 3; we are now on Part 4 which talks about KiwiSaver. I would ask that the member could bring it back to this part please. 
The CHAIRPERSON (Hon Rick Barker) 
: The member makes a fair point. 
Hon DAVID CUNLIFFE 
: The member makes a fair point. I confess my incredulity got the better of me and I will move to Part 4. 
Part 4 is the single most important part of this bill. It is the single most important part of this bill because it contains the lion’s share of how it is paid for. $3.5 billion is being stripped out of KiwiSaver and the Opposition parties will show in detail in this Committee stage of debate what is being done: precisely what changes are being made that cause KiwiSaver to be gutted; why once again the Government is not being full and frank in the way it is presenting these changes; the financial and economic effects of the change and the impacts on ordinary Kiwis; and finally why this is bad policy on any measure of the Government’s own objectives. 
Let me begin with what is being done. In very very simple terms the Government is proposing to change the so-called minimum contribution from 4 percent to 2 percent. Now that of itself does not ostensibly sound bad and it did not sound bad in the election campaign. At a lower threshold more people might come in and it might improve uptake one might think. Does it sound good so far? A number of Kiwis thought it was a palatable change. Here is the not-so-fine print: it is effectively not a minimum at all; it is an effective maximum. Why is that? Firstly because the default setting for any new worker is not now 4 percent but under this bill it will be 2 percent. We know and the data shows that most of the 827000—I think it is now—New Zealanders who are in KiwiSaver came there through the default option when they took a new job. So it is being prejudiced from the start-off. 
The second and perhaps most important feature is of course that the matching contribution is capped at 2 percent. So technically people could put in more than 2 percent it is just that they would not get any return on it because it would not be subsidised by either the Government or the employer. That accentuates the difference between the Australian scheme which is a 9 percent—wait for it—purely employer-funded scheme and the New Zealand scheme under this bill which is now largely employee funded. Interestingly enough the Government is also going to repeal the part of the KiwiSaver legislation that protects employees from the actions of employers who seek to offset against wages. It may come up with another solution to that problem so I will not overemphasise that one. To make matters worse when the Government realised that it had stuffed up in the campaign and over-promised to the tune of some $700 million because it finally figured out what had been obvious to Labour for months—that ordinary working Kiwis on low incomes would have their actual annual contribution cut from $1000 to $520 and it decided to restore that very sharp-edged Christmas present— 
Hon Dr Michael Cullen 
: Not quite! 
Hon DAVID CUNLIFFE 
: Not quite as Dr Cullen says but that move cost the Government $700 million. It then did the Grinch act with the $40 enrolment fee to save $200 million. 
Hon Lianne Dalziel 
: How miserable is that! 
Hon DAVID CUNLIFFE 
: I hear people on this side of the Chamber outraged and the well-suited gentlemen on the far side of the Chamber give not a toss. Why is that? Because for someone on the income of I do not know Steven Joyce when he sold RadioWorks $40 is not a big deal. But for someone on a minimum wage of $12 an hour—or something closer to $9 after tax—$40 off savings is a significant disincentive. When that is combined with the fact that Government has just scrapped anything over a 2 percent contribution and one is going to get diddly-squat from one’s boss suddenly it is not looking so attractive. 
Now we come to the next point. The Government’s own analysis provided in the introduction to this bill was clarified by my esteemed colleague Dr Michael Cullen when he asked the question: “What provision has been made for further enrolments in the financial estimates for this bill?”. The answer was “Nothing”. Why is that? It is because the Government is not expecting anybody else to enrol because it has just gutted the scheme. 
I want to cast our memories back to a particular moment for us—one of the most hopeful moments of the election campaign—which was the day the National Party announced its tax policy. Our tracking polls showed its support drop about 5 percent in a day because this policy is a political lemon. It is a loser. A million Kiwis either enrolled in KiwiSaver or wished they could have. A million Kiwis thought it was great to have a nest egg and mainly they are New Zealanders who are not of substantial means. Average-wage earners enrolling at 30 get about $420000 when they retire. That is a big deal for them. That is the value of their home and that for many people I have talked to is not only their principal saving vehicle but also their hope for a better future. That hope has been taken away from them by a Government that does not seem to care. 
Why? It has been done in order to fund a tax cut for the better off. Those who earn less than $44000 and have kids will lose. Those on the average wage of $45000 get $1.92 a week more. Whoopee! But those on three-quarters of a million dollars get $264 more a week. Wow! The Government is taking from the poor gutting KiwiSaver to give to the rich. That is fabulous stuff and the Government has done that on its first day in the job! I could say: “Told you so New Zealand.” I wish I did not have to. 
Hon Bill English 
: So Labour got it wrong? 
Hon DAVID CUNLIFFE 
: The current Minister—he may not last long at this rate; a bit like Gerry Brownlee the shortest-lived Leader of the House—Mr English tried to enter a financial veto. When he realised it was going public he quickly withdrew it but sadly the damage was done because the public knows it was a $750 million stuff-up. That is the second $700 million stuff-up that that Minister has made in his first week with a warrant. I tell Mr English that it is not a good start. We wish him luck from here on. 
Finally if this is inequitable and if this is a very unpopular move it is also an economically fundamentally stupid move. It is stupid because if Bill English had not noticed there is a global credit squeeze on. Presumably that is the reason he wants to tilt the New Zealand Superannuation Fund into loaning to itself by having both assets and liabilities. He wants more savings in New Zealand but he is gutting the best single savings vehicle the country has ever known. It is bizarre. The only other example I can think of was Rob Muldoon killing that superannuation fund of yesteryear—the Kirk fund—whereas he said he would not. So in a sense we are used to that kind of double-talk from that party but it is none the less sad for New Zealanders whose hope for the future is being sold down the river. 
CRAIG FOSS (National—Tukituki) 
: 
 I am intrigued by mention of the New Zealand Superannuation Fund and I am looking forward to further debates on it with members opposite although I cannot quite see it in this particular bill the Taxation (Urgent Measures and Annual Rates) Bill. However the member obviously has some strong opinions on it as does New Zealand because that matter was on the table before New Zealand again at the general election and people resoundingly endorsed the National Party’s policy of up to 40 percent of the New Zealand Superannuation Fund being invested in New Zealand infrastructure as opposed to offshore infrastructure and being exposed to various risks. As the member is no doubt aware the recent updates included quite an asset write-down for the New Zealand Superannuation Fund. Perhaps 40 percent of that risk would not have been there if the funds had been invested in New Zealand in the first place. But anyway that is a debate for another day. 
Part 4 brings in the 2 percent plus 2 percent option. It was interesting to hear the previous speaker because as I noted in my first reading speech I recall being at the Finance and Expenditure Committee when the original KiwiSaver legislation came through and there were strong submissions on it. It was agreed by the Green Party and the Labour members of the committee and I think by the New Zealand First members as well that “2 plus 2” was very desirable and in fact was quite pragmatic; it was not some political philosophy or anything like that. There was simply a recognition that many New Zealanders cannot afford to save 4 percent of their gross salary. It was as simple as that—about 5.5 or 6 percent net. 
So I find it surprising that members opposite are arguing that it is a bad thing that we are going down to “2 plus 2” particularly when some of the unions that contributed to their election fund were in favour of that at the Finance and Expenditure Committee. Business New Zealand was in favour of this at the Finance and Expenditure Committee. In fact it is something that makes KiwiSaver—and it was Labour’s original policy—more robust more durable more sustainable and more affordable for all New Zealanders. It is as if somehow any higher contributions have been banned. This measure does not ban any higher contribution whatsoever; it simply allows the entry level to and the durability of KiwiSaver to be much more robust and sustainable at 2 percent plus 2 percent. If individual organisations want to negotiate different agreements with their employers so be it. What is the problem? There is an interesting silence opposite. 
I imagine that the next speaker will be the previous Minister of Finance. In previous speeches he has talked about pension portability and about how at risk KiwiSaver is because of the agreement with Australia in relation to pension portability and the discussions on that. He said that the Minister obviously had not called Australia that the Minister did not know what he was doing and that it was all at risk simply because of this 2 percent plus 2 percent rather than 4 percent plus 4 percent. If we read the press releases and watch television we can see that to quote the Australian officials there is no problem whatsoever. The key to the agreement that the Australians had was the fact that KiwiSaver was locked away until the retirement age of 65 years which is the same as their scheme. 
It is interesting that the current Opposition finance spokesperson was trying to dissociate or separate the New Zealand KiwiSaver scheme from the Australian scheme yet the previous Minister of Finance was obviously trying to bring the two closer. Maybe his hidden agenda was to income test superannuation because that is what the Aussies do. I presume Dr Cullen will speak next because we do not quite know about that. There is nothing at risk. Pension portability is not at risk. That is another red herring raised by that member opposite who is trying to be clever. Obviously he has far too much time on his hands these days. I tell Dr Cullen to get used to it but I am interested to hear his response because to quote the Australians again there is no problem whatsoever with the changes that the National Government is putting before the Committee today to bring the minimum contributions to KiwiSaver down to 2 percent plus 2 percent—locked in. There is no problem about portability whatsoever. Thank you. 
Hon Dr MICHAEL CULLEN (Labour) 
: 
 The point I was making was whether the Government had checked with Australia which it had not. The Government drafted this scheme—or launched its policy—without thinking to ask the Australians whether it would affect portability. National did not even bother to ask. I know for a fact that no check was made with the Australians. I still think the previous speaker would be wise to wait longer for definitive statements from Australian Ministers not from Australian bureaucrats whom he was quoting in that particular respect. 
Let me take another point. The unions were not asking for a “2 plus 2” scheme. The unions were asking for the retention of the “2 plus 2” entry point which then goes up to “3 plus 3” or “4 plus 4”— 
Craig Foss 
: No. 
Hon Dr MICHAEL CULLEN 
: Yes; over the next 2 years which is what the current law provides but is then phased out. The unions did not want to stick to “2 plus 2”; they wanted “4 plus 4” but they wanted to make it easier for people to start in the scheme. The reason I said no to that was that it would have become much more complex for employers. If employers have to run 4 percent for them and 3 percent for them and 2 percent for them it means large compliance costs for employers. But if the National Government had decided just to make that change well one would have accepted that it was always an arguable point. Nobody was arguing for a “2 plus 2” scheme because it does not add up. 
Craig Foss 
: Yes they were. 
Hon Dr MICHAEL CULLEN 
: It does not add up to anything like enough to make a difference. Why do members think Sir Roger Douglas had “4 plus 4” in 1975! Why do they think the Australians are on 9 percent now and talking of going to 12 percent or 15 percent? The sums do not add up particularly when the National Government has removed the fee subsidy which was a flat-rate subsidy designed to ensure a higher net return for small savers within the KiwiSaver scheme whereas that now has gone. 
This is a scheme now that is so much less attractive. National opposed the KiwiSaver legislation when it was first passed. National opposed the extensions to KiwiSaver and National has hated the success of KiwiSaver. The fact that well over 800000 New Zealanders have joined KiwiSaver has got National members’ bitterness their bile their envy and their jealousy wrapped up. We have just listened to a member who is eligible to join a superannuation scheme based on a salary of $131200 with an 8 percent employer contribution. He gets up on his hind legs—he who is eligible for a more than $10000-a-year employer contribution to his superannuation scheme—and tells people on 30000 bucks a year that they cannot get a 4 percent employer contribution for $1200 a year. That is his idea of equity. No doubt it is because he thinks he is a hard-working New Zealander whereas people on $30000 are not hard-working New Zealanders. Talk about the politics of envy! 
Why are those members over there always envious of those on low incomes? A kind of strange reverse envy always comes across from them. Those members think that low-income earners do not do any work because they do not earn as much. They grade people according to their income—the more one earns the harder one must be working. Well I tell Mr Foss that in the real world life does not work like that. A lot of people on low incomes work a lot harder—and at much less attractive jobs—than a lot of people on higher incomes. That is the reality. KiwiSaver has been hugely successful. 
Mr Key has gone around the country in the last few years saying that New Zealand does not have a debt problem. Actually we have the second-highest national debt as a proportion of GDP—after Iceland—in the developed world. What has happened to Iceland? It has gone down the tubes. The way that Iceland has gone over the last few months Icelanders are almost hoping that the ice cap will melt so that half of them will drown. We will probably end up being the outstanding country in terms of national debt. We have an appalling savings record. We have had a net dissaving for year after year after year at the household level and all that has disguised that in the last few years has been the strong growth in house prices. Now that that growth has gone the reality is being revealed very very clearly that New Zealanders are as a collective divesting themselves of assets at a fairly substantial rate. That is why so few people in retirement in New Zealand have any significant additional income. Some have a lot but most people have next to nothing in addition to superannuation. They may get an extra couple of thousand dollars a year—that is all. 
KiwiSaver was going to give ordinary people the chance to get into a subsidised superannuation scheme lift New Zealand’s saving rate and change our whole psyche about savings in New Zealand. But National members are again telling us that we can consume our way to victory. It is as though we are in World War II and are being told we should—not dig for victory but—eat potatoes for victory. That would have been the National Party’s slogan in the United Kingdom during World War II. People would not have grown things; they just would have been told to eat more because that would somehow or other solve the problem. National says we can solve New Zealand’s economic problems just by consuming more—much of it produced offshore—rather than producing more and exporting that. We have to save more in New Zealand to produce more of our own capital for investment both here and offshore. 
There is nothing wrong with New Zealanders owning more offshore as that spreads the bets for our future retirement income within New Zealand. That income should not all be based on the New Zealand economy. In that respect it is wise for us to spread our bets internationally. Sir Roger Douglas agrees with that. National is cutting the possible KiwiSaver contribution from both employers and employees from 4 percent to 2 percent. Employers will initially not be able to take the percentage off gross wages but National will change the law again so that from next year employers can give employees who are in KiwiSaver a 1 percent pay increase and those who are not in KiwiSaver a 3 percent pay increase. Because National is taking away the employer tax credit there is no incentive at all for any employer to contribute 4 percent. 
Finally let me deal with the question of the $20 a week employee tax credit. National has worked a con job on the media by convincing them that everyone will get the $1040 a year—rubbish. National has said that if an employer is contributing 4 percent—that is above the 2 percent—it will match that dollar for dollar up to $20 a week. But if an employer is contributing 2 percent National will still match it dollar for dollar up to $20 a week. So those on $26000 a year will see their employee tax credit halved from $1040 to $520. The media have completed misunderstood that. The Minister of Finance has done a con job in that regard. For ordinary employees the total contribution to KiwiSaver has gone from 4 percent plus 4 percent plus $1040 to 2 percent plus 2 percent—and they may pay the lot themselves—plus something less than $1040. Their savings have effectively been halved and in many cases they will be paying the same amount they were paying previously. In practice they will end up paying 4 percent to get a bit over 4 percent when they would have been paying 4 percent to get something like 10 percent. Is this addressing New Zealand’s savings problems? Is this building a habit of capital accumulation? Is this a property-owning democracy? Is this driving stronger growth? Is this turbo-charging New Zealand? It is nothing like that at all. Like the research and development tax credit this is yet again a short-term gain for long-term pain. It is the exact opposite of what Sir Roger Douglas used to argue for. To be fair he did get the long-term gain eventually; it is just that we had to undergo a lot of short-term pain. 
This provision is fundamentally wrong. It fails to address one of our most important structural economic problems in New Zealand—it has gone into the air as if somehow or other it is not important. It is crucially important in this country. We are in the middle of an international financial crisis in part driven by the growing gap between savings countries and spending countries. National says we should be a spending country continue on this huge long historic shopping binge and not worry that someone some day will call in the bill. We have to get off that shopping binge. We in New Zealand have to start working saving producing and exporting but this bill—and this part in particular—will help to destroy that ambition and destroy this programme that has not been given the chance to work. 
Hon BILL ENGLISH (Minister of Finance) 
: 
 It was interesting to hear the previous Minister of Finance recast a number of his arguments. Today is the first time I have heard him describe KiwiSaver as the equivalent of the original Douglas scheme or the Australian scheme. Well New Zealand has quite a different context from the Australians of course. They have a sharply income and asset tested public pension; we do not. We have a relatively generous—by international standards—universal pension and we are one of the only countries in the world to have that. On top of that we have the Cullen fund—named after Dr Cullen—which has been pre-funded on a scale matched only by Norway with its oil reserves. It is not matched by Ireland despite the Irish economic miracle. Its pre-funding is about half the size of ours. 
In terms of public provision for pensions we already have universal national superannuation which is paid to everybody regardless of income and we have pre-funding—which I might say for the next 5 years will be funded from borrowed money. Now Dr Cullen has said that on top of that he meant KiwiSaver to be the equivalent of the Australian scheme. Well the Australian scheme is designed to replace public superannuation—that is why the employer contribution is 9 percent. Dr Cullen did not go around the country telling the public that it was always Labour’s intention to replace national superannuation. That is a new rationalisation he has dreamt up today to criticise this policy. The fact is that New Zealand is providing adequately for retirement income with a universal pension which the Aussies do not have with pre-funding which the Aussies do not go anywhere near and with the significantly subsidised KiwiSaver. 
In fact the jury is still out on KiwiSaver. A lot of people have signed up but it will take time to see whether it achieves what Dr Cullen claims it will. Dr Cullen says that unlike almost all other incentivised schemes in the world it will unambiguously lift private savings. Well it is not clear that it will. I hope it does—I surely hope it does—because the taxpayer is contributing billions of dollars to KiwiSaver to incentivise savings. But the fact that 800000 people have signed up does not of itself mean that private savings have increased. They are increasing because the cost of debt is high. 
Well here is one thing that Labour has not thought of: KiwiSaver takes away from people their choice to repay debt. If they join KiwiSaver they reduce their ability to repay their debt. People are not just some kind of automaton. They make complex financial choices across their consumption their investment and their debt. If many New Zealanders have a top priority now it is to address directly the problem that Dr Cullen diagnosed—and I agree with him—and that is very high household debt. How do we get debt down? We pay it off. That is what we do. That is why this Government is putting tax cuts back into people’s pockets and reduced subsidies for KiwiSaver will make up for some of the reduced tax take. 
New Zealanders have the option to spend more. Well to keep the economy ticking along they do need to spend something or to pay off debt. Most assuredly they should pay off debt. Why would the Government automatically make a better choice than everyone else about whether to pay off debt? New Zealanders now understand the risks of debt. They have dropped their consumption remarkably and with lower interest rates they will be able to pay off debt. In fact one of the problems that this economy will have is everyone paying off debt instead of spending money. That will hold growth down in the shorter term and cost people their jobs but in the longer term it is an adjustment that may well be good for the country because people will pay off debt. The simplistic notion that putting big subsidies into KiwSaver will fix everything is wrong. 
The other argument is that KiwiSaver provides a pool of capital for local businesses. How many local businesses got $1 out of a KiwiSaver provider’s investment? None actually and none will for some time because a lot of providers like a lot of Kiwis rightly see that as somewhat risky. Let us have a more nuanced and intelligent debate about savings in this country instead of these mindless slogans. 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 I think the public would be surprised to know that the Minister who has just resumed his seat was the last Minister in this country to cut the pension. He reduced the floor below which superannuation could fall; he reduced it from 65 percent of the average wage to 60 percent of the average wage. I know that there is a word we are not allowed to use in this Chamber but I would use it happily to describe what that Minister just did. He talked about what would happen to people under a particular position that has never been a proposition put forward in this country and that is to do away with our national superannuation scheme. New Zealand superannuation has been designed to provide across-the-board access to support at age 65 and it is protected at its percentage of the average wage. The last time that was adjusted downwards it was done by that very Minister when he was a Minister of Finance. 
I noted the statement in the explanatory note of the bill—and some Government speakers have talked about this—that the Government is committed to keeping the KiwiSaver scheme and making it an enduring and affordable scheme for members employers and taxpayers. But I think that is an absolute nonsense. I think that the lie to that statement in the explanatory note of the bill can be found in the reality that these changes have been designed only to pay for the promised tax cuts which have been subsidised by some of New Zealand’s lowest income earners. 
Actually no one out there can understand why National has taken the knife to this scheme. It has been the best chance New Zealand has had for decades to foot it with other countries that have recognised the need to encourage a savings culture over many years. Those who have been committed to growing the depth in our capital markets for example were hugely welcoming of KiwiSaver when it was first announced. No one thought that National would take the knife to this scheme under urgency straight after the general election and ram through the changes without consulting anyone in our capital markets without consulting anyone in the industry more broadly and also particularly without the scrutiny of a select committee to consider the detail of the bill in order to take the time so that the National Party could be persuaded to soften the position that it is taking. 
I say this is an ill-conceived policy and it is not one that is supported by the business community generally. Sure some small-business employers will be happy to see the end of the 4 percent contribution. But they are not paying the 4 percent contribution at the low end of the income level because there has been a direct subsidy to employers in return for that. In actual fact the smaller employers were always going to find the 4 percent manageable under the scheme. The reality is that those who run our capital markets are absolutely devastated that this change has occurred to KiwiSaver. 
I listened to National candidates say that this measure has been designed to encourage more people to join KiwiSaver. After all with over 800000 people enrolled it is only about 150 percent more successful than Treasury originally forecast it would be. But the point has been made that nowhere has National budgeted for an increase in enrolments because the bottom line is that it is not expecting any more enrolments. 
This measure is not about encouraging low-income people to put aside 2 percent of their income and have it matched by a further 2 percent from their employers. It is not about developing a savings culture in New Zealand. It is about chipping away yet again at a Labour Government’s attempt to get New Zealanders saving. The sooner the National Government realises that savings are important to the future of our economy the better it will be. There is as Michael Cullen pointed out before extreme dishonesty in the way that National has pretended to keep the Government contribution at $1000 a year because of course it is not $1000 a year if people are contributing only 2 percent of their income to the scheme as lower-income earners. 
I too am concerned about the situation in terms of our trans-Tasman arrangement over the question of portability. Why did the National Government not think to speak to the Australian Government before announcing these changes? 
CHRIS TREMAIN (National—Napier) 
: 
 I would like to bring the debate on Part 4 back to where Dr Cullen was going with it. He talked about the real world which he likes to speak about although I am not too sure he inhabits it. It is certainly not a world he inhabits on the campaign trail—that is for sure. When we were out on the campaign trail in provincial towns like Napier KiwiSaver was one of the key things that hard-working Kiwis wanted to ask about. They wanted to know what National’s position on it was. I visited many many businesses such as Reinforcing Steel and Mesh Brebner Print Napier Engineering and Contracting and AllBrite and talked to lots and lots of employees at the coalface. 
First and foremost before touching on that I congratulate the 800000 people who have signed up to KiwiSaver. I think that is a good start to the scheme. Congratulations and well done! But Mr English is correct. The count is out as to how successful it will be. On a number of occasions when in Opposition I asked written questions of the Minister of Finance. I wanted to know how many of the 800000 people who are in the scheme are on $50000 or less a year. 
Hon Annette King 
: About half. 
CHRIS TREMAIN 
: Oh rubbish! Half are on $50000 or less? How many are on $40000 or less? I asked written questions of the Minister but I did not receive any replies. He could not give me any answers. 
Hon Annette King 
: You can have those answers. 
CHRIS TREMAIN 
: Can I? There were no answers to those questions. 
When I was on the campaign trail I was out in the real world talking to hard-working Kiwis. Guys at AllBrite for example are on $12.50 an hour $13.50 an hour or $14 an hour. They are hard-working Kiwis working 50 to 55 hours a week. It is hard out there. I asked in the canteen how many of them were in KiwiSaver. Only one or two out of 20 put up their hand and said that yes they were in KiwiSaver. I asked whether it was the 4 percent contribution that had put them off. Most of them said that yes they cannot afford it. People on $30000 $35000 or $40000 cannot afford to contribute 4 percent of their income. When I asked them whether they would join up at a 2 percent level not everyone in the canteen said yes—that would be exaggerating—but certainly a significant number above two or three said they would be interested. 
Why it is important that those guys at that end of the income scale get into KiwiSaver? Because right now they are missing out on that tax advantage. Right now they are missing out on the $1040 that Labour is saying we are trying to cut out from under their feet. Actually we are giving them access to it. 
Darien Fenton 
: Rubbish! 
CHRIS TREMAIN 
: Rubbish? I say to Ms Fenton that one has to be in the scheme to get access to the credit. She should understand that. If one is not in the scheme one does not get access to the credit. What we are doing is helping hard-working Kiwis to get into the scheme and get that tax break. 
Hon Annette King 
: What a load of rubbish! 
CHRIS TREMAIN 
: Rubbish? People have to be in the scheme to get the credit. Unlike the Labour Government we are out there trying to help hard-working Kiwis. On the campaign trail it was clear that Kiwis want the opportunity to be in KiwiSaver. People on under $40000 want to be in it and now we are delivering that opportunity. Just 32 days after the election we are in the House giving those Kiwis the opportunity to get into the scheme at 2 percent— 
Hon Darren Hughes 
: So why isn’t the Government budgeting for an increase in savings? 
CHRIS TREMAIN 
: They can voluntarily put in 4 percent of their income I say to Mr Hughes. They can go up to 8 percent—so can the employer. They will get access to the credit. Employees around the country on low income levels will get a significant tax break. That is great. I am proud of what we are doing here today. We are delivering what we said we would. We were totally transparent throughout the election process about what we would do. Now we are delivering on our promises going forward. Thank you Mr Chair. 
Hon PAREKURA HOROMIA (Labour—Ikaroa-Rawhiti) 
: 
 It is a fact that more than 800000 people have signed up to KiwiSaver. I have just heard my colleague from Napier talk about going to workplaces and seeing only one or two people put their hands up to say that they have joined KiwiSaver. There are 800000 people who have put their hands up. 
It was fascinating to listen to the Minister of Finance’s assumptions about those who save. He said that our superannuation scheme is generous. It is generous if people are at the top end of the scale of pay and have a life whereby they can save. But for the 73 percent of Maori in this country who get nothing out of this tax adjustment this is a sad sad day. It is a sad day for Maoridom. I am really sad that the Maori Party has supported this measure. I know that Hone Harawira knows better. I was pleased that at least he was on TV tonight talking about the next exercise which is the 90-day stand-down period bill. Every member of KiwiSaver is worse off under National’s adjustment. 
There will be trouble with portability. It will be very interesting to follow up Mr Foss’ statement that he has it organised. That is hard to believe. Who was he talking to? The bureaucrats or the Ministers? It cannot be sorted out because there is an incompatibility between the structure and design of the two schemes. I think he was telling a short one. 
People are worse off. A Maori who worked in the 1950s the 1960s and the 1970s could never save because he or she was on a low income. The last time Maoris ever got into saving was in the 1950s and 1960s when we had the little pink Squirrel savings books at school. I think Pakeha had them too. Children had to take their threepence or whatever it was along to school every Wednesday and put it in. That is a similar alignment to the design of the National Government’s KiwiSaver programme. 
I go back to the statements made by the leader of the National Party. They were very very interesting. What did he say? He said he was and continues to be supportive of what Labour was doing in relation to KiwiSaver. I am not too sure but I wonder whether the Minister responsible for this measure is waiting for him to trip up. Mr Key said in May 2008: “We haven’t finalised our KiwiSaver programme yet but there will be compulsory employer contributions. They’re likely to be at pretty similar levels to what is outlined in the legislation at this point.” That is what people talked to Chris Tremain about in those coffee shops during their lunch breaks. They talked about those levels. Then Mr Key said: “Well we’ve always said that we’ve got concerns about certain aspects of KiwiSaver we’ve also said that there would be a KiwiSaver. I didn’t like the first version that Michael Cullen had because there wasn’t really much in it and that’s why he beefed it up in Budget 2007.” This is a sinister manipulative calculated move to undermine one of the best schemes in this country. 
Let us talk about low-income people who have never saved. What is wrong with contributing 4 percent? Mr Tremain’s mathematics are quite interesting. He talks about the $1040 but what he does not talk about is the fact that he has taken 50 percent of the injection into the accumulated figure. He has taken it away. He has flogged it. That will put pressure on low-income people who will get nothing out of this. There was a culture that was delivering. People knew that in 7 to 10 years they would have a putea a nest egg that would help them to go forward. Now there is an assumption that if we stimulate business and keep it all up in the macroeconomic area around the big-business boys they will trigger activity down at the bottom and everybody will be right. Never mind the poor people. Never mind the low-income people. That is what Bill English has done. He has gutted KiwiSaver without going to the people without declaring it— 
Hon Bill English 
: We had an election. 
Hon PAREKURA HOROMIA 
: Yes National won the election—that is dead right. But that is the sort of arrogance that is starting to spurt out in this House. It is sheer arrogance. They are taking from the poor and giving it to the rich. 
DAVID BENNETT (National—Hamilton East) 
: 
 I think that when we look at this part of the Taxation (Urgent Measures and Annual Rates) Bill and the KiwiSaver aspect of it it is important to look at the general nature of the bill and the general nature of what we are dealing with in the economy. We are dealing with an economy that is in recession. It has had 9 long years of poor economic management. It is an economy that needs new direction and leadership in a country that needs leadership. 
There are young people out there who are training in New Zealand. They want to make New Zealand their home but they want to see a future in this country. They want to see a Government that will deliver a future for them so they can stay and work here. They want to see some reward and some incentive for their hard work and their direction. This bill does that. Not only does the independent earner tax credit do that but the KiwiSaver changes do that for young New Zealanders. Young New Zealanders who would not have joined KiwiSaver before because 4 percent was too high now have a chance to be part of that scheme. Young New Zealanders who want to make their future in this country now have a reason to stay here. They have a reason because we are giving them the ability to get into a savings regime that will deliver a future for them. Young New Zealanders will see a future in this country. They will believe in this Government and they will see that we are delivering for them. We are giving substantive delivery so that they can make a constructive future in New Zealand. That is the heart of this legislation. That is the heart of what the National Party is about. 
National is here to deliver for New Zealanders. We want to bring a new vision. We want to create an economy that is strong and growing. This measure will actually deliver that growing economy. It is the first step in delivering that growing economy because it will send the right signals and give the right incentives to those young people to stay in New Zealand. If they know that they can be part of a savings regime they will stay here and be part of the New Zealand dream that they want to buy into. We are giving them that chance—a chance the Labour Government did not give them. That is why they were leaving in droves. They did not see a direction or a future from the previous Government. But this Government is giving them that direction and future. We will not just say the scheme is a Government-knows-best scheme as the Labour Government did. We will give them the opportunity to partake in that savings regime. It is important that we do that. It is important that we give people that chance to invest in the future of their country. That is what we are doing through this KiwiSaver regime. The reduction from 4 percent to 2 percent gives people that opportunity. It gives them the chance to have a savings scheme. 
The worst thing that can happen is to have a scheme here that means the low-income people in New Zealand do not get the chance to save. If we have a scheme that is just for middle New Zealand or for high-income earners it leaves a whole generation of low-income New Zealanders without savings to top up their superannuation when they retire. That will be the dilemma that will face this country. The National Party does not want to see that. We do not want to see young New Zealanders on low incomes who do not have a savings regime and cannot therefore supplement their superannuation in the future. We want to see them have their homeownership we want to see them supplement their superannuation and this is the opportunity to do that. This gives a chance to young New Zealanders to have a future here to get into a savings scheme so that when they actually need that money it comes to them. 
The Labour Party does not care about them. Labour members do not care about the people who do not go into the savings schemes. As long as they can be in a savings scheme that is all they care about. They do not care about the people who do not get into a scheme. They do not care about the low-income earners who cannot give 4 percent. They never have and they never will because that is not how they think. But the National Party will deliver a structure that will benefit all New Zealanders. It is a structure that will deliver and it is the structure the public wanted at the election. They wanted a chance to be part of the future of this country and that is what this measure will do. We are giving more New Zealanders the opportunity to be part of a savings scheme and to build a better future for themselves. That is what National is doing and it is something that Labour would not do. 
Hon DAVID PARKER (Labour) 
: 
 I want to start by referring to a statement made by the Hon Bill English in his last contribution which stood in stark contrast to things he has been saying outside the House recently. In response to Dr Cullen’s point highlighting the importance of KiwiSaver in improving the savings of New Zealanders Bill English said that the effect of cutting KiwiSaver was being fed back to people in tax cuts that they would use to retire debt. I thought that the National Party was saying that the tax cuts were part of the fiscal stimulus that would increase economic activity. Mr English cannot use the money for two purposes. It is either a fiscal stimulus or it is being used to retire debt. It cannot be both. That will be recorded in  
Hansard 
 and I think it ought to be remembered next time National members point to tax cuts as being part of their fiscal stimulus package. 
“Going for growth” was the slogan yesterday and it is but a slogan. National wants to improve productivity in New Zealand. New Zealand workers already work very hard. We work longer hours than Australian workers. We work longer hours than most people in OECD countries. Our problem is not how hard our workers work it is how productive the output of their labour is. Total factor productivity in New Zealand is poorer than in Australia because we have lower savings than Australia and in addition so many of our important assets are owned by overseas owners because we do not save enough money to own our own assets and we are reliant on overseas capital to fund our assets. KiwiSaver was the key to fixing that. It made us more like Australia where Australians have a 9 percent contribution to their savings scheme all paid by the employer. The “4 plus 4”—4 percent from the employee and 4 percent from the employer—under KiwiSaver plus a $1040 tax credit to the employee was pretty similar. New Zealanders would have started to accrue savings so that we could own more of our own country so that we could invest in increasingly sophisticated plant and equipment so as to improve total factor productivity to add to the very hard work that is already done by New Zealand workers. 
But oh no that sensible prescription for economic growth has been ruined by the National Party as a result of turning it from a “4 plus 4 plus $1040” scheme into a “2 plus 2” scheme. National members say that the scheme will be more accessible to people yet they have admitted that their projections are that no more people will enrol in the scheme. So the same number of people will be in the scheme but they will be saving less. How does that improve the wealth of New Zealand? How does it improve the productivity of New Zealand? The answer is that it does not. It does exactly the opposite. 
Hon Darren Hughes 
: No go for growth! 
Hon DAVID PARKER 
: That is right there is no go for growth. As a result of this 800000 New Zealanders—the 800000 people who are already in the scheme—will be worse off. But even more significant is the difference between us and Australia. For a long time the National Party has been rattling on about people moving to Australia for higher incomes. Australians have higher incomes because they have higher total factor productivity and they own more of their own country. If we have less sophisticated plant because we cannot afford as much because we have a higher cost of capital in New Zealand or because we do not save enough productivity in New Zealand will never get towards the productivity increases seen in Australia and the income gap will continue to grow. That gap stopped growing under the Labour Government. We had it halted but just watch it will grow again. 
Hon STEVEN JOYCE (Associate Minister of Finance) 
: 
 It was strange coming into the Chamber tonight and hearing Michael Cullen look for Roger Douglas’ endorsement of what he was saying. I do not think I have seen that in 20 years. I thought that I must have walked into some sort of time warp because Michael Cullen was citing the approval of Roger Douglas for what he was saying. 
The other thing I was concerned about was that I wondered whether Labour members actually realise why they lost the election. It was because they stopped listening to New Zealanders. One of the things they stopped listening to New Zealanders about was KiwiSaver. On the subject of KiwiSaver up and down this country stacks and stacks of hard-working New Zealanders were saying to politicians who would listen that they could not afford and did not want to put 4 percent of their income into the scheme. Up and down the country people were saying that to all the politicians who would listen. Unfortunately for the country the only ones who were not listening are the ones who are not listening now and that is the Labour members. The reality is that a lot of people are saying: “Give us a 2 percent scheme. We will participate and join in a 2 percent scheme.” 
Hon Darren Hughes 
: Who is saying that? 
Hon STEVEN JOYCE 
: The people who were talking to the politicians who were listening before the election were saying that. Labour members were not listening and that is why they lost. There is still an excellent chance for people to contribute to their superannuation. The $1000 has improved the whole scheme. As Mary Holm said today it is a very good scheme now for both employers and employees. 
The more important thing which the Labour Party does not want to think about is the long-term economic growth in this country. That is the bit it does not want to think about. It successfully drove long-run productivity growth in this country right down over the 9 years it was in Government. Labour successfully drove down our economic growth projections over the time it was in Government and it does not know why. It simply does not know why. The reason it happened was that fundamentally Labour tried to control too much of people’s incomes. Whatever way Labour did it it put taxes up it spent people’s money and it refused to give back to people more of their own money so that people had their own incentives to control their own lives to work hard and to get ahead under their own steam. That was the problem and that is ultimately why the people of Auckland in particular voted the Labour Party out. Labour was imposing high tax rates on ordinary Aucklanders and people up and down the country and 82000 people voted with their feet and left this country because Labour would not listen and realise that people wanted the right to spend more of their own money to make their own decisions on whether they would save or consume. “Nanny Labour” was not the deal for controlling their income and the way that they spent it. 
There is only one solution to the economic challenges that we face in this country and that is to grow a whole lot faster. The only way we will grow a whole lot faster is not by sitting here in Wellington and arguing over which percentage of people’s incomes we will control; it is by reducing the amount we control and giving people the opportunity to work and get ahead under their own steam. That is the only way we will do it and that is why we have made the choices that we have made about KiwiSaver and the research and development tax credit—to give New Zealanders a chance to have more of their own money. 
They are not the easy calls. They are the calls that were never made by the New Zealand Labour Party while it was in Government and that is why the growth rate was so low when it left and that is why the long-run productivity growth was so low. Frankly we could not afford to have those members any longer. The people of New Zealand knew that. They voted for change because they wanted a crowd that would listen to them and understand. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 This has been an extremely insightful discussion—insightful because of the complete claptrap that the Government is reciting having dredged the barrel for anything resembling an economic argument. David “Cliché” Bennett fell back on the last press release that he read which must have been a pre-election one and then his lookalike twin brother the Parnell yuppy rehearsed his Crosby/Textor lines. This apparently is the man who is the king of listening: whatever the punters want give it to them. What they did not want was their superannuation contributions their savings future capped at 2 percent. Nobody asked the National Government to cap employer contributions nobody asked it to take away the $40 overhead subsidy nobody asked it to take away the superannuation tax credit and nobody asked it to take $3.5 billion out of the best savings scheme New Zealand has ever had. The ghost of Muldoon is stalking the Government benches: “Find a good savings scheme and scrap it—heh heh heh!”. 
To get back to economics for a moment we have witnessed tonight David Bennett saying that the whole reason he is in this House is to care for low-income New Zealanders. 
Hon Darren Hughes 
: And a brighter future. 
Hon DAVID CUNLIFFE 
: And a brighter future. It almost brought tears to my eyes but my enthusiasm for his religious conversion was tempered by the fact that the Minister of Finance not an hour ago had to withdraw through embarrassment—his butt having been saved by Hone Harawira—a financial veto relating to a $750 million kick in the guts for low-income Kiwis just before Christmas. So when David Bennett goes home and rereads his clichés he should think about how what Mr English has done affects the people he purports to serve. 
But getting back to economics for just a second I wonder whether anyone on the Government benches understands the savings gap. I hate to do Economics 101 on my first week in this job but it seemed to me that the fact that Kiwis were spending $1.20 for every $1 they earned because they thought they were becoming wealthy because their house values were going up—that is called dissaving—was offset by the surpluses that our Government was running. If members opposite do not run Government surpluses and are now spending us into debt they are borrowing to pay for these tax cuts. If Kiwis are not saving do members know what happens? Our current account blows out even further. Our current account deficit is the difference between what Kiwis are borrowing overseas and what we are earning through exports and what the Government is saving on Kiwis’ behalf. So the consequences of this ill-fated move go beyond taking away ordinary Kiwis’ nest eggs. They gut the Government saving on Kiwis’ behalf and KiwiSaver was the one tool that was fixing that long-run problem. And now by National members’ own admission they have killed it because their own books make no provision for new enrolments and they are too scared—where is the point of order for my saying they lack bottle—to put the future debt track out there so that all New Zealanders know how far in the shtook this is going to get us. 
Hon Steven Joyce 
: The debt track’s yours. 
Hon DAVID CUNLIFFE 
: Oh no sir! When we were elected we inherited a gross debt to GDP ratio of—wait for it—35 percent. We got it down by half. Can Mr Bakshi do those sums while he is still here? That is half. My great fear for New Zealanders is that through the ill-fated efforts of the new Government the debt track will go back to the 35 percent that we inherited in 1999. 
Craig Foss 
: Decade of deficits. 
Hon DAVID CUNLIFFE 
: It was not a decade of missed opportunities because we did a hell of a lot to cut the ratio in half but members opposite have squandered in a week what it took New Zealanders 10 years to build up. And why? The media the press gallery and the public know that the real reasons for this bill are not economic and they have nothing to do I say to Mr Bennett with helping low-income New Zealanders because those members have just kicked them in the guts by three-quarters of a billion dollars at Christmas. This bill has everything to do with rewarding constituencies. That is why the lion’s share of the tax cuts go to the best-off—they happen to be the voters who are the most faithful to the National Party—and that is why those members have penalised real businesses and rewarded the financial sector’s soft-shoe guys. The games that have been played to cover this up the half-truths that have been told and the rubbish economics that have been paraded would make one wince. 
Some of those members cannot tell the difference but I fear for New Zealand because I know that the Minister of Finance is better than that. He can tell the difference but he did it anyway. He knew all along that there was a billion-dollar kick in the guts in this bill but he did not tell us until Dr Michael Cullen forced him to by putting an amendment that asked him to insure low-income New Zealanders against the effects of his policy. And then he said: “Oh you got me. OK I will veto it. Here is the financial veto.” Stupidly he made it public; stupidly he signed it; and stupidly he gave us the number. It is now on the Internet—$750 million with the Minister’s signature beside it. You are too late—sorry not you Mr Chairman. The Minister of Finance then withdrew it throwing National’s new coalition partner deeper into mana-depressing territory because its mana was used to bail out your lack of honour. You did not tell New Zealanders what was coming. You surprised them— 
Hon Bill English 
: I raise a point of order Mr Chairperson. The Chair is obliged to enforce the conventions of the House. This member has been using the term “you” incorrectly as have other members of the Opposition yesterday and today. I suggest that you let the Opposition members know that they are not to bring you regularly and generally in a derogatory way into the debate. 
The CHAIRPERSON (Lindsay Tisch) 
: I thank the member. 
Hon DAVID CUNLIFFE 
: Mr Chairman I certainly withdraw and apologise for drawing you into the debate. There was no intention to do that and it was quite inadvertent. 
The Minister of Finance is the one who has trashed the mana of the Maori Party. Our team has tonight provided to New Zealanders the fact that something like 71 percent of all Maori earn incomes of less than $40000. That means some 71 percent of Maori people if they have children are in the category of people who are net losers from this bill. They are part of the crew that is paying the $750 million bill. 
Chris Tremain 
: I raise a point of order Mr Chairperson. The member is an experienced former senior Minister. We are talking to Part 4 of this bill and he has gone back to Part 3. I ask you to ask him to talk to Part 4 which has the provisions relating to KiwiSaver. 
Hon DAVID CUNLIFFE 
: Speaking to the point of order Mr Chairperson I respectfully submit that earlier there was a very similar point of order from Mr Foss on exactly the same point. Because of the interdependencies between the spending provisions of this bill and the funding provisions your alternate Chairman ruled that it was in order to draw those links. 
The CHAIRPERSON (Lindsay Tisch) 
: Continue. 
Hon DAVID CUNLIFFE 
: Thank you Mr Chairman. New Zealand has a historical problem of a savings gap. It was held off by the fact that the Government was saving on New Zealanders’ behalf. The structural solution to that problem was KiwiSaver. It has worked a dream. It has exceeded all expectations. There is no justification for the Minister of Finance to even raise the suggestion that it has not increased net saving because 827000 New Zealanders who were not saving are now saving massively through this scheme. OK there may be some diversion but the chances of it being 100 percent are nil—absolutely nil. That is a red herring one of many floated by the Government tonight because it knows that it is on very shaky ground here. It knows there is no economic justification. There is no logical linkage between undermining one’s savings programme and one’s incentives for innovation in order to fund a short-run consumption increase. 
Hon Ruth Dyson 
: So why would they do it? 
Hon DAVID CUNLIFFE 
: Well the politics are plain. National does it because it rewards constituencies that have been faithful to it. Upper-income earners and the financial sector are the beneficiaries and they just happen to be the main donors to the National Party. Do we see any potential connection here? After years of trying to get National elected they have finally got that and on National’s first business day it has put the interests of its core constituencies ahead of the interests of the many New Zealanders who are going to pay the bill. 
The strategic mistake that National has made is that it is just a bit too obvious. If National members had waited until some time next year to introduce this measure perhaps they would have snuck it through with less public concern—but actually I think we would have called them on it. The fact that they are trying to ram it through without select committee consideration with an enormous lack of mana—in fact lowering the mana of this whole House and of every Minister of Finance who has gone before Mr English—is what is truly sad about this legislation. It is bad economics; it is bad I say to Mr Bennett for many low-income New Zealanders because many of them will lose; and it is bad for Maori. 
JO GOODHEW (National—Rangitata) 
: 
 I move that the motion be now put. 
DARIEN FENTON (Labour) 
: 
 It is a pleasure to make my first contribution on this bill. I would call this a very disastrous bill particularly Part 4. This is a bill that gives big tax cuts to people on high incomes but increases in taxes to people on low incomes. Part 4 which I will endeavour to address—unlike lots of members of the Government—guts KiwiSaver by halving employer KiwiSaver contributions. It caps workers’ contributions at 2 percent rather than the choice that workers had before of 2 percent or 4 percent under the Labour-led Government. Of course employer tax credits are abolished. I want to explain to Government members who have tried to say this is about helping low-paid workers and who have terribly misrepresented the union movement’s position on the 2 percent contribution that what the unions were advocating was an option of 2 percent as a minimum. No one supported removing the 4 percent minimum. What happens under Part 4 of this bill is that employers will not be contributing 4 percent. They will be contributing 2 percent. 
Hon Member 
: As a maximum. 
DARIEN FENTON 
: That is right. Over a lifetime that adds up to hundreds of thousands of dollars for many low-income and indeed many higher-income workers. That is the objection that members on this side of the Chamber have to the changes to KiwiSaver. There are many others but that is the main objection I want to point out. 
The problem with this is that many unions and employers have already gone in and made agreements around the previous KiwiSaver scheme. Many have agreed to 2 percent plus 2 percent with an agreement that in future it will go to a 4 percent contribution. The problem with this bill is that in the future it will be really hard to persuade employers to contribute more than 2 percent. It will mean that some employers are going to put pressure on workers to fund the employer contribution out of a wage increase. Workers should be able to choose a 4 percent supported option and already hundreds of thousands have. The implementation of the changes under this bill will mean that these workers will be significantly disadvantaged. 
Let us talk again about low-income workers the workers who are going to be paying more under National’s tax plans. These are the workers that I am particularly concerned about; for example the caregiver in aged care who earns $12.50 an hour who is going to pay more in tax in 2010 and 2011 under National. Now those workers’ chance of having a savings scheme that will help them when they are older is being gutted. 
I do not accept the argument that low-paid workers have not signed up for KiwiSaver. In fact there has been specific research done on it by the Inland Revenue Department. That research is on the website if members choose to look at it and it shows that a large number of low-paid workers have signed up to KiwiSaver. Do members know why? It is the only chance they have ever had to have a superannuation fund where the employer is making a contribution. I know that thousands of workers have tried for years and years to negotiate an employer contribution in their bargaining. Those workers who do not have any power and who struggle to get a decent wage increase year in and year out have suddenly thanks to the Labour-led Government had an employer contribution that was going to see them enter their old age with a decent pension on top of the State pension. As I have said those workers stand to lose hundreds of thousands of dollars over a lifetime of saving. 
To add insult to injury we now find out they are going to have to pay the fee of $40. How mean how miserable is that! It has taken years and years to get this scheme. When was the last one? Was it 1975 the one that Muldoon abolished? 
Hon David Cunliffe 
: About then. 
DARIEN FENTON 
: They have waited all of those years to get a compulsory workplace savings scheme and here it is being gutted by the National Party in its first week in Government. It is absolutely shameful. 
The other thing that is very concerning is National’s intention to allow employers to take KiwiSaver contributions out of wage rises. That will result in employers putting more pressure on workers to forgo wage increases in order to cover the employer contribution. 
Hon JOHN CARTER (Minister of Civil Defence) 
: 
 I move  
That the question be now put 
. 
Hon DARREN HUGHES (Labour) 
: 
 The Taxation (Urgent Measures and Annual Rates) Bill is another example of a bill the Opposition has received just as the debate has started. If there is not going to be select committee consideration of these bills and if the Opposition is not going to get the opportunity to read them before the debate starts it is important that we get the chance during the Committee stage to ask questions of members and of the Minister in the chair Bill English in particular. If we cannot do that it will mean these important bills go right through the legislative procedure with no proper scrutiny—because we can guarantee the Government caucus will not have asked any questions when Cabinet took it to the meeting. There will have been no proper chance for transparency on this legislation. We need to use this opportunity to do that. 
I have some questions to ask the Minister of Finance when he has finished sending text messages and smiling about how smart he is. My first question to him asks how many extra people will join KiwiSaver because of this change in Part 4. I am asking the Minister of Finance how many extra people will join KiwiSaver because of the changes he is introducing in Part 4. Can he give me a number? 
Chris Tremain 
: How are you going to know that? 
Hon DARREN HUGHES 
: Chris Tremain asks how we are going to know that. Every single speech that National Party members have given tonight including the speech made by Chris Tremain has said that halving KiwiSaver contributions will open the floodgates to low-income workers wanting to join KiwiSaver. When I ask Government members whether this will lead to 10000 or 20000 extra people joining a year they laugh and say nothing about it. They have no answer. Chris Tremain used the basis of his speech to tell us that this change in Part 4 will make sure that lots of other people will be able to join but those members will not answer the question. 
Hon Bill English 
: Ask the question again. 
Hon DARREN HUGHES 
: I have already asked the Minister the question. The Minister knows what it is. 
Hon Bill English 
: How many people voted against you in the Otaki seat? 
Hon DARREN HUGHES 
: Not many. I tell the member that yes I was defeated. Oh yes; “Mr Comedy Show” over there thinks he is David Letterman but that is about half an hour away. The only joke Bill English knows about defeats is the 2002 one because out of every member sitting in here there is only one man who had the worst defeat in 100 years and it is not me; it is Bill English. 
Hon Bill English 
: I’m back. 
Hon DARREN HUGHES 
: He says he is back. He thinks he is the leader of the Government. He thinks he is the Prime Minister of New Zealand but we know he is not. He is the also-ran and when I asked him a serious question about people joining KiwiSaver he had nothing proper to say at all. 
The KiwiSaver scheme is the one that National members said was nothing more than a glorified Christmas club. They voted against it in droves after we introduced it. John Key said that the only person it would be good for was his pool boy which I thought was an extraordinary revelation. Those members said the scheme was a glorified Christmas club and not worth anything whatsoever. Then New Zealanders joined and they joined not just in the numbers we thought they would—and we were an optimistic Government a sunshine Government; we looked at things and said this would work—but in numbers four times that amount. Tonight the number of New Zealanders who have joined the KiwiSaver scheme stands at 827000. 
We are told that if the benefits of KiwiSaver are reduced if the entitlements people get from KiwiSaver are halved as in Part 4 then somehow more people will join. National has no answer except to say that halving the contribution will make more people join—and Annette King said that if it is zero plus zero then even more people will! If four plus four is so terrible that two plus two is better then maybe zero plus zero would be better or even better maybe 2 percent from the worker and 4 percent from the boss. But National members did not want to go for that one either. Why is National not giving a choice in Part 4? I thought National was the party of choice. It could have said it would introduce a third level into KiwiSaver which could be either “2 plus 2” “4 plus 4” or “8 plus 4”. National could have put more choice into KiwiSaver but instead it is shutting the door on it. 
This whole bill is a disaster. We are opposed to the whole thing. It is amazing that some of the parties in Parliament are voting for it. It is amazing that the Maori Party is voting to put taxes up for some people. It is amazing that the ACT Party is voting for it. Roger Douglas wrote books about the fact that the scheme he helped with back in the 1970s was abolished. He said it was one of the biggest missed opportunities yet on his first week back in Parliament he is voting out another scheme that is for savings for the economy and for working families across our country. So it is amazing to see the number of parties that are lining up to vote against it. What they are doing is a mistake. 
Out of all the parts in the bill this part is the worst. The reason is that this part will have an effect on New Zealand for the worst in 20 years’ time. This part of the bill changes the choices people can make in their working lives and in 20 30 or 40 years’ time they will not be able to go back and change those choices. People cannot go back and save more once their working lives are over. Tax rates go up and down of course with political debate. We know that. That will happen throughout political history. But those members opposite are shutting the door on a chance for working people to build up their savings over their working lives 
Hon PANSY WONG (Minister for Ethnic Affairs) 
: 
 I move  
That the question be now put 
. 
Hon DARREN HUGHES (Senior Whip—Labour) 
: 
 I raise a point of order Mr Chairperson. The closure motion of course is in your purview and yours alone. I make the point— 
The CHAIRPERSON (Lindsay Tisch) 
: It is. I refer to— 
Hon DARREN HUGHES 
: My colleague Moana Mackey has been calling all evening trying to get a call. 
The CHAIRPERSON (Lindsay Tisch) 
: I refer to Speakers’ ruling 60/7. 
A party vote was called for on the question  
That the question be now put. 
Ayes 68 
New Zealand National 57; ACT New Zealand 5; Maori Party 5; United Future 1. 
Noes 51 
New Zealand Labour 43; Green Party 7; Progressive 1. 
Motion agreed to. 
The question was put that the following amendment in the name of the Hon David Cunliffe to clause 55 be agreed to: 
to omit this clause. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 51 
New Zealand Labour 43; Green Party 7; Progressive 1. 
Noes 68 
New Zealand National 57; ACT New Zealand 5; Maori Party 5; United Future 1. 
Amendment not agreed to. 
The question was put that the following amendment in the name of the Hon David Cunliffe to clause 56 be agreed to: 
to omit this clause. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 51 
New Zealand Labour 43; Green Party 7; Progressive 1. 
Noes 68 
New Zealand National 57; ACT New Zealand 5; Maori Party 5; United Future 1. 
Amendment not agreed to. 
The question was put that the following amendment in the name of the Hon David Cunliffe to clause 58 be agreed to: 
to omit this clause. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 51 
New Zealand Labour 43; Green Party 7; Progressive 1. 
Noes 68 
New Zealand National 57; ACT New Zealand 5; Maori Party 5; United Future 1. 
Amendment not agreed to. 
A party vote was called for on the question  
That Part 4 be agreed to. 
Ayes 68 
New Zealand National 57; ACT New Zealand 5; Maori Party 5; United Future 1. 
Noes 51 
New Zealand Labour 43; Green Party 7; Progressive 1. 
Part 4 agreed to. 
Clauses 1 and 2 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 It is appropriate in the Committee stage debate of the title clauses to recall the overall significance of the measure that they represent. This has been an extraordinary debate so far on an extraordinary bill. What is clear which will no doubt carry through into the third reading debate is that thanks to the loss of mana by the Maori Party the Government will have the numbers sadly to pass this bill and thereby these clauses will be enacted. That I think we can take as a given based on the voting patterns so far. 
What has become equally clear through the debate is that there is neither a valid social justification nor any valid economic justification for the measures that are proposed. There has been a growing recognition throughout the House in the media and amongst the commentators that when we strip it all away the bill is about politics it is about who gets what and it is about rewarding constituencies. It is not about growth it is not about savings and it is not about good policy design. 
Let us recall that the bill that these clauses represent is going to cost New Zealand about $5 billion. Of that $5 billion $3.5 billion comes from gutting KiwiSaver: providing not a 2 percent option but effectively a 2 percent cap and thereby taking away with it not only the best chance working New Zealanders have ever had to have a nest egg—a big nest egg on retirement—but the hopes and dreams of many New Zealanders who had just started to believe that maybe they too could have a pool attendant like Mr Key one day. But those dreams are gone. So has the dream of paying off the mortgage when they can cash in their KiwiSaver because 2 percent plus nothing will not go very far. It will cost the average income earner starting at 30 years of age about a quarter of a million each by the time he or she retires—thank you National Government! 
So the real losers today are ordinary New Zealanders but the other loser here is actually the National Party interestingly—and ironically—enough. Up until today National had done a pretty fair job of telling New Zealanders they could have everything they had under Labour. The polls were very clear. We were not a Government that was reviled by New Zealanders; they just thought maybe it was time for the other guys to have a go. We will find out in 2011. All of the data is showing that most New Zealanders thought that the economy under Labour was well managed that the Government was doing a good job and that overall it acted in New Zealand’s best interests. It is just that they were a bit bored and thought they could have all of that and some new faces. 
The real problem with this bill—the bill supported by the title clause—is that the title should be the “Emperor’s New Clothes Bill” or the “Wolf in Sheep’s Clothing Bill” or the “New Zealanders Start to Come to Their Senses Bill” because it dashes the hopes of the million New Zealanders who were KiwiSavers and it gives a kick in the guts to those Kiwis who were paying the self-admitted veto-driven $750 million loss that Bill English first confessed to which is now on the Internet and which he then withdrew—that was extraordinarily inept for his first week on the job. That is almost historic. I have never seen a financial veto withdrawn and taken off the Table after it has been posted on the Internet. Extraordinary! 
Those people will not forget this. They will not forget this because on our first day of business National dropped all pretence and reverted to type just like Ruth Richardson’s first week on the job. Bill English once presented himself as the centre candidate in the leadership race against John Key—and why is it by the way that Mr Joyce is sitting right behind Mr English? We will figure that out. 
Hon Dr Michael Cullen 
: He gets to stab Bill before Bill stabs John! 
Hon DAVID CUNLIFFE 
: I figured that might be something to do with it. 
So we know who the losers are. I actually think one of the biggest losers here is the Maori Party. We had been hoping to build a working relationship with the Maori Party because I think there is some stuff we need to work on together. I fear that those members are not going to be here in 2011 because the majority of Maori Party voters who voted Labour with their party vote are not going to be impressed by the fact that the only reason that this veto was not needed and the only reason they are not getting the $750 million insurance cheque from Michael Cullen’s amendment is because Hone Harawira and his mates supported that bill. It is the beginning of the end for the Maori Party. It is like the foreshore and seabed legislation in reverse. This is the beginning of the end of the Maori Party because it has put itself let us hope unwittingly in the situation of propping up a National Government that is already showing itself to be different from what it told the electorate— 
Hon Parekura Horomia 
: And what they told the Maori Party. 
Hon DAVID CUNLIFFE 
: —and what they told the Maori Party. So I feel kind of sorry for them in this because they have been taken for a ride. 
This bill could also be called the “Bad Economics Tax Reform Bill”. It is bad economics for four principal reasons. The first reason is the savings gap is one of New Zealand’s enduring structural economic problems and it is one of the most important legacies of the outgoing Government that there was a structural solution that was working well. This guts it. 
The second principal reason is because the measures in this bill are the opposite to productivity enhancing. They are funding a tax cut that will be either frittered on consumption or perhaps squirrelled away and have no multiplier. But either way—and Mr Bennett cannot count it twice—it does nothing for the drivers of growth. It does nothing for technology; in fact it does the reverse. It cuts the research and development tax credit that was being used to good effect by our most innovative businesses. 
The third reason it is bad economics is because it was never going to be an appropriate solution to a relatively short-run cyclical recession problem. It is a structural tax cut which Treasury itself has confirmed was inappropriate. Members should read the bill which says it was inappropriate. The briefing to incoming Minister states it was inappropriate. The flow-ons have not been quantified and the briefing to incoming Minister makes it clear that after $9 billion of stimulus from the Labour tax package in Budget 2008 another $5 billion was imprudent. Between Budget 2008 and now—wakey wakey!—the world financial markets have gone into a tailspin. That means it will be harder to borrow and banks are having to get expensive credit guarantees. 
Against that background the last thing we need is to be driven further into debt. I tell New Zealanders that the fear is that we will be driven so far into debt that the decade of prudent management inherited from the outgoing Government will be wasted. We started off on 35 percent sovereign gross debt to GDP. We got it down to 17 percent. My bet is— 
Chris Tremain 
: At $48 billion. How can that be? 
Hon DAVID CUNLIFFE 
: I tell Mr Tremain that National will not actually tell us. National will not publish the forward debt track. My bet is it is back up to 35 percent in part as a result of this bill and in part admittedly as a result of factors beyond the control of all of us. But it is not an appropriate solution to a cyclical problem. 
Finally this does not maintain a prudent stance in the markets. Both this and talk about driving the New Zealand Superannuation Fund to override good process and forcing it to buy assets in New Zealand will push up the price of assets it will push up the price of debt and it will make the borrowing problem worse. It is bad financial economics as well as bad real sector economics. 
But let me conclude as I began this summary under the title clause. I think New Zealanders now know it is not about economics it is about who gets what. 
CRAIG FOSS (National—Tukituki) 
: 
 I would like to talk to the title of this bill and to suggest some other titles that perhaps we could consider. It is the Taxation (Urgent Measures and Annual Rates) Bill. It is actually very very urgent. Perhaps when the Minister of Finance was drafting this bill he considered naming it the “Labour Still In Denial Bill”. Those members are totally in denial. They are still not listening as my colleague the Hon Steven Joyce pointed out before. They are not listening. They have not been listening for the last few years they were not listening during the election and they most certainly are not listening now. In every speech from the minute we started to debate this bill yesterday until now—and no doubt during the third reading—they have been totally in denial. They have been furiously looking around trying to make themselves busy and trying to find a couple of academic points here and there. They are actually contradicting themselves from speaker to speaker. From the previous finance Minister to the current finance spokesperson they are totally contradicting themselves. 
Then we got some lecture from the spokesperson over there about cycles and all that. With regard to the denial part he said something about a short recession. The Reserve Bank predicted New Zealand would go into recession late last year and early this year and New Zealand followed its prediction and forecast. The Labour Government led New Zealand into recession long before any other country went into recession—in particular the countries we compete with. New Zealand is still in recession and sadly it looks like we will stay in recession for a bit longer. None of us in this Chamber wants that of course but that is the situation and members opposite should not deny it because by denying it they are not doing their—probably short—legacy any good at all. 
Something was also said about the forward debt track. Perhaps those members are in denial about the forward debt track. As I noted in an earlier speech members opposite are asking what the forward debt track is. Well I ask members opposite what revelations are still to come. What ticking time bombs have been set up in other portfolios in other ministries? I cannot understand members opposite. One of them talks about before the Pre-election Economic and Fiscal Update and another one of them talks about after the Pre-election Economic and Fiscal Update. They have talked about the debt to GDP ratio etc. Yes it is down to 18 percent but the Pre-election Economic and Fiscal Update took it out to about 30 percent and possibly even higher—and that was before the revelation about the accident compensation scheme. 
Those members should get in the real world today and get out of denial. Why do they not celebrate this bill which will mean that at long last New Zealand has an ongoing programme of personal tax cuts of rewarding New Zealanders for their hard work? After 9 long years a bill to bring in personal tax cuts will be voted on; after 9 years—about 3100 days under the previous regime—it will be in law very shortly. The first tax measure of the previous regime was to hike the top marginal tax rate from 33c to 39c and 3000-odd days later they admitted that yes they were wrong and they brought in their tax cut plan when they were about 17 points behind in the poll. New Zealanders saw right through that. Labour members are still in denial in every speech. 
One point I note is the disgraceful and disgusting attempt in the last few days by the Hon Trevor Mallard at wedge politics aimed at the Maori Party and low-income New Zealanders. Some of the language and the rhetoric that have been used are absolutely disgusting. Anyone reading  
Hansard 
 will see it as simply disgusting and disgraceful racism. 
Hon Dr MICHAEL CULLEN (Labour) 
: 
 Diddums is all I can say to the poor member Craig Foss who has just spoken. Let me get this right. New Zealand is in a recession. That is not surprising—so is the United States so is Germany so is Japan so is most of Europe and so are all kinds of other countries around the world. The member says that the answer to the recession is as follows—and let me get this right. Firstly we cut long-term savings; secondly we reduce innovation; thirdly we increase taxes on people on low incomes. Then of course we have the really brilliant part of the growth strategy: we get teachers to tell parents in plain English how their kids are doing. This in itself will drive increased productivity throughout the economy. This is the growth strategy. On top of that the real big driver the real turbocharger for this 1953 Morris Oxford that the National Party is putting up is a $10 a week tax cut. People will flood into work for that; they will work so hard that the economy will take off and exports will double! We will be in the top half of the OECD within 3 years thanks to a $10 a week tax cut! Does anybody believe this rubbish? Do people believe that that is a growth strategy in the 21st century? It would not have been very good in the early 20th century; it is hopeless in the early 21st century. 
So what does this bill do? It increases taxes for many people. There is nothing urgent about this bill. The only thing that is urgent is that it is being taken under urgency. That does not make it urgent. The bill also provides for annual rates. Actually it talks about KiwiSaver. I do not know why the Office of the Clerk approved KiwiSaver being in this bill because there is no reference to it in the title of the bill. It says “Taxation (Urgent Measures and Annual Rates) Bill”. I would like to know how cutting KiwiSaver contributions come within that particular heading. National has got away with stuff I never got away with when Dave McGee was Clerk I might say in that regard. 
We know what the increased tax on low incomes is. The increased tax on low incomes is $730 million over the next 5 fiscal years. It is worse than that sounds because the increase does not take place until 1 April 2010. So it is actually $730 million over about 3 tax years. It is actually about $230 million a year in increased taxes. On whom? On those earning $14000 to $24000 a year on all families with kids that earn under $44000 a year and on quite a lot of families with kids that earn over $44000 a year. They will pay higher taxes than under the current law. That is what this bill does. 
The second thing it does is reduce innovation. It abolishes the research and development tax credit. We are told that this is because companies are rorting it. Well not a single company has got a research and development tax credit yet because the first tax year that it applies to has not yet finished. It is all very well that PricewaterhouseCoopers and all these people have been vetting these lovely schemes but nobody has actually tested anything. I have heard complaints from accountants that the Inland Revenue Department is being too tough around the rules for the tax credit. Far from the tax credit being too easy to get the complaint is that it is too hard to get. 
What we do know is that if we do not have one and Australia has one we will continue to see research and development sucked out of this country. I do not like tax credits in these areas any more than I like bank guarantees. We had to have bank guarantees because everybody else had them. If we did not have them then we did not get the money linked to New Zealand banks and we would not see New Zealand retail deposits in New Zealand banks. If everybody else does it unfortunately we have to do the same thing. The same is unfortunately true with research and development tax credits. If everybody else is doing it and we are not doing it that is an incentive to site research and development elsewhere. 
What is research and development? It is the brightest brains the highest-value jobs the companies that produce the most the companies that export and the companies that are more innovative and pay higher salaries. National says that it is going to turbocharge this economy by taking those jobs away and exporting them across the Tasman. This is part of its great strategy for bringing people back to New Zealand. Can anybody explain the logic of this? Nobody in National can explain the logic of this. Basically it is the same as with all the rest: the Labour Government did it and therefore the National Government will reverse it because it hates stuff that looks good. That is what it has done. It is like Working for Families and it is like KiwiSaver. 
Then of course we reduce KiwiSaver in this bill. We turn it from a scheme in which the average worker accumulates savings of 10 percent of his or her wages per annum of which the worker pays 4 percent to a scheme in which he or she accumulates savings of about 5 percent per annum yet many workers—particularly the low paid—will still pay 4 percent because the employer will shift the cost on to the employee. Mr English claims that lots more people will join but he failed to answer the question. In terms of the money that National has calculated—and it has calculated money; it has come up with costings and those costings are based on assumptions—one of the assumptions has to be what the increased uptake of KiwiSaver will be compared with the status quo. The fact is that National has not budgeted anything in that regard. It does not expect an increased uptake at all. 
Yes the unions wanted to retain the “2 plus 2” entry point. But they were not arguing to stay at “2 plus 2”; they were saying that people could go in at “2 plus 2” then gear up for “4 plus 4” with annual wage increases so that they did not feel the initial pain quite as much. That is enormously different from sticking at “2 plus 2” over the lifetime of savings. The sixty-eight members of this House who voted for this are all entitled to an employer’s superannuation subsidy of between 8 and 20 percent on their superannuation scheme. They all voted to lower the subsidy for ordinary workers to next to nothing and they conned the media into believing that they would get $1040 a year. They will not—only if they contribute 4 percent continuing. At 2 percent many will get a tax credit that is a great deal less than $1040 a year as a result of these changes. And the threshold of the employer’s superannuation tax payment has been lowered. It goes down from 4 percent to 2 percent. So if the employer continues to pay 4 percent instead of 4 percent going into the employee account 3.4 percent goes into the employee account. 
Time after time after time at every step there is a cut in savings. This is a country with an appalling savings record with a chronic current account deficit with an excessive reliance upon foreign capital and with endless debates about foreign ownership of the New Zealand economy—and this Government decides to cut savings. There is in an international financial crisis partially driven by the growing gap between the debtor countries—the borrowing countries—and the savings countries and the National Government has firmly nailed its flag to the mast of more borrowing and more spending. This is not an economic programme that makes any sense: a dumber economy lower private sector research and development funding more taxes on low incomes fewer savings—that is the National Government’s formula. Somehow or other a little tax cut in the middle and the top will make up for it! 
We are not actually lowering marginal tax rates for most people; they barely change for the vast majority of people. So the incentives are not there because economists tell us that the incentives are in terms of the marginal tax rate not the average tax paid. Once one lowers the average tax paid people just bank the difference—that is a given. It just becomes part of the family budget from then on. It does not change incentives to work from that point on. 
The final point is the betrayal by the Maori Party of its constituents. Those members are voting for a bill that discriminates particularly against their constituents. The low-income people who lose under this bill are disproportionately Maori. Maori disproportionately benefited from and were enthusiastic about KiwiSaver because it was particularly geared to helping low to middle income earners get a regular savings habit at work. For the first time for decades we were seeing significant Maori uptake of work-based superannuation. And the Maori Party voted for this. That is why the financial veto was withdrawn—the National Government was worried that the Maori Party members would abstain on or vote against the measure. The National Government leant on them and they caved in. Their so-called mana was not enhanced at all. Their mana is knocking around somewhere in the gutter at the present time. They are feeling about this big. Mr Harawira said that he wants to kill Trevor Mallard because Trevor Mallard dared to point out that he has betrayed his own constituents. Well utu time has a date: it is probably November 2011. 
It is already launched; the blogs are turning against National. When one of National’s favourite journalists the daughter and sister of National Party MPs is attacking it in her blog today we know that the worm is turning. The honeymoon is over. I say to the National members that it is time to get out of bed boys and girls and start trying to defend where they are because the honeymoon is over as a result of the legislation that they are pushing through. They should listen to  
Checkpoint 
 tonight as group after group is lined up to attack the National Government. This is the real world those members are in. They will go back to their offices wait for the officials to turn up and scare them with the latest frightening story panic again rush in blame everybody in sight and try to pretend they are not the Government. Well they are the Government. We know where we are—we are the Opposition. They are the Government they have to do it and what they are doing at the moment is cutting the taxes of the wealthy increasing the taxes of low-income people cutting savings cutting innovation and betraying the very people who voted for them in this election. 
Hon BILL ENGLISH (Deputy Prime Minister) 
: 
 Dr Cullen just cannot stand the idea that the National Party put a plan for the economy to the New Zealand public and they voted for it. It is a different plan to his plan. In fact people who are voting for the KiwiSaver changes tonight are voting for a KiwiSaver that will be fair. It will be fairer for the simple reason— 
Hon Member 
: Fairer? 
Hon BILL ENGLISH 
: —it is—that Labour has never understood that most of the working-age population is not in KiwiSaver. Labour has always believed that the great battling New Zealand public should put their hands in their pockets to fund Labour’s latest little vote-catching scheme. We have changed the rules so that those New Zealanders get an opportunity to join KiwiSaver because if they are able to join KiwiSaver they will get the benefit of the subsidies provided by the Government. If they cannot join KiwiSaver which most working-age New Zealanders have not done they do not get one cent to help them with their saving. If they are working on the average wage trying to pay off a mortgage when interest rates have been rising and cannot afford to join KiwiSaver because they cannot give up almost 6 percent of their net pay each week—which a lot of people cannot; and they are the ones who did not vote for Labour because Labour would not listen to them—those people who are struggling to keep their heads above water on their mortgages now have a better chance. Because interest rates are dropping they may now be able to enter KiwiSaver at 2 percent. 
See Labour did not listen to those people. They listen only to the people who take the cash and say they are grateful. Those are the only people they listen to. Also through this debate we found out that Labour always intended KiwiSaver to replace national superannuation. That is why they have been talking about— 
Hon Member 
: We did not! 
Hon BILL ENGLISH 
: Dr Cullen has been saying that his intention for KiwiSaver has been to make it like the Australian scheme. The Australian scheme is 9 percent KiwiSaver is 10 percent and that is how we should have it! The Australian scheme—as I pointed out to the House—replaces the public pension. It is viciously income-tested and asset-tested. New Zealand does not have income and asset-testing. We had a 20-year debate over it we have settled on universal superannuation and now in addition to that we are pre-funding it. So every year the New Zealand taxpayer puts $2.5 billion into the New Zealand Superannuation Fund to pre-fund national superannuation. That is staying where it is. That is part of the deal for retirement income. The KiwiSaver arrangements Labour had simply cut too many people out so we have changed them. 
The other example of Labour listening only to people who take its cash and are grateful is that of all those people in New Zealand who over the last 4 or 5 years have not benefited from Working for Families. The benefits of Working for Families for households with children have been significant: big increases in their net income—$100 or $150 a week in some cases. But people who earn under $44000 who have no children of whom there are 630000—battling Kiwis who voted Labour loyally for 10 years—got nothing. The strongest economic growth in a generation and they got nothing. Tonight we have listened to them and we have given them something so alongside families they now have the tax cuts and the share of the economic growth they should have had 10 years ago. 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I stand to speak to the title clause of the Taxation (Urgent Measures and Annual Rates) Bill. Of course the use of the word “urgent” in the title is rather perplexing. It does not seem to me that there is anything so urgent that this bill has to be rammed through the House tonight or tomorrow. What is so urgent about this bill that it could not be considered by a select committee? What is so urgent that we could not have a proper public debate about the content of this bill? What is so urgent that we could not let civil society which is the foundation of our community have a look at the content of this bill? And what are the urgent things that are not in this bill? 
The UK Tory party the Conservative Party has become very interested in climate change because it thinks that is quite an urgent thing. It has started to embrace the idea of using the tax system in order to move our society towards a more sustainable direction. Its leader David Cameron has talked a great deal about it. It seems to me that climate change is an urgent issue and if we want to take urgency to deal with something urgent then why not deal with climate change? Surely that should be at the top of the agenda like green taxes are now at the top of the agenda for discussion by the Conservative Party in the UK. But there is nothing in this bill about climate change. There is no transition for the tax system—to shift taxes off income and on to resources and pollution. Instead the only discussion we are having about climate change is that maybe the taxpayer should pick up more of the costs because the Government is about to weaken the emissions trading scheme. Every time we weaken the emissions trading scheme the taxpayer is going to hand over more money to pay for the pollution of other people. It seems to me that if “urgency” is what this bill is meant to be about then we should be looking at climate change and what we are going to do about it. 
What about discussing something else that should be dealt with in this bill? I think the state of our rivers is quite an urgent issue and is something that our tax system should look at. There is nothing in this bill about making sure people pay in that respect. There is the issue of a tax on commercial water-use. This bill is a tax bill so it could have talked about a tax on commercial water-use. It could have something about that as an urgent issue. Then there might be a financial incentive to use water efficiently. Instead there is no financial incentive because this tax bill does not really deal with the urgent issues that are facing our country. 
What about another urgent issue that should be addressed by this bill—that is inequality and poverty in our country? We have a major problem with inequality and poverty and this tax bill will actually make it worse. Instead of the tax bill that we have already passed into law that would give tax breaks to lower and middle income earners particularly lower-income earners this bill reduces the tax breaks that we are going to give to those people. The tax cuts we were going to give to lower-income earners are being taken away. 
But it seems to me that what is really urgent in this bill and why it is so important that it is passed quickly is that next year people are going to get tax cuts of one sort or another. Now when they get those tax cuts most of them will say: “Oh look National gave us tax cuts just like they promised to do.” That is what most people will say. They will not realise they were already going to get bigger tax cuts particularly for lower-income workers. The reason this bill is so urgent is the politics of it. The Government needs to get it through quickly before people realise what is being done. That is what is urgent about this bill and that is why it is being pushed through. The reason we are having this debate at 10.30 at night and going through to midnight is the politics of it so that people do not realise. 
What about the savings problem? That is another urgent problem that I would like us to address. The fact is that we have a massive current account deficit most of which is an investment deficit because we are highly indebted. We borrow lots of money so we can trade each other’s houses. What about dealing with that problem? Instead this bill does not deal with that. It makes the problem worse. We have a bad savings culture. We are trying to do something about it. 
KiwiSaver was very very far from perfect but it was a step in the right direction. The Greens support the 2 percent but it should be “2 plus 4”. Why does the Government not do “2 plus 4”? Why does it have to be “2 plus 2”? Why not go to “2 plus 4” if the Government really cared about savings? We have a savings problem and we all agree about that. What about “4 plus 4”? Why do we not go that way? Let us give people the option of 2 percent but let us support it. It seems to me that an urgent problem that we have as a country is our savings culture. But this bill puts things backwards. 
We have another big problem an urgent problem—because it seems to me that the bill should be about our urgent problems. We have another urgent problem which is research and development. We do not do a lot of it in New Zealand. Most of it happens in universities and the public sector. Very little of it happens in the private sector. We had this idea of a research and development tax break in order to get more research and development in the private sector. It was not necessarily going to work and it was not perfect but it was trying to address one of the fundamental problems of our economy which is that we do not do enough research and development in the private sector. That is an urgent problem which we should be doing something about. Instead we are going in the opposite direction with this bill. 
It is urgent that the Government has another look at it and that the Minister of Finance thinks whether this is really what he would want to be responsible for or whether he really wants to put down as his first bill through the House something that does not deal with the urgent problems we face like climate change water quality inequality savings and research and development. In fact it starts to put some things backwards. In terms of the urgent problem of the economic stimulus package—which is an urgent problem I give you that—I ask whether we want to have a stimulus package that consists of tax cuts. A large part of those cuts will be spent mostly on imports although not entirely. Therefore we will be stimulating the Chinese economy with our tax cuts. Some of those tax cuts will be saved which is good. But if we really wanted a stimulus package to deal with the urgent problem which is the fact that people are losing their jobs why not build more State houses? Why not insulate cold damp houses which has long-term benefits and employ New Zealanders? It would stimulate economic activity because even though the Government does not think it is a problem we think it is a problem that people live in cold and damp houses. We think we need more houses. If we insulate houses it has benefits for the health system the education system and energy efficiency. That would be a good way to stimulate the economy. That would be a good kind of stimulus package instead of this package which is very very focused on tax cuts. It does not look at the big picture—what we need to do as a society and what we need to do as an economy to prepare for the future. That would be a much better way to have an economic stimulus package. 
Hon PETE HODGSON (Labour—Dunedin North) 
: 
 I just want to respond to some of the comments made by the Minister of Finance when he said at the outset that what Labour could not get used to was the fact that the National Party had gone into the public arena with its tax policy had made it clear to the public of New Zealand and had won the election. 
Hon Gerry Brownlee 
: Title debate. 
Hon PETE HODGSON 
: Well let me just ask the Minister of Finance whether when he went into the public arena to take part in an election campaign he was in a position to spell out that those people earning under $20000 or under $44000 if they had children were going to get a tax cut decrease compared with what was already in New Zealand statute? Did he tell the public of New Zealand that? I do not think so. Do we think he told the public of New Zealand who are earning between $44000 and $50000 that the $10 a week these people who have been missing out all this time were going to get is not coming after all? Did he say that to the people in the— 
Craig Foss 
: Between $24000 and $44000. 
Hon PETE HODGSON 
: No those on $24000 to $44000 are getting it. But National members campaigned that those on $24000 to $50000 would get it and then they broke the promise. Mr English did not— 
Hon Bill English 
: That’s not right. 
Hon PETE HODGSON 
: That is not a broken promise? Well should we go back into Part 3 with the leave of the Committee of course and change the law so that we can have an amendment to make sure that the promises that the National Party made in the election will be kept? At the moment unless we go back into Part 3 that is the case. The abatement starts to occur well before $50000 and the measly $10 in Annette King’s words is much less than that. Did he say to the people of New Zealand that any dollar above 2 percent paid by the employer would have to go and visit the taxman first? Did he say that? No he did not say that before the election. In fact he did not say it before yesterday. Yesterday the announcement came in the form of Mr English saying that it should not come as a surprise to anyone. Well if it was no surprise then why did he not just say so? He did not point that out so National has gone into the election with one tax package and come into the House with another. 
But the other thing I would like to say about Mr English’s remarks is that ridiculous comment about how Dr Cullen had hoped that KiwiSaver would replace New Zealand superannuation. This is what is ridiculous about it. If the previous Government had wanted that to be the case we would not have made KiwiSaver opt-out; we would have made it compulsory. 
You see the whole point of making it an opt-out system was to give a bit of choice to the public of New Zealand but also to protect New Zealand superannuation from right-wing Tories in future generations. This was in addition to New Zealand superannuation which the Minister was generous enough to point out has now become a universal entitlement and is now being pre-funded thanks to the Cullen fund—there is $14 million in that fund and I tell Mr English not to go near it. 
So let us just see whether the logic of Mr English’s comments about Dr Cullen’s intentions is true. It is palpably false. A few things about the New Zealand economy are in good shape and a few things about the New Zealand economy are not in good shape. Generally speaking we can say that our net or gross debt to GDP levels are in good shape and have been in good shape for a few years. We can say that we have a high— 
Craig Foss 
: Is 45 percent prudent? That is what Helen Clark said in the 1990s. 
Hon PETE HODGSON 
: I do not know the member’s name and I do not know where he comes from but he would be very hard-pressed to back that assertion up with any record in  
Hansard 
. He should go and look; he will not find it. The member is just making it up. 
But let us take a look at some of the good things about the New Zealand economy. We would probably agree that we have a relatively good credit rating internationally—in fact we have a very good credit rating internationally. I think we could agree that the business regulatory environment is in good shape. The World Bank keeps telling us that and other surveys keep telling us that we are near the top for setting up or pulling down a business and near the top for regulatory regimes for businesses. We have low or very low levels of corruption and we are all pleased and proud about that. We have low unemployment though we know that that will go up in due course. But we know that some things about our economy are not good. We are a low-wage economy even though in 9 years the Labour Government managed to lift the minimum wage from $7 an hour for an adult to $12 an hour for an adult. In the 9 years prior to that it had been lifted by somewhat less than $1 an hour. 
Hon David Cunliffe 
: In 9 years? 
Hon PETE HODGSON 
: In 9 years—less than a dollar an hour; $5 an hour over the 9 years of our Government. But we are still a low-wage economy. We are an economy that does not save and we are an economy that does not do research and development. And we are passing legislation today that increases taxation on the low paid that cuts research and development and that causes dissaving. What is sensible about that? What is reasonable about that? 
What is more this change is structural. This is not a short-term stimulus. The Greens suggested that we might retrofit a few more houses or build a few more State houses—that would be a short-term stimulus. Or we could do what they did in Australia and say married superannuitants would get $2100 and a single superannuitant would get $1100—or whatever the figures are. It is a short-term stimulus. People on the equivalent of Working for Families in Australia would get $1000 a child or whatever it was—I am sorry I do not recall the details. That is what a short-term stimulus is like. This is not a short-term stimulus; it is medium-term wealth redistribution. It is a structural fiscal change that will cause deficits. 
Hon Dr Michael Cullen 
: Social engineering. 
Hon PETE HODGSON 
: It is social engineering at its worst. I cannot believe that National would use the offices of this House to ensure that its own social engineering predilections would come to pass. But that is what it is. 
Hon Annette King 
: It is putting the rich back on the dummy. 
Hon PETE HODGSON 
: Yes it is putting the rich back on the dummy. That is exactly what it is—a wealth redistribution in the medium term. The whole idea of fiscal restraint went out the door when the Speech from the Throne was read on Tuesday this week and we heard that there would be fiscal deficits foreseeably. That is not acceptable. That is not prudent. That is something resembling shadows of Muldoon. 
Hon Gerry Brownlee 
: Ha ha! No it is a legacy of Labour actually! 
Hon PETE HODGSON 
: It is not a joke. 
This country has come into a fiscally positive position in recent years under successive Governments. It has certainly stayed there for 9 years of the Labour Government and here within days we are moving into fiscal deficit. A fiscal deficit for a short period would be a good thing. You see that is what a short-term stimulus would deliver; it would help to pull us through. But no the Government has not done that; it has eschewed the idea of a short-term stimulus and instead gone for a medium-term structural change which is the redistribution of wealth. That is Tory behaviour at its worst. It is bad for our economy it is bad for the rich-poor gap it is bad for innovation it is bad for saving it is bad for exports it is bad for high wages and it is bad for our competition with Australia. I cannot think of a thing that is good about it and the shame of it is that we had this opportunity and we blew it. That is the shame of it. We had the opportunity to do something that was going to be clever and nothing clever came before this House. That is a shocking shocking shame and I am very very sad that we will end the Committee stage of this legislation in due course which shifts us in the wrong direction at the wrong time for all of the wrong reasons. 
Hon JOHN CARTER (Minister of Civil Defence) 
: 
 I move  
That the question be now put 
. 
MOANA MACKEY (Labour) 
: 
 I am happy to take a call on clauses 1 and 2. When we deal with the title we can see that this bill would probably best be called the “Taxation (Tax Increases for the Poor Less Security in Retirement for the Low Paid and a Dumber Economy) Bill”. That is exactly what this legislation does. That is what the National Government thinks is so urgent that it needs to be passed at quarter to 11 at night in urgency—tax increases for some of our most vulnerable families less security in retirement because it is gutting KiwiSaver and a dumber economy because it is getting rid of the research and development tax credits. 
With the kind of global crisis we are facing now there are probably a few things that people might expect their Government to do. First they would probably expect it to protect the most vulnerable—those who are most likely to lose their jobs those who are most likely not to get pay increases and those who are most likely to be unable to afford to pay their mortgages pay their food bills or be able to buy the kinds of things they need to send their kids to school. The second thing one might expect one’s Government to do is to promote innovation promote research and development and promote the kinds of policies that will bring in higher-paid jobs increase exports and put more money into the real economy. When the country has such high personal debt levels the third thing one might expect the Government to do is to take savings seriously and try to increase personal savings and increase the depth of capital in the country. 
The astonishing thing about this legislation is not that National has ignored one of those things but that it is that it has ignored all of them. And not just that—it has done the exact opposite of everything one would expect a responsible Government to do in a global financial crisis. Indeed it has done the opposite of what just about every other country we compare ourselves to is considering doing in this global financial crisis. 
The most offensive thing about this bill is that the members who have spoken on it tonight have tried to make us believe that they are doing it because they care about poor people. They have tried to make us believe that they care about the low paid and about workers. Maybe this bill should be called the “Taxation (Merry Christmas Low-paid Workers and You Are Welcome from the National Party) Bill”. 
We heard from Mr Chris Tremain who did a little dance while he said it that workers should be thankful for this legislation. We are sorry but we did not realise we were meant to be grateful for the fact that the lowest-paid workers will have their taxes increased and for the fact that the lowest-paid workers will have their retirement savings slashed. When those workers get to retirement age there will be no point in doing any more extra work because they will lose their independent earner tax credit when they work. They cannot supplement the retirement income they lost through this legislation by working because they will be disadvantaged. Mr Chris Tremain told us that we are meant to thank the National Government for this legislation because it is so good for our workers. 
Then David Bennett came in. Amongst all the clichés he tried to tell us how much he cared about young people. Well I would welcome anyone to listen on the Internet to Mr David Bennett’s speech on the youth minimum wage abolition bill. He called that communism. He said that paying young people the same money for doing the same job as someone who is one day older than them was communism yet we had to listen to speech after speech from Mr David Bennett with all the clichés telling us about how much he cared about those young people. 
Young people are joining KiwiSaver I say to Mr Bennett. Mr Bennett can stand up in this Chamber and tell us until the cows come home that this bill will make more people join KiwiSaver yet he will not answer the simple question as to why those increases are not budgeted for. If the Government is expecting an increase in KiwiSaver participation why is that increase not budgeted for? He now pretends he is reading his papers because he has no answer to that question. 
Those members know that this legislation single-handedly with a stroke of a pen destroys KiwiSaver. They know that this legislation single-handedly with a stroke of a pen will seriously damage the real economy. It will drive jobs offshore at a time when we need them the most. Other countries around the world will be saying: “Thank you New Zealand National Government for getting rid of your research and development tax credit because we have benefited from it.” 
Worst of all this legislation will increase the tax on some of our most vulnerable families. I urge the Maori Party to think very very seriously about supporting this bill. It is not mana-enhancing to take money out of the pockets of the poorest families in this country and give it to the people who need it the least. 
Hon PAREKURA HOROMIA (Labour—Ikaroa-Rawhiti) 
: 
 We have just witnessed one of the quite interesting assumptions dished out by the Minister of Finance. I think Dr Cullen’s chronological order on the framework that it is supposed to stimulate the economy is spot on—take away the 2 percent and make believe that the $1040 is still there but it is not against $26000; it is against $52000. Then we hear this preaching and leeching from people like Mr Bennett that this measure is about helping poor people. Roger Douglas stood up in this Chamber and said “Well as a start you forget about the beneficiaries.” 
Hon Annette King 
: And the old people. 
Hon PAREKURA HOROMIA 
: And the old people. That is what he was alluding to and that was parroted by the Minister of Finance in a very simple way. He has put out the assumption that at the end of the day our superannuation fund is too generous. So all this hinting is going on. It was not too different from the rough talk and the make believe in relation to accident compensation. It was a whole lot of hogwash. 
We have listened to Mr Bennett flick out the platitudes in relation to caring and sharing and wanting to help young people and Maori along the freeway to the future. Well the freeway to the future in this country has a hell of a lot of potholes in it—potholes brought about by mean-spirited people. We are heading towards Christmas a time when the mistletoe is glistening and the fellow with the red cap comes ripping through town. [ 
Interruption 
] What has Gerry Brownlee given to people? Big bags of nothing! It is a disgrace. Maori people are affected. Tena ano taku korero ki a koe e Hone. 
[ 
I have told you that before Hone 
.] 
Hon Gerry Brownlee 
: That won’t go down well at home. 
Hon PAREKURA HOROMIA 
: It might not go down well with you but our people will understand that. 
The CHAIRPERSON (Eric Roy) 
: Order! 
Hon PAREKURA HOROMIA 
: I am sorry Mr Chairperson. I should have said “Mr Brownlee”. It will go down well with our people because 73 percent of Maori who work miss out in this case. 
What a sad day for Maoridom! That the Maori Party was not told or that it was not explained clearly enough to them is not too dissimilar to what was not told to the public. A whole lot of porkies were told to the public and one does not have to be a rocket scientist to know that. Craig Foss huffs and puffs over there because he is a price-taker. He knows how to play the futures market; he knows how to let it slip. There are a whole lot of people with passionate theories about how to build up the price of the profit margin. That is why Merrill Lynch is down in the mud. That is why a lot of those big corporations driven by price-takers and the leader of this country have hurt people’s investments. That is why old people in this country are crying and worrying—it is because their superannuation has been taken away from them by bogus investors. Craig Foss knows about that. 
At the end of the day it seems quite peculiar that the Minister of Finance is saying that this was a prelude to changing the KiwiSaver programme to take over superannuation. He is lucky that the Cullen fund is there. Treasury has told the Minister that a strong platform has been left for the National Government to work off. National is lucky and it should be thankful that we have helped it along. But what does it do? On its first day in here it has come in and dealt to the poor people and to the Maoris. Those National people could not even run the House properly on the first day and that was a sad example. 
One does not have to be a rocket scientist to understand that when one stimulates business there are fundamentals in it—one understands where the market is one makes sure that the product is saleable and one makes sure that there is good research and development. This bill has been about stripping the general research and development which is something that the majority of businesses in this country asked for. What did the Government do? It closed research and development and shoved it down a ditch. Shame on it! 
JO GOODHEW (National—Rangitata) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 68 
New Zealand National 57; Maori Party 5; ACT New Zealand 5; United Future 1. 
Noes 50 
New Zealand Labour 43; Green Party 6; Progressive 1. 
Motion agreed to. 
A party vote was called for on the question  
That clause 1 be agreed to. 
Ayes 68 
New Zealand National 57; Maori Party 5; ACT New Zealand 5; United Future 1. 
Noes 50 
New Zealand Labour 43; Green Party 6; Progressive 1. 
Clause 1 agreed to. 
A party vote was called for on the question  
That clause 2 be agreed to. 
Ayes 68 
New Zealand National 57; Maori Party 5; ACT New Zealand 5; United Future 1. 
Noes 50 
New Zealand Labour 43; Green Party 6; Progressive 1. 
Clause 2 agreed to. 
Bill reported without amendment. 
Report adopted. 
Third Reading 
Hon BILL ENGLISH (Minister of Finance) 
: 
 I move  
That the Taxation (Urgent Measures and Annual Rates) Bill be now read a third time 
. It is not surprising that there was some debate in the House over this matter. The political parties have had competing tax packages out in the public arena for some time. The previous Government in the 2008 Budget finally gave in on the argument for tax cuts. It announced tax cuts of its own which is described as being at the edge of reasonable or at the edge of prudence or whatever it was. In the run-up to the election the National Party announced its tax package. There have probably been few issues as thoroughly debated as tax rates over the last 4 or 5 years particularly at the time of the 2005 Budget because the previous Government had promised some tax cuts and it was a matter of some debate that after the election it decided not to implement the tax cuts it had promised. It has been a fairly significant debate since then. 
This bill has been part of the plan on which the National Party was elected. It is a plan to get this country through a recession as best we can—a recession that began well before international events started to unfold as dramatically as they have in recent months; it began early this year—and to lift our long-term growth rates for the benefit of all New Zealanders. We were elected on the basis of that plan just a month or so ago but also I think on the basis that many New Zealanders felt it was time for a Government that had a bit more respect for their capacity to make their own decisions about their own lives whether they be about the size of the heads they were allowed to have in the shower and how long they were allowed to stand in the shower right through to making more of their own financial decisions. Of course any Government makes a great number of financial decisions for people but they were in a position where the previous Government was telling them when to save when to spend and when to pay off debt. Our approach is different from that which is one of the reasons that our tax cuts are larger than the previous Government’s. 
This tax cut is part of a fiscal stimulus that began with the 2008 Budget which according to Treasury calculations—and it is somewhat of a dark art as to how it does them—means that over the next 2 years $7 billion of fiscal stimulus will come into the New Zealand economy. I have seen some commentators and some of our political opponents describe that as being insignificant or too small. In fact it is not. By international standards it is one of the largest fiscal stimuli that are occurring in the developed world. So it will make a difference to this economy. Of course we cannot avoid being in a recession. As I said New Zealand was in a recession before international events came on. That was a product to a large extent of 9 years of complacent and misdirected economic management by the previous Government. But this fiscal stimulus will help people to keep jobs who would have otherwise lost them and it will protect people from the sharpest edge of recession. We will see in other countries just how sharp that edge can be. 
The tax package fits into that context but it also fits into a longer-term context where we have argued for many years—it is part of the philosophy of our party—that a lower tax take and lower tax rates would in the long run provide better incentives for people to get ahead and that the private sector part of the economy is more likely to get things right than the Government would when making decisions about too much of the activity in the economy. Of course the balance between those two swings around. In the last couple of months the previous Government with our support issued guarantees for bank deposits and wholesale borrowing by banks which was quite a big shift in the role of the Government. Of course our view has to adapt according to the circumstances. 
That is the tax part of the legislation. Then we come to the KiwiSaver part of the legislation where I think the fundamental point that the debate missed is that many working-age New Zealanders—even with the number at apparently 800000 or whatever it is—are simply not in KiwiSaver and they face tough times. During the election campaign we made our plan for KiwiSaver clear: it is focused on making it fair—that is allowing more New Zealanders access to the benefits of KiwiSaver because if they cannot afford to save almost 6 percent of their net income then they cannot afford to be in KiwiSaver. I would suggest as we go into this recession that we should be realistic about how many Kiwis feel about their job security and their ability to give up 5 percent of their net income particularly when many of them are carrying too much debt. Putting money into KiwiSaver does not pay off one’s debt. In fact putting it in there means one is likely to lose it in the current circumstances but one still has to pay interest on the mortgage. 
So our approach has been to give people tax cuts. They then have the opportunity to decide how they will use that money. Many of them will pay off debt; that is actually a form of saving. That is why savings rates are bound to increase. The Labour Party missed the reality that the only way to save is actually to consume less and many New Zealanders are doing that right now. One of the reasons they are consuming less is to pay off their debt and that is a decision that they make according to their own sense of what the risks are. That is why we have lowered the threshold for KiwiSaver contributions to 2 percent. People are free to contribute whatever they like above that and to make use of whatever arrangements they have made or will continue to make with their employers. 
The bill also includes one significant change from our pre-election policy on KiwiSaver which is to revert to what was the pre-existing policy on KiwiSaver—that is the member tax credit will be paid out at the rate of dollar for dollar. There was some suggestion during the debate that this was not what it appeared to be. Well it is what it appears to be. If people on $30000 a year are contributing 4 percent of that to KiwiSaver then they will get $1040 from the Government. Of course if they go in at the default rate of 2 percent they will get a smaller member tax credit. Everyone knows that. 
Finally on KiwiSaver I say we should see it in the context of retirement income for all New Zealanders. We have as was discussed during the Committee stage a universal pension in New Zealand—New Zealand superannuation—after many years of debate. We have a pre-funding arrangement that is beaten I think by only the Norwegians who are using oil revenues—very large-scale pre-funding by any international standard—and in that context the Opposition’s argument that KiwiSaver has to be as big as the Australian scheme can only mean that Opposition members envisage KiwiSaver one day replacing New Zealand superannuation. That is not our vision for KiwiSaver; it is a top-up for people who save during their working life. 
We are pleased to support this bill in its third reading. It is a different tax package from Labour’s and that means there will be different rates and thresholds. But I will make this one simple point: no one is worse off as a result of this legislation. [ 
Interruption 
] If as an Opposition member claimed Maori are going into Christmas on bad incomes I say that they are the incomes Labour left them with after 9 years of the strongest economic growth the country has had. They are not affected at all by this legislation so I say the rubbish from the Opposition about low-income people being attacked is nonsense. If those people are hard up it is because they have loyally voted for Labour for 10 years and not been rewarded either by Labour winning the election or by the benefits of economic growth. The crocodile tears for low-income New Zealanders were I think ridiculous; 630000 people will finally get a tax break after 10 years of Labour ignoring them. We are proud that that is part of this legislation. 
Debate interrupted.