Hodgson Pete: Budget Debate 
Hodgson Pete: Budget Debate 
[Volume:647;Page:16412] 
Hon PETE HODGSON (Minister for Economic Development) 
: 
 Here we are in the middle of the Budget debate and the member who has just resumed his seat John Carter who is one of the more moderate members on the other side of the House decided to devote his time to talking about local government. He devoted his time not to the Budget debate not to policies from the National Party for the forthcoming election—certainly none of those issues were to be found—but to local government. He said that the costs on local government are too high but that he opposes rates rebates. I leave people to work out whether there was any logic from one end of that speech to the other. 
 What I will say about the National Party’s contribution to the Budget debate over the last day or so around tax cuts is that its members do not like them. They do not like the tax cuts. They did not believe they were coming. They had fooled themselves and started to believe their own propaganda which was that Dr Cullen would not give any tax cuts or that if he did then he would not give goodly sized tax cuts. They did not believe that he would and that is because they do not understand Dr Cullen and they do not understand this Government. 
This Government has said it straightforwardly time after time—listen to the language around the automatic stabilisers or whatever you like. When one starts to hear Dr Cullen or an Associate Minister of Finance speak about our approach to economic development it is always to look through the economic cycle and to look through the business cycle and to say that we will not use pro-cyclic inflation and we will not use a pro-cyclic injection of tax cuts into the economy to cause inflation but we will do the opposite. We will husband resources in the good times and spend them when the storm clouds gather. So they gather now because of petrol prices or food prices or the subprime mortgage issue. They gather around the Western World and the truth of the matter is that because New Zealand has husbanded its resources and because Dr Cullen was able to make the announcement regarding tax cuts last week those storm clouds will substantially pass over us. 
Let us compare this with 10 years ago when the storm clouds last gathered. That was the Asian economic crisis. There was no kitty to put into the economy to give it a boost. There was no purse full of money; it was empty. So the Government of that time cut spending. It froze some things and it reduced some things. Quite obviously and most memorably it reduced superannuation for 500000 older New Zealanders. It said they would need to bear the brunt of the Asian economic crisis. Let us consider the difference between the two approaches. Ten years ago the storm clouds gathered and the pensioners got a cut. Today the storm clouds gather again and we are able to give those same New Zealand superannuitants an increase in their take-home pay. 
National members did not like the size of the tax cuts. They thought the tax cuts would be modest and timid. They did not realise that there would be a 3-year programme out to April 2011. They should have worked out that that is what one does at the bottom of the economic cycle. That is when one does the spending and they did not like that because they are now painted into a corner with nowhere to go. 
National members did not like the timing of the cuts. They thought that 1 April next year would be good but we brought it forward to 1 October this year. They say that it is bribery and it is cynical and that it is just before an election. We say in response that they were brought forward because that is when relief on the household budget is needed for goodness’ sake! That is what we call timely intervention. Those members do not like it because of its coincidence with a certain electoral event—the general election later this year—but the truth of the matter is that that is when the economy needs to be stimulated. 
The thing National members like the least is that these tax cuts on a percentage basis give more assistance to low and middle income earners than they do to upper-income earners. If there is one thing that will divide this House and that has divided this House for decades and will do so for decades more it is that the Labour Party stands for low-middle income earners and the National Party stands for its rich mates. If we look at low and middle income earners in this country at someone on the average wage or at an ordinary superannuitant we will find at least in percentage terms that is where the biggest changes are. Dr Cullen has designed the tax cuts precisely for that and National Party members do not like it. They do not like it because they cannot give their well-to-do mates a big tax cut because we have announced tax cuts that take us to the limits of what this economy can reasonably expect to pay for. 
 So the question now is what the National Party’s next move is. What will National do next? National members have two main choices. The first is to cut services or spending if one likes and the second is to rack up debt. Let us look at each of them. 
So far in relation to cutting services National has said: “We are going after bureaucrats.” I have one message for National members and it is that it does not matter what they do to the bureaucracy of this country they will not save enough money to give significant tax cuts because there are simply not enough bureaucrats. 
For example let us take the health system—the one National members like to pick on. They say there are too many bureaucrats in health. Let us play a quick game. What proportion of the total health expenditure in this country from the taxpayer goes to the Ministry of Health which is where the bureaucrats are? Is it 10 percent or is it 5 percent? [ 
Interruption 
] I hear someone say that it is 5 percent. That is wrong; it is 1.7 percent. That means 98.3 percent of the vote that leaves the desk of the Minister of Health flows past the Ministry of Health and out into nurses and doctors for patient care. That is the truth of the matter so if National members go cutting bureaucrats they will not find enough money as there is not enough to be found. 
Therefore if one is to trim spending one has to go to one of the four big votes. There are only four votes of any size in the New Zealand Government system. The first is health the second is education the third is superannuation and the fourth is social welfare. Have we ever seen National take to those votes in the past? Have we ever seen it reduce health education social welfare or superannuation expenditure? And if we have seen it do that when did we see it do it? Tragically we do not need to go back too far. We need to go only to the 1990s. Does anyone in this House recall the time when in order to enter a New Zealand hospital—we did not call them hospitals back then we called them Crown health enterprises—one had to pay a part charge? Does anyone remember that? The patients hated it. The hospitals hated collecting it. There was a lot of disobedience around it and finally that bankrupt policy was abolished and so was the Minister who thought of it. 
Can anyone remember the “Education cuts don’t heal” posters? That was the National Government in the 1990s trying to get savings out of expenditure in order to give tax cuts to its mates. That is what National did back then and year after year we saw expenditure in tertiary education drop so that students faced fees that rose astronomically. 
Does anyone remember the benefit cuts? It was when everyone who was on a benefit got a cut. I remember going back to Dunedin on the Friday night after that debate and gathering in the Octagon in a silent vigil while the bells of the Anglican cathedral tolled and people held candles and asked themselves what the Government had done. 
Do members remember the superannuation cuts I have just mentioned? That is another way in which National could save money for its rich mates. It has those options I suppose or it could run into debt. It did not run into debt in the 1990s—it did not get us out of debt particularly either. But in the time before that under Muldoon that is exactly what happened. Those are the two options. 
There is only one third option and that is to acknowledge that the tax cuts have happened to acknowledge that it is time to get over it and to acknowledge that we should now move to other aspects of the New Zealand political policy framework and see what National has to say about the role of the conservation estate policing defence health or anything except tax cuts because tax cuts have been its only policy. The tax cuts have been made; National members need to move on and decide whether they want to offer better support for science or students—all of the things that were announced last week that the National Party will vote against later this week. 
Let us hear the National members talk about anything now except for tax cuts. It is time for them to move on. They have the idea of being in Government. Therefore let us hear what they would do should they ever win the Treasury benches.