Parker David: Budget Debate 
Text is incorporated into the Bound Volume 
Parker David: Budget Debate 
[Sitting date: 16 June 2004. Volume:618;Page:13698. Text is incorporated into the Bound Volume.] 
DAVID PARKER (Labour—Otago) 
: 
 I rise to speak in support of the Budget and to support the motion moved by Dr Cullen the Minister of Finance who delivered this very good and very responsible Budget. The first thing I will do is respond to the main focus of the speech made by the Hon Dr Lockwood Smith which was to criticise the marginal tax rates suffered by people who have children and who are in receipt of family support or other Government assistance. After listening to his speech one would think this is something new. In fact as most listeners will have learnt from listening to previous speeches from members on this side of the House those marginal tax rates do not change one bit as a consequence of this Budget. It is just that the thresholds at which those abatement rates occur change because of the additional money going into them. 
I know that under the Standing Orders I am not allowed to refer to the absence of members and I note the large number of nodding heads of Opposition members who have come to the House tonight to listen to me and to listen to why this very good Budget was supported in terms of its Working for Families package and not just by the Labour Government. The Budget was not supported just by us it was supported by the Progressives as well and by United Future the Greens and New Zealand First. They were the parties that supported the Budget and the focus it gave to meeting the needs of New Zealand families in the low to middle income bracket. 
The only two parties to vote against the Budget were ACT and National. The National Party just a couple of months ago was telling the nation that everything should be funded on the basis of need not race. And when we have a Budget that is most clearly focused on need National votes against it. National members say that paying additional income to families on low and middle incomes is a bribe. Yet they do not see the hypocrisy of that when compared with the effect of tax cuts that give disproportionate benefits to higher earners. 
Why did we think the need rested in families? I will come to that but first of all I will record that we are in a strong financial position as a consequence of the Budget surplus that this Government has run for the last 5 years. We do not have to go back very far—only to the mid 1980s when we came out of a long period of a National Government under Mr Muldoon—to come to the time when Government debt as a proportion of gross domestic product (GDP) had ballooned to 70 percent. That meant that one in five of the tax dollars taken by the Government was spent on interest. We have reduced that. Indeed the subsequent National Government did some OK work on that front as well but by the time Labour came back into power in 1999 debt had dropped to 35 percent of GDP. We have debt down to 24.7 percent of GDP this year and it is dropping towards 22 percent. Rather than one in five dollars being spent on interest one dollar in twenty is now being spent on interest. The unemployment rate is down. It was at 7.4 percent when Labour took office and it is now 4.6 percent. The growth rate was 2.6 percent per annum during the decade under National in the 1990s and it has been 3.4 percent on average over the last 3 years—well above the OECD average. 
Why is it that we are focusing on families? During the 1980s and 1990s low to middle income families did very poorly in New Zealand. Between 1986 and 1990 the incomes of the bottom 50 percent of households dropped in real terms—not a minority of 10 percent at the bottom but half of all New Zealand households had a drop in their disposable incomes between 1986 and 1998. Indeed the only section of the population to have a significant increase in disposable household income was the one top decile. That top decile increased their incomes by about 30 percent during the period 1986 to 1998 at a time when the incomes of the bottom 50 percent of households went backwards. The incomes of every household in the bottom 50 percent went backwards. The bottom 10 percent went backwards more proportionately than any other group. That was very hard for low to middle income families. 
So against that background we say unashamedly that when there is a growth dividend—more money available as a consequence of strong growth in the economy—we think it is appropriate to focus the rewards on the group that suffered during that period. We have the ability now to pass on this benefit to low and middle income families. What does that mean? This Budget focuses on families with children—300000 low to middle income families with children; over 60 percent of all families with children. We know that they are the ones with the greatest need. Now what does this Budget do for them? Low to middle income families on $25000 to $45000 per annum get an average $100 per week extra in their pockets. That is a lot of money for people in that situation. 
Let us look at a couple of instances that were reported in the newspapers in advance of the Budget. I refer to the family up north of two parents and four children with one parent working who earns $55000 a year. That single-income family will be better off by $150 per week. What would be the flat tax rate required to deliver an equivalent benefit to that family? It would be a patently unaffordable flat tax rate of 9.5c in the dollar. 
Darren Hughes 
: How much? 
DAVID PARKER 
: It would be 9.5c in the dollar. To achieve that Government services in education health and superannuation would have to be absolutely slashed. 
Darren Hughes 
: What will happen to my schools? 
DAVID PARKER 
: The schools in the member’s electorate would close. Either that or the parents would be paying substantial private education fees. 
Government Member 
: No hip operations! 
DAVID PARKER 
: Indeed! This Budget doubles the number of hip operations funded by the Government. Rather than being doubled they would have to be slashed probably by half. 
When I was on the Finance and Expenditure Committee last year we heard some heartfelt submissions as to how some families were suffering. One of the ones I remember was someone who came to the select committee and said: “I’ve got the care of my grandchild. I didn’t want to be a grandparent with the full-time care of my grandchild but I am. I get very little assistance from the Government despite the fact that I am a low-income earner and I am doing my best to raise this child for the betterment of my grandchild and our community.” 
 Another person in a similar position was a lady called Maureen Dunn. Her story was reported on 28 May in the  
New Zealand Herald. 
 She is aged 41 and has the care of her granddaughter aged 8. She earns $27638 as a teacher and with her various tax credits at the moment has an after-tax income of $509 a week. She does not get any family support. When this Budget fully comes into force it will deliver this person whose present income is $509 a week after tax an extra $123 per week. That is a 25 percent increase in income— 
Rod Donald 
: Why wait 2 more years? 
DAVID PARKER 
: Yes she has to wait 2 more years. That is the fiscally responsible thing to do and we are fiscally responsible. I will give members another example—James and Losa Lotulelei. These people were referred to in the  
New Zealand Herald 
 again on 28 May. They are both cleaners and both earning about $21000 a year. At present their after-tax income is $652 a week plus what their parents who are living with them receive. Their income will go up by $125 a week by 2007 also. 
I have heard talk of complaints that this is making beneficiaries of lots of people. Well we used to have the universal family benefit. Did that turn everyone into idle beneficiaries or somehow imbue them with a lack of a working ethic? It did not and this provision will not either. One of the other reasons we should not be worried is that under this Budget every person who receives an increased entitlement receives more if he or she is in work. This Budget increases the gap between the earnings of beneficiaries who are out of work and low to middle income people who are in work. So the argument that this somehow disincentivises people from working is just patently wrong. 
I refer to the National Party position which is very close to ACT’s position. All they can say is: “Well we are not bridging the gap between the fortunes of Australian citizens and New Zealand citizens.” But I remind members of Parliament again that that gap grew during the 1990s during the decade of National stewardship of this country’s economic performance when Dr Brash was in charge of the Reserve Bank.