Webb DuncanDEBATE ON BUDGET POLICY STATEMENTDr DUNCAN WEBB (Chairperson of the Finance and Expenditure Committee): Thank you Mr Speaker. I move That the House take note of the report of the Finance and Expenditure Committee on the Budget Policy Statement 2021-22 and Half Year Economic and Fiscal Update December 2021.SPEAKER: The question—Hon Grant Robertson: You have to speak now I think.SPEAKER: The member might want to keep going or—Dr DUNCAN WEBB: No I think I'll keep going if I may Mr Speaker.Chris Bishop: It's a good thing you didn't sit down!Dr DUNCAN WEBB: I didn't sit down. Silence is golden Mr Bishop and I thought I'd start with a pause. You might want to try it.First of all I'm very pleased to be standing to talk about this Budget Policy Statement (BPS) and I'm very much looking forward to the delivery of the Budget by the Minister of Finance. But I do want to recognise at select committee the submitters of whom there were about 98 and a number of those—about half—submitted in person. I want to say that we did listen very carefully to them. A lot of them were very focused. They focused on things like climate change on transport policy. I particularly enjoyed the free bus fares lobby group which actually has a very good message to send about access to transport and also of course a number of submitters who endorsed and encouraged the Government in addressing poverty—[Interruption]SPEAKER: Order!Dr DUNCAN WEBB: Thank you Mr Speaker. Each of those things is obviously important and the Budget Policy Statement in particular sets out the direction that the Minister of Finance intends to travel to reach those destinations. What the BPS says is that the issues that matter most to New Zealanders are the ones that this Government is intending to address particularly those long-term challenges. The priorities set out by the Minister are familiar. Obviously the Budget Policy Statement is very much under the shadow of COVID and continuing to keep New Zealanders safe from COVID-19. Accelerating and reinforcing the recovery and the rebuild from the impacts of COVID-19 is an important part of the Budget Policy Statement—and also in addition and at the same time laying the foundations for the future including addressing those key issues of climate change and our climate change response housing affordability and child poverty.The overarching feature—and I'll get to the select committee proceedings shortly—was the need to get on and help New Zealanders even in the face of the COVID pandemic and a reflection of the fact that we're in a financial position to do that because of the strong recovery to date careful management of the books and a strong fiscal position and the fact that those protections were put in place not only to protect the health of New Zealanders but also to protect jobs protect businesses and livelihoods. And as we've seen today in question time that is ongoing. And of course a headline feature of discussions was the one-off $6 billion in Budget 2022 to invest in major programmes and an acknowledgment that the health reforms feature heavily in that—but also acknowledging that those operating allowances will reduce over time to $4 billion in 2023 and $3 billion in 2024-25. And important recognition also of multi-year funding so that agencies including the new health agency can have a considerable certainty over what their Budget allocations will be from year to year.Also in the Budget Policy Statement of course Government debt was an important topic of discussion and in the statement it was forecast to peak at 40.1 percent of GDP which whilst high for New Zealand's historical standards is still significantly lower than was forecast in Budget 2021. That puts us in one of the lowest net debt positions in the world certainly in terms of our OECD neighbours and gives us a resilient economy to start with. The Minister did talk about debt and in particular was asked in committee about what a prudent level of debt was. Importantly he noted that GDP is not the only question to be addressed there but also what the social and economic needs of the community are. And of course avoiding long-term infrastructure deficits was one of the things he identified where having a low debt certainly wouldn't be prudent if what that meant was ongoing decay of infrastructure. So a specific number was something that was avoided.The committee also heard from the Minister that the Government was focused on a just transition to a climate resilient sustainable and low-emissions economy and also focused on the physical and mental wellbeing of New Zealanders. In particular the Budget policy was focused on improving health outcomes for all New Zealanders including COVID-19 response and of course a focus on improving the wellbeing and opportunities for Māori and Pacific peoples including through access to affordable and stable sustainable housing. And a final priority an obvious one was around child wellbeing and a reduction in child poverty including access to housing and stable housing. Obviously the DHB reforms were focused on the replacement of DHBs by Health New Zealand and making that transition to make a much more efficient effective and equitable health system. That's part of in the long term managing rising health costs. And again as I think I noted that's one area where that multi-year approach will be of critical importance.In terms of climate change the Minister referred to the emissions trading scheme and the fact that the proceeds of that will be recycled into emissions reduction programmes through the Climate Emergency Response Fund noting that the initial allocation was $4.5 billion. I think it's fair to say he noted that that was very much an initial allocation and in the future more will be needed.And of course at the Finance and Expenditure Committee there's always robust discussion. The ACT Party unsurprisingly talked about the tax burden but the Minister really responded when challenged particularly on the 39 percent tax rate that it's appropriate for people who are earning over $180000 to pay at that rate also noting that the Minister noted that the economy has been very very strong. Most people are in work and therefore the amount of tax paid as a proportion of the economic activity remains very stable. And he thought the balance was about right. And so in terms of the tax take as a proportion of GDP and also the total amount of Government spending which is about 35 percent of GDP the Minister noted that was at the higher end but also as set out in the Budget Policy Statement that is projected to return to a stable level of about 30 percent—and if I recall rightly slightly below that.Mr Watts focused on the costs of establishing the new health entities and the deficits of the DHBs but the Minister did respond to that emphasising the importance of the two new entities and the importance of making sure that they get off on the right footing—that they begin life in a stable position and aren't given any legacy problems that they may have over from the DHBs and that they will therefore be a much more effective way of delivering health services and deliver real fiscal benefits and will be a real break from the current system.And of course Treasury also presented on the Half Year Economic and Fiscal Update and as was to be expected inflation was touched on. The question was asked whether Government expenditure would increase inflation but the secretary was very careful in the response noting that this isn't necessarily the case at all; it depends on the quality and nature of that spending and of course what the tax revenue is noting that taxation dampens inflation. And from that we could draw that tax cuts would do the opposite.So in summary we still have the continuing shadow of COVID-19 but the Government's strategy has proven effective. This is still a wellbeing Budget focused on the wellbeing of New Zealanders giving New Zealanders the capability to live lives of purpose balance and meaning to them and I'm very much looking forward to seeing the Budget in due course.