Don Brash

Leader of the Opposition Post-Budget speech, 27 May 2004

Mr Speaker, I move that all the words after "That" be omitted and the following inserted: "this House has no confidence in the Labour-led Government because it has squandered New Zealand's greatest ever opportunity to invest in policies which would restore this country to the levels of prosperity enjoyed by Australians; because it has chosen for New Zealanders policies which promote dependence rather than independence; and because, after five years of over-taxing hard-working New Zealanders, it has embarked on a programme of cynically-timed election year giveaways to many of those same New Zealanders, funded by their own taxes."

Mr Speaker, perhaps unusually for a Leader of the Opposition, I want to begin my speech today by saying that there are some things in this Budget with which the National Party agrees.

For months, we have called for relief for low and middle income New Zealanders.

For months, we have called for encouraging people off benefits into employment.

For months, we have recognised that providing more support for childcare and early childhood education would be highly desirable.

For months, it has been clear that we need more vigorous steps to reduce waiting lists for elective surgery.

To the extent that these priorities have been addressed by this Budget, we agree with the objective, if not always the method of delivery.

But beyond that, we can see little of merit. This Budget is, at its core, a belated series of bribes, cynically timed for maximum political effect, which fails totally to lift New Zealand's living standards towards those in Australia.

To begin with, it is worth noting that the relief for low and middle income families has come in the second Budget of this Government's second term, in Dr Cullen's fifth Budget. All through that period, New Zealanders have been over-taxed so Dr Cullen could boast of ever larger surpluses. Those surpluses represent the extent to which New Zealanders have been over-taxed. Not until this fifth Budget has he seen any merit in providing some relief from this over-taxation.

And why the long delay? Because until a few months ago the Government was confident they could win another term without providing help to the families that need it. Suddenly, the Government is contemplating the possibility that they might lose the next election, and they think that dishing out the dosh is the best way of trying to shore up their diminishing electoral support.

But it is even more cynical than that, because much of the dosh won't be delivered until shortly after the election, so they are trying to imply that people who want to get that extra help will need to vote Labour in case a National Government comes to power and blocks that extra help.

This is a vote-buying exercise of the same character as the policy U-turns which have been typical of this Government in the past few months - with school closures, the RMA, Treaty issues, the seabed and foreshore, and the age of consent.

Secondly, it is important to remember that the Government itself has no resources to assist anybody. Any assistance it provides to some New Zealanders first has to be taken away from other New Zealanders. And of course for the past five years the Government has been taking it away from most of us.

Over that period, the Government has increased the top tax rate, and has increased taxes on cigarettes, alcohol, and petrol. These and other tax increases now raise more than $1 billion a year, and as a result, the average household has paid an extra $2,600 in tax since this Government came to power late in 1999. In addition, the gradual inflation of incomes into higher tax brackets has added a further half billion dollars a year to the Government's coffers.

Before the 1999 election, the Labour Party promised that only 5% of taxpayers would be adversely affected by its proposal to raise the top tax rate from 33% to 39%. Today, some 12% of all taxpayers are paying tax at 39%, including almost 20% of full-time taxpayers. One-third of all taxpayers are already into at least the 33% tax bracket, and more than half of all full-time taxpayers are in that situation. When GST is taken into account, more than half of all full-time taxpayers face tax of over 40% on additional income.

At last, low and middle income families with children have got some prospect of relief. 300,000 families in all, but only by 2007. But what about all the other hard-working New Zealanders?

What about the young couples who are working hard, saving hard towards their first home, deferring having children so they can get the mortgage down? Doing the responsible thing. Nothing for them.

What about the middle-aged couples who, having raised and educated their children, are trying to put something aside for their retirement? Nothing for them.

What about the single person who is trying to get a small business off the ground, who employs three people and would like to employ one more? Nothing for them.

There are one and a half million households in New Zealand. The Budget tries to buy the support of just 300,000 of them - one household in five. The other 1.2 million households just keep on paying their tax. They are not even asked to be patient: there is no suggestion at all that this Government has the slightest intention of reducing personal tax rates, or the company tax rate, at any stage at all. The Government just intends to keep on raking it in, and dishing it out to those they hope will vote them back into office.

In a fundamental sense, this is a Budget which punishes the most hard-working, which punishes those most responsible, which punishes precisely those of our citizens who are determined to ensure they stand on their own feet.

Perhaps most worrying of all, there is no indication that the Government expects any increase in New Zealand's trend growth rate. Dr Cullen is fiddling while growth slows.

When the Government was first elected, they talked about getting New Zealand's per capita income back into the top half of the OECD within 10 years. In the Speech from the Throne in August 2002, the Government again indicated that it saw "its most important task as building the conditions for increasing New Zealand's long-term sustainable rate of economic growth."

Well, they no longer talk about getting into the top half of the OECD within 10 years. They suggest they will do it "over time". The reality is that they have abandoned the objective as too hard, but haven't had the intestinal fortitude to tell New Zealanders. The Budget documents project growth as being slower, on average, over the next 10 years than over the past 10 years.

This has to be the great tragedy of the fifth Labour Government - they have squandered a unique opportunity to lift our relative living standards, to close the gap with Australia, to create a place where our most able and innovative and enterprising young people want to return to. When the history of this Government is told, this will surely be its epitaph: they dropped the ball.

Mr Speaker, this Government has been the beneficiary of some of the best growth in the last 40 years. That good growth has nothing whatsoever to do with anything the Government itself has done.

In part, the good growth has been the result of the economic reforms of previous governments, the policies which they have tried desperately to brand as "failed". When talking to overseas fund managers, Dr Cullen usually admits this himself.

In addition, the Government came to office at the end of 1999 at a time when the economy was already growing at almost 5% per annum and when the exchange rate, which had started falling in 1997, was falling towards its lowest level in history in late 2000, providing a huge boost to provincial New Zealand - indeed to all export industries.

And then, just as the exchange rate was stabilising and beginning to appreciate, the world witnessed the tragic events of September 11, 2001. What had been a net outflow of long-term migrants from the country of some 10,000 people a year in the two years to June 2001 turned into a huge net inflow in the next two years. And so a domestic building boom followed the strong growth in export industries.

And on top of this, central banks around the world dropped interest rates to levels never before seen, sparking a worldwide boom in property prices, with New Zealand included.

So none of the reasons for recent strong growth had anything to do with policies adopted by this Government.

They just reaped the benefit in the form of unprecedented Budget surpluses and strong employment. So what do they do?

They spray money around to a small minority of households who, they hope, will vote for them in the next election, and by so doing convert families earning as much as $70,000 a year into beneficiaries, dependent for part of their income on the grace and favour of the Government. They further entrench a debilitating culture of dependency.

They promise to spend more on health, while providing no assurance that further spending on health will actually deliver the shorter waiting lists, the improved medical services, or the improved medicines which all New Zealanders deserve.

We know that in the three years to 2002/03, government spending on health rose by 22%. Over the same period, the number of elective operations, and the number of total operations, actually fell by 3 to 4%. Between December 1999 and April this year, the number of people drawing the sickness and invalids' benefits has gone from 86,000 to 113,000, an increase of 31%. Simply adding more money to a centrally-directed, bureaucratic, and top-heavy health sector won't deliver the outcomes which all of us want to see.

The Government proposes to spend money on a whole raft of programmes designed, they say, to help business, to help exporters, to grow the economy.

But in every survey of business opinion, the business community gives the Government the same message. Get rid of the obstacles to growth, reduce compliance costs, fix the Resource Management Act, stop pushing up the costs of operating a business through passing legislation like the Holidays Act and the Employment Relations Law Reform Bill, and cut the company tax rate so all businesses, and not just those favoured by Mr Anderton, can grow and prosper.

The business community can see that in the past five years since this Government came to power, 21 of the 30 OECD countries have reduced their company tax rate - but not this Government.

Back in April 2000, more than four years ago now, Dr Cullen said his Government would like to reduce the company tax rate "as fiscal conditions permit". Perhaps he thought he had to say that to his audience, which was in Hong Kong, and for whom a 33% company tax rate seems inordinately high. Perhaps he thought that he could say that in Hong Kong without anybody reporting him back in New Zealand.

Mr Speaker, the Government's Budget seems likely to do nothing to curb the culture of extravagance and waste which has grown up in the past few years: the hip-hop tours, the gross abuses of the tertiary education funding system which my colleague Bill English has highlighted in recent days, and all the rest.

Plenty of money for dopey polytech courses and a bigger bureaucracy. Plenty of money to bribe public servants into joining unions. But not enough money to clear the backlog of drug testing so we can prosecute the makers of methamphetamine; not enough money to clear the growing backlog of court cases; not enough money, or the will, to keep violent offenders in gaol; not enough money to treat cancer patients in New Zealand.

We know that, between 1997 and 2000, the number of people employed in what Statistics New Zealand calls "Government administration and defence" decreased by nearly 8%. In the three years from 2000 to 2003 on the other hand, the number increased by over 10% - and we know that the extra people weren't employed in the armed services! The Government is employing more public servants to take money off us, so they can employ more public servants to give it back to us!

Tragically for hundreds of thousands of New Zealanders and their children, they are giving it back to us with no expectation that we will help ourselves, or at least no insistence that we help ourselves. The Government has provided some carrot to encourage people off benefits, but has removed the stick. There is no strong pressure for people to get off their backsides and get a job, despite a desperate shortage of employees in most parts of the country. There is no adequate policing of people moving from the unemployment benefit to the sickness benefit. There is no adequate policing of the DPB, a situation which creates strong financial incentives for a woman not to name the father of her child or children and not to get married.

Being soft on welfare may sound a kind and compassionate thing to do. It may make the Government feel good. But it certainly doesn't help those locked into a life of dependency, deprivation, and degradation.

Mr Speaker, two years ago Dr Cullen said that it would be clear by the middle of this year whether New Zealand was on track to lift its growth rate so we could gradually get back into the top half of the OECD. Well, the middle of 2004 is just one month away, and this Budget makes it clear that the Treasury sees no prospect of any lift in our growth rate.

The OECD, in its report last December, suggested that the slide in our relative living standards, which was a feature of the seventies and eighties, had been arrested, "but a further acceleration - necessary if New Zealand is to move back into the top half of the OECD ranking, as the government is intent on doing - is still not in sight".

Mr Speaker, Dr Cullen can't be expected to carry all of the blame for this deplorable situation. The Prime Minister and other Ministers must share the blame.

But as Minister of Finance he must bear primary responsibility for the Budget, for its failure to give most hard-working New Zealanders any tax relief, for its failure to reduce the company tax rate, for its continued waste of taxpayers' money on extravagant and possibly fraudulent programmes.

Little wonder that that same document makes it clear there is no prospect whatsoever of achieving what the Government claims to be its highest priority, namely raising the living standards of all New Zealanders to those enjoyed in other developed countries.

Never before had a Minister of Finance and a government faced such an opportunity to invest wisely in the future of our country.

Never before had a Minister enjoyed such capacity to say to hard-working, innovative New Zealanders that he saw them as the key to unlocking the country's potential, and that the Government would back them.

Never before had a Government enjoyed such an opportunity to say to the 500,000 New Zealanders living abroad - the children and grandchildren of people still here - you can have a great future back home.

But this Government did not see this as a Budget of opportunity. Asked to choose between self-reliance and dependency, they chose the latter.

Given the chance to chart a bold and better way forward, they had no answers.

The clear and overwhelming message in this Budget to all of those who believe New Zealand can do better is that the only way to achieve this is to bring about a change of Government at the earliest opportunity.

ENDS

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