Q+A's budget debate with the minor parties

The interview has been transcribed below. The full length video interviews and panel discussions from this morning's Q+A can also be seen on tvnz.co.nz at, http://tvnz.co.nz/q-and-a-news.

Q+A is repeated on TVNZ 7 at 9.10pm on Sunday nights and 10.10am and 2.10pm on Mondays.

BUDGET DEBATE WITH MINOR PARTY REPRESENTATIVES

Hosted by PAUL HOLMES

PAUL It's Budget week, this Thursday is the doing budget, the budget that will show the extent of the government's ambition for New Zealand. So this morning a special debate with four of the minor parties, although three of them are part of the coalition government and two are Ministers, this morning they're here representing their parties, their own economic visions, not the government's. It's tricky but we've done it. So welcome Metiria Turei, Peter Dunne, Dr Pita Sharples and Sir Roger Douglas. So first of all from each one of you, brief statement on what we want to see in this week's budget Metiria.

METIRIA TUREI - Green's Co-leader

We want to see a choice by John Key to benefit those who need the most as opposed to those who have the most. Inequality is our most significant social and economic problem in this country. We need to have solutions that will increase support for those who need it the most because everybody will benefit. Inequality means everybody pays. If you benefit those who need it the most everybody will benefit.

PAUL When was there not inequality?

METIRIA It has been getting significantly worse in the last two decades, and people are very concerned about it, and so they should be. Tomorrow I'm releasing a whole package from the Greens about how to deal with income inequality and how to benefit those right at the very bottom so that the whole community, the whole of society is made better off.

PETER DUNNE - United Future Leader

Well I'm looking forward to a budget Paul, that's going to give middle New Zealand families a break, that's going to see them able to keep more of their own income, and to spend it as they choose to spend it. I'm looking forward to a budget that's going to really reinforce the fact that what we're trying to do generally is shift the New Zealand economy, boost production, boost investment and boost growth and ultimately incomes.

PAUL What do you make of Phil Goff's idea, his ruminations about removing GST off fresh fruit and vegetables?

PETER Well I'm intrigued that he's going to take it off fruit and vegetables but not meat for example, and that starts to give you the problem of where this unravels, the salted peanuts issue, the issue that we had in Australia some years ago about whether a ham sandwich was, or whether the ham was, it's a nonsense, and I think he'd be better off saying either we'll repeal the tax completely which he can't do, or he'll live with the consequences if the GST goes up.

DR PITA SHARPLES - Maori Party Co-leader

Well I'm glad you're talking about GST off food because the Maori Party has been saying that for two periods now. Australia's done it, they've done it for ten years, secondly they've worked out a computerised programme which takes out the difficulty in deciding what bit's what, so we'd like to see that because for a number of reasons - one there's going to be an increase anyway in GST - two, it hits the lowest income people mostly, and it's basic food, they just don't have expendable income like the higher income people, and that's where it hits.

PAUL Is it apparent to you there's definitely going to be a GST increase this week?

PITA Well all the talk's been about it, everyone's sure it's gonna happen.

PAUL We even got the income tax reductions on the front page of the weekend Herald yesterday, by the two main political correspondents at the Royal New Zealand Herald, quite right.

ROGER And you won't be running to the bank too fast either.

PAUL And what do you want to see?

SIR ROGER DOUGLAS - ACT Finance Spokesman

I'd like to see the budget deal with three adverse trends that New Zealand faces, the long term adverse trend is the fact that this country has been going down the tubes for over 40 years, relative to other countries. That will have to involve steps that will increase our productivity, lower taxes, more choice and competition, in the government monopoly area. The second trend I'd like to see this budget deal with is the huge blow out in government expenditure that's incurred after 1996. If we don't do that we're in real trouble. And the third trend is, which we have to be aware of, is the short term trend in relations to Greece and other countries which we haven't felt the full impact of yet.

PAUL I take it you don't have a lot of faith then in what the government's going to do to turn those round?

ROGER From what I've heard no, not much.

PAUL But you're part of the government aren't you, you're part of the government, the reason Rodney wouldn't come on this morning is because he's part of the government.

ROGER Yeah well I'm a back bencher, so I'm allowed to say what I like, and what I'll be doing is releasing my budget document Tuesday or Wednesday of this week.

PAUL We shall look forward to it. Now, he has told us ages ago that there's only 1.1 billion of new spending available. Now at the same time I see Mr English is saying he's managed to save, or take 1.8 billion out of public sector spending.

ROGER Over four years, which means 450 a year, let's get it right.

PAUL But either way, public debt in New Zealand, that is to say the percentage of government debt to GDP is only 27% which is not bad internationally, isn't it 27%, when you look at Britain on 68%.

ROGER Government expenditure, core government expenditure is at least was 37-38% last year.

PAUL A damn sight lower though than some of our trading partners.

PETER Yes but I think that's a bit of a false argument, if you start to say oh we're not as bad as Britain, or we're not as bad as Greece, we can therefore be a little bit more flexible in certain areas, at a time when our economy is under huge pressure, I think you start down a slippery slope. What Bill English has done, has been to say there's 1.1 billion available for new spending, there will be reductions in other spending over a period of time, because we've looked at a lot of stuff that's frankly low quality, and I think that's gotta be an ongoing challenge for government to deal with.

METIRIA It's always gonna come down to priorities, there's a ten billion dollar spend on new roads, which we know will only increase congestion, won't create the sort of jobs that if you invested in public transport, and won't support the families who need it the most. So the government will always have scarce and limited resources.....

PAUL But you've gotta be realistic on roads, we use them you know, we have to catch up.

METIRIA Ten billion dollars in roads when our families absolutely need support right now.

ROGER Look Peter's absolutely right, you have to deal with the low quality government expenditure and on Tuesday or Wednesday I'll list about four and half billion dollars worth of low quality government expenditure.

PETER Now listen, I'm not that right Roger.

PITA You've gotta get a balance, you know we're talking about getting our economy in tune with Australia over the period, well when you do that then it's gotta be paid for somehow, and so you lose on the social side, on the health side, and the education side, and education is the one thing that could take New Zealand forward and unite us all, and bring a bit of equality, gotta put more money into education.

ROGER I've been on an inter party working group and we came up with an agreed position, but the truth is everyone says we want high quality education. Politicians have been saying that we want high quality education for 70 years, there was a test done in a South Auckland school, decile six, one of the questions was, you've got 36 apples, take 27 away what's the answer - 23% got it wrong. We haven't got a high quality education.

PAUL They're quite difficult numbers though if I may say so.

ROGER 36 minus 27, you'd just about get that right Paul.

PETER I was talking to a constituent yesterday who put the dilemma to me this way - in the school she teaches at 31 senior classes have class sizes over 31 pupils, one as high as 46, right now at the moment, that's where we've gotta be making a lot of emphasis, a lot of pressure to bring those numbers down to give teachers and pupils a much better ratio, and I think in terms of the quality of spending I agree with Pita that's one area where we've gotta be very careful that the axe doesn't fall too sharply.

METIRIA The government is changing the system now so that you don't have to have qualified teachers in early childhood, when we know that access to quality early childhood education is a key indicator of a child's success through the rest of their schooling years, but they're dumbing down even early childhood at this stage, these are the government's choices.

ROGER Do what we've done for 70 years and you'll get the same result. We need competition in there, we need a bit of private sector involvement.

PITA We need a big investment in whanauora, I mean we're talking about education and things like this, you've gotta get into some families which don't share the same goals, the same dreams, the same opportunities that others in high incomes do. Whanauora will get in there and give them a drive to feel strong about themselves instead of handing ....

PAUL Pita can I say something to you, you know the Pakeha community looks at that whanauora and doesn't trust it.

PITA Good, then soon they will, because they'll see the benefits of it after a year and they'll increase the amount that's going in there, it is simply about trusting the people to do something for themselves, those that are highly motivated to do something, giving them the opportunity.

PAUL Can I put to you also that question that Sir Colin Meads was talking about in the Sunday Star Times this morning, is does the government do too much for Maori people, it may be a perception.

PITA It's not even about that, what the government is doing with Maori is good for New Zealand, not just good for Maori. You can't have one group underachieving in certain areas where they can be clearly identified as an ethnic group, as a tangata whenua or anything like that, we've all gotta go through together, so those moves, all those moves, settling the Foreshore and Seabed, getting those claims for land stolen, that's gotta be dealt with, and then we can move forward.

PAUL How much damage has been done by John Key and the Tuhoe business this week?

PITA Well it's been difficult because the claim was moving in a certain way through due process, and the Prime Minister has felt a reason to cut it off, and I think that it's going to be very difficult to see how we're going to pick this up.

PAUL Let's get back to the economy now. We have had the credit crunch, the huge massive world wide meltdown, world chaos, we apparently according to the Securities Commission Chairwoman here, have a very weak regulatory system, one of the aims that the government has in raising the GST and reducing the income tax, is to encourage people to invest, but given the economic situation at the moment, given the world situation, given our regulatory environment, why would anybody put their money in anything other than bricks and mortar, and by the way we're a low wage economy, it's bloody fantasy to think anyone's got any money to save anyway.

PETER That's where you come back to the fundamental challenge facing this country, we are a low wage economy, we've gotta do more to boost our incomes.

METIRIA Raising the minimum wage would help.

PETER Well that's one part of it.

METIRIA Provided we do.

PETER We've also gotta make sure we give people who've got the capacity to invest in growth the opportunity to do so, and that's the bit we consistently fail to do, we talk about the need for more productivity, we talk about the need for more jobs...we need to actually encourage people to invest more.

ROGER We know what brings about higher productivity, it's lower taxes, it's competition, it's private enterprise, those are the things that do it. Look we've just heard about minimum wages, I had a bill in that would have reintroduced youth rates, all the other parties voted against it, what they actually voted for Paul was to say to a young Maori boy who was offered a job at $360 a week, doesn't matter who with, you are not allowed by law to take that job at $360 a week, you have to go on the dole at $160, get up at 11 o'clock, join a gang if you want supplementary income, it's disgusting.

PAUL Let me get Metiria in. You believe passionately in this minimum wage, I mean my big argument is there is no money left in households at the end of the week.

METIRIA Well look raising the minimum wage, at the moment the government subsidises businesses, about a billion dollars in welfare would be saved if the minimum wage was raised to $15 an hour, we're talking 400,000 New Zealanders working for less than $15 an hour.

PAUL How much would be saved?

METIRIA` Round about a billion dollars in government subsidies, in government support. Now if you were to do that you know sure what we're talking about is people who work at Burger King, at McDonalds, people who work in cleaning jobs for example, those are jobs that have to be done, people need to do that work, and getting them done isn't going to be an issue...

PAUL Don't you see what he's talking about though, what he says you know if you had a youth rate that would encourage me as an employer to take someone on.

ROGER 38% of young Maori are out of a job.

METIRIA There is no proof that raising the minimum wage for young people has caused job loss, absolutely none at all, now the advocates for keeping a youth rate sort of say it, but there is actually not evidence....

PITA The minimum wage has to go up, it has to go up to at least $15.

PAUL Can we do that and go back to the youth rate.

PITA We're not talking about problem at all, we're talking about GDP issues, we're not talking about quality of life, like genuine progress index is something that we push, how much time to people spend with their wife and their children, you know is building a new prison giving jobs.

PAUL 38% of young Maori men do not have a job, now a youth rate might actually....

METIRIA It won't, it won't make a difference.

PETER I was just going to make the point about quality of life. Quality of life is also making sure that there's a future for you in this country, that your kids aren't giving up and leaving to go and live elsewhere because there are better opportunities for them. Quality of life is also about ensuring that people can live to a reasonable standard in New Zealand, so we've gotta focus on those things as well. I agree with part of what Peter says, but I think the economic perspective is also important.

PAUL The economy's stupid I spose. Let's talk about what looks like we have quite substantial income tax reductions coming, do we approve of those?

METIRIA The most wealthy will get the most money.

PAUL That's how it goes.

METIRIA Well that's because of the choices they're making about what the cuts will be. If you cut out the top rate from 38 to 33% then everybody over $100,000 is going to benefit hugely, those on the medium income of $28,000 will get something like $4 a week, that is not fair, it is fundamentally not fair in a community where inequality is increasing, and the poor are getting poorer while the rich get richer, that is not a fair decision to make.

PITA That's right...

PAUL Alright, the poor are getting poorer while the rich get richer.

ROGER Look there's a simple fact, if you take out the tax paid by people on Working for Families because they get a credit, 10% of taxpayers pay over 70% of the tax, you cannot design a tax reduction which doesn't help them, and look the important thing, these are often the people who attract the capital and create the jobs. If we want a decent country with a decent standard of living we want new jobs which these people can create, because they'll be higher paid jobs.

PAUL Final word on tax from you Dr Sharples.

PITA Well I would like to see a whole cut down in all tax, we actually said $25,000 free, tax free completely, then start your climb up like this, and yes it is expensive but it's a question of what you roll out at the end of the day.

PAUL You believe this too.

PETER We've done the numbers to actually have a tax free threshold of any magnitude means that your capacity to make changes elsewhere in the system are limited, because it is a big number and it's simply too expensive.

PITA So you need a transaction tax.

PAUL Okay capital gains tax too.

METIRIA Well that would help wouldn't it, I mean that would help to provide income, it would spread the burden, spread the tax burden more fairly across the community, it would spread the tax burden more fairly across property investment, it would help to encourage people to do less in property investment and more into other constructive investment.

PAUL And before we depart on a discussion about what's never going to happen I thank you all for coming.

ENDS

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