Dr Russel Norman: Budget Speech

The Triple Deficit Budget

This Budget is a deficit Budget.

It runs a fiscal deficit, it runs an environmental deficit, it runs a social deficit and perhaps most sadly, it betrays a deficit of vision for New Zealand.

This Budget takes money from overseas creditors for its fiscal deficit.
This Budget takes away the dreams of our young people with its social deficit.
This Budget takes away the chance for our kids to love New Zealand as we do, with its environmental deficit.
Vision Deficit
And it adds to the deficit of vision that has so far marked this photo-op Government. New Zealanders believe in more than just money.

New Zealanders want prosperity, which is enough money to live comfortably but is also warm homes, safe, healthy food for their kids, a transport system that works, an Aotearoa that they can love forever, not mine for a quick buck.

The Green Party supports this vision and therefore cannot vote for this Budget.

This Budget was an opportunity to take Aotearoa down a new, smarter economic path.

This Budget could have provided the map and the funding to transform the New Zealand economy from one that is based on commodities and extractive industries, towards one that rides the clean technology wave; an economy that has a reputation for high quality, sustainable commodities and for knowledge-intensive, high-tech, clean-tech industries. New Zealand could be a brand of integrity.

Our country can be more than just dirty extractive industries – cow faeces in our water and National Parks desecrated by mining. We can be more than a quick buck, more than what we can dig up, suck up and sell off.

Instead this Budget from the National, ACT and Maori Parties, proposes to consume our capital; our financial, natural and social capital. We should pass on wisdom to the next generation, but we are passing on financial, environmental and social debt.

Most of all, this Budget makes manifest the contradiction at the heart of our age: we live in a society whose central rationale is maximum economic growth at any cost, and yet we know that this growth threatens our well-being, and even our long term survival.
Fiscal deficit

Mr Speaker I would like to start by addressing the fiscal deficit.
This Budget borrows to fund tax cuts, more motorways and climate pollution subsidies.

We are already borrowing $250 million every week and yet this Government has introduced huge tax cuts that will cost $4.6 billion in the 2011/2012 financial year.
We are already borrowing and yet this Government is spending $9.5 billion dollars on holiday highways and other pet motorway projects that will cost us more than they will deliver in benefits.
We are already borrowing and yet this Government will spend $630 million in 2011 on subsidies to climate polluters. This is fiscally irresponsible.

The impact of these measures will mean that Government debt balloons out to 26.5% of Gross Domestic Product, that annual finance costs go up to nearly $6 billion in seven years time, and that we won’t return to pre-crisis debt levels until 2024.

This unnecessary public debt, when piled on top of a mass of private debt in our country, reduces our economic sovereignty. Future generations will bear the burden of this debt and will be beholden to the international lenders who own so much of our economy. This is not freedom and this is not the sovereignty New Zealanders seek.

The build-up of national debt will also provide an excuse to privatise public assets after the next election.
In 2012, John, Bill and Gerry plan to sell off what's left of New Zealand’s public assets. The so-called minerals stock take, which prepares the very best of our conservation estate for mining, is not the only stock take in town.
Mark my words: John Key will use Government debt to justify a ‘for sale’ sign over state owned assets such as Air New Zealand, Television New Zealand, Solid Energy, Meridian, Genesis, New Zealand Post, and the Accident Compensation Corporation.

Capital Gains Tax

John Key blames tax loopholes for his decision to increase GST and cut tax rates. He could have closed the loopholes, but he has legalised them instead. He has rewarded tax avoidance with a tax cut.

This is not smart, nor is it fair.

A capital gains tax is smart and you can make it fair by excluding the family home. Sam Morgan does not think it’s fair that he pays less tax than his secretary and nor do I.
A capital gains tax is part of the solution to our property crisis. It can broaden our tax base, and strengthen our economy.

A capital gains tax is sharply progressive because income derived from capital gains is concentrated amongst the most wealthy. The US uses a capital gains tax and shows us that those earning more than one million dollars get about 40% of their income from capital gains. Meanwhile those earning under $75,000 get less than 2% of their incomes from capital gains. So capital gains taxes are highly progressive because the tax falls on those who can afford it most, whereas GST is regressive because the tax falls on those who can afford it least.

The Green Party stands for smart, fair taxes and has the courage to say what National and Labour both know: that only a comprehensive capital gains tax excluding the family home will help protect New Zealanders from property speculation. It will help make the dream of homeownership a reality for more Kiwis and it will feed much-needed capital to a starved productive sector.

We also know that there is a need to increase housing supply at the same time. Building more state housing can counter upward pressure on rents and boost the building sector of our economy, while helping our most needy families.
John Key may talk about taking a balanced approach, but when it comes to rebalancing our economy there is little action. Our tax system remains skewed.

The tax treatment of property – changes to LAQCs and depreciation measures – are a step in the right direction, but a timid step. The time for a capital gains tax is right now, this year, in this Budget and the Government has missed the moment to strengthen our economy, just as it has missed the chance to tighten foreign investment rules around property.

To ignore these opportunities fails the fortitude test.
Social Deficit

The tax cuts in this National, ACT, and Maori Party Budget will go mostly to the well off, while raising GST hits those on low incomes disproportionately. This widens the gap between New Zealand’s haves and have-nots. It punishes those who already struggle to make ends meet. And the punishment falls most heavily on Maori and Pacific peoples.

So this Budget will increase inequality and increase the social deficit, and ultimately the fiscal deficit.

Looking after our most vulnerable children should be the heart of any Budget because one day these kids will fill either our workforce or our prisons. This Budget from the National, ACT and Maori Parties increases the money for prison beds, adding to the fiscal deficit and betting on which direction the social deficit is heading.

New Zealand is one of the most unequal countries in the OECD and that inequality drives crime, illness, violence, poor educational outcomes and so much more. The cost of prisons, courts and police in this Budget alone has increased to $3.7 billion from $1.7 billion just ten years ago.

Inequality costs everyone.

Because some New Zealand families can’t afford to heat their draughty homes, it costs taxpayers $54 million each year to treat respiratory illness, it costs businesses 180,000 sick days, and it costs $400 million in electricity that we didn’t need to use, doing untold, unnecessary environmental harm along the way. There are many more examples that all point to how inequality hurts everybody.

Earlier this week, my colleague Metiria Turei launched a plan to reduce inequality and to help make New Zealand a place where everyone gets a fair go – a plan called Mind the Gap.

It includes a tax free threshold of $10,000 which would benefit everyone, but would give the most help to those New Zealanders who need it the most, the low-income earners.

Mind the Gap also suggests giving every family a reasonable amount of electricity at a fixed low rate so they can stay warm and healthy. Under a progressive pricing plan, additional power would be charged at a higher rate so it still pays to save power. Again, this measure helps all of us, but has the biggest positive impact on our poorest families.

These are just two of the eight, practical and fiscally responsible steps described in Mind the Gap.

It is measures such as these that can address the social deficit that this Government inherited.

Instead, John Key chooses to concentrate on tax cuts that mostly help the wealthy ahead of the needy. John Key’s Government chooses to dishonour the Treaty of Waitangi by ensuring Maori remain in poverty.

The eight-point plan in our Mind the Gap package is part of what we have called a Green New Deal for New Zealand. It sits alongside two economic stimulus packages that the Green Party released last year, packages that offer practical solutions to our economic, environmental and climate crises.

Green New Deal solutions tackle all of these pressing problems at the same time.

Green New Deal solutions account for the fact that these challenges are global in nature.

Green New Deal solutions see opportunity and lay out a practical path to prosperity.

The most high profile of our Green New Deal solutions is the $323 million home insulation programme that has already made nearly 40,000 New Zealand homes warmer and healthier.

It is evidence that we offer practical answers to New Zealand’s problems. Indeed, we have a surplus of solutions to offer a Government in deficit.
Environmental Deficit

As well as a vision deficit, a fiscal deficit, and a social deficit, this Budget deepens our environmental deficit.

We are currently clearing native vegetation at the fastest rate since European colonisation, an extraordinary fact. We are in the middle of a biodiversity crisis in this country, a crisis caused by us.

The key reason for this loss of vegetation is agricultural intensification, according to Landcare Research.

We know that a key driver of agricultural intensification is the rapid increase in rural land values. Rural developers are seeking the tax free capital gains that come with dairy conversions and dairy corporations are pushing land harder in order to pay the interest on the big loans.

A capital gains tax would put downward pressure on rural land prices and take some of the pressure off the land and our biodiversity.

Agricultural intensification is also driving the desperate decline in water quality across our country. Drinking water for rural towns like Dunsandel is polluted by dairy corporations. Rivers are being dammed and drained for irrigation, the water replaced by runoff thick with faeces and fertiliser.

We have health warnings now that newborns are at risk of nitrate poisoning. I repeat, babies in Canterbury are at risk of blue baby syndrome which is caused by too much nitrate in the water.

This Budget does nothing to address New Zealand’s environmental deficit. There is no capital gains tax. There is no charge for using the publics’ water for private profit, and there is no charge for pollution.

In fact, Government grants for irrigation schemes subsidise the destruction of our rivers and aquifers. It is environmentally tragic and economically stupid.

Likewise the Government’s plan to subsidise greenhouse pollution to the tune of $100 billion over the next 40 years, according to Treasury estimates.

The Greens have shown how we can make a 30% reduction in our greenhouse emissions, put our economy on a competitive footing to trade in a global economy where carbon matters, and do our bit to secure a safe future for our children.
Instead, John Key's Government has locked New Zealanders into subsidising our biggest polluters. The more they pollute, the more we pay. We teach our children that if they make a mess they should clean it up, but John Key's lesson to industrial polluters is that there is no accountability for them; their mess is our problem. They have little incentive to cut emissions through smarter technology.

And National will keep hidden how much taxpayer money subsidises each individual polluting company. National will publish the welfare details of a couple of DPB mums, but will not publish the details of billions in corporate welfare handed out to greenhouse polluters.

John Key’s Government will no doubt also remain silent about the 27% cut to environmental research in this Budget.

Conclusion

The Green Party will not vote for this Budget, but we respect the Finance Minister and acknowledge his hard work. As a Minister who takes his responsibilities very seriously, he no doubt argued for a capital gains tax. We extend our sympathies that he lost out to his Cabinet’s most conservative instincts.

The result is a Budget that takes our country in the wrong direction. It adds to the nation’s fiscal, environmental and social deficit and has a terrible deficit of vision at its heart.

It adds to the fiscal deficit and takes away the sovereignty of future generations by borrowing to pay for tax cuts that heavily favour the wealthy, borrowing for holiday highways and borrowing to subsidise polluters.

It adds to the social deficit by entrenching inequality and locking our society into a further cycle of poverty, crime, and illness.

It adds to the environmental deficit and takes away the chance to enjoy the wilderness of Aotearoa New Zealand.

The Green Party will not vote for this deficit Budget.

ENDS

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