National’s Bill English and Labour’s David Parker face off in a deputy leaders’ debate hosted by Lisa Owen

Patrick Gower: Great to have you with us. Just two more episodes, actually, of The Nation to go before Election Day, so today the deputies debate, the two men vying to be the next Finance Minister. What do they have to offer you, and do their sums add up? We're giving over a significant chunk of the programme today to hear from National's Bill English and Labour's David Parker. And moderating the debate, Lisa Owen.

Lisa Owen: Thanks, Paddy, and thank you, gentlemen, for joining us this morning. We want to start today by talking about tax. If I can come to you first, Mr English. You've allowed $1.5 billion of additional spending. How much of that is going to go on tax cuts?

Bill English: Well, we've allowed roughly a billion for spending on health and education, welfare, police and so on, and around 500 million each of the next three years if it's appropriate, have tax cuts.

So, how much of that will be for tax cuts?

English: Well, around the 500 million per year, and you can accumulate that, because of course 500 million on its own would deliver a very small tax cut. We've talked for some time now about moderate tax reductions and that's in the context of a government that's been careful about its spending. We can manage good public services with current taxes or slightly lower, with moderate tax reductions. This is contrast to the Opposition parties who want to raise many more taxes and spend more money.
OK, well, if you're talking about 500 million accruing and you can give moderate tax cuts, what does that mean for thresholds, then?

English: Well, we haven't made any specific decisions about that. We've simply indicated a direction to reward hard work, savings, investment, exporting, and if we're re-elected, we'll have the opportunity to get into the detail.
Well, you talk about a reward there. So, who exactly would you be rewarding? You've previously said working low- and middle-income New Zealanders, hardworking.

English: That's right. Low- and middle-income New Zealanders. We think the tax structure for income tax is about right at the top end. There's less opportunities for avoidance. People are paying what they should be paying. And any moderate tax reductions from here should be for low- and middle-income households.
But if you do the sums, 500 million doesn't really go that far. It is the 'block of cheese' tax cut, isn't it?

English: And that's why we've always described it as a moderate tax reduction. This is as much about direction for the government and for the economy, which is about dollars in the pocket, and we believe we're headed in the right direction of rewarding hard work, savings and investment and holding government spending so we don't have to raise more taxes.
Didn't your own leader in 2008 mock the 'block of cheese' tax cut?

English: Well, if you get into some bidding war about dollars per week, I suppose that's what was happening then. We're not indicating that. We're not promising large amounts of money, but we are indicating a clear direction — the type of economy we want to be, where hard work is rewarded and where government constrains its spending, where we don't lift our spending and fund it with more taxes.
So, the Prime Minister has been throwing around various figures — $10, $20, $30. So, which is it?

English: Oh, no, he hasn't. I think commentators have been throwing around—
No, no. He has. It's a quote. He said $10, $20, $30 a week.

English: We haven't done any specific work on dollars per week and wouldn't expect to before the election.
Just pulled that figure from the air, has he? Making it up?

English: Well, look— well, there's been a bit of a game about trying to get National to give a dollar amount per week. We simply haven't done that work. We'd have to make sure all our fiscal criteria are met to enable a tax cut, cos the top priority is repaying debt.
All right, let's bring Mr Parker in. What do you make of that?

David Parker: I call it the Collins tax cut. They weren't even talking about it until they were in trouble a couple of weeks ago on Judith Collins. Until then, the Deputy Prime Minister was saying they couldn't really afford anything. Let's be clear. They've run six deficits in a row. They've racked up $60 billion worth of debt and now their answer to New Zealand's declining exports is to dangle the prospect of very small tax cuts in front of the electorates.
So, it's an election bribe, you're saying, to stave off the Dirty Politics backlash?

Parker: I think it was partly that. I also think the Government, having tried to assert that we were fiscally irresponsible and were going to run deficits, or our alternative Budget, which shows us running larger surpluses, and so decided to go back to their old mantra, which is tax cuts, in order to avoid talking about the challenges we face in the economy.
Hang on a minute. That theory doesn't really play out, because the Prime Minister started hinting at tax cuts in May, so it can't just be a Dirty Politics comeback.

Parker: And then the Minister of Finance, Mr English, poured cold water upon it. But it's come back.
And he has said that only if it's fiscally responsible, only if they're in surplus and there's this money. But you're promising tax cuts as well, in the second term.

Parker: We've said that they're open. Yes, of course. We run larger surpluses so we'll repay debt, lower. By the end of our second term, the capital gains tax, excluding the family home, revenue starts to grow, and so tax cuts would be possible under us.
At what level?

Parker: Oh, well, we're not promising tax cuts, so we're not— actually, at a higher level—
$10, $20, $30 a week? Or haven't you done your sums either?

Parker: I'm not promising them. Look, at a higher level than National can afford, cos we're running larger surpluses, cos we gather a bit more revenue through growing capital gains tax, excluding the family home.
So you are promising bigger tax cuts than National?

Parker: No, we're actually not promising tax cuts. We've said that we've left open the possibility of tax cuts. Our promises are to run Budget surpluses and to reduce net government debt to 3% of GDP by the end of our second term.
So you're leaving open the possibility, as you put it, of tax cuts that are at a higher rate than National?

Parker: Yes, we are.
National's tax cuts which you're criticising.

Parker: We are, but you're talking so many years into the future. We should be talking about the economy and what we need to do to stop those gaps widening; to address the fact that home-ownership rates are the lowest in 60 years and are still dropping; and that our exports are going backwards.
How many years into the future? What year would you anticipate tax cuts if Labour was in power?

Parker: We've said at the end of our second term.
OK. So, Treasury has said that around 2018. Do you think that's a realistic option for a time frame for tax cuts?

English: We'll be talking about, you know, time frames and priorities this next week around our fiscal policy, so you'll get more detail on it then.
Parker: Given that the deficit's gone back by 500 million a year since your Budget to the PREFU, how are you adjusting your spending to compensate for that, Bill?
English: Well, in the Budget and in the pre-election update, we confirmed making 1.5 billion available for more spending and moderate tax reductions. That remains in place. And again—
Parker: Your surpluses went back by 500 million a year, though, so how are you going to trim your cloth like we've trimmed ours?
English: Well, as I've said, the allowances have been made. They're all built into the forecasts, and we'll talk more about the detail on Monday.
Parker: People have been voting for a week now, and they still haven't got your fiscal plan. They've had ours. People have pored over it. They can see we're in surplus, and you still haven't announced your fiscal parameters or your tax cuts. How do people who have already voted take that into account?
When they'll come, Mr English. When they'll come?

English: We outlined the framework in the Budget. That was confirmed in the pre-election update.
Give us a sec. People are going to the polls, as Mr Parker points out, in two weeks. Some people are already voting. When can they expect to see a tax cut from National?

English: We'll be talking about that on Monday, but I think people going into the polling booth— they know this.
People are voting now, Mr English. When can they expect to see a tax cut? You've intimated there's one coming. What's the problem with saying when?

English: We'll talk about the context tomorrow, on Monday, and then people will have a bit more detail.
So, this term or next term, Mr English?

English: They'll have a bit more detail then, and what it'll highlight—
This term or next term? It's a very simple question.

English: And we'll answer that in more detail on Monday. But what it will show is the contrast of the Opposition parties wanting to raise more revenue and waste more government spending. We want to stick to pretty controlled spending and low or slightly reducing taxes.
Well, in saying that, as Finance Minister, can you honestly say, hand on heart, that you personally think a tax cut is the best use of that money, rather than, say, paying down debt?

English: Well, we've said debt reduction is a priority. We d— we ran up debt through tough times to protect the most vulnerable, keep public services running, rebuild Christchurch. Now we are in better times, it is a top priority to stabilise and start repaying debt.
$500 million. Is it better to use that to pay debt or to give it away in tax cuts?

English: Well, the good thing is we've got choices, even though we've just come out of a recession.
I'm asking you to make a choice, Mr English. Which is best use of that money?

English: Well, we'll outline on Monday the way we'll look at those priorities. But repaying debt, stabilising—
Why are you worried about telling voters what they're getting now?

English: Well, they've have a rough— a good idea of how this government will conduct government— fiscal policy in the next term.
A rough idea or a good idea, Mr English?

English: Well, a reasonably—
By the time they go to the polls?

English: They will have a pretty good idea, but they know the style of this government. It is to manage pretty carefully, keep control of the spending. We don't believe in new and more taxes. We think we can manage with the tax revenue we have, because the Opposition plans in that respect will affect growth and jobs.
Parker: Let's get on to growth and jobs.
Mr Parker, I just wanna ask you which is more important — paying down debt or giving people a tax cut?

Parker: After six deficits in a row, we have to pay down debt, otherwise, as the Minister of Finance used to say until a few weeks ago, if another hiccup comes along in the world economy or if there is another large earthquake, the government's finances aren't in as good a position to deal with it.
So it's frivolous what National is planning to do?

Parker: I think it's designed to take the focus off the economy, and that's what we should be debating here, not just the fiscal track for the government. We should be debating what we need to do to improve the economy so it grows faster and can sustain higher wages.
So, Mr English, I just wanna be clear here. You are promising to pay down debt; you're going to get debt down to 20% of GDP by 2020; you're going to cut tax; you're not going to cut spending; and you're going to maintain a surplus? Really? You're gonna achieve all of that?

English: Yes, we are, and that's all laid out in the Budget back in May, and then Treasury have verified that independently through the pre-election update just a month or so ago.
Mr Parker, can you match that?

Parker: We— We better it. We do gather a bit of extra revenue. We do it in a way that also improves the economy. A capital gains tax excluding the family home pushes money away from over-investment in rental property into the productive economy in order to grow exports, and that, allied with more of our own savings through universal KiwiSaver, and through incentives for research and development push us towards a higher-value economy that sustains higher wages.
Right, well, let's talk about your capital gains tax. If I have shares, say, and they've grown in value and I decide to sell them, am I going to pay capital gains tax on those shares?

Parker: You will pay 15% of the gain over and above the value when it came into effect. So if your shares were worth—
So yes.

Parker: Yes. So if your shares were worth $100,000 when it came into effect, you might have only paid $50,000, but the starting value for our capital gains tax is $100,000, and if you sell them some years into the future, then you'll pay a 15% tax. But that's fair.
You've just said to me that you wanna take some of the heat out of the housing market and the investment in the housing market. Doesn't that capital gains tax on shares fly in the face of encouraging people not to put their money into rental property and to put it into the productive sector, into shares?

Parker: No, it doesn't. What it achieves is neutrality. People should be investing on the basis of the profitability of the business that they're investing in, not for an untaxed capital gain. How is it fair for someone to earn hundreds of thousands of dollars on the increase in the value of a property or on the increase in value of shares and pay no tax on that, and for someone else working for a wage to pay tax on every dollar they earn?
What about my KiwiSaver? Will I pay tax on that? Capital gains tax?

Parker: We've said that capital gains tax will neither increase nor decrease tax on KiwiSaver.
Yes, but how's that going to work if my provider or broker is buying and selling shares to grow my retirement fund?

Parker: Well, it will work as it currently does.
OK. I've read your capital gains tax policy, and there is a lot of detail that's not in there. It's going to be referred to a specialist committee, which hasn't yet been named, and the detail hasn't been decided. Are you at best being tricky with that information, or do you just not know? Because either way, people are having to go to the polls with a big unknown, aren't they?

Parker: There's actually more detail in respect of our capital gains tax policy than there is the whole of the National Party policy. For four years, there's been more than 20 pages of detail out there. These things are not rocket science. Every other developed country in the world — Australia, Canada, Unites States, Great Britain. They all have them. The idea that somehow Kiwis aren't bright enough to do this in the way that strengthens economies overseas — it defies logic. So I'm absolutely confident that the scaremongering that we've had in respect of whether family trust homes are covered or what happens when people inherit a home, all of which have been misinformation. Actually, if people like you read that document, you'll see that nine out of 10 questions are already answered.

All right.

English: Here's a question. How long do you have to live in a home before it's a family home?

Parker: If I buy a home for a family home, it's the day I move in. What's difficult about that, Bill?

English: What if I own a rental and I move out of the home I'm in and live in the rental for, say, two years. Does that mean that I could then avoid capital gains tax on it?

Parker: If you change your family home, it's the new family home that becomes your family home. What's difficult about that, Bill?

English: So IRD will have to know—

Parker: You can vent all of these scaremongering examples, Bill, but they've all been dealt with in economies like Australia that are so much stronger than ours, because they've got a capital gains tax excluding the family home. Before they had a capital gains tax, Australia used to have lower rates of home ownership than us. They've got one. They've now got higher rates of home ownership than ours, and they've got a stronger economy and higher wages.

Let's take a break there, gentlemen, and we will be back.

Welcome back. If you are just joining us, I'm with the deputy leaders and finance spokesmen from National and Labour — Bill English and David Parker. Mr Parker, what is the one new thing you would do to boost our economy?

Parker: I would be pushing investment away from the speculative economy into the productive economy to grow productivity and exports. Why is that necessary? National came to power promising to increase exports as a share of the economy from 33% of GDP to 40. They have instead gone backwards from 33 to 29, and they're going back now to 26. If we're going to grow the wealth of our country, have secure well-paid jobs where people can afford to save a bit and buy a house, we need to do a few things differently. So our mix of policy is we need more of our own capital saved through universal KiwiSaver, like in Australia — it's why they own their banks plus ours — push it into the productive economy by pushing against speculation through a capital gains tax, excluding the family home — only 15% of the gain — and then encourage more of that push from volume towards value through research and development tax credits and incentives for investment into new plant and equipment.
Mr English, your new idea?

English: Labour is proposing a CGT as if it's an answer for everything.
No, no. Your new idea, Mr English, for boosting the economy?

English: We actually think we're going in the right direction...
So no new idea?

English: David talked about the exporters. Exporters have done very well against quite strong headwinds. There's a lot of resource going into Christchurch which is not available to the export industry, the high dollar. They're in really good shape now. That as we see the dollar drift off, government do what it can to influence the interest rate track, build on investment—
Mr English, I'm going to give you one last chance, Mr English. Have you got a new idea to boost our economy?

English: We want to keep going in the direction we're going cos it's the right direction. We disagree with the Opposition who believe that New Zealanders have got it all wrong in the last four or five years. We think they've got it right. We will continue, for instance—
So we don't need a new idea?

Parker: They're doing what National tells them to do which is over-invest in property and under-invest in exports.
English: That is certainly not correct.
Parker: No, that is absolutely correct. Our exports are going backwards. We've had the best terms of trade in 41 years and we didn't once cover the cost of our imports and interest.
English: ...and continuing to upskill our young people. Where a lot of what we need to achieve in this economy, is not about sitting around waiting to win Lotto with one big idea, it's about doing dozens of things well just in the way that our households and businesses in the last four or five years have all had to adjust. They've become more productive, more focused, less dependent on debt, and that is the opportunity for New Zealand — sustainable growth built on credible, stable government and sensible policy.
Mr Parker, Mr English is right, isn't he? I mean, we've got 3.5% growth this year, going down to a respectable 2.7 — some of the best in the OECD, inflation is down, household debt is down. Why would you change horses when things are going so well?

Parker: Well, they've ridden the back of very high dairy prices, and they've racked up $70 billion... between $60 and $70 billion of government debt. The truth is, exports are declining, the gaps are widening in society as evidenced by the fact that we've got the lowest rate of home ownership in 60 years, and still getting worse. If you have exports going backwards, despite the best terms of trade in my life, we haven't earned enough to pay for our imports and interest, you've got to do something different. The trend going out is those exports to go even lower as a percentage of the economy, and as a consequence, we have to plug that gap by borrowing more money from overseas and selling more of our land and companies to overseas owners.
Mr English, economists say that growth has peaked, and Mr Parker is right — dairy prices are down 50%. Wood products are down. Exports are falling. What's your plan B?

English: Well, the plan is to continue with the plan, so exporters have done very well despite the high headwinds. Dairy prices do go up and down. They fell by similar amounts a couple of times in the last five years. What we are seeing, though, is greater investor confidence. We're seeing a burgeoning of areas like the high-tech sector. We're seeing exporters gearing up because they can see the currency coming off, and they're starting to believe that the economy is being sufficiently well managed that they're not going to get a sharp interest rate cycle in a housing boom.
Well, you told us earlier on the show... Earlier this year on this show, you told us those good times were coming and that people could expect higher wages. How much higher?

English: Well, the average wage will move from 55,000 to 62,000 over the next four years.
Let's look at that figure because we put that to an economist, who looked at the numbers for us, and factoring in inflation, that gives us a 0.9% pay rise a year, worse than the 20-year average. Is that the best we can expect under National?

English: It's what this economy can now produce, and by any developed country standard, its consistent increases in real wages are pretty unusual. And that's what New Zealand has achieved in the last year or two and can over the next four or five years. And what's going to build that further—
It's below the 20-year average, Mr English. Is that the best we can expect?

English: Of course we hope we could do better, but what's not going to help do better is an economy that stalls when you get the Harawira-Kim Dotcom-Cunliffe-led government with a whole bunch of policies, which even if you agreed with them, are complex and will create a great deal of uncertainty. So we're an economy who has the opportunity through steady progress over a number of years to actually lift household income in a way that is relatively unusual in the developed world.
Mr Parker, you're complex according to Mr English and your mates are complex as well.

Parker: It's pretty simple that people should invest on the basis of profitability rather than chase a tax avoidance that people working for a wage can't get. That's pretty simple.
All of our policies are actually already applied in Australia. They do better than us. We should take some of their ideas like having more of their own savings, which flows through to higher wages cos you've got more money to invest in improving the productivity of the economy, therefore making it grow faster. You know, we can get to a virtual circle here where we invest less in speculation and more in productivity. You've also got to fix—
I want to jump in here, Mr Parker. Let's talk about your relationships with other parties. Everybody needs friends under MMP. Winston Peters' bottom lines. Mr Parker, are you prepared to block the sale of Lochinver Station and set up a foreign buyers register?

Parker: We've said that whoever is taking that decision is bound by the law, and that would be true to Mr Peters as well. We say that we do think that there's no advantage in selling our land to overseas buyers. They actually normally employ New Zealand farmers, and we lose the ability to farm our own land and the long-term profits. So we're opposed to that sale—
English: Will you block it?
Parker: What we've said is that we'll try and block it under the discretions that there are at law. If we can't, we can't...
So you're on the fence now, backing away from what Mr Cunliffe said earlier, that he would block it.

Parker: No, no. He said that we would do our best to block it under the law, but that we had to apply the law. We will then change the law so that future sales do not occur.
All right. Mr English, would you block it to go into a relationship with Mr Peters in the coalition?

English: No, we won't block that sale. The legislation under which it's being processed was originally written by Mr Peters and the previous Labour government. It's being... The court interpretation—
OK, so you wouldn't block that sale?

Parker: You haven't blocked one farm since, Bill. That's a nonsense. The discretions are so wide you can either approve or turn down virtually anything, and you guys approve everything.
English: No. The courts have set quite a high threshold, and that's how this sale will be treated with tougher tests than applied when Winston Peters was last in government.
Parker: You haven't turned one down.
Mr Joyce on this programme said only a ridiculously small amount of land had been sold to foreigners — 700,000 hectares, including joint ventures, on your watch. Is that a ridiculously small amount?

English: And it may well be that there's been foreigners selling back to New Zealanders.
Is that a ridiculously small amount? Is that the right characterisation?

English: If the general concern is widespread foreign ownership of New Zealand land, then the information that's available suggests that it is quite small foreign ownership, and we don't think that's a large problem.
Another bottom line is buying back assets.

Parker: Half of our forests are now in foreign ownership.
English: Well, you signed them over, David, when you were the minister.
Parker: Well, actually, some of them I did, and we actually said with the benefit of hindsight, we've got that wrong and we're not going to do it again. We're going to change it for the future. Otherwise democracy gets moribund as it is under your government.
All right. Buying back assets. Mr English has already told us this year that you won't do it. Is that still right? You won't buy back assets?

English: No, certainly not. We've sold them. We got 4.7 billion in the bank.
What about you, Mr Parker? Would you buy back assets in order to be in a relationship with Mr Peters?

Parker: We've shown that we can't afford to in our fiscal plan, and so unless we were going to drop something else out of our plan, we couldn't do it.
You've got $100 million put aside, haven't you? Isn't that the Winston fund?

Parker: $200 million per annum in out-years. Unless things can be done within that envelope, we obviously, in order to meet our promises of budget surplus and paying down debt, have to prune other expenditure that we propose.
So you can't help Winston in that regard?

Parker: Well, no. I just said that—
Aren't you pushing him over to National?
Parker: No. What I've said is that if aspirations go above that $200 million per annum by third parties, then we'll have to cut our own spending. We don't negotiate what goes in or out before the election.
All right. So what then about a royal commission into the dirty politics allegations? Would you have one?

Parker: I think it's absolutely necessary. You know, the inquiry that we've got into Judith Collins at the moment is far too narrow. It doesn't look at any conduct within the Prime Minister's department nor any of her other mistakes in respect of Whale Oil or the Oravida controversies.
OK. On that, Mr English, I just want to ask you, would it be wrong for a member of your staff to go into someone else's website and download personal details, like credit card information? Would that be wrong?

English: Look, if you're referring to this stuff that's being discussed in the last few weeks—
I asked you a really simple, ethical question. If someone in your office goes into a website that's not theirs — someone else's website — starts downloading credit card details, do you believe that that is wrong?

English: I wouldn't ask a staff member to go and do something like that.
Not asking if you asked. If they did it off their own bat, is it wrong?

English: Look, the question you're putting is completely hypothetical.
It's an ethical question, Mr English. Simple to answer. Is it wrong or not?

Parker: Sadly it's not hypothetical. It happened in the Prime Minister's office.
English: Someone has gone into Cameron Slater's Gmail and downloaded 10 years of emails. Is that wrong?
All right, if you're worried the hypothetical nature of it, let's put it this way. Let's say Jason Ede who worked for the National Party goes into a computer, a website that's not yours, he downloads personal information, allegedly, including credit card details. Is that right in your view?

English: Look, these are allegations made in a book. They've been discussed endlessly for two or three weeks.
Parker: And no one's inquiring into them.
Is it OK, Mr English?

English: We've got an election—
Is it OK? It's a really simple question. Why are you worried about answering it? Is it OK?

English: I wouldn't ask a staff member to do it, and, actually, I don't think it's the biggest issue.
What if a staff member did it off their own bat?

English: I don't think this is the biggest issue in the election campaign, and I don't think I can say anything that will add to the extensive commentary there's already been.
Parker: You could inquire into it.
You can tell us what your stance is on that in terms of ethics. If someone in the office—

English: I've already told you.
No, you said you wouldn't ask them to do it. I'm asking you, 'Is it OK if they've done it off their own bat?' Is that OK in your book?

English: Look, it's a hypothetical question. You're making up a situation that's not real. The one that's been talked about—
Have you read Dirty Politics? It's very real.

English: No, I haven't read Dirty Politics. I haven't bothered, and like most New Zealanders, because actually they think there's some bigger issues involved in this election campaign.
Parker: Well, there are bigger ones than that one, like whether the Serious Fraud Office or the Financial Market Authority have been subjected to a criminal conspiracy. I agree there are bigger issues, but there are also smaller issues that need to be inquired into as well.
In terms of Winston Peters, would you give him some kind of finance portfolio in order to seal a relationship for coalition?

Parker: Those negotiations won't take place before an election.
So not prepared to say. Mr English? Obviously, you would have the main role, one assumes? But would you have something in the finance portfolios for Mr Peters?

English: It certainly wouldn't be the finance portfolio, but it is an open question for any kind of Opposition parties coming in. Because you've got, potentially, quite a strong Greens vote.
If Winston is the kingmaker, then he's had ambitions— He was the Treasurer once before. I think it would be a great deal of uncertainty of exactly how all that would fall out in what would be quite a complex set of arrangements—
Parker: The tradition has always been under MMP that the largest party provides the Minister of Finance. I don't think that's gonna change.
English: Except in 1996 it wasn't, and that's when Winston dug in and became the Treasurer.
Parker: Bill— Bill—
Let's end on a lighter note. You both wanna be in control of the purse strings in the next government. So let's take budgeting down to a home. How much is it for a basic block of cheese, a kilo of cheese?

English: Well, it depends whether it's on special. $9 or $10.
Mr Parker?

Parker: Depends whether it's Tasty or Mild. It's a bit cheaper if it's Mild or Colby.
Price?

Parker: Uh, you'd get it for about $7 a kilo.
Wow. $9.50 to $11.50 we saw. Helen Kelly and Fran O'Sullivan will join Paddy and me later to pick that debate apart.

ends

© Scoop Media