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Don Brash Writes No. 59, 25 May 2005

Don Brash Writes No. 59, 25 May 2005

Michael Cullen's sixth and final Budget

And what an extraordinary Budget it was!

The President of the Labour Party hinted at a "deep dark secret" and fed the speculation that it would contain some worthwhile adjustments to either tax rates or the thresholds at which those rates apply. In the event, it provoked the Dominion-Post to run a front-page banner headline "Is that it?"

John Shewan, a senior PricewaterhouseCoopers partner and one of New Zealand's foremost tax authorities, observed:

"Nothing in this policy mix encourages hard work, entrepreneurship or wealth creation. When it comes to tax rates, the policy framework means that individuals will generally be better off to live and work overseas and companies will aim to generate profits overseas. This is not conducive to increasing workforce participation, labour productivity, or growing the economy."

What a damning indictment!

The Budget failed both to provide some meaningful tax relief to mainstream hard-working New Zealanders in the here and now, and to stimulate additional growth so that New Zealanders might be better off in the future.

Yes, there was a tiny bit of tax relief - amounting to a derisory 67 cents a week for New Zealanders earning less than $38,000 a year. And even that 67 cents will not be available till 1 April 2008.

One commentator described it as an April Fool's Day joke, with Michael Cullen giving the country three years to get the joke.

Meantime, the Labour Government's carbon tax will add at least $4 a week, and possibly double that, to the costs facing most household budgets.

The tragedy is that this Government has squandered the best international conditions for our major exports in a generation. It has received an avalanche of tax revenue through the door - the result of the growth stimulated by those international conditions, some new taxes, and plenty of increases in existing taxes (on income, alcohol, petrol and cigarettes to name just the major ones). In 1999/2000, tax revenue received by central government was $32 billion.

In 2005/06, the year covered by Michael Cullen's sixth Budget, tax revenue is projected to be $48 billion - a 50% increase in just six years! As compared with 1999/2000, we will have collectively paid a cumulative $55 billion in additional taxes by 30 June 2006.

But still Michael Cullen, with a Budget surplus in excess of $7 billion this year, pretends there is no scope for any tax relief.

And this is despite the fact that, after tax and inflation, the average Kiwi household has seen no increase in income over the last five years. As a consequence, the gap between after-tax wages in Australia and after-tax wages in New Zealand has risen from $5,000 a year in 1999 to almost $9,000 currently. Is it any wonder that 600 New Zealanders leave to live in Australia every week? Most do not come back.

Helen Clark argues that all the extra taxation we've paid has bought us wonderfully improved healthcare and education. Yeah right! It has certainly bought us lots of additional bureaucrats in DHBs, in PHOs, and in the Ministries of Health and Education. It has enabled the Government to increase funding for the Wananga from $5 million in 1999 to $239 million last year - much more than the once-only Treaty settlement with Ngai Tahu, much more than is spent on the University of Auckland, and much more than is spent on trade training in the whole country.

It has enabled the Government to fund hip-hop tours, twilight golf courses, and courses in homeopathy for pets. But it has bought us precious few additional operations; we still have horrendously long waiting lists for surgery; the NCEA is still a shambles at every level; and far too many of our children are coming out of school barely literate and barely numerate.

No, Michael Cullen and Helen Clark had a wonderful opportunity to make a difference: to tell New Zealanders that they are valued, that hard work and initiative are still worthwhile, that New Zealand is still a place where hard-working mainstream New Zealanders can get ahead.

The National Party will soon be releasing its own tax policy, and at that time people will see a clear difference between Labour and National in this area, as in so many others.

Tim Groser to be a list candidate for National at the general election

Last Sunday, I announced that Tim Groser, the man who has single-handedly done more to negotiate better access for New Zealand farm products to international markets than anybody else, would be a list-only candidate for the National Party in the forthcoming general election.

The National Party's rules allow a maximum of five people to stand for the Party on the party list, without standing in an electorate. All other candidates must be on the list and standing in an electorate. Tim is one of the list candidates, and the Board and I agree that he has the potential to make an enormous contribution to New Zealand through being part of a National-led Government.

He has stood down from his position as New Zealand ambassador to the World Trade Organisation (WTO), but hopes to continue in his role as chairman of the agriculture committee of the WTO. I certainly support his doing that because of the enormous contribution he can still make in that capacity, not only to New Zealand but to world trade and prosperity more generally.

I have made it clear that if, as expected, he wins a seat in Parliament, I am willing to give him leave of absence until his role as chairman of the agriculture committee comes to an end, probably in December this year. And I have agreed that because there is a widespread view among many of the members of that committee that the skills and experience which Tim brings to the committee would be very difficult, if not impossible, to replace.

I have been profoundly disappointed at the way the Labour Government has reacted to this development. After praising him enthusiastically only weeks ago, suddenly he has been accused of traitorous behaviour and being "not our first choice for the job anyway". I suppose it is this kind of petty-minded vindictiveness which gives politicians such a bad name.

How quickly Labour seems to have forgotten that the National Government under Prime Minister Jenny Shipley gave its whole-hearted support to former Labour Prime Minister Mike Moore in his bid to head the WTO in the late nineties. Why? Because Jenny Shipley recognised that New Zealand's interests in a better world trading environment could be advanced by Mike Moore, even though he had been a fierce political opponent. I would have hoped that Helen Clark's Government would have recognised New Zealand's wider interests also.

As you will have seen from today's newspapers, warnings from officials did finally get through. Helen Clark has had to backtrack from her fit of pique and the Government has confirmed Mr Groser in place in the meantime, to try to keep these important trade talks on the road.

And of course there is a precedent for a member of Parliament simultaneously undertaking an international role: Labour MP Hugh Watt took up the position of New Zealand High Commissioner in London on 22 March 1975, but was a member of Parliament until 30 October that year, more than seven months later. And I'd be happy to wager that Mr Watt's contribution to New Zealand during that seven month period was a pale shadow of what Tim Groser could achieve for New Zealand over the next seven months.

Don Brash

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