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Flavell: The Big Deal Budget

The Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Bill 2008: Third Reading

Te Ururoa Flavell, MP for Waiariki

Friday 23 May 2008; 12.20pm

Tena koe Mr Speaker, tena koutou katoa

The tax cuts programme is apparently all about fairness and social justice, according to the Minister in his speech earlier.

So what does nearly eleven billion of personal tax cuts mean in the wallets of most New Zealanders?

What we know in dollar terms, is that high income earners will get two and half times more tax dollars back than those on the full-time minimum wage and around three and a half times more tax dollars back than those families supported by benefits.

So while someone living in poverty will get an extra twelve or fifteen bucks or so per week, a person on $80,000 will receive around $55.

I’d suggest that many New Zealanders would say to that, Big Deal.

Twelve dollars these days with price rises and so on will disappear pretty fast.

Every day of the week, the papers have headlines describing the intractable poverty of an increasing number of New Zealanders.

Insufficient disposable income, sub-standard housing, inadequate nutritious food and unequal access to health care all contribute to an increasingly desperate state of health and wellbeing.

This is a Budget which has been coming a long time – the drive for personal tax cuts has dominated the public discussion for years.

So who gains the most by The Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Bill 2008?

Where will the bulk of the 10.6 billion dollars go?

Well Mr Speaker, the Minister has been upfront that the personal tax cuts have been specifically designed not to exacerbate inflationary pressures in the economy.

Flash words, but what does it actually mean?

I think it means, that the money has been more directed to those who will be able to save the money rather than spend the money – given that consumer spending causes inflation to increase.

What we know, Mr Speaker, is that this Budget is a sweetener for Generation Y.

The bulk of the $10.6b will go to those middle-income earners, the classic swing-voters, on the flawed assumption that they will be more likely to save than spend, and that giving money to the poor is pointless as they’ll just waste it.

In fact, Mr Speaker, the poor are far more likely to repay debt than to go on a consumption blow-out.

Mr Speaker, the question that everyone has been asking is, where’s the relief for the poor, for Maori, for Pasifika in this great tax cuts package?

Where is the tax package that will mean Māori and Pacific Island women whose lives are currently being tied up in gambling, have another pathway forward?

Where is the real and meaningful tax relief to confront all the other social hazards that are symptoms of poverty – the fact that Māori and Pasifika people are especially vulnerable to unethical lending practices?

Where is the genuine tax relief to make a difference to Māori and Pasifika families who are disproportionately affected by reduced housing affordability, and as a consequence are most likely to live in inadequate, overcrowded housing?

Does this Tax Bill do anything to make a difference to the demands on the Auckland City Mission – where 50% of the users of foodbanks are Maori, with Pasifika making up another 25%?

Mr Speaker, the tax changes announced today will not eliminate this poverty in the midst of plenty.

We in the Maori Party really do want to see this tax cut programme come in, to start to make the difference that we urgently need in our personal tax system.

But we are genuinely torn by our knowledge that it will not make a tangible difference to those who suffer, those we may refer to as te pani me te rawa kore – those who are our most vulnerable members in our community.

And it is because of what appears like crumbs from the tables of those of us in this House who are privileged, that we must abstain on the basis of principle.

We are referring to those whose lives were changed for the worse by the Mother of All Budgets in 1991.

This House will remember that Budget as one which reduced the income of beneficiaries by 24 percent.

It was a budget in which the economy suffered, the social impact on New Zealanders was immediately felt in health, education and social services. And for the last seventeen years, this group of New Zealanders has been struggling to get back on their feet.

We know this group of New Zealanders were looking for a break.

Yet just two weeks ago, the Minister of Social Development announced in the now infamous, Pockets of Significant Hardship and Poverty that beneficiaries are now, comparatively, worse off than in 1991.

So we now have a situation where the budget legislation passed by this House in 1991, which slashed benefit levels and forced New Zealand into recession, has still not been rectified in 2008.

And what was the big relief in store for those who are most in need?

When you drill down into the detail of the 2008/09 budget and look at the breakdown we find:

1. Unemployment and Emergency Benefit reduced by $39 million;

2. sickness benefit by $13 million;

3. widows benefit by $3.5 million and

4. special circumstances assistance reduced by $634,000.

It has been disappointing that much of this Budget debate has been reduced to some moments of ridicule around a bigger block of cheese.

As boring as it may be for the purposes of debate, bread and butter, milk and cheese are vital elements of the daily budget for far too many people. It is in the absence of such basic provisions for instance, that force people to ask for help when they are in severe and significant hardship.

It is the absence of such provisions that may be catered for in special circumstance assistance – assistance which has now been cut.

This appropriation is to assist people in financial difficulty, with the Clothing Allowance, domestic violence and witness protection relocation, home help, civil defence payments; Civilian Amputees Assistance, and other forms of welfare assistance.

All cut, reduced, diminished.

Which is probably no wonder that cerebral palsy sufferer Helen Capel thinks beneficiaries are the forgotten people.

No wonder the Salvation Army has come out and said that there is nothing to support the ‘hard end’ group of people who are really suffering.

No wonder economist Susan St John has described the people who can no do paid work because of disability or family responsibilities, as being “totally invisible”.

The 2008 budget could have introduced a tax change to restore benefit levels to what they were before the ‘Mother of All Budgets’.

Mr Speaker, some of the speakers in this Debate asked where are the solutions? Well here’s just a few, and believe me there’s more on the way:

* We believe that lower income people should carry less burden proportionally than those who are on higher income levels. We know that 1.8 million taxpayers are on income of $25,000 or less; it is this group that should have benefitted from tax cuts, not the other way around.

* We need to pledge to end child poverty in terms of all poverty measures by 2020. One part of this is to introduce an official poverty line so we actually know where we are.

* We could follow the lead of the CTU, the Combined Trade Unions and introduce a new minimum wage of $15 per hour.

* Food should be exempt from GST on the grounds that it hits the low income people struggling to buy food with the same burden per dollar per rich people. And it makes the difference at the checkout and at the petrol pump.

* We need to address Maori unemployment - the fact that unemployment rates for Maori have shot up to 8.6% and for Pacific peoples 8.2%, compared with 3% for Europeans is really a national shame.

* And we could do it by encouraging Maori enterprise – by encouraging iwi economic development, not just setting up another Crown agency to call the shots. Why not give us a break – Maori innovation could be major contributor - let us determine the solutions – this House might well be surprised.

Mr Speaker, that is just the start and there is much more to come.

The Government could have done this. It could have been bold. It could have made a difference.

Instead, as others have said already, its tax cut package has won some favours and perhaps gained some ground, but for some New Zealanders it has been merely more of the same. A budget where they are forgotten; where they are invisible; and that they continue to suffer.


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