I congratulate Carmel Sepuloni on her speech, because I think she is absolutely right. She said that we may have a honeymoon period for this Budget. Certainly, the commentators are saying that it is a good Budget, and I think that most New Zealanders perceive it to be a good Budget. But she said that people will eventually wake up to the increases in GST, and they will eventually wake up to the increases in accident compensation levies. I have heard the words GST and accident compensation mentioned time and time again over the last 12 hours—time and time again. The tragedy for the Labour Party is that it could actually make that criticism stick if it told the truth. There is another elephant in the room, and it is the emissions trading scheme.
Hon Members: Oh!
JOHN BOSCAWEN: Yes. Let me direct my comments particularly to National. I heard Darren Hughes having a crack at the Minister of Police, Judith Collins, about the proportion of people in her electorate who earn under $40,000. I ask Judith Collins, and the other National members, to look at the 550,000 people in their electorates who earn between $40,000 and $85,000 a year. Page 9 of the Budget 2010 Minister’s Executive Summary, presented by Mr English yesterday, shows that people earning between $40,000 and $85,000 can expect an average increase in income of 0.4 percent—0.4 percent. The Reserve Bank tells us that the emissions trading scheme will increase the cost of living by 0.4 percent from 1 July. So the people earning between $40,000 and $85,000 get absolutely nothing—absolutely nothing.
People listening to this debate on the radio and people watching it on television right now will hear a constant reference to the emissions trading scheme from the ACT Party, and the reason for that is that no other party in this Parliament wants to raise it. So, yes, there has been positive coverage of the Budget, but in my view some of the most interesting coverage came this morning from Paul Henry on television’s Breakfast programme. Paul Henry seems to be the only commentator who picked up on the fact that the emissions trading scheme will add 0.4 percent to the cost of living from 1 July. That will actually reduce the net benefits to people who earn between $40,000 to $85,000 to zero—absolutely zero. I say to members of the National Government that they need to start challenging their Ministers and start challenging their Prime Minister. If those members look at the appropriations, they will see that the allocation of New Zealand units has gone from $139 million worth of units in the last year to over $1 billion—an increase of $900 million.
Carmel Sepuloni can talk about millionaires buying properties—and she may try to create some envy—but I say to her that her criticisms would be far more effective if she acknowledged that the money is going not to the millionaires but to the foresters, not so that they can buy more buildings but so that they can buy more forests. That is it: we have $1 billion—$1 billion—going to people who plant forests. People who planted forests are in two categories. The first category consists of people who planted trees before 1990. If they chop those trees down, harvest them, and do not replant them, they will incur a significant loss of value, but, only, I suspect, if the Kyoto Protocol is extended beyond 2012. The second category consists of those who planted forests from 1990 onwards. They will not harvest those forests until some time in the 2020s. They will be given an allocation of units—officials tell me that it will be something like $700 million worth of units—for trees planted in the early 1990s when there was no expectation of taxpayer subsidies.
I say to Labour members that if they really want to make an impact on this Budget, they should go out there and acknowledge that Labour would have had its own emissions trading scheme from 1 January, and that it would have increased electricity prices by 10 percent. But the world environment has changed, and National can respond to this, because it can suspend the emissions trading scheme. It can leave in place the incentives to ensure that trees planted from 1982-83 are not harvested, so that we can meet our Kyoto Protocol obligations
JOHN BOSCAWEN (ACT) : We often have banter in the Chamber, and when members with the call pick up on the comments of other members, it is recorded in Hansard. One particular comment was made this morning that was not picked up in Hansard, but I think it is very important that it goes on the record. My colleague Sir Roger Douglas said that no matter what one thought of the Budget, the reality is that the media are reporting it in a good light. If I heard correctly, I heard Steve Chadwick say: “Wait and see.” I think that Steve Chadwick is absolutely right, just like I think her colleague Carmel Sepuloni is right. She said that all the hype will die down in 2 or 3 days and then people will be faced with reality. People will not have to wait until 1 October for the increase in GST, because the cost of living is going up from 1 July. That is when the emissions trading scheme is coming in, that is when Treasury has forecast that electricity will go up by 5 percent per year, and that is when Treasury has forecast that petrol will go up by 4c a litre.
We are debating Part 1 of the Taxation (Budget Measures) Bill today. This part increases the rate of GST. Trevor Mallard proudly got up and showed to the Committee the increases in GST that people will pay on various incomes. My message this morning is to National members. Steve Chadwick is absolutely right when she says: “Wait and see.” There is no reference to the impact of the emissions trading scheme in people’s average incomes.
I come back to page 9 of the Budget document. We have just heard from the co-leader of the Green Party, who said that this is actually a subsidy from the poor to the rich. Well, I say to Metiria Turei that at least those people earning less than $40,000 a year get something. The Budget talks about an increase of 0.7 percent, and they will have to give back only 0.4 percent. So although they will not get much, at least they will get something. But we should look also at the big group of people in the income bracket of $40,000 to $85,000. The Budget forecasts here in black and white that they stand to get a net 0.4 percent out of it. Treasury forecasts that that whole benefit will be wiped out by the emissions trading scheme. It is no wonder that members of the National Party’s grassroots are revolting against the emissions trading scheme. It is no wonder that a resolution was put at the central North Island conference of the National Party last week calling on the Prime Minister and the Minister of Finance to suspend the emissions trading scheme. It is no wonder that the Tāmaki electorate, where I live—Allan Peachey is my local MP—have a remit before the National Party’s Auckland conference in a fortnight’s time.
I say to Labour that Steve Chadwick is right and that Carmel Sepuloni is right. But Labour members should get out and criticise the emissions trading scheme. They talk about inflation of 5.9 percent. They should go out and tell the people that electricity is forecast to go up by 5 percent. They should go out and tell people that the price of petrol will go up. People will see those things soon. Carmel Sepuloni is right: people will not be fooled for ever. I say to members of the National Party that people will see it a lot earlier than some people think they might.
I will explain to Louise Upston—who represents the electorate of Taupō, which is an area that has huge amounts of forestry—why GST is going up. Well, the reason it is going up is that there is an allocation of an extra $1 billion to people who planted trees in the 1990s and early 2000s, and also in the 1970s and 1980s. Those people planted trees and are now retrospectively being given over $1 billion of credits for those trees. It is a tragedy because there is no guarantee that the Kyoto Protocol will be extended. There is no guarantee that New Zealand will have any commitment beyond 2012.
In this measure we have a wealth transfer. It is not necessarily to rich people; it is to people who planted trees in the 1990s and early 2000s without any expectation of this massive subsidy. Although the National MPs in this House may want to put their heads in the sand, the members of National Party are not dumb. They see it, Paul Henry on Breakfast this morning sees it, and Steve Chadwick sees it. She says that we should wait and see. Time will tell, and people will realise that there is no net gain to them. Yes, there is redistribution
JOHN BOSCAWEN : We are debating Part 2 of the Taxation (Budget Measures) Bill, which makes changes to the Working for Families allowances, and also adjustments to the personal rates of taxation. It sets up much lower rates of taxation. In particular, it drops the rate of taxation for those earning less than $14,000 from 12.5c in the dollar to 10.5c in the dollar; for those earning in that big bracket from $14,000 to $48,000, the rate goes down to 17.5c in the dollar, and for those earning from $48,000 to $70,000, the rate is reduced to 30c in the dollar. One of the reasons the Government has given for these reductions in personal income tax rates is the need to compensate for the increase in GST. Of course, the first part of this bill gives effect to that increase in the GST rate from 12.5 percent to 15 percent.
But I challenge these decreases in personal tax rates. I was very pleased to hear Brendon Burns say just a short time ago that one of the things these tax reductions will not do is compensate for the increases in power and petrol that we can expect from 1 July as a consequence of the emissions trading scheme. Mr Burns has been the first MP I have heard from the Labour side to acknowledge that the emissions trading scheme will have an effect on inflation. I am very pleased that Mr Burns has done that, because his colleagues have talked in very general terms about the inflation rate of 5.9 percent, and how a rate of 5.9 percent will eat into these tax reductions. There are two components to that 5.9 percent: there is the general effect of inflation, and there is the one-off effect of the increase in GST and in the price of power and electricity, which will flow throughout the economy as a consequence of the emissions trading scheme.
I find it also interesting that Labour is constantly referring to Paul Reynolds, the chief executive of Telecom, and the impact that these tax reductions will have on his take-home pay. I suggest that another group of people we should be looking at is not individual persons but farmers. I ask what impact these personal tax reductions will have on the incomes of farmers, who are the actual backbone of our economy. We have heard a lot from the Government in recent times about the fact that the costs of the emissions trading scheme will not affect agriculture until 2015. But farmers, like all New Zealanders, will be affected by increases in electricity, petrol, and diesel prices from 1 July. Meat and Wool New Zealand, the lobby group that represents sheep and beef farmers, has said that the impact on farmers, as a consequence of the electricity and petrol cost increases, will be about $1,300 a year, and will be a further $1,300 at the beginning of 2013 when the emissions trading scheme is effected. Essentially, that is $2,600 for electricity and petrol costs. Will these tax reductions fully compensate farmers for that? No, they will not.
There is another cost that the emissions trading scheme will impose on dairy farmers’ incomes from 1 July. Fonterra has announced publicly that the cost on its company from 1 July will be about $38 million, which is firstly a consequence of electricity price increases, but also because the emissions dairy herds give off will have to be accounted for in the processing of milk. That cost of $38 million on Fonterra will be passed directly back to farmers. Dairy farmers will be paying, on account of the emissions trading scheme and the processing of milk, about $2,600 a year from 1 July and a further $2,500 from 1 January 2013. All up, those two costs—on the one hand the cost of electricity and petrol, and on the other hand the cost of Fonterra processing dairy farmers’ milk—will affect dairy farmers’ incomes by $3,900 on 1 July 2011 and a further $3,900 on 1 January 2013. I acknowledge that the Government has said that it may well review the emissions trading scheme and that that secondary increase may not come in, but certainly Meat and Wool New Zealand are quoting $3,900 as the first one-up impact on dairy farmers’ incomes. Thank you.
JOHN BOSCAWEN: We are debating clauses 1 and 2 of the Taxation (Budget Measures) Bill—that is, the title and the commencement date. I note that the Labour Opposition has focused its efforts on renaming this bill. I would like to focus on the second clause, which is the commencement date. The substance of this bill starts on 1 October. I know that various provisions come into effect on the day after the date of Royal assent, but the substance of this bill commences on 1 October.
Hon Clayton Cosgrove: The man’s a genius!
JOHN BOSCAWEN: I thank Mr Cosgrove. We have a GST increase from 1 October, and we have the start of the personal tax cuts and the income tax cuts on 1 October.
I suggest that this legislation should start on 1 July. I actually think the country needs to have tax cuts on 1 July. The reason I say that is that National has been at absolute pains over the last 4 months to say that if it went ahead with an increase in GST, it would make sure that there were at least equal compensatory reimbursements or equivalent tax cuts. Well, we have another tax coming into effect on 1 July, and it is the emissions trading tax. I know that National does not like me referring to that as a tax, and, no, it is not a tax in the true sense of the word. It is not revenue collected by the Government and redistributed, but the substance of it is a tax on electricity and petrol. Treasury estimates that the impact of that emissions trading scheme tax is to add 5 percent to the price of electricity and 3c or 4c a litre to the price of petrol, and that will double again on 1 January 2013. The effect of that, the Reserve Bank tells us, is to add 0.4 percent to the cost of living. That starts on 1 July.
We could actually bring this legislation further forward than that. We could introduce the tax cuts in June, because Contact Energy, a company that generates electricity from gas and that has to pay for its emissions from 1 July, has already announced tariff increases effective from the middle of June. Naturally, the electricity companies will not all come together and increase their prices on 1 July. So what has happened? Contact Energy has the early running. It has moved to increase its tariffs 3 weeks before 1 July. So we do not need to wait until 1 October for the tax reductions; they need to be brought forward to at least 1 July.
Finally, I will comment on the Minister’s Budget speech. He said, when referring to tax cuts: “First, for all income earners at all taxable income levels, the reduction in personal income tax will be sufficient to match the increase in GST.” The Prime Minister and Government Ministers, including the Minister of Finance, have been at pains over the last 3 or 4 months to say they were going to reimburse people for the increase in GST. The Prime Minister even went and gave a speech at North Shore Grey Power back in April about that. But this Government has continuously refused to acknowledge that we have a tax being put on electricity and petrol, and that that tax will make its way through the whole economy. It puts a cost on every single individual in this country