United Future
Hon Peter Dunne

Budget speech 2004

 I tell the Leader of the Opposition that for years I have been concerned about the plight of middle-income earners. For years I have made speeches in this House, often as a lone voice about the plight of middle-income earners, and for years I have urged successive Governments for a better deal for middle New Zealand.

Now here is a Budget that starts the process of delivering that better deal. The point I begin on is this: the divide that has been drawn between the parties today is not so much one on whether the resource is there to pay for this better deal, but the way in which this better deal should be delivered. For too long middle New Zealand has been quiet, uncomplaining, and perhaps compliant in terms of the way in which they have been dealt with by successive Governments.

They are the group of people who pay all the taxes, but seldom get any of the benefits. Now, after 20 years, they say that it is time that they received a dividend. Where I think that other parties are missing the point in this debate is that New Zealanders are not a dogmatic people, they are not a profoundly ideologically driven people, and they are getting just a little tired of seeing the debate about their future always promoted in terms of this ideology or that ideology.

What they are most interested in is where do they fit in that equation.

That is why I am delighted to see a Budget that, for the first time in a generation, puts the concerns of decent New Zealand families upfront. It has been a dramatic transformation over a relatively short period of time. Two years ago the Budget of the then Labour-

Alliance Government did not mention the word “family” once. Last year, 15 specific family initiatives were introduced—a number as a result of negotiations between the Government and United Future. This year, just 2 short years later, we have the most dramatic family-friendly Budget in a generation. I think that middle New Zealand, and those families earning a combined income up to around $80,000 a year, who will all benefit in some shape or form from this Budget, will not be as interested in the arcane arguments about whether it is delivered through the tax system or any other system, but will be much more interested in the fact that at last they will get a dividend for the hard work of economic reform under successive

Governments in the last 20 years. That is what it all should be about. Around the world today economic and political debate is shifting away from the abstract, and much more towards how the gains that are being produced benefit societies and communities. Perhaps it is September 11, but certainly there is a much greater recognition abroad today that the purpose of Government and society and all those abstract terms like “economic growth”, or “performance”, or “employment”, or whatever, are to create better conditions for families to get about their business. That is the core point of this Budget. I do not necessarily think that the Government has got it absolutely right in terms of the way in which the system will be delivered. I think that there are some issues regarding sequencing and timing, but frankly, they are secondary to the fundamental point of doing something positive for New Zealand. There are about 480,000 families in this country with dependents. Over the course of the programme that this Budget introduces, just over 300,000 of those 400,000-odd families will benefit. That is a hugely significant part of social progress.

I think that it is mean-spirited to be arguing about the mechanisms, when families out there today will be looking bluntly at the dollars and what they mean to them. Some issues here need to be taken further. As I said, I am pleased to see the attack made on dealing with the circumstances of middle New Zealand families in particular.

I am delighted that as a result of the discussions we were able to have with Dr Cullen, Mr Maharey, and other Ministers, the package is perhaps a little broader in its intent than was first intended. That is good and positive. I am also pleased to see some movement in some other areas. It is significant that an initiative promoted by Gordon Copeland last year, which received some limited recognition in last year’s Budget, has been picked up to a much greater extent in this year’s Budget. That is the basic and sensible point of indexing a lot of the payment rates to movements in the rate of inflation.

Part of the difficulty that we have experienced for so long with abatement rates, with all of those various forms of payments that have been made, has been that the gap between their introduction and their review has been years. Consequently, it often becomes too costly to keep up with progress.

I am wrapped that Dr Cullen and the Government have now agreed to index those payments. That will make it significantly easier, not just for Governments in the future but also for those who benefit from those forms of assistant. We see a significant example of this in the big problem the Government still has with tertiary education and student loans in particular. It is good to see that the threshold at the top end of about $50,000 has been raised to $62,000, in terms of family income, before the under-25 parental income test threshold applies, but the problem is that this is curing about 10 years of no movement.

 I sincerely hope that we will not see another 10 years before that aspect is addressed. There was a cryptic line in the Budget that we ought to be aware of. Dr Cullen made a reference to the fact that there would need to be some consequential changes to the provisions of the Human Rights Act. I think that is a matter of grave concern. It is one area where the Government may need to think again about the impact of its policies. The reason I say that is what that reference refers to is that under the Human Rights Act now means that married students without dependents under the age of 25, who are currently exempt from the parental income test, apparently ought to be included under that test. We will have the absurd situation where a couple of married students, who may well have been married at 18, at the age of 24 living their own separate lives will still be subject to a parental income test as to whether they can get student allowances because of the provisions of the Human Rights Act. That is absurd, and I give notice that that matter will need to be reviewed before we go very much further down the track.

There are other issues that need to be dealt with in that area. Part of the problem that could be addressed is that 25-year-old limited itself. I would like to have seen some movement in bringing down that threshold age, because that would have had a significant impact, as well.

That is work to be done for the future. There are a number of other initiatives contained in the Budget that I am very, very pleased to see. I say that from the focus of wanting to see a Budget that makes New Zealand a better place for our families, and a better place for those raising children.

We know of the stresses and the pressures that our young people face today, and in that context the move to increase the *Social Workers in Schools Programme is a good one. It is perhaps a commentary on the state of our society that we need to be even contemplating such initiatives, but I am delighted to see that this move is being extended. I know that my colleague Judy Turner, who pushed for that, will be equally delighted. I know, too, that she will be pleased to see that the Government has made significant movements in terms of increased funding for mental health support—that is, a $200 million increase over the next 4 years.

My colleague Marc Alexander will perhaps rest a little easier at night and maybe leave Phil Goff alone just temporarily with the increase of $4.4 million for restorative justice and the additional $1.5 million for victims’ rights, but I suspect that this will only embolden him to try for more gain in that area for the victims of crime in the future. Another initiative that we spoke of last year, which we are delighted to see carried through in this year’s Budget, is the continued increase in schools operations grant, and particularly the increase in support to the *New Zealand Qualifications Authority in terms of its administration of the examination system. All of these measures contribute to making the system that affects a number of our children and our families more user-friendly, more positive, and more geared towards their needs. In a period where we have gone through a long stage where Budgets were often quite abstract from the reality of most people, where the moves that were introduced seemed to be at such a high level that for most people they had no immediate impact, the sorts of basic measures that this Budget, building on last year’s Budget, introduces are positive, and will be welcomed by many, many New Zealanders. It would be wrong to conclude that this Budget is an end in itself. Listening to the debate there seems to be a feeling that the Government has somehow missed an opportunity, as if this is the only opportunity that will exist for any Government to make significant social change.

I believe that is a wrong and false attitude, and it perhaps symptomatic of the thinking that has led us to see a series of stop-start measures over the last 20 years or so. One of the issues we do need to consider in the light of the current debate about the most effective way of assisting our families is whether our existing tax system delivers to them in the most fair and equitable way. United Future has long argued, and will continue to argue, for the concept of income splitting for tax purposes. Income splitting because it will allow people a fairer slice of the action, if one likes, and it will recognise the concept of household income.

Ironically, of course, we used to recognise household income as the basis of our income tax system. We only moved away from it in 1957; not for any sound policy reason, but for the fact that the *PAYE system was introduced and there would have been difficulties in administering source deductions because of differing incomes. That issue is still very much on the agenda, and it also recognises a key element as far as we are concerned that people ought to have choice about their circumstances and how they apply them. I believe that is one of the areas that perhaps this Budget is a little light on, but it does not mean that the issue cannot be recognised for the future.

It is really about recognising the equal role both parents have in the construction of the rearing of the family unit and in the running of that household, and particularly for the parent or partner who chooses to stay at home, and therefore loses the ability to earn income, income splitting is a way of recognising that contribution much more powerfully. It is very interesting to note that in the context of the current debate, which a certain article in the *Sunday Star-Times a couple of weeks or so ago has engendered, how many people have raised, right up until this morning’s *Morning Report, the notion of income splitting as being the way ahead and the way we ought to proceed on.

That is a matter that the Families Commission, which will be opening its doors in just a few short weeks, will want to put high up on its agenda and start to do some good and sound policy work on and make some recommendations to Government in the future. Where we are today, and where this Budget is so important and so valuable, is that we have shifted the debate—and I take particular delight in the fact that we have had influence with the Government in doing that—and we are now unashamed as a country it seems to focus on what is good for New Zealand families.

We used to be a little bit embarrassed about it because our circumstances were all different, and therefore perhaps to talk about my circumstances as opposed to the next person’s circumstances might be a little unfair or a little inappropriate. We have moved away from that, and that is good. We are now in a position where all of the issues can be debated thoroughly, openly, and fully. I acknowledge the work that the Progressive party leader has done in terms of the drug and youth suicide funding that is in this Budget, which we thoroughly support, because that again is part of that much more upfront recognition of these issues and how they can be dealt with. We do not want to see this Budget lead just to some self-centred argument about how much money has gone into my pocket as opposed to the next person’s pocket, and so on, and so forth.

We do not want to see that sort of mean-spiritedness that seems to bedevil this type of debate. We want to see a much more fundamental assessment about how Governments in the future use their resources, garner their policies, if one likes, and work to achieve economic growth in the interests of prospering this society and its families. I want to conclude by drawing an analogy to the Irish argument, which many people still like to lord as being a great example of a way to move forward.

What the Irish have done is particular to their own circumstances, but the point of comparison for us is this. They have actually set some national objectives that are not too ambitious, but in terms of being a great place to raise one’s family, they have outlined the sorts of policies that they need to achieve that and then worked through to the economic policies they need to achieve the growth to fund the social programmes. It is a seamless approach. This Budget lays the groundwork for that type of approach in New Zealand. There is still a way to go.

We want to work with the Labour-led Government in the lead up to next year’s Budget to start to take this focus one step further. As I said at the beginning, this Budget is a dividend for low to middle income families, but middle New Zealand in particular, for over 20 years of hard work. I want to see the gains that are made for those families in this Budget become a threshold for the future that we can build on and build a more constructive society when we can truly hold our heads high and say: “We have done what we have done for the benefit of all New Zealand families, and all New Zealand families will be better off economically and socially as a consequence of these moves.”

If the Budget achieves those objectives, then this will have been a watershed in our social, economic, and family development.