What Really Matters

Don Brash MP National Party Leader

6 May 2006

What Really Matters

Address to the National Party Canterbury-Westland Regional Conference The Spinnaker Conference Centre, Waikawa, Picton

Madam President, my Parliamentary colleagues, delegates, members of this great National Party. Thank you all for the huge contribution you made to the election outcome last year. As you know, we didn’t get quite enough votes, and weren’t quite able to form a government. But we did vastly better than most of the pundits had expected, and got the highest share of the party vote since 1990 - 39%.

Nearly double what we achieved in 2002. And it was almost enough. We very nearly won the election, despite where we started, because we successfully outlined what a great country New Zealand could be, and we outlined a plan for getting there.

We emphasised the simple fact that, for New Zealand to succeed, New Zealanders must succeed - that ordinary Kiwis must be given the right incentives to work hard and get ahead in life - without a punitive tax burden, and without the dead hand of government bureaucracy and pettiness beating them down.

And we pointed out the obvious. That unless New Zealanders get ahead, unless the country grows because of the endeavours of hard-working Kiwis, then we can’t afford all those services that a successful country considers their birthright. Services like top quality education, top quality healthcare, a complete roading system, to name just three. We pointed out we’re in a competitive world, where we compete with every other country to pay doctors, nurses, teachers, police officers, engineers, plumbers and builders. And in order to pay well, we have to earn well.

Events since the election have, if anything, underlined that our approach was right. Labour’s now telling us all that the roading programme they promised can’t be done on the funding they’ve allocated. They’ve admitted they can’t cope with hospital waiting lists by playing a cruel game of hide and blame with patients and hospital boards; and they’ve started trying to soften us up to let more criminals out of prison because they can’t afford the prisons and can’t reduce the crime.

The evidence of Labour’s failure is all around us, and that’s without factoring in their wastefulness and poor management of government services. But in the seven months since the election, politics has, to a degree, been a phoney war.

Voters had a period of being weary of politics, and that’s understandable, given the long election campaign, the close result, and then the time it took before a government was formed. The Labour Party’s also been embroiled in a huge amount of political scandal over that period. Just last Wednesday, we saw the most serious, most damaging, most confidence-destroying leak of commercially confidential material from the Cabinet room in the history of this country - a billion-dollar leak of Budget confidential information that could only have come from one of Helen Clark’s inner circle.

Our concern is for the thousands of Kiwi shareholders in our largest company who’ve lost out this week as a result of Labour’s inept handling of this issue. The Government’s bumbling has needlessly worsened the situation for investors, and shows the Government’s complete lack of understanding about how the economy and the capital markets work.

And Helen Clark can hardly complain, because it’s she who’s set the ground rules; it’s she who’s set the appallingly low standards for this administration. It was Helen Clark who decided to see off former Police Commissioner Doone, not by following due process, but by leaking, inaccurately as it later turned out, to a Sunday newspaper. It’s Helen Clark who, day after day, not only watches as her Ministers refuse to give straight answers to questions but who evades giving straight answers herself in Parliament.

It was Helen Clark, staring at the prospect of electoral defeat, who said it was okay to steal half a million dollars off the taxpayers of New Zealand, and spend it on her election campaign, knowing full well that in doing so she’d breach the legal spending cap - something our Electoral Act calls a corrupt practice. It’s Helen Clark who’s headed a government that’s set a world record in prima facie cases being established that somehow just never quite get to court.

It’s Helen Clark who presides over a Government of leak and spin, of smoke and mirrors, a Government of half truth and evasion. And, based on past experience, I’ve no idea whether the Government is actually serious about finding the person responsible for the billion-dollar telecommunications Budget leak.

But I want her to know that Don Brash and the National Party are deadly serious about finding the source of that leak. Because Don Brash and the National Party care about the integrity and honesty of our system of government, and care about the confidence and trust New Zealanders are able to place in their elected officials.

That’s why today I am calling for a select committee inquiry into the leak so that Parliament and the public will have an opportunity to assess for themselves what went on and who was responsible.

All these scandals raise very important constitutional considerations, and as Her Majesty’s loyal Opposition it’s our job to prosecute them, and prosecute them vigorously. We’ve done so, and will continue to do so. But to many New Zealanders they’re “Wellington issues”, they’re peripheral to their lives. Labour’s scandals don’t matter to people in the direct and immediate way that being chucked off a hospital waiting list matters, or paying a huge marginal tax rate matters, or seeing the Government become ever more efficient at taking their money, while at the same time becoming less efficient at spending it.

During the past few weeks, I’ve had a chance to take stock and obtain a fresh perspective. I’ve had the privilege of traveling around the world, stopping in Washington, London, Beijing and Singapore. In these cities, I met with political leaders, government officials and business people.

And these meetings have left me more convinced than ever that, on the key themes of the last election campaign, our approach was right for New Zealand - and it’s now more important than ever for me as Leader of the Opposition to campaign aggressively for that approach.

When you see first hand what’s happening overseas; when you hear from leading figures in the major countries of the world what issues they are grappling with, and what developments are occurring or are in the pipeline; when you experience the energy and dynamism of countries as diverse in political systems as China and the United States, or as different in sheer size as China and Singapore, you can sense our place in the world is fading.

We’re getting left behind because we no longer emphasise the core values and attitudes that once determined the Kiwi character: once deeply-held convictions about the importance of personal responsibility, self-reliance and independence. Those convictions in turn formed a Kiwi character that was resourceful and achievement-oriented, and that thrived on competition.

But our welfare system, some aspects of our education system, our cringing political correctness, and our tax system are all doing terrible damage to these core Kiwi values. We’re increasingly out of step with the most dynamic countries, and as a result we’re making absolutely no progress in narrowing the gap between our living standards and those in our more dynamic neighbours. As I’ve noted previously, the gap between average after-tax incomes in Australia and those in New Zealand - already 20% in 1999 - had widened to 33% last year!

It’s tragic that policy in New Zealand is ensnared in the strange ideological obsessions of the Labour Party - ideological obsessions which are utterly obsolete internationally. Labour’s policy toolkit is a museum of fossilised ideas

Elsewhere, governments are searching for ways to expand the choices and the options their citizens have, and to provide them better incentives to get ahead in life. In New Zealand, Labour’s largely prescriptive, with an over-bearing nanny state cutting back options, and imposing perverse incentives on working people.

Last week, at the Northern regional conference, I spoke about tax, and the need for providing the right incentives. I pointed out, and I confirm again today, that National is strongly supportive of providing extra encouragement to people bringing up families, and our fair tax plan at the last election illustrated that. For most families, the combination of our Working for Families extension and tax cuts gave greater support than does Labour’s Working for Families package.

Our objection to Working for Families is the delivery mechanism that Labour chose, not the principle of allowing for family size in the tax structure or of easing the financial pressure on families generally. It makes no sense to heavily tax families, and then put them through the indignity of having to claim credits back from a state agency.

The only advantage to this system is that it allows Labour to spend tens of millions of dollars advertising the return of taxpayers’ money! The problem with loading Working for Families on top of an unchanged tax structure is this

• It involves unnecessary administration costs in paying high taxes and then applying for refunds.

• It generates effective tax rates that are far too high, and

• It overlooks the need for tax relief for people without dependent children.

National proposed a fairer overall package, and much lower effective tax rates for most families. National would’ve substantially dropped the marginal tax rate - the tax rate people face when doing some overtime, or when they receive a wage increase. For somebody on the average wage, their marginal tax rate would’ve fallen from Labour’s 33% to only 19% under National. Somebody on the average wage receiving Working for Families now has a tax rate on extra work of no less than 53%.

Just think about that for a moment. Somebody supporting a family and earning only the average wage, around $40,000 a year, will now take home less than half of any extra earnings they might make - from overtime, or a wage increase.

So, in attempting to ease the pressure on lower to middle income families, Labour’s inflicted a demoralizing and self-defeating tax rate on middle income families.

So much for the incentive to get ahead from your own efforts. This is not a recipe for a stronger and more prosperous New Zealand. It’s a recipe for New Zealand incomes continuing to lag behind the rest of the world, and for more Kiwis deciding their aspirations are better met elsewhere.

Helen Clark and Michael Cullen will be leaving behind a terrible legacy of poor incentives and dependency. They’ll leave a mess of poorly-thought-out and politically opportunistic tax and income support policy, which will unfortunately cost all New Zealanders dearly in the years ahead.

Now of course I can’t tell you at this stage precisely what tax reductions National will propose for the next election - there’s too much water to go under the bridge to make that feasible. But you can be absolutely sure that lower taxes, and much improved work incentives for all Kiwis, will be central to our policy at the next election, and indeed in subsequent elections.

Under National, you will pay lower taxes! I want to talk about another issue today. I want to talk about the Treaty of Waitangi. But how, you may well ask, does the Treaty fit in to a discussion on getting New Zealand to grow faster and improve its place in the world?

Well, there are a lot of obstacles that can get in the way of a country succeeding and becoming more prosperous. One of those is the disillusionment and resentment which sets in when some members of society have been historically wronged and their assets have been taken from them, as has been the case in this country with the illegal confiscation of land from some Maori tribes at the time of early European settlement.

Injustices like those suffered by many Maori at that time undoubtedly hampered their ability, and the ability of their descendants, to make a full contribution to their own prosperity, and the strong feeling of resentment has been an enduring brake on New Zealand’s growth and prosperity over the years. Where the government was involved in creating, or at least sanctioning, such injustices, it rightly falls to subsequent governments to put matters right.

The National Party in government has a proud record of settling those historical grievances - and I, in turn, am proud to lead a party with that great history. And, as an aside, the results of those historical settlements have in many cases been very positive indeed, as the experience of Ngai Tahu in this region amply illustrates.

But the National Party believes that it’s vitally important that the process of settling historical grievances is accelerated. Partly this is because the longer the process goes on the more the rest of the community worries that perhaps Treaty settlements confer some special preference on Maori New Zealanders.

This is not the case. But there is another and more important reason to accelerate the process. If some people believe that their circumstances can be blamed on what somebody else did to them or their ancestors decades or even centuries ago, the risk is that they become frozen into a victim mindset, blaming “the government” for their problems, unwilling or unable to help themselves. They begin to see their economic salvation as coming from some future compensation from government.

But, as Rob McLeod has argued, if the total of $1 billion originally earmarked for compensation were to be spread evenly across half a million Maori New Zealanders, they would get only $2,000 each - invested at, say, 6%, just enough to provide an income of $120 a year, before tax. That simply isn’t going to make a material contribution to raising the living standards of Maori New Zealanders.

This isn’t an argument for increasing the size of the compensation, as some have suggested. It’s an argument for getting on with the process, so that the victim mentality, the illusion that living standards depend on the size of a government compensation payment, can be put behind those who currently see the world this way.

As my colleague Deputy Leader Gerry Brownlee told the Northern regional conference last weekend, if we continue to settle historical grievances at the pace being set by the Labour Government, we’re going to spend the next 35 to 40 years arguing over some $600 million, and be sidetracked on endless interpretations of what the Treaty means.

This is entirely counter-productive, and does nothing to accelerate our economic growth. Indeed, by keeping people focused on the past, it is highly damaging to economic growth. It’s vitally important that we get to a point where the Treaty grievances are behind us, so we can all turn our attention to making our modern boat go faster, towards a more prosperous future.

By all means we should continue to celebrate our cultural diversity and our Maori heritage, but without always looking back through the prism of the past. We also need to ensure that in correcting one injustice we don’t create another, that we don’t entrench a society where individuals are encouraged to think their opportunities or lack of them are determined by the colour of their skin. Or that the only way for them to succeed is by having a special quota or set of rights conferred on their ethnic group.

That’s why the National Party is so focused on ensuring one law for all New Zealanders. That’s why we want to abolish separate electoral seats based on race. If New Zealand is to succeed in the future, if we are to ensure our prosperity, and our ability to compete in a world marketplace for the best and brightest, the doctors and the nurses, the police and the teachers, the engineers and the builders, then we must demonstrate that all New Zealanders are treated equally under the law, and that everyone gets an opportunity to get ahead and succeed in this country, regardless of their ethnicity and regardless of when their ancestors arrived.

National stands ready to deal with this issue. Labour doesn’t. Labour is coasting on this issue in the same way they’re coasting on many other issues, and across the country the evidence of that coasting is becoming clear for everyone to see.

Right across the board, Helen Clark and her Government have done nothing at all to build on the fantastic legacy left to them by the reforms of the previous 15 years, and what moves they have made have taken us backwards. For the last seven years, she and her ministers have coasted along, pretending that low unemployment was a result of their brilliance, pretending that the growing Budget surpluses were a result of their fiscal prudence, pretending that we were on track to get back into the top half of the OECD countries any time now.

Worse than that, she’s squandered the ever-growing taxes paid in by hardworking taxpayers on poorly-focused programmes that are badly run and badly managed, to the point where even some of her own ministers realise they can’t just keep tipping good money after bad. She’s squandered the flexibility and the incentives left for people by previous reforms, and indeed has reduced that flexibility and the incentives to work hard wherever it seemed that votes could be bought. She’s squandered the golden weather created by strong export prices.

She’s talked the talk about economic transformation, about the importance of improving productivity, about the need to close the income gap with Australia, of moving up the value chain so that all New Zealanders can see their incomes increasing - and can see opportunities for that to happen here, without the need to move across the Tasman.

But she’s utterly failed to deliver. It’s very clear now that, if present policies continue, we don’t have a snowball’s chance in hell of closing the income gap with Australia - indeed we don’t have a chance of preventing further widening of that gap! We don’t have a snowball’s chance of getting into the top half of the OECD within 10 years, as Helen Clark originally said was her aim - or in 20 years, or in 30 years.

And we don’t have a snowball’s chance in hell of reaching Michael Cullen’s original target of 4% annual growth. For the last nine months, the economy hasn’t grown at all, and the Treasury thinks we won’t do better than 3% over the next five years, if that.

And Helen Clark’s answer? Which policies is she now racing to enact to lift our growth rate? Sadly, none. And that shouldn’t surprise anybody: when we look at the seven pledges on her infamous pledge card - the one which pushed the Labour Party 20% over their legal limit in the campaign - only one could, at a pinch, be regarded as having any relationship whatsoever to our growth rate.

Her response to my calls last weekend for lower taxes to provide incentives for hard-working New Zealanders was to provide the media with nothing but a political commentary on National’s tax policies, as if she was a disinterested bystander with all the time in the world. Well, the clock’s ticking.

Prime Minister, enabling New Zealand to grow faster is, at this point in time, your job. Providing New Zealanders with incentives to stay in this country and get ahead for the benefit of all of us is your job. Growing the cake so that we can afford first world infrastructure and services is your job. Commenting on Opposition policies is not your job. You have a Budget coming up. Kindly do your job. Or get out of the way and let somebody else do it.

No, Helen Clark’s Government has cruised along, basking in an environment which they’ve done nothing at all to create, and squandered the best opportunity in decades to lift our living standards back towards those in Australia. And, at the risk of repeating myself, failure to close that ever-widening income gap with Australia will ultimately destroy the kind of society all of us want for ourselves, our children, and our grandchildren. And here’s the nub of the problem.

You can’t escape the conclusion that Helen Clark’s Labour Government is trying more and more convoluted ways of making the money go round, without having any idea about how to make the cake grow.

You can’t escape the conclusion that Helen Clark has no understanding of what drives people to better themselves and to achieve more, and therefore she can’t create an environment that encourages people to do that, to the benefit of us all. The reality is that only National understands it’s the actions of individuals that cause the economy to grow. Only National understands that only by providing the right incentives will you encourage people to stay living in New Zealand, work hard and get ahead.

Only National understands that unless people are given the right incentives to work hard and earn more, we’ll never be able to keep paying for quality health care, education and vital infrastructure.

And only National can fix these things..

You in this hall know that, and I know that. That’s what motivates us. Our challenge, and my challenge in particular, is to re-dedicate ourselves to ensuring sufficient New Zealanders understand that, so we can together bring this sorry Labour Government, this tired Labour Government, this outdated Labour Government, this Government that is trying in vain to swim against the international tide, to an early end, to the benefit of all New Zealanders.

Ends