Hon Phil GOFF Leader of the Opposition

1 October campaign launch 12 Noon Monday, 27 September 2010.

SPEECH NOTES

A few days before the election in 2008 John Key was asked if National was planning to increase GST to 15 per cent. He gave an unequivocal answer. He said - National is not going to be increasing GST. The answer was emphatic and left no room for nuance. It was also crucial. Had he given any other answer, the issue would have dominated the election campaign. His solemn pledge not to increase GST shut the issue down. But this week, on 1 October, John Key will break his word. National will increase GST to 15 per cent. They will ignore the evidence that families are feeling the squeeze. Even middle income families are finding it hard to make ends meet.

They will claim that families are getting tax cuts. But for most families those are being gobbled up straight away by price rises, increased GST and higher charges for services like ACC.

Prices keep going up. Things should be getting better for hardworking Kiwi families but they’re not. And while prices are going up, wages are stalled. The recovery is on hold. We should have been growing strongly out of recession by now. Returns on our exports like dairy and timber are at near record levels. At the start of this year economists were forecasting we might get growth rates as high as six per cent.

But National put that recovery on hold because it had no idea how to build a stronger economy that works for people - with more jobs and higher incomes.

We don’t need more gimmicks like the cycle pathway. We need some decent action. There aren’t enough decent jobs. Labour is demanding better. But the public also wants to know what we would do. We will go to the next election with a detailed vision for more jobs and higher incomes. Labour will support innovation in our clean tech industries. We will change monetary policy to better support exporters and home buyers. We will build more savings and more skills. Labour will create tools to own more of our own future. I will release detailed ideas around all these job-creating ideas over the next 12 months. And at the same time, Labour will help hardworking Kiwi families get ahead by taking the pressure off grocery bills. Today I am announcing a Labour commitment that we will take to the next general election: Labour will remove National’s 15 per cent GST from fresh fruit and vegetables. Wages aren’t keeping up with prices. Taking GST off healthy, unprocessed fruit and vegetables helps gives families some relief. It helps make them healthier. Labour has studied new research by Auckland University, in conjunction with Otago University. It is internationally important research - and it demands a response. It shows: People will switch their diet to healthier eating if there is a price incentive. A price incentive about the size of GST is more effective than anything else researchers tested to get people to switch to healthy foods.

In the light of research, the options are to take action research shows will be effective; or to ignore it and allow a serious health problem to continue to grow.

According to figures published in the Economist last Friday, New Zealand has the world’s third worst problem with obesity.

It costs us at least $500 million a year, and the cost is rising when health budgets are already under pressure. Action has to be taken to stop it reaching epidemic levels. Health experts say the high number of very obese children is scary and the Government is doing nothing to help.

Better nutrition through price signals is a key. Most countries have an exception to a comprehensive GST. Out of 30 OECD countries with New Zealand’s rate of GST or higher, only three don’t have exemptions or lower rates of tax on some food items.

I have always supported a comprehensive low rate of GST. So when National increased the rate of GST, we had a choice: either to reverse the GST rise, or to make it fairer by providing some relief.

Unwinding the GST-income tax switch would be enormously complex and cutting all of the GST increase out unaffordable at this point.

Once the government has jumped off a cliff, you can’t just go back to the top as if nothing was broken. But we can reduce the unfairness and the pressure on hardworking Kiwi families. Fairness and hardship are important considerations as well as purity. An exception for fresh fruit and vegetables avoids the usual complaints about exceptions - it isn’t complex. If it’s not a fruit or vegetable, it won’t have GST removed. If it’s not fresh or unprocessed it won’t have GST removed. It’s easy for anyone to decide if a product is a fresh and unprocessed fruit or vege. Since I said Labour would look at this issue I have seen ludicrous statements that it would be hard to tell if meat and chicken were in; if bread and pasta were in, if toffee apples and strawberry yoghurt were in.

Let me be clear - meat and chicken are not fruit or vegetables. Neither are bread and pasta. Strawberry yoghurt and toffee apples are not fresh and unprocessed. But there is a serious point here - some serious people like economists and newspaper editors have growled that they can’t tell the difference between an unprocessed apple, and a carton of orange ice cream.

So that shows you how important it is to give price relief to the right products. If you as a consumer can’t tell if something is fresh and unprocessed, then the price signal will help you to make a good choice anyway.

There is a serious point that we won’t take GST off some healthy foods that are processed - like bread, for example. Labour will only take GST off unprocessed food because that is simple and avoids arbitrary lines being drawn between food varieties. Not everything that is healthy is excepted, but everything that’s excepted is healthy.

Fresh fruit and vegetables is a simple and clear category of food that anyone can understand. Earlier this year the government put up the tax on cigarettes. It will earn an extra $200 million a year in tax revenue as a result.

That was the right thing to do - but instead of using that extra revenue for health, the government used it to help pay for tax cuts for top earners.

If it’s appropriate to put up the price of cigarettes by $200 million a year in tax because you want to discourage smoking, why wouldn’t you spend the same amount to reduce the price of healthy fruit and vegetables to encourage people to eat what is good for them?

Labour has looked at the impact this increase will have on retailers. And we have looked at Australia. We found that removing GST from fruit and vegetables is relatively straightforward, with a small one-off cost to put it in place.

Once the systems are in place, it is simple to operate. Many businesses already deal with zero-rated inputs, such as rent, financial services, second-hand goods and overseas travel.

Zero-rating another defined input that most businesses don’t deal with is much easier than the complexity of increasing GST to 15%.

The Australians, British and Canadians, of course, and most other OECD countries already remove particular food items from GST. To say it’s hard to do just isn’t true.

The Australian Tax Office provides software that simplifies the process. The advice we got from Australia was that it is the support you provide through the IRD that is important, much more than the actual rate of GST.

Axing GST on fresh fruit and veges is good for families. Wages aren’t keeping up with prices. Taking GST off healthy, unprocessed fruit and vegetables helps gives families some relief.

And it helps make us healthier as a nation.

ENDS

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