Prime Minister's Post-Budget Speech To ParliamentPrime Minister
Listening to the Budget today made me feel proud to be a New Zealander.
This is my nineteenth year in Parliament. I have listened to a lot of budgets. Some of them have been damn awful. This is the most balanced budget I have seen in those nineteen years, because it sets out a clear vision for a more prosperous and decent New Zealand.
The Budget deals with the long-term issues and not the short-term fixes for New Zealand's problems. It reconciles the need for fiscal prudence with the need for investment in the economy and in our social areas. It provides for the non-material parts of our national life, for our environment, our arts, our culture and our heritage. They all get their place in the sun – and not before time.
I want to congratulate Michael Cullen on the remarkable job he has done on putting the budget together, and I want to commiserate with Wyatt Creech on his extraordinary amnesia.
At the last election I led Labour into government with the Alliance on the basis of some very clear commitments. We knew New Zealanders were looking for a change of direction. New Zealanders were looking for human values to come to the fore again in public policy.
We did not underestimate the size of the challenge before us. The challenge was first and foremost in the economy. It was still overly dependent at the end of the twentieth century on commodities, and we have experienced at best patchy growth over a long time.
There is a transition that has to be made to a new economy. But our country has been trailing far beyond other western countries in trying to make that transition. We have been sucking in imports far beyond the capacity of our exporting to pay for them. Our current account was in a bad state.
On top of that we have been seeing skills shortages choking off the potential for growth that did exist in the economy, and there was a feeling that we were sliding backwards as a society: that the gaps opening up were too vast; that the health services couldn’t provide; that higher education in particular was too expensive; that older people couldn’t live in dignity and were seeing their living standards sliding; and that crime was a growing problem. Those were the challenges, and we went into that election saying: they’re big, and we can’t change the world overnight, but by God we are going to make a good start – and we have!
When we got our ministerial warrants on the 10th December we rolled up our sleeves and we got on with the work that has gone into this budget presentation today.
Despite the requirements of the Fiscal Responsibility Act, there were some shocks in the books. Up to some $200 million had to be found just to carry on the existing operations in critical areas like our Children, Young Persons and Family Service, our Inland Revenue, and Police. Their funding needs were not catered for adequately in last year’s budget baseline provision.
My own portfolio of arts culture and heritage was full of hidden horrors. The New Zealand Symphony Orchestra’s money was to run out at the end of May. Te Papa was running on the basis of a letter of comfort from Bill Birch, which wouldn’t be very comforting to any normal person. And everywhere else one looked, the arts infrastructure was fragile and teetering on the brink. That was the primary reason for the cultural recovery package announced on 18th May: to stabilise the sector financially and put it on a firm footing to face the future with confidence. This is a government which recognises the intrinsic value of a strong arts, cultural and heritage sector, and recognises the potential economically of a strong creative sector for employment and for export earnings.
A creative nation releases energy, right across the performing and visual arts, to film, television, new media, the internet, design, technology, fashion, architecture - you name it. That sector will enable us to rebrand this country in the twenty-first century as a dynamic and young country drawing from so many heritages and presenting to the world products, services and technologies which are leading edge. That is where our future will lie.
This budget delivers on the core commitments that we made on our commitment card. It is a very long time since a government in New Zealand delivered on what it said it would do before an election. That has been the outstanding and distinguishing feature of this government. We made core commitments and we are keeping them. Some were announced well before the Budget, some even before Christmas. For others the details are in the budget today for the first time.
Our first commitment was around economic growth and development. The Budget makes huge investments in this area.
The development of the new economy is going to be driven by science, research, and technology. There is a ten per cent increase in funding in that area. That's an extra $43 million, around half of which goes straight out to the private sector in grants.
There is a new grants programme for research and development for the private sector with almost $12 million in it, and almost another $9 million more funding for Technology New Zealand.
Yes, we have opted for grants over tax incentives because we know that innovative start-up firms don’t pay tax at all. Therefore a system based on tax incentives does them no good. We know also that the design of research and development tax incentives is difficult and that without great care you can see great leakage from the revenue base without the extra research and development you hope to attract.
There is also greatly increased funding for basic research which has the potential long term to create new areas of potential for business.
And then there is the industry and regional development programme. I do not underestimate the size of the task Jim Anderton has had in setting up this programme, because over a long period of time now the State has progressively divested itself of the capacity to deliver in this area. A new Ministry, the Ministry of Economic Development, has had to be set up. A new agency, Industry New Zealand, is being created. New funding of over $330 million over four years is going into their programmes.
They will work with the regions on economic strategies. They will have industry specialists and grants to work with and support our firms with growth potential as yet untouched. They will be able to provide small early stage financing to get new business ideas up and running and employing our people and creating wealth for our country.
We will see Trade New Zealand playing an expanded role in getting direct foreign investment into New Zealand. .
This whole approach based around industry and regional development and growth and investment in science, technology, and research is about laying the basis for a more sustainably growing economy with higher value industries than we have had.
This is a government that believes that growth to be sustainable has to be led by production. Perhaps the greatest folly of the previous government was to ignore the production side and try to stimulate growth through increased consumption based on tax cuts. That flawed policy has to bear a direct responsibility for the blow-out in the current account because it has seen us continuing to import far more than our exporters can ever cover through their work. That is what we must now change, and we are changing. We are looking to the longer term.
The new higher value economy needs highly educated and skilled people in much larger numbers than we have them today. That is why this budget delivers in such a big way on education and training.
On our commitment card we were very specific. We said we would cut the costs to students at tertiary education starting with a fairer loan system – and we have done that. We have done it massively. It is costing us over $420 million over four years to make that scheme fairer. But we have done it in the belief that we will over time attract more people into education and training if the cost is seen to be fair.
There is also almost $110 million extra over four years going into tertiary fees stabilisation. Believe me that is a huge change. If you look at the fee increases over recent years in our tertiary institutions they are horrific, and I don’t blame the institutions. The last government had a sinking lid on investment per student in tertiary education and the families and the kids were paying for it. We are aiming to stabilise the fees.
One element of the budget which had almost no pre-publicity but which I want to congratulate the Minister of Health and the Minister of Finance on today is the spending in the health area, which is simply phenomenal.
I acknowledge that in the run-up to the last election the National Party in a panic decided to increase the baseline health funding and that was certainly useful. But we have gone better than that. On top of that we are able to put in another $74 million a year to elective surgery and there is huge progress now able to be made in mental health funding.
Let’s think of that in terms of what it does for ordinary New Zealanders. I have been associated, as has David Cunliffe, the Member for Titirangi, with a family whose son was killed by a mentally ill person who was not properly supported in the community. That family has petitioned this Parliament to ask for the Mental Health Commission’s Blueprint to be implemented so that no family ever suffers like their one does again because of gaps in services.
I believe that what the Minister of Health and the Minister of Finance have delivered today in the budget for mental health, which is $257 million more over the next four years, is going to enable us to make huge progress in seeing that the mentally ill citizens of this country have their needs properly met. That is long overdue.
There has been a lot of publicity before the budget about other core areas of the commitment card. There was the pledge to the superannuitants that this government would make good the pledge of the 1993 Superannuation Accord to keep the married base rate for superannuation at no less than sixty-five per cent of the net, average, ordinary-time weekly wage. The last government was prepared to let that fall to sixty per cent and see considerable hardship develop among our superannuitants.
We pledged to put that right. The Minister of Education says the last government wanted to cut superannuation further, and he’s right. The first thing they tried on their coalition allies was to drop the base level to fifty-five per cent, not sixty. They got stopped at the pass at sixty, but we knew where it was heading under National – ever downwards.
Elderly people live in fear with governments like that. This government has restored the level as the major political parties agreed that it would be back in 1993. Labour, National, Alliance and Peter Dunne were parties to the Accord. We know that it has brought considerable comfort to elderly people to see more than $21 extra a week go into the pay packet of married superannuitants and over $12 extra into the pay packet of single superannuitants.
In housing we are able to implement the full pledge on the income related rents by 1 December this year. The ordinary low income households of New Zealand who depend on state rental housing are hanging out for 1 December because it is going to put discretionary income back into the pockets of those families.
When we move back to social allocation of housing we will see that the neediest people get the chance to have a state house, because that is what state housing was built for and we are restoring that original mission. I am proud to say that Catherine Holloway who featured in my election campaign opening has a state house under the Labour Government for her children and will have an income related rent by 1 December. I am proud to say that.
Our commitment card also talked about initiatives to reduce burglary and to reduce youth crime. The Minister of Justice and the Minister of Police have made very important announcements about that and we look forward to proactive policing and justice services which will make a real impact in that area.
I want to say now a word about the government’s commitment to closing the gaps. In the 1980s and 1990s in New Zealand inequality deepened greatly. Many research studies have pointed to that, including one recently commissioned and released by the New Zealand Treasury.
Unfortunately New Zealand has had faster growth in inequality than any other country in the developed world. That is shameful. In our country that inequality has had a unique and unfortunate dimension. There has been a growing disparity between the life chances of Maori and other New Zealanders, and Pacific peoples and other New Zealanders. It is simply not tolerable to this government to see tangata whenua consigned permanently to the status of disadvantaged citizens in their own land. It is not acceptable. That’s why earlier this year we set up a special cabinet committee to work on closing the gaps.
The gaps have increased over time and it will take time to decrease them. But what is important is that we take the right steps now to start the process. There has been a strong voice from Maoridom urging that it be able to take control of its own destiny, determine its own strategies, and devise its own solutions.
That means the government going back into the mainstream budgets and ensuring that funding meant for Maori actually delivers for Maori. The evidence is that it has not been.
It means strengthening the capacity of Maori organisations to strategise, to plan, and to deliver services. That is why $140 million over four years is going into plain ordinary provider development for Maori and Pacific peoples’ organisations.
Those communities too will benefit enormously from the many policies of this government which are of greatest help to low income people: the rise in superannuation, the income related rents, and the extra funding in the public health system and education. But in particular the budget is making provision to promote equality of opportunity for Maori and Pacific peoples, in education, in health, economic development and employment, youth justice, and housing.
The emphasis on closing the gaps is strong for three reasons. First, it is a simple issue of social justice. Second, for Maori, it is a Treaty issue. Third for all New Zealanders it is important that the growing proportion of our population which is Maori and Pacific peoples not be locked into economic and social disadvantage, because, if they are, our whole community is going to be very much the poorer for it.
I want to conclude by saying that this budget makes a choice. It makes a choice for investment in our people, our infrastructure and our economic development.
This budget is not about cutting and slashing public services and spending. It is a budget that is about building and it is about making investments for the long term, starting right now.
May the twenty-first century in New Zealand be known as the century of the builders and the restorers, not the wreckers and the destroyers.
May this century see the ordinary, decent, hard-working people of New Zealand finally reach their reward from a more prosperous society which is prepared to share its gains and not see them hogged by a few at the top.
May this century see a New Zealand where the gaps begin to narrow not to widen further; where the environment is cherished, and this budget delivers in a big way in that area; and where we all enjoy and benefit from a creative sector which expresses our unique identity as a country, and contributes to the rebuilding of our economy as well.
Those are my hopes for our country in the twenty-first century. A new century with a new government, new hope, and a new budget which gives a fresh start.