The Minister is going to talk about the details of our benefit reform package in a moment, but I am going to start by giving you a broad overview of what we are doing and why.

The first thing I want to say is that when Minister Bennett and I talk about the welfare system we are doing so with a healthy amount of first-hand experience.

When I was young, and my father died, my mother relied on the Widows Benefit until she could get back on her feet and into a job.

The Minister was a young sole parent who received the Domestic Purposes Benefit on and off for a number of years.

As a result, both of us have a strong commitment to the safety net that welfare provides.

We believe in a welfare system that supports people when they are most in need, encourages them to get back to work, and occasionally gives them a kick in the pants when they are not taking responsibility for themselves, their family, and other taxpayers.

Currently there are around 345,000 working-age people receiving a benefit.

Some people on a benefit will realistically never be able to work and the welfare system will continue to support them.

But for most people, a benefit should only provide temporary support until they can return to work. In fact there is little chance of a better future for beneficiaries and their children unless they do come off a benefit and work for an income. Long-term welfare dependency imprisons people in a life of limited income and limited choices.

Many people on a benefit can't wait to take the step back into work and we should applaud them for that. Some are fearful of it, however, and others are downright resentful. But the world of work is always going to offer more possibilities than the limitations of welfare.

There's another factor here, too.

People who receive a benefit are able to do so only because others are going to work every day, earning a wage and paying taxes. In many cases these are people who are themselves far from well off.

So it's not fair on working New Zealanders to have people receiving benefits but not making every reasonable attempt to pick themselves up, find a job, and stand on their own two feet.

For these reasons, our benefit reforms are squarely focused on getting people back to work as soon as possible.

These reforms will seem very familiar to many of you because they are, with a few tweaks, what we campaigned on at the last election.

Out of the whole package there are five aspects I'd like to outline briefly.

First, the Government is going to introduce part-time work obligations for two new groups of beneficiaries.

These are DPB recipients whose youngest child is aged six or over, and people on a Sickness Benefit who have been assessed as being able to work part time.

These people will need to be available for part-time work of at least 15 hours a week and accept suitable job offers, or undertake work-related training.

Work and Income will, however, have a good deal of flexibility around people's individual circumstances. And where people do not have the skills to get a job we will work with them to help them gain the skills they need.

Second, the Government will introduce more graduated sanctions for people who don't comply with their work obligations.

At the moment, case managers have only one real sanction and that is to stop benefit payments altogether.

The Government is going to give case managers more flexibility, and a better range of tools, by introducing an intermediate step of a 50 percent reduction in the person's benefit, followed by full suspension and then cancellation of the benefit.

Where beneficiaries have children in their care, however, they will face a maximum sanction of half their benefit.

The third part of the package I want to highlight is an increase in the amount that people on the DPB and Invalids Benefit can earn each week, without affecting their benefit, from $80 to $100. This will happen together with some other adjustments to abatement thresholds.

These changes will give beneficiaries an additional incentive to work a few hours a week, get into the work habit, gain some confidence, and start building work skills.

Fourth, the Government is going to change the rules around the Unemployment Benefit so it can only be granted for a 12-month period.

People who are still looking for work a year after going onto the Unemployment Benefit will have to reapply for their benefit.

As part of that process they will have to complete a comprehensive work assessment to determine what steps they need to take to move into or towards work.

These new rules will provide a strong signal that the Unemployment Benefit is a temporary support only, for people who are actively seeking work.

The last part of the package I want to mention is a system of more frequent reassessment for people on the Sickness Benefit.

The first two medical certificates issued to a sickness beneficiary will now be for a maximum of only four weeks each. This will ensure more attention from the person's doctor and case manager during the all-important first two months on the benefit.

People on a Sickness Benefit will also face a compulsory reassessment by their case manager after 12 months, and this may involve a referral to a designated doctor.

It is important to note that the reforms we are announcing today are not focused on saving money in the short term; they are focused on improving outcomes for beneficiaries.

Over the medium-to-longer-term, however, these changes will help with the sustainability of the welfare system. For example, if we were to assist just five percent of sole parents with a youngest child aged over six into work, there would be a saving of almost $200 million over the next 10 years.

While these reforms will improve the benefit system, there is still more work to be done. The Government remains concerned about the prospects of a growing welfare roll in the decades ahead, accompanied of course by an increasing welfare bill.

I signalled in my Statement to Parliament that we would be establishing a working group to advise us on ways to reduce long-term dependency on welfare. That process is going along well and we will soon be able to announce the membership and terms of reference for this group.

Today, however, is about the Government's package of benefit reforms and I'd like to hand over the Minister to talk through it in more detail.

 Click here to read Minister Bennett's media release

Click to download a summary sheet in PDF: Future Focus (pdf, 341 Kb)

Thank you for inviting me to speak here on the North Shore.

I'd like to start by acknowledging the huge contribution older people make to society in every walk of life: as grandparents, friends, colleagues and as mentors to the younger generations.

Your organisation, Grey Power, has a long history of standing up for the interests of older New Zealanders.

I appreciate the good relationship Grey Power has with the government. A number of ministers meet with Grey Power regularly, and I know that the Minister for Senior Citizens, John Carter, speaks to Grey Power meetings on a frequent basis.

We have had a very busy year-and-a-half as the Government.

As well as getting New Zealand through the global economic and financial crisis in as good a shape as possible, the government was committed to advancing our election policies and keeping our word to the voters who placed their trust in us.

The vast majority of our election polices have already been implemented, or are well on their way.

In Health, for example, we have delivered an additional 11,805 elective operations - a record annual increase. We have funded a 24-hour Plunketline and a 12-month course of Herceptin. We have increased the number of doctors being trained and introduced a new voluntary bonding scheme to encourage health professionals to stay here in New Zealand.

In Law and Order, we have passed new laws to toughen sentences and restrict bail for violent offenders, improve police powers, crack down on gangs and support  victims of crime. We have provided funding for an additional 600 frontline police, and we've given the police new tools to go after criminals, including 720 tasers and the power to DNA-test offenders arrested for imprisonable offences. We've passed legislation to deal with boy racers and we've launched a crackdown on the drug P which is already resulting in increased seizures, lab busts and prosecutions.  And we have legislation before the House to strengthen New Zealand's parole laws.

In Education, we have legislated for and designed National Standards in literacy and numeracy for Year 1-8 children. We have invested in a 21st Century Building Plan to build new schools and improve existing ones. We have increased the options for secondary-age students outside the traditional school system by progressing our Youth Guarantee and Trades in Schools policies.

We have also completed the first stage of Resource Management Act reforms, taken decisive action to sort out the electricity sector and have put red tape under the microscope, undertaking reviews of 14 major pieces of legislation.

We confirmed an unprecedented $7.5 billion of new spending to invest in much-needed infrastructure and unclog New Zealand's economic arteries.

As a government we have done what we were elected to do and we have kept our promises.

I want to take some time today to talk about tax. This is an issue that Grey Power members, and older people more generally, are interested in, and understandably have some concerns about.

Before I get onto that subject, however, I'd like to make a few comments about New Zealand Superannuation.

My cast-iron commitment has always been that the government will maintain payments linked to 66 per cent of the after-tax average wage, and people will continue to be eligible for Superannuation when they reach the age of 65.

Future funding at this level is locked into the government's long-term spending path and is reflected in all of the government's accounts including projections far into the future.

That will continue to be the case no matter what our political opponents say.

Moreover, our opponents appear to have missed a vitally important point.

What enables the government to keep paying Superannuation far into the future, despite an ageing population, is a healthy, growing economy, with a budget in surplus and low government debt.

That is why this government's focus has squarely been on limiting the effects of the global recession, putting in place measures to grow the economy in the future, and getting the government's finances into a sound position.

When we came into office late in 2008, the Treasury was predicting that government debt would spiral out of control in future decades. With sound management, this Government is keeping debt under control.

Only a government which has debt under control will be able to pay for Superannuation, as well as health care, law and order and everything else, in 2025.

So I would be very suspicious, if I were you, of any party that seeks to ramp up government spending by borrowing lots of money.

I now want to talk about tax.

As you may know, the government is currently considering a package of tax measures, where some taxes would go up and others would go down.

Overall, we are not trying to increase taxes, but to get a better mix of taxes.

We have had an expert, independent team called the Tax Working Group looking at the tax system for the last eight months. Their advice is that the mix of taxes in New Zealand is not ideal - in fact, far from it.

So the Government wants to make some changes to the mix of taxes.

That is for a number of reasons.

First, we want to encourage people to save, invest their money in productive businesses, and get a good return for that investment. One particular problem we have in New Zealand is that too much of our investment is in property and that is in part because of our tax rules.

Second, we want to increase the incentives for people to work hard, improve their skills and get ahead here in New Zealand. We don't want young New Zealanders feeling they have to go to Australia, or further abroad, to make a better life for themselves. Some of you will have children or grandchildren living in Sydney or London and you'll know exactly what I mean.

And third, we want a tax system which is widely regarded by New Zealanders as fair and reasonable, and which limits the opportunities some people have to rearrange their affairs to pay less tax. In other words, we want people to pay their fair share of tax, not duck and dive to avoid it.

The Tax Working Group discussed a lot of different options for changing the tax system.

Some of these the Government won't be taking forward.

We are not, for example, going to progress any ideas for a new land tax.

A big reason for that is the effect a land tax would have on older New Zealanders, who might well own the section their house is on, but have no ability to pay an extra tax. That would be unfair.

We are also not going to progress any ideas for a comprehensive capital gains tax.

However, the Government does believe there is a gap in the current tax system around property investments.

Property has been a very popular investment for New Zealanders.

Overall, New Zealanders have around $200 billion invested in rental properties - nearly four times the size of the entire New Zealand share market.

People are obviously getting a financial benefit from investing in rental property but, overall, no tax is actually being paid. In fact, in this sector the government is giving more money back through tax losses than it receives in actual tax payments.

In contrast, those people who have their savings in a term deposit at the bank, are all paying tax on the interest they earn, at up to 38 cents in the dollar.

Over-investment in rental property has also been a factor in driving up house prices, making it really tough for young people to buy their first house.

The Government will therefore be making some changes to the way property is taxed. Those changes will result in increased government revenue and more fairness for taxpayers. We will announce them in the Budget in May.

As part of the overall package of tax measures, the Government is also considering an increase in the rate of GST to 15 percent, together with a reduction in personal income taxes across the board, and up-front increases in benefits, New Zealand Superannuation, and Working for Families payments.

What would be the effect of this tax switch?

The immediate effect would be that prices would rise by just over 2 percent but at the same time people would have more money in their pockets, through income tax cuts and increases in benefits, Super, and Working for Families.

As a government, we are working to ensure the extra money in people's pockets would be greater than the increase in prices. If we can't ensure that happens for the vast bulk of New Zealanders, we won't be increasing GST.

Let me tell you how that compensation would work for Superannuitants.

As part of a tax switch, Superannuitants would get an increase in income through two completely separate channels. I think of that as a "double-whammy" increase.

First, Superannuitants would get an income tax cut, which would apply both to Superannuation payments and to any other income they receive, for example from interest, dividends or part time work. It is important to remember that Super, unlike other forms of income support, is legislated on a gross basis, so a tax cut means that Super payments have to go up.

Second, and in addition to their tax cut, Superannuation payments would be increased up front, by just over 2 percent, to reflect the general rise in prices. What I mean by ‘up front' is that the increase in Super payments would be immediate from the day GST went up, without waiting for the usual annual inflation adjustment.

This double-whammy increase means that under an income tax/GST switch, Superannuitants would have their incomes lifted quite significantly, and by an amount that exceeds the increase in prices.

In addition to this, the floor for Superannuation payments would rise, because across-the-board tax cuts will increase the after-tax average wage. Super payments for a married couple cannot drop below 66 percent of the after-tax average wage, so any tax cut that affects the average wage will also affect this floor for Super.

So, when people talk about GST you should bear in mind these different means of compensation, which together are quite substantial.

Earlier I talked about the immediate effect of a tax switch between GST and income tax. I now want to briefly discuss the longer term effects on the economy.

Switching GST and income tax is not simply a money-go-round, as some commentators have mistakenly assumed.

Reducing personal income taxes, together with an increase in GST, in fact gives people more choices.

Take a young couple whose take-home income goes up as the result of an income tax cut. They can use that increased income to save, or pay off a mortgage, and they are not taxed on it. GST is a tax on spending, not on saving.

In addition, when the couple do save money, and earn interest or dividends on their investments, they will get to keep more in the hand, because of the cut in income taxes. These cuts will make a difference.  For example, a reduction in the second-highest tax rate from 33 percent to 30 percent would represent around a 4.5 percent increase in the return to savers. That sort of increase is an additional reason to favour saving over spending.

Furthermore, because each person's tax rate has gone down, they have a better incentive to work hard, do some more hours, seek a promotion, or up-skill themselves, and do all that here in New Zealand, because they get to keep more of any extra money they earn.

For all these reasons, a tax switch would encourage savings and investment, help increase economic performance, and give young Kiwis a reason to stay here in New Zealand.

There's one more thing I'd like to say about tax, and about GST in particular.

On Sunday Phil Goff starts his two week bus tour of New Zealand to campaign against a rise in GST, and he says he'll drop in on Grey Power along the way.

I hope he does.

Because while he's visiting you could ask him whether he is going to campaign in 2011 on lowering your Super payments, taxing you more on the interest you get from the bank, while also lowering GST. I bet he doesn't.

And you could ask why, when Labour was in government, Phil Goff, Annette King and Trevor Mallard all voted to increase GST to 12.5 percent with no compensation at all for low income workers, beneficiaries, or Superannuitants.

How they can launch an anti-GST campaign after that is beyond me. That's opposition politics I guess, but it's rather hollow and hypocritical.

Can I say in conclusion that the Government is committed to a number of things.

We are committed to lifting the long-term performance of the economy, to making New Zealand a more prosperous country capable of providing well-paid jobs and a better standard of living for everyone.

We are committed to providing the world-class public services needed to give opportunity and security to New Zealanders and their families.

We are committed to making New Zealand a place where your children and grandchildren want to live, work and raise their own families.

We are committed to maintaining Superannuation payments linked to 66 percent of the after-tax average wage, and from age 65 onwards.

We are committed to a better mix of taxes and a tax system where people pay their fair share.

As a result, New Zealand will be a better place to live, work, invest, grow up and retire.

There can be no greater outcome than that.

Presented to the House of Representatives in
accordance with Standing Order 345

The Government starts 2010 with a very full programme of reform in front of it.

Our eyes will be firmly on the economy this year as we continue to implement our economic plan.

Only by lifting our country's economic performance can we deliver New Zealanders the jobs, increased incomes and better living standards they aspire to and deserve.

Last year saw the worst global economic and financial crisis since the Great Depression. Almost all the world's developed countries went into recession and a number are now facing fiscal crises.

For more information on National's economic priorities in 2010, click here. For more information on National's social priorities in 2010, click here.

The good news is that New Zealand has weathered the worst of the global crisis, and New Zealanders can be pleased at how well this country has come through it.

The economy has performed better than almost anyone expected a year ago and is now starting to grow again.

That has been due to a combination of factors including the resilience of New Zealand businesses, the relatively strong performance of trading partners like China and Australia, the swift monetary policy response of the Reserve Bank, and the sound economic management of the Government.

While unemployment is higher than any of us would wish it to be, it is encouraging that the loss of existing employment almost completely halted in the last quarter. But every person out of work is one too many. That is why the Government's focus remains on the economy and on jobs.

Last year we introduced a number of measures to help stem job losses, in particular by maintaining a sizeable fiscal stimulus, cutting tax and bringing forward public infrastructure spending.

However, in the longer term, sustainable jobs will only be created when people have the confidence to invest in productive businesses, which can then expand and take on new employees.

It is encouraging to see that businesses are reporting a marked increase in confidence, and are positive about hiring new staff over the coming year.

New Zealand actually has the opportunity to come out of the recent downturn in a better position than many other countries and be well placed to attract investment, build productive firms and create jobs.

We have a lot of things going for us as a country. We are rich in natural resources, we are one of the best food producers in the world, we have a beautiful landscape, and we are home to some of the smartest and hardest-working people in the world.

However we have not been making the most of our strengths.

This is demonstrated by the fact that the New Zealand economy was already in recession well before the global crisis struck. Our export sector was in poor shape, having stagnated for several years. New Zealand has long spent more than it earns, resulting in a high level of debt to the rest of the world. The Government is running budget deficits caused by a slump in revenue and previous big increases in spending.

In recent times New Zealand incomes have fallen further and further behind the countries we like to compare ourselves with, including Australia.

The Government is committed to turning things around and in particular to closing the gap with Australia.

We are keeping a tight lid on new spending over the foreseeable future, which will enable us to get the budget back into surplus and keep public debt under control. Tight control of spending will also help to keep pressure off interest rates, which means lower mortgage costs for New Zealanders.

Overall, our economic policies are aimed at shifting the economy more towards exports and productive investment, and away from consumption and borrowing.

2010 will be about putting in place policies to grow the economy and create sustainable new employment, not just this year but over the longer term. This Government was elected to achieve a step change in our overall economic performance and that is what we intend to deliver.

The Government's other priority this year is to make significant reforms in social sectors like the welfare system, education, the justice system, health and state housing. New Zealanders deserve a future with less unemployment, welfare dependence, crime and all the social problems that go along these. To secure this brighter future we have to get to grips with some of the big issues in these areas which have long been left unaddressed.

We owe that not just to the people who receive these important public services, but to all New Zealand taxpayers.

 

The Government's achievements in 2009

Before I lay out the details of the Government's programme for 2010, I want to briefly review the events of last year.

As well as getting New Zealand through the global economic and financial crisis in as good a shape as possible, the Government was committed to advancing our election policies and keeping our word to the voters who placed their trust in us.

The vast majority of our election polices have already been implemented, or are well on the way.

In Health, for example, we have delivered an additional 11,805 elective operations - a record annual increase. We have funded a 24-hour Plunketline and a 12-month course of Herceptin. We have increased the number of doctors being trained and introduced a new voluntary bonding scheme to encourage health professionals to stay here in New Zealand.

In Education, we have legislated for and designed National Standards in literacy and numeracy for Year 1-8 children. We have invested in a 21st Century Building Plan to build new schools and improve existing ones. We have increased the options for secondary-age students outside the traditional school system by progressing our Youth Guarantee and Trades in Schools policies.

In Law and Order, we have passed new laws to toughen sentences and restrict bail for violent offenders, improve police powers, crack down on gangs and support the victims of crime. We have provided funding for an additional 600 frontline police, and we've given the police new tools to go after criminals, including 720 tasers and the power to DNA-test offenders arrested for imprisonable offences. We've passed legislation to deal with boy racers and we've launched a crackdown on the drug P which is already resulting in increased seizures, lab busts and prosecutions.  And we have legislation before this House to strengthen New Zealand's parole laws.

We have also completed the first stage of Resource Management Act reforms, taken decisive action to sort out the electricity sector and have put red tape under the microscope, undertaking reviews of 14 major pieces of legislation.

We confirmed an unprecedented $7.5 billion of new spending to invest in much-needed infrastructure and unclog New Zealand's economic arteries.

We have passed legislation to amend the Emissions Trading Scheme, ensuring it strikes a better balance between New Zealand's environmental responsibilities and our economic opportunities.  This balance is vital to ensuring that New Zealand jobs aren't sacrificed in pursuit of overly-ambitious climate change targets. 

We have done what we were elected to do and we have kept our promises.

Our supply and confidence partners

None of this would have been possible without ACT, the Maori Party and United Future, and I want to acknowledge their ongoing collaboration and support.

They have given us support on confidence and supply, and on a range of bills consistent with their own policies. They have made a valuable contribution to the Government's decision-making in cabinet committees.

Importantly, between parties there has been a high level of trust, respect, and a willingness to find solutions together.

On occasion during the past year there have been differences of opinion between National and one or other of our support partners.  That is democracy in action.  But through it all, we have worked well together to provide stable and inclusive government for all New Zealanders.

 

Our priority for 2010 - the economy

The coming year will continue the Government's focus on the economy and on jobs.

Our goal is to lift the long-term performance of the economy, to make New Zealand a more prosperous country capable of providing well-paid jobs and a better standard of living for us all, and to provide the world-class public services needed to give opportunity and security to New Zealanders and their families.

At the heart of the Government's economic plan lies six main policy drivers: a growth-enhancing tax system; better public services; support for science, innovation and trade; better regulation, including regulations around natural resources; investment in infrastructure; and improved education and skills.

The Government has had a number of review groups and taskforces looking at these different aspects of the economy.

I have also asked Ministers to look closely at their individual sectors through an economic growth lens. I asked them to identify areas where the Government could remove barriers that prevent resources being used most productively, and where we could do more to encourage innovation, skills and employment.

These processes have helped the Government chart a clear way forward.

We are of course acutely conscious that New Zealand's wealth is ultimately generated by the private sector - by the small firms, the big companies, and the sole traders who generate the jobs, the profits, and the return on investment that drives our economy.  It is these businesses which will ultimately bring about the step change in the New Zealand economy.

A growth-enhancing tax system

The tax system changes people's behaviours and is therefore a powerful lever for the Government to boost economic performance.

The Government agrees with the Tax Working Group that New Zealand relies heavily on the taxes most harmful to growth, particularly corporate and personal income taxes; that there is a hole in the tax base around the taxation of property; that the tax system lacks integrity and fairness because of differences in the treatment of entities; and that there are significant risks to the sustainability of the tax revenue base.

We have a tax system that taxes labour and investment income at relatively high rates, taxes consumption at a relatively low rate and generally gives money back to people when they invest in residential property.

Is it any wonder that our economy is tilted towards consumption and property investment, that we have a shortage of savings, and that a high proportion of New Zealand graduates live overseas?

Tinkering over recent years has made the tax system more complicated, led to poor incentives in the economy, and created a raft of different ways for people to minimise their tax payments.

The Government will therefore be introducing measures this year to reform the tax system. We intend to announce those measures as part of the Budget in May.

The Government has a number of objectives with regard to tax reform.

We need a tax system that creates incentives for people to work hard, improve their skills and get ahead here in New Zealand.

And we need a tax system that encourages saving and boosts the productivity of investments.

In both these ways, the tax system helps to drive economic performance and create jobs.

Furthermore, we need a tax system which is not difficult to comply with or administer, which is regarded as fair, and which limits opportunities to divert income and reduce tax liabilities.

In other words, we want people to pay their fair share of tax. Fairness is a very important consideration to this Government. In working through reform options we are keeping the equity of tax changes squarely in mind.

That is one reason we are not only looking at possible reductions to the top personal tax rate. That is where a lot of commentary has focused, but the Government has always been looking at the whole personal tax structure, across the board.

The Tax Working Group discussed a broad range of options for tax reform. The Government has considered all of these options closely.

Some of the options discussed by the Tax Working Group are not favoured by the Government, for a variety of reasons, and will not be progressed.

In particular, we will not be developing any proposals for a land tax, a comprehensive capital gains tax, or a risk-free return method (RFRM) for taxing residential investment properties.

These decisions were taken after detailed consideration of the pros and cons.

Since there is only a certain amount of land, and it can't be moved overseas, a land tax appeals to economists as an efficient way to raise revenue. However, a land tax is effectively a lump-sum tax on people who own land at the time the tax is introduced, would only fall on people who hold their wealth in one particular form, and would create cash flow problems for many landowners, especially those with lower incomes.

An RFRM is another tax that, while having some conceptual appeal, would also create cash flow problems for taxpayers. A property owner could have a very sizeable tax bill each year under an RFRM, but little or no ability to pay it, except by putting up rents.

A comprehensive capital gains tax extends the tax net and is highly progressive. However in the Government's view it would make the tax system more complex to administer and comply with, and may encourage taxpayers to hold on to assets longer simply to avoid tax.

These new taxes are therefore off the table.

However the Government does believe there is a gap in the current tax system around property investments where income is being derived but, in aggregate, no tax is being paid - in fact the Government is actually losing revenue in this sector.

We will therefore be making changes to the way property is taxed, which will result in increased Government revenue and more fairness for taxpayers. These changes will be announced in the Budget.

The Government is also carefully considering a modest increase in the rate of GST, to no more than 15 percent.

We are acutely aware of the effect that a rise in GST could have on lower income families.

Therefore, if an increase were to occur it would have to be accompanied by across-the-board reductions in personal taxes, as well as up-front increases in benefits, New Zealand Superannuation, and Working for Families payments.

The net result of a reduction in personal income taxes, and a modest increase in GST, is to give people more choice. Their take-home pay would increase and they could use that increase to save, or pay off their mortgage, without being taxed on it. Savings and investment are therefore encouraged, rather than consumption.

GST is also a very difficult tax to avoid, no matter how people structure their financial affairs. As David Lange once observed, even drug dealers pay GST.

No decisions have yet been made about raising GST and the Government has asked for more work to be done on this.

Suffice to say, the Government would not embark on a policy of increasing GST unless it would benefit the New Zealand economy in the long term and unless it saw the vast bulk of New Zealanders better off.

The Government is not, however, considering any major changes to the Working for Families scheme.

Higher income families will benefit more from personal income tax cuts, simply because they pay more tax. The Government does not want to magnify this effect by taking money from low to middle income families through a reduction in Working for Families. In addition, increasing the targeting of Working for Families would run counter to the Government's desire to reduce people's effective marginal tax rates.

Our main concern with Working for Families is the possibility that people can earn a lot of income, but do so in a way that means they are still eligible for Working for Families payments. That is contrary to the intent of the policy, which is aimed at supporting genuine low to middle income earners. The Government is therefore looking at how to make Working for Families fairer in this regard.

While the Government has ruled out some of the proposals discussed by the Tax Working Group, most of the options discussed by the Group still remain on the table.

Better public services

New Zealanders also want to know that the tax they pay is being spent as wisely as possible.

This year the Government will continue to drive savings in the public sector, demand stronger performance from government agencies, and lift the quality of public services.

We began that process last year by capping core government administration and by conducting a line-by-line review of expenditure as part of the 2009 Budget. That review identified a total of more than $2 billion in spending over four years that was redirected to frontline services.

That was not a one-off exercise. The pressure on government departments to lift their game will be constant. Most agencies will see no additional funding for several years. They will therefore need to make enduring and significant changes to the way they operate, including reorganising their back office administrative functions, making better use of technology, exploring innovative options for delivering services, and sharing support services with other government agencies.

Resources must move to better support frontline services for the public.

The Government will also improve the way the Crown's assets and liabilities are managed. The Crown has a very large balance sheet, with over $200 billion of assets.  We owe it to New Zealanders to exercise a standard of stewardship that reflects the size of this investment.

Science and innovation

New Zealand's future economic performance depends to a large extent on generating and using new ideas.

We are home to some of the brightest and most innovative people, scientists and inventors in the world. Despite our small size, and distance from foreign markets, New Zealand companies have time and again proven themselves capable of producing world-beating products and services.

From Weta Digital and Icebreaker through to Zespri and Fonterra, New Zealand's leading exporters have harnessed science and innovation to develop new products and improve the way they do business.

The challenge for New Zealand is to get more of our firms using science, research and technology to deliver more valuable products and services, which in turn allows them to succeed in competitive export markets and to create new and better-paid jobs for New Zealanders.

Science and innovation are therefore key elements of the Government's economic agenda, both this year and into the future.

Our objective is a high-performing public science system which supports economic growth, and a wider innovation system that encourages firms to increase their investment in, take-up, and application of research.

This year the Primary Growth Partnership gets fully up and running, with the Government investing up to $40 million, alongside industry, in research and innovation to boost New Zealand's primary, forestry and food sectors. This investment rises to $70 million in future years.

We are also investing significantly this year in the Domestic Centre for Agricultural Greenhouse Gas Research, and in the Global Research Alliance, to drive much-needed research on agricultural greenhouse gas emissions.

This year the Government will fund a network of open access food development and commercialisation facilities across New Zealand.  This network will provide the infrastructure that food and beverage firms need to develop new ingredients and consumer products.

The Government therefore remains committed to high quality innovation in New Zealand's traditional resource-based sectors. However, we also want to boost our support for innovation in newer, knowledge-intensive activities like high-tech manufacturing. Growing a substantial portfolio of these businesses, beyond our core resource-based strengths, will be important for New Zealand's future economic growth.

In 2010 the Government will be making changes in the way we invest in Crown Research Institutes (CRIs).  The Government believes CRIs can be more powerful engines of growth and we plan to introduce changes to deliver greater benefits for New Zealand. We will also introduce measures to get more research and knowledge out of CRIs and into firms.

As I indicated earlier, the fiscal situation means that future new spending allowances can only be very modest, and most agencies will miss out on funding increases altogether.

Nevertheless, science and innovation, and how they can underpin business opportunities, are so important for this Government that we have made this area a priority for new spending in this year's Budget, with a focus on boosting business research and science capability.

Trade

This year the Government will continue to open up New Zealand exporters' access to world markets. We want to make it easier for New Zealanders to sell their goods overseas so they can create more jobs back home.

In 2009 we signed free trade agreements with Malaysia and with the 10 countries of the ASEAN block. This year we will be signing agreements with Hong Kong, and with the economies of the Gulf Cooperation Council.

The Government will also press ahead with perhaps our most important trade negotiation, working towards a free-trade agreement with the United States through the Trans-Pacific Partnership. In addition we will be undertaking important trade negotiations with India and Korea.

Efforts on the multilateral front will also continue, as we strive for a conclusion to the Doha round of WTO negotiations.

The Government will put considerable energy into obtaining these trade agreements because New Zealand's future economic prosperity depends on them.  New Zealand exports already support a significant proportion of jobs in New Zealand.  By increasing our access to world markets we have the potential to create many more of the high-quality and well-paid jobs that New Zealanders seek.

With regard to our main trading partner, Australia, the Government intends to push hard for progress on the Single Economic Market.

Australia is often the first stop for New Zealand businesses looking to expand into an overseas market, but getting to grips with different federal and state regulations can sometimes be a challenge. The Single Economic Market is about aligning the regulatory environment in New Zealand and Australia, so that a New Zealand company can do business in Palmerston, Northern Territory as easily as it can in Palmerston North.

We want to give the Single Economic Market a new impetus this year and that is something I will be discussing with Prime Minister Rudd.

Better regulation

Across all portfolios, the Government has been looking carefully at areas where overly-restrictive regulation may be getting in the way of doing business, and we have a commitment to better and less regulation.

Work will continue on a programme of regulatory reform designed to unleash enterprise.  This will include reviewing existing regulations in order to identify and improve or remove those that are unnecessary or ineffective. It will also include a careful review process to ensure that the introduction of any new regulation passes a high hurdle in terms of its likely effectiveness.

For example, the Government will continue to look at whether labour laws are imposing excessive costs on the country and holding back opportunities to create jobs.

 

We will be introducing legislation this year to amend the Holidays Act, following the report from the Advisory Group set up to examine this area. The Government also shares concerns from many quarters about the fairness and consistency of personal grievance decisions. We will be releasing a discussion document this year on ways to improve their fairness and certainty and, if necessary, will introduce amending legislation.

 

Unlocking resources

 

This year the Government will also be looking at regulations that may be preventing natural resources being used most productively, or in some cases being used at all. 

In general, the Government is in favour of unlocking resources for economic benefit and to create better-paid jobs for New Zealanders, where this is also consistent with our environmental, conservation and other objectives.

This year we will be pushing ahead with the second phase of resource management reforms. Ten separate streams of work are underway, covering economic growth areas like infrastructure, urban design and critical work on improving New Zealand's freshwater management.

The Emissions Trading Scheme will be in effect, and government agencies will continue to implement our climate change policy in a way which encourages New Zealanders to make choices that further our climate change goals, like reducing emissions and planting trees, while also ensuring New Zealanders' economic and job opportunities are preserved.

Last year the Government set up the Environmental Protection Authority that allows resource consent decisions for nationally significant projects to be made more quickly while continuing to protect the environment. Later this year we will introduce legislation to extend the Authority's mandate to oversight of hazardous substances and new organisms, as well as the administrative functions of the Emissions Trading Scheme.

New Zealand's natural resources have the potential to significantly raise New Zealand's economic performance.

It is a little-known fact that in 2008, New Zealand's third-largest export earner was oil. Last year the Crown received nearly $1 billion from petroleum production with $543 million being from royalty payments alone. This is revenue that has benefited all New Zealanders.

During this year the Government will progress an action plan to unlock New Zealand's petroleum potential. Estimates are that the petroleum sector could generate many billions more in export revenues by 2025.

There is also extraordinary economic potential in the mineral estate residing in Crown-owned land.

Mining in New Zealand uses just 40 square kilometres of land, less than 0.015 percent of our total land area. The export value of that land however is $175,000 per hectare, which makes mining an extremely valuable use of land.

The Government will shortly be releasing a discussion document for public consultation on potential changes to Schedule 4 of the Crown Minerals Act. Schedule 4 is the part of the Crown Minerals Act which prohibits mining or prospecting on specified areas of Crown land.

The discussion document will recommend that some areas of Crown land be removed from Schedule 4 and in addition that some areas currently not in Schedule 4 be added to it.

Notwithstanding the public consultation process, it is my expectation that the Government will act on at least some of these recommendations and make significant changes to Schedule 4. This is because new mining on Crown land has the potential to increase economic growth and create jobs.

I know some people have expressed concern about increased mining but I can assure New Zealanders that any new mines on conservation land will have to meet strict environmental tests.

Moreover, the Government is also proposing to establish a new Conservation Fund, potentially drawing on royalty revenue from mining operations on Crown land. The Conservation Fund would resource special conservation projects around the country. That means that if there is an increase in mining activity, New Zealand's natural environment would also be improved.

The Government will also take action this year to remove particular regulatory roadblocks to water storage and irrigation in Canterbury. This will be in addition to the work already being carried out by the National Infrastructure Unit and the Land and Water Forum on progressing water storage infrastructure throughout the country.

Overall, the Government is committed to ensuring that water storage and irrigation projects which meet environmental standards, and which are good economic propositions, can happen in a decent time frame.

The Government will introduce legislation this year to change the regulations governing the aquaculture industry. This is an area where the current regulations are stifling all prospects of growth in the sector.

Fonterra's capital restructuring proposal may require the Government to amend the Dairy Industry Restructuring Act 2001, which governs competition in the New Zealand dairy industry. This capital restructuring process is an exciting opportunity for New Zealand farmers and the country as a whole if it allows Fonterra to grow strongly into the future and deliver on its full potential.  In considering any proposal from Fonterra, the Government will ensure that the New Zealand dairy industry continues to operate efficiently and economic growth is maximised.

 

Improving access to capital

New Zealand businesses will only be able to grow and take on new workers if they have sufficient access to capital.

The challenge of accessing capital has increased since the global economic and financial crisis. Investor uncertainty has been high and a number of people lost money in investments they were poorly advised on or knew little about.

The Government will be focusing this year on ways to promote investment in capital markets while also strengthening protection for investors. We want New Zealanders from all walks of life to be able to invest their savings in productive businesses, either directly or through funds, with more confidence in the regulation of those capital markets, and with the knowledge they need to make informed choices. That is important if New Zealanders are to diversify away from their heavy reliance on property investment.

To this end, the Government has been considering the report of the Capital Market Development Taskforce as a matter of priority.

In the next week or so we will release our response to all of the Taskforce's recommendations, which range across several portfolios.

A good number fall within the scope of the review of the Securities Act that is already underway.

The Taskforce also concluded that there is an opportunity for New Zealand to become a hub for financial services in the Asia Pacific region, specialising in providing high-value middle and back office functions for the funds management industry. The Government is keen to see if this or similar new industries could be developed here and we have asked officials to determine what steps we would need to take to make that a reality.

Investing in infrastructure

 

The Government has begun its programme of infrastructure spending that will see an extra $7.5 billion spent over five years on productive infrastructure. That will contribute directly to job growth through increased spending, particularly in the construction industry, and indirectly by increasing the productivity of New Zealand firms.

Total capital expenditure over the next five years is likely to be around $24 billion.

The Government intends to invest $10.7 billion over 10 years on building new state highways. Construction will begin later this year on the Te Rapa Bypass in the Waikato, the Christchurch Western Corridor, and the Te Atatu-Lincoln section of Auckland's Western Ring Route.

We will continue work on the Christchurch Southern Motorway, the Victoria Park Tunnel, the Kopu Bridge, the Hawkes Bay Expressway extension, and many other projects besides. And this year will see the completion of the Manukau Extension and the Manukau Harbour Crossing in Auckland as well as a number of important regional projects.

The Government will also be progressing electrification of the Auckland commuter rail network.

In 2010, fibre will begin to be laid as part of the Government's $1.5 billion ultra-fast broadband initiative, and further investment will improve broadband in rural and remote areas.

Reforming local government

 

This year promises to be a busy and interesting one for local government. 

The Auckland Governance reforms we began in 2009 will continue with the new Auckland Council in place from 1 November 2010.  Aucklanders will elect representatives for the new Council and local boards at elections in October.

The reforms will simplify and streamline governance structures within the Auckland region.  This will result in better, more cost effective public services for Aucklanders delivered through integrated planning and service delivery across the region.

The Government is also committed to changes that will give all ratepayers better information about their local council and ultimately more influence over their council's activities and spending.

Tourism and the RWC

Tourism is one of New Zealand's key export industries. What is more, a strong tourism brand enhances New Zealand's profile and benefits other exporters, not just the tourism industry. Last year the Government boosted funding for marketing New Zealand as a tourist destination by $20 million. A number of new campaigns are being rolled out this year in key markets such as Australia, the United States and China.

A successful 2011 Rugby World Cup tournament is also a priority for this Government. Ministers have an ambitious programme, not only to ensure that the tournament itself is a success, but to maximise the wider benefits to New Zealand in terms of jobs and growth. The Government wants the positive impact of hosting the tournament to be felt long after the stadiums are empty (and the William Webb Ellis trophy is safe and sound in its new home at the New Zealand Rugby Union).

 

Foreign affairs and defence

The Government will continue to exercise an independent foreign policy, and to actively represent New Zealanders overseas. This includes being an important voice in the nuclear non-proliferation arena and as a constructive contributor to global efforts to secure an international climate change agreement. 

We will work closely with our Pacific neighbours, and continue the work we started last year to strengthen New Zealand's engagement in the region.  The Pacific will be our main focus for overseas assistance, to help develop the sustainable economic development these countries seek.  Our security efforts in Timor Leste and the Solomon Islands will also continue, as part of our commitment to a safe and stable Pacific.

New Zealand will continue its hard work in multilateral forums such as the United Nations.  Our commitment will also continue to the International Security Assistance Force mission in Afghanistan, building security and stability, ensuring a safe environment for redevelopment, and ensuring it cannot be used as a haven from which to threaten the world's security.

The first Defence Review and White Paper in 13 years will also be completed this year.  It will provide a clear analysis of the future strategic and defence challenges for New Zealand, and the type of defence force we will need to face it.  This blueprint for New Zealand's security will ensure that the New Zealand Defence Force possesses the capabilities necessary to protect New Zealanders and New Zealand's interests well beyond 2020.

Our second priority for 2010 - social sector reforms

The Government's other key priority for this year is to make significant social sector reforms. These reforms are needed for two reasons.

First, despite unprecedented levels of spending, too many New Zealanders are missing out on the quality public services they have a right to expect.  In a restricted funding environment we must find new ways to do more with less. 

Second, reform is needed to better equip New Zealanders, particularly young New Zealanders, to face the significant economic challenges they will face in an increasingly competitive world.

Education and skills

In this regard there is no more important area for reform than education.

This Government views our education system as one of the fundamental tools for creating an egalitarian society where all New Zealanders have an opportunity to succeed. 

We believe a high-performing education system at all levels is essential to ensuring New Zealand's young people have the skills they need to acquire the jobs of the future. 

The status quo is not good enough. While New Zealand is home to some of the best schools, teachers and students in the world, we are letting too many children and young people slip through the cracks. 

We must ensure that our young people have the skills that employers demand and that will lead to productive well-paying jobs. New Zealand simply can't afford a future where 20 percent of our workforce does not have the skills necessary for modern jobs.

Nor can we afford to get anything less than maximum value for the hundreds of millions of taxpayers dollars that we invest in our schools and tertiary institutions. 

This year National will progress the education reforms that are necessary to address underachievement in our schools, improve young New Zealanders' job opportunities and drive improved educational performance across the board.

Central to this reform effort is the implementation of our National Standards policy in all Year 1-8 state schools.

This policy will ensure that all parents, in all communities, can expect schools to regularly assess their children against national benchmarks in reading, writing and maths, to have this information reported to them in plain-language, and to know what is being done to support their child's progress.

National Standards will demand a significant step up in performance from some of New Zealand's teachers and schools.

To that end, the Government will be supporting our National Standards policy with further reforms designed to ensure taxpayers' funds are making it through to the children and schools who need extra support. 

That begins with early childhood education.   This year the Government will focus on increasing the number of children in our poor communities, and in our Maori and Pacific populations, who attend early childhood education. 

Children who don't attend any form of early childhood education start school at a significant disadvantage. Despite funding being poured into early childhood education in recent years, we are still not picking up and supporting enough of these children.  So the Government will this year be making changes to ensure better support is provided to the children who are missing out. 

We will also look carefully at how we provide extra support to schools where children are failing to reach National Standards in literacy and numeracy.  We want to make sure that where children are struggling, their school is equipped to intervene and help them as early and as well as possible. 

We will implement a range of reforms to lift the performance of these schools, and ensure that where children need extra help they get it. 

This will include improving the training of our teachers, both in our training institutions and in professional development programmes; refocusing the tens of millions currently aimed at struggling students; and intervening more aggressively in schools which are consistently failing their students. 

In making these efforts we are determined to be transparent with parents about how their children are achieving.   

This year we will develop a policy about the use of information collected through National Standards.  We want to strike a balance between being up-front with parents and communities on the one hand, and on the other hand ensuring that information isn't misconstrued or misinterpreted.  We will announce our policy in this area prior to the collection of National Standards data in 2011 and its subsequent reporting in 2012. 

The Government's reforms in education will extend well beyond our primary schools. 

In particular, we will be stepping up our push to ensure secondary-aged pupils have greater opportunities to learn trades and practical skills in schools and training centres.  We don't accept that a university education is a prerequisite for a good job, and we don't think our school system should function as if it is. 

So we are determined to ensure our secondary schools provide more students with the practical and trades skills that will empower them to enter further training or employment once they leave school.

This year we will make legislative and funding changes to modernise our secondary schools.  These changes will ensure that schools can access the trades and technology expertise they need; give them greater flexibility over their timetables; and ensure they can access the classrooms, equipment and expertise of other training providers.

We will also be continuing the reforms necessary to support our Youth Guarantee policy of providing 16- and 17-year-olds with the option of pursuing their education in the setting which best suits their needs, be it a school, polytechnic, workplace or other training provider.  

We know that such an ambitious programme of reform will not be without its critics.  However, the Government remains determined to work alongside communities, schools, teachers and education experts to ensure the success of all these education reforms.

Finally, the Government will be addressing the increasingly urgent problems in our tertiary education sector.

We are concerned that as a consequence of previous ad-hoc policy changes, there are a large number of tertiary programmes, particularly below degree-level,  that have drop-out rates as high as 50 percent, and that some of these programmes fail to properly equip students for the jobs they seek.   

We simply must improve the value we get from our tertiary education investment, both on behalf of taxpayers and employers, and on behalf of the students who take these courses. 

So this year the Government will be progressing the policy changes needed to ensure that tertiary education providers provide courses that are relevant to the modern job market and that are of a consistently high quality.   

We are also concerned that our universities, thanks to an inflexible and bureaucratic funding and policy framework, are finding it increasingly difficult to produce the world-class graduates New Zealand's economy demands.  We will be working with the universities to ensure Government policies support their drive for excellence and equip our best and brightest with the skills for New Zealand's future. 

We will also take a careful look at the policy settings around student support to ensure that taxpayers' generosity is not being exploited by those who refuse to take their tertiary studies seriously, or who show little inclination to transition from tertiary training into work. 

Better social services

We remain concerned about the overall effectiveness of social services provided to our most vulnerable citizens.

I have said it before, and I'll say again today: I worry that there are signs of an emerging underclass in New Zealand.

Child abuse, family violence, poor educational results, and crime continue to characterise the lives of too many New Zealand families, particularly amongst our Maori and Pacific communities.

The Government funds a broad range of social services to support families and communities. However, we are not convinced that our investment in these services is showing the results that taxpayers have a right to expect.

We continue to hear of families being trapped between bureaucratic government silos, receiving ineffective and patchy services that only entrench the cycle of dependency. 

This Government is determined to get better results for the funding and efforts we invest to confront these issues.

We are committed to improving those social services provided directly by the Government. We will also improve the way we work with the many Non-Government Organisations which provide Government-funded services in the community.

We want to reduce the bureaucracy associated with their work, improve the co-operation between different organisations, services and programmes, and generally achieve better results for the money we invest. 

Alongside this work we will continue to develop the Whanau Ora policy, which promises a new approach to the way the Government funds and co-ordinates social service contracts in many communities.

The Whanau Ora taskforce has been canvassing ways in which the Government could improve its approach to assisting families in need, and it will make a series of recommendations to the Government shortly.

The Government will consider the taskforce's report carefully.  It is our intention to announce the details of the first stage of the Whanau Ora programme in this year's Budget. 

In developing Whanau Ora we will ensure that it is available to New Zealanders of all races who are in need.

It is my expectation that Whanau Ora will work particularly well in addressing the problems too many Maori families face.

These problems haven't gone away since I spoke about them as Leader of the Opposition in early 2007, and it is in all New Zealanders' interests that we address them.  The status quo isn't working, hence the Government's willingness to consider new ideas.

 

Reform of the benefit system

 

The Government will this year introduce legislation to reform the benefit system, consistent with our election policies.

 

In 2010, New Zealand taxpayers will fund an estimated $7.6 billion of benefits and income support, not including Superannuation. This amounts to $20.8 million every day, or $867,500 every hour. It is critical we ensure this money is spent effectively.

I need to be able to look taxpayers in the eye and assure them that their hard-earned wages are not being used to support those who lack the will or desire to work as hard for their living as their fellow New Zealanders.     

There are many people on a benefit who will realistically never be able to work, and the welfare net will continue to support them.

But for most people, a benefit should only provide temporary support until they can return to work. In fact there is little chance of a better future for beneficiaries and their children unless they do come off a benefit and work for an income. Long-term welfare dependency imprisons people in a life of limited income and limited choices.

Our benefit reforms will therefore be squarely focused on helping people get back to work as soon as possible, and ensuring that they do so.

These reforms will include adjustments to the criteria and testing for a Sickness Benefit, to ensure it only goes to those people who are genuinely too sick to work.  They will include strict re-application rules to prevent people languishing on an Unemployment Benefit for more than a short period between jobs.  And they will increase the work and training expectations we have of people receiving the Domestic Purposes Benefit. 

These changes will be supported by adjustments to the benefit abatement regime, to improve the incentives on beneficiaries to, at the very least, take up part-time work.

These welfare reforms will have positive effects not just for beneficiaries themselves but for the sustainability of the welfare system.

If, for example, just 100 DPB recipients were to move off their benefit and into work, the welfare system would save close to $10 million over their lifetime. If we were to assist five percent of the sole parents whose youngest child is aged over six years into work, we would save almost $200 million over the next 10 years.

Despite these changes, however, the Government remains concerned that taxpayers will continue to face a rapidly increasing welfare bill in the decades ahead.

The number of people receiving a Sickness or Invalids Benefit in particular has been allowed to grow out of control in recent times. Without any fundamental changes, this number is expected to keep growing over the longer term, by perhaps 50 percent over the next 15 years. 

When combined with the demographic effect of our ageing population, this problem becomes even more urgent. We owe it to our children, the taxpayers of the future, to bring welfare rolls back under control.

Accordingly, this year the Government will appoint a working group of experts to recommend ways in which we can reduce long-term welfare dependency and thereby reduce the welfare bill future generations will face. 

Housing

The Government will also work through a series of challenges in the provision of state housing. 

We are concerned that in some parts of New Zealand people who have been assessed as being most in need of a state house cannot get one, or cannot get one of a suitable size or quality. Meanwhile, New Zealanders elsewhere in the country have access to state houses that exceed their relative needs.  We must confront these problems if we are to ensure fairness in this critical area of state support. This year the Government will establish an advisory group to provide us with advice on these issues. 

The Government will also make changes to the Residential Tenancies Act.  The Bill amending this Act is now in the House and will enable landlords to better manage their properties effectively, while also helping ensure that tenants have access to stable, good quality accommodation.  The Bill extends the Residential Tenancies Act to cover tenants living in boarding houses.  It will also provide quicker, fairer and more cost-effective dispute resolution, which is good for both landlords and tenants.

 

Justice, law and order

 

Just as the Government will be implementing new policies to address the causes and problems of welfare dependency, so too will we continue work to address the drivers and consequences of crime.

We are acutely conscious of the burden crime imposes on our society and economy.  That burden falls on individual victims and their families, and it also falls on all of us as taxpayers.

New Zealanders should not have to put up with growing levels of serious and violent crime in our communities. Growth in violent crime is wrecking and damaging lives, clogging up the court system, and forcing us to invest greater and greater amounts in locking up dangerous criminals.

The Government has a comprehensive approach to confronting these problems.

We will continue to send a strong message that criminal behaviour will not be tolerated.  This year, in addition to the range of tough new legislation we have already passed, we will pass the Sentencing and Parole Reform Bill incorporating a ‘three-strikes' policy to deter and punish our most serious repeat offenders.

We will reform and simplify the criminal justice system to make it fairer on victims and ensure it is more efficient and cost-effective in the administration of justice.  This will include comprehensive changes to the legal aid system; legislation to modernise court processes, including the introduction of audio-visual conferencing; and new laws to improve victims' experiences of the trial process.

Part of our ongoing work to address the drivers of crime will be the introduction of legislation to reform liquor licensing laws. The purpose of this legislation will be to reduce the crime and harm caused by binge drinking, by stopping the excessive proliferation of liquor outlets in many of our communities.

We will also begin implementing our Fresh Start policies to ensure fewer young people embark on a life of crime.  We will pass our Fresh Start youth justice bill early this year to enable the Youth Court to make immediate use of a new range of court orders and programmes.  This will be supported by the introduction of military-style activity camps, new outdoor activity programmes and a range of new parenting, mentoring and drug and alcohol interventions.

Work will continue on our comprehensive plan to tackle the drug P.  In April the Government will receive a detailed progress report on the cross-government action plan.  We expect this will demonstrate considerable progress, and will reinforce the need for the comprehensive approach the Government has taken. 

This year we will progress legislation to restrict the availability of pseudoephedrine, while continuing to step up the availability of treatment programmes for P users, and providing the Police and Customs Service with the continued backing they need to crack down on P dealers and gangs.

The Government will also work closely with the Police to develop new approaches to support proactive crime prevention by frontline officers.  We have been heartened by the impressive results demonstrated by new approaches in Counties-Manukau and we will be expanding and intensifying these efforts.

The Government will also be redoubling its efforts in road safety and will shortly release a road safety strategy for the next 10 years. 

It is important to New Zealand to have a world-class prison system that rehabilitates those who want to turn their lives around, but keeps the most dangerous prisoners safely locked away. 

We will be moving forward with our plan to open up two prisons to private management. This will bring innovation and fresh ideas to our prison system.  We expect this to reduce the cost of running these prisons, although it is more important that we have safe and effective prisons than cheap ones.

To manage forecast growth in prisoner numbers we will increase prison capacity through cost-effective means such as container cells and double bunking.  We will also look at ways the private sector can be involved in the delivery of prison services by developing a public private partnership model.

Health 

 

Extra money for the provision of health services will by necessity be more limited for several years as we deal with the consequences of the current financial situation. It is widely acknowledged that the previous levels of funding increase are no longer possible.

 

Despite this, the Government is working to deliver better, sooner more convenient patient care, to boost and support our doctors and nurses, to cap the health bureaucracy and to move resources to frontline services.

That will include stopping the duplication and waste caused by DHBs reinventing the wheel 21 times, by reducing the resources tied up in back-office administrative functions, and by pumping savings back into frontline services.

Legislation will be introduced to support shared services across DHBs and the Ministry of Health and to ensure that greater priority is given to regional collaboration amongst DHBs in order to secure health services, particularly in rural areas.

More will be done to lift productivity and deliver even more progress on elective surgery, critical cancer care and emergency care targets.

We will continue to invest in preventing sickness with targets around immunisation, smoking cessation, diabetes and heart disease.

We will continue investing in the ‘Warm Up New Zealand: Heat Smart' home insulation programme which is potentially one of the most significant public health initiatives of the decade.

This year the Government will embark on a new push for better-performing primary care services. We want to realise the vision of multi-disciplinary co-located teams of health professionals. We want closer integration between hospitals and community based care. Over time patients will see more hospital-type services delivered closer to home.

One way to step up the volume of elective surgery is to separate the delivery of emergency and elective surgery. We have announced that a new elective surgery centre will be built at Greenlane, and expect to announce a second site soon.

Work will continue to secure the future of New Zealand's unique no-fault 24/7 accident compensation scheme for New Zealanders at work, at play and on the road. Changes made in 2009 to contain costs and to ensure the ACC scheme is affordable, sustainable and fair will be bedded in. There have been early signs of improvement in rehabilitation rates, cost management and investment returns as a result of these changes, and the Government is confident that this progress will continue in 2010.

 

Treaty of Waitangi, constitutional and electoral issues

Alongside our substantial programme of economic and social reform, the Government will this year continue to progress and resolve historic Treaty of Waitangi settlements, in line with our ambitious goal of concluding these settlements by 2014.

This year we are likely to focus much of our effort on the Auckland region, where around 20 percent of outstanding claims are centred.  The opportunity exists for just and durable settlements to be achieved throughout the Auckland region and we will be working hard in pursuit of that goal. 

The Government is impatient to stop looking in the rear-view mirror at grievances past and instead to shift our eyes to the challenges of our shared future as New Zealanders. 

In support of this objective, we will continue our work to devise a replacement for the 2004 Foreshore and Seabed Act.   We are concerned that if this issue is not addressed it will remain a weeping sore for many years to come.

We seek a solution that addresses the legitimate concerns of iwi, that is acceptable to the vast majority of New Zealanders, and that ensures public access to our beaches is protected. 

This year will also see the establishment of a group to consider constitutional issues, including Maori representation. The structure, terms of reference and the membership of this group will be released in due course, and consultation and hui across New Zealand will begin.

 

We will also progress work on electoral reform, as outlined in our manifesto.  This will include the introduction of legislation to hold a referendum on the future of MMP at next year's general election.  This referendum will give New Zealanders the second say on MMP many felt they were promised when the system was first adopted.

The Government will progress legislation this year to reform New Zealand's electoral law, following the repeal of the Electoral Finance Act.  We will also continue to progress the Electoral (Administration) Amendment Bill, providing for a single agency to administer elections.

Conclusion

 

In conclusion I want to say that as Prime Minister, I am privileged to meet so many New Zealanders from all walks of life.

As I travel around the country, I am impressed and heartened by the resilience and optimism of New Zealanders and by their desire to do better for themselves, their families and their communities.

2009 was not an easy year for many people. Some people lost their jobs, some their savings, and others their confidence.

Yet things are undoubtedly looking up.

The economy is picking up and new jobs will appear as businesses have the confidence to invest and expand.

What makes New Zealand such a great country to live in still remains.

The policies we intend to introduce this year will be a big part of the country's improvement this year, next year and into the future.

The Government's overriding concern is to improve opportunity, fairness and security for all New Zealanders.

As this Statement has shown, we have an active and comprehensive programme ahead of us in 2010, in almost every economic and social area.

 

As a result, New Zealand will be a better place to live, work, invest, grow up and retire.  There can be no greater result than that.

Rau rangatira ma

Tenei te mihi atu ki a koutou

Tena koutou, tena koutou, tena koutou

E nga mate, haere, haere, haere

Today we come together to mark a very important day in New Zealand's history.

On this day one hundred and seventy years ago, just kilometres from this room, our forebears came together to sign a unique and ambitious document:  The Treaty of Waitangi.

Today we remember that momentous occasion as the formal coming together of two pioneering peoples, of the Maori people who first settled this land, and of the British people who sought to share it.

The document that was signed that day, its meaning and significance, have since been the subject of much debate. 

Too often that debate has been characterised by extremism and by people who have sought to weaken the strong ties that unite Maori and other New Zealanders. 

As we stand here in 2010 however, the genuine and mutual respect that New Zealanders have for each other has prevailed.

In our homes and communities New Zealanders of all ethnicities live and work side-by-side in pursuit of a shared set of aspirations.  No matter our cultural heritage, by and large New Zealanders value hard work and education, we seek better living standards and increased opportunities for our children, and we want this to be an inclusive nation where we respect each other and where each of us has the opportunity to get ahead. 

Implicit in that set of values is an acknowledgment of the legal and cultural traditions we have in common.  We share a respect for the rule of law, for property rights and for a basic sense of fairness in which Jack is as good as his neighbour.

In my view, that shared sense of justice is more powerful than anything that could ever be summarised in any one document.

This Waitangi Day, as we reflect on our history as a nation, I could take the opportunity to outline the many times in New Zealand where we have strayed from the path of justice, or acted in ways which call our basic sense of fairness into question. 

No one in this room would deny the existence of such dark moments in our history.  Indeed, we share this history with many other countries in the world where first peoples have been treated unfairly by those who have sought to share their lands. 

But today is not the day to dwell on our failures.  Let today be a day when we reflect on the prouder moments of our history, and on the growing unity that, for many decades, has underpinned the relationship between Maori and other New Zealanders. 

This Waitangi Day I want to talk with you about the positive steps New Zealand has taken to address the injustices of our past.  Specifically, I want to outline for you what this Government seeks to achieve through the Treaty Settlement process and the significance I place on it as Prime Minister.

As you know, the genesis of the settlement process can be traced back to the establishment of the Waitangi Tribunal in 1975.   

The Tribunal was established to investigate contemporary instances where the Crown had failed to recognise Maori ownership of their lands and properties, in breach of the agreement that was signed here in Waitangi, and perhaps more importantly, in breach of the basic respect for property rights that we hold dear. 

The mandate of the Tribunal was extended in 1984, so it could enquire into historical grievances.

Since the early 1990s Governments of red and blue have worked to recognise these breaches, and to negotiate settlements with the iwi which were wronged.

I believe it is to our credit as a nation that we have been prepared to confront the darker parts of our history and acknowledge the instances in which glaring injustices have occurred.   

It is a credit to successive Governments and to many iwi, that redress for such injustice has been agreed to at the negotiating table, and that past mistakes have been put to bed. 

Most importantly, it is a credit to New Zealand that, as a people, we share a desire to complete this redress process, so that we can move beyond grievance and towards a shared brighter future.

To my mind, that is what the Treaty settlement process is all about.

It is a process that puts into practice some of the most basic values that as parents we try to instill in our children, and that as citizens we expect from each other. 

It is about acknowledging unfairness, making amends for mistakes and accepting each others' apologies.  It is also about performing what for all of us can be the hardest task of all, choosing to close the door, move on from failure, forgive each other and seek a better tomorrow. 

It's that desire for a better tomorrow that motivates this Government's commitment to the progress and resolution of the Treaty settlement process.

We are impatient to stop looking in the rear-view mirror at grievances past, and to instead shift our eyes to the challenges of our shared future as New Zealanders.  

We want to address injustice and build a platform from which Maori and other New Zealanders will stand up and confront the challenges of a new generation.  Like lifting educational achievement, improving the health of our families and improving the living standards of us all. 

That's why the National Party campaigned on a goal of concluding just and durable Treaty settlements by 2014. 

I think it would be a betrayal of Kiwis' basic sense of decency to forget the past and the legitimate claims of iwi.  But at the same time I am determined that New Zealand will not become stuck in that past.

I believe it is to the benefit of all New Zealanders that we move beyond the settlement phase of our history and into the brighter future we all seek.

I want to shift our focus and energy from the settling of historic claims and the sense of grievance it conjures, so that we can instead throw ourselves at the next phase in our history. 

I am optimistic that next phase can be characterised by better race relations and an even more strongly united sense of our shared aspirations as New Zealanders. 

Today let me acknowledge that achieving this Government's goal of concluding historic Treaty Settlements will be a considerable challenge. 

When we came into office in 2008 there were 60 claims outstanding.  If we were content to continue at the settlement pace of the previous Labour-led Government, then we would only expect to resolve those claims at a rate of 1.6 a year.  In other words, we would still be signing settlements in 2048.   

Proceeding at that rate would merely stall resolution, and strand New Zealand in an ongoing discussion of grievances past. 

I won't accept that.  We must do better.  The Government has the will and my sense is that iwi have the will has well. 

Last year, we held two national hui with iwi to discuss ways in which Treaty settlements could be achieved more efficiently and expeditiously. They were very successful.

Iwi leaders see the experience of others who settled in the late 1990s and how much they have achieved in the intervening period.  They do not want to spend time and money on litigation and negotiation; they all want to cut to the chase, achieve good settlements and move on.

Today let me assure you that this Government shares their desire to move on.  Our foot is firmly on the settlement pedal. 

Let me take this opportunity to briefly outline for you the steps we have taken to speed-up the resolution of historic Treaty claims.

We have re-established the Treaty of Waitangi Cabinet Committee for the first time since Jenny Shipley was Prime Minister. 

I chair that Committee.

It brings together ministers to focus on settlement issues and to ensure negotiations are not allowed to stall or fester.  

We have been meeting fortnightly when Parliament sits, but this year I expect we may meet even more regularly. 

The Committee is supported by a team of top-notch officials whose job it is to ensure we receive the best possible advice about progressing settlements in a way that is efficient, fair and durable.

We have also provided additional resources to the Office of Treaty Settlements, which negotiates with iwi on our behalf, so it can undertake its task effectively. 

We don't think it's good enough for settlements to be stalled by an inadequate or creaky bureaucracy. 

We have also brought together a high-level team of Crown negotiators to work with the Minister for Treaty Negotiations. They are a bi-partisan group and include two former Labour ministers, a former Ambassador to the United States and senior businesspeople.

Perhaps most importantly, I have appointed a Minister of Treaty Negotiations in whom I have the utmost confidence.  In Chris Finlayson we have a Minister with an outstanding legal mind, years of negotiating and legal experience, and a person who shares my sense of urgency to resolve Treaty claims. 

I have instructed Chris to get out there and meet iwi and to work closely with them to conclude settlements. He has been doing exactly that and has just finished an extensive hikoi visiting most of the East Coast, much of the Central North Island and the Whanganui River. He is a very busy minister, and he is getting the job done and done well.

But make no mistake, the 2014 target the Government has set for itself is ambitious.  Reaching our target will require much work and goodwill from the Government, from the New Zealanders we represent, and from the iwi with whom we are negotiating. 

If we are to move beyond grievance, we need all New Zealanders to be on board.

As I've travelled around New Zealand I sense that everyday Kiwis are ready to join us, they want the Government to rise to the challenge of moving on and they share my impatience to close the settlement chapter of our history.

However, we must ensure that our desire to move on is tempered with some caution.

I am determined that every Treaty settlement that this Government signs will be full and final.

I do not want to condemn our children and grandchildren to endlessly re-litigating these negotiations, due to sloppy work and inadequate attention to detail.

To ensure finality, the Government must work through a four-step process on the journey to settlement.  It's not easy, it's complex work and I think it's important you have an understanding of what it involves. 

The first step is to establish clearly which representatives the Crown should negotiate with to settle a claim, through what is called a ‘deed of mandate'.  We need to make sure we're negotiating with the right people and that they have a legitimate right to the redress they are seeking. 

The second step is to progress discussions to a point where terms of negotiation are signed.  This is the point at which the Crown and iwi agree that we have come together in good faith and that we're all on board for the process that will follow. 

The third step is to sign agreements in principle, which set out the bare bones of a proposed settlement.

Finally, once all the detail has been worked out, we sign a binding deed of settlement that is then given full and final effect by legislation.  It is a testament to New Zealand's shared commitment to Treaty settlements that, by and large, such legislation has been supported by all parties in Parliament.

So, as I've outlined, moving settlements along is no easy task.  But it can be done. 

I'm pleased to say that the National-led Government has got off to a great start.  Since the beginning of last year we recognised eight deeds of mandate, signed seven terms of negotiation, signed 12 agreements in principle and signed four final deeds of settlement.

We are determined that this momentum carries on into 2010.

This year it is likely that much of our effort will be focused on the Auckland region, where around 20 per cent of outstanding claims are centred.

It's worth outlining some of what that may involve.  Because settling historical Treaty claims by 2014 means just that - settlements have to take place.

Governments and iwi cannot just talk about settling - both sides actually have to get together and do the deals.

Several potential aspects of Treaty settlements are worthy of mention.

The first is that sometimes iwi ask for restoration of historic names.  New Zealanders have nothing to fear from this.  Just think of how, many years ago, Mount Egmont was renamed Egmont/Taranaki.  Over time everyone has become more comfortable with the change, to the point where Taranaki is the more common name nowadays.  There are other settlements where name changes have taken place and where we can envisage this happening in the future.   

Sometimes iwi ask for input into how a discrete area can be looked after - be it a river, mountain, forest or similar area.   In many cases the Government may deem this is reasonable, given the historical connection iwi may have with that area and the shared interest all New Zealanders have in ensuring good management or restoration of it.

In Auckland, for example, there has been some discussion over the volcanic cones or maunga.

The previous government offered the local iwi Ngati Whatua o Orakei the transfer of title and a say in the management of some of these cones. 

The trouble with that approach was that other Auckland iwi had overlapping claims to the cones, meaning the issue ended up returning to the Waitangi Tribunal.  

This stalled settlements in the Auckland region for three years. It's also meant that while we‘ve been waiting for the issue to be resolved, we've had a situation where no new tree could be planted on One Tree Hill.

The Government has been talking through these issues with iwi over the past 12 months.  We've made great progress. I'm pleased to say that things are now at a point where we could settle all claims in the Auckland region.

This would involve transferring the title of the volcanic cones in a way that takes account of all the iwi with legitimate interests in the cones, and that would give iwi a role in managing them, alongside the Council.

In fact, it is the same co-management model that has worked without a hitch at Orakei Basin - including the reserve and Bastion Point - since 1990 when that land was vested in local iwi.

What effect would this change have on the public? None. Public access remains the same, and that's an important bottom line principle for this Government. 

Ladies and Gentlemen, these are exciting times.

In 2010 the opportunity exists for concluding just and durable settlements throughout the Auckland region, something that a few years ago would have been regarded as a pipe dream. Iwi are keen to get on with the business, the Crown is keen, and everyone agrees that public access can never be compromised.

We all have a stake in making this happen.

When I talk to New Zealanders I find the desire to justly conclude the Treaty settlement process is widely shared.

Yes, there are extremists on both sides. 

These extremists cynically damage the goodwill needed to put an end to grievance and division.

There are those who can't see the point in all of it - who point to the 20 years we have already been working on Treaty settlements and who see no end in sight for a gravy train born out of actions from a time so long past that they bear no relevance in modern day New Zealand.   Who believe the price for fairness is too high and that we should ignore past injustice.  There are those who believe progress is impossible. 

And then there are those who never want to see an end to the Treaty settlement process, who believe all the woes of today can be traced back to colonisation and the subsequent breaches of the Treaty.  Who promote a culture of entitlement, disrespect and separatism.   And those who believe the mistakes of the past 170 years entitle Maori to receive special treatment and to act outside the law. For whom division is the only objective.

I believe these extremes represent a small minority of New Zealanders.

By and large, New Zealanders are united in a desire to respect the settlement process, and to focus on the shared and equal aspirations of all Kiwis, no matter their ethnicity. 

This Waitangi Day, I think we can all agree that it's time to consign the grievance mentality to the history books. 

Why can't this be the generation of New Zealanders who open the next chapter in our history?

Let's move the conversation on from one about past injustice, to one about how to address Maori underachievement, about how to deliver world-class education standards, and how to eradicate the deficit mentality so that every child can have the opportunity to succeed, prosper and celebrate success.

Let's move on and acknowledge that in modern-day New Zealand, the history of colonisation and injustice can't be allowed to dominate decision-making or be used as a crutch for supporting dependency and a lack of personal responsibility. 

The desire to see Maori improve their lot in life, to be better equipped to participate and succeed in modern day life and to no longer be overrepresented in negative statistics associated with education, health and crime lies at the heart of why both the National Party and the Maori Party chose to form a government even though neither party were compelled to do so.

This won't happen without debate, Inevitably solutions will have to be found.  It will, from time to time, challenge both sides.  And it won't always be perfect.  But if successful it will be worth it.

A New Zealand that makes us all proud.

A New Zealand that really delivers equality of opportunity.

A New Zealand befitting the 21^st century.

So this Waitangi Day, let's strengthen our resolve.

Let us get behind the settlement process so we can move beyond grievance, and towards the brighter future we all deserve.

Thankyou.

 Your Royal Highness, Chief Justice, ladies and gentlemen.

Rau rangatira ma

Te Atiawa iwi

Tena koutou katoa.

It gives me great pleasure to welcome Prince William to New Zealand.  He is here today, representing Her Majesty The Queen, as the Queen of New Zealand, at the opening of the new Supreme Court building.  

We are delighted that Prince William is back in New Zealand on an official visit.   The training demands of the Royal Air Force mean that this visit must be short.  We hope, though, that Prince William will feel warmly welcomed.  His visit this time coincides with our summer holiday, when New Zealanders are enjoying the beach, the bush and the barbecue.  I'm very pleased that as well as today's formal events, Prince William's programme includes some of those activities.  Like many New Zealanders, he is getting out sailing in Auckland harbour, and will be walking in the bush this afternoon at Kapiti Island.

He is also a great rugby enthusiast and is patron of the Welsh Rugby Union.  I can attest to the fact that yesterday he showed particular interest in the progress at Eden Park.  I regret to advise Your Royal Highness that I confidently expect that the All Blacks will trounce Wales - and England for that matter -  when New Zealand hosts the Rugby World Cup in 2011.

It is great that you can share in these outdoor activities.  As you know, sport and the great outdoors are much loved by a country that values time to play and relax.

But we are also a nation that works - works hard, and works well.  One of the key reasons that this country works so well is that we have a reliable and effective judicial branch of government.  The opening today of the Supreme Court building is enormously important for the senior members of the Judiciary, who finally have a permanent home. 
 
Today's ceremony to mark the opening of the Supreme Court building is significant also for the whole country.  It represents more than just the opening of a building, and there is much to celebrate.

This building, like the Beehive and Parliament Buildings, are very important to New Zealand's sense of national identity and our international reputation.  What happens in these buildings both represents and affects New Zealanders.  In my view, the buildings themselves can and do symbolise the core values of this country - values such as fairness, justice, democracy, and an absolute rejection of corruption.

These values of honesty and integrity are hallmarks of New Zealand.  In 2009, New Zealand was rated first on the Transparency International's ‘Corruption Perception Index'.  Out of 180 countries, New Zealand was rated as having the lowest perceived public sector corruption.  As a nation, that ranking is something of which we can be very proud.

The strength and integrity of the three branches of government also means that there is a healthy relationship between them.  The buildings of our three institutions are only a few minutes' walk from one another, and I regularly see the Chief Justice and the Speaker of the House of Representatives both formally and informally. 

That does not mean, however, that the institutional roles are blurred.  I am well aware that it is the role of the Supreme Court, as the highest appellate court in the country, to play an important role in ensuring that the other two branches of government act in accordance with the laws of New Zealand.

It is true that occasionally there may be disagreement about where the respective boundaries lie.  This is healthy and provides a tangible illustration of the separation of powers in operation as the executive, legislature, and judiciary go about their business.

There will always be robust debate.  What is important is that those in office in each branch of government respect the roles of the others.  I am certain that in this country that is the case.  I know that I speak for the Attorney-General and my Cabinet colleagues when I say that New Zealand is very well served by the calibre of its Judges, the most senior of whom sit in the Supreme Court.

The ceremony today marks the opening of the building which will be the home of the New Zealand Supreme Court.  

In time, the new addition to the "government end" of Wellington will become a familiar feature of the cityscape.  I am told that the building incorporates technology that will ensure that it is future-proofed for a long life, including the capacity for video-conferencing and live-streaming. 

This kind of technology will ensure that the proceedings of the Court are open and accessible to all New Zealanders, for whose benefit the justice system is administered.  We look forward to justice being served here for many years to come. 

Kia ora huiui tatou katoa.

It is my pleasure now to ask Prince William to speak and open the new Supreme Court building.

Click here for the speech by Prince William