6. JOHN KEY (National—Helensville) Link to this
to the Minister of Finance
Does the Fiscal Strategy Report released last week accurately report the Government’s fiscal intentions?
Does the Minister recall page 48 of the Fiscal Strategy Report, where he says that the Government’s revenue projections have been influenced by “Our decision to inflation-index personal income tax rates”; can we now assume that the decision has been made, post his announcement in Budget 2005, actually to roll out indexation of personal tax cuts in 2008?
Hon Mark Gosche
Hon Dr MICHAEL CULLEN Link to this
I have certainly seen a report that confirms a fiscal strategy based around $11 billion in tax cuts, funded by significant borrowing or funds coming from offshore—it is now not clear which it would be—is still being pursued. Another report states that figure was quite wrong. A third suggests large tax cuts may not be affordable, and a fourth suggests they would have been implemented by a mini-Budget after the election. The first was from John Key, the second was from Gerry Brownlee, and the third and fourth were from Dr Brash. None of them look very coherent to me.
Could he do the country a favour and clarify his position, given that in Budget 2005 he stated unequivocally tax cuts would be rolled out in 2008 with personal indexation, then spent the rest of 2005, and the early part of 2006, telling the country that those indexation changes could now be in jeopardy, but now in Budget 2006 has reaffirmed that they are on; could he answer this simple question: are tax cuts going to be rolled out and indexed in 2008, as he declared in Budget 2005?
Hon Dr MICHAEL CULLEN Link to this
But I do not do simple answers. What happens in 2008 will depend very substantially on what happens in terms of revenue over the next year or two. We have a business tax review. But may I read to the member the latest OECD Economic Outlook report from the chief economist. [] I would love to read it—
Madam SPEAKERHon Dr MICHAEL CULLEN Link to this
I would like to read to the member the latest OECD Economic Outlook dated May 2006 from the chief economist of the OECD: “It is important that temporary revenue gains in economic upswings not be used as a pretext for permanent tax cuts and spending increases that exacerbate inflationary pressures and create a legacy of high structural Budget deficits that only become apparent during subsequent downswings.” And he wrote that without knowing John Key!
I remind both those who ask questions and those who answer them, they should be brief. I also note, given the interjections during that answer, that members cannot expect yes or no answers to their questions.
Hon Dr MICHAEL CULLEN Link to this
The report shows we have moved to a net financial asset position. Including the Superannuation Fund, the Crown’s financial asset position is predicted to be positive by 5 percent of GDP by 2010. Through prudent fiscal management, this Government has finally paid off National’s “think big” debt and made provision for the future.
Does he stand by Budget 2005 where it unequivocally states that tax cuts will be indexed and rolled out in 2008?
Hon Dr MICHAEL CULLEN Link to this
As I said, we will have that included in the current fiscal forecast. We are also working on a taxation review with the business sector. That may have implications for tax thresholds. We are also working on another set of matters. The member will have to wait. I am sure he is desperately waiting for the tax cut he so needs in order to keep himself in the lifestyle to which he is accustomed.
Peter BrownDoes the Minister recall making this statement in his Budget speech: “over this period the Government will be prepared to issue up to $1.0 billion in infrastructure bonds.”; given that there is minimal reference to that in the Fiscal Strategy Report, when will he be in a position to outline the full details?
Hon Dr MICHAEL CULLEN Link to this
It will be some little time before the details are finalised. In the interim that will be managed through the normal Treasury bond issuing system.
Does the Minister recall telling the Finance and Expenditure Committee: “People who think there should be tax cuts on the back of big surpluses should be taken out and quietly drowned.”; if so, does he also recall telling Mr Campbell on Campbell Live just last week, 2 hours prior to the Budget: “Yes, there might be tax cuts in a year or two, depending on whether we have got big enough surpluses.”?
Hon Dr MICHAEL CULLEN Link to this
The first comment was a reference to the continued process of disinformation waged by that member—and, to be fair, I think by my count, three members of the press gallery—that an operating surplus is available for spending on current expenditure. That is precisely what the OECD is referring to. However, because of our splendid fiscal management, if the Inland Revenue Department forecasts are correct, there will be room for changes in business taxation, which will be the priority in the 2008 tax year.
Can the Minister confirm, in relation to the answer he gave 2 seconds ago, that when he went on Campbell Live and said there may be tax cuts in a year or two, depending on the size of the surplus, he was referring to business tax cuts, not personal tax cuts?
Hon Dr MICHAEL CULLEN Link to this
No. I was primarily referring to business taxation cuts, but they may have some implications for personal taxation. The member will simply have to wait with trembling excitement to see how much he will get, on top of his current $50 million of personal wealth, in a tax cut provided by a Labour-led Government.