2. Hon BILL ENGLISH (Deputy Leader—National) Link to this
to the Minister of Finance
What is the reason for the $700 million “Top-down Adjustment to Spending” recorded in the 2007 Budget?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
It is because, as with the member, things sometimes happen more slowly than they should.
Can the Minister tell the House whether this top-down adjustment to spending, which reduces his appropriations by $700 million, means he has so much money coming through that he cannot spend it in this financial year, or does it mean he is taking the Opposition’s advice and trying to slow down the growth of Government spending?
Hon Dr MICHAEL CULLEN Link to this
The member cannot have it both ways. It means some anticipated spending is not occurring this year. In relation to capital spending, it will tend largely to mean that that will occur next year. This is a normal Treasury adjustment that has actually happened for many, many years, including those while the member was in Government, but this is the first time that the numbers have been made publicly available.
Tim BarnettHon Dr MICHAEL CULLEN Link to this
I have seen a report that a National Government would cut half a billion dollars from the recent Budget and every Budget thereafter. Of course, it has yet to be explained how that would be achieved without cutting into the spending on health, education, or superannuation. I remind the House again that when the member opposite was last in Government, he cut New Zealand superannuation.
Hon Annette KingWe know he is getting desperate now. [ Interruption] What has happened to the therapeutic goods bill?
Madam SPEAKERMembers have had their opportunity to express themselves. Now we will hear the supplementary question from the Hon Bill English.
Can the Minister confirm to the House that this top-down adjustment to spending means he is cutting $700 million off the appropriations he made in the last Budget because he cannot spend the money this financial year?
Hon Dr MICHAEL CULLEN Link to this
No, it does not. Actually, it means we are cutting $700 million off the forecast at the half-year update.
Can the Minister confirm that that answer means that as recently as December he forecast to spend $700 million more than he can actually spend; and which doctors, nurses, and teachers is he sacking?
Hon Dr MICHAEL CULLEN Link to this
No, I leave that part to the member opposite. He is the one who wants to sack doctors, nurses, and teachers. What it means is firstly, we do actually have spending under control. Secondly, we have fewer people on benefits than we had anticipated. Thirdly, because there is a very tight economy due to the excellent growth we have seen and the very low levels of unemployment, some capital spending, for example, has been deferred. I remind the member—and I will tell him again—that this adjustment has happened almost every year for many, many years. It is the first time that the top-down reduction has actually been published.
Can the Minister explain why, when I suggest in public that the Government spend a bit less of the forward allocation he calls that fiscal lunacy and sacking doctors and teachers, but when he actually adjusts the appropriations to take out $700 million of his planned spending he calls that a top-down adjustment?
Hon Dr MICHAEL CULLEN Link to this
No, I do not call it that; Treasury calls it that. Putting that aside, the member has not got it right. This money is coming off this year’s—
Hon Dr MICHAEL CULLEN Link to this
The member should know about top-down adjustments, he has had the odd one in the past. This money is coming off this year’s appropriations, and the consequences of that are already built into next year’s appropriations. In order to lower those appropriations, one would have to cut out items of spending. The member is being unusually coy about his inability to say where he would cut $500 million from.
Rt Hon Winston Peters Link to this
Why on earth would the Minister not follow the National Party’s style of Government, which was to rubber-stamp anything and everything that Treasury said, no matter how bad it was for the economy?
Hon Dr MICHAEL CULLEN Link to this
I believe that Treasury, which is an excellent department, is there to give me advice. I believe that I am paid a very large salary to read that advice carefully, then, with my colleagues, to arrive at decisions. One can get a rubber stamp for a matter of a few dollars.
Can the Minister confirm, for the benefit of the House, that the top-down adjustment to spending, which was in the Budget that he signed off—so presumably he agrees with it—amounts to a situation where he appropriated a certain amount of money in the last Budget, he defended every dollar of that as being absolutely needed, he confirmed that back in December, and now, on the books, he has cut that allocation of spending by $700 million, apparently with no consequence at all in this fiscal year?
Hon Dr Nick SmithHon Dr MICHAEL CULLEN Link to this
Indeed, far from that money sloshing around, as the member notes, it is actually gone. That is what a top-down adjustment is; it takes the $700 million out. If it were still there it might be available for sloshing around, but it has been drained out of the Budget. The reason for that is simple: forecasts are not always accurate about spending in key areas. I have to note, though, that Treasury does indeed sometimes get its forecasts wrong, and one reason is that it is impossible to forecast accurately the growth rate of the economy, and that has a significant impact on the total level of spending.
If the Minister is looking after every dollar carefully, how is it that his forecasts, given just in December last year for the remainder of the financial year, have turned out to be $700 million wrong?
Hon Dr MICHAEL CULLEN Link to this
I know the member has forgotten that he once was a Treasury Minister, but the updates on forecasts are done primarily in March, with the March baseline update. Some departments do not fully calculate their appropriations at that point. Some departments have agreements to carry forward expenditure from one year to the next, but that is not taken account of in the Estimates document in terms of the detail. That is why a top-down adjustment occurs, to allow for that fact. I seek leave, as this is highly technical and complex, to table a Treasury report on the adjustments to expenses forecast.