3. Hon BILL ENGLISH (Deputy Leader—National) Link to this
to the Minister of Finance
Does he stand by his statement regarding the Government’s debt target that “debt has for a time fallen under that target”; if so, is that an indication that he intends to increase Government debt from its current level?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
I can confirm that the Budget will reiterate the Government’s medium-term debt target, which is to maintain gross debt, excluding Reserve Bank settlement cash, as a proportion of GDP, broadly stable at around 20 percent. Unlike Mr Key, I have no intention of moving this target upwards to 25 percent of GDP.
Does the Minister recall saying, in respect of tax cuts, “When you cut your income, you either borrow more or spend less.”, and also that any increase in borrowing is “fiscal lunacy.”; and what is his opinion, now that he is planning to increase debt at the same time as cut taxes?
Hon Dr MICHAEL CULLEN Link to this
The member makes a habit of making assertions on the basis of an answer that did not give him the answer he wanted to hear in the first place. I tell the member that the growth in spending in the future, and the rate of increase in social services, will have to be slower given tax cuts.
Does the Minister recall telling workers just over a year ago that they could not have tax cuts because “if we were to clear the headroom for tax cuts it would mean huge cuts in spending.”, and what faith can they have in a Minister of Finance who has just told the House that because of his tax cuts he will have to reduce his spending?
Hon Dr MICHAEL CULLEN Link to this
Again the member did not listen, but interpolated on what I said. What I said is the rate of growth in spending on social services—
Hon Dr MICHAEL CULLEN Link to this
The member has got it, you know. The member has got there. It took him a wee while, a couple of minutes, but it sank in finally. The rate of growth in spending on social services will have to be slower than it has been. We have, of course, achieved a remarkable increase in the level of social services, and can afford to do that.
Can the Minister now confirm that when National says it will slow the growth in social spending, it is called a spending cut, but when the Minister has just said he will slow the growth in social spending, it is what one does to pay for a tax cut that one never wanted?
Hon Dr MICHAEL CULLEN Link to this
What I know is that I can judge things by the record. When that member was in Government he froze the pension for 3 years. He chaired the select committee that approved the cutting of benefits. He was part of a Government that imposed hospital charges on New Zealanders. We know what cuts in social spending look like. They look like what a National Government does when it gets its hands on power.
Can the Minister confirm that he will be raising spending, and does he agree with Helen Clark’s statement that “cutting taxes and raising spending is a recipe for disaster.”; and when will he tell his Prime Minister that he plans to implement her recipe for disaster?
Hon Dr MICHAEL CULLEN Link to this
If the member is proposing that there be no increase in spending at all, I wish he would say so. That would mean no wage or salary increases for anybody in the public sector, no increases in any benefits, no increases in New Zealand superannuation, and, clearly, a cutting of services in the health system throughout the country. The question is what the forward path will be, and the member will find that out in just over 8 sitting days.
Metiria TureiWhat is the Government’s ultimate target for student debt, because it has just reached a whopping $10 billion today, and will he correct his Minister for Tertiary Education and admit that fewer students received a student allowance in 2006 than did when Labour took over in 1999?
Hon Dr MICHAEL CULLEN Link to this
I do not have the latter data. The student loan scheme began in the early 1990s and, therefore, is yet to reach full maturity. It has also been coping with an expanding number of students over that period of time. Therefore, inevitably, the total debt is going to be higher. The question is how burdensome that debt is on the individual. The time taken to repay a student loan has gone down by more than a third under this Government.
I raise a point of order, Madam Speaker. I would like some clarification as to which is the bigger number. I am surprised that the Minister of Finance cannot quite do the maths right. Is it 64,000, which is the number of students who got a student allowance in 2006; or 59,000, which is the number of students who got the student allowance—it is the opposite way. I will do that one again.
Madam SPEAKERI would just like to confirm whether 64,000, which is the number of students who got a student allowance in 1999, is higher than the number of—
I am sorry but the member has had more than her share of what is not a point of order. However, if the Minister wants to make any other comment I invite him to do so.
Hon Dr MICHAEL CULLEN Link to this
I do not have the information in front of me. Of course, many people do not realise that eligibility for student allowances is not based solely on parental income tests. There is a whole set of other tests that apply around full-time courses, such as previous academic performance and so on and so forth. Most students who do not get a student allowance are not disqualified on the basis of the parental income test; they are disqualified on the basis of other criteria.
What credibility can the Minister of Finance have when he ends up doing exactly the opposite of what he has argued for—namely, he has said that people should not cut taxes because that will mean more borrowing—and it just turns out by coincidence that in the year when he is planning to cut taxes he is going to increase his borrowing?
Hon Dr MICHAEL CULLEN Link to this
The member is rushing to certain conclusions. What I have said very clearly is that we will stick to the medium-term debt target of around 20 percent of GDP. I quote Mr Key: “We’re sort of comfortable with a notional debt-to-GDP of around about 25 percent, so that’s gross debt.” That is $700 million a year of extra servicing costs compared with 20 percent of GDP. The member may not like it, but that is what his leader said.
If the Minister thinks I am speculating about borrowing, what is the item in the February accounts to the Government that shows borrowing has gone up by $867 million; is that something Treasury just made up, like the $600 million gap in the previous month’s accounts?
Hon Dr MICHAEL CULLEN Link to this
If the member could work it out, he would see that if debt were to remain at exactly 20 percent of GDP every year, irrespective of managing through economic cycles, nominal debt would still go up. Otherwise the Government, every year, would be paying for every item out of its income, which is not the long-term fiscal target.