3. Hon BILL ENGLISH (Deputy Leader—National) Link to this
to the Minister of Finance
Does he recall advising Cabinet, with regard to Budget 2007, that failing to stick to Budget spending limits risked “an interest rate response from the Reserve Bank, the exchange rate staying higher for longer and a more pronounced economic slow-down”, and has he given similar advice this year?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
Yes, and tomorrow I will deal with the matters contained in this year’s Budget.
Can the Minister confirm that in Budget 2007 Labour did not stick to the spending limits, that the result was an interest rate response from the Reserve Bank and the exchange rate staying higher for longer—as have interest rates—and that we are now experiencing a more pronounced slow-down, partly because Labour would not stick to its own spending limits?
Hon Dr MICHAEL CULLEN Link to this
No, I cannot. The additional element in last year’s Budget was primarily the cut to business taxation, which the National Party opposed. That was not, of course, spending; that was revenue reduction. Of course the major impact, in terms of what happened subsequently, was that the economy continued to grow faster than forecast. In conjunction with international pressures, that led, therefore, to stronger inflationary pressures than had previously been forecast.
Dr Ashraf Choudhary Link to this
What reports has the Minister received on fiscal policy decisions made before consideration of inflationary forecasts?
Hon Dr MICHAEL CULLEN Link to this
I saw a report promising tax cuts to the average wage north of $50, before seeing any fiscal projections. That was then revised to $45 to $50, then revised to $45 to $50 after 3 years, and then further revised to blame the journalist for misreporting all of that. This morning it became: “Oh, well. Look, you know that the answer is of course, if you know—anything is affordable but you know you have to look at all the different priorities. But I believe very strongly in personal tax cuts.”, from which one could take anything.
Has the Minister seen the comment this morning by the Public Service Association that any tax cuts can “only be funded through borrowing or cutting public services.”; can he recall making that statement every Budget up until this one, and does he still stand by it?
Hon Dr MICHAEL CULLEN Link to this
As the member will see tomorrow, the Government has reduced its forward-spending allowance. To have higher tax cuts than I will announce tomorrow would require a much bigger cut in the spending allowance, and I will look forward to the member explaining, when, on the campaign trail, Mr Key finally says what his tax policy is.
Can the Minister recall stating many times that any reduction in the forward-expenditure allowances was a cut, and how come, when he does it, it is a wise decision, but if anyone else proposes it, it is a cut in social spending that will see doctors and teachers sacked?
Hon Dr MICHAEL CULLEN Link to this
What it will mean—and let us be quite clear about this—is a slower rate of improvement in social services than would otherwise occur. If anybody believes that I am going to start arguing that tax cuts have no cost, then they do not understand me. But I should be generous. I congratulate the member on hauling Mr Key into line over the issue of tax cuts this week.
Would the Minister agree that the public of New Zealand see his refusal to offer any personal income tax cuts for 8 years, despite record surpluses, not as sound economic management but as an arrogant assumption that Labour knows better how to spend their money, and that they see it that way so much so that political scientist Dr Jon Johansson has described him today as “Labour’s biggest liability”?
Hon Dr MICHAEL CULLEN Link to this
For the man who took National to less than 21 percent of the vote, that is a pretty rich kind of accusation, or quotation. What I do know is, firstly, we have cut taxes for families in New Zealand very substantially, and, although the member may be on an income where that does not matter, if he was on an ordinary family income, then, with his number of kids, he would be grateful for Working for Families. Secondly, I know that New Zealanders want better health, better education, better superannuation, and more investment in law and order, and they want that from a Government. A National Government cut spending in all those areas when it was last in office, and that member was the Treasurer when superannuation was cut under National.
Can the Minister tell us whether that little outburst means what we think it means—that he still hates the idea that after 8 years he has finally been pushed into offering personal tax cuts to 1.8 million wage earners in New Zealand who do not have children, which would allow them to qualify for Working for Families; and does he regret the fact that when conditions were pretty good for several years for tax cuts, he missed the opportunity?
Hon Dr MICHAEL CULLEN Link to this
No; I took the opportunity to lower taxes for business, to lower taxes for families, to lower taxes for savers, to increase superannuation, to introduce 20 hours’ free early childhood education, to reintroduce income-related State housing rentals, and on and on, and that member voted against every one of them. Now his leader claims he was responsible for all those policies.