2. AARON GILMORE (National) Link to this
to the Minister of Finance
What fiscal challenges does the Government face as the economy comes out of recession?
Hon BILL ENGLISH (Minister of Finance) Link to this
The Government faces considerable fiscal challenges. The effect of the recession has been to significantly reduce tax revenue. At the same time, there is a strong build-up of Government spending. In fact, in the past 5 years Government spending has increased by more than 50 percent. The current Government is borrowing $250 million a week to fill the gap between expenditure and revenue. Clearly we have to look closely at value for our public spending.
I think the main reason has been the momentum built up under the lax administration of the last Government. There was a sharp growth in spending, particularly across back-office functions, with no clear evidence of better services for the public. For instance, Public Service pay has risen by 4.5 percent each year since 2000. The Government is keen to see better, smarter public services, and we will have to do that with little or no new money.
Hon David Cunliffe Link to this
Does he stand by his statement this morning that it is “good for the economy” to push the country into deep recession, making it harder for struggling Kiwi workers to make ends meet; if so, why?
The Government expects that there will be plenty of negotiation with the Public Service about pay rises, but we expect that those pay rises will reflect what is happening in the rest of the community, where many people have taken low pay increases or have reduced their hours of work in order to keep their jobs. There will be legitimate pay rises, and we want to make sure that any pay rises that eventuate come with better ways of working. The Government needs to get some benefit for the public from increases in public servants’ pay.
Hon David Cunliffe Link to this
If he believes it is good for the economy to make spending cuts of $2 billion to $3 billion, how can he also believe it is good for the economy to give $110 billion worth of subsidies—according to his department, Treasury, which his Prime Minister obviously cannot rely on—to big polluters in foreign-owned multinationals?
I believe that what the Government is doing is good for the economy. It is charting a careful path between the need to pump money into the economy to keep it ticking along, on the one hand, and not running up excessive public debt, on the other. At the moment we are borrowing at the rate of $250 million a week, and under that member’s policies it would be much higher. We believe that would be irresponsible.