5. Dr RUSSEL NORMAN (Co-Leader—Green) Link to this
to the Minister of Finance
Will the Government have to borrow further to pay for the latest Christchurch earthquakes?
Hon BILL ENGLISH (Minister of Finance) Link to this
We will not have a clear idea of that until we know the likely costs and where they fall. However, it does appear that the damage as a result of the most recent earthquakes has occurred largely in areas that already required substantial repair. The member will be aware that the Government set aside a fund of $5.5 billion in the last Budget, and that allowed for considerable uncertainty around the estimates of costs. So it could be some time before we know whether that particular event will require more money to be allocated to that fund.
Will the Minister reconsider the case for raising an earthquake levy, given that the most recent earthquakes have thrown into doubt what the final cost might be?
No, we do not plan to reconsider it. The Government, as we indicated in the Budget, has the capacity to fund its share of the Christchurch rebuilding costs. There are other, more significant issues at the moment that need to be resolved to allow the rebuild to continue. Our funding is not the main one.
In light of his earlier comments that the Government is very keen to reduce Government borrowing, would an earthquake levy not be one way to reduce Government borrowing?
In a technical sense I suppose it would, as would putting up taxes, raising GST further, or whatever else. The Government has come to what we believe is a pretty balanced approach whereby we are constraining Government spending and we have done a reorganisation of the taxation system, which we believe will be beneficial to the economy. Now we just want to get on with growing the economy, having resolved those issues.
Is he aware that the Christchurch City Council proposes to raise an earthquake levy on ratepayers, and is it not a cruel paradox that the very people who are least able to pay a levy—the ratepayers of Christchurch—may have to pay a levy, when the rest of the country does not?
Certainly, the burden of the earthquake falls by far the most heavily on the people of Christchurch. That is why I think the rest of New Zealand will effectively be paying for the rebuild. We have borrowed the money now and it has to be repaid later, with interest. All New Zealanders will be contributing to that. The Government is working very closely alongside the city council to work out the best division of the burden of costs, including those costs that fall on the council.
Does the Minister stand by his earlier argument that an earthquake levy is the wrong way to pay for the earthquake rebuild when the economy is weak or in recession, in light of the fact that Treasury now predicts an average of 3.1 percent growth over the next 5 years?
Yes. We considered all these issues in the period between the February earthquake and the Budget, and the Government believes it has struck about the right balance between, on the one hand, generalised fiscal constraint to assist the progress of the economy and get the Government’s books into order, and, on the other hand, our ability to fund the earthquake rebuild. Had the costs been larger, or had it been more difficult to get the deficit under control, of course it is possible that we could have looked at either a levy or a tax increase. In the end, we decided that that was not a good idea.