7 April 2005

Pressure builds on National for alternative budget

“Suggestions by National that in government it would restrict new budget spending to between $300 million and $400 million a budget make it even more imperative that they put up an alternative budget,” Finance Minister Michael Cullen said today.

He was responding to comments by National’s finance spokesperson, John Key, on Morning Report this week that National would restrict new budget spends to around $300 million to $400 million while at the same time providing “wide scale tax relief across the board.”

Dr Cullen said the budget figures were simply not credible.

“Mr Key fails to realise that new budget spending needs to cover wage and price increases for existing programmes as well as the on-going cost of any new initiatives. A budget of the size he is talking would not allow any room for pay increases for nurses and teachers, or funding for extra police or just about anything else.

“To put it in context, to find a budget this small in New Zealand’s history one would need to ignore the effects of inflation and to look back more than a decade.

“And Mr Key’s attempts to pretend that National can fund its reckless policies by cutting back the number of policy advisors in the core state sector and staff in the Tertiary Education Commission are too silly to warrant serious response,” Dr Cullen said.

Key transcript.

John Key, Morning Report, April 5, 2005

SEAN PLUNKET: The National Party's vowing to downsize the public service to help fund its promised tax cuts if it gets into power this year. The party's Finance spokesman John Key has also announced plan, a plan for a tax revamp to ease costs that he claims are choking New Zealand businesses. I spoke to him just a little earlier. Well firstly I, I just want to ask you what it is like to be the anointed one as, ah, described by John Tamihere who clearly rates you very, ah, highly in that remarkable interview he gave to Investigate Magazine.

JOHN KEY: Well it was great to have those comments and, um, obviously grateful for them for John, from John but, ah, really there was so much other stuff in that interview which, um, will be fairly heavily discredited I guess by some that, um, I'm sure the Labour Party won't be listening to his endorsement anyway.

PLUNKET: Ha, ha, okay, let's talk about the policies that you have been talking about in recent days. Ah, firstly a major call to cut the public service. You've said that you believe the state sector isn't delivering for the public in some areas. Which areas are you talking about.

KEY: Well in many respects it can be quite a lot of the core bureaucracy. We're not really talking about nurses and that sort of stuff.

PLUNKET: Well are you or are you not talking about nurses and teachers.

KEY: No we're not talking nurses. We're talking about the core state sector.

PLUNKET: You're talking about teachers.

KEY: Ah, no we're talking about the, ah, the people that drive the policy areas and the policy advice in Wellington which is about 37,000 employees these days and that's grown by about a quarter in the last, ah, six years. Last week there was a, um, document unveiled by Treasury where they wrote to Dr Cullen, they told him that the spending and hiring had been out of control. 80% of it was not aligned with government policy areas and I think it's quite clear he's made it clear himself that he'll be cutting costs for exactly that reason. He is essentially overseeing a tremendous build up in wasteful expenditure and a very large build up in head count which is just simply not delivering results and our model is one that says look we don't intend just to throw more and more bodies at the problem and hope that they'll somehow come up with a solution. Our model is to say we would rather retain and recruit the best where working for the core state sector is seen as a really important function, one that ranks up there in pay with the private sector.

PLUNKET: Okay well can you give us some examples of departments where you will cut numbers.

KEY: Oh well, you know, we're going to come out with a very detailed plan so I don't want to preempt things really.

PLUNKET: Well I just said some examples.

KEY: Well just give you an example. Tertiary Education Commission is one great example where the Government introduced it as being a light handed regulation.

PLUNKET: Okay so you'd cut jobs there.

KEY: Well there, there's 434 people in an organisation that started with, you know, not much more than 50. So it's across the board, Sean, and if you go and look at those departments what you'll see and many people from the private sector will tell you the same thing. They go into a meeting with, um, Ministers in Wellington and dozens of people turn up. They are producing a whole lot of, ah, stuff that Ministers are not reading and they're providing conflicting advice out of different departments.

PLUNKET: How much do you intend to save by those cuts, how many million dollars.

KEY: Well the OECD made it quite clear that New Zealand is the only country that doesn't have a baseline review and so that and the baseline review would really say.

PLUNKET: No I just want a figure John. How much would you save by cutting the size of the public service.

KEY: Well the answer is, um, in one sense we're not sure because we just don't know, ah, the full extent of, of everything there. We can only do.

PLUNKET: Give us a ball park.

KEY: Well the OECD made it clear if you cut 1% of expenditure and that includes wasted programmes that alone is, is $500 million.

PLUNKET: Where are you going to cut tax, tax by that much because fringe benefit tax isn't going to do it. Does that give you enough money for a general, ah, change in the tax system that benefits a large number of people.

KEY: Well there's two elements to that. The first is saving money in certain areas and we'll highlight that in more details after the budget and the second is that there's a thing called the new budget spend which is how much more you commit in future budgets. I made it clear in a speech yesterday that we will, we anticipate our number being, ah, lower than Labour's and that will be in the similar sort of order, 300-400 million..

PLUNKET: Okay, you haven't answered the question. What about a general tax cut. How big.

KEY: Well there will be, no my point was really this. There will be a general tax.

PLUNKET: Well it wasn't my question John. What is the size of the tax cut you think you'll be able to afford.

KEY: There will be a general tax cut. My point is simply this. You're talking about quite large numbers that, that I think you'll be able to save and that allows you to have a very substantial tax programme on top of probably running a smaller surplus, so for Dr Brash to outline our full tax package but when you start standing up as we have and said that there will be wide scale tax relief across the board I can assure you that is a very expensive exercise.

PLUNKET: That's the National Party's Finance spokesman John Key.

ENDS

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