Hon Dr Michael Cullen
Minister of Finance

22 August 2005 Media Statement

Unfair, unaffordable, unworkable and hypocritical

Finance Minister Michael Cullen today described National’s big tax bribe as unfair, unaffordable, unworkable and hypocritical.

“The unfairness is obvious. There is no regard to family circumstance and it delivers the biggest benefits to those at the top of the income scale. A person on $20,000 a year would get a tax cut of $6 a week. Two thirds of taxpayers would get less than about $10 a week. Someone on $100,000 a year would get $92 a week. Every Member of Parliament would qualify for $92 a week.

“At 1 April 2007, all two child families on $45,000 or less and all three child families on up to $60,000 would be better off under Labour’s tax relief package. This comparison takes no account of the far greater support Labour is offering for childcare costs than National.

“Moreover, National would cancel the $10 a week per child Family Support increase scheduled for April 2007. That will mean many more children living in poverty as beneficiary families with children would miss out.

“It is reasonable to ask how multimillionaires like Don Brash and John Key can possibly propose tax cuts for themselves at the expense of poor kids.

“The unaffordability should be clear to all by now. It’s even clear to the National Party since John Key said only a few weeks ago that the cost would have to be about $1 billion a year, or $3.25 billion over the forecast period, to be affordable.

“Now, with the various tax rebates thrown in, it’s about $10.75 billion. It takes something to produce a $7.5 billion budget blowout in just a few weeks in Opposition. Just think what National would do if it was ever in government.

“National will need to raise billions of dollars extra in borrowing. And this is not for roads and other capital since National’s promised increased spend on roads last Friday is $630 million less than the government has already committed to since the budget.

“For the first time since the late unlamented Sir Robert Muldoon, we have a major political party promising to borrow to fund current consumption.

“Even then, major slashing will occur to areas of essential spending including health and education. By the end of 2006, hospitals will have to start cutting services because the National Party’s net new spending allowance for Budget 2006 is about what I had envisaged as needed for Vote Health alone.

“It is unworkable because there is no way there will be a majority in Parliament to support it. These are empty promises that cannot be carried into practice.

“Finally, it is hypocritical. National spokespeople have long argued the key taxes to cut were the 39 cent rate and the corporate rate. The former stays and the latter is the last tax to be cut – this despite a promise from Dr Brash only last year that under a National government, there would be an immediate cut in the company tax rate to 30 per cent.

“It is also hypocritical because National in the build up has laid great stress on the issue of big cuts in marginal tax rates. But for those moving off benefits, the cut is at best 2 per cent and for some there is an increase of 18 per cent.

“It is only between $38,000 and $50,000 there is a substantial difference so, despite John Key’s fervent desires, many people would still, thank goodness, choose to watch their kids playing sport on Saturday mornings.

“This is all about bribing people at the expense of core services and increased borrowing. It is fiscally unsustainable and would only lead to another round of savage cuts, asset sales and restructuring which is clearly the hidden agenda in today’s release.

“This shows what Dr Brash really came into politics for: to pick up where Ruth Richardson left off in 1993,” Dr Cullen said.

“For the 66 per cent of taxpayers, who would get around $10 a week tops, this would be a big price to pay for a comparatively small return.”

ENDS

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