Key John: Questions for Oral Answer — Questions to Ministers 
Key John: Questions for Oral Answer — Questions to Ministers 
[Volume:634;Page:5617] 
3.  
JOHN KEY (National—Helensville) 
 to the  
Minister of Finance 
: How large was the Government’s operating surplus in the 2005-06 financial year? 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 The operating balance excluding revaluations and accounting changes which is the best measure was $8.65 billion or 5.5 percent of GDP. This compares with 5.9 percent of GDP in 2004-05. 
John Key 
: I raise a point of order Madam Speaker. I made it quite clear in my question which the Minister has had quite a number of hours to prepare an answer to that I was asking what the Government’s operating surplus was not what the operating balance excluding revaluations and accounting changes was. I would be grateful if you could ask him to answer the question please. 
Madam SPEAKER 
: I think that the Minister did address the question but if he wants to add anything more to it then he is perfectly entitled to do so. 
Hon Dr MICHAEL CULLEN 
: There are a number of different ways that I could express the figure. The other is that the cash surplus was $3 billion a year. [ 
Interruption 
] 
Madam SPEAKER 
: No I am sorry. Members wanted to hear additional information. The Minister is providing it. Would members please give him the courtesy of being heard. 
Hon Trevor Mallard 
: I raise a point of order Madam Speaker. In response to your instruction John Key said “No”. Madam Speaker you asked him to be quiet and he said “No”. I just wonder firstly whether that is being quiet and secondly whether it is defying you. 
Madam SPEAKER 
: Thank you. No both Mr Key and Dr Smith were commenting when I was giving my ruling. That is the last warning. If that happens again members will be leaving the Chamber. Now would the Hon Dr Michael Cullen please continue unless he is finished. 
Hon Dr MICHAEL CULLEN 
: I have indicated what the best measure of the fiscal surplus is—that is the operating balance exclusive of revaluations and accounting changes. Most people—unlike the member opposite—know that when one has an accounting change that brings tax revenue forward one cannot go and spend it every year thereafter. 
Dr Don Brash 
: I raise a point of order Madam Speaker. Everyone accepts that there are many different ways of defining a fiscal surplus. My colleague Mr Key explicitly asked for one particular definition of the operating surplus and the Minister did not answer that question at all— 
Madam SPEAKER 
: I am sorry to interrupt the member but that is not a point of order. 
John Key 
: Can the Minister confirm that the last three surpluses have been $11.5 billion $6.3 billion and $7.4 billion and that they represent the three biggest surpluses in New Zealand’s history and can he tell us exactly why he has been so opposed to personal tax cuts over that period given that his own Prime Minister is telling him that he should either cut taxes or move aside? 
Hon Dr MICHAEL CULLEN 
: The member just makes it up as he goes along. He is the only person—[ 
Interruption 
] They just cannot take it when it comes back at them. He makes it up as they go along. The fact is that the largest operating surplus as a percentage of GDP particularly excluding accounting changes occurred when Sir William Birch was the Minister of Finance. The member should understand that the economy gets bigger every year in dollar terms. 
Hon Mark Gosche 
: Does the operating balance give a full picture of the Crown’s fiscal position? 
Hon Dr MICHAEL CULLEN 
: There are a range of measures. The Opposition seems fixated on one which is the final accruals operating surplus. But also there are issues such as the level of gross sovereign debt. At present that is $36 billion. Under the scenario that Mr Key outlined on radio this morning it would be $11.5 billion a year of tax cuts. That rises to $105 billion in less than 5 years’ time. 
Keith Locke 
: Does the Minister agree that any tax cut should benefit all New Zealanders particularly the poorer ones by making the first $5000 of income tax-free and that any surplus provides a golden opportunity to future-proof our economy by investing more in public transport and renewable energy generation? 
Hon Dr MICHAEL CULLEN 
: The only way of giving tax cuts that deliver most to those on low to middle incomes is through the family support tax credit mechanism and things like the earned income tax credit kind of mechanism that we are bringing into place. Unfortunately to simply make the first $5000 of income tax-free would give me something like $1950 a year whereas somebody earning less than $9500 would get a great deal less about $750 a year—unless of course the top tax rates were increased in order to offset that reduction. I am sure the member—[ 
Interruption 
] Oh the member is arguing back—that is OK. 
John Key 
: Does the Minister now accept that he misled the public of New Zealand during the election campaign when he went around scaremongering and saying that tax cuts were both unaffordable and reckless; in which case if the public could not trust his word during the election campaign why on earth should they consider trusting a thing he says going forward? 
Hon Dr MICHAEL CULLEN 
: Apart from the fact that that is pretty much what Dr Brash said at the end of last week I refer him to the ANZ quarterly economic forecast released today which states: “In the current political environment fiscal constraint may well be a stretch. Any additional fiscal stimulus will only add to inflation pressure forcing the Reserve Bank’s hands.” That man wants to give away tax cuts then see the middle class pay more on its mortgages. 
John Key 
: Does the Minister think that the largest surplus announced today adds any weight at all towards the affordability of tax cuts; if not why not? 
Hon Dr MICHAEL CULLEN 
: It certainly was the largest surplus announced today because it was the only one I announced today. But apart from that what the member is actually trying to argue is that if last year he managed to pay off $5000 extra on his mortgage above what he anticipated that means that for each of the next umpteen years he can lower his income by $10000 a year. That does not make sense. 
John Key 
: Does he stand by his statement on Television One news when he said: “Eight and half billion dollars surplus and still no tax cuts? So? What’s the connection between the two? None right.” and will he be changing that to “Eleven and a half billion dollars surplus and still no tax cuts? So? What’s the connection between the two? None right.”? 
Hon Dr MICHAEL CULLEN 
: Well I do not know! The problem with what that member is saying he having spent all morning in front of the mirror practising that question is that of the $11.5 billion that he wants to give away in tax cuts $1.8 billion is purely an accounting change bringing accrued taxation forward $2 billion is the contribution to the super fund another $1 billion - odd is the earnings on the super fund $1.7 billion is retained profits by State-owned enterprises and Crown entities and $1.8 billion is invested in schools and hospitals. This man proposes to borrow all the money for all capital spending and put a contribution to the super fund spend all the State-owned enterprise surpluses and spend any accounting changes. That is the most ludicrous fiscal policy that anybody in this country has ever put forward. He makes Sir Robert Muldoon look like a follower of the Chicago school. 
Hon Dr Nick Smith 
: I raise a point of order Madam Speaker. I want to draw your attention following on from Don Brash’s point of order which you so conveniently dismissed to Speakers’ rulings 153/2 and 153/3 in respect of answers from Ministers being given in the public interest. What you have allowed in this House is a very simple question from National’s finance spokesperson about what the surplus is—a very direct question. It is information that the Minister absolutely has because since my colleague lodged the question the figure is now in the public arena. You have allowed the Minister of Finance to give all sorts of lectures about Sir Robert Muldoon and all sorts of irrelevant things but you have not required him to answer the fundamental question on the sheet. This House will turn into a farce if you are going to allow Ministers to avoid basic questions of that sort. I ask you to either reconsider your point in response to Don Brash’s point of order or give a considered ruling. Otherwise frankly question time in this House will become a mockery. 
Hon Dr MICHAEL CULLEN 
: Firstly that point of order is now out of time; it should have been raised following the previous ruling. We have long since passed that point in question time. Secondly it is directly questioning your ruling which you gave quite clearly. I thought we had an understanding in this House that we were going to try to improve our behaviour in those kinds of respects. 
Madam SPEAKER 
: I rule that that was not a point of order. I thought the Minister had addressed the question quite fully and the response reflected the question. 
Rt Hon Winston Peters 
: Is the Minister saying that the last question from Mr Key is as moronic as the one put by the Television One journalist who seemed not to understand that one cannot just have a tax cut and surplus equivalents and anyone who did not think that one could was somehow being mean or Scrooge-like? 
Hon Dr MICHAEL CULLEN 
: I think what it emphasises is a strong misunderstanding on some people’s part about what an operating surplus consists of. It consists of a range of elements and clearly Mr Key does understand and is pretending that a level of tax cuts is affordable which would horrify Dr Brash if he thought about the consequences on the macroeconomic stability of New Zealand. 
John Key 
: Does the Minister recall telling the Finance and Expenditure Committee: “People who think there should be tax cuts on the back of the big surpluses should be taken out and quietly drowned.” in which case given his own Prime Minister’s and his Cabinet’s new-found desire for tax cuts on the back of large surpluses can I inquire whether he will be characterising those drownings as suicide or homicide? 
Hon Dr MICHAEL CULLEN 
: Apart from the fact that the member keeps making up what goes on in Cabinet in his case I would be happy for the drowning to be very noisy indeed but I am sure he would arrange for the publicity photographers to be present. 
Rodney Hide 
: Why does he not drop his ideological opposition to letting working people keep more of their money through tax cuts especially now that even the Green Party is supporting cutting taxes? 
Hon Dr MICHAEL CULLEN 
: The thought of an Act-Green coalition is one that really puts the fiscal scares right up me I have to say. Unlimited expenditure and reducing revenue would be the outcome of that particular combination. In fact the member has not been listening to what I have been saying for some months. We are engaged in a business taxation review process. That will lead to changes on 1 April 2008 and there may well be consequential changes to personal rates. I remind members opposite again that we have received repeated warnings in recent times about significant fiscal loosening over the short term. If Mr Key wants to be the high interest rate leader of the National Party let him be so.