Foss Craig: Questions for Oral Answer — Questions to Ministers 
Text is incorporated into the Bound Volume 
Foss Craig: Questions for Oral Answer — Questions to Ministers 
[Sitting date: 29 June 2010. Volume:664;Page:12217. Text is incorporated into the Bound Volume.] 
2. 
CRAIG FOSS (National—Tukituki) 
 to the  
Minister of Finance 
: What reports has he received of recent Budget measures taken internationally and what implications do they have for New Zealand? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 Governments around the world are trying to deal with ballooning debt and deficits and that means some difficult choices. For instance in last week’s UK Budget the British Government was dealing with a deficit of 11 percent of GDP. It had an emergency Budget that included a 25 percent reduction in all departmental spending other than health and overseas aid a freezing of wages for State sector employees and an increase in GST with no offsetting change in income tax. That shows the kind of predicament that a country can get into if it does not pay attention to managing its Budget. 
Craig Foss 
: What were the circumstances that forced the new British Government to take such drastic measures? 
Hon BILL ENGLISH 
: The incoming British Government has referred to an unbalanced economy where that imbalance was caused by a decade of rampant Government spending and growth in all the wrong places. It talks about “a new model of economic growth [needing to be] built on saving investment and enterprise instead of debt”. That sounds very familiar. In New Zealand we are taking a more measured approach. We have curbed increases in Government spending and have reprioritised almost $4 billion of public spending in order to target our limited resources to the most vulnerable and to front-line public services. 
Hon David Cunliffe 
: Will the Minister listen to his own warning that cutting too much too quickly can push a country into fresh recession leading to more unemployment and more families struggling to make ends meet; and does he now regret the advice he gave to the previous Labour Government to give unaffordable tax cuts and build up debt in advance of a recession? 
Hon BILL ENGLISH 
: I have listened to my own advice and I often do because it is consistently good. The Government has also listened to some of that advice and that is why New Zealand is taking a measured approach to fiscal constraint. We have set a horizon of 3 to 5 years over which Government departments need to manage within the money they have. We expect them to deliver more for less. 
Craig Foss 
: What lessons can New Zealand take from the British experience? 
Hon BILL ENGLISH 
: I think the lesson we can take is that Governments should be consistently careful about the use of taxpayers’ money and they should make measured and consistent change over time. If we do not make firm decisions consistently then we will end up making very harsh decisions as the UK Government has now been forced to do. That is why in Budget 2010 we delivered a package of changes that amount to measured control of Government spending as well as growth-promoting measures that will assist to close the Government deficit. 
Hon David Cunliffe 
: Has the Minister seen reports of falling business confidence in New Zealand and does he attribute that to European Budget contraction or is it more likely a verdict on his own Budget which over 7 years musters less than 1 percent extra growth and only 5.7 percent of the extra jobs on the cycle? 
Hon BILL ENGLISH 
: I think some fluctuations in business confidence are not unexpected. The fact is that the recovery is a bit patchy. Some sectors are doing well; some are not doing so well. The good news is that New Zealanders are not racing back to the housing market. They are being careful with their spending; they are not borrowing a lot more money in a hurry; and at the same time the export sector is reflecting the benefits of higher prices and higher productivity. That is exactly the rebalancing we need in this economy. We need more growth in our ability to earn from the rest of the world and less reliance on debt domestically. 
Craig Foss 
: Is he aware of any policy options that would make a painful British-style correction necessary? 
Hon BILL ENGLISH 
: Yes there are policy options that would store up trouble for New Zealand—for instance increasing Government spending rapidly in response to every single group that wanted a bit more money borrowing a lot more money in global markets and a reckless increase in Wellington-based bureaucrats that does not enhance front-line services. If we followed those policies which are the policies of the Opposition we would end up in the same situation as the UK.