Cullen Michael: Taxation (Annual Rates and Urgent Measures) Bill — In Committee 
Cullen Michael: Taxation (Annual Rates and Urgent Measures) Bill — In Committee 
[Volume:628;Page:749] 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I think one of the problems Mr English always gets himself into is that he cannot read documents properly. Of course the Council of Trade Unions did not say that the surplus is too large. 
Hon Bill English 
: I said the workers think it is. 
Hon Dr MICHAEL CULLEN 
: Ah he said the workers think it is—precisely! The Council of Trade Unions is not arguing—[ 
Interruption 
] But the member was inferring from that statement that therefore there was room for tax cuts. Mr English said that because people wrongly believe the surplus is too large we should therefore respond to their wrong belief and have a tax cut. 
Hon Bill English 
: That’s right. 
Hon Dr MICHAEL CULLEN 
: That is right—that is Mr English’s economic policy. That is why Mr Key has replaced him as the Opposition spokesperson on finance. What Treasury said what the Reserve Bank said and what the OECD said was not what National thinks they said. They all said that the surplus should be kept at its current level and that there should not be any further fiscal easing. Mr English’s problem—and for all that Southland country bumpkin thing he is actually a first-class honours English graduate from the University of Otago—is that he knows these things. He knows that in fact giving a tax cut is the same as having an increase in spending in terms of fiscal easing. It goes the same way. It both lowers the operating surplus and therefore increases and stimulates demand and therefore inflationary pressures. 
That is why if the National Party wants to give $2 billion of tax cuts from 1 April next year and it swallows its pride and reads the Treasury papers properly it will find out that Treasury says first its policy was all wrong—it was the wrong tax cuts—and second that to pay for them it has to cut spending by that amount. What Treasury actually said was that if we scrimp and save and take about $300 million off the growth in spending each year—and it cannot come up with any significant ways of doing it other than all the usual things such as to increase the age for superannuation and better target support for childcare that is more income testing etc.—then we will have little tax cuts year by year by year. But it has never argued that we can afford large tax cuts absent a large decrease in spending. That is the Treasury position; that is the OECD position. Indeed if we take Treasury at its face value and it cost $300 million a year we could afford $900 million which is less than half of the first round of what National is proposing for 2006. 
Mr English before the election was admitting privately up and down the country that the policy did not make sense. He was going to go quiet on it and hope National did not win because then he could become the leader after the election and reverse that silly policy. We know that Mr English on that front bench was the only one who actually understood that the policy did not make sense and that was why he dissociated himself from that policy in any number of private meetings up and down the country before the election. I got plenty of reports back about that. 
So all this part does is confirm the current tax rates. The challenge for members opposite is very simple: if they want to lower tax rates tell us where the corresponding spending cuts will come from. What will get hatcheted? Mr Borrows wants more police. Mr Williamson wants more money for roads. Mr Finlayson probably wants more judges or at least more money to be paid to judges. He certainly wants more QCs that is for sure and that ups their fees when we have to pay for them to represent the Crown. I have yet to hear from a single Opposition spokesperson who does not want more money spent in his or her area both geographically and in policy terms—and that member is the worst.