Wilkinson Kate: Questions for Oral Answer — Questions to MinistersText is incorporated into the Bound VolumeWilkinson Kate: Questions for Oral Answer — Questions to Ministers[Sitting date: 15 October 2013. Volume:694;Page:13827. Text is incorporated into the Bound Volume.]2.Hon KATE WILKINSON (National—Waimakariri) to theMinister of Finance: What reports has he received on the Government’s financial position and especially progress in meeting its target of returning to surplus by 2014/15?Hon BILL ENGLISH (Minister of Finance): Treasury last week published the Government’s Financial Statements for the year ended 30 June 2013. They showed higher tax revenue and lower than forecast Crown expenses that helped to more than halve the Government’s operating deficit before gains and losses to $4.4 billion for that year. This compares with a $9.2 billion deficit the previous year and was considerably better than the deficit forecast in Budget 2012 of $7.9 billion so it was $3.5 billion better than forecast in the last Budget. This confirms that the Government’s careful approach to fiscal management is working and that our focus on getting better results for the community is flowing through to better results for the Government’s books. Fortunately we did not listen to all the advice from the Opposition about how to do this.Mr SPEAKER: Order!Hon Kate Wilkinson: What has been the Government’s approach to stemming previously unsustainable growth in Government spending and how was this reflected in the latest annual Financial Statements?Hon BILL ENGLISH: The Government has taken a balanced approach which has been to focus on the longer-term drivers of Government expenditure. Those longer-term drivers are often social failures—that is the incidence of crime welfare dependence and lack of educational achievement. In each case the Government is focusing on improving those results for the community and that is flowing through to the Government’s books. So in the latest year core Crown expenses came in at $70.3 billion about $3.4 billion below what was expected in last year’s Budget. Part of this result was lower than forecast costs in Canterbury and part of it was lower expenditure by Government departments. We remain on track to reduce Government expenditure as a proportion of GDP to 30 percent by 2016-17 down from 35 percent of GDP in 2010-11.Hon Clayton Cosgrove: In respect of the Government’s financial position does he stand by his statement regarding the bailout of Solid Energy that “As far as we’re concerned we’ve got a deal.” and how does he reconcile that statement with the news that the Bank of Tokyo-Mitsubishi UFJ is taking legal action to block the Solid Energy bailout?Hon BILL ENGLISH: I do stand by the statement. Both the auditors and the directors of the company according to company law had to ensure the solvency of that company by 30 September. The Government has negotiated a deal with the banks that creates that position. The fact that the Bank of Tokyo-Mitsubishi UFJ wants to take some legal action to prevent it being compelled to join the deal is really a matter for the bank. Our best advice is the bank has a very small chance of success. The irony is that ifit succeeded in that legal action the company may go into liquidation with the loss of a thousand jobs and the bank would lose all its money. It may wish to consider that.Hon Kate Wilkinson: Why is it important that the Government sticks to its successful economic and fiscal plan and continues to focus on returning to surplus?Hon BILL ENGLISH: There are a number of reasons. One is that the New Zealand Government will continue to incur more debt until we actually get to surplus. At the moment Government net borrowing is still $110 million per week down from a peak of $260 million per week in 2010-11. The second reason is that the Government has an objective of doing as much as it can to keep interest rates lower for longer and a strong fiscal plan is likely to achieve that. Thirdly the fiscal results are secondary to the task the Government has set itself which is to get better results from Government expenditure for the community. When we rehabilitate prisoners effectively when we teach children how to read when we keep young people in school and out of offending we save a lot of money and that is starting to work.Hon Kate Wilkinson: What will be the Government’s main areas of focus after it reaches a Budget surplus in 2014-15?Hon BILL ENGLISH: Budget 2014 will confirm or otherwise whether we get to surplus although it does look pretty likely. We then want to reduce net debt to a prudent 20 percent of GDP by 2020. One has only to observe international events such as the potential threat of the failure to resolve the debt ceiling argument in the US to understand that the international financial markets in which we still borrow billions and on which we are dependent for sourcing a lot of our investment capital could be volatile and uncertain for New Zealand so we need a prudent level of debt. The Government will also have other choices such as resuming contributions to the New Zealand Superannuation Fund or investing further in public services that achieve results for the community.