Copeland Gordon: Estimates Debate — In Committee 
Copeland Gordon: Estimates Debate — In Committee 
[Volume:627;Page:21985] 
GORDON COPELAND (United Future) 
: 
 Three great debates have been unleashed by the 2005 Budget. Firstly is there room for tax cuts? It is interesting to get a perspective from someone who is independent of this debate. John Shewan chairman of PricewaterhouseCoopers says: “Yes at about the $2 billion level.” It makes United Future’s $2.5 billion package over 3 years look prudent and modest does it not? The figures tell the story. 
The Budget forecast an operating surplus over the 3-year period 2005-07 of $18 billion. Please note that this is after all the Government’s revenue expenditure covering health education pensions welfare police defence etc. Of that $18 billion surplus $7 billion will be contributed to the New Zealand Superannuation Fund—nicknamed the Cullen fund—to pre-fund the future greatly increased cost of New Zealand superannuation. United Future supports the New Zealand Superannuation Fund. That leaves $11 billion after New Zealand Superannuation Fund contributions. Our tax cuts which unlike other parties we have announced to the public will utilise $2.5 billion of that surplus over 3 years which still leaves $8.5 billion for capital expenditure on items such as schools hospitals roads defence equipment etc. 
Secondly the big debate has been about whether tax cuts will be inflationary and raise interest rates. Labour says “Yes” although whether Dr Cullen actually believes that may be another question. After all because John Howard and Peter Costello used it against Labor in Australia and it worked for them Dr Cullen reasons that maybe it will work for him as well. But again let us turn to someone who is somewhat independent in this matter. What does Dr Bollard Governor of the Reserve Bank say? 
Several of us on the Finance and Expenditure Committee took the opportunity when we last saw Dr Bollard to ask him those very questions. His answer was of course that it depends on the net effects and that is exactly right. Tax cuts used by highly indebted families to repay debt for example would not be inflationary. Tax cuts coupled with a reprioritisation of Government spending to increase productivity would not be inflationary and tax cuts invested by the private sector to improve productivity would not be inflationary. Borrowing to reduce the $1 billion costs of decongestion in Auckland would not be inflationary because it would reduce the cost of trucking goods across the city or to the wharf. It would reduce taxi fares and fuel consumption increase workforce productivity etc. Therefore logic would suggest that the funds should be borrowed to eliminate traffic congestion in Auckland Wellington and Tauranga. 
The Government with United Future’s support has given itself the legislative authority to borrow for land transport but chooses not to do so and I for one have to wonder why. What is the case for not doing that when even Dr Bollard would say that it would be a good thing to do it would increase productivity and have a positive effect on inflation? But no the Government wants to go down a different line. 
Thirdly the other big question that has come out of the Budget is whether the Government is spending taxpayers’ funds wisely. Let us take a few examples. Health expenditure is budgeted to increase to $9.3 billion next year but will that be spent effectively? 
I shall give a couple of examples. I spoke to a surgeon recently who works at Starship children’s hospital. He said he could not tell me how frustrated he was and that he would like to do a lot more surgery there but could not. I asked him why and he replied that he did not have enough nursing support staff. I told him that good nurses were available from the Philippines and asked him why did he not bring in some of them to work at Starship because that would solve the problem and enable him to get on and do more surgery. He said he could not do that because it was not under his authority and that others in the organisation made decisions about recruitment. He did not know whether they had thought of Filipino nurses. However he did know that productivity in Starship children’s hospital could be vastly improved by having more nursing staff. 
I told my colleague Paul Adams about this and he was interested because of the situation of a surgeon friend of his who did cataract operations.