Collins Judith: Oral Questions — Questions to MinistersText is incorporated into the Bound VolumeCollins Judith: Oral Questions — Questions to Ministers[Sitting date: 11 March 2015. Volume:703;Page:2119. Text is incorporated into the Bound Volume.]5.Hon JUDITH COLLINS (National—Papakura) to the Minister of Finance: What recent reports has he received on the Government’s finances and how does this compare with forecasts in the Half-Year Update in December?Hon BILL ENGLISH (Minister of Finance): It is a very good question. This morning Treasury released the Government’s—[Interruption] Just listen. This morning Treasury released the Government’s financial statements for the 7 months to January. These show that in the year to January the Government posted a surplus of $77 million. The surplus was driven by higher than expected tax revenue and lower than expected expenses. The out-turn was $712 million better than forecast by Treasury in the half-year update in December. Although it is too early to say whether we will have a surplus at the end of the 2014-15 year this is a part-year surplus—the first one for some years. It demonstrates that the Government has made significant strides in managing public finances.Hon Judith Collins: What are the implications of this result on the full-year surplus for 2014-15?Hon BILL ENGLISH: One of the implications is it looks a bit more likely we could get to a full-year surplus than perhaps we thought back in December. Corporate tax and source deductions are both ahead of forecast but actually these are both pretty difficult numbers to forecast accurately. It remains to be seen whether the higher than expected growth in revenue continues through the rest of the financial year. The Government still considers that the strong economy and responsible fiscal management can deliver a surplus when the final accounts are published in October despite the fact that Treasury’s latest forecasts in December show a $572 million deficit. We will not know whether we have achieved a surplus for the whole year until the final accounts are published in October but it is nice to have one for at least 1 month.Grant Robertson: In light of those answers about the surplus was then ACC Minister Judith Collins correct when she said that the Government had ignored ACC’s recommendations for bigger cuts for the third year running because we needed to get to surplus?Hon BILL ENGLISH: As I answered that question yesterday every Minister thinks that the decisions that are made in respect of their Budget bids—or in this case the ACC bids—every Minister believes that it is their bid that is going to put us over the line or not over the line. In the case of the Minister’s statement it is one of many decisions made by a Government that add up to a surplus or a deficit. But I have to say the former Minister for ACC did a great job of reducing levies and we now levy $1.5 billion less than just a few years ago.Dr Russel Norman: I raise a point of order Mr Speaker. Mr Robertson’s question was a very direct question that has not been answered once again by this Minister—Mr SPEAKER: Order! The member will resume—[Interruption] The member will resume his seat. The Minister addressed the question. I accept he did not answer the question as to whether the Minister was correct but he pointed out that every Minister has a different perspective as they argue their case around the formation of a Budget bid.Hon Judith Collins: What have been the trends in revenue forecasts in recent years and how has this impacted the return to surplus?Hon BILL ENGLISH: The revenue has gone up each year but we are in the unusual situation where we have solid economic growth but also historically low inflation so this is good for New Zealand households because it means their cost of living is increasing at very low rates but it makes it more challenging for the Government because higher inflation pushes up the tax base and enables us to collect more tax in a growing economy. However the Government’s management of expenditure has been disciplined and despite the fact that the tax base is not growing as fast as was expected we are able to manage expenditure and therefore stay on track for surplus.Hon Judith Collins: What were the main drivers of the better than expected financial result in the year to January?Hon BILL ENGLISH: In any given month things move up and down and of course they can change in subsequent months. But in the month of January corporate tax was $158 million above the forecasts and source deductions such as PAYE were $146 million or 1 percent above forecasts. Expenses were around a quarter of a billion dollars lower for the first half of the financial year with variances spread across a number of departments but it is likely that some of this lower expenditure will be due to timing differences and the money will be spent later in the year. These are encouraging trends: a slightly higher tax revenue than expected and expenditure is on track or a bit lower.