8. Government Financial Position—Surplus and SpendingFLETCHER TABUTEAU (NZ First) to the Minister of FinanceGovernment Financial Position—Surplus and Spending8. FLETCHER TABUTEAU (NZ First) to the Minister of Finance: Does he believe New Zealand has a surplus; if so why?Hon BILL ENGLISH (Minister of Finance): Yes; and that is because the Government's revenue exceeds its expenditure.Fletcher Tabuteau: If we have a real surplus then why have the poorest 20 percent of New Zealanders superannuitants in particular had to struggle with price increases at literally twice the rate of those of the richest 20 percent since the Minister's Government came into power in 2008? Hon BILL ENGLISH: The member of course is talking about two different things here. One is simply the Government accounting system which is the most transparent public accounting system in the world. On the other hand he is addressing the issue of how inflation affects superannuitants and I think the record shows that because national superannuation increases are tied to movements in the average wage and movements in the average wage over the last 7 or 8 years have been significantly above inflation the real value of national superannuation has increased. Of course theoretically you could go back and recalculate it according to the index that Statistics New Zealand published yesterday.Fletcher Tabuteau: If we have a real surplus then why has this Government decided to cut real funding dollars from our hospitals schools police and housing undermining the core delivery of all of these vital services? Hon BILL ENGLISH: I simply disagree with the member. It is not the case that what he has asserted is true. All of those services have received significant increases. In fact in the last Budget I think the Police had an increase of $300 million which by any reckoning is a large amount. But in any case we are more focused on whether those organisations are getting results than on the sheer bulk of spending. The lesson of history often in Government agencies is if they get too much money they become even less able to deliver services. We have struck the balance about right with a strong focus on results and where they can show they get results they get more money.David Seymour: What happens to interest rates and inflation when a Government abandons fiscal restraints such as in the period 2005-08?Hon BILL ENGLISH: For a range of reasons including the fact that the Government of the time allowed Government expenditure to increase by I think 50 percent over about 6 or 7 years first mortgage rates then were more than double what they are today. Today you can get a 2-year fixed-interest mortgage for 4.2 percent. First mortgage rates in 2007 were 10 percent.Fletcher Tabuteau: Given the Minister insists he has a surplus why has his Government back-pedalled on adjusting immigration settings and police numbers despite insisting that everything was OK about a month ago?Hon BILL ENGLISH: It is not really whether I insist we have a surplus. In fact the accountants and the Auditor-General insist we have a surplus. If we were to report a deficit with the current expenditure and revenue they may come to the conclusion of it being political interference. But the member is raising a whole range of policy issues. I just want the member to understand this. We are one of the very few developed countries in the world that have the choice of dealing with those sorts of policy issues. Even our cousins across the Tasman face large and persistent deficits and they simply do not have the choices that the member is talking about. We do.Fletcher Tabuteau: Does he think a Government with a real surplus would have sat back and on its watch overseen the greatest housing shortages of our time?Hon BILL ENGLISH: I do not see the two as being related. What the Government has been doing—Hon Member: That's the problem.Hon BILL ENGLISH: The problem in the housing market is not some lack of Government expenditure. It is a set of dumb planning rules that have been in place for 20 years which have prevented the flexible supply of housing when there was strong demand. The Government has set about systematically getting those rules changed with increasing success.Fletcher Tabuteau: What has the Minister been able to say to New Zealand's hard-working families who cannot afford a home to live in and cannot make it from wage packet to wage packet let alone save for the future about this Government's supposed surplus?Hon BILL ENGLISH: What we are able to say to those families is first that they are in one of the faster growing economies. So whatever challenges they are facing week to week they are in a country where there is more opportunity to do something about that than most other developed countries. We are also able to say to them that because the Government has surpluses their entitlements are secure and their public services will continue to improve. That is better than you can say in most developed countries.Fletcher Tabuteau: What does the Minister say to New Zealand businesses and investors who are worried about the stability of the New Zealand economy because this Minister has grown Government debt to its largest level in New Zealand's history?Hon BILL ENGLISH: We explain to them what has happened with the Government debt cycle and that is because of the recession and the earthquake in Christchurch where we are just tipping over $17 billion of contribution to the rebuild that we borrowed when times were tough and now that the times are better we need to pay that debt down to prudent levels. I look forward to the member's support because he has just been giving a long list of new spending which makes it a lot harder to pay down the debt. I was hoping he might share our priorities to get the right balance of them.