English Bill: Debate on Budget Policy Statement 
English Bill: Debate on Budget Policy Statement 
[Volume:637;Page:7757] 
Hon BILL ENGLISH (Deputy Leader—National) 
: 
 This could well be a special occasion because I think we have witnessed Dr Cullen’s last Budget Policy Statement appearance at the Finance and Expenditure Committee. The Government in its effort to refresh will have to do away with someone. Unfortunately Dr Cullen is by far the most capable of the Labour Ministers but equally he has made it quite clear in the last few months that he is past his usefulness to the Government. The Prime Minister is now treating him without respect. The other day when he floated the idea of the mortgage tax—a dopey idea as it was—she simply slapped him down and made him back off. But when Winston Peters goes out and says to the national media something that is directly counter to Government policy in a foreign country with its Minister of Foreign Affairs Helen Clark describes that as an honest opinion about tragic circumstances. Dr Cullen is now a lame duck within the Labour Cabinet. 
Dr the Hon Lockwood Smith 
: A dead duck. 
Hon BILL ENGLISH 
: Well his idea was a dead duck. But he is not dead; he is just lame. He is a lame duck. Of course he is going to be replaced by Mr Mallard who is another lame duck. He has blown his credibility in the finance area over the Auckland stadium before he has even got the job. 
Dr Cullen to his credit over the years has fought the worst spending instincts of the Labour Party but he has left himself confused about just where he is up to. The main issue debated at the Budget Policy Statement hearings was that Dr Cullen has always said his fiscal programme is prudent and that those people who are going around promising for instance to reduce taxes would create expansionary fiscal policy which would drive up interest rates. It turns out that Dr Cullen is describing his own policy because for the first time ever at the select committee hearings Dr Cullen conceded that it is his spending plans that are putting pressure on interest rates. 
He had to do that because the Governor of the Reserve Bank had already said so. In the most recent Monetary Policy Statement the Governor of the Reserve Bank who was sitting there trying to decide about the interest rates that New Zealand households will pay said that Dr Cullen’s fiscal policy was quite expansionary. What does he mean by that? He means that over the next 2 years Dr Cullen and the Labour Party have already programmed $5 billion of new spending. This is at a time when the Governor of the Reserve Bank is worried about the economy not adjusting to the imbalances. He is signalling through the Monetary Policy Statement that one of his problems with setting interest rates is the Government’s spending momentum. That $5 billion is before the election bidding starts—and we know how large scale Labour can get in its election bidding. 
So the Governor of the Reserve Bank is looking out over the next 2 or 3 years. He will decide whether the interest rate on the mortgages that New Zealanders pay from their weekly incomes will go up and he is saying that the Government’s spending plans are making his job harder. That is why it was illogical for Dr Cullen to be proposing the mortgage tax because Dr Cullen was trying to get out of the mortgage levy a situation where he could keep on spending but householders would pay the price directly through a mortgage levy. The Reserve Bank needed that to help cool down the economy. 
When Dr Cullen goes around shedding crocodile tears for exporters he should do what he can to take the pressure off them. The one thing he can do is to rein in the scale of Government spending because who believes that out of the $4 billion of new spending New Zealanders are going to get $4 billion of new services? No one believes that. They believe that Labour might claw back a few of the votes it has been losing. There will certainly be more pay rises for civil servants well ahead of the private sector. There will certainly be higher interest rates for longer for every New Zealand household. 
But we know the one thing there will not be is more and better public services. Because Labour has fallen into the trap of believing that if it spends more money on it then that will fix the problem. Of course it does not. Members should just look at health. The Government now spends 40 percent more than 7 years ago for roughly the same output. Roughly the same amount of health things are getting done and it is costing 40 percent more. Members should look at the problems our leader John Key has been highlighting with that smaller group of people with intense social and economic problems which he has called the underclass. Almost universally the public believe that the Government is complacent about it and more important that its solutions are not working. Spending more money on those kinds of big Government solutions is not going to make any difference. 
Dr Cullen has persisted with the spending programme that will mean interest rates are higher for longer. It is interesting that even though that spending programme is very large the Budget process is creating real tension within the Government. This is where Dr Cullen is really coming under pressure internally. You see when Labour signed up to its coalition agreements it gave away everything to the small parties. Labour was getting such persistent windfalls of new tax revenue that Helen Clark decided she could pay for whatever New Zealand First and United Future wanted. Even with the huge tax windfalls they have enjoyed New Zealand First and United Future are getting most of the discretionary cash out of this Budget round. 
That is leaving the usual hopeless big spenders like Pete Hodgson Steve Maharey and Annette King increasingly irritated. They are finally realising that Labour gave away large amounts and very expensive promises—like 1000 more police plus 250 non-sworn staff and the increase in national superannuation which are all things that New Zealand First campaigned on—and now it has to pay the bills. So Dr Cullen is trying to get the lid on the spending even though there is about $2 billion more spending. Those tensions in the Government are going to become more and more evident. 
In fact it is becoming clear now who is setting the agenda for the Government. New Zealand First has got its promises which are using up most of the Budget. United Future is the champion of tax cuts. We know that Dr Cullen is not in favour of tax cuts at all. So what is he doing now? What actually is the economic strategy of the Government? Because it is not clear at all from the Budget Policy Statement. What we needed to see from the Budget Policy Statement but did not see was a focus on two things. The first thing was quality of Government spending. One million dollars was spent on an Immigration Service website that has two vacancies posted on it. That is one of hundreds of low-quality Government expenditures. 
The second thing we needed to see was a shift in the balance of the economic strategy. The Government has focused almost entirely on strengthening the Government balance sheet and building up savings to manage risks that are 20 to 30 years away. Well that has some merit. But what we need is to balance that up with a focus on growth in the next 5 to 10 years. Because it is that economic growth that will allow us to spend what we need to support and help people and which will provide the opportunities for our young people who cannot wait 30 years. So the Government’s focus of 30 years away is too unbalanced. We need to balance that up with a focus on growth. But unfortunately it is not here. 
Dr Cullen is not able to adapt to the changing times. His thinking is still back in the late 1990s. He is becoming a stick in the mud who is stuck in the mud—that is why his political viability is running down. He is irrelevant to the economic debate. It will soon be time for a change to shift gear to a much more aspirational Budget Policy Statement which unfortunately is still 2 years away when it will come from the new National Government.