English Bill: Budget Debate 
English Bill: Budget Debate 
[Volume:631;Page:3275] 
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 I think that member is headed for a better work-life balance! Listening to Jim Sutton has made me realise that there is no room for rising stars in Labour because Jim Sutton is already up there. It is no wonder that Helen Clark wanted that car to get to Christchurch so quickly so she could get out of it. 
I want to address the fiscal strategy that Dr Cullen has followed in this Budget. My colleague John Key pointed out to the House that there appear to be no conditions under which Dr Cullen will accept that tax cuts are a good idea. That is absolutely evident in reading the Fiscal Strategy Report which I know that everyone will have read from start to finish. What is striking is that the discussion about the fiscal strategy shows absolutely no understanding of the connection between where the Government gets its revenue from—ordinary working Kiwis—and the effect tax has on the incentive to get ahead and on the dynamics of growth. There is no mention of it whatsoever. One would think that the Government’s revenue just fell out of the sky and turned up on the Minister of Finance’s desk and that he then got to spend it all. That is what it seems like. 
John Key 
: It was in the incoming briefing so they weren’t allowed to write about it. 
Hon BILL ENGLISH 
: I am not surprised. That is the nub of the problem. Dr Cullen has absolutely no understanding that tax is paid by people who work and earn and that the payment of that tax affects people’s incentive to get ahead and to grow the economy. He does not regard that as at all relevant to the massive increases in revenue that are showing through the Fiscal Strategy Report. 
In fact it is very telling that the focus now of the fiscal strategy is on building the Government’s asset base. That is now the focus. That is what it is all about. It is not about using fiscal policy as a tool for growth. It is not about a better tax system. It is all about building the Government’s asset base. That is why the Government has picked up on the word “investment” as my colleague Mr Key has said. It is all laid out in a background paper to the Otago/Southland Labour Party regional conference  
Language Matters 
 which states that the word “investment” not “spending” should be used. At least Treasury told the truth in the Fiscal Strategy Report. Treasury called it spending because that is what it is. The Government does invest in the New Zealand Superannuation Fund but when it is running a “help” telephone line for beneficiaries and the staff of that line are answering three calls a day then that is spending—at the rate of $56 a call. That is not investment. When the Government sent people off around the world on the hip-hop tour did any New Zealander regard that as an investment? No they did not. They regarded it as spending. Out of all the people of New Zealand only the 50 people in the Labour Government believe that every dollar the Government spends is some kind of investment. 
Dr Cullen now has a real problem in getting the trust of the New Zealand people and I will say why. I read these Fiscal Strategy Reports every year when they come out. When Dr Cullen first came into Government his target was the operating balance but that became too big. He said we could not have tax cuts because the operating balance was not big enough but it became too big. Then he changed his focus to the operating balance excluding revaluations and accounting changes which is a swept-up version of the operating balance but that became too big. Then he changed the goalposts to the cash balance but that became too big. He still could not give tax cuts. He ran out of excuses not to give tax cuts. So now he has changed the target to the Crown’s asset value and net worth. 
John Key 
: That’s positive now too. 
Hon BILL ENGLISH 
: That is positive now too so that has become too big. That is the key to it. The public no longer listen to what Dr Cullen and Labour say about tax because there are no conditions under which Labour would give tax cuts—none whatsoever. Every dollar is the Government’s dollar. It knows how best to spend it and it will never give tax cuts. 
 But there does seem to be misunderstanding about the “chewing gum” tax cuts because nothing in this Budget indicates that the “chewing gum” tax cuts will be given except on page 48 of the Fiscal Strategy Report where Treasury states:“In practice taxes will tend to grow somewhat faster than GDP as the growth in personal incomes pushes individuals into higher tax brackets.” Then comes this mysterious sentence: “Our decision to inflation-index personal income tax rates reduces this effect …”. Well actually no decision has been made to inflation-index personal income tax. Anyone reading the Fiscal Strategy Report would think Dr Cullen had conceded that point. He has not. How did Treasury get to produce  
Budget 2006 
 which contains the Executive Summary the Fiscal Strategy Report and the Economic and Fiscal Update and include reference to a major tax decision that has not been made? 
Interestingly that part of the document is signed by Dr Michael Cullen. Maybe the reason he was confused when he went on  
Campbell Live 
 and when he said to the media that maybe there should be tax cuts is that he finally read his own Fiscal Strategy Report which states that he has decided to inflation-index personal income tax rates. Does this man know what he is doing? Does he know whether the Government has made that decision? Somebody had better ask him. 
I turn to this ridiculous idea that every Government dollar spent is an investment. I discovered something that horrified me a couple of weeks ago—the Government spends $140 million administering our tertiary education system when just 4 years ago it used to spend $40 million. Four years ago it cost $40 million to run our tertiary education system; now it costs $140 million. The Government is not investing in education; it is spending on bureaucrats plans strategies reviews workshops launches trips conferences seminars and back-patting not education. The most important matter in education today is that 20 percent of our young people are failing to get sufficient literacy and numeracy skills to become competent citizens. They are failing. What does the Minister of Education say about it? When the Education Review Office told New Zealand in its annual report that 20 percent of students were failing Steve Maharey said he thought the office’s chief executive “would want to say: ‘Look you’ve got the wrong end of what we wanted to say.’ He was talking about a group of kids who weren’t doing as well as we would like them to …” but that that did not mean they were failing. That is the fundamental dishonesty of this Government. 
The Government is out there spending money flat out with no appreciation of how it is earned and the public knows that it is not getting to grips with the real issues. In education that real issue is about basic standards that every child ought to meet. If Steve Maharey spent a fraction of his new money in this Budget on bringing in national standards and on making sure that every school taught every child to make progress towards those national standards then that might be regarded as an investment. But he certainly will not do that because he will not acknowledge that 20 percent of our young people are failing. We know they are failing. In National Certificate of Educational Achievement level 1 literacy 27 percent of young New Zealanders failed the literacy standards—and I can tell members that the standards are not sophisticated complex or difficult. 
This is why the public does not trust Dr Cullen. They do not believe him any more. They do not trust the line about investment because they know that the money is not being spent on things that matter but on the usual suspects under a Labour Government—bureaucracy and waste.