Bradford Sue: Questions for Oral Answer — Questions to Ministers 
Bradford Sue: Questions for Oral Answer — Questions to Ministers 
[Volume:647;Page:16370] 
11.  
SUE BRADFORD (Green) 
 to the  
Minister of Finance 
: What advice if any has he had as to whether last week’s Budget will increase or decrease the income gap between beneficiaries and waged workers? 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I thank the member for her question and note both the Green Party and the Maori Party holding the Government to account for the Budget unlike the National Party. I received advice that the general overall measure of inequality is not worsened by the Budget measures on taxation. If we take the case of a single person on the equivalent invalids benefit grossed up to the equivalent tax levels at present that person will pay $12 a week less in tax on 1 October. Obviously that does not flow through to a person actually on the invalids benefit. However a person on the invalids benefit is guaranteed annual indexation to cover increases in the cost of living; a person on a low income is not and often does not receive that in New Zealand in modern times. It should also be noted that of course beneficiaries with children receive the indexation of the family tax credits and the reduction in the bottom rate and the big increase in the threshold means that many single beneficiaries will be able to earn more at a lower tax rate than was previously the case particularly those on unemployment and sickness benefits. 
Sue Bradford 
: Is it not true however that at a time of very rapidly rising food fuel and housing costs and despite a recent Ministry of Social Development report that shows beneficiaries are actually worse off now than they were after National’s 1991 benefit cuts the Minister delivered a Budget that is actually guaranteed to make the gap between beneficiaries overall and wage workers grow? 
Hon Dr MICHAEL CULLEN 
: I do not think that follows necessarily because as I say beneficiaries are guaranteed compensation for those price rises. That does not always apply to those people who are on low earned incomes. The fact that there is a gap of course is part of the incentive for people to move off benefits if they are able to do so. There are pressure points for some beneficiary families and the Government is looking at ways of effectively addressing those pressure points. 
Su’a William Sio 
: Has the Minister received any advice of the effect on inequality of scrapping the cuts for low and modest income earners and steps 2 and 3 of his tax-cut package in order to give bigger tax cuts to the highest income earners? 
Hon Dr MICHAEL CULLEN 
: Yes indeed. The package in the Budget leads to the standard measures of inequality which are the Gini coefficient and occasionally something that is called the 80:20 test—that is the comparison of the 80th percentile versus the 20th percentile—not being affected negatively by the tax package. Any change to that package by for example as Mr Key seems to be hinting taking away the further moves at the bottom-end and transferring those to the top-end will clearly worsen inequality. 
Sue Bradford 
: Why does the Minister think that tinkering around the edges of the benefit system as he suggested on the weekend will be enough to deal with deepening poverty and the gap between wage workers and beneficiaries when the annual 1 April CPI increase is so small that it does not even touch on the depth of the need out there and when the system has lost the discretion it used to have through the special benefit which allowed Work and Income to top up people enough so that they could survive from one week to another but that is all gone? 
Hon Dr MICHAEL CULLEN 
: If prices are increasing significantly then the increase on 1 April is not small. The increase on 1 April is exactly the measured increase in the consumer price index and therefore compensates as best as any average can because individual circumstances vary for those price movements. The member refers to the study but of course the study ignores the fact that the real incomes have risen for those in employment and therefore if benefits increase by only the cost of living then the gap widens. The Labour Party clearly stands for labour; that is why we are called the Labour Party. 
Sue Bradford 
: Does the Minister accept Treasury’s projections that unemployment numbers will drop significantly over the coming year despite the recent job losses and rising oil and food prices or have those figures been used just in order to claim that we can afford $10.6 billion in tax cuts? 
Hon Dr MICHAEL CULLEN 
: I do not generate the Treasury forecasts in any shape or form; they are generated independently on Treasury’s own best estimate of what happens. Ministers of Finance do not create their own numbers in that regard. That is one of the big differences between being a Minister of Finance and being an Opposition spokesperson on finance.