Magazine article New Zealand Management

Why Nats Must Open Books

Magazine article New Zealand Management

Why Nats Must Open Books

Article excerpt

Finance Minister Michael Cullen became somewhat cantankerous while preaching fiscal conservatism in the politically testy aftermath of the 2006 Budget. After six years of strong economic growth, the Government's books looked strong and hefty surpluses were encouraging a clamour for tax cuts. Dr Cullen was resisting a rising tide of criticism, determined to hold on to the worthy fiscal gains made under his management, and he railed at the National Party "for returning to its misguided election promise of borrowing to fund tax cuts". Those tax cuts, he insisted, could be afforded only by borrowing and cutting services. In other words, there would be fewer teachers, fewer nurses, fewer police and a rising interest bill for future generations.

Cullen took comfort from a Colmar Brunton poll showing 75 percent of people preferred spending on health, tax relief for working families, roads, superannuation and interest-free student loans to tax cuts. "And that's precisely what this Government is delivering," he declaimed.

Taxpayers, meanwhile, were coughing up $90,000 or so for National's postcard campaign (although this is a trifling sum when stacked against the total tax take of $50 billion budgeted to be collected in 2006/07). The mail-out was highlighting the party's pledge to deliver tax cuts through "wise borrowing" and by prioritising spending (another way of saying money no longer would be spent on programmes which consume money now). Cullen characterised the postcard promises as "the temptation to splurge".

National's John Key riposted by contending the Minister was under pressure, reflected in his accusing the media of dumbing down their coverage of the tax cuts issue, and blaming everybody else for "his failed Budget".

Key could draw on a poll to claim the high ground, too, a One News poll which showed a majority of those surveyed wanted tax cuts. He also could complain that some government spending was of dubious value. Whether there is enough "dubious" stuff to compensate for the tax cuts is in the realm of political debate.

Key also raised the matter of surplus measurements. He recalled the introduction of "the OBERAC" into the Government's reporting systems, and how Cullen had regarded this as a better measure of the health of the Government's books than the operating surplus. Cullen subsequently had put it aside in favour of a smaller number--the cash surplus--"when the OBERAC got so large it looked like tax cuts were affordable". …

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