Government will not borrow for tax cuts

tax cuts lack real ambition for our economy, Finance Minister Michael Cullen said today.

In the first of his series of speeches on the Labour-led government’s four tests for personal tax cuts, Dr Cullen said that for the first time in many decades we have a real chance to put the economy on a sustainable footing for growing prosperity.

“New Zealand is enjoying the longest period of economic expansion since World War II,” Dr Cullen said. “Over the last eight years, the Labour-led government has used this expansion to reinvest in public services and infrastructure, to deliver tax cuts for families, businesses and savers, and to drive down Crown debt.

“Under Labour, Crown debt stands at less than 20 per cent of GDP – down from over 35 per cent eight years ago. The amount of money we are spending just to finance that debt has fallen by over 30 per cent as a proportion of GDP.

“We have pursued a low-debt policy because we want to build a buffer against fiscal shocks and to protect future generations. If a downturn occurs, Labour will not have to cut superannuation like Bill English did as Treasurer on 1 April 1999.

“Labour drove down debt to prepare for the major challenges presented by our ageing population, which could see debt rise very significantly as the century progresses.

“Even before these challenges hit home John Key wants to increase our debt to at least 25 per cent of GDP. But he does not pretend he wants to borrow more to pay for more services and he does not really believe he needs to borrow more to pay for roads. He only wants to outspend Labour on tax cuts.

“His plan would cost an extra $700 million a year in financing costs alone, around what the government has invested in new health services for each of the last two years.

“But the real worry is that Mr Key’s pro-debt policy shows he does not take long-term challenges seriously. His risky deal for tax cuts today would leave the bill to our children and grandchildren tomorrow.”