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Budget Blowout Is Big

6 May 2001

The Government's claim that its budget blowout is too small to worry about is wrong, National's Finance spokesperson Bill English said today.

"If the Government thought the blowout was so small, why couldn't it find the 'small' savings needed to cover it, and so hold on to its precious economic credibility?

"The Prime Minister claimed on TV that the blowout is '...only a quarter of a percent of the total spending planned for the term of office of the Government'. In fact it is 4.5 percent of the spending over which the Government has control and that is a large blowout.

"More importantly it is a large proportion of the remaining discretionary spending. Last year the Government made decisions committing most of its $5.9 billion cap. Dr Cullen called this 'front-end loading'.

"He has allocated $550m for the 2001 budget and $630 for the 2002 budget, a total of $1180 new money. His blowout represents 22.9 % of the remaining funds.

"The spending blowout is also 45% of the $600m Dr Cullen plans to allocate to the superfund in this years' budget. This year he will be rescued by higher taxes than he forecast, but it shows how the superfund puts pressure on spending choices. The credibility of the fund depends on governments being able to control spending tightly every year.

"This is a budget out of control, and the pressure has hardly begun. Dr Cullen's colleagues now face 18 months of stories about health cuts running up to the election, and a tight budget next year as well.

"The budget will blow out again because the Government has used most of the money to buy votes, without leaving enough to run the system and deal with contingencies," Mr English said.

Ends


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