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Richard Prebble’s The Letter Budget Special

Richard Prebble’s The Letter Budget Special


The Budget reminds us of the Sherlock Holmes story - Inspector Gregory: “Is there any point to which you would wish to draw my attention?” Holmes: “To the curious incident of the dog in the night-time.” Inspector Gregory: “The dog did nothing in the night-time.” Holmes: “That was the curious incident.” What’s curious about the Cullen Budget is there is nothing to revive economic growth, tackle Auckland’s traffic, combat the energy crisis or the compliance costs for business, in fact any of the real issues. So if you’re busy you need not read on.


Labour ‘s credit card pledge was “No rise in income tax for 95% of taxpayers”. As the Budget did not adjust the income tax brackets, now 95% of all taxpayers pay more tax than when Labour came to office. The Parliamentary Library economists calculate that to fully adjust for inflation the $9,500 threshold should have been adjusted in the budget to $13,200 (a 38%) increase; the $38,000 threshold to $41,800 (a 10% increase) and the $60,000 threshold should be raised to $65,000 (10% increase). The failure to raise just the top threshold means that 270,000 workers are now in the 39-cent tax bracket – ie 18% of fulltime workers. Helen Clark can’t have been conscious when she signed the pledge card.


A Labour strategy has been to repeatedly announce the same spending announcement. In December 2001 Annette King announced $400 million “new” money for health each year for the next three years. The budget re-announced it. The trickery is greater. In fact $120 million was never “new” money. Annette King lost out in Labour’s first two budgets and health spending was cut – so it’s just catch-up money. The crisis in hospitals’ deficits will continue. $165 million of the $280 million is “ring-fenced” for primary health. Hospital boards will continue to cut waiting lists by simply taking thousands of patients off the waiting lists and putting them in “active review”. It’s NZ’s greatest state secret how many patients are on active review. They are not counted. Any bureaucrat that did a count would be fired!


Another loser. Real police spending is falling. Real per capita spending on police under Labour has fallen from $216 per person to $214.


The motorist is a real loser under Labour. In 1999 petrol and road user charges raised $1517 million, $1194 million went to Transfund for roading and Government took the rest - $323 million. This year petrol and road users will raise $1910 million, Transfund gets $1464 and the government takes $446 million!


ACT New Zealand has managed to obtain a copy of the Treasury beneficiary number forecasts that this year for the first time have been omitted from the printed Budget Tables. But they forgot to take the numbers off the Treasury’s website. When we look at the numbers, it is easy to see why Labour didn’t want to publish them. The Budget claims that Labour’s economic policies will create jobs but the Treasury doesn’t believe it – as the unemployment benefit is predicted to rise by 6,000 over the next two years. What’s even more disturbing is the rise in disguised unemployment. Unless Treasury’s predicting that the SARS epidemic is going to sweep through New Zealand, it’s not possible to account for the fact that Treasury says that within three years, the number of people on the sickness benefit will have risen 34 percent from when Labour came to power. When Labour took office, there Perhaps the reason the Government didn’t publish the benefit number predictions is because the Domestic Purposes Benefit numbers are due to rise by 3,000 over the next three years. This is despite – or perhaps because of – the United Party’s Commission for the Family. The benefit table is on ACT’s website:


Having spent $27 billion on education, Labour has just noticed kids can’t read. No worries – help is at hand. Trevor Mallard, Minister of Education, has announced the Budget will spend $15 million over four years to appoint 15 new literary development officers.


Labour boasted that it had a spending cap. In Dr Cullen’s first Budget he boasted, “The $5.9 billion spending cap we have imposed on ourselves remains in place.” This Budget has no spending cap and in an obscure passage: “the likelihood of sufficient fiscal headroom in Budget 2004 for some significant initiative beyond the amount presently allowed.” One has to go to page 21 of the Economic and Fiscal Update to find “would allow for policy changes of under ½% of GDP in each of the 2004, 2005, and 2006 Budgets.” Enquiries in the Budget lock-up reveal that this is an extra $500 million new spending each year.


Treasury forecast average growth of 2.5% a year over the next ten years. Under what Helen Clark calls the “failed policies of the past” New Zealand grew 3.6% in the 1990s.

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