Hon Dr Michael Cullen
Minister of Finance

28 July 2008 Media Statement

Come clean on borrowing plans Mr Key

The National Party must confirm it will not raise the government’s debt target following John Key’s pledge not to borrow for tax cuts, Finance Minister Michael Cullen said today.

After committing a huge policy flip flop by pledging not to change the Working for Families programme – which Mr Key had previously attacked as middle class welfare – the National Party has come under pressure to reveal how their tax cut package will be funded.

On radio this morning Mr Key rejected the government’s assertion that he would have to increase debt to pay for bigger tax cuts by saying, “We will not be borrowing for our tax cuts.”

“John Key has promised huge tax cuts and has even said he doesn’t care what the economic impact of his tax cuts will be,” Dr Cullen said. “He’s also promising to do all the things we know he hates, like investing in trains, keeping Working for Families in place, supporting KiwiSaver, and backing interest free student loans.

“And now he tells us he’s not going to borrow to pay for his tax cut programme. Something doesn’t add up.

“The pre-election fiscal update is likely to show that government revenue has been hit hard by the global slowdown. Mr Key may not be worried about that, but anyone who cares about the health of our economy should take it very seriously.

“National will either have to cut public services or borrow more to pay for tax cuts. It’s as simple as that. Mr Key’s gimmicky plan to cap the number of public servants will only save him $500 million over three years by his own admission.

“John Key must now confirm that he would raise the government’s debt target, and that he would make our children and grandchildren pay for his election campaign spend up.”

Since 1999 the Labour-led government has reduced Crown debt from over 35 per cent of GDP to around 20 per cent today. This has saved the taxpayer billions in debt repayments while still allowing for significant improvements in public services, billions in tax relief, and historic investments in transport and energy infrastructure.

ENDS

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