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Time Act came clean on tax policy - Labour

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"Act must be made to answer the hard questions about their tax policy," Labour finance spokesperson Michael Cullen said today.

"Act says it will cost $3.2 billion. This is almost certainly a convenient under-estimate. Labour's estimate, based on the Treasury model, would put the figure at over $4 billion.

"But even accepting Act's dodgy estimate, the question is unanswered. Where is the money going to come from? Did Act find something in the Pre-Election Economic and Fiscal Update not visible to anyone else?

"Rodney Hide is reported in the Sunday Star Times as saying they can fund their tax cut programme without cutting spending. What the Prefu actually shows is that even a spending freeze of four years would be insufficient to cover the costs.

"Act is careful to present this as a painless option but in fact it would impose great hardship on the most vulnerable New Zealanders.

"The level of superannuation for a married couple would fall to less than 55 percent of the average net wage. Progress toward pay parity for primary teachers would stop. All public sector pay rates - except, no doubt, those at the very top - would be frozen for years, or cut.

"And as underlying health cuts increased costs, there would have to be savage cuts in public health services. In each of these areas, a freeze is a cut and the losers in every case are ordinary New Zealanders.

"There would be no additional funding for roading, for research and development, or for the expansion of tertiary education. That in turn would mean massive fee rises which would make the 1990s look like a picnic.

"No wonder Act does not want to talk about its core policies. No wonder, too, that Mr Prebble was so nervous and unconvincing on television last night," Dr Cullen said.

"Even Infometrics, ideologically inclined toward Act, argues that large spending cuts will be needed on top of the freeze. It calculates that $850 million would have to be cut next year and $400 million the year after, resulting in a $1.2 billion or 3 percent cut in the spending baseline for 2001-2002.

"Act has not even made it clear yet whether they are still advocating a flat tax or whether they would retain the lower 15c rate. This has huge implications for low income earners. If they abandon the 15c rate, everyone earning below $39,460 a year will pay higher taxes to fund tax cuts for the wealthy.

"Act is trying to flannel their way though the election campaign by hiding their real agenda behind a smokescreen of populism. Mr Prebble cannot in reality pretend he is Pauline Hanson without the dress sense.

"Tax cuts for the rich are Act's top priority. Richard Prebble says it will be on the table at every cabinet meeting he attends and Rodney Hide has said he will be demanding the revenue portfolio in a National-Act coalition government.

"The public is entitled to some straight answers on what Act's tax policies will mean, not only for Act's wealthy financial backers but also for the ordinary New Zealander," Dr Cullen said.

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