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Shipley heads into fiscal meltdown

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"Jenny Shipley's reckless $800 million tax cut promise risks taking New Zealand into fiscal meltdown," Labour finance spokesperson Michael Cullen said today.

"The $800 million actually represents $1.6 billion off the operating balance given Bill English's dollar for dollar pledge.

"He promised the National Party conference, and repeated in a debate with me on National Radio's Crosstalk show on July 25, that National would match every dollar spent on tax cuts with an extra dollar in social spending.

"And he said this would apply not only to the $400 million tax cut scheduled for April 1 but to any cuts National delivered in the next electoral cycle.

"His exact words in his speech to the conference were: "Over the next term of Government, for every dollar in tax reductions, we will provide for an extra dollar of expenditure on social services. This is our dollar for dollar commitment."

"There was never any suggestion that the additional spending was already provided for in Treasury base lines or referred to existing policies," Dr Cullen said.

"That means Mrs Shipley has effectively committed National to $2.4 billion; $1.2 billion in tax cuts and $1.2 billion in new spending.

"Mrs Shipley can't have it both ways. She can't commit National to such a fiscally expansionary programme and at the same time maintain that Labour cannot afford to fund its spending promises," Dr Cullen said.

"This is especially so as Labour will have at least $800 million more headroom than National in the first year - the $400 million we would expect to raise from our modest tax increase for the 5 percent of taxpayers earning more than $60,000 and the $400 million we would save by cancelling National's April 1 tax cut.

"Even more irresponsible is that Mrs Shipley is would risk plunging the country back into deficit just to save her own skin.

"It is a disgraceful vote bribe which would only line the pockets of the richest New Zealanders, all of whom have already got substantial benefit from the economic reforms initiated by her Government," Dr Cullen said.

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