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Richard Prebble's Letter From Wellington 27/5/2002

Monday 27th May 2002

The Budget

Rodney Hide has a penetrating observation on how to read the Budget - ignore the text and just read the tables. The fiscal accounts and financial projections are what the Budget is really about.

Here's an example. The Budget text says police are to get $34 million extra a year, so The Evening Post, on the front page, reported "The police are getting an extra ...$34 million ..." This is now taken to be a fact. In the Budget lock-up, Treasury admitted the extra money for police is is almost entirely a technical adjustment for pay rises - $27.5M of the $34M.

Page 90 of the Budget Economic and Fiscal Update shows that not only did the police get no new money but they actually suffered a cut of $11 million. (see

An Election Budget

The Cullen Budget is electioneering. Labour has targeted four groups in its election strategy - the 800,000 superannuitants and beneficiaries, 350,000 Maori, 125,000 Pacific Islanders and 175,000 students. During the past three years, most of the increased spending has gone to these four groups, at the expense of health, compulsory education and security (personal and national).

Surplus - Extra Tax

Everyone agrees Budget deficits are not good but neither are large surpluses. A big surplus just means we have been over-taxed. Labour didn't need any of its tax increases - the 39 cents, petrol, cigarettes etc.

The Case of the Missing Petrol Tax

This year the government increased petrol tax by four cents a litre ($190 million a year) and increased road-user charges by $37 million - to solve Auckland's roading crisis.

Last year, the government spent $1.006 billion for maintenance and building of state highways (including motorways), and local roads. This year, Labour has appropriated $1073 million for operational and capital spending on state highways (including motorways) and local roads. While this is up by $67 million, the total extra tax being milked from road users is about $227 million.

So where where has the extra $160M in roading tax gone? (see


In no area is Labour's spin more suc-cessful than in health. Dr Cullen, in a written answer to an ACT Parliamen-tary question, had to admit Labour had cut health spending. "Real per capita expenditure declined from $1853 per person last year to $1841 this financial year (2001/02)."

The much-publicised extra $400 million for health is really not an increase at all - $300 million is needed just to meet increased demand and costs, and $120 million is needed as a catch-up for last year's cuts.

Health boards are running up deficits totalling $240 million this year - up nearly $200 million. Dr Cullen has told all boards they must eliminate deficits within three years. Boards will have to cut spending.


Total spending on welfare will rise from $12.7 billion this year to $14.3 billion by 2005 - an increase of $1.6 billion. The number of people on the invalid benefit is projected to rise from 58,000 last year to 77,000 by 2005 - an increase of 19,000. The Letter can't explain this spectacular rise.

Total spending on invalid benefits is expected to rise from $745 million last year to $1124 million in 2005 - a 50 percent increase. In the last year alone, invalid benefits have gone from $745 million to $912 million - $65 million over budget.

Beneficiaries Increase

Thirty years ago, there were 28 full-time workers for every working-age beneficiary. Today there are just four full-time workers for every beneficiary of working age. Welfare spending has increased by $1 billion since Labour came to office. There are now 400,000 working-age beneficiaries. Numbers on the DPB, sickness, invalids and unemployment benefits are in total projected to grow by 16,000 by 2005. (

They Are Letting Out the Criminals

Labour's spin is that the government has toughened up on crime. The Budget tables show this is a lie. Corrections spending (ie prisons) is projected to fall from $416 million to $395 million in 2005 - a cut in real terms of $50M (taking into account inflation). (see

The Letter estimates this means Labour intends letting 1000 extra offenders out of jail early. This is false economy. Half of all early-release prisoners re-offend within a year.

Speed Cameras - is it a Tax?

The Budget predicts revenue from traffic fines will increase from $81.9 million to $94.2 million next year - a 15 percent increase. During November last year, police had to turn off speed cameras while they appealed a legal challenge. There were 30 road deaths during that month, compared with 39 in November 2000 - a 24 per-cent drop. (

Where is the Growth?

Labour has set the goal of 4 percent growth to take New Zealand back to the top half of the OECD. Dr Cullen said it would take five years to achieve. Treasury predictions in the Budget are for growth to fall to 2.8 percent in 2005 and 2 percent by 2012. (see


A sign of this government's political ideology is the treatment of private tertiary providers. Their funding is effectively frozen. But Wananga (Maori tertiary providers) have seen their funding increase from $28.6 million to $99 million.

The record shows just 19 percent of Maori attend public tertiary institutions. It's the private sector that has picked up the challenge of up-skilling Maori - 36 percent of students at private tertiary institutions are Maori.

The Text

Dr Cullen used his speech to repeat the claim that tax cuts don't work. If so, why has he cut tax for Maori businesses to 19.5 percent?

Bill the Boxer

The Letter has received an email from Conor English (Bill's brother), advising us that Bill was not a school boxing champion and has never boxed before. "As one of his six brothers I can say that, like me, he is incredibly uncoordinated ... I would not be putting big money on (him to) win ...He's taking an enormous risk ... because he believes in the cause ... It's about the kids..."


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