Estimates Debate — Vote Finance

Vote Finance is an appropriation in the order of $49 million—$48,877,000 to be precise. I know that this is a Government that likes to spend a lot of money. I know that it is a Government that likes to waste a lot of money. I know that this is a Government that likes to hire a lot of consultants, despite the fact that the Minister of State Services has been telling us for years that the reason we have had such a large build-up in the State sector was that all of that knowledge was coming in-house and there would be no need for consultants. Lo and behold, the Minister of Finance kindly released that information to the Finance and Expenditure Committee a few weeks ago, and what did we see? Labour used to criticise the National Government for spending around $90 million a year on consultants. Lo and behold, there it was in black and white, that Labour is spending $137 million a year on consultants, and that is in addition to the extra 8,000-10,000 core bureaucrats it has added here in Wellington.

But that is not what I want to talk about in terms of Vote Finance. I want to talk in relation to what must now be the biggest waste of $2.742 million in New Zealand’s history. It will go down with the Nordmeyer “Black” Budget and Michael Cullen’s “Black” Budget, which are rather synonymous now with one another. Six percent of the departmental vote—$2.742 million—was spent on purchasing advice on tax. We see what a waste of money that was when we look at what has come out of this Government recently.

Let us start with the Budget’s alignment of GST and provisional tax, costing $760 million. That was a very interesting scenario, because when I went into the Budget lock-up and asked Treasury officials why that issue was costing $760 million, why there was a $760 million loss of income in that financial year, the Treasury officials were at a loss. But they did eventually provide someone who gave me the answer. The answer was, of course, that under GST payments there is no accrual accounting, so, because it moves into an income period that is some 20 days forward, they cannot be counted.

Well, that is quite interesting except that Dr Michael Cullen, the Minister of Finance, made an interesting revelation, I thought, at a KPMG seminar that I heard him speak at recently. He said that he was not told of this fact until weeks before the Budget was produced. Weeks before the Budget was produced he did not know that $760 million was not coming into the Government’s coffers in that year, and that is despite the fact that he spent $2.742 million for advice for taxation.

What is even better, of course, is that his lapdog sidekick, David Cunliffe, has been out there, running around the country—

Dr the Hon Lockwood Smith: Who?

His sidekick—the Dewey of Huey and Dewey—has been telling the country: “We’re doing great things for business because we’re giving you $760 million as part of a $1.4 billion package.” That is quite interesting, except that I am sure Mr Cunliffe, when he has a bit of time on the back bench in the years ahead, will be able to reflect on the fact that of course it is not worth $760 million to business. I see that Mr Cunliffe has his calculator out and he has already worked it out. He is a reasonably smart Associate Minister of Finance, I am sure. The use of money for 20 days cannot possibly add up to $760 million worth of costs, unless we are talking about billions and billions of dollars, and we are not. So it is just a hoax that the business community is getting $760 million worth of benefit. It is, for the record, getting about 20 days’ use of money. That was not worth spending $2.742 million on advice.

I will move on to the next point, which is Labour’s intention to put a capital gains tax on foreign-held shares owned by New Zealanders. This comes from a Minister of Finance who last night had the audacity to go to the property investors’ seminar and tell them that diversification is a good thing. He said that last night, but, when it came to the Budget, part of his $2.742 million worth of tax advice was telling New Zealanders that it is not a good thing to diversify. He said: “We don’t want you to own foreign-held shares.”, even though the Cullen fund sends three-quarters of its money offshore, even though foreign-held shares are a relatively small proportion of shares owned by New Zealand investors, and even though those investors already have money here in New Zealand and on the stock market, and the money is likely to go further into the property market—which is the thing Michael Cullen was having a go at 6 months ago, when he was thinking more logically.

It is sad to see a promising political career, like Mr Key’s, snuffed out so early. If that is the best the member can do in an appropriation speech on vote Finance, the National Party is shorter of talent than I thought. With all the issues around: the global economy; oil prices; exchange rates; even, one might argue, the current account; what does that member come up with? The same old saw: “consultant advice”. That is the best he could do—consultant advice on tax. [Interruption]

That is very interesting. He disputes the fact that there have been substantial business tax cuts in this year’s Budget. The reality is that there are about $1.4 billion worth. I am happy to recite them again—fringe benefit tax thresholds raised, provisional tax payments aligned with GST and an option to pay on the basis of current-year cash flows, PAYE intermediaries subsidised, a 6.7 percent tax discount for small businesses in their first year, and so on and so forth. [Interruption]

The CHAIRPERSON (H V Ross Robertson): I am sorry to interrupt the honourable Minister but there is a barrage of interjection from my left. Of course, it means that that person has an unfair advantage at the microphone. I ask the member on my left to realise that interjections are to be rare and reasonable, and—I have given up on this one—hopefully witty.

The net effect of these provisions is equivalent to roughly a 2c cut in the corporate tax rate.

💬 John Key: Rubbish.

It is not rubbish; it is clearly substantiated by independent Treasury advice. A 2c cut in the corporate tax rate may, in other cases, be attractive. Why did we not do that? One reason is that a very significant proportion of corporate ownership is held internationally. Why would we give priority to a tax cut in favour of foreign owners, when we could target that tax cut to hard-working New Zealand small businesses? And that is exactly what we have done.

I should add that as part of the tax simplification process overseen by this vote the compliance costs of taxation for small businesses have fallen, according to independent advice, by 40 percent since that member’s party was in Government. For medium-sized businesses it has fallen by 50 percent. We are not taking a scalpel to red tape; we are taking a meat axe to red tape, and the independent advice proves it.

The fact that the worst that that member could do was to talk about consultants proves one thing: this Government has presided over one of the most substantial expansions of the New Zealand economy, if not the most substantial, in our history. Unemployment is at a 20-year low, average growth is at a 20-year high, and our average growth rate is a full 1 percent or more above that achieved by the National Party when last in Government.

New Zealanders know, as they consider the run-up to this year’s election, that a vote for that party is a vote for risk and uncertainty; and a vote for the Government is a vote for prudence, good fiscal management, good leadership, and stability. It is a pleasure and an honour to serve under Dr Cullen in this good and prudent Labour Government.

In examining Vote Finance I would like to focus on the fiscal policy advice that this Government has been receiving. We know that this Government sprays taxpayers’ money around as if there were no tomorrow. Government spending has risen—it was $34 billion in the last year—and if this Government were to get another term it would take that spending up to $60 billion. This Government would double its spending in 9 years, on things like tertiary singalong radio programmes, Cowboys and Indians parties for the Weathertight Homes Resolution Service, and that kind of wastage and nonsense.

But I want to focus on something more serious, because we all know of this Government’s wasteful spending. I have a Treasury document, called State Sector Wages. I want to know what this Minister plans to do about that advice. That document is dated 28 January 2005, and it tells us that over 5 years the core public service—and let us put teachers and health professionals aside—has increased by 25 percent under this Labour Government. The number of people involved has risen from 30,000 to 38,000. The document also tells us that the average rate of increase in the cost of that public service is 8 percent a year. In fact, in the year to June 2004—in 1 year—it scored a 12 percent increase in cost. That Treasury document tells us that what has been driving those cost increases, averaging 8 percent a year, in the public sector is the increased number of positions I have mentioned—a 25 percent increase in 5 years—and increased wage levels. But let us wait for this one. There are also increased costs associated with regulatory change, particularly the Holidays Act, equal employment policies, and those kinds of things.

The report goes on to tell us: “Commensurate increases in outputs do not appear to have been achieved as a result of this increase in costs.” That is Treasury stating that the taxpayer is spending a huge amount—8 percent a year more—on the core public service, and that we are getting nothing for it. I want to know what the Minister will do about that. I guess Labour will lose the election, and that will solve the problem. Treasury goes on to state that the cost of the public sector is expected to increase more rapidly than the rate of economic growth. Do members know what Treasury points out will be the consequence of that? The increase in cost of the public sector has the potential, to quote Treasury, to “choke off” economic growth. That is what the report from Treasury, which is under Vote Finance, states in the fiscal policy advice to this Minister. We want to know what the Minister will do about it. Treasury is telling him that if the rate of increase in the public sector continues, it has the potential to choke off economic growth. The report states that it will mean that the Minister will be unable to implement the policies he wants to implement.

One of the most recent policies of this Government that I have heard about is interest-free loans for students forever. Have members heard anything more irresponsible than that? That will mean that anyone with half a brain will enrol in something, so that he or she can borrow to the hilt on the student loan scheme and have free money forever. That has to be the dopiest policy—and the Government claims to be fiscally responsible! What advice has Treasury given the Minister on that? What advice has Treasury, under this vote, given the Minister on that policy? Interest-free student loans forever! I bet I know the advice Treasury has given him. It would be not to go down that route, because anyone with enough brains to get into a tertiary institution will have enough brains to know that he or she should borrow every cent possible under such a stupid policy, given that the money is free. All that he or she would have to do over the years would be, under a very gentle regime, to pay back the principal gradually. I do not know what advice Treasury has given the Minister on that policy.

It is not my intention to entertain all of that rather spurious contribution in detail, but I do want to mention several important indicators. Firstly, Government expenditure as a percentage of GDP has fallen during the life of this Government, from 35 percent to 31.7 percent, as outlined in the Budget documents themselves. What is more, tax as a share of GDP has remained stable, and will remain stable, at around 30 percent. More important still, our commitment to the fiscal anchor, that is debt reduction, has been honoured. Gross sovereign issue debt has fallen from 35 percent of GDP when we were elected in 1999 to—wait for it—23 percent in June 2005. It has fallen from 35 percent to 23 percent, and it is going down further to 20.2 percent by 2008.

If that is not good enough, net Crown debt has fallen to zero. By 2006-07 New Zealand, rather like Singapore, will be a creditor nation for the first time since Sir Julius Vogel borrowed to build the railways. If that is not good enough for the National Party, what is? It is not interested in the facts; it is interested in cheap scaremongering that it can put on a red-blue billboard—because it is the season! But I do not underestimate the New Zealand public like National members do. I think that members of the New Zealand public know we are in for the long haul. And, yes, they have a few issues, and not everything is perfect; and they are a bit grumpy about a few things, but the reality is that they know that when we have the kind of expansion we have had in the last 5 years, it ain’t good luck! If it were good luck, then by God we have been the luckiest Government in history, every year for the last 5 years! Luck just does not get as good as that. If Dr Cullen were as lucky as that, he should buy a lot of Lotto tickets and become a very, very wealthy man.

Again, this is a good, prudent Government. It is a Government that has restored a deficit in public service capability, quite proudly, since we were elected. That was the right thing to do. That crowd opposite ran it down. It left us with a public service that could not discharge its responsibilities to New Zealand families. We fixed it, and we make no apologies for doing that.

Occasionally, we get somebody who does something wrong, and when we find that, we nail it. We do not beat around the bush and pretend it did not happen. We nail it. Ministers take responsibility. We do our job. That is what the public expects, which is why we will be back here on the Treasury benches in 8 weeks’ time and why Mr Key’s political career will flatline, rather like net debt.

Three great debates have been unleashed by the 2005 Budget. Firstly, is there room for tax cuts? It is interesting to get a perspective from someone who is independent of this debate. John Shewan, chairman of PricewaterhouseCoopers says: “Yes, at about the $2 billion level.” It makes United Future’s $2.5 billion package over 3 years look prudent and modest, does it not? The figures tell the story.

The Budget forecast an operating surplus over the 3-year period 2005-07 of $18 billion. Please note that this is after all the Government’s revenue expenditure, covering health, education, pensions, welfare, police, defence, etc. Of that $18 billion surplus, $7 billion will be contributed to the New Zealand Superannuation Fund—nicknamed the Cullen fund—to pre-fund the future greatly increased cost of New Zealand superannuation. United Future supports the New Zealand Superannuation Fund. That leaves $11 billion after New Zealand Superannuation Fund contributions. Our tax cuts, which, unlike other parties, we have announced to the public, will utilise $2.5 billion of that surplus over 3 years, which still leaves $8.5 billion for capital expenditure on items such as schools, hospitals, roads, defence equipment, etc.

Secondly, the big debate has been about whether tax cuts will be inflationary and raise interest rates. Labour says “Yes”, although whether Dr Cullen actually believes that may be another question. After all, because John Howard and Peter Costello used it against Labor in Australia and it worked for them, Dr Cullen reasons that maybe it will work for him as well. But, again, let us turn to someone who is somewhat independent in this matter. What does Dr Bollard, Governor of the Reserve Bank, say?

Several of us on the Finance and Expenditure Committee took the opportunity when we last saw Dr Bollard to ask him those very questions. His answer was, of course, that it depends on the net effects, and that is exactly right. Tax cuts used by highly indebted families to repay debt, for example, would not be inflationary. Tax cuts coupled with a reprioritisation of Government spending to increase productivity would not be inflationary and tax cuts invested by the private sector to improve productivity would not be inflationary. Borrowing to reduce the $1 billion costs of decongestion in Auckland would not be inflationary, because it would reduce the cost of trucking goods across the city or to the wharf. It would reduce taxi fares and fuel consumption, increase workforce productivity, etc. Therefore, logic would suggest that the funds should be borrowed to eliminate traffic congestion in Auckland, Wellington, and Tauranga.

The Government, with United Future’s support, has given itself the legislative authority to borrow for land transport but chooses not to do so, and I for one have to wonder why. What is the case for not doing that, when even Dr Bollard would say that it would be a good thing to do, it would increase productivity, and have a positive effect on inflation? But, no, the Government wants to go down a different line.

Thirdly, the other big question that has come out of the Budget is whether the Government is spending taxpayers’ funds wisely. Let us take a few examples. Health expenditure is budgeted to increase to $9.3 billion next year, but will that be spent effectively?

I shall give a couple of examples. I spoke to a surgeon recently who works at Starship children’s hospital. He said he could not tell me how frustrated he was and that he would like to do a lot more surgery there, but could not. I asked him why, and he replied that he did not have enough nursing support staff. I told him that good nurses were available from the Philippines and asked him why did he not bring in some of them to work at Starship, because that would solve the problem and enable him to get on and do more surgery. He said he could not do that because it was not under his authority and that others in the organisation made decisions about recruitment. He did not know whether they had thought of Filipino nurses. However, he did know that productivity in Starship children’s hospital could be vastly improved by having more nursing staff.

I told my colleague Paul Adams about this and he was interested because of the situation of a surgeon friend of his who did cataract operations.

I have two points to make before I start my intended speech. Firstly, when Dr Bollard was questioned by the Finance and Expenditure Committee he was absolutely clear that if tax cuts were funded in part by borrowing more money and increasing Government debt, then that would be absolutely inflationary. It is axiomatic that if borrowings are increased—

💬 John Key: Are you the world’s expert?

I was quoting Dr Bollard from a meeting that member was present at, where Dr Bollard made it absolutely clear that if tax cuts were funded through borrowing—which will have to be done if the promises of tax cuts and spending bribes that National has made for this coming election come to fruition—then there is only one way that that equation can be made to work, and that is through increasing Government debt. That is somewhere this Government will not go.

It is not so long ago that this country had spiralling Government debt and when Government debt equalled 70 percent of GDP.

💬 Hon Dr Nick Smith: National fixed that.

No, National actually caused that. That was Mr Muldoon. The member has a very short memory.

💬 John Key: What was the absolute level of debt?

The absolute level of debt is absolutely irrelevant. The relative level of debt was 70 percent of GDP. The importance of that is shown by the fact that $1 in $5 of tax that was collected by the then National Government was spent on interest. If the following Labour Government had not substantially restructured the economy that amount would have ballooned to $1 in $4 in 1-2 years. That is why it is important that debt goes down, not up. When this Government came to power—

💬 Dail Jones: What was unemployment?

Unemployment was quite low in 1984, but that was on an unsustainable basis. Huge subsidies were afforded only because the Government was increasing Government debt at such a huge rate.

In the meantime, when this Government came to power, Government debt had been reduced to 36 percent or 35 percent of GDP. It is now down to under 25 percent of GDP and we are determined to drive it slightly lower, down towards 20 percent of GDP, which we think is appropriate. Now $1 in $20 of tax is spent on interest, rather than $1 in $5, so the taxes people pay can go towards health, education, superannuation, law and order, and the things that people in this country expect the Government to provide.

During the period of this Government growth has also been impressive, averaging 4 percent over recent years. That is higher than the OECD average of 2.5 percent, higher than Australia’s rate, and indeed, the rate in the United States, which our critics often compare us with.

Earlier in this debate there was reference to a problem attracting nurses, or a problem with the number of nurses at Auckland Hospital. One has to ask oneself why that is—why did nurses desert New Zealand in the 1990s for Australia? The answer is that Australia had better wages and conditions. Why has health expenditure gone up? Part of the reason is we have had to pay our nurses and doctors more in order to keep them in New Zealand.

Our unemployment rate is 3.8 percent. That is not the tenth-lowest rate in the world—that would be pretty good. It is not the fifth-lowest or the fourth-lowest rate. It is the second-lowest rate in the developed world and that is something we should be proud of. The drop in Māori unemployment on a proportionate basis has been most impressive. In 1999, unemployment stood at 15 percent for Māori overall, and 32 percent for young Māori. Overall, that figure of 15 percent has dropped to 8.7 percent. It is close to half. That must bode well, not just for Māori but also for our future prosperity as a nation and for our future social cohesion.

There are 250,000 more people in jobs than when we took office. In fact, it is slightly more than that. One can say that pretty fast, but that is more people than the combined populations of Cromwell, Alexandra, Dunedin, Oamaru, Queenstown, Balclutha, Gore, and Invercargill—in fact, it is more people than there are south of the Waitaki River. That is all people, including retired people, children, and women looking after children who are not in the workforce. There are more people in extra new jobs in New Zealand in the last 6 years than there are people south of the Waitaki River. Let us look at the unemployment statistics for my own electorate.

I was going to take my call during Vote Revenue, but I just cannot help myself from replying to the Associate Minister of Finance, Mr Cunliffe, who is affectionately known as the “Minister of Homework”. He needs to do a bit more homework, because he spent quite a bit of time telling the country that gross debt to GDP had fallen from 35.1 percent to 22 percent, and what a wonderful thing that was for the country, because Labour had worked hard to repay debt. Sorry David, wrong on that one!

The CHAIRPERSON (H V Ross Robertson): The member will refer to other members by their full name or their portfolio title.

Sorry Mr Cunliffe, but Labour has repaid $1 billion of debt; and that is all. That is the lot. Nominal debt has gone from $36 billion to $35 billion. Debt to GDP has actually fallen, of course, but only because GDP has grown, and not at all because Labour has assiduously paid off debt. You have not paid any debt, so do not run around the country telling people that you have been so efficient paying off debt, because you have not paid off any debt at all.

The CHAIRPERSON (H V Ross Robertson): The member cannot bring the Chair into the debate.

Mr Cunliffe’s second claim was that the Government had been so great, because it had cut spending as a percentage of GDP in the 6 years it had been in power. Firstly, he claimed that the figure had gone from 35 percent to 30 percent. Unfortunately, the “Minister of Homework” needs to do a bit more homework. The number was actually 31.3 percent. Mr Cunliffe should look at the facts. It is not my fault that you want to claim that you came into office before a period of time you were actually here.

The CHAIRPERSON (H V Ross Robertson): The member cannot use the word “you”.

What is very interesting is that I asked the Minister of Finance about those numbers. I asked him what was the number, if one took into account the right years and the non-discretionary spending items, which was essentially a reduction in the unemployment benefit, and took financing costs out for a second, because there has been no change. In fact, the numbers would show that Government spending, as a percentage of GDP, had been rising. That is a shock. It has been rising, not falling.

And then of course, there are the plans Labour has for the next 3 years to take Government spending as a percentage of GDP from 29.6 to 32.6, roughly spending about $12 billion annually on the baseline. So, sorry, Mr Cunliffe is not right on any of those figures.

Then there was the last claim, of course, that the Government is fiscally prudent. “Yeah, right!”, I suppose they say—when one looks at a student loan scheme where the message is pretty simple, such as it announced today, which is to borrow as much money as one can and never voluntarily repay it, and never have a job to try to repay that through one’s student holidays or anything. One should just borrow to the hilt and then one will be absolutely fine, because one will never have to repay it to any great extent and there will be no incentive to do so.

I want to go back to the issue of policy advice, and ask what advice there was on tax. What advice did the Government and the Minister of Finance receive in relation to thresholds? In fact, the change in thresholds will take place in 2009. No consideration whatsoever has been given for the last 9 years, or it will be 6 years, and then 9 years prior to that—none at all. Those years have mysteriously been forgotten. That was about a 14 percent reduction, because of inflation in New Zealanders’ incomes, but there is no consideration there.

What will happen to the $1.4 billion in additional taxes that New Zealanders will pay in the 3 years because of fiscal drag? No consideration has been given to that. Was that all part of the advice given on thresholds—advice that saw a Government deliver 67c a week to New Zealanders earning $38,000 a year, but it has enough money to fund singalong courses that are meant to be fiscally prudent? Today we found out that it has enough money to fund Little Hiawatha and sort of Cowboys and Indians parties and Sound of Music parties, but it does not have enough money for the poor old family that is out there working hard and doing an honest day’s work, because they will get 67c a week. All that largesse is paid for by taxpayers in New Zealand, whom that Government has absolutely no regard for. It is a disgrace. No wonder it is on its way out!

The desperation of the Opposition spokesman is simply proven by the technique he is using. He excludes numbers that are going down and includes numbers that are going up, and thus concludes that the average has gone “up”. Well, congratulations! But I have the privilege of sitting near the Secretary of the Treasury and he has just confirmed to me that the numbers I quoted last time—Government expenditure was 35 percent of GDP when Labour came in and is 33.7 percent now—are correct. If Mr Key does not believe those numbers, he should take them up with Treasury, because that is just what I have done.

Dr Smith and other members have referred to the tax cut debate. That is a very important debate. For the benefit of the public who are listening, I will say two very simple things. The public understands the difference between a surplus and a deficit: one gets paid, one gets wages, one gets money in the purse, one pays one’s rent or mortgage, one buys groceries, one pays a power bill. Whether one is in surplus or deficit at the end of the week comes down to one thing: is there any money left in the purse? The reality is that this year’s Budget forecasts that we will be in a cash deficit for 3 out of the next 4 years. That deficit will actually go down to about $3 billion negative in 2008. In other words, we will have to take on a small amount of debt in order to fund ongoing operations. If Mr Key—who is so banally hectoring—were running a business, he would hardly take on additional debt to fund current consumption and operations. That would not be prudent. Nor will we take on debt.

Dr Cullen has also used the analogy of a banquet. At the “Tax Cut Banquet” the top table goes first and they scoff themselves on the smorgasbord. They gorge themselves. The middle table gets a small helping, and the bottom table gets the crumbs. At the end of the meal, everybody gets the same bill. That bill has three components. It has the debt that those people want to load onto our children in the form of Government borrowing or flogging off what is left of the country’s assets. Those parties have tried it before, and we were sick of it and voted them out then. Why would we have them back now?

The second form of that bill is in the cuts to services like health, education, and other important things. Kiwi families know that what matters to them is not 10 bucks a week from John Key. They want to know that when their kids are sick they can go to a doctor, they want to know that they have a good school down their street, and they want to know that the cops are there to keep them safe. In short, they want good Government, not cheap Government. We have offered them good Government, and we know that the voters will ensure that we can continue to offer good Government.

But, of course, the crunch, the kicker, is the third part of the bill: higher interest rates. Let me give members the simple, back-of-the-envelope example of a family with three kids that earns $50,000 a year and lives in Auckland with a mortgage of $200,000. If I leave aside the $120 or so a week extra they will get from Working for Families—the family tax cut that Labour has already promised—and simply take the effect of a 3c cut across the board in tax rates, by my calculation that is around 28 bucks a week for a family with an income of $50,000, give or take. If National were to borrow the $7 billion it would need to fund the tax cuts plus its spending promises, I bet members opposite that the interest rate would go up at least 1 percent. If it did, that is 38 bucks a week on a $200,000 mortgage. That family would be 10 bucks worse off a week under National’s tax cut, thanks to their mortgage going up, leaving aside what they would not get from Working for Families. No sane family in New Zealand on $50,000 will vote for that lot and see their mortgages go through the roof, when they could stick with good fiscal prudence and a good Government.

I think the previous speaker, the Hon David Cunliffe, mentioned that people want to know what they will get when they ring the police. [Interruption] Under this Labour Government, though, dialling 111 has produced anything other than police.

Let me share with the House this little titbit that I found out the other day. Members will be aware that there is a motorway going through my electorate called ALPURT B2. It is the first tolled motorway, although it is not in a Labour-held seat but in a National-held seat. There are a couple of tunnels involved in this motorway construction, so everyone has been involved. The police came along because, of course, people thought the police would be interested in safety in those tunnels. But the only thing the police were interested in was a place in those tunnels for their speed cameras. That is the only thing they were interested in. They were not interested in issues of public safety in those tunnels; all the police were interested in was to make sure there was a place in those tunnels for their speed cameras.

That approach will change when the Government changes—the public is sick of that. [Interruption] The Labour members will get a chance to take their call. They should just settle down for a moment.

What the public finds so insulting about what the Associate Minister of Finance has just said is the notion that the Government knows better how to spend its money. When one goes around the country now, one of the things that has changed hugely in the mood of the public is that people are sick of the Government, and they are sick of Prime Minister Helen Clark telling them how they should run their lives and telling them where money should be spent. The people of this country are sick of that.

The public are sick of people like the Associate Minister of Finance David Cunliffe standing up and saying: “We know best how to spend your money.” We have heard today where this Government is spending money. For workers in New Zealand, it takes a lot of work to earn money and it is hard work earning money. When workers hear that this Labour Government’s priority for spending money in tertiary education is on singalong radio courses, and that the Weathertight Homes Resolution Service spends their hard-earned money on Sound of Music parties and on Cowboys and Indians parties, they find it kind of insulting when this Government says: “We will give you a tax cut—67c in 3 years’ time.” That is why the public is so angry about this Government. It is a bigger issue than just tax cuts.

The public are sick of people like David Cunliffe standing up and saying: “We know better than you do how to spend your money.” Members heard the Associate Minister trying to explain deficits and surpluses. The public know that! The public know that one cannot spend more than one earns. What the public object to, though, is being told endlessly by this Government that they are too stupid to know how to spend their money, that this Government knows better, that this Government will tax them more, and that this Government will spend their money on singalong radio courses in tertiary education and on Cowboys and Indians parties and Sound of Music parties. That is what makes the public so angry.

I asked the Minister of Finance some specific questions about what he is doing in response to Treasury advice. I specifically asked about the Treasury advice on the burgeoning public sector, where Treasury has told him that, in fact, core public sector expenditure risks growing faster than the rate of economic growth in this country, and it risks choking off economic growth. It is growing at an average of 8 percent a year, and Treasury is pointing out to the Minister that that is very serious. I want to hear from the Minister what the Government is doing in response to that.

We also asked the Minister another question, which he has ignored totally, about what the Treasury advice on interest-free loans to students was. I know from my time as an Associate Minister of Finance that Treasury will have given advice on that and advised that that policy will invite abuse of the student loan scheme. I think that the people of New Zealand deserve to know the full advice the Government received on this—what would one call it?—bribe.

💬 John Key: Desperation.

Dr the Hon LOCKWOOD SMITH: It is an election bribe from a desperate Government.