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Fears Budget Heralds Much Pain In Years To Come

Fuseworks Media
Fuseworks Media

By Ian Llewellyn of NZPA

Wellington, May 29 NZPA - The budget is just delaying painful cuts in health and education, government opponents said today as Finance Minister Bill English warned future budgets would be tight.

Mr English said his first budget presented a road to recovery through the worst global economic conditions in 60 years.

The budget axed planned tax cuts, suspended payments to the New Zealand Superannuation Fund and reduced long-term spending increases.

However, it also maintained and increased spending in the short term at the expense of greater debt.

Mr English told a business audience in Wellington today it was wrong to characterise the budget as "slash and burn" but warned future budgets would be tight.

"If that's what you call a $3 billion increase in government spending in the middle of a recession, then I don't know what you would call expenditure constraint," he said.

"We've given the leadership of the public service and those people on the front line a year where there is still a big inflow of cash, but it is time for everyone to get their thinking cap on and understand the world has changed."

Big spending portfolios have not had any increases built in from 2011 and next year's new spending is limited to $1.45b and after that $1.1b.

Mr English's predecessor Michael Cullen had larger amounts set aside for new spending and tagged some of this for health.

National has taken a different approach and tagged increases for cost growth in health and education as "unquantified fiscal risks."

Mr English said departments would have to learn to do more with the same resources.

Labour's finance spokesman and former health minister David Cunliffe said the amount of money set aside for all increases in funding would mean cuts.

"The Government should have been upfront with people and told them what needs to be done, the projections are totally unrealistic without large cuts to programmes in the future."

Health costs rose faster than inflation.

"If you go below $500 million of new money in health then you are reducing existing services because you aren't keeping up with ageing and inflation."

Mr Cunliffe said there was room for reprioritisation, but it was limited.

"I did a reprioritisation exercise in 2008 and came up with $500 million. If I could have come up with $700 million, I would have but I hit the wall around that level... I don't think there is a pot of gold left."

The secondary teachers union PPTA said the financial cap set by the budget would make it almost impossible for business-as-usual to carry on in schools.

Labour leader Phil Goff also attacked the plan to suspend contributions to NZ Super Fund until 2020.

Mr Goff said if contributions were maintained then the fund would be $35 billion larger in 2031 when it starts to be used to subsidise super payments.

"This decision has effectively killed the fund which many New Zealanders are relying on for their retirement," Mr Goff said.

"There was a political consensus around superannuation in order to provide New Zealanders with certainty so that they could plan for retirement. This has now been broken.

Mr English the Government would start making contributions again when it had money and they were currently built into forecasts from 2020.

He said there was no need for a debate around superannuation entitlements and there were no plans to change the age of eligibility.


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