12 November 2007

Where's the money coming from?

Progressive leader Jim Anderton says public expectations for social spending and tax cuts are unrealistically high.

"Not a day goes by without more calls for the government to increase spending on a deserving cause, and very often those examples have significant merit. There is also a case to be made for fair tax cuts. But any tax cuts need to be tempered by constant calls for more investment in health, education and other sectors.

"Just to take one example. In the past 24 hours, the National Party alone has demanded more spending on fighting cancer, more spending on the department of corrections, more fisheries officers and more fisheries research. Not one of those statements indicated a willingness to pay for those extra services.

"Last night's Sunday programme asked why people who get sick are treated differently to people who have accidents. I have a lot of sympathy for that view, but the cost needs to be met from somewhere - and the tax system is the only way it's going to happen.

"Every dollar spent on tax cuts is a dollar that can't be spent on social services.

"As the economy grows and productivity improves, the government has more fiscal headroom from which it can fund both tax cuts and social services. But there is always an opportunity cost. You can't spend the same dollar twice.

"Most people don't connect social services and taxes. They want the government to be more generous with their taxes but they want the government to have less of them. No politician is ever popular for pointing out the obvious, but expectations that can't be met by any government will only lead to frustration, disappointment and a sense of betrayal.

"No call for the government to spend more on something or for tax cuts is credible without asking, 'where's the money coming from?'"

Jim Anderton says there is even less public awareness of the seriousness of our current account deficit and inflationary pressures.

"When the economy as a whole is persistently spending much more than we earn, the government's restraint is helping to take pressure off. There are real constraints on how much any government could cut taxes or increase spending in the current environment, without seriously pushing up inflation and worsening our national tendency to spend more than we earn. Tax cuts and increased social spending risks higher interest rates, which have to be paid by home owners and businesses.

"That is the reality that John Howard is facing in the Australian election with predictable results!" Jim Anderton said.

ENDS

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