Hon Dr Michael Cullen

Minister of Finance

9 April 2008 Media Statement

English still spooked by debt test for tax cuts

John Key’s admission that he will ‘out tax cut’ Labour at any cost is causing problems for Bill English, Finance Minister Michael Cullen said today.

Mr English has sought to cast doubt on the importance of the government’s 20 per cent of GDP gross debt target in recent days following Mr Key’s statements that National will out-spend Labour on tax cuts regardless of what the government announces in next month’s Budget.

“The Labour-led government will not borrow for tax cuts,” Dr Cullen said.

“Our medium term debt target is to have gross debt sit around 20 per cent of GDP. The unexpected strength of the economy in recent years meant that debt has for a time fallen under that target.

“Next month's budget will re-affirm and achieve that target, will continue our investment in services and superannuation, and will include a three year programme of personal tax cuts.

“John Key has said he wants debt to rise to 25 per cent of GDP to pay for tax cuts, a move that would cost $700 million a year in extra debt servicing costs.

“Mr Key has said he is not capable of expressing a personal view, so it must be National Party policy to increase debt to 25 per cent of GDP. If that is the case, Mr English should probably avoid trumpeting his debt credentials.”

ENDS

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