Responsibility for tax cuts on F.O.L. says P.M.

Press, 20 May 1981, Page 1

Responsibility for tax cuts on F.O.L. says P.M.

Wellington reporter

The : Prime; Minister (Mr Muldoon) has put. the for tax cuts this year firmly oh the Federation of Labour.

He has reiterated that regardless of-the final outcome of talks on wage cuts for- tax cuts, there will be no wage explosion' thisyear.'.:;j '.’v ,-

Mr Muldoon did-not say's what means-might be em-.: to prevent - a wage ./ explosion this year.

In/ a statement issued immediately.; after. mews of F.O.L. (executive/ rejection of tax cuts in. return for reduced ’ wage ’ claims . in award talks this -year, Mr Muldoon said that there would be no tax cuts this year if the trade-off were not accepted by the F.O.L.

Mr Muldoon released a copy of.the letter sent to. the F.O.L. executive ' at their request after wage talks. yesterday. morning/ between.: the F.0;L.,:.-the Employers* Federation,, and; the Government... /.■■•/- //

.After stating that parties at the; talks acceptedthat a trade-off was; technically: feasible and .would-help, toreduce inflation, the letter put/lhe’Government’s pro-.; pqsal-in'. writing as—■ '

—A probable dollar-for-dollar tax cut for reductions in after-tax' wage

settlements in-line with the F;O.L./working, party preferenCe.-. / : /.-:// /. ‘ •.

—rThg/distinct possibility of/applying , the formula at /this. ye’at’s award, talks. ..—An assurance that • social services-would not be .reduced in order to finance, the.; tax cut. However, .‘ the /.-Government would to ’“pursue increased efficiency in all areas of expenditure.” —The. pledge of no reduction in personal, income’, tax in this, year’s.. Budget; without an. agreement on a “wage offset:’’ . ‘ • ’’ A similar- letter was also sent to the Employers’ Federation and the Combined State Unions. ■'

. Mr Muldoon?, said. that he was .“astonished” ' that the.: Federation of Labour / had decided' not. to accept a wage-tax trade-off, after the wage • talks /'yesterday: ■ '.FT. amsomewhat mystified, however, by the statement that they will go into the advocates’ talks on Wednesday (today). .. believing there will be no tax cuts this year. ' • “The responsibility rests with the Federation of

Labour, which throughout our discussions has clearly recognised the logic/ and good sense of the proposal.

“I made it / clear to the Federation of ’Labour” that if there is no trade-off; ’there wi IT be no jtax.cuts? ; “Mr Knox says that I did not seem to be sure'of i what I had to offer. What I had to offer was-pu t very clearly in my letter to the F.0.L.”

■ Mr Muldoon said it was “pointless” for Mr Knox to say that the'tripartite talks should continue when the F.O.L. was not prepared to accept a wage-tax trade-off. The talks could be resumed if the F.O.L. should change its mind; the initiative lay with the F.O.L. From Wellington the Press Association reported that in a joint statement the Combined State Unions’ chairman (Mr D. H. Thorp) and Mr Knox said they believed the public would not. be fooled by Mr Muldoon’s comments about there being no tax cuts.

.“OF course there will be tax cuts,” they said. The F.O.L. conference resolved earlier this month to oppose the wage-tax tradeoff for fear that social services might suffer.

But Mr Muldoon said that the Government was not of a mind to get the tax reductions by cutting social services. He suggested instead;that such reductions could be financed by increasing the budget deficit. - ,

The Employers’ Federation said last evening that the F.O.L.’s decision not to accept a tax-wage trade-off threw serious doubts on its avowed desire to help reduce unemployment and fight, inflation.

“A tax.cut in lieu of a wage increase ..would put more money into the pockets of workers without contributing to inflation,” the federation said. “All New Zealanders would be better off, particularly those on lower, incomes.” ' ■ / ..-