Govt dept jobs must go—Douglas

Press, 1 July 1988, Page 1

Govt dept jobs must go—Douglas

By

BRENDON BURNS,

political reporter

Thousands of Government department jobs must be axed, said the Minister of Finance, Mr Douglas, yesterday, to produce a truly productive New Zealand economy.

In an address to a Right-wing Centre for Independent Studies seminar in Wellington, Mr Douglas pressed ahead with his Cabinet victory over the Prime Minister, Mr Lange, in favour of major spending cuts. Mr Lange, who on Wednesday had hinted at delaying the October tax cuts and/or a GST increase, yesterday said he would be delighted if these measures could be avoided by Mr Douglas. Rejection of Mr Lange’s Wednesday comments about a $3.2 billion Budget deficit forecast was continued yesterday by Mr Douglas.

Even before his 9 a.m. address, he told radio listeners that with the spending cuts already agreed by the Cabinet, there was no need to increase GST or delay October’s tax cuts to produce an acceptable Budget outcome. An early statement, designed to reassure financial markets, said Mr Lange’s release of figures showing a March $1 billion deficit forecast ballooning to $3.2 billion by June had to be put in context. “In themselves, they provide an incomplete and doubtless misleading picture of the process as a whole,” said Mr Douglas. In his address, the State Sector Act, introduced in April, was said to have begun a new era in public administration. A public sector with a cost-plus system proofed against inflation was not sustainable. In the last four years, most

New Zealand business had undergone major restructuring to adjust to changing Government policies. “The manufacturing sector alone has shed 20,000 jobs in an effort to become more competitive,” said Mr Douglas. “It is time that the public sector undertook similar adjustment because if it does not, it will act as a brake on the achievement of a truly productive, dynamic economy.”

The State. Sector Act allowed significant improvements to the quality of public spending, freeing up resources to boost social services and reduce taxes.

In a joint statement yesterday, Mr Douglas and Mr Lange said they were confident that the Cabinet’s decisions last week would achieve a financial deficit close to last year’s as a percentage of gross domestic product. In the year to March 31, the financial deficit, which includes borrowing and asset sales, was $1323 million, or 2.2 per cent of G.D.P. Cabinet had achieved the result, they said, with decisions on both expenditure cuts and non-tax revenue.

If more revenue were required to close any gap shown by final estimates — expected yesterday or today — this would be only a small fraction of over-all tax take.

But Mr Douglas told Parliament yesterday that an estimated financial deficit similar to last year’s had been achieved now without having to consider delays

to the October tax cuts or increasing GST. “The decisions needed to achieve these figures have been made by a responsible Cabinet on the advice of both the Prime Minister and myself,” he said; It was a Cabinet not afraid to take tough decisions, he said. As well as a similar financial deficit in G.D.P. terms, Mr Douglas said the Budget on present estimates would produce a fiscal surplus of more than $1 billion. This measures Government revenue and expenditure and last year’s $467 million surplus was the first in 35 years. Mr Lange, at a news conference, said the final financial deficit figure would not be resolved until Monday’s Cabinet meeting. “For my part, I will be delighted if the Minister (of Finance) can bring in the deficit at the same proportion of G.D.P. with the tax scales unchanged and GST the same.” He said there were other options for increasing revenue than income tax and GST.

Mr Lange did not expand on this point, but a move to much wider applications of the userpays principle in Government departments is thought one likely source of more revenue.

The Budget would carry into the core State sector the accountability’ and efficiency of the private sector, said Mr Lange. But it would not make arbitrary cuts in income support or in areas impacting directly on the lives and wellbeing of people.