Dooglas breaks Silence

Press, 9 November 1988, Page 1

Dooglas breaks Silence

By

BRENDON BURNS,

political reporter

The Government’s economic policies will continue, the Minister of Finance, Mr Douglas, affirmed last evening in a speech that implied criticism of the Prime Minister.

Mr Douglas chose a snap debate on Mr Prebble’s sacking to defend his December 17 economic package — and to say he wanted further economic change. He said “twists and turns” in economic direction, implicitly created by the Prime Minister, Mr Lange, had reduced economic confidence. This seemed to refer to Mr Prebble’s dumping, as well as Mr Lange’s axing of the flat tax rateGuaranteed Minimum Family Income package in his January announcement. Another policy move by Mr Lange without consulting the Cabinet — his suggestion in June that a Budget deficit blow-out delay or reduce October’s tax cuts — can be judged another of these “twists and turns.” But Mr Douglas seemed to warn Mr Lange that he had the support of his Deputy Ministers of Finance, Messrs Caygill and Moore, in opposing further such announcements. He said ail of them were committed to not deviating from further economic change to gains. Mr Douglas said he freely conceded the Guaranteed Minimum Family Income part of his December economic package had not found “universal favour.” Mr Lange’s axing of this and the fiat tax rate were not his wish, but the Government did not want to ignore low-income families. Both he and Mr Lange wanted an improved system of income maintenance for low-income families as a major Government priority. Mr Douglas then appeared to

question the fairness of the compromise tax cuts package which last month replaced the original fiat tax rate-G.M.F.I. proposal. “Neither of us intends to tolerate a situation never originally planned which leaves the Government open to accusations that it favoured the rich at the expense of the poor,” said Mr Douglas. This was not sound economic policy, he said. “Low-income people stand just as much in need of sound incentives to work and improve their position as people at any other level.” Mr Douglas said he could not deny occasional, unexpected twists and turns had not happened in economic matters during the last year. He could not deny these did not impact on confidence in the Government’s economic direction. One or two “hiccups” were inevitable during a big restructuring of the economy. But this did not mean the Government had not maintained the pace and direction of reform in the last year, he said. The Opposition spokeswoman on finance, Miss Ruth Richardson, said Mr Douglas had broken his silence to attack the Prime Minister over the sacking of Mr Prebble. “But in essence what he did was roll over.” If Mr Douglas really wanted to keep the integrity of his economic policy intact he would have to have attacked Mr Lange unequivocally. His limited comment meant his policies had been dumped with Mr Prebble, said Miss Richard-

son. Mr Lange’s actions in recent days are feared by some commentators as meaning fewer asset sales are likely, thus interest rates might be pushed up by the Government’s borrowing more internally. Mr Douglas said interest rates would continue to fall because the Cabinet was determined to lock-in the gains it had made. He defended the Government’s record on unemployment, saying the total was now only about the same as when National left office. “That is an achievement which is probably unique among countries faced with major restructuring and major disinflation.” Unemployment is the key issue of concern which has led Mr Lange to attempt to rein in Mr Douglas. He has been promoting a new form of job scheme, which Mr Douglas is opposed to because the extra costs incurred would, he said, delay economic recovery. Mr Douglas said recovery was now coming, but it was fragile. The Government had resolutely to' face up to the reform still required. The vast majority of changes were now in place or in train, he said. “But I would be irresponsible in my role as Finance Minister if I did not emphasise there are some tasks which still do need to be undertaken.” Gains made so far had to be locked in and further advanced. The future for the Govt, page 20.