Press Release – The Nation
‘THE NATION’ DAVID CUNLIFFE & STEVEN JOYCE Interviewed by DUNCAN GARNER Duncan So Labour’s given more details of its spending and borrowing plans, and to talk more about those plans of course are the politicians, and I’m joined here in Auckland …‘THE NATION’ DAVID CUNLIFFE & STEVEN JOYCE Interviewed by DUNCAN GARNER Duncan So Labour’s given more details of its spending and borrowing plans, and to talk more about those plans of course are the politicians, and I’m joined here in Auckland by Labour’s Finance Spokesman, David Cunliffe, thanks for coming in David. In Wellington is Steven Joyce, National’s Campaign Chair. Steven good morning to you.
I want to start, I’ll direct this to you David. Labour says, you say that you’ll have about four billion dollars more borrowing over the first four years. National’s come back and said that’s 11 to 14 billion. I mean it’s turning into a farce and who to believe isn’t it?
David Cunliffe – Labour Finance Spokesman Well look we are putting four billion in which is less than the value of the assets they’re planning to sell, that’s because short term we have to cover the cash that they would have got out of selling them. The reason we’re doing that is New Zealanders don’t want to see their precious assets sold. They don’t want to be poorer in the long term just to generate a bit of cash in the short term.
Duncan But Steven Joyce you say 11 to 14. I mean John Key said 11 billion dollars yesterday, although he’s arguing now that it could be 14 billion. Why are you saying this when they put up a pretty comprehensive list of numbers yesterday?
Steven Joyce – National Campaign Chairman Well comprehensive doesn’t make it right of course, and we’re up to now actually by our calculations around 15 billion. So they say about three and a half, they’re trying to pretend that you’re not borrowing for the Super Fund, which is another six and a half. They’re about two billion short on their revenue line, about two and a half billion short on their expenditure line, and they’ve all got a half billion dollar mistake that they’ve made around SOE dividends. So that all adds up to about 15 billion. And the trouble is these guys have got form on this, they increased expenditure about 50% in the last five years they were in government, and they also have opposed every spending restraint that we’ve had when we’ve been in government. So I think it just beggars belief that they’ve got these nice tight numbers suddenly with about three weeks to go before the election.
David Oh well look I’m afraid the Minister has no credibility. The Minister said for example that we were going to be borrowing for the inner city rail loop, and we’re taking that money out of the Holiday Highway and reinvesting it in Auckland’s inner city rail. He completely got the numbers wrong on the ETS tax, he’s completely got the numbers wrong on the R&D tax credits. He’s booked a billion dollars deficit for a policy that we haven’t even announced yet, in early childhood education, which is fully allowed for in our spreadsheet.
Duncan I tell you where Mr Joyce makes a good point Mr Cunliffe, and that is around the six billion dollars of extra borrowings that you will have to make to put and restart the contributions to the New Zealand Super Fund.
David Sure, we were really transparent about that when we announced it two weeks ago. Of course it’s necessary in the short term to borrow to provide the financial assets that will grow at a faster rate than the cost of the debt to provide for future superannuation.
Duncan But you’re trying to hid the six billion dollars of extra borrowing by saying that net debt not gross debt. You still have to borrow to invest in a fund that is volatile in world markets?
David Absolutely right, and we put all of those numbers out two weeks ago, we said exactly what the borrowings were gonna have to be for the New Zealand Superannuation Fund. Of course it’s legitimate to talk about net debt including New Zealand Super Fund assets, that’s how it was done all through the previous government, and why it’s important is because if you’re running a book for a household, or a government, or a company, you look at your assets on one side of the ledger and your liabilities on the other.
Duncan Steven Joyce you completely disagree don’t you?
Steven Well that’s right and David has just admitted that that means they’re gonna borrow six and a half billion dollars more than they’ve just said with their three and a half billion dollar figure. So that takes them to ten and we haven’t even got started yes, and to suggest that you’re not borrowing – well he actually has accepted that he is borrowing, but he’s not including it in the numbers. So it’s ten billion dollars as we sit here today with those two numbers together alone, that would be more borrowing from foreign banks and they say own our future. I say you’d end up owing to those foreign banks.
David So you can use all the glib one liners you like, what New Zealanders want is solutions. They want solutions to the long term problems of solving the retirement crunch which is part of the reason that your government’s earned a downgrade. They want solutions to keeping our assets because they don’t want to see our future sold out.
Duncan But it’s still borrowing though Mr Cunliffe and this is the point I started on, and Steven Joyce has focused on here. You still have to book that six billion dollars of debt, you’ve just hidden it effectively because you’re talking about net debt and not gross debt. It is still money that you have to source from offshore markets – yes it is. Do you accept it’s money you have to source from offshore markets?
David It maybe – some of it maybe sourced from onshore from higher savings flows, so there’ll be parts of each. But look the point here is we get to keep our assets, pay down our debt, give every New Zealander a taxcut, and talking about borrowing the previous government has racked up 37 billion dollars in borrowing so far in debt, they’re planning to rack up another 13, that’s takes them to 50. Now the Labour Party doesn’t need to be lectured to by Steven Joyce about borrowing, when we ran surpluses for nine years, never had a downgrade. This government’s been downgraded already, different environment okay I want to be fair, somebody here is borrowing 50 billion.
Duncan There’s a couple of points there that Steven Joyce made about some of your assumptions in here. One of them is the SOE dividends. You could call them heroic assumptions at times because it looks like they’ve been overstated by maybe half a billion dollars?
David No that’s incorrect. What we’ve done is taken the best available information from the Treasury. It may well be that the government thinks they have more specific information now than they’ve made public, but I not that in the Prefu document they said there was no specific information available about SOE dividends that could be put in the public domain. So we challenge them, let them do it, let them put it out there.
Duncan We’ll let Mr Joyce respond to that then. Mr Joyce when it comes to that revenue stream that they’re banking on here of 845 million, writing to 1.4 billion, are they right or not?
Steven No they’re wrong, and actually a simple – when you do these things you should do a simple fact check on a few things, and that’s what worries me a little bit about the hasty nature of these numbers. If you actually just look back between 2006 and 2011 you’d know the average dividend stream from these companies, is about 350-360 million, and then to turn around and say it’s a billion dollars going forward. Somebody should have said hang on let’s go back and check whether we go our numbers right or not. It’s as simple as that in terms of doing it, they didn’t do that. If they’d done that they would have realised they’ve taken the wrong line from the Prefu summary from Treasury and they’re sort of half a billion dollar short, and I’m sorry but that’s actually symptomatic of the problems that they’ve got throughout these numbers.
Duncan But how do you explain then the 735 million dollars of revenues that came out of those – you know the dividends that came out of the assets to June 2010?
Steven Well that was because Meridian ironically sold an asset which of course Labour says is something that is verboten and you couldn’t do. Look at the end of the day we’re saying this. We’re going to keep 51% of these four companies. We’re going to sell a minority shareholding, keep control, in order to be able to finance future investment in New Zealand without borrowing overseas. We think that’s a healthier approach. It’s an approach that actually retains New Zealand’s sovereignty more. But the Labour Party solution is no no pretend that that’s not happening and just go out and borrow an extra 15 or so billion dollars, and it’s just truly a way of saying to New Zealanders we will actually end up owing more to foreigners with our future if you follow the Labour Party approach. It’s the wrong way to go.
Duncan We’re talking about Labour’ policy costings plan. Mr Joyce it’s not just about Labour’s costings, it’s also Labour brought up a number of good points yesterday. I thought about some of your costings, and just on your asset sales alone you’ve banked the five to seven billion, but you also in that Prefu and in the government numbers this year, also take the full dividends. I mean that’s completely dishonest isn’t it?
Steven No that’s not correct. What we’ve done is we’ve said that the capital allowance that we’ll have over the next four years, which I think is between four and five billion will be covered by the net proceeds of the SOEs which is the total amount that you float les the dividends, and it’s that simple. They’re trying to make something out of it but the numbers are actually significantly less than the five to seven billion you’d expect to get from the assets. And the reality is that if you didn’t get the five to seven billion, you’d have to match your capital budge accordingly, and that’s of course what we’ll do, because we’re putting it in the future investment fund, and it will be transparent for New Zealanders as to how much goes in there and where it goes.
Duncan I want to some to the asset sales stuff shortly, but are you saying that you would sell all these by the end of the next term, cos that’s what your numbers look like?
Steven No, no no, no no, because over a four year period from 2012 to 2016, that’s the budget Prefu period, and it would be net. The net proceeds as I say that’s been booked in terms of capital expenditure is around the four billion dollar mark and they’re looking at five to seven for the four companies, the 49% flotation. So it’s just the net figure which nets off the dividends as well.
Duncan David Cunliffe you say Steven Joyce is misleading New Zealanders here?
David Oh I think the Prefu’s a very misleading document. If I’m looking at page 82 in here, yes it’s 56790 and 835 million for the three years from 2014, which is capital released from the asset sales being ploughed back in, which now of course National’s putting a fancy new name on it, calling it Future Investment Fund, it was already there in the Prefu. What wasn’t there in fact, what the Prefu said wasn’t possible was to say what the dividend loss would be. Now the Minister after we’ve challenged it on behalf of New Zealanders to say how much dividends the country is losing because of the asset sales, now the Minister thinks he can give you a net figure. Well why wasn’t that made transparent in the Prefu document. New Zealanders want to know, because they know that once the assets are sold they’re sold, they can’t be got back, they’re sold, and the dividends will be lost. By our calculations within nine years New Zealand will be worse off and we won’t be as robust in the future because we won’t have the assets to sell next time we’re in the schtuk.
Steven That’s not correct, because I mean firstly let’s be clear. We’re only selling 49%, we’re hanging on to 51%.
David We know that stuff around control is incorrect. Minority shareholders have rights well before 50% as you know.
Steven Well that’s right but you still control over ….
David They’ll hardly be SOEs Minister, if they’re not controlled by New Zealanders. By what means Minister is the government going to prevent New Zealand mum and dad shareholders on-selling their shareholding to an Australian or some foreign multi-national who offers them a higher price in the market. By what means Minister?
Steven Well actually two things, firstly any shareholder is limited to no more than 10%.
David That wasn’t the question.
Steven We actually back New Zealand shareholders significantly more than Labour does. Labour thinks everybody would sell them down the river.
David There is no means to prevent the on-sell, is that what you’re saying.
Steven Let me finish. The evidence is that places like Port of Tauranga, which runs the mixed ownership model with the Regional Council up there and also with Contact Energy minor shareholders, actually they’re being held more by New Zealanders than before. So the whole thing is just a scare tactic and it doesn’t make any sense.
Duncan I want to move this debate to contingency plans. Roger Douglas has asked a number of questions in parliament this year about what your contingency plans are. That Treasury’s overstated growth by 1% on average for the last seven years which leaves a hole in revenue of about 14.5 billion dollars. So if it goes belly up what are you going to do about it. First to you Mr Cunliffe.
David Well firstly in our Capital Gains Tax revenue stream we’ve based that on lower than Prefu growth assumptions to make sure that we’re on the safe side of the line.
Duncan That doesn’t kick in for ten years, let’s be honest.
David No it kicks in in year 1 then it builds up gradually.
Duncan Very slowly. What are you gonna do in that first four years. I’m not talking long term, I’m talking short term.
David We are virtually matching the government’s very tight spending. Over four years they’re planning to spend 220 million dollars, over three sorry.
Duncan Would you make spending cuts in that first four years more than what you’d have to?
David We will have to see what the future holds and we will have to react to the situations as the future presents it.
Duncan It’s on our doorstep, look at Greece, it is on our doorstep.
David Yes and that means that we have to solve the structural problems. Now Standard and Poors did not downgrade New Zealand because we were running a short term fiscal deficit. Let’s be really clear. It was the long term retirement crunch which we are sorting out. It was the lack of export diversification, which we will help sort out, and it is the lack of savings, which we are sorting out, and the government is silent on. So who has the solutions here?
Duncan Well yours are long term structural. Steven Joyce what is your answer to that question. I want to know what are you going to do in that short term period if things go belly up, contingency plans?
Steven Well David’s stuff has been quite interesting from a fantasy perspective, but the reality is ….
Duncan Mr Joyce could you answer my question please. What are you going to do to that big hole.
Steven We’ve said that we’ll take the tough decisions, and we have, we’ve just delivered a zero budget in election year. That has not been done in living memory, and Bill English as we know now has a track record of delivering responsible tight expenditure budgets which still allow us to deliver good Public Services while doing so, and we believe we’ve got more room to do that. It’s simply not credible for Labour to say that because they’ve opposed every spending restraint we’ve taken in the last three years in virtually every area, and now they’re saying oh no no we’ll be as tight as the government.
Duncan But what happens if Sir Roger Douglas is actually right and there’s a 14.5 billion dollar hole that you don’t know about, and if you look at Treasury’s predictions they haven’t been right.
Steven Well no, but frankly it’s alarmist and with the greatest respect to Roger, and I know he comes from a certain time in New Zealand’s economic history, but he’s been going round telling the government over the last three years it should have cut its spending as a percentage of GDP and yet if you go back and look at his record as Finance Minister in the late 80s he actually increased it because actually government expenditure as a percentage of GDP does increase in recessions. That’s just the way it works. So he doesn’t actually have a track record which allows him to wander around and say that there’s gonna be a massive hole. The reality is what you do is you deal with the situation in front of you. We now have shown through our track record….
Duncan But Treasury’s track record is poor on this.
Steven No but our track record is actually good on this in terms of delivering low expenditure increases, and in this case a zero budget in election year which as I say hasn’t been done in living memory, and we would continue to do that if that’s appropriate. Now we’ve had to pay for the Canterbury Earthquakes, and everybody accepts I think even David that that’s important.
David Yes I do.
Steven That we have to stand behind Christchurch to do that. That has been very important…
Duncan What I’m asking Mr Joyce, on the eve of this election effectively , is National willing to relook at spending priorities even further you know going forward. I know you’ve got 800 million dollars for each budget going forward. Would you look at zero budgets in the future if things go belly up, which is entirely possible?
Steven We’re confident of our numbers as they stand today, but we have shown through our track record in the last three years that if circumstances change then we adjust to those circumstances. We’re confident of our numbers and I don’t see any need to change them at this point. I know Bill doesn’t and I know that the whole Cabinet doesn’t believe we need to change those numbers at this time. We also know that our track record on spending restraint is a heck of a lot better than these other guys, and I think New Zealanders know that, because that’s why they’re where they are at the moment.
Duncan Steven thank you for joining us from Wellington. Just before you go David I just want to ask you one question. On radio last night you said this about Judith Collins, a Minister in the Crown. “I have thought that if Judith Collins was the last woman on earth the species would probably become extinct”.
David Yes an unfortunate comment, I sincerely regret it and I’ve rung her to apologise. I shouldn’t have been in that conversation, and it was the wrong thing to say.
Duncan What made you say it?
David Look honestly I don’t know. It was a regretful comment, and I’ve apologised to her.
Duncan Alright David thank you for joining us this morning on The Nation.