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No binding spending caps in Budget, says Key

Tuesday 20th April 2010

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Prime Minister John Key has dashed the New Zealand Business Roundtable's hopes that the Budget would include a fixed cap on government spending.

Speaking at his weekly post-Cabinet press conference, Key said he had been surprised to see comments from the Roundtable's executive director, Roger Kerr, suggesting that a cap linked to government spending as a percentage of Gross Domestic Product would be confirmed in the Budget.

Key said he did not personally favour that approach.

"The last time I looked at the Budget package, it didn't have a spending cap in it," said Key, other than the $1.1 billion maximum allowable on new government spending, announced in last year's Budget.

Key said he fixing a spending cap to a GDP ratio didn't make sense, because it could drive a government to worsen a recession by forcing spending cuts if GDP fell in hard times.  He denied claims that such a cap would be introduced in legislation before the end of the year.

Key also intimated that ACT party leader Rodney Hide's efforts to get Cabinet agreement to his proposed Regulatory Responsibility Bill are going nowhere.

The issues were going "back and forth" between Hide and Finance Minister Bill English and the Cabinet had not been briefed for some time, he said.

Consideration of a GDP-linked spending cap and a bill to discourage economically damaging regulation are both part of the coalition agreement between the National and Act parties.

Key confirmed that the Budget tax package was "largely finished", but declined to discuss the Budget in depth ahead of his departure on Wednesday for a trade mission to the Gulf states and attendance at the ANZAC Day Gallipoli commemorations in Turkey.

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