SPEECH TO TIMARU GREY POWER

HON DR MICHAEL CULLEN,
MINISTER OF FINANCE

Thank you for the opportunity to speak to you today. It is always nice to be back in the South Island.

I have heard it said that Grey Power was formed to fight the surcharge. Now that the surcharge has gone, Grey Power is moving on. It is also moving on in the way that it does business with the government. In the last year, the national officers of Grey Power have adopted a policy of open dialogue. They meet regularly with various Cabinet Ministers and we have free and frank discussions. That, in my view, is the best way to clarify what each expects of the other, and to clarify where the limits lie about what sorts of initiatives might be expected in the immediate future.

I would be interested to hear from you about what you see as your key priorities. From my point of view, representations to me from Grey Power tend to focus on three core issues: New Zealand Superannuation, health, and personal safety - what we could broadly call law and order.

I have talked a lot about New Zealand Superannuation in the last year, and I don't want to dwell on it too much. I do think, though, that there are a number of points worth repeating.

Firstly, we need to see Superannuation in the context of this Government's term of office, not something that is addressed in each specific budget. Government budgets have changed in recent years. Historically, we had what could broadly be called a "bottom up" process of budgeting. Ministers made bids, they were assessed on their merits, and the resulting total, compared to projected revenue, left a surplus or deficit.

The change, especially since the 1996 General Election, has been to apply a "top down" process as well. The top down budget sets a total amount within which the bottom up bids for money have to be accommodated. It is an extra discipline that allows the government to meet broader financial targets, like staying out of the red and managing its debt.

Last year, the government increased the base level of New Zealand Superannuation, at an annual cost of something over $210 million. Over the term of this government, the higher NZS rate will cost $684 million. Eleven percent of the total top down limit for new spending went on this particular policy initiative. The increase was from early on in our term of office, and of course it is still being paid this year and next, even if it does not feature as a new item in the 2001 publicity about and commentary on the budget.

The government has set the floor for the married rate of New Zealand Superannuation at no less than 65 percent of the after tax equivalent of the average wage. It is important to remember that what this does is to maintain the level of NZS relative to the average wage. If the New Zealand economy performs poorly over the longer haul, the average wage will tend to stagnate. If it prospers, the average wage will tend to rise steadily.

It is possible for NZS to retain its relativity with average incomes in the rest of the community, but unless those other incomes are rising, there is no lift in the absolute level of NZS. It is this real level - the quantity and quality of goods and services that NZS can buy - that determines the quality of life of retired New Zealanders.

This is why the government's project to transform our economy into a higher value, higher productivity, high wage production unit is of more than altruistic interest to Grey Power. Of course you want to see your grandchildren prospering from the unfolding opportunities that new technologies and expanding trade create. But remember this. As they prosper, and as long as NZS is linked to their wages, so do you prosper too.

I have talked in the Budget about the need for intergenerational consensus on New Zealand Superannuation. I am disappointed that the National Party seems to using the excuse of a lack of consensus to in fact frustrate one. As I read National Party policy, it seems to imply that they will guarantee the relative level of NZS for the already retired and for those nearing retirement, but not for the next generation. I think they badly misread the sentiment of the retired. I see no future in a policy that sets up divisions within society.

Even if National were to convince New Zealanders that it will protect NZS for the currently retired - and their track record on this is not good - the really big argument is about insisting that adequate pensions are preserved for the generations yet to come. There is absolutely no point in creating conditions that will inevitably lead to intergenerational sniping, resentment and jealousies.

The New Zealand Superannuation Fund is the safest and most tangible way to create confidence within the next generation that NZS will be there for them. The Fund is, in my view, the vehicle with which we will drive the intergenerational consensus and solidarity that we depend on.

That is enough on Superannuation. I am going to turn to health. I have to say that I have been flabbergasted at the negativity that has been reported in response to the Budget's announcements on health spending. As a nation we have become accustomed to health spending as an area that simply gets accustomed to large annual increases. My own view, however, is that we need to narrow down the focus and concentrate on four key areas. These are:

• defending the funding base that has been established;
• making sure that we get the value for money gains that can improve health status and quality of life using existing funds;
• doing more at the prevention and primary end of the spectrum so that fewer people need hospital treatment; and
• balancing unavoidable health treatments and more discretionary or elective treatments, so that the emphasis is always on enjoyment of life.

I think that the Minister of Health and I have worked well to meet these goals. Let me give you some examples using ballpark figures. Health got 44 percent of the money available for new spending in this year's Budget. In dollar terms, health expenses are up by 5.7 percent. The government has committed itself to just under $1,000 million in new operating funding and $450 million of capital funding in the health sector over the next four years. That is big money in any language.

More importantly, though, there is a better focus on where the money is going. For a start, there is $84 million more allocated to the system in the next financial year to meet demographic change: that's either more people or a change in the age structure of the population.

A similar annual amount goes into maintaining payments for elective surgery. The attack on the waiting lists initially involved temporary funding. The Labour Alliance Government extended the term of this last year, and has made it permanent in this Budget. This is an important change in the emphasis of health funding.

Health funding now has more of a quality of life dimension than previously. It is particularly important for lower income people and the retired: they tend not to be able to simply pay for elective surgery out of their private incomes. It is worth noting that about half of the elective surgery spending is for people over 65.

Budget 2001 allocates an extra $94 million over four years for primary health care, with an emphasis on prevention as a means of reducing hospital admissions and later complications of disease and disability. Something that you will be particularly interested in is the $178 million over four years allocated to the development of disability support services. This allows more home support in preference to residential care, alongside better funding for those with severe support needs. That again moves us down the quality of life road.

Finally, I would add that three large hospital rebuilding programmes have been announced for Wellington, Auckland and Southland. The balance is sound. Protect the funding base, keep up spending on elective surgery, emphasise that prevention is better than cure, and see the health system as one that always strives to improve quality of life. After all, we all want a health system, not a sickness system.

I am not sure that you expected a Minister of Finance from the Labour Party to address you on law and order, but I need to reiterate that there is no virtue in being soft on crime. Crime usually targets the vulnerable in our society, and crime prevention should clearly be seen as one of the priorities of a government of the centre-left that stands firmly on the side of those who are exposed to the harsher edges of modern society.

Last week we announced an extra $22 million to ensure the public will be better protected from dangerous offenders. This is part of an estimated $90 million to be provided for the new Sentencing and Parole regime which will see violent offenders locked up for longer and early release offered to offenders who pose no risk to the public.

The Government announced the new Sentencing and Parole Bill in March and it is expected to be passed early next year.

Dangerous offenders sentenced after the new legislation comes in will no longer be eligible for automatic release after serving two thirds of a prison sentence. Inmates guilty of the worst types of murder will have to wait much longer before becoming eligible for parole.

Automatic release after two-thirds of a sentence will be abolished by the Sentencing Act. Final release date will now be the sentence expiry date with an additional six-month supervised transition back into the community possible.

The age at which someone can be sentenced to preventive detention is to be lowered from 21 to 18. A greater range of sentences will be available for murder, with the minimum non-parole period for the worst types of murder increasing from 10 to 17 years.

A New Zealand Parole Board will replace the present Parole Board and District Prisons Boards. Its fundamental principle will be that the protection of the public is the paramount consideration for determination of any case. It will be able to keep offenders who pose an undue risk to public safety in prison right up to final release date.

Criminals guilty of the worst offences may have to wait up to five years between applications to the Parole Board for release, instead of being considered annually.

At the other end of the spectrum, courts will have more discretion in sentencing. Inmates will be eligible for earlier release where they show contrition, deal with the reasons for their offending and do not pose a risk to public safety.

The reforms are matched with victim support initiatives and new rehabilitative programmes that make the public safer by treating some of the causes of offending.

My colleague Matt Robson announced that the Government will spend $7 million over four years on programmes targeted at repeat disqualified drivers and treating alcohol and substance abuse so that, as a society we start to deal with treating the causes of crime so there will be less offending and fewer victims.

Any one who has ever been a victim of crime well knows the trauma suffered and the sense of violation and anger that can fester long past the criminal act. In New Zealand we are fortunate to be able to turn to the expertise and compassion of Victim Support Groups who work with the Police to counsel and comfort victims in the aftermath of crime.

The Budget package contained $500,000 a year of new funding for local victim support groups. This money will be used to increase the number of professional staff employed by local victim support groups, and to implement improved case management and monitoring systems.

Increased funding for victim support is accompanied by changes in the Sentencing Act to introduce a strong presumption in favour of reparation. There will be an extension of reparation to allow payments for physical harm, and not just property loss or damage and emotional harm. Importantly, courts will give the views of victims more prominence. The government has kept its word to keep the public safer by tackling the problem from both ends. The new Sentencing and Parole Bill will help to improve security for New Zealanders by keeping dangerous offenders in prison for longer. We are building new prisons to meet the increase. And the new drug and alcohol treatment programmes will help reduce re-offending when inmates have served their time.

In closing I would like to summarise what I believe to be the most important aspects of last week's Budget and what sets it apart as a Labour Alliance budget.

As soon as we were elected the Government we moved to attend to problems with the social security system. In our first year we lifted the pension, introduced income related rents, eased student loans and spent more money on elective surgery and education.

This year's budget continues the long term view, investing in young people, working with business to promote training, skills, regional development, and support for technological innovation to create well-paid jobs. We put aside money through the New Zealand Superannuation Fund to meet costs that will emerge in twenty or thirty years time. The Budget reflected the core values of the coalition government: equality of opportunity and personal security and emphasised social, financial and environmental sustainability.

Only by taking a whole of government approach can we balance our competing demands: short term versus long term, resource use versus conservation, demands for more spending versus the ability to pay our way, the needs of the young against the needs of the elderly, and on it goes.

These competing forces, ever present, are part and parcel of the balancing act of government. I hope that this government is remembered for an approach that is judicious, compassionate, fair and fiscally conservative - like me.