$10 billion - Cullen's record spend-up

By KEVIN TAYLOR, political reporter

Finance Minister Michael Cullen today unveils a huge Budget spend-up thought to be a record in dollar terms.

Most of the new spending will go to low-and middle-income families in a plan billed as the long-awaited "social dividend" for those who have gained the least from economic growth of the past 20 years.

Westpac bank economists are calling the Budget a "spending extravaganza".

Core Crown annual spending is expected to rise from $41.9 billion last financial year to $51.9 billion in 2007-08.

Westpac is predicting that the new spending could be as much as $15 billion over the next three years.

The Government has already increased the "Working for Families" plan by about $200 million to $1.1 billion annually.

Despite the increases, economic growth is expected to keep total spending at about 42 per cent of gross domestic product.

Dr Cullen told a business lunch in Wellington yesterday that assistance from Working for Families would stretch well up the range of family incomes and into the middle-income bracket.

About 60 per cent of families with dependent children will get help.

Some 300,000 families will eventually benefit - 48,000 more than now.

The benefit system is to be reformed and the Government intends to increase the gap between welfare and work payments to encourage beneficiaries into work.

In his speech yesterday, Dr Cullen also raised the question of child poverty.

"Nobody can really defend the situation where we have far too many of our children living in poverty at the present time," he said.

"The fact is that the majority of the workforce of the future is currently being formed in families who will receive assistance from this package."

The Government has already revealed details of new Budget spending totalling more than $650 million over the next four years.

In the latest announcement, Health Minister Annette King said yesterday that money for hip and knee replacement operations would be boosted by $30 million this financial year, rising to $70 million annually by 2007-08.

This will double the number of hip and and knee operations within four years, from 4665 a year to more than 9300.

Poverty expert Charles Waldegrave believes today's Budget will be the biggest redistribution of income to the poor since 1972, and will have far-reaching effects.

Dr Cullen yesterday repeated the line he has been using for the past few weeks - the Budget will deliver the biggest single set of changes to the benefit and family assistance system since the 1991 benefit cuts.

The Salvation Army's social policy research director, Major Campbell Roberts, said he was optimistic that the Budget would deliver for the poor.

"The Budget is shaping up to be a lifeline for struggling New Zealand families," he said.

"Based on what we have heard ... we are very hopeful that the Budget will deliver to those most in need.

"With poverty at higher levels than they were in 1989, a Budget that really commits itself to the poor is long overdue."

Major Roberts said many families did not have enough money to meet basic needs.

"If this Budget puts more money in their pockets, it will mean more food, heating and clothing for children, and that can only be good for the whole of New Zealand."


* For coverage of today's Budget, visit our Budget Feature after 2pm.