Budget 'deception' defended

Politically contentious work to change the way the Budget is presented was being done by officials even before Treasury head John Whitehead and Finance Minister Michael Cullen discussed the issue.

Dr Cullen revealed in February that the Budget presentation would be altered, leading to claims from National and Act that the delivery is being cooked or massaged to dampen expectations of tax cuts.

He said next month's Budget would provide "greater clarity" on a different figure than the very large surplus - the much smaller cash position. That cash position is actually forecast to go into deficit by $705 million in the 2005-06 year, according to the last forecast in the December Economic and Fiscal Update.

The Government is concerned the huge surplus is providing continued political ammunition to opponents to justify tax cuts. Its argument is the surplus is already allocated to things such as roads, prisons and contributions to the NZ Super Fund.

Mr Whitehead told the Herald he had anticipated that the surplus - called the operating balance - was becoming an issue even before discussing it with Dr Cullen.

But he denied being instructed by Dr Cullen to begin work on re-representing the Budget, the fruits of which will be revealed on May 19. And he added he would not take such instructions anyway.

"I've got a responsibility under the Public Finance Act to publish those under Generally Accepted Accounting Principles - and that's what I do."

However, Mr Whitehead believed it was not only ethical but his responsibility to drive a re-presentation of the books.

"For example on the Oberac - the operating balance excluding revaluations and accounting changes - it was exactly the same sort of thing."

State Services Commissioner Mark Prebble agreed, saying it was normal for public servants to discuss issues with the minister, including, where necessary, issues of presentation.

"The question is, was the job done properly. Are the figures correct. Are they presented correctly," he said. "I've got no suggestions of any problem there."

However, Act leader Rodney Hide said it was disturbing the Treasury was admitting working "hand in glove" with Dr Cullen to change the Budget presentation to say there was now no money for tax cuts.

"While the books aren't being cooked, the presentation is, and that's just as bad."

Mr Hide has obtained documents and emails under the Official Information Act which he says show Treasury in on the "deception".

He cites a January 21 email to Mr Whitehead which said "the plan ... is to firstly promote the cash measure to the top of the communications we do from now on (Crown monthly statements and Treasury reports on this)".

That has already been done.

The term "surplus" has been quietly dropped from Treasury press releases on the Government's monthly financial statements in the past few months.

And a key table of fiscal indicators has been rearranged in all the monthly statements this year to place the Government's cash position at the top, displacing the surplus figure further down.

National finance spokesman John Key said very strong economic conditions had given Dr Cullen a marketing problem.

"There's not many finance ministers in the world that are actually going through the process of redefining the books in order to make them look worse."

New Zealand First leader and former Treasurer Winston Peters said Dr Cullen had deliberately muddied the waters by concentrating on the operating balance instead of the cash surplus, which was the figure he concentrated on as Treasurer.

"I think the public is only interested in the cash surplus really, and what that means," Mr Peters said.

"What Dr Cullen has done is thoroughly confuse the public and the whole debate on what the actual surplus is."

Forecasts for Budget 2005
(for year ending June 30, 2006)

* The surplus (operating balance): $6.2 billion

* Operating balance before revaluations and accounting changes (oberac): $6.2 billion

* Cash available: -$705 million (deficit)

* Total revenue: $68 billion

* Total expenses: $62 billion

* Projected new operating spending: $2.1 billion

Source: December Economic Update