KEY POINTS:
Treasury's calls for a capital gains tax, an increase in GST and cuts to superannuation have been rejected by Finance Minister Bill English.
Mr English today released Treasury's incoming briefing to the new Government.
While some of it reads like National Party policy, it then takes some ideas a few steps further than is comfortable for the incoming Government.
It calls for even lower personal taxes than currently proposed by Mr English by aligning the top personal rate with the corporate rate, currently at 30 per cent, and then reducing those rates in line with other countries.
Treasury argues that taxes on things that are mobile and low growth - such as people's wages and money - should be shifted to tax those that are "less mobile and less damaging" to growth - such as consumption and land.
The coded call for an increase to GST and the introduction of a capital gains tax was rejected by Mr English.
"We won't be doing that... It is not our policy," he said.
National did plan to reduce taxes over time, but further cuts were not possible with the Government's books in deficit.
Treasury also said the Government should signal now that retirement income policy was not sustainable in the long term and super would have to be cut.
Mr English also rejected this.
Treasury also differed with English over the need for stimulus package due to the international credit crisis and associated recession.
The current budget was enough and "the use of fiscal stimulus will be costly in the short term and may require savings later" to avoid bigger deficits.
Mr English said he would be going ahead with tax cuts before Christmas and a stimulus package.
Treasury believed that Government expenditure had been increasing at an unsustainable rate and could not be sustained even in the short term.
The quality of spending had be improved and spending growth had to be curtailed.
"Some agencies have had significant personnel growth that does not appear to be warranted," Treasury said.
Mr English agreed with Treasury that living within the $1.75 billion operating spending increase for future budgets would be "very challenging", but said it could be achieved.
Existing spending would have to be re-prioritised and some areas such as health had the capacity to live with lower increases than received in the past.
Mr English said he and Prime Minister John Key had already talked to departmental heads and all areas including health would have to face up to smaller increases in budgets.
In other areas Treasury was also worried that New Zealand needed more skilled people with higher levels of learning and this was being hampered by mixed results throughout the education system.
Maori and Pacific children were not participating in early childhood education and students were leaving school to early.
It called on the Government to drop plans for lower student-teacher ratios as they were less effective and more costly to making teachers more accountable for student achievement.
Treasury also believed that the emissions trading scheme was generally sound and only needed a few changes.
As the Government's chief financial adviser Treasury has in the past been accused of taking an ideological stance.
Former finance minister Michael Cullen once described an incoming briefing to him as an "ideological burp".
Mr English said he was relaxed about the Treasury briefing saying it was free to give advice and it was up to Governments to accept or reject those views.
He said National had been elected on a policy platform and it would be implementing that.
Labour leader Phil Goff said Treasury's briefing highlighted that National had inherited a healthy set of books and it should not be squandered.
Mr Goff said much of the document was an "idealogical wishlist".
If National took up any ideas such as cutting taxes for high earners, while reducing protections such as minimum wages then it would be strongly opposed by Labour.
- NZPA
