English says ring-fencing health tax would up tax take

Ring-fencing taxes for health would lead to increases in the amount of tax people paid, National leader Bill English said today.

However, Revenue Minister Michael Cullen denied that would happen if Labour introduced a dedicated health tax. He said it would "simply replace an existing part of income tax".

Mr English, a former health and finance minister, told National Radio he had rejected the idea of a dedicated health tax when he was in Government.

"The only reason you ring-fence a tax is so you can increase it.

"I know what the attraction is and the attraction is this -- that you can go to the electorate and say 'look, if you don't pay more taxes, your children will die; if you don't pay more taxes, we won't be able to look after old people'."

There would be increases in health costs and ring-fencing taxes for health would mean people would be taxed more.

Senior Government whip and Tukituki Labour MP Rick Barker yesterday inadvertently let slip at a candidates' meeting that Labour was considering a dedicated health tax.

After the meeting, an embarrassed Mr Barker admitted to Hawke's Bay Today he had jumped the gun on the proposed tax. He said the idea was a concept of Labour's health policies and did not amount to an extra tax but a redirection of funds.

The dedicated fund could increase if people were prepared to see a bigger slice of their taxes go towards health spending, Mr Barker said.

The MP later rang Dr Cullen and apologised for his slip-up. The policy was to have been released on Monday.

Dr Cullen said it would not mean an overall increase in how much people paid in taxes.

Labour would "explore the idea of a dedicated health tax" using an equivalent amount of money from existing income tax, he said today on National Radio.

For instance, if he dedicated five cents in the dollar to health, existing income tax rates would reduce by that much.

"This Government's been very transparent about its taxation intentions, and therefore if we're going to explore that idea we believe it important that it was put out into the public arena before the election."

Dr Cullen said there was a need "for more intelligent debate" about the level of public health care New Zealanders expected and what they were prepared to pay for.

In the long-term, if health care costs went up, decisions would have to be made over whether to pay for that or reduce other areas of government spending to ensure taxes did not raise.

Other National MPs yesterday claimed Labour had plans to introduce "stealth taxes" such as death duties and increases in petrol taxes in order to keep a promise not to increase income tax or GST.

Dr Cullen said he "categorically" ruled out any intention to bring back death duties and "denied that there was any pressure to increase petrol taxes".

National's "scaremongering just showed how desperate National was", Dr Cullen said.

Dedicated taxes to fund health services exist in other countries such as Britain. Former National health minister Simon Upton also floated the idea of a health tax, but withdrew it after the health sector said he planned to use it to reduce funding.

- NZPA

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