Key denies 'doomsay' Budget

Prime Minister John Key yesterday foreshadowed cuts to existing programmes developed under Labour when his Government's first Budget is unveiled in three weeks.

But he said it would not be a "doomsay [sic] Budget".

He said the line by line review of Government expenditure had been "extremely productive".

As an example of cost-cutting, Finance Minister Bill English told Parliament that he had saved $1 million "canning a programme to teach kids how to pat dogs".

Mr Key, speaking to a Business New Zealand audience in Wellington, said that in Labour's last five Budgets, the average new operating allowance was $3.82 billion.

"The world has changed and that kind of additional funding simply won't be available to future Governments. Trade-offs will need to be made."

While the Government would be spending more in the Budget than ever before, the rate of increase in spending would not be kept up.

"That will require ending some Government programmes and reshaping others."

Like any family with a big mortgage, the Government would have to prioritise its funds and "resist some luxuries".

But responding to Labour's claims that the Government is preparing the ground for a "Black Budget", Mr Key said: "I want to make it very clear today that this will not be a doomsay Budget."

Mr Key has already said the Budget will have significant increases in education and health spending.

In 2008, Labour planned on cutting new spending for the 2009 Budget to just $1.75 billion including $750 million more on health - a total that National also said it would limit itself to.

But Mr Key told reporters that "even $1.75 [billion] is a lot given the challenges we face".

Mr English later told reporters that most of the $1.75 billion would be used to fund National's own election promises, from funding the breast cancer treatment drug Herceptin to increasing police numbers.

"There were a number of promises made by the previous Government for significant increases in spending which we won't be meeting."

Mr Key told the business audience that the Budget would see the Government taking steps to get its borrowing levels under control.

"I make no apologies for facing up to this challenge. New Zealand simply cannot afford a runaway balance sheet."

Mr Key also sent his own unmistakable signal to the business audience that tax cuts promised for 2010 and 2011 would be delayed. The Budget would contain some "responsible" decisions.

"These will include delaying some steps in our economic plan that we would rather have made sooner," he said.

When asked if that pointed to a delay of the tax cuts, he said: "I would be opposed to the cancellation of tax cuts."

Mr Key said he felt deeply for the unemployed victims of the recession but he also said the recession could be a "springboard for better times ahead". "I believe we are capable of leap-frogging the other countries we compete with economically so that New Zealanders are much better off on a relative basis."

Labour finance spokesman David Cunliffe said the 2009 Budget "must be a jobs budget not a banker's budget".