The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
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Peter Costello

Treasurer

11 March 1996 - 3 December 2007

Transcript of 14/05/2003

TRANSCRIPT
THE HON PETER COSTELLO MP
Treasurer

Address to the National Press Club

Wednesday, 14 May 2003
1.00 pm

 

SUBJECTS: Budget

PRESENTER:

Ladies and gentlemen, welcome to today's National Press Club Telstra Address. As time is short today, the Treasurer does have to return to Parliament around 1.45pm for Question Time. As time is short and obviously our guest requires no real introduction other than to say this is the eighth consecutive time that he's appeared obviously here, for the Post Budget Address.

Let's please welcome today our guest, Peter Costello.

TREASURER:

Thank you very much Laurie. And thank you to my friends in the press for coming out again for another post Budget luncheon and to all of our guests here. It's become a little of a ritual hasn't it - the Budget on the Tuesday night, the address down here on the Wednesday and the selling of the Budget through the week and the week thereafter.

But I want to take you back if I can to when we started working on this Budget. We begin working on a Budget in about November, some six months before a particular Budget is brought down and we convened our Senior Ministers in November of last year to determine what the shape of this year's Budget would look like.

Let me take you back to that time. It looked like there would be military action in Iraq but Australia had not made a commitment. We were suffering a very, very severe drought and it was clear that Australia would be well down in relation to farm production. It was clear that there would be big drought assistance measures that were required. We were looking at a very uncertain world outlook with the United State economy weak, Japan weak, Europe weakening particularly Germany, the United Kingdom subdued. And so we were looking at the way in which we face up to the recurrent requirements of the particular Budget round and also advance our structural reform.

We have got something of a tradition now of putting down a big structural reform statement as part of each of our Budgets. Last year the Intergenerational Report allowed us to put down a structural statement about what we have to do in this country if we are going to get health and pharmaceuticals on a sustainable basis over the next forty years and how we are going to respond to the pressures which the ageing of the population is giving us.

This time we determined that it was higher education reform that ought to be the statement which formed the structural reform programme for the forthcoming year and come through the Budget.

And so, as we looked at all of those things we undoubtedly had great pressures that were coming in, in relation to the 2003-2004 Budget. Of course the biggest of these was defence spending. The Budget papers will show that the defence spending increase since 2000-2001 consists of a number of components and you can see that in the way in which this layered diagram sets up the build-up we have had in defence funding since 2001. The blue represents the forward estimates which would have been the case without any changes. They were growing over the course of the forward estimates and would have had defence spending at around about $12 or so billion by 2003-2004. In 2000-2001 you can see from the green we made a commitment to East Timor. In the early years of that commitment it cost about a billion dollars additional per annum. It is now beginning to phase down and it is costing us about half a billion per annum. It will be ongoing even after Australian troops, or even if Australian troops were to completely leave East Timor because, as you can see from the yellow continuation, we raised an additional battalion in order to maintain that commitment, to rotate through East Timor so that we could have adequate defence preparedness in relation to that commitment.

In 2001-2002 we embarked on the biggest build-up in Defence White Paper expenditure, which you can see in the grey, an increase of $27 billion over a decade determined to modernise Australia's equipment and to build technological changes and to take advantage of the replacement of numbers of platforms over the course of that ten years.

And then as you can see in relation to this Budget with the red funding on top of that, we announced new measures principally in relation to combat readiness, the tempo of the defence force, special operations and additional commando companies.

Defence spending will increase to $15 billion in 2003-2004 and grow across the forward estimates. Defence was our first priority when it came to expenditure in this Budget.

Our structural reform package in relation to higher education has really three components. But in the debate that we have had over the last 24 hours some people have overlooked that one of those components is increased Commonwealth funding in relation to the higher education sector. In fact, a 7½ per cent increase over three years. That is the blue. The forward estimates were growing anyway. That is the red. The blue is the step up in Commonwealth contribution to higher education, 7½ per cent over the next three years and continuing.

And in return for that step up of Commonwealth funding in the higher education sector, we are asking for changes, yes, we are. Changes in governance in relation to University Councils, workplace relations, to make universities more flexible, to make sure that universities, like other institutions including the public service, deliver best value for money. So in return for additional funding we want to make sure the institutions are flexible and operating on a very sustainable basis.

The second element of the higher education reforms that we announced last night is flexibility in relation to course fees. A flexibility for the HECS funded places where universities can vary those charges down or vary them up to a maximum of 30 per cent.

Let me make it clear that the Commonwealth will continue to fund the full HECS fee as varied and has lifted the income threshold from which the repayments take place so that a student by 2005 makes no repayments unless their income goes above $30,000. That's the second area. We hope that universities where they have high demand will be able to reflect that. We hope they will be able to reflect it where they have low demand. We hope that there will be competition between universities to get more incentive and competitiveness and flexibility into the system.

The third area of our higher education reforms is in relation to the loans programme H-E-L-P HELP. The HECS funding will continue as I said earlier but there will be new higher education loans programmes available at a 3½ per cent real interest rate for fee paying students, and there will be an overseas or OS or OS-HELP for those students that want to study overseas. These are programmes not available at the moment. They are not available at the moment. They are a new option which is being introduced for those students that want to take advantage of them.

Higher education is a structural reform, a big structural reform, an overdue structural reform. And the Government's reform agenda moves on in relation to education.

The other area where we were increasing spending as we came up to this Budget was in the health area. You can see from, again, the layers that we laid down here, the increase in all areas, in all areas of the health system. The red area, the Medicare Benefits Scheme, the yellow area the Pharmaceutical Benefits Scheme, the fastest growing area of Commonwealth expenditure being driven by of course the ageing of the population, but also by scientific advance as new pharmaceuticals become available to Australians through the subsidised system. The Health Care Agreements which as I said last night are being increased by $10 billion over the last five years, Health Agreement. And the other principally private health insurance initiatives and programme funding also growing.

You can see from the course of 1996 to 2006, that health spending moves from nearly $20 billion to $40 billion, a very significant build-up in health spending. As I said last night in the Budget Speech, a 65 per cent increase from the next Budget year back to 1995-1996, a 65 per cent increase. Now some of the drivers that are operating in this area are of course are the ageing of the population.

But health is increasing not just because of the ageing of the population but the scientific driver. Two drivers in relation to health care expenditures. Even driving faster in the pharmaceutical areas but of course a big area of government expense and one that we have able in this budget to meet. How are we able to meet some of these expenditures, well the biggest change that has occurred in relation to expenditures during the course of my time as Treasurer, is our reduction in public debt interest. The pay off from retiring debt is that our interest payments have fallen. When I first became Treasurer, we had to fund nearly $9 billion just to pay our interest bills.

That's now fallen by about $5 or $6 billion. It's $5 or $6 billion we save year after year because we have got our debt down. It has given us the opportunity to redirect funding to other areas so, as our public debt interest payments have fallen, our ability to provide for hospitals and schools and families and children has grown. This grab illustrates the pay off from good economic policy. Retiring debt gives you a recurrent saving. Now it's tough to retire debt, you have got to get a surplus and beyond to retire debt. But the pay off of our work in relation to debt is a saving which has now given us opportunity to redirect to other things. I have said before, and I say again, the blue line represents payments for the past, the green line represents investment in the future. And the smaller the blue and the larger the green the more pro-future your policies have become. And that's an indicative change that we have seen over the last five years of course as we cope with the ageing of the population, the ability to shrink that blue and to finance our programs becomes even more important.

Let me go then just as briefly as I can to how Australia stands in budget terms compared with some of the other economies of the world. You'll see from the very right part of this grab, that we are forecasting a surplus in 2003-04. A surplus of $2.2 billion. You'll see that we expect an outcome in the current financial year of 2002-03 of a surplus of around $3.9 billion. What I'd call moderate surpluses, but surpluses. How do we compare? Well the European Union on average, will have budget deficits of 2 per cent of GDP. In Australian terms, it would be a deficit of about $14 of $15 billion. The OECD, a little over 3 per cent of GDP. The United States budget deficit in 2003 and 2004 is predicted to be 4 per cent of GDP. For Australia that would have meant a budget last night with a $30 billion deficit. 4 per cent of GDP of the United States, 4 per cent of GDP Australia, that would have meant a budget last night of $30 billion. Just to put the US financial position in an Australian perspective. And Japan, which continues to have structural difficulty. What that shows is that Australia is in a stronger position than the countries that we like to compare ourselves with in Europe, the OECD, and even in the United States.

We can see that also in our debt position. You have seen me with this table before. This is not absolute debt, this is debt as a percentage of your economy. What we call a debt to GDP ratio. You'll see that from 1990 on when we were running deep deficits, our debt to GDP ratio climbed to nearly 20 per cent. You'll see that it's now below 5 per cent, in fact it is below 4 per cent, on a forecast for 2003-04. We have got our debts back in shape in private company speak it would be called a robust balance sheet. We have got our balance sheet robust. So, we are in a strong financial position. We are running a surplus, and we have got a robust balance sheet as a Commonwealth and it's put us in quite a strong position compared to other countries. Here's our debt to GDP ratio's falling, as you can see, whilst most of the other countries that we compare ourselves, although making progress in the late `90s now have rising debt to GDP ratios.

And can I make this point, at the end of a financial year, if you run a surplus, you've got to do something with that surplus. It's like a profit and loss in a balance sheet. If you run a profit, you post your profit to your balance sheet. If you run a loss, you take it off your balance sheet. If you run a surplus, you reduce your debt. If you run a deficit, you run up your debt. People say, what happens if you spend a surplus? If you spend a surplus, you don't have a surplus. It's spent. People often say to me, well why don't you build up a surplus for spending? By definition, when it's spent, it's not a surplus. All you can do with a surplus is retire debt. Now the truth of the matter is - or build an asset, you build an asset against the debt, so you retire net debt. You can retire gross debt or retire net debt, but you've got to retire debt. If we in this financial year had run a surplus, let us say, of $4.6 billion, then instead of paying off $2.2 billion worth of debt, we'd back pay $4.6 billion. Instead of our debt to GDP ratio being say 3.7 per cent, it might be 3.6 per cent. But there's nothing else you can do with it. Once you spend it, it's no longer a surplus.

We took the decision in this Budget that if our balance sheet was strong, as it has become over the last six or seven Budgets, if our Budget was in surplus as it was, unlike the United States and the European Union, if we had met our funding commitments as we had in relation to defence and terror and the drought, then in those circumstances it would be responsible to return to the taxpayer. Something different was what we had in mind in relation to last night's Budget. This was not your traditional pre-election tax cut. Plainly. If it had been a pre-election tax cut, the media would have been right saying there were going to be no tax cuts on Tuesday night. They would have come in 12 months time. No, what this was, was because we had strengthened the balance sheet, because we could meet our commitments and because we could maintain a surplus, it was an opportunity to make a return.

Now you can argue about whether the tax cuts are generous enough or whether they are too generous. But how do we fix in relation to those levels, we fixed in relation to those levels as a return to the taxpayer, and that's what I say, responsible, responsible return to the taxpayer. A $2.4 billion return to the taxpayer consistent with keeping our Budget in surplus. The return is higher for those that are in the lower income brackets because they pay less tax. It is less, in percentage terms, for those who are in the higher income tax brackets because they pay more tax. The red line will show you in percentage terms the return. And I make this point, there are some countries around the world that are reducing taxes, but they're not doing it on balanced budgets - the United States is one. There are some countries around the world that are increasing taxes - the UK is one, whilst the running deficit budgets. But there aren't many countries around the world that are running budgets which are in surplus and reducing taxes - Australia is one. Australia is one and there wouldn't be too many others. Even in Australia, can I put to you, there aren't many governments that are reducing taxes. I know of, well, six States and two Territories that are taking different views, but this is a return.

Now I'll just finish with one last point, because I think when you're looking at the policy which the Government brought down last night, it's also important to look at alternatives that are being put forward in relation to it. And Mr Crean, at some points last night seemed to be saying the tax cuts were not great enough, presumably he's in favour of larger tax cuts. At other points he was saying that spending was not great enough, which presumably means that he thinks spending should be increased. But let me make one very clear and very plain point to him, he can't be in favour of both. He cannot be in favour of bigger tax cuts and bigger spending. He can be in favour of bigger tax cuts and less spending, or no tax cuts and bigger spending, but he can't be in favour of both. I don't know if this has occurred to him or not. He has two trucks out there. One complaining about tax being too high and the other complaining that spending is too low. His trucks had a head-on collision last night. They ran into each other and they are both destroyed.

Here's how he put his argument on 3AW this morning when asked, would he be giving back what he said was $3.7 billion too much tax that the Government was taking, he said this `Clearly it gives us scope to give more of it back, and I've said that, I said that 12 months ago, I said it in the lead-up to this Budget. Bracket creep should be returned to the families in the form of tax cuts or the provision of services'. Returned as a tax cut or returned as more expenditure. Can I make one point, if it's an expenditure, it can't be returned. More services means keeping the tax and spending it. That's what it means. It means keeping tax and spending it. I don't know that the point has dawned on him yet, but you return to taxpayers, you have less capacity for increasing expenditures. If you increase expenditures, you have less capacity for returning to taxpayers. And if a difference does open up between the Government and the Opposition on this point, then so be it. We think this Budget properly invests in defence and security and health and education. We want to make sure that we keep a Budget in surplus whilst we properly fund those areas consistent with taxes being as low as they can be. That's the way in which we approached the Budget that we laid down last night. We are seeing the benefits of some of the hard yards of the last six and seven years. Our country is doing as well, if not better, than nearly all of the other countries of the developed world. Good economic policy will make Australia strong and secure our opportunities in a difficult international environment and this Budget is all about bringing that about. Thank you very much.

PRESENTER:

Thank you Treasurer. Time now for questions we have a long list of questions and only around 20 minutes for those questions so I would ask our media members to keep their questions short and restrict themselves to just one question please.

JOURNALIST:

Treasurer, Veronica Brooks from Dow Jones. Last night you made a fleeting reference to the Government possibly establishing an asset position if you can sell the rest of Telstra. Could you explain how that might be structured and managed and secondly how you might fire wall that from any future Government tampering with that asset position.

TREASURER:

Sure, if I can get my net debt graph back up on the screen. As we reduced debt you can see from the high point in 1995 and 1996. We have had less Commonwealth bonds on issue and so much so that the financial markets have wondered about whether this market would remain liquid enough to be worth an investment.

We have tried to maintain it's liquidity at around $50 billion. Not because we need $50 billion, but because the market says $50 billion is about the level of liquidity. We said that as part of this budget we would look at the question as to whether or not with the further surpluses and further assets sales we would redeem all of those bonds and put Australia in a debt free position, or whether or not we would keep those bonds out there and build a corresponding asset position against it. So that net debt would fall but not gross debt. That is the critical point there.

We have come to the conclusion that we will keep the bond market liquid with securities on issue of about $50 billion because we think it does add to the financial markets and the alternative would be slightly higher interest rates. And that is a decision which we announced on Tuesday.

In the future if surpluses or asset sales were sufficiently large that we had to develop a substantive asset position against a liability, say superannuation. We have said that we would closely consult. The normal way in which you would do it, of course, is you would put it into equities. I have two concerns about that. One is as you said if it were put into equities future Governments would be able to spend it very easily and you have got to work on the theory that there may be a Labor Government one day, so you would have to try and lock it away in a way that could not be got at, and I think that is very hard. The second thing is, of course, if you do go into equities you can lose money as well as make it. This has always been very much on my mind how, you know, taxpayers might well say that you put this money into equities and if you have got a negative return in the last two years they might get very angry.

Now you explain, no doubt, that this was a long-term policy but you would have to think about that very carefully as well. But I do not think we are yet at the position where we have to decide that yet and that is why I said if we were to get to that position we would consult widely on those mechanisms.

JOURNALIST:

Fergus Maguire from Bloomberg. On the tax cuts you announced last night returning some of the surplus to taxpayers rather than repaying debt. Are we likely to see, does this represent the change in policy and are we likely to see continuation of those tax cuts when a surplus allows?

TREASURER:

Well, it represents a change of policy to this extent. I feel that our debt to GDP ratio is, as you can see, pretty strong. It is pretty strong by international standards and it is now reaping benefits for us in terms of intrest rate savings. And, in addition to that we have now made the decision that we are going to keep securities on issue. So, it does represent now I think the opportunity to sit back and say well we have now got that debt problem which blew up in the early nineties under control. We are in a comparatively stronger position after we have funded our legitimate expenses we can return to the taxpayers and to that extent I think it is a little different to the position where we were in the late nineties where we were doing everything we could to retire that debt. I feel that debt is now in a strong position as you can see from the graphs that I have put up here. Certainly recognised internationally. I make this point, since I became Treasurer in 1996 we have had two foreign currency upgrades, foreign currency bonds upgrades. We were downgraded twice in the 1980's, we have managed to get both of those back. We reversed the damage of the 1980's, we now have triple A rating on our foreign currency bonds. With a position like this I think we can maintain that. So, we are in a different situation, we are much stronger, we have a much better credit rating as a consequence of what we have done and I think we can start thinking about that return to the taxpayer and that is why we did it on Tuesday night.

PRESENTER:

Belinda Goldsmith from Reuters.

JOURNALIST:

Belinda Goldsmith from Reuters. The Budget boosts funding for the ACCC, but the question of who is going to replace Allan Fels when he leaves in a few weeks is still unresolved. Is there any sign of a break in the deadlock with the States on his replacement and on another high level appointment, have you made any decision whether Ian MacFarlane will be re-appointed RBA Governor when his term expires in September?

TREASURER:

Well, the situation in relation to the ACCC, as you know, is there are eight voters and I am not one of them, nor is the Commonwealth. We just fund the institution. We just fund every last dollar of the institution, but we don't, and we are answerable in the Parliament for the Commission. The only thing we don't have a say in is who runs it. There are eight votes under a voting formula that was put in place by Mr Keating in 1995, for which I thank him very much. The voting is four for one candidate, one for another, and one for another with one that won't vote and one that can't decide which way to vote. But, my reckoning that means that one candidate is well in front of others. If there is a vacancy the Treasurer can appoint an acting appointment and I guess that if the impasse is not resolved that is what we will do. We will make an acting appointment. In relation to the Governor of the Bank, as you know, we appointed him in 1996 to a seven year term. His term is coming to an end this year. I think he has been an outstanding Bank Governor and I think that when we look back on the last seven years they will be perceived as years of very good economic management. Need I say any more?

PRESENTER:

Laura Tingle.

JOURNALIST:

Laura Tingle from the Financial Review Treasurer. Just taking a leaf from you and going back in history a little bit - eleven days. On Meet the Press at that time Treasurer, you were asked when wage and salary earners would receive the next income tax cut and most people would have been forgiven for thinking that you weren't going to give them one, but we'll just put that aside. You say in your answer at that stage that...

TREASURER:

Could you give the name of the questioner please Laura?

JOURNALIST:

Yes, Ian Henderson, actually...

TREASURER:

Right...

JOURNALIST:

...it's nothing personal. You say we obviously want to deliver the lowest taxes we can to the public consistent with good economic policy which keeps interest rates low and the Budget in balance. Now, presuming these tax cuts aren't going to put upward pressure on interest rates, I am just wondering whether there is any element in them which is looking at providing some underpinning for a possibly softer economic outcome than you are forecasting?

TREASURER:

Well, the quote was as you read it, we want to provide low as tax as possible consistent with keeping interest rates low and the Budget in balance and that is what I think we did last night. That is precisely what I think we did. Will there be, I think your question is, do I think that these income tax cuts will be stimulatory...

JOURNALIST:

(inaudible)...

TREASURER:

...well, put it this way, they are more likely to be stimulatory than contractionary. If they have an effect they will be stimulatory. What will be the level of stimulation? Well, $2 ½ billion in a $700 billion plus economy, so, it is not 1 per cent, is it? It is something less than that. So, you would expect that they would be mildly stimulatory. I wouldn't overstate the case but they are more likely to have that effect than the reverse. Would that be a good thing? Well, our growth forecast is three and a quarter per cent. That is less than we have had in the late `90's when we got used to 4 per cent growths on low inflation, so that would be a good thing, actually. I think the situation is that the world economy is weak, I think the Australian economy is suffering to some extent from the down-turn in the United States, and Europe and Japan, and I think this will be consistent with good macro management.

PRESENTER:

Lincoln Wright.

JOURNALIST:

Treasurer, I would like to ask about the cost of the war in Iraq. The Opposition claims there is a black hole in the Budget because you haven't fully costed the existing deployment there and I was wondering whether or not, what your opinion on that is. Will it cost more than $645 million over 3 years or will it cost $1.3 billion which I think the Opposition is saying?

TREASURER:

Well, you seriously expect that I will agree with the Opposition? This is the additional cost? We, regardless of whether we have a commitment in Iraq we pay the soldiers and the sailors wages. We own the Hornets, and the Hercules, and the PC3 Orions, and the frigates. We have the normal, what you would call I guess, fixed cost in relation to the defence forces. The marginal cost or the additional cost comes from tax free allowances in theatres of war, deployment allowances, deployment costs, costs of ordinance - which is, ordinance - which is used, and those things. That is costs over and above the costs that you would otherwise have, and will fund anyway. Now in relation to that the cost will be $645 million, that is the cost.

JOURNALIST:

But your own Budget papers say that you don't know the final cost?

TREASURER:

Well, the cost will be $645 million on the assumptions as to when the troops are brought home. And since we are in the business of bringing the troops home we know that pretty squarely, pretty squarely. That is happening as we speak, in fact I think the Hornets are going to arrive at Tindal airbase tomorrow. And the return of the special forces will be pretty imminent after that. So, the time we were putting the Budget papers together it may not have been quite clear what the precise day is but by now it is pretty clear what it is, and that is the additional cost.

PRESENTER:

James Grubel.

JOURNALIST:

James Grubel from AAP, Mr Costello. Given that a couple of measures from last year's Budget still remain locked in the Senate, blocked in the Senate, how are you going to get some of the changes through in this budget through the Senate, particularly the Medicare and the higher education. Will you be seeking talks or have you sought talks already with the Democrats or will you be looking at trying to get meetings with Meg Lees and the other independents and try and circumvent the Democrats and the Labor Party?

TREASURER:

Well, you are quite right that some of the big structural reforms which we laid down in last year's Budget have still not been enacted. And I am glad you referred to that because one of the problems that we run into in relation to economic management is that long-term structural reform which is in the interests of Australia and would be in the interests of both parties, if they were, either of them were in Government, are being blocked in the Senate. We all know the Pharmaceutical Benefits Scheme has to be re-based, we know that. In fact you don't even have to go to me as the authority for that. The co-payment in relation to pharmaceutical benefits was introduced by Paul Keating, by Labor. We know that you have to re-base the financials of that scheme if it is to survive. The Labor Party knows that. They know if they were ever to get into Government they would have to do it. So why does it remain blocked in the Senate? It has nothing to do with policy. They know that people have used the disability pension as an alternate to unemployment benefits. They know that. Various Labor Party front benchers used to accuse us of keeping that pension beneficial so that the unemployment rate looked lower than it was. And when we tried to fix it they defeated it. They know that has to be fixed, so why are they voting against it?

Let's come to higher education. Are they going to tell us that they are against HECS? They introduced HECS, John Dawkins introduced HECS. They know that the universities want the opportunity to have flexibility and they need workplace reforms, they know that. So what we actually need in relation to the Labor Party is some leadership. We need somebody who is prepared to stand up and say, "There are times when reform is in the interests of the country, and if I become Prime Minister I would like to have seen this done." That is what we need. And what we get is this opportunism on all of these issues. Now, I would hope that our Budget would go through the Senate on the support of the Opposition. They know this has to be done. And if they, they were thinking to themselves, "Well, you know, we might be in government one day and wouldn't it be good if this was done", that is the attitude that they would be taking. Now, if the Labor Party is not going to take that attitude and it is going to try and vote down all of these structural reform measures, then yes, of course, we will have to try and seek support from more responsible minor parties. Have I spoken to them yet? No I haven't because we haven't even produced the legislation yet let alone got it through the House of Representatives. But, if the worst comes to the worst then of course we will seek to do what ever we can. We have not had a majority in the Senate for a day yet in the last seven years. And all we have accomplished we have accomplished in spite of the Senate. So it has been pretty hard going.

PRESENTER:

Next question and it may have to be our last, is Karen Middleton.

JOURNALIST:

Treasurer, Karen Middleton from The West Australian. On Radio National this morning, Minister Vanstone said that she has resisted giving welfare beneficiaries just an extra five bucks because all they can do with it really is buy a sandwich and a milkshake, and that is not much. Is she right?


TREASURER:

Well, look, Karen, I don't know what she said and I don't know what has motivated her comments. But I think I can see where you're going. I may be wrong about this Karen, but I think I have been around long enough to think you are trying to get an answer from me that you can use to cast doubt on tax cuts. Now, I might be cynical Karen, and forgive me if I am cynical. But can I just say this, my experience in relation to tax cuts, which I think is the nub of your question, is this, would people like large tax cuts or small tax cuts? Well, I think that is pretty obvious. Would they like tax cuts or no tax cuts? I think that is pretty obvious. Would they like tax cuts or tax rises? I think that is pretty obvious. So we can always work and we can always say that we'd like larger tax cuts and I will be along with the majority of the public. The trick is, however, to deliver them after you have met your expenses and balanced your Budget. And if you can do that then I think that is good policy.

Thank you all very much for your time.