KEY POINTS:
The Prime Minister's attempt to blame the Treasury for the fact that we have not had personal income tax cuts already is hard to swallow.
"I'd have liked to have done it earlier," Helen Clark said on TV One's Agenda programme, "and I think all our Cabinet and
caucus would have, but we have never had advice that made it possible."
But now the Treasury has conceded the model it has been using to forecast revenue has been getting it wrong and the surplus is structural and not a one-off, she said.
The image that comes to mind is of a beer poured too fast. It needs to settle before you know how much of it was cyclical froth, only good for a white moustache, and how much was structural and can be drunk.
Helen Clark and her colleagues are entitled to be annoyed that the Treasury has consistently underestimated Government revenues and surpluses. Over the last three fiscal years they have underestimated operating surpluses by an average of $2.2 billion a year.
And the cash surpluses - which is what is left of the operating surplus after funding capital items like contributions to the Cullen fund, student loans and spending on roads, school buildings and so on - have been higher than forecast by more than $3 billion a year.
That is because nominal gross domestic product - real growth plus inflation, a rough proxy for the tax base - has grown more than expected.
Because real growth has been relatively subdued over the past couple of years - it has been the trough rather than the peak of the cycle - that increase in the tax base should be durable.
The effect of inflation is more problematic since it pushes up the Government's costs as well as everybody else's. However, none of that means that the Treasury was advising against tax cuts, but isn't now. We are not privy to its advice since then but its briefing to the incoming Government in 2005, a public document, argued that after 10 years of fiscal frugality the Crown accounts, in particular its debt, were in such good shape that there was now scope to focus on the growth benefits from a lower tax burden.
Helen Clark is right to recall that this advice also included "redirecting", that is cutting, some of the provision for future spending initiatives. It was the Government's choice not to do that.
Finance Minister Michael Cullen dismissed the 2005 advice as an "ideological burp". Did that dose of ministerial antacid deter the Treasury from subsequently repeating it? Let's hope not. In any case it has been the Government's call, not its advisers', to put a higher priority on not allowing its debt to rise than to tax cuts.
Dr Cullen has laid out four conditions for tax cuts.
The Government will not cut services to deliver them. It will not borrow to fund them. It will not cut taxes in a way that makes inflationary pressures worse, or leads to greater inequalities in our society.
Helen Clark's promise that there will be tax cuts presumably means she is confident those conditions can and will be met.
And "if Treasury says it's okay" was not one of them.
