Ghoulish smoke and mirrors: Reaction to National's fiscal plan

The National Party's fiscal plan is ghoulish smoke and mirrors that will put more children into poverty, if you listen to Labour and the Green Party.

Even ACT is critical - although for different reasons - and it says the plan does not go far enough.

On Friday, National released its plan, saying it will lower taxes, reduce net debt and bring discipline to government spending. It brings together a lot of the commitments the party has made throughout the campaign and during 2023.

It would aim to return to surplus in 2026 - the same as Labour has promised. National also committed to spending less - about $3 billion over four years - and borrowing less over the forecast period as well.

The flipside is savings and revenue raises that need to be made up for those commitments.

National would ask public service executives to find about 6.5 percent worth of departmental budgets. It would also deliver a "mini Budget" before Christmas if elected.

National's finance spokesperson Nicola Willis said national would return to indexing main benefits to inflation, saving the government about $2b over four years.

And there was an allocation for an increase in the prison population - about $718m over four years to account for increased prisoners expected under tougher sentencing.

It says its plan has been reviewed by consultants Castalia.

'Smoke and mirrors'

Labour leader Chris Hipkins targeted the $2b in reduced spending on benefits.

"In the middle of a cost of living crisis they are prioritising cutting benefits and giving tax breaks to property speculators and landlords. I think that says everything about their priorities. This will result in more children in poverty.

"The National Party's plans announced today - first of all - they don't add up, but one thing that does add up is that they are going to have more children living in poverty.

"Contrary to what the National Party think, it's not easy to live on the benefit. People on the benefit are generally living a pretty hand-to-mouth existence. Cutting their benefits in order to pay for tax cuts is actually going to force more children into poverty and it's going to make life harder for those people."

Hipkins said "They want to sell New Zealand homes to overseas investors. They want to put thousands of people out of work - but they won't say who's going to lose their jobs or when. They want to continue to run down our public services like the last time they were in government by not investing fully in them."

The numbers today did not add up and neither did any of their other numbers, Hipkins said.

Labour finance spokesperson Grant Robertson took a similar line to his leader.

National's fiscal plan "relies on more cuts to public services, cuts to the incomes of some of our poorest New Zealanders, and more emissions", he said.

He said National failed to see the gaps in its tax policy.

"In fact it makes matters much worse by doubling down on that and including $537 million from their tax plan that does not add up to prop up their fiscal plan.

"That is a $537 million hole at the very beginning."

Robertson said cutting the incomes of the poorest families in New Zealand to fund tax cuts for millionaires "is a shameful depiction of the priorities of Christopher Luxon and Nicola Willis".

With National reversing it to index benefits to inflation, it was "one of the worst things that could happen in terms of child poverty".

Robertson called National's $9.9b budget buffer "a fiction" and said it was nothing but moving money around that was set aside for cost pressures.

"If we were to put Labour's fiscal plans on the same terms that National have done, in terms of their so-called buffer, we in fact have a larger buffer of $10.5b"

He said National's no further funding for climate action was a "recipe for increased emissions".

"By removing the funding in the Climate Emergency Response Fund, National are abrogating their responsibility to work on the reduction of emissions."

Robertson also called National's plan for social housing "appalling".

Labour would find more holes in National's fiscal plan, which was a "complete failure", he said.

National said it wanted to see a 6.5 percent reduction in departmental spending at government agencies.

Robertson said: "If you take the example of the Department of Conservation, you can get rid of all the comms staff, all of the extra policy staff and you still wouldn't meet where Nicola Willis wants to take the cuts there.

"The whole thing is built on smoke and mirrors."

Willis took to Facebook to respond to Robertson's comments, saying she was "appalled, but not surprised" to see him "peddling more nonsense".

"National has presented a careful fiscal plan that will restore discipline to government spending, lower taxed and generate less debt ... National will stop the wasteful spending while delivering tax relief and increasing investment into health and education every year.

"Our plan is prudent and careful - it includes $9.9b of unallocated spending buffers to allow for the unexpected."

'Ghoulish'

Green Party co-leader James Shaw said the plan was "ghoulish".

"It essentially takes money away from the most vulnerable people in our society to give it to some of the people who are the most well off."

Shaw said National's type of austerity budgeting had been seen before, and "it's one of the reasons why we have a multi-decade infrastructure deficit. It's why we don't have enough houses and it's why we have such a wide gap between the wealthiest and the poorest people in our society.

"I'm afraid this plan is just going to take these challenges and make them worse."

"The National Party's plan is to reverse a change that was made in 2019 to index income to whichever is the highest - either the CPI or the average wage increase - what that does is it means people who are earning money will earn a tax cut funded by cuts to benefits.

"It means that people who are out of work, who are struggling, who are our most vulnerable people in our society will receive less support than they otherwise would, and that is a direct transfer to people who are middle and high income earners - who will benefit most from Nationals' plan.

"At the moment, wages are rising faster than inflation, so if income support is tagged to inflation, which is rising at a lower rate than wages, it means the gap between people who are earning an income and people who need that support will continue to increase.

"That gap is one of the reasons that over the course of the last several decades, we have ended up with this multi-generational poverty we have got."

Shaw said it was a "bleak vision of the future where they are defunding action on climate change, where they are defunding support for the most vulnerable people in our society, in order to fund prisons and support for property speculators".

"To me, that is ghoulish."

The Child Poverty Action Group said National's fiscal plan showed the party had no intention to help those living in the greatest poverty.

Child Poverty Action Group convenor Alan Johnson said people across communities were being swept into poverty by systems that make the rich richer and the poor poorer.

All political parties should be creating policies that ensure children have access to education, housing and food, he said.

The ACT Party said its potential future coalition partner's fiscal plan would not do enough to change New Zealand's direction.

Leader David Seymour said his party's plan would find three times more savings than National's, and reduce Net Core Crown Debt by twice as much.

In a statement, Seymour said National's plan amounted to kicking out Labour and keeping its direction.

"National's plan contains a central contradiction; criticism of Labour's spending beside a commitment to continue it.

"In any future ACT-National coalition, it will be ACT fighting hard for a change in direction. To cut wasteful spending and pay down debt faster than National proposes. The alternative is that the management changes, but the policies stay the same.

"National's plan effectively promises to reduce income taxes by collecting more from commercial landlords, foreign home buyers, and online gamblers. If these novel revenue sources don't come through, it will be difficult to sustain tax cuts and balance a budget."

National's five fiscal principles:

• 1. Return to surplus and reduce debt - National will achieve a surplus in 2026/27, reduce government debt (down $3.4b compared with PREFU forecasts) and provide buffers in future spending allowances.
• 2. Support frontline services - National will support frontline services, and prioritise increases in funding for health and education to account for inflation.
• 3. Invest in infrastructure - National will invest in infrastructure to boost productivity and contribute to New Zealand's economic recovery, including making a $3.7b contribution to the National Land Transport Fund.
• 4. Restore discipline to government spending - National will reduce spending on bureaucracy, better manage social welfare expenditure, and end funding for failed programmes like Auckland Light Rail.
• 5. Deliver tax relief for hard-working Kiwis - National will provide tax relief up to $250 a fortnight for an average-income family with young children in childcare.