There are those who can count . . .

Labour’s tax plans would leave a gaping hole in public finances and add $18.5 billion dollars to net crown debt, Associate Finance Minister Steven Joyce says:

“At a time when an increasing number of large countries are wrestling with severe problems caused by too much debt, Labour’s recipe for New Zealand would be to borrow more each and every year on volatile world financial markets. . . “

Treasury’s models which are used for economic and fiscal projections for Budgets show Labour’s tax increases would raise around $21 billion of extra revenue out to 2024/25  while at the same time they’d forgo about $28.5 billion in revenue.

“That leaves a $7.5 billion revenue hole, on top of another $7.5 billion in extra interest costs Labour would have to pay on their higher debt. In addition, Labour would need to borrow billions more if it doesn’t proceed with the mixed ownership model for SOEs, pushing total net Crown debt $18.5 billion higher by 2024/25.

This would also put pressure on interest rates which would add costs to for households and businesses.

“And that is all on the assumption they could start a capital gains tax in 2013 and raise billions of dollars despite all their complicated exemptions and loopholes.”

The main reason for Labour’s debt and deficit blowouts would be:

-They have underestimated the costs and overestimated the revenue from almost all of their promises.
-They have no basis for adding in $300 million a year from tax avoidance measures – on top of the $800 million a year the Government is already on track to obtain from Budget 2010 measures.
-They have failed to include extra interest costs on their higher borrowing.
-They have not factored in the need to borrow billions of dollars more to maintain the Government’s level of capital investment – in the absence of proceeds from the mixed ownership model for four State-controlled energy companies.

To make matters worse, they have hidden in their numbers an Emissions Trading Scheme based on a $50 per tonne price for carbon across the entire scheme. That would mean Kiwi households would have to fork out four times as much for the ETS as they do currently under the National-led Government’s more balanced scheme.

Labour has made it quite clear they see the ETS as simply another way to raise revenue.

“And, of course, Labour has already admitted it will spend more. It is yet to announce its spending promises, but has railed against every decision this Government has made to contain spending. Any new spending would add even more to Labour’s debt each year,” Mr Joyce says.

Labour criticises every move National makes to rein in spending and has made absoultely no commitment to fiscal restraint should they get hold of the public purse again.

“When you look through all the spin, it’s the same old Phil Goff and Labour: overestimate the revenue, underestimate the costs and borrow the rest.

“In stark contrast, National has a credible plan to balance the books and start repaying debt within three years. We are building on the encouraging economic growth figures released last week with a plan to take New Zealand forwards, not backwards.”

There are those who can count and those who can’t. Then there’s Labour which doesn’t appear to worry about counting at all – and hopes the rest of us either can’t count or aren’t interested.

Their tax and spend policies put New Zealand into recession before the rest of the world and each policy announcement confirms they’ve failed to learn from their own past failures.

The breakdown of the costs of Labour’s package is here.