A re-elected National Government will return to surplus this financial year and stay there so we can reduce debt, reduce ACC levies on households and businesses and start modestly reducing income taxes, Finance Spokesman Bill English says.
“National’s clear economic plan is working for New Zealand by successfully supporting higher wages and more jobs, and ensuring government spending is invested wisely to deliver better results,” he said when issuing National’s Finance Policy today.
“National is working hard to ensure the economy grows sustainably into the future, supported by more savings, productive investment and exports. This will provide opportunities for Kiwi families to get ahead here in New Zealand.”
As set out in the Budget, a National-led Government will restrict average Budget allowances for discretionary new spending and revenue measures to $1.5 billion a year over the next three years. Within this allowance National will:
• Allow around $1 billion a year for new spending, including between $600 million and $700 million a year more for health and education. This total new spending is consistent with the level of new spending in our last two Budgets and it’s well below the $2 billion to $3 billion spending increases under the last Labour government, which had little to show for them.
• Reserve the remaining $500 million per Budget for modest tax reductions and further debt repayment, as economic and fiscal conditions permit. This portion of the allowance will be moved between Budgets and accumulated as necessary. Therefore, by the third year there will be around $1.5 billion available for tax cuts and debt repayment.
“It means that over the next four years, National will spend around $10 billion more in total, and most of that on health and education,” Mr English says.
“This is well below the $18 billion in extra spending Labour has already earmarked for the next four years, and that’s not counting the Greens and Dotcom.”
National’s five fiscal priorities for the next three years are:
1. Return to surplus this year and maintain surpluses over subsequent years. These growing surpluses will enable us to meet the Government’s capital requirements and reduce debt.
2. Reduce net government debt to 20 per cent of GDP by 2020, including starting to repay net debt in dollar terms in 2017/18. Reducing government debt puts New Zealand in a better position to cope with the next economic shock or natural disaster.
3. Further reduce ACC levies on households and businesses, starting on 1 April 2016. A National Government will cut levies on all ACC accounts by an average of around 30 per cent. Subject to public consultation, this will reduce levies by between $700 million and $900 million a year – the equivalent of a tax cut for households and businesses.
4. Begin to reduce income taxes from 1 April 2017, providing economic and fiscal conditions allow, and if the first three priorities have been achieved. Any tax reductions will be modest, given the fiscal headroom available, and they will focus on low and middle income earners.
“We will consider the details of a possible tax package closer to the time,” Mr English says. “As the Prime Minister and I have said, we won’t be setting out a specific tax package before this election.”
5. Use any further fiscal headroom – including from positive revenue surprises – to get net debt to 20 per cent of GDP sooner than 2020.
“Once debt gets to 20 per cent of GDP, we will begin to resume contributions to the New Zealand Superannuation Fund,” Mr English says.
“In addition, we will help to keep interest rates lower for longer for New Zealand families by reducing core Crown spending to below 30 per cent of GDP by 2017/18 from 34.4 per cent in 2008/09 under the previous government. And our focus will remain relentlessly on targeting that spending where it delivers better results for New Zealanders.”
National will continue to improve management of the Government’s capital investment programme, which totals around $24 billion over the next four years.
“That includes using the remaining $1.7 billion of proceeds from the Government share offers to reinvest in new public assets like schools, hospitals and regional roads – without having to borrow this money.”
Mr English says New Zealanders have a stark choice this election.
“They can continue to support National and its clear economic plan that is working for New Zealand. It’s delivering a strong economy, it’s getting us back to surplus and it’s getting on top of debt. Under National, we will achieve sustained growth that delivers solid increases in household incomes and new jobs through the next term.
“Or they can put all that at risk by changing course to who knows what direction.
“Under Labour, the Greens and Dotcom, the economy would stall. They would introduce five new and unnecessary taxes and create a surge of wasteful government spending.
“And they would undermine the confidence necessary for businesses to invest now so we get stronger growth later.” . .
National has been criticised from the right for not offering bigger tax cuts and the left for offering the cuts at all.
The amount isn’t big but the contrast the plan provides with Labour and its potential coalition partners is significant.
National will allow low and middle income earners to keep a little more of their own money.
Labour and its partners would leave them with a lot less because of the five new taxes they’d impose on top of higher KiwiSaver contributions.
On top of that we’d be faced with higher interest rates, higher inflation and lower growth.
National’s plan is working.
It’s cushioned the most vulnerable from the worst effects of the recession and got the country back on track to surpluses and growth.
The policies Labour and its mis-matched mates would impose on the country would undo the good work and take us backwards again.