More tax and bigger budget hole

September 14, 2017

Labour has been frightened into saying it won’t implement any recommendations of its tax working group until after the 2020 election.

But a Labour led government would still add the water,  regional fuel and visitor taxes; reverse the income tax cuts that every party but Labour voted for; and bring farming into the ETS.

And if they don’t introduce new taxes their Budget will have a bigger hole.

A Taxpayers’ Union media release points out:

The Taxpayers’ Union says Labour can’t have it all ways, pointing out that Labour’s manifesto is costed at $23 billion over the next Parliamentary term, second only to New Zealand First.

“Labour have done the right thing in committing to put any capital gains or land tax to the vote,” says Jordan Williams, the group’s Executive Director. “But without new revenue, and having promised new spending of $13,287 per New Zealand household, Labour need to explain what spending they’ll cut in order for Grant Robertson to keep to the Party’s debt targets.”

“Two plus two doesn’t equal five.  Labour can’t credibly promise to hike spending, keep to their debt limits, but also say they won’t hike taxes.  It just doesn’t add up.” . . 

The only way to spend more without taking more in tax is to increase debt.

Labour’s fiscal plan shows it would reduce debt more slowly than National would.

The plan also had a hole, unless you believe a Labour-led government would run zero Budgets.

Ruling out a Land and Capital Gains Tax in the next term is the right thing to do but it will make the hole in Labour’s budget bigger.

 

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Labour’s plan too tight to work

September 6, 2017

The varied opinions on the size of the hole in Labour’s budget remind me of the one-liner if you lay every economist in the world end to end you’d still not reach a conclusion.

However, while there is debate on the size of the hole, there is agreement that Labour’s fiscal plan is too tight to work.

Pattrick Smellie writes:

Labour’s numbers are nothing like as compromised or wrong as Joyce claimed, but it requires some heroic assumptions about Labour’s ability to control all spending outside health and education to believe the numbers it’s published.

In other words, Joyce has claimed a worst case scenario. Robertson is claiming best case.

On that basis, it’s entirely reasonable to split the difference in the interests of trying to explain what’s at stake here, and to conclude that Labour’s forecasts will turn out to be anything between $4b and $6b short of its published fiscal plan, should it form a government after September 23.

If Labour turns out to be a spendthrift government, then Joyce’s alleged $11.7b miscalculation could prove to be too little.

Alternatively, if Labour turns out to be an unexpectedly tight-fisted government in a time of endless forecast Budget surpluses, its spending under-estimation might be far less than my punt of a $4b to $6b shortfall. . .

Looking at Labour’s record, its  policies and the threat of more taxes, could anyone have any confidence that it would be tight-fisted?

It has fought tooth and nail against every single efficiency National has introduced over the last nine years. It can’t be trusted to ntroduce more efficiencies.

Even if the leopard changed its spots it is irresponsible to leave nothing in the kitty for inevitable expensive eventualities.

We’ve had natural and financial disasters in the last few years, only fools would bet on no more in the next few.


Labour’s got $11.7b hole in numbers

September 4, 2017

Labour has a very large hole in its numbers:

The Labour Party has an $11.7 billion hole in its fiscal plan that blows its debt out and breaks its own budget responsibility pledge, National’s Finance spokesperson Steven Joyce says.

“These are significant errors that raise questions about Labour’s whole spending approach and their fiscal competence,” Mr Joyce says. “Their spending numbers were already high and this makes them a lot worse.

“Labour’s recipe would lead to more debt, higher interest rates and a slower economy – not to mention the host of extra and unexplained taxes they would impose on households and businesses.

“All of this would cost jobs and eat into family budgets.”

The five errors are as follows, over four years:

  • Failing to roll out their operating allowances for each year into subsequent years ($9.4 billion).
  • Failing to allow for any increase in paid parental leave in their Family Incomes package despite saying they have included it ($567 million).
  • Counting additional BEPs multinational tax revenue when Treasury has already counted it in the PREFU update ($902 million).
  • Only including costs of their Family Package from 1 July 2018 when they said it would begin on 1 April 2018 ($289 million).
  • Further finance costs associated with extra borrowing ($580 million).

“The biggest error is their failure to continue each year’s operating allowances for additional expenditure into subsequent years. When operating expenditure is added, for example an increase in wages for police, that expenditure continues into following years. Labour’s operating allowances don’t allow for that.

“Once corrected, Labour’s spending plans result in net debt increasing by nearly $20 billion from current levels of $60.6 billion to $79.3 billion over four years.

“Labour was already increasing debt by $7 billion from current levels by their own admission, but this takes it to nearly $20 billion. This would be an irresponsible level of debt increase at this stage of the economic cycle. New Zealand should be reducing debt now, not increasing it, so we are ready for the next rainy day.

“They also would break their fiscal responsibility rules as net debt would not fall below 23.5 per cent of GDP by the end of the forecast period, in fact it would be higher than it is now, and get nowhere near their own plan to reduce debt to 20 per cent of GDP by 2022.

“That level of spending and increased debt can only lead to one thing – higher interest rates for Kiwi mortgage holders.

“Labour’s true spending plans as revealed in this analysis confirms that behind the leadership change we are dealing with the same old irresponsible tax, borrow and spend Labour Party.

“Labour needs to withdraw its fiscal plan and re-work its proposals.”

How can you count on a party to govern when it can’t correctly count the cost of its own policies?


More tax, more spending, more debt

August 29, 2017

Labour’s recipe for government is more tax, more spending and more debt:

. . To help cover the additional spending, Labour would ditch National’s promised tax adjustments, extend the bright line test to tax capital gains on residential housing, aggressively target multinational corporate tax avoidance, and impose a tourist levy, which would cumulatively reap some $9.73 billion over the period. Labour would also take a slower path to cutting debt a proportion of the economy, with net debt peaking at $68.09 billion, or 21.9 percent of gross domestic product, in 2019/20, adding an additional $1.11 billion interest bill to the government over the horizon. . . 

It’s the same old tax and spend:

Labour is once again proving they’re the same old Labour Party with plans for big increases in both government spending and debt over the next four years, National Party Campaign Chair Steven Joyce says.

“In their fiscal plan released this morning, Labour has committed to $13.7 billion in additional spending over the next four years funded by cancelling tax changes for Kiwi families and increasing debt,” Mr Joyce says.

Cancelling the tax cuts would leave people on middle incomes paying more because of bracket creep.

It also shows Labour thinks it’s better to spend more of other people’s money than to leave a little more with them to spend, or save, as they choose.

“This nearly doubles the additional expenditure of $17 billion over four years already allowed for in the pre-election fiscal update. All up Labour is proposing to add more than $30 billion in new operating spending over the next four years. And then there’s additional capital spending as well.

“All this flows through into increased debt. Again by their own numbers, Labour will increase debt by $11 billion over four years compared with the pre-election fiscal update. This is not the stage of the economic cycle to be increasing debt. We should be reducing debt and putting money aside for the next rainy day.

The natural and financial disasters of the last nine years reinforce the importance of lower debt to provide headroom for more when the next one strikes.

“Labour’s tertiary policy announced today alone has an additional $3.4 billion over four years in expenditure in just one announcement.

“And the ink had hardly dried on their fiscal plan when they made another commitment to fund 26 weeks paid parental leave, which isn’t listed anywhere in the document.

“Labour also has some questions to answer about how their numbers add together. For example, their remaining annual operating allowances don’t seem to be cumulative.

“Big increases in expenditure and debt can only flow through into higher interest rates, and that would be bad for Kiwi businesses and homeowners. That’s before you even get in to Labour’s extra taxes.

Higher taxes and  higher interest rates would put pressure on businesses and households.

“We need to keep the country moving in the right direction and Labour’s approach to spending and debt would only slow the country down and put up costs for consumers.”

It’s the same old Labour Party with the same old recipe which will increase the burden of government, undo a lot of the good that’s been done in the last nine years and act as a hand brake on the growth needed to generate the income required for first world services.

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No need for new or higher taxes

August 24, 2017

The PREFU yesterday showed a bigger surplus and slightly softer growth than expected.

A slightly softer growth forecast is the main feature of largely unchanged Pre-election Fiscal Update compared to the Budget forecasts three months ago, Finance Minister Steven Joyce says.

“The softer growth New Zealand has experienced in the six months to March flows through to a lower starting point in the 2017/2018 year,” Mr Joyce says.

“The net effect is that growth is slightly lower through the forecast period – averaging 3.0 per cent over the next four years rather than the 3.1 per cent predicted in the Budget.

“The other notable change is that Treasury expects the labour market to be tighter over the next four years, with lower unemployment and stronger nominal and real wage growth.

“Treasury forecasts unemployment to drop to 4.3 per cent by June 2020 and for the average annual wage to increase from $58,900 at March 2017 to $65,700 by 2021, a $1300 per annum improvement on the Budget forecast.”

This is getting down to where only the unemployable – those who can’t or won’t work –  aren’t in work. If we don’t have enough locals willing and able to work we will need more migrants.

Other changes to the forecasts include:

A smaller balance of payments deficit across the forecast horizon
Lower CPI inflation, especially in the 2017/18 year
Net government debt falling below 20 per cent of GDP in the 2020/21 year. New Zealand Superannuation Fund contributions remain scheduled to resume in that year.
Most other elements of the forecast remain very similar to budget predictions, with nominal GDP, migration levels and budget surpluses largely unchanged, although the timing of budget surpluses has changed.

“The Budget surplus is expected to be $2.1 billion higher in the year just finished,” Mr Joyce says. “However Treasury expects the lower growth forecast to result in surpluses that are $1.8 billion lower over the next four years. The net effect is about even.

“The Government’s strong fiscal management means that New Zealand is one of the few OECD countries to be posting fiscal surpluses. This hard-won position is underpinning the Government’s strong economic plan which is delivering jobs and steady real wage growth for New Zealanders.”

Continuing surpluses mean there is no need for new or higher taxes.

The large infrastructure spend committed to in Budget 2017 means that residual cash remains broadly in balance until the 2019/20 financial year.

There is limited room for any additional expenditure beyond what is already proposed in these forecasts until the 2020 financial year when there is expected to be a $1.7 billion cash surplus. Anything significant in the meantime would involve more borrowing or raising additional tax revenues,” Mr Joyce says.

More borrowing would be irresponsible.

Natural and financial disasters in the last few years show the necessity for reducing debt when possible to provide headroom for more borrowing when it’s needed.

More or higher taxes would also be irresponsible, showing politicians have a higher regard for their own spending then the right or people to keep more of what they earn.

The PREFU forecasts include the following budget spending commitments:

• $7 billion in additional operating expenditure over four years in Budget 2017 which commenced on 1 July 2017.

• $1.7 billion per annum ($6.8 billion over four years) operating allowance to be allocated for Budget 2018, increasing by 2 per cent each subsequent budget.

• $32.5 billion in total capital infrastructure investment between 1 July 2018 and 30 June 2021.

• $6.5 billion over four years ($2 billion per annum in out years) for the Government’s Family Incomes package commencing on 1 April 2018.

“Government annual operating expenditure in these forecasts increases from $77 billion to $90 billion over the next four years, which is sufficient for significant ongoing improvement in the provision of public services,” Mr Joyce says.

Careful management and a focus on the quality of spending rather than the quantity has given National the ability to pay for improved services while offering modest tax cuts.

Labour has been forced to say it won’t increase income tax but it wouldn’t deliver the tax cuts. That ignores the needs of middle income people who have moved into the 30% tax rate by bracket creep, effectively facing a tax increase when they earn a pay rise.

Labour and the other opposition parties are also considering new taxes with no plans to compensate with a decrease in existing taxes.

For three terms National has demonstrated that more spending isn’t the same as better spending, that better results can be achieved by more careful spending and that they understand every dollar a government spends is a dollar someone else has earned.

Everything Labour and other opposition parties say shows they would turn their back on that responsible approach and take New Zealand back to the bad old ways of tax and spend, tax and spend.


One week two taxes

August 10, 2017

It’s just over a week since Jacinda Arden took over as leader of the Labour Party and she’s already announced two new taxes.

The first was a fuel tax :

The Labour Party might have changed its leaders but where it wants to take New Zealand hasn’t changed, National Party Campaign Chair Steven Joyce says.

“By resurrecting a decade-old idea of charging Aucklanders another tax it’s now clear why they had to abandon the “fresh approach” line,” Mr Joyce says.

“Regional Fuel Tax was Labour Party policy back in 2007 and it has been rejected by voters many times since then. It’s about as tired as R&D tax credits.

“Labour would make Aucklanders pay at least another 10 cents a litre every time they fill up their tank and that’s just for starters. That would have a real impact on the cost of living for hard-working Aucklanders.

“And it would probably spread around the country. Last time around, Wellington and Canterbury were lining up for regional taxes too. There is also no national price so fuel companies could easily transfer the cost to motorists around the country.” . .

The second is a water tax.

 A Labour-led government would implement royalties for bottled water, irrigation schemes and other commercial uses, leader Jacinda Ardern told the Environmental Defence Society’s annual conference in her first major policy speech on environmental policy since becoming party leader last Tuesday.

Drinking water, stockwater for farms, and ‘non-consumptive’ uses such as hydroelectricity generation would not face the charges, which would be set following a national conference of affected industries and water users within the first 100 days of the new government, Ardern said. . .

What happens when irrigation water is also used for stock?

Why is water for stock to drink seen as a more virtuous use than water to grow grass for stock to eat?

Farmers are understandably worried:

Pledges from Labour to consult on a “proportionate and fair” royalty for irrigation water have eased the concerns of farmers – but only by a tiny margin.

They remain terrified by the potential impacts on farming families, rural communities and the entire economy.

Federated Farmers water spokesperson Chris Allen said consultation is welcome “but talking won’t allay the fears of farmers of where this could go”.

The Federation remained opposed to any royalty on irrigation water, especially when it remains unclear what purpose it would serve, other than adding another tax.

“At least Labour appears now to be proceeding with caution, recognising the considerable risks. They’ve promised that if they are part of a new government, deciding the levels of any royalty on commercial use of water will be preceded by consultation.”

Mr Allen said the 10 cents a litre figure some had bandied around would bankrupt farmers and cripple our export competitiveness and regional economies. Even one thousandth of that figure, if that’s a level Labour has in mind, would be “eye-watering” given the volume of consumptive water use.

“With any royalty, farmers and growers would have little choice but to pass on the extra cost, if they could, meaning New Zealand consumers would pay more for food, and our products would be at a disadvantage against imports.”

Farmers recognised some positives in the Labour policy announcements. They would applaud that riparian planting would qualify for carbon credits under the Emissions Trading Scheme, “but we hope this is not a hint of a policy announcement to come on including animal emissions in the ETS”.

And the idea of activating young people who are out of work to join water quality improvement projects is worthwhile.

“That will get young people out on the land and more familiar with the farming sector, and they’ll get to experience – and help with – the large amount of environmental enhancement work farmers are already doing.”

But the whole exercise of adding a new tax on water, even if the revenue is shared with regional councils for water quality work, “is counter-productive, and a money-go-round with administration costs added in.

“Farmers are working hard to live within the limits imposed by environmental standards and the desire by all New Zealanders – farmers included – to clean-up water quality hot-spots.

“Adding an extra cost in the form of a water tax drives a perverse incentive for farmers to intensify their activity, and deprives them of income that at worst puts them out of business and at best leaves them with less money to spend on environmental protection work.”

Labour has pledged to consult, and Federated Farmers would take that opportunity, Mr Allen said.

“If we can get round a table with them, we’ll be able to talk them through all the downsides of what they’re proposing in a rational way. This needs to be done without the distraction of a general election.”

Federated Farmers believes an important principle is that if there’s to be a charge for commercial use of water, it should be paid by all, with no room of discrimination.

“If you’re going to be stupid enough to bring this in, it’s got to be fair.”

DairyNZ chief executive Dr Tim Mackle said Labour’s proposal to introduce a water royalty for commercial water users would be difficult and require extensive consultation around the regions.

. . .“Within a farming business, just like any business, commercial water rates already apply. Our farmers also pay for access to irrigation, and access to water on their land through council consents. Water royalties could potentially duplicate these costs.

“Labour earlier hinted that such a levy wouldn’t result in a cost increase for farming, but without a robust conversation about how their water royalty policy will work we can’t know exactly how this would affect dairy farmers.” . .

Horticulture NZ says “Let’s not do this“:

“Extra costs on growers of fresh, healthy fruit and vegetables will make healthy food more expensive,” Horticulture New Zealand chief executive Mike Chapman says.

“This seems incongruous with policies around alleviating poverty and the benefits of healthy eating to reduce the economic burden of secondary health issues as a result of obesity.

“Horticulture New Zealand supports sound, consistent water policy to support efficient use of water and we have issued our own such policy (available here).

“But we do not support a blanket tax without due consideration of New Zealand’s water priorities as a nation. These priorities must include water for drinking, sanitation and food production.

“Today’s statement does not provide sufficient detail about Labour’s intentions, which should be made clear prior to the election. We don’t feel it is enough to say that if Labour forms the next Government, there will be a conversation about water within the first 100 days.

“There is already the Land and Water Forum which has been working on the wider issues of water allocation, rights and use for some time.

“Horticulture is a rapidly growing industry, contributing significantly to the economic wellbeing of New Zealand. Our vision is healthy food for all forever. We do not want to see the cost of fruit and vegetables grown in New Zealand, supporting local economies and providing jobs, pushed up higher than the cost of imported or processed food. We do not believe the long-term outcomes from a blanket water tax would benefit New Zealanders.”

The Taxpayers’ Union says a water tax shouldn’t pick and choose:

“Picking and choosing who pays what ‘water tax’ and changing the tax rate based on its use, is economic silliness,” says Jordan Williams, Executive Director of the Taxpayers’ Union

“In principle, a case can be mounted for charging users of water. However, Labour’s proposal seems more focused at the users, than the actual use.”

“If Labour is genuine in charging a ‘fair’ amount for water, why hasn’t it backed tradable permits for water? That’s a far more efficient, fair, and environmentally beneficial system than royalties payable by some users.”

“Jacinda Ardern comparison to royalties on oil and gas is a bit silly. Labour’s water royalty policy is akin to saying, they’ll charge oil drillers if the oil is used to make asphalt, but not if it’s used for plastics. Our point is that a water royalty should treat industries the same – rather than pick and choose.”

“The most disappointing thing about today’s announcement is that it’s really just another tax on business and entrepreneurship.

With the Treasury swimming in money, Labour should be explaining how it will lower the tax burden to get Kiwi businesses ahead – not saddling industry with even higher tax bills.”

Taxing water for bottling will be popular with voters even though a tiny amount of available water is involved and there’s a danger of it being regarded as an export tariff.

But why tax water for bottling unprocessed but not the water that is processed into beer, wine and other beverages? Or will the spring water at Speights be taxed too?

Taxing irrigators might be popular in some places until the consequences become apparent – higher costs for milk, meat, fruit and vegetables.

But popular isn’t necessarily good and the water tax is unfairly targeting a small number of businesses, most of which are in Canterbury and Otago.

Most of these will have fenced and planted waterways and already be doing everything else they can to protect and enhance water on or near their farms. It is unfair and unreasonable to take money from them to clean up other people’s messes elsewhere.

It is especially unfair for those of us who have to adhere environmental farm plans which are independently audited each year, where the only problem with nearby water is E.Coli from seagulls and where we pay the costs of water to provide environmental flows in the Waiareka Creek.

Some of the money would go to regional councils the rest would be absorbed into the consolidated fund, to be used for Treaty settlements, where there is no need for it.

The government is forecasting surpluses for years ahead, there is no need for any new taxes unless there are compensatory cuts elsewhere.

The water tax is Labour’s attempt to hide its economic profligacy under environmental camouflage.

Two new taxes in one week prove that the party has a new leader but nothing else has changed including its tax and spend policies.


Labour now the Sweatshop Boys

June 23, 2017

Duncan Garner has the line of the day on the AM Show – he’s calling Labour the Sweatshop Boys.

He’s referring to the party’s botched intern scheme :

There are calls for Immigration NZ to investigate a Labour-linked election campaign which used unpaid labour in the guise of an education programme.

More than 80 overseas students have been doing unpaid “drudge work”, and living in a cramped Auckland marae without a working shower, reports political blog Politik. . .

Rivals ACT called the campaign a “sweat shop filled with immigrant labour”.

“I cannot believe the Labour Party’s do as we say, not as we do attitude. This is a new low for hypocrisy, even for them,” ACT leader David Seymour said.

“Who would believe in Labour’s promised crackdown on cheap student labour when Labour are one of the worst offenders in the country?” . . .

That is hypocrisy writ large.

National Party campaign chairman Steven Joyce said Labour had to explain how it could justify “exploiting” international students for its election campaign while it was also speaking out against international education providers.

“This is truly appalling behaviour both for its lack of human decency and industrial strength hypocrisy,” Joyce said.

“If the allegations are correct, Labour has brought international students to New Zealand on false pretences, failed to look after them, and failed to meet their obligations to the students in the most basic way, while at the same time campaigning against exploitation of migrants.” . . .

Employers are very, very worried about Labour’s threatened changes to immigration.

Skills shortage in many sectors including IT, trades, farming, contracting and hospitality mean employers are already struggling to get anyone to fill positions. They’re wasting time, money and energy working their way through the process of employing immigrants.

Labour’s threatened changes would make that much, much worse.

These employers are working hard making a significant and positive economic and social contribution to New Zealand.

Labour wants to hobble them and yet has the hypocrisy to bring in people from overseas, not to work in productive businesses,  but to campaign for the party, and do it without pay.

Compounding that, the party that is supposed to stand up for workers put them up in sub-standard accommodation.

Matt McCarten did a mea culpe yesterday but the party can’t blame the mess only on him.

Newshub has obtained internal documents outlining Labour’s ambitious plans to put foreign students to work on its campaign.

The plan shows the party needed to find $270,000 in funding to pull it off and was banking on unions to fund a lot of it. . .

The budgeting was based on 100 students staying for an average of eight weeks. The cost of feeding and housing them in motorhomes was estimated at $240,000, with an operational budget of $30,000 for petrol, venues and AT HOP cards.

The documents show First and Unite unions agreed to contribute $100,000, “white collar unions” – likely the likes of the PSA – committed to $50,000, while Union Trust put up a start-up loan of $25,000.

The plan was to get E tū and “other appropriate unions” on board too.

The Council of Trade Unions was also to be involved in management of the project, and while Labour has been distancing itself from the project, the documents explicitly states: “The programme and certification is the responsibility of Labour.” . . .

Hypocrisy is bad enough, but there are also questions over which visas the students are on.

. . . We know these “fellows” are being given free accommodation in exchange for their work, so they are in breach of their visitor visa conditions, if they have visitor visas.

It is possible they have other visas, such as work visas. But it is hard to imagine they could qualify for work visas, and the hypocrisy would be great – Labour bringing in unpaid fellows on work visas, while campaigning against such work visas.

So it looks like either Labour has arranged 85 work visas for its unpaid fellows while campaigning to reduce the number of work visas for unskilled jobs or Labour has been complicit in a huge case of immigration fraud.

Even if the students are on working holiday visas, there are other questions:

Immigration Minister Michael Woodhouse did not know whether Immigration NZ or MBIE’s labour inspectorate was investigating the issue, but believed Labour had serious questions to answer about possible breaches.

Woodhouse said the students would be allowed to undertake the work if they were on working holiday visas, as Labour believed, but there were still questions about whether there had been breaches of employment law.

“What I am aware of is similar schemes to this have been investigated very seriously by the labour inspectorate because it is work masquerading as voluntary work, and I think that is also a question that should be asked of the Labour Party.”

Providing services for food and board counted as work under employment law, he said.

“Regardless of what visa they’re on, there are certainly questions about the nature of the work they’re doing and whether that meets the definition of employment.” . .

The Sweatshop boys and girls in Labour will be sweating over this.

Even if there is no immigration fraud, what they are doing is in direct contradiction of their immigration policy and their supposed role in protecting workers from exploitation.

 

 


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