Labour leader accuses National of setting itself up for election year ‘slush fund’

National has made income tax cuts from 2017 one of its five top fiscal priorities, despite not yet being able to post a surplus. Finance Minister Bill English has set a $2.5 billion new spending allowance for the 2017 Budget, and with a $1.99 billion surplus forecast for 2017-18 year, there is room for quite a bit of deterioration in the books before the tax cuts would be in jeopardy.

Mr English said they would be “modest” tax cuts if fiscal and economic conditions allowed.

But Labour leader Andrew Little has said National is setting itself up for an election year “slush fund’’.

The new spending allowance for this year’s Budget and for next year’s is just $1 billion which Mr English called “the new normal’’. But he had sufficient confidence in the Government’s finances to put together the package for families in hardship which will cost $240 million a year and $790 million over four years.

Mr English dubbed the Budget a “responsible and supporting Budget from a responsible and supporting Government’’.

With two big housing measures out of the way before Budget day — tax on capital gain and partnerships with private developers to boost Auckland supply — the child poverty measures were the centrepiece, including a real rise in benefits for households with children and working for families and an increase in childcare assistance of lowincome households. The package has received cautious applause from many advocates including the Salvation Army and Unicef. However, former MP Sue Bradford said it was an attack on the sole parents who would have to be ready for work when their youngest turned 3 instead of 5 and will be expected to work 20 hours a week, not 15 hours.

I know how tough it is for those low-income families.

John Key

When Labour made a similar point in Parliament, Prime Minister John Key said “tell that to the thousands of Kiwi families who do that every day’’.

Mr Key twice referred to his upbringing by his widowed mother Ruth: “I know my history. I know the struggle my mother had. I know how tough it is for those low-income families,” he said.

“Today is the day when we are in the position to stand up and give them just a little more.”

And as he did through his mother’s efforts, children today could see that “hard work and enterprise is the way to do things’’.

Tightening the work test was one of three contentious moves in the Budget.

Setting a new levy on international passengers and the axing of the $1000 grant to new KiwiSaver members have both been criticised.

Critics have said it breaches National’s election promise last year of no new taxes — although user-pay charges are usually called levies.

The levy will be set at $6 for departing and $16 for incoming passengers to fund responses to such incursions as the Queensland fruit fly.

The axing of the $1000 gift from taxpayers to new members of KiwiSaver was a big surprise and the most recent in a long time of tampering of the scheme, mainly under National, since it began in 2007, and has been criticised for sending the wrong message about saving.

Mr English’s surplus — from an $18.4 billion deficit four years ago — has been pushed out a year to 2015 -16. It is a puny $176 million, assuming there is no slump in export commodity prices but is forecast to grow to $3.6 billion by 2018-19.

“The overall fiscal trajectory has not changed,” he said. “The surplus target has helped to turn around the Government books.”

The Government’s four other priorities are: returning to surplus — in 2015-16; reducing net debt to 20 per cent of GDP by 2020 (it’s 25 per cent now); further reducing ACC levies; and using any further fiscal headroom to reduce debt faster.

Growth is forecast to average 2.8 per cent for the next four years, and unemployment is forecast to fall to 4.7 per cent in two years.