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John Bishop's analysis on Budget 2014

Budgets are essentially political documents, particularly in election year, and this year even more so because the Minister of Finance thinks the Government can have a bit of a spend up while proclaiming the need for restraint and praising themselves for the restraint they have shown.

The spending that has been sanctioned, particularly the family assistance package worth $500 million, goes to the political heartland of the National Party, the middle of the middle class who think they both need and deserve state assistance. There is also a good dollop of dough for sore spots and pet likes Christchurch and schools in North Canterbury, and for some projects of cultural merit like buying the TVNZ Film Archive.

  • Total new spending is $5.7 billion (including $16 billion of reallocation) which takes total spending to $70.3 billion in the current year which represents 30.3% of GDP, almost the same as previously years, but a drop from 34.44% in 2008/09.
  • There is a $372 million surplus forecast, not very big this year but it is forecast to increase to $3.5 billion in 2017/18.
  • Taxation is unchanged except for cheque duty being abolished which will save users about $4m a year, about a dollar per Kiwi, and that is the sum total of tax reform.
  • Spending on households with families increases, with extra money for paid parental leave, family tax credits, doctors’ visits for under 13 year olds, early childhood education, and for vulnerable children, a family assistance package worth $493 million over four years.
  • The economy grew 3.1% in 2013, the fifth highest in the OECD, and growth is forecast to continue at between 2% and 4% over the next four years.

The Minister of Finance also neatly frames the expected debate over election promises. His budget speech states that Treasury advice is that additional spending over the $1.5 billion the current government has allowed itself will boost interest rates. Our prediction is that National will use this to bash Labour and other parties if those promises (spending and revenue reductions) go over the Treasury determined figure. That is consistent with National’s narrative that the country cannot afford a Labour/Greens government.

Our criticisms and quibbles:

  • The ACC levy cuts dangled as a prospect in 2015 could have come earlier or at least been made more definite.
  • The abolition of cheque duty – while welcome – should only be the start not the end of a programme of cutting compliance costs.
  • There is a suggestion of a commitment to further welfare reform. Mr English says in the budget speech:

    “The future cost to taxpayers of people who received welfare in 2012/13 will be $76 B by the time they exit welfare or retire. About three quarters of that cost is due to people who first received a benefit under the age of 20.” 

    This describes the cost of welfare for those for whom it becomes a way of life. So what is the government doing about it? The budget offers nothing: no commitment to developing a policy framework to address a very complex matter, and no practical steps. There is $100 million to help people transition from welfare to work but that is not a long-term answer to the problem of preventing people from becoming welfare dependant in the first place.

So is this a good budget for the country? It’s certainly a well-calculated action plan to get the National government re-elected, but there’s little prospect of reduced government spending, substantial tax cuts or significant reform of spending.

To convince this Government that government is too big in New Zealand and the tax burden should be reduced, we must continue to pressure our politicians to share the benefits of the improved economy with all taxpayers. 

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Budget in surplus but little else for taxpayers to crow about

 Budget 2014 is now public. The Taxpayers' Union had two people in the budget 'lock-up' crunching the numbers before the embargo was lifted at 2pm.

Overall we give the budget a score of six and a half out of ten.

We're disappointed that Finance Minister Bill English has failed to commit to giving New Zealanders meaningful tax relief.

Points for getting the books back into black, but deductions for not addressing the long term fiscal issues facing New Zealand.”\

While there’s a little bit of fat trimming here and there, overall its more of the same tax and spend. To fix our long term problems of an excessive tax burden, Bill English needed to wield an axe to superfluous spending. He’s failed to do so.

Compare this Government’s approach to Australia. Despite Australia’s dire fiscal outlook, its Government is reforming things such as the retirement age to make the public sector sustainable.

Over the next four years, the New Zealand Treasury forecast $7.6 billion in fiscal surpluses and this year, just $15.5 million is allocated to tax relief.

That represents $4,935 per household of over taxation. Instead of committing to giving that money back, the only tax cut in this budget is to cheque duty. That’s a tax cut of one dollar a year per New Zealander.

In answering a question from the florr during the lock-up, Mr English told journalists and analysts that he has the balance about right. We don’t agree. What’s needed is an early and clear commitment to a program of reducing tax and compliance costs.

Of $4,935, Kiwi taxpayers get back $1 per year. And that’s only if you still use cheques!

No wonder John Key has hinted at tax cuts during the election campaign. This is a tax cut that benefits only the one per cent who still use cheques.  What’s next, removing excise tax on fountain pens?

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