Labour’s manifesto promises to raise benefits by inflation or average wage growth, whichever is higher. However, the pledge is missing from the party's 'fully costed and fully funded' fiscal plan.
The Taxpayers’ Union calculates that reversing the Coalition’s decision to index main benefits to inflation would cost an additional $1.18 billion between 1 April 2027 and 30 June 2031.
Taxpayers’ Union Head of Policy James Ross said:
"Are voters meant to believe Labour's manifesto or their fiscal plan? The two documents contradict each other on whether Labour will peg benefits to wage growth or not, so they clearly can't both be right."
"Labour have already been forced to reissue their fiscal plan after we caught their $90 million maths blunder. Now we’ve found another $1.2 billion in missing costs, on top of billions more in uncosted promises. How many more holes are hiding in Labour’s numbers?
“This is no small error. The annual bill climbs to half a billion dollars in 2030/31 alone, or $571 per household over the period covered by their plan. Labour haven’t explained where a cent of it is coming from, so which magic money tree is going to make this one go away?
“Hipkins insists every promise is fully funded and independently checked, but the mistakes keep piling up. It is getting beyond a joke that Labour still hasn’t released its underlying workings and correspondence with Hall Chadwick for proper public scrutiny.”
NOTES TO EDITORS:
The Taxpayers’ Union’s estimate is the extra cost of indexing benefits to the higher of inflation or wage growth, compared with current inflation-only indexing. Labour’s manifesto (p.62) promises to “increase benefits by whichever is higher: inflation or average wage growth through indexation”, but its fiscal plan has no line for it.
Our calculations use Treasury’s 2026 Pre-Election Economic and Fiscal Update (PREFU) throughout.
Treasury’s forecasts of CPI and average weekly earnings are in Table 4.1 (p.86), and its forecast spending on Jobseeker Support and Emergency Benefit, Supported Living Payment and Sole Parent Support is in Table 5.2 (p.122). These are the main benefits that the 2024 law change moved to solely CPI indexing.
For each year, the gap between wage growth and CPI is compounded into a cumulative gap, and this is applied to Treasury’s baseline benefit spending for that year. Benefit rates change on 1 April, so in each financial year (1 July to 30 June) nine months are paid at the previous year’s rate and three months at the new one. We therefore weight each year’s cost 75 percent to the previous year’s cumulative gap and 25 percent to the current year’s.
The first uplift is assumed to take place on 1 April 2027. The estimated additional cost rises from $20.6 million in the last three months of 2026/27, to $497.9 million in 2030/31. This gives a total missing cost of $1.18 billion between 2026/27 and 2030/31, or about $571 per household.
