Key and English star in seductive tax cut tango
The triennial pas de deux is only just beginning
It’s a seductive slow dance for the ages. A polished black dress shoe steps across the marbled tiles, Prime Minister John Key sweeps a rose in front of voters.
‘‘About $3 billion would do it, I reckon,’’ he suggests with a wink.
Turning away to glance back, Finance Minister Bill English reaches out to touch the rose... but he dare not make contact.
‘‘What are we doing? This is so (fiscally) irresponsible - I can’t, I won’t... but how can I say no to you?
‘‘I’m not ready yet,’’ he whispers.
Or in the southern drawl, (and in real life): ‘‘As we’ve always said, if economic and fiscal conditions allow, we will begin to reduce income taxes’’.
‘‘However, we also need to bear in mind that there are a lot of risks globally and that is why it is important to get our debt levels down,’’ he adds. It’s a well-rehearsed performance. Debt reduction is a declared Government priority. If it comes with the added benefit of locking a large amount of money away that can be easily reallocated if necessary, then flexibility will be the hallmark of robust fiscal policy.
The Government opened its books this week to reveal the budget surplus had more than doubled on forecasts - a cool $1.83b in the black.
Budget surpluses are currently earmarked for debt repayment and policies to ‘‘lift economic performance’’.
Once debt targets are reached, more money would become available for spending on infrastructure - flagged by English, but not so much that it could be described as ‘‘shovelling money’’. Or, it could be tax cuts. Keeping that money tied up for debt repayment, ‘‘if conditions allow’’, also allows for that money to be reallocated if conditions don’t allow.
Importantly, it keeps it away from Treasury officials looking to account for it in a budget. Most importantly, next year’s budget.
Key and English’s tax cut pas de deux is as much about enticing voters, as it is about keeping an election carrot away from the Government books until the election campaign starts.
If it’s already budgeted for then any incentive for voters to retain the National Government on that basis is lost. So, about $3b you say? Would you look at that, they’re more than halfway there. If economic and fiscal conditions allow, we will begin to reduce income taxes.