All eyes on thresholds in Joyce’s big debut

An independent body will hold a Labour government accountable for its Budget promises, says

‘‘Battlers’’ are set for a boost to their incomes in today’s Budget when Finance Minister Steven Joyce unveils a much-anticipated tax and family income package.

But they may have to wait until after the September election to reap the full benefits of any planned changes.

Joyce has said his first Budget will target low- and middle-income earners but has ruled out cuts to personal tax rates.

Instead, he has signalled strongly that he will lift the tax thresholds, shifting more income into a lower bracket to reduce individuals’ overall tax bills.

At the same time, he is expected to increase the accommodation supplement and make changes to the Working for Families regime to help lift incomes.

Other moves could see abatement rates change and the threshold for student loans repayments, currently triggered on income above $19,084, relaxed.

Prime Minister Bill English yesterday steered away from mentioning tax cuts, saying the Government would focus strongly on supporting economic growth.

‘‘Because we have been able to do that over a number of years now we’ve got some positive choices.

‘‘There’s a whole line up of people wanting us to spend money, but we will make some responsible choices.’’

The Government was facing some big spending demands on infrastructure and wanted to reduce debt.

‘‘There’s a range of calls on the surpluses and we’ll be pretty responsible about it.’’

But Joyce has repeatedly mentioned the 30 per cent threshold, that cuts in on income above $48,000 - well shy of the average wage of about $62,000 - and that is expected to be his focus ‘‘if there’s room’’.

Poverty researcher Susan St John has pointed out that someone with children and a student loan, who earns more than $48,000, also faces a loss of 22.5 per cent of their Working for Families entitlement, making their effective tax rate as high as 64.5 per cent.

With strong and rising surpluses, amounting to $24 billion over the next four years, Joyce will have room to move but is expected to phase in any changes beyond the September 23 election.

That could mean he will allocate only a few hundred million to tax reductions in the 2017/18 year, with bigger increases in coming years.

Under the current regime, the personal tax rates are 10.5 per cent up to $14,000 a year, 17.5 per cent from $14,000 to $48,000, 30 per cent above that until the top 33 per cent rate cuts in at $70,000.

If Joyce opts to lift the $48,000 threshold up to the average wage at $62,000 that could cost him about $1.7b but deliver up to $33 a week in the hand to all those earning more than $62,000.

That could leave him some room to move the lower, 17.5 per cent, threshold. A move from $14,000 to $20,000 could put up to another $8 a week into the pockets of those on and above the average wage.

But pushing the $48,000 threshold significantly higher would narrow the gap to the top 33 per cent threshold of $70,000, bringing added pressure to lift that top threshold too.

Today there is an opportunity to deliver a Budget that gives New Zealanders a fair share in our prosperity. There is the chance to give every New Zealander the dignity of a warm, dry, secure place to live. There is the opportunity to invest in our future with an education system fit for a rapidly changing world. There is a chance to show we care by funding our health system to keep us well, mentally and physically.

These would be the priorities in a Labour Budget. They would start to address the nine years where National have allowed too many New Zealanders to fall behind. Now, they’re playing catch-up. They’re tired, and out of touch, and reduced to half-baked mimicry of Labour’s policies.

It’s time for a fresh approach – New Zealand needs it, and Labour is ready to deliver it. These are the key questions New Zealanders need answered in today’s Budget:

After nine years of denial, have they done something that will finally fix the housing crisis and get New Zealanders affordable homes?

Have they done enough to turn around their legacy of neglect in mental health and their $1.7 billion of health service cuts?

Have they given schools the operational funding they need to they can keep the lights on, pay their bills and make up for last year’s funding freeze?

Have they given the Police the resources they need to keep our communities safe?

After nine years of failing to contribute a single cent to the Super Fund, will they finally do the right thing by future generations?

Have they finally recognised New Zealanders birth right – to swim in clean rivers and streams and properly resourced making all waterways swimmable? When Labour has the opportunity to lead the next Government, the budget I deliver will set out a plan to give New Zealanders some hope for them and their families and to begin to address the shortfalls and shortcomings of National’s approach.

Our Kiwibuild programme will deliver homes to first-home buyers. They will be sold at cost, and the proceeds used to build more homes. 100,000 over 10 years – all affordable, all within reach of young New Zealanders.

Labour will close the tax loophole that effectively amounts to a taxpayer subsidy to speculators of $150m a year and helps them outbid home buyers, and then pump those savings into grants for home heating and insulation.

Labour’s next budget will invest in health, including funding primary healthcare, homecare, breakthrough lifesaving cancer medicines and mental health services.

It will end the freeze on operational funding, which is a huge strain on already stressed school budgets. Parents are forking out more and more in ‘‘donations’’.

Labour will invest in education, so schools can get on with teaching, not begging for money. We will introduce three years of free post-school education to help prepare our young people for the changing world.

Our budget will also be the first where a government is held accountable by an independent body to a set of Budget Responsibility Rules. We understand the public needs to know that we will be responsible and prudent, with our spending phased and focused to achieve results.

New Zealand is a relatively wealthy country. We are blessed with wonderful natural resources and talented people. Now is the time to harness the potential of every single one of us, and give everyone a fair shot at success and a share in prosperity. We can do better than what will be put on offer by National today. It’s time for a fresh approach.

Grant Robertson is the Labour finance spokesman.