Mother of alternative budgets

The National Party has walked back its controversial debt target, promising big tax cuts and amuch looser debt target in its alternative budget.

But there are still big cuts to government day-to-day spending, with operating allowances slashed to 60-75 per cent of what Labour has promised over the next three years. Those cuts would save $7.3 billion over the next four years but would mean some tough choices on public services, which might not get the money needed to keep running at current levels.

The big sweetener is a temporary tax cut. This is achieved by lifting each of the tax thresholds on December 1. The 10.5 per cent threshold would rise from $14,000 to $20,000, with the 17.5 per cent threshold lifting to income between $20,001 and $64,000. The 30 per cent threshold would apply to income between $64,001 and $90,000, and the 33 per cent threshold to income above that.

National thinks the changes will cost the Crown $4.7b before the thresholds snap back to normal on March 31, 2022.

Finance spokesman Paul Goldsmith reckons the average income earner would pay $3000 less in tax over the 16-month period. Judith Collins said the budget was responsible. ‘‘Responsible economic management has been a hallmark of successive National governments. The government I lead will continue that tradition,’’ she said.

Businesses would also get a tax break, with National promising to double the depreciation rate for businesses to invest in new plant, equipment and machinery over a year. The party estimates this will cost $430 million a year for five years, or $2.15b in total. The figures come with the imprimatur of economic agency NZIER, which has vetted them.

Finance Minister Grant Robertson described the plan as ‘‘desperate and reckless’’. ‘‘Judith Collins’ unaffordable plan will lead to harsh cuts to public services in the middle of a global pandemic, when we need a well-resourced health system more than ever. National has also changed tack again on debt and taxes in this announcement. They now have as many positions on the economy as they do on the border.

‘‘After three different leaders since the Covid crisis began, National – backed by a radical ACT Party – are a risky alternative,’’ Robertson said.

The party wants to cut new spending to a point where New Zealand returns to surplus before the decade is out, with a small surplus posted in the 2027/28 year. That is in contrast to the current Government, which forecasts deficits into the 2030s.

National is also promising a big reduction in net debt levels, although it has backflipped on its initial plan to reduce net core Crown debt to 30 per cent of gross domestic product (GDP) by roughly 2030.

Goldsmith said it was ‘‘just not practical’’. He now thinks he can reduce net core Crown debt to 34.9 per cent of GDP by 2033-34. The current Government’s debt track would see net core Crown debt at 47.9 per cent of GDP in the same year. But that lower debt track would mean difficult decisions – particularly around healthcare, where costs are expected to rise with an ageing population.

‘‘Responsible economic management has been a hallmark of successive National governments.’’ Judith Collins

National Party leader