Basic error taxes Nats
Just as the National Party looked like breaking out of Labour’s Covid-19 shadow by releasing its big temporary income tax policy out into the wild, the worst thing happened: Labour found a mistake.
It wasn’t a dodgy ‘hiding expenses and ginning up revenue’ sort of problem but a basic error of using numbers from May’s Budget, rather than last week’s pre-election economic and fiscal update (PREFU).
Nevertheless, the net result was the same. National’s sums didn’t add up. It will need to find an extra $4 billion over the next 10 years to plug the gap.
But that could also be put in the shade by the end of today, if Auckland stays in alert level 2.5 for longer, instead of moving down to level 2 as expected, after a curious new case of Covid-19 broke out.
A person who tested negative during managed isolation tested positive after feeling sick a few days after getting out. Currently, it appears the case is relatively contained; there were only contacts within the family.
At this stage, it is understood there is no information that will materially change the Government’s plan to move Auckland down from level 2 and the rest of the country to level 1 tomorrow.
That will come as a relief for the many businesses outside of Auckland, particularly in hospitality, that can open up quickly. In Auckland, it will be a slower process.
Labour will be counting on a bit of a feel-good factor when life gets closer to its normal rhythms over the next few days.
The Government will also likely be signalling a pathway back to level 1 for Auckland after Cabinet meets today. Certainly, NZ First and the political hard heads within Labour will understand even with a commanding lead in the polls, being tardy on lifting the country’s alert levels – especially in the South Island – will start to irk people.
But it was National’s budget blunder, not the daily Ministry of Health Covid-19 numbers, Labour was focused on yesterday.
On Parliament’s forecourt, Grant Robertson contained his glee at finding this mistake but barely.
Labour was clearly caught off-guard by the politically sophisticated policy released by National finance spokesman Paul Goldsmith on Friday.
Now, it would be able to say, for the next four weeks, that National had a $4 billion hole in its costings.
Yet, it was the symbolism rather than the mistake that mattered: it goes to competence.
The $4b over 10 years – particularly in the current climate – is little more than a rounding error but it will have to be found from somewhere.
The number came from the fact National plans to halt contributions to the NZ Superannuation Fund. That money, under its plans, could then be used to pay down debt. The Super Fund is a Labour monument, so the party is committed to keeping money going into it.
Anyway, National booked $19.1b in savings over a decade using the numbers from the May Budget, but the update PREFU tables said only $14.8b would go into the Super Fund over the same period.
However, in fairness, the real figure we should be talking about is the cost over the next four years.
That is the official Treasury forecast period. Beyond that are projections Treasury effectively says should be treated with a grain of salt.
A comparison of the Budget Economic and Fiscal Update (BEFU) and PREFU tables shows the difference over the official forecast period of the next four years is $1.72b. It’s something but not much.
In the grand scheme of the Covid-19 recovery, the new budget is something of a money-go-round and $4b doesn’t mean a lot.