Lab-Greens to set joint Budget limit

Labour and the Greens have agreed on a joint set of Budget rules, including a pledge to run surpluses and cap debt.

In a further move to reassure voters, the two-party Budget Responsibility Rules (BRRs) will be assessed by a watchdog independent of ministers that could also cost Opposition parties’ promises.

Under the BRRs, set to be unveiled today, they agree to a range of fiscal controls including sustainable Budget surpluses and lowering net debt to 20 per cent of gross domestic product in five years.

But their timeframe would see them hit the 20 per cent target two years later than National.

Labour finance spokesman Grant Robertson said he needed the extra time to address the ‘‘major infrastructure deficit, such as in housing and transport’’.

Surpluses would be delivered ‘‘across an economic cycle’’ but he envisaged being in surplus every year unless there was a significant disaster or economic shock.

‘‘From time to time you are faced with the difficulty of not maintaining a sustainable surplus and that’s what that’s a recognition of.’’

The independent watchdog would define the cycle, but it was normally five to eight years.

At the same time the parties pledge to keep spending within ‘‘the recent historical range’’. That averaged about 30 per cent of GDP but hit 34 per cent during the Global Financial Crisis.

‘‘We are setting ourselves some disciplines here,’’ Robertson said.

The settings were significantly tighter than Labour had imposed at the last election.

Green finance spokesman and co-leader James Shaw said the parties wanted to show voters the shape of the next government.

He did not believe it would be hard for the Greens to stay within them.

Other BRRs would prioritise investment with a long-term focus, such as restarting contributions to the ‘‘Cullen’’ NZ Superannuation Fund and moves to reduce the impact of climate change.

On tax, where Labour and the Greens disagreed, they have pledge to ‘‘ensure a progressive taxation system that is fair, balanced and promotes long term sustainability and productivity’’.

Labour’s policy includes setting up on tax after the election but it would not campaign on any changes beyond those it has already announced.

‘‘The major policy decisions ... will come from that working group, but we are not in a position at the moment to go any further,’’ Robertson said.

Shaw said the Greens would campaign on tax changes similar to those at the last election.

But he wanted to see some tax reforms in the first term in Government.

Robertson, who would be the finance minister in a LabourGreen government, said the BRRs set a ‘‘framework’’. The parties would have different policies within that.

‘‘People will vote and make their judgement on those policies but the framework is a higher level document than individual policies.’’

Details of the independent watchdog were yet to be finalised, but it would not be within Treasury.

Robertson said parties could agree to have policies costed but Shaw said ‘‘ideally’’ it would cover all parties.