Matt McCarten on politics

Matt McCarten is a Herald on Sunday political columnist

Matt McCarten: Brutal Budget wallops the poor, pampers the rich

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John Key's spin doctors deserve a bonus.

Prime Minister John Key delivers his post-Budget speech during the Trans-Tasman Business Circle lunch at the Sky City Convention Centre. Photo / Getty Images
Prime Minister John Key delivers his post-Budget speech during the Trans-Tasman Business Circle lunch at the Sky City Convention Centre. Photo / Getty Images

This week's Budget is a public relations success. John Key's spin doctors deserve a bonus. The pre-budget "framing" was first class.

The tax on tobacco and the rollout of Whanau Ora and other matters that could detract from Thursday's announcements were cleverly released earlier.

Even the closing of the outrageous tax loopholes for property speculators and increasing GST were well signalled.

The Government wanted this Budget's headlines to be about individual tax cuts so that people would be rushing to see how much more they'd get in their take-home pay.

This strategy has succeeded brilliantly.

It's a carefully constructed Budget that gives Labour little room to attack.

After all, it was the Labour Party that introduced GST - at 10 per cent - in 1986.

Three years later they increased it by 2.5 percentage points - the same amount that Key revealed this week.

It must be difficult for Phil Goff to huff and puff against something he strongly advocated when he was a Cabinet minister in the Lange government.

The arguments by both sides in Parliament on Thursday were exactly the same as when GST was raised in 1989.

The only difference now is that Labour is in Opposition and National is in Government.

Goff's admission that he wouldn't necessarily reduce, let alone eliminate GST if there were a change of government, makes his current posturing contemptible.

His party's opportunistic manoeuvring about removing GST from food is just intellectually insulting.

Bill English's Budget, which gives our rich another five-cent-in-the-dollar cut in their taxes and replaces it with more regressive income-tax scales that will proportionately hit the less well-off, largely completes the Rogernomics agenda.

The effective tax our wealthiest New Zealanders contribute to the common good is almost half of what they paid before the neo-liberal regime was imposed on us 25 years ago.

Our rich are treated extremely generously. We have no capital gains taxes or death duties, which every other civilised country expects from their richer citizens.

Conversely the overwhelming majority of New Zealanders now pay more into the Government coffers and yet get less in return than they used to.

New Zealand ranks near the top of the world list in terms of the speed at which the gap between the haves and have-nots is growing.

With the notable exception of the Greens, there is a consensus amongst the parliamentary parties that this is acceptable.

It's accepted wisdom now that if we look after the rich then somehow enough of their wealth will trickle down to the rest of us.

Of course the business institutions and pundits are applauding the Budget.

Both their profits and their own salary packages will increase. The rest of us are led to believe that the few extra crumbs thrown to us will more than compensate for the increase in GST.

Bollocks! Inflation will rise to at least 5 per cent, the 2 per cent caused by the GST increase added to underlying inflation.

That's why, within 12 months of this Budget's tax cuts coming in force in October, the overwhelming majority of workers will be worse off.

There are three other realities that need to be taken into account.

First, price rises will be more than the GST increase as retailers round up prices and take the opportunity to maintain profits.

It happened the last two times GST increased and will happen again.

Secondly, closing the loophole in tax avoidance by property speculators will increase many rents by about $10 to $20 a week, according to these people.

And anyone who doesn't realise that many employers won't pay their employees a wage increase next year on the grounds that they've had a tax cut doesn't know how life really works.

Key and English may believe this Budget is fair and will help people who struggle to make a living. But it's not.

I can sum up this Budget in one sentence.

Telecom CEO Paul Reynolds will get a mind-blowing $4800 more in his hand every week.

One of the hundreds of workers he sacked recently who now languishes on the dole will get $1.20.

Any questions as to which side Key and his Government are on?

- Herald on Sunday

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