Claire Trevett is the New Zealand Herald’s deputy political editor.

Finance Minister Steven Joyce warns workers not to get hopes up for a Budget tax windfall

Voters are set to find out if Finance Minister Steven Joyce (right) is more generous than PM Bill English. PHOTO/ Mark Mitchell
Voters are set to find out if Finance Minister Steven Joyce (right) is more generous than PM Bill English. PHOTO/ Mark Mitchell

Finance Minister Steven Joyce is talking down expectations of a windfall for voters in this week's Budget, saying people should not get too excited about what might be possible despite healthy surpluses in the years ahead.

However, his political rivals are expecting him to spend up large in the Budget, given it is an election year and Joyce's first year as Finance Minister - and possibly
his last if National does not form a government after the election.

Joyce will deliver his first Budget on Thursday and has something his predecessor Bill English did not have - forecast healthy surpluses.

He has signalled a package on family incomes, and possible changes to the tax thresholds.

However he has ruled out cutting tax rates in the Budget - so any gains for higher income earners would be in tax threshold adjustments designed to address fiscal drag.

"I wouldn't want to overplay it. We're not going to be able to do a massive amount in any of these areas because we still only have a surplus of $1.5 billion as at end of March.

"You want to do what you can, and the question is when you can."

However, he said there were also other priorities including paying down debt, infrastructure spending, and spending on public services such as health as the population grew.

He would not give any hints as to what was planned for workers' taxes "but again, I wouldn't want to overplay what is possible."

Despite that, Labour's finance spokesman Grant Robertson said he was expecting National to set out significant spending because it was an election year.

"There is a high level of expectation being raised by National and it will be interesting to see if they can meet that.

"I think the Government is showing all the signs of one where, having failed to address a whole series of issues over a number of years, it is going to try and take credit in the Budget for finally coming around to doing something."

He said it was hard to deliver on the promise to help lower income earners by adjusting tax brackets, because higher income earners would always benefit more.

"So my expectation is there will be a very substantial Working for Families package."

It was also possible National would increase the Accommodation Supplement and there could also be assistance for single people or those without children who did not qualify for Working for Families.

Commentators on the left such as the Council of Trade Unions (CTU) and Child Poverty Action have called for a big boost for Working for Families, saying its value had dropped in real terms since National changed indexation and abatement rates.

However, those on the right are calling for tax cuts saying there has already been a big focus on lower income earners, such as the lift in benefit rates.

Taxpayers' Union head Jordan Williams said this year should be middle New Zealand's turn.

"Politically the National Party have stood on platforms of lower taxes yet they've never delivered. Now is the time for them to do so.

"It is middle New Zealand that got us back into surplus and instead of ensuring New Zealanders get a fair portion of that back in tax relief, they appear to be taking a 'we know better' approach and spending our money."

He said adjusting for fiscal drag since the last changes took effect in 2011 would put an average of $9.30 a week in workers' pockets.

While he believed $3 billion was needed and affordable, it was more likely National would spend about $1.5 billion.

Act leader David Seymour also said it was time for tax cuts that went beyond the adjustments of thresholds.

"Of course there should be tax cuts, it's outrageous."

He was promoting a top tax rate of 25 per cent.

"But Steven Joyce has ruled out tax cuts. If he U-turns on that, I'll be the first to welcome it."

CTU economist Bill Rosenberg said he was expecting extra spending because it was an election year, likely on Working for Families.

"It's the easiest way to get money into the pockets of lower income families without giving big concessions to those higher up."

However, it was possible tax threshold changes or cuts would be announced and timed to take effect next year.

"They will make it sound like a sure thing, but obviously the political game is it only necessarily occurs if they get in."

Child Action Poverty spokeswoman Susan St John also said more was needed for Working for Families, saying National's 2010 changes to abatement rates and indexation had effectively cut its value by $700 million a year in real terms.

WHAT WE KNOW

Highlights of the pre-Budget announcements

• $4 billion in new capital infrastructure in this Budget and $11b over the next four (includes $812 million for State Highwya 1 repairs on the coast near Kaikoura)
•$503 million for 1125 extra police staff over the next four years, including 880 sworn police officers
•$321 million for 'social investment' meansures
•$303.9 million for screen industry production grants
•$68.8 million for vulnerable children
•$60 million for Pharmac
-$59.2 million to double-crew ambulances

- NZ Herald

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