2025 Report: Brash comes up with predictable prescription

Former National Party leader Don Brash. Photo / Herald on Sunday.

Slashing taxes and government spending has been confirmed as a possible prescription to increase productivity and close the wage gap with Australia.

The 2025 taskforce report, headed by former National Party leader Don Brash, said the Government's goal of closing the 35 per cent income gap with Australia by 2025 was an ambitious one that would require New Zealand growth to outstrip that of Australia by 1.8 per cent a year.

Even before its release Prime Minister John Key said the radical changes were unlikely to be implemented quickly, if at all.

Recommendations, already reported in several media, include:

* Replacing the top tax rate of 38 cents in the dollar and business rate of 30 cents in the dollar with a top tax rate of between 20 and 25 per cent.

* Limitations on some universal benefits. Those included interest-free student loans and subsidies for early childhood care education.

* The government to reduce operational spending to 29 per cent of gross domestic product by 2012-13.

* Use the NZ Superannuation Fund to pay back borrowing and change the age of entitlement.

* Impose congestion charges in cities to pay for roads.

* No capital gains tax.

Brash said he realised it would be difficult politically to implement his recommendations.

"Our view is that the recommendations would give us a very good chance of achieving the prime minister's vision but we do not underestimate the difficulty of the politics involved."

Key said during the 1980s and 1990s New Zealand underwent radical economic reform while Australia took a more incremental approach. The trans-Tasman neighbour was now in much better shape.

"In that regard I am not convinced that absolutely radical big bang reform is the right way to go," Key said.

"It would certainly have a dramatic effect on New Zealanders and in the short term it would feel very much like we were pulling the rug out from underneath them."

Key said the Government would also keep its promises.

Opposition leader Phil Goff said the 2025 Task Force was "a sham designed to cover up the fact that National has done nothing to help hard-working Kiwi families struggling to make ends meet now.

"The taskforce has been a waste of time. National will never accept the proposals in this report, and taxpayers need to know why it is persisting with the farce," he Goff.

He questioned why National set up the task force in the first place when it knew what Brash would recommend. "It was entirely predictable that what he'd say is what he's been saying every year for the past 25 years."

Goff said he feared the government was simply using Brash as a stalking horse for other ideas that would look less extreme by comparison.

"There's no doubt National would like to do what Dr Brash is recommending. National opposed Working for Families, early child education and student loans, but they promised they would leave those things in place, and going back on that promise now would have savage electoral repercussions for the Government.

"It's not good enough for John Key to simply say National won't carry out Dr Brash's agenda, but pick and choose bits of it. What he must do is come up with an urgent plan to lift Kiwi incomes and reduce household costs, and do it now."

The taskforce was set up as part of a support agreement with the Act Party which has a key policy plank of a flat tax and takes its name from the year that New Zealand aimed to catch up with Australia.

Brash said cutting back government spending levels to those of five years ago would fund the supposed tax cut programme.


- NZPA / HERALD ONLINE

See the Taskforce's reports here

2025 Taskforce website