English to deliver no frills plan

Finance Minister Bill English viewing a copy of the 2010 Budget. Photo / Mark Mitchell

Finance Minister Bill English will deliver a no-frills Budget today that will more tightly target Government assistance, cap the huge rates of borrowing and set a plan to get the books back into surplus in five years.

Although the Government has been borrowing on average $380 million a week, Mr English revealed yesterday that about three or four weeks ago it had borrowed $1 billion.

In other weeks, when the rates have made it prudent to borrow now instead of delaying, it has borrowed $700 million or $800 million. "We simply have to get that under control."

The operating deficit this year will hit record levels, of at least $16 billion - well up on the $11 billion forecast in the December update of the books.

The Government has signalled that it wants to cap net debt at no more than 30 per cent of GDP.

There will be zero new spending other than on education, health and law and order - and their increases will be taken from elsewhere.

Other measures, already well signalled, include cutting the Government's cost of the KiwiSaver scheme by reducing its contribution - at present a maximum $20 or $1040 a year; tightening the eligibility of Working for Families tax credits to the wealthy, and tightening student loans repayments for those overseas and making it harder to get loans for those over 55.

Mr English said the Government "remains committed to KiwiSaver".

"KiwiSaver will remain an attractive proposition. The 1.7 million New Zealanders who are in it will want to stay and others will continue to join at the rate of about 20,000 a month."

A Government contribution would remain - "it will still be much more attractive, for instance, than putting the money in the bank".

He did not believe Labour would promise to undo the changes. "When people see the whole picture of KiwiSaver in the context of what we are trying to do to get the Government's's finances on a positive track back to surplus, I think people will see that the decisions are pretty reasonable." Mr English will set a new savings target for the public sector but details of how it will be spread will wait.

Labour is likely to use the Budget to continue its campaign over rising prices in the face of a plan today that promises no relief to householders.

"I think we'll see largely a timid and tinkering Budget that disguises the problems and leaves it to the other side of the election," said leader Phil Goff.