Chef Brash ladles out sweet 'n' sour for Bay

JONATHAN DOW AND NZPA
Hawke's Bay voters feel loved or left out by National's tax cuts.
The tax cuts are substantial for most workers but low and middle-income families are still likely to be better off under Labour's targeted tax relief plan.
"To be quite honest, it's better than what I'd expected," said Davyd Luck, general manager at Comtech Services in Napier.
A slashed tax rate of 33 cents for income between $50,000 and $100,000 is what really makes a difference to him, but the rate of 19 cents for his income up to $50,000 helps, as well. Currently he pays 33 cents for income below $60,000 and 39 cents for anything above.
Mr Luck will not up his spending to meet his income and, instead, will invest any extra money for his retirement. "It would be a really nice holiday each year but, of course, it's not going there."
National announced yesterday it would also reduce the company tax rate to 30 cents, no later than April 2008. "It's definitely going to help," Hastings builder Alan Whyte said, but the Government still needed to cap inflation and keep the cost of fuel under control as well.
Mr Whyte is pleased his staff will benefit, too.
"You've got to look after the workers."
But for him, National's tax lolly was simply an added bonus. "I'd go with them, anyway."
Jim Keefe, a Napier sickness beneficiary waiting in the sun at the Maraenui market for the opening of the Maraenui Information Centre by Maori Affairs minister Parekura Horomia, today reflected a lack of faith in either plan.
"I watched it on the TV news this morning," he said, "but I don't care about it. Come next year they'll be taking it all away."
Comparing the cost, he said: "And where is Don Brash going to get all the money from? It will have to come from somewhere.
"The dropping of the interest on the student loans is more important. That's me."
National today defended the cost of its massive tax reform package, saying it will still have enough money to pay for vital services in health and education.
National's $3.9 billion a year policy contains substantial tax cuts for most workers, but Labour has lashed the policy.
Finance Minister Michael Cullen says the "insane" cuts would leave National short of cash for new spending in each of the next three years.
But National's finance spokesman, John Key, said today Dr Cullen was scaremongering and had his figures wrong.
"Not one nurse, not one teacher will be going (leaving New Zealand) under National. In fact we will be hiring more teachers and nurses over time," he said.
"We have a clear slug of money we will be increasing government spending every year by. It's actually a number relatively similar to Labour's."
A Labour claim that National would only have $750 million to spend on new initiatives next year, compared with Labour's $1.9 billion, was "garbage", Mr Key said.
Labour's figure did not take into account its lavish promise to scrap interest on student loans, which would cost at least $100 million next year, rising to at least $300 million a year by 2008, he said.
Labour had also spent the extra $1.58 billion cash Treasury was now projecting it would get - above expectations - over the next four years, in its extended families package, whereas National had not used it.
National would have about $1.5 billion for new spending in each of the next three years, which would only be about $200 million a year different from Labour.
"It's garbage when Michael Cullen gets up and says we are going to have less money (than budgeted)," he said. "It's totally incorrect."
Questioned on how National would pay for some of its other promises, such as tax deductions on student loan payments, Mr Key said National would cut waste in the tertiary sector.
National had also announced it would axe Labour's planned roll-out of universal subsidies for doctors' visits and prescription fees, which would give it extra money to reinvest in the health sector.
But Dr Cullen said National's tax cuts would cost $600 million next year, its childcare and student loan rebates $250 million and National had said it would cut spending on existing initiatives by about $300 million.
In real terms that meant it would only have $750 million available for new spending.
Dr Cullen said the figures meant National would have to borrow over $3 billion to pay for its tax cuts, not the $2 billion it was suggesting.
In order for National to pay for policies such as an end to parole for violent criminals, state sector wages would have to be severely held back and health services would have to cut by the end of the next financial year, he said.
Bank economists have believed both National and Labour's proposed tax relief policies are affordable and due to the slowing economy would not push up inflation.
But economic forecasting company Infometrics economist Gareth Morgan said today both parties' policies could cause inflation and as a result push up mortgage interest rates if the economy took longer than expected to cool.
"We've got an economy that's at full capacity, we've got inflation at the top of the band, we've run out of people for the workforce, and here's both these turkeys spending money like crazy," Mr Morgan said.
"They are both banking on the economy shrinking.
"I don't actually think that's going to happen."
He said the property market was nervously expecting a drop in interest rates, but with Labour and National's spending plans, the reverse could happen.
PricewaterhouseCoopers tax partner John Shewan said that if the economy grew at a stronger than expected rate then both parties would have to revisit their policies.
National's borrowing would also be inflationary if the party could not cut government spending in the way it had promised.
In documents issued at its tax release yesterday, National said it would look for savings in education and health, which it would then redirect into those portfolios.
It would also prioritise finding and cutting "low-quality" spending across government departments.
It would then move its focus to finding savings in the areas of economic and regional development and social welfare spending.