Budget 09: Tax cuts gone forever: Goff

Phil Goff says the "decade of deferrals" will leave a $20 billion hole that "John Key won't be there to pay for". Photo / Mark Mitchell

Labour leader Phil Goff says National's Budget breaks its promise on tax cuts and creates a burden on future generations with its decade-long cancellation of payments into the New Zealand Superannuation Fund.

Mr Goff calls it a "dishonest Budget". He said yesterday that the 2010 and 2011 tax cuts were "dishonestly and recklessly promised to buy votes in the election campaign".

The tax cuts are now likely deferred until after the next election, but Mr Goff said they were "gone forever".

He said the suspension of payments to the Superannuation Fund were not for two years, but for a decade. This "decade of deferrals" of the $2.2 billion annual payments would leave a $20 billion hole that "John Key won't be there to pay for when it comes time to pay the bill".

Mr Goff said this would impact on the fund when "generations X and Y" came to retire. "Young New Zealanders today will be increasingly unwilling to be paying their taxes for others to retire when that opportunity will be denied to them."

He said the damage to superannuation for future generations "will be the legacy of Bill English". The cross-party accord on superannuation New Zealanders demanded a decade ago was "destroyed". The suspension of Super Fund payments was made all the worse by the fact KiwiSaver was also gutted with the halving of employer contributions.

Mr Goff said National cared about nothing except avoiding a ratings downgrade from international credit agencies, particularly the visiting Standard & Poor's. "It is designed to placate and grovel to Standard & Poor's."

The ratings agencies were "not part of the solution but part of the problem" in the global economic crisis, he said.

He noted the support they gave Enron before its collapse and the A+++ ratings to companies involved in the subprime mortgage crisis.

Mr Goff said 1250 more New Zealanders were put on the dole last week - the worst week since National were in power in the 1990s. He said funding for research and development had been cut by 75 per cent. He was also concerned about the future cuts that would come to the health sector that had been put under tight spending control.

Mr Goff agreed that some spending needed to be cut, but did not detail what he would do. He said National's decisions were "badly skewed". Mr Goff said the Budget should have been a "stimulus package", with money put towards skills training and investment to create new jobs.

Prime Minister John Key dismissed Labour as a "credit card opposition" who only knew how to spend, calling Mr Goff "whack it on the bill Phil".

THE PARTIES

PETER DUNNE, UNITED FUTURE
"The Budget is a careful balance of new spending and the dropping of inefficient past programmes, in sharp contrast to the 'slash and burn' approach of National Party Budgets of the early 1990s." The deferral of the next round of tax cuts was "disappointing but inevitable in the current fiscal circumstances".

That made it "all the more important that the Government's medium-term objective of aligning the top personal, corporate and trust rates at 30c be achieved ... The voluntary sector needs the certainty of long-term funding to effectively deliver vital services to New Zealand communities feeling the pressure from the economic downturn".

RUSSEL NORMAN, GREEN PARTY
"New Zealanders need some bold initiatives to tackle the twin environmental and economic crises - not a Budget that leads to less gain and more pain later. This Budget offers few practical solutions to combating the current economic woes and the wider ecological problems facing New Zealand. [It] is a vision for not much new, and look out for big bad cuts next year. It does manage to find money for new roads while leaving nothing substantial for new housing stock. It includes initiatives to retain doctors but this will be essential given the cuts to preventive medicine, where the Obesity Action Coalition lost its funding."

JIM ANDERTON, PROGRESSIVES
"Governments around the world are investing in the future. This one has slashed the future, this is the broken promise Budget."

The Budget was a weak response to the problems created by the international economic crisis. Huge cuts had been made in science and research, which was an economic disaster.SIR ROGER DOUGLAS,

ACT FINANCE SPOKESMAN
The Government has spent too much money. "They suffer from the tyranny of the status quo - more borrow and hope." The tax cuts that had been scrapped would have cost the Government less than $1 billion. "The Government needed to find just 1.5 per cent of waste to deliver [its] tax cuts.

"This is against a backdrop where Government spending is, in real terms, $18 billion higher than it was nine years ago."

TARIANA TURIA, MAORI PARTY
"None of us were under any illusion that the economic and fiscal outlook would sustain a generous spending programme to meet every need. This Budget is a careful Budget. Protecting the vulnerable was an important priority in our negotiations [to support the Government]. In the area of social services, we sought to ensure that the people would benefit from accessing their full and correct entitlements while at the same recognising our collective responsibility to keep the economy moving, to keep people in jobs, and to create opportunities to generate hope. Every issue is a Maori issue. We know if the Budget doesn't work for Maori, then that isn't a good Budget for New Zealand."

PANELLISTS

STEVE MAHAREY, FORMER LABOUR MINISTER
People usually judge Budgets by asking what it does for them. Not this year. Instead we need to ask what it does for the country.

We need to know it will give confidence to people who are loaning us money. The Budget passes that test. We need to know, more importantly, if it puts in place a plan that will lead to the kind of change that will make us stronger. The Budget struggles to pass this test.

The crisis we face is not cyclical, it is structural. If we want to emerge with an economy relevant to the new economic order, we need to make big changes.

To take one example, our traditional reliance on agricultural commodities has to end. Everything that leaves our shores should be value-added and sustainably produced.

Only major investment in education and science will allow us to move forward.

The Budget does provide more resources. But is it transformational? No. Does it tell a story that can win the backing of all New Zealanders? No. Does it suggest the kind of institutional changes needed for such change? No.

Perhaps this is too much for one Budget to do. But we cannot wait for the next one.

RICHARD PREBBLE, FORMER ACT LEADER
As always Bill English's analysis was excellent.

"In the five years to June 2009, core Crown expenditure will have increased by 49 per cent. By contrast, the nominal economy has grown only 25 per cent and tax revenue by 25 per cent over the same period. No government, business or household can survive for long with expenditure growing at twice the rate of income."

Then Mr English told us, "The first step was to carefully scrutinise existing spending. This involved considerable input from both my Cabinet colleagues and public sector chief executives."

Oh really? What is the result of this scrutiny? A cut in Government spending of just $301 million. Labour increases Government expenditure by $18 billion and all National can find is a 0.4 per cent saving!

Government expenditure as a percentage of GDP is set to increase from 31.8 per cent to a record 37.3 per cent of GDP financed by huge Government borrowing. Despite Phil Goff's howls of rage, given Dr Cullen's hatred of debt I suspect that if Michael were delivering his 10th Budget he would have been much more prudent.

LAILA HARRE, UNIONIST
Who believes that without the relentless pressure of public opinion it would have been more tax cuts for the wealthy rather than more of our state-owned assets that went on the chopping block in Bill English's first Budget? Good on New Zealanders for shifting the political centre line.

No tears from me over the Cullen Fund either. The best investment we can make in future superannuation is to invest in the people (today's kids and especially today's poor kids) who will be paying taxes then.

Thumbs up for home insulation (go, Greens). But the hike in Government debt and limited imaginations have conspired against those poor kids again. With Treasury now forecasting unemployment peaking at 8 per cent next September (which means youth unemployment at around a quarter of all 18-25-year-olds) this was the time to announce a much bigger job-creation programme, helping to avoid an unemployment catastrophe and equip young New Zealanders to earn our way out of debt.