Budget 2022: Act leader David Seymour's plan - tax cuts but big cuts elsewhere

Act Party leader David Seymour has proposed a big boost in Defence spending, but $5.3 billion in cuts to other spending in the next year in an "alternative Budget" he claims would get the books back in shape sooner.

Seymour is unveiling Act's plan today, a mix of new and old policies from raising the retirement age to performance pay for teachers.

It includes a big lift to Defence spending to 2 per cent of GDP, which Seymour said would bring New Zealand into line with its allies. That would mean a $7.5 billion in extra capital expenditure over the next four years – almost double what Labour would spend.

It also contains the latest iteration of Act's long-standing policy for a relatively flat income tax system: those earning less than $70,000 would pay 17.5 per cent and those who earned more would pay 28 per cent.

However, there would cuts elsewhere – his plan includes cutting "wasteful spending" by $5.3 billion in 2023 – including stripping back the core public service to 2017 levels.

Seymour said Finance Minister Grant Robertson's $6 billion allowance for new spending in this Budget was "absurd" and Act would reverse 80 per cent of it.

Seymour said it was time for some hard calls to be made to deal with inflation and the debt taken out over Covid-19 – and took aim at Labour and National for being too scared to make them because of the 2023 election.

"There is a school of thought that all that needs to be done is to be a small target and win the next election. It requires significantly more debate than that.

"Labour is addicted to spending, it has no respect for the fact that it's other people's money that they're throwing around, leading to high inflation. While families are being forced to cut their budgets left, right and centre, Labour is fiscally incontinent," Seymour said.

The Government will unveil the actual Budget on May 19. Finance Minister Grant Robertson has said the main focus for new spending in that will be in health and climate change.

Last week Robertson set out his own new fiscal responsibility rules, including a debt cap of 30 per cent of GDP. He has also revealed the return to surplus was now likely to be in 2024/25 year - a year later than was forecast in December.

The plan also resurrects Act's policy to increase the retirement age over time, and for partial asset sales of the remaining SOEs, into the mixed ownership model National introduced for energy companies.

Act is the only party calling for significant cuts in spending, and Seymour said returning to surplus was important to deal with inflation.