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Home / New Zealand

Budget draws battle lines for election

NZ Herald
22 May, 2015 05:00 PM4 mins to read

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Finance Minister Bill English. Photo / Mark Mitchell

Finance Minister Bill English. Photo / Mark Mitchell

Opinion by
Govt’s masterstroke is $25 increase in core benefits.

National needed a good Budget. It got one. The Budget was a rock of certainty and continuity in a sea of almost surreal politics played out most visibly and vividly by the Prime Minister and the Leader of the Opposition.

Bill English has said unexpectedly tighter fiscal conditions made this year's document one of the most difficult he has had to compile.

His Budget is bereft of vision. It largely ignores the very basics of any Budget - the state of the economy.

Yet, it may go down in history as one of English's best Budgets.

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It is certainty of the most political English has delivered.

The masterstroke is the $25 increase in core benefits - the first time in 40 years that the core rate has been increased other than for adjustments for inflation.

The announcement left Labour MPs gobsmacked. They were completely outflanked.

So National is the new friend of the beneficiary? We don't think so. National is not seeking to capture the votes of the poor.

By being seen to be making a reasonable effort to tackle endemic child poverty, National is trying to shut Labour out of the picture in middle New Zealand.

Labour's leader appears to have decided to give National a helping hand.

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Having inadvertently anointed a humble member of the public with the status of the lead singer of Kiss, Little made a huge gaffe in thinking aloud about means-testing those over the age of 65 who are still working while picking up their entitlement to New Zealand superannuation.

It is territory that only those with a political death wish venture into.

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It was a bad end to a week which had begun in the best possible way for the centre left. It was little wonder that those who make no apology for wanting to tax the rich far more heavily were absolutely cock-a-hoop.

Faced with discontent in his own ranks over the Government's lack of action in suppressing demand in the white-hot Auckland property market, the Prime Minister crossed the political divide to effectively pick up a policy that Labour is at the point of dropping - a capital gains tax.

Key would beg to differ. His argument is that the Government's hasty rewriting of the rules covering the treatment of profits by those who own residential property other than the family home is merely a much-needed tightening up of the Income Tax Act to stop people avoiding paying tax on their properties.

Under current rules, someone who does not intend to sell their property is classed by Inland Revenue as an "investor" rather than a "speculator".

While tax has to be paid on rental income, the property is designated as a capital asset and any later profit or loss from selling the property is capital and is not taxable.

The new provision will stipulate that any sale made within two years of the purchase of the property to be subject to paying tax.

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Those on the centre-left who advocate for the introduction of a capital gains tax see National's rewrite of tax legislation as the very thin end of a very thick wedge.

In tweaking the Income Tax Act , Key has set a precedent which opens the way for other politicians to make incremental changes to tax law with the ultimate objective of producing an all-embracing capital gains tax.

That is not the kind of legacy Key is intending to leave when he eventually goes.

The Prime Minister is very much into "legacy politics" as evidenced by his drive to change the country's flag.

That initiative already looks dead in the water. You know you are in trouble when the panel set up to run the referendum has more members on it than people who turned up to a consultative meeting on the flag - as happened in Christchurch.

The stuff of Key's dreams is proving to be a lot harder to implement.

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The danger now is that the referendum might turn into a vote on Key's record in Government.

Just as well that English delivered the right kind of Budget this week.

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