Election 2023: Labour forced to fix GST policy after $240m mistake found

National’s Nicola Willis says Labour made a mistake in the costings of its GST policy, which meant the cost of the policy was $235 million more than Labour had claimed - an error Labour acknowledged was in its early material but was quickly rectified before the public release.

Labour said the error was only included in the first version of the policy document, which was sent to media before the announcement. It was not in the material released publicly on Labour’s website after.

The error was fixed on Sunday before that announcement, but media were not advised so the figures used in many news stories remained inaccurate.

The initial material said the four-year cost of it would be $1.985 billion and costed from the 2024/25 financial year - it is actually about $2.2 billion with $115 million of it being tied to the 2023/24 financial year.

Speaking to journalists at the Beehive today, Prime Minister and Labour leader Chris Hipkins acknowledged the error should have been corrected earlier.

“We should have more proactively corrected that on the day of release,” Hipkins said.

He said Willis was “mischief-making” with her claims about why the error occurred. Willis had earlier claimed Grant Robertson was advocating for a later start date for the policy. Hipkins said the Finance Minister had supported an April, 2024 start date, as was confirmed in the policy yesterday.

Robertson, Labour’s finance spokesperson, used the $2.2b figure and the correct years of spending during a press conference yesterday after the policy announcement.

“The correct cost of the GST policy has always been accounted for in our fiscals and was discussed in the media conference yesterday,” a spokesperson said.

“References to ‘holes’ or ‘uncosted’ by the Opposition are false.”

National finance spokesperson Nicola Willis is critical of Labour over its mistake in its initial documents released to media on its GST policy. Photo / Mark Mitchell

Willis said it was a “schoolboy error equating to quarter-of-a-billion-dollar hole”.

Claims of mistakes in the books are a common theme in election years as parties try to cast doubt on their opponents’ credibility.

How the mistake happened

The policy will take GST off fresh and frozen fruit and vegetables and is meant to kick in on April 1 next year, the first day of the tax year.

But Labour’s initial policy document only costed the policy as beginning in the 2024/25 fiscal year, which begins on July 1, 2024 - three months later.

This left the policy unfunded for three months of 2024. The party also costed the policy for only part of the 2024/25 year, leaving it underfunded in that year.

“If the policy is introduced when promised, there will be a three-month hit to the books in the 2023/24 fiscal year, which ends in June. This is not accounted for in Labour’s policy,” Willis said.

“Labour has also made a mistake in their costing for the 2024/25 fiscal year. The annual cost of the policy should be approximately $500 million as in later years, but Labour has only budgeted $365 million. This is not explained.

“The cumulative size of this error is likely to be around $250 million over the next two years,” she said.

While mixing up the beginning of the tax and fiscal years is a fairly common mistake, what is less clear is why Labour only costed the policy for part of the 2024/25 year when the party had always said the policy would apply for all of that year.