11 Sep 2023

CTU claims National's tax policy would require deep cuts to services

10:29 am on 11 September 2023
Nicola Willis

National's finance spokesperson Nicola Willis Photo: RNZ / Samuel Rillstone

The Council of Trade Unions (NZCTU) is sounding warnings about National's tax policy, saying it would require much deeper cuts to core services than the party is letting on.

National says the findings are "ludicrous", and has accused the union of making a partisan political attack.

NZCTU economist Craig Renney released his analysis of National's tax policy on Sunday, saying areas like courts, biosecurity, cybersecurity and family violence prevention were in the firing line.

National has ruled out cuts to frontline services, but Renney said doing this and also achieving the $594m a year in savings the party had targeted in its plan would require spending to be reduced by 31 percent.

Renney - who is a former advisor in Labour Finance spokesperson Grant Robertson's office - said his calculations used data from the May Budget.

National's finance spokesperson Nicola Willis said the cuts the party would require were small.

"Look, it's really ludicrous," she said. "We're very clear in our policy, that we would ask chief executives to identify savings in these organisations where they are not critical to frontline services."

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"There is funding being caught in the backroom bureaucracy that is not making it to the frontline. We will be tasking chief executives across the agencies we've identified with the task of finding 6.5 percent in reductions. That is actually quite a small reduction.

"The sorts of things we expect them to identify - things like advertising, work programmes on policies that are no longer necessary, refurbishment, farewell parties - these are things that we think there should be a ruler run over."

Renney disagreed.

"The 6.5 [percent] is on top of the 2 percent that's already been identified by the government, so that makes it 8.5 percent - and then once you cut out the frontline areas, because National has said it doesn't want to target the frontline services, once we cut that out of the analysis then the remaining areas then have to lose 31 percent of their expenditure.

Council of Trade Unions (NZCTU) policy director and economist Craig Renney.

CTU economist and policy director Craig Renney is a former advisor to Grant Robertson. Photo: Stuff / ROBERT KITCHIN

"And that assumes that the money that they've promised to bring in via overseas buyers and the money they've promised to bring in via overseas casinos turns up - if that doesn't turn up, the cuts get even deeper and deeper.

"If we were able to make savings in some of the areas like the Serious Fraud Office, for example, which is up for cuts, surely we will be looking to recycle that back into that frontline service, rather than using that money from tax cut."

Willis argued the CTU was taking a partisan approach, coming shortly after a CTU ad campaign which targeted National's leader Christopher Luxon.

"First, we had the large attack ads about the leader of the National Party. Now we have a report which has ignored the explicit undertaking national made in our policy document.

"I think it's particularly telling that when Grant Robertson came out and identified $4 billion worth of reductions and spending across the bureaucracy, the CTU was silent. And yet when National identifies $594 million worth of savings, suddenly all they can talk about is cuts.

"It's very hard to take this sort of thing seriously: this is a partisan political attack."

Renney said it was a question of degree.

"Cuts of one or 2 percent, which is what the Labour Party has said, we wouldn't necessarily agree with those cuts ... they're not anywhere near the scale of the National Party's cuts, nor are they anywhere near approaching some of the some of the areas that the National Party has highlighted inside its cuts.

"It's really harder and harder to do ... because most of the easy wins have been done already, via scaling back Covid expenditure and cutting back on some other areas."

He also said the back office functions in many of those departments were "the real engine rooms of those frontline services", and some would be essential for delivering the tax cuts National had promised.

"They've identified IRD and IRD investigations as being an area that they wants to explore for cuts. Well, that will be an essential component part of delivering their taxation from foreign buyers ... Gambling Services which are inside the Department of Internal Affairs are inside the scope for cuts and yet the National Party is going to be relying upon those people even more to deliver its overseas casinos money."

Renney told Morning Report National had spent months telling New Zealanders it would go through line-by-line on departmental spending, how it would do the cuts and and how it would balance the books and it had not done that.

Asked about Labour's cuts he said the party had taken the approach of not replacing staff when they left particular areas.

"Those cuts are somewhere in the area of a quarter or less of the cuts that the National Party is trying to propose so it's a difference of scale and a difference of the level of challenge.

"And we all know as you try to achieve the next dollar of saving it gets harder and harder and harder."

The CTU wouldn't agree on the Labour Party cuts either and it would be going carefully through the level of cuts it had proposed also.

Renney maintained that many backroom functions being proposed for cutting supported people doing frontline jobs.

Willis remained certain her tax plan would work.

"We are confident that with the huge increase in expenditure across public agencies - and which has gone up more than $3 billion across the agencies we've identified - that chief executives and their able public servants will be able to find savings that allow these these to be made without any cuts to frontline services."

She told Morning Report National had identified 24 agencies across government, they had looked at spending on their own activities and identified increases in spending which was a 62 percent increase.

"We've judged that on average we think it's very reasonable to say to chief executives if we become government can you please look line by line through your costs and identify 6.5 percent of savings. We think that's reasonable and we think most New Zealanders will too."

She used the Ministry for the Environment as an example which has increased its departmental spending costs from $68 million to $248m a year.

"So it's more than tripled what it's spending on policy advice, communications advice, management and the like and in that context I think it's very reasonable to say to the chief executive there has been a very large increase in spending, please identify savings."

Chief executives would be asked to bring recommendations to ministers and the government would make the final decisions on cuts.

Asked about ACT's statement that it might not support National on supply Willis said it was a hypothetical situation and if voters wanted a change of government they should support her party for their party vote.

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