10 Oct 2023

Election 2023: Labour, National renew attacks on each other's costings

12:18 pm on 10 October 2023
Grant Robertson and Nicola Willis

National's finance spokesperson Nicola Willis and Labour's finance spokesperson Grant Robertson. (file photo) Photo: RNZ / Angus Dreaver

Labour and National have renewed attacks on each other's fiscal policies, each claiming their opponents costings don't add up.

Labour has issued a rewrite of National's fiscal plan - in National Party colours - claiming it would need much bigger cuts than advertised.

National in turn said Labour's "real fiscal plan" revealed the prospect of never-ending deficits and government debt rising forever.

In a media release, Grant Robertson said Labour's so-called "honest National Party fiscal plan" showed his opponents would need an extra $800 million a year more in cuts than National predicted - a total of $3.1 billion a year, translating to about 6000 job losses nationwide - to make its tax plan add up.

This was based on three shortfalls he said had been found:

Despite two economists modelling the foreign buyers' tax from real estate data and being unable to replicate National's expected revenues, the party has so far failed to provide evidence debunking those calculations - or front up with its own.

Labour finance spokesperson Grant Robertson speaking to reporters in Wellington on 2 October, 2023.

(File photo) Labour's Grant Robertson says National is not being honest about how much would need to be cut to make its tax plan add up. Photo: RNZ / Angus Dreaver

Robertson said National could have done so at any point in the last 40 days, and "there's only one explanation why they've chosen not to do so: it simply does not add up".

Labour's release described the offshore gambling tax as a "worthless gimmick".

When calculating the cost of restoring interest deductability on rental property, Labour said "even the ACT party is using more accurate publicly available data" on wholesale interest rates.

"This true picture of costings will require cuts to public services of up to $3.1b a year. That's nearly a third more than the $2.3b in cuts National initially claimed, with additional cuts of $716m in 2024/5, then $743m, $780m, and $798m in subsequent years," Robertson said.

Labour said National's promise to protect health and education from the 6.5 percent baseline cut they proposed would mean a 14.3 percent cut elsewhere, and the party would need to spend more than $300m on redundancy payments.

This would mean even after cutting all policy, communications and advertising functions from the Justice sector, Department of Conservation, and Social Development, they would need another $35m, $40m and $55m respectively to meet the demanded cut amounts, Labour said.

Labour also pointed to other areas it said National failed to account for in its fiscal plan: last-resort funding for local councils that failed to meet water safety requirements under its three waters policy, Build-to-Rent depreciation deductions the party committed to in March, appropriations changes in its Housing Growth policy, and what Labour said were underestimates of the cost of ending the Clean Car discount.

National Party finance spokesperson Nicola Willis said the party had released a "corrected version of Labour's fiscal plan which fixes errors in the original, including a blowout in the cost of Chris Hipkins' absurd policy of removing GST from fruit and vegetables, a woefully undercosted dental policy, and the failure to account for Labour's proven track record of overspending its budget allowances".

National said it showed:

  • The real costs of Labour's GST and dental policies (an extra $736m over four years)
  • Labour track record of blowing its budget operating allowances ($600m per year each Budget)
  • Permanent deficits, with the books never getting back to balance
  • Debt blowing out by $7b by 2027/28 and an endless debt spiral.

Willis told First Up Robertson's claims that National's plan would require $3.1b a year in cuts to public services were not credible.

"He's wrong, he's desperate and his claims at this point in the campaign are just not credible," she said.

"National has had its tax and fiscal plans independently checked by external experts, who have found it to be cautious and consistent.

"We've been really clear that we do expect efficiencies from the public service. The way we want to deliver those is by asking chief executives across a range of entities to come up with on average 6.5 percent in savings. Now how they wish to achieve that and exactly how much they deliver will depend on that exercise."

Willis said Labour's version of National's policy was "yet more desperation from a Labour Party that has never kept to a single spending promise it has set in a fiscal plan".

National Party finance spokesperson Nicola Willis speaks to media about GDP and the economy.

National's Finance spokesperson Nicola Willis says Labour is resorting to desperate politics. Photo: RNZ / Angus Dreaver

"The Labour Party cannot deliver. It is out of ideas, out of time and this is just more desperate politics. National's tax policy and fiscal plans have been independently checked by external experts and found to be consistent and credible.

"The real scandal is Labour's fiscal fantasy of delivering spending restraint when the past six years have proven it is incapable of that. Labour's addiction to spending has poured fuel on the inflation fire, blown New Zealand's debt from $5 billion in 2019 to $100 billion and delayed the return to surplus three times. They are in simply no position to lecture anyone on fiscal rectitude.

"And because Labour has no way to pay for their reckless spending, a Labour-Green-Māori coalition can only mean more taxes for hard working Kiwis."

Robertson argued National's cuts would have a massive effect on frontline services, and leave New Zealanders and businesses worse off.

"The more you look at Christopher Luxon's and Nicola Willis' plans, the worse they get."

So far as her criticism of Labour's fiscal plan was concerned, in a statement, Robertson accused National of not correctly costing Labour's dental policy or the removal of GST from fruit and vegetables.

"National has used household dental spending data from Statistics New Zealand. However, we don't include all dental work and we're proposing to fund it on a capitation basis, like GPs."

Labour's funding formula was the same as the Ministry of Health's independent costing of free basic dental care, Robertson said.

The party had conservatively costed its GST policy on the assumption that all of the savings from removing GST would be reinvested into buying more fruit and vegetables.

"But, once again, National and its associates have made basic maths errors - they've effectively double-counted: increased the current GST-inclusive expenditure on fruit and veg by a bit over 17 percent which would mean the actual GST-free expenditure would go up a whopping 36 percent and would mean people cutting significantly on other types of food."

Nobody, including the Taxpayers Union, was claiming that would actually happen but that's what would be needed to make National's alleged 'blow-out' add up, Robertson said.

Indexing of benefits

Willis has defended removing the indexing of benefits to wages and instead linking them to the inflation rate.

When pressed on whether beneficiaries would get less money over time, she promised National would increase benefits each year and the other major advantage for them would be rents wouldn't increase so much if her party was in government.

Asked if more people might fall into poverty as a result of linking benefits to inflation, she told Morning Report Labour had to step in this year to change the formula because the cost of living had risen faster than wages.

"Our policy is a more consistent and principled way of ensuring benefits keep up with the cost of living."

When told that expert advisory groups on welfare have concluded linking benefits to wages is a much better way of preventing poverty, Willis responded: "We're saying that inflation indexing benefits has been the accepted practice across successive governments because it ensures that benefits keep up with the rising cost of living and we think that's important."

Willis said National was also campaigning on more help to move people off welfare and into work, especially as children growing up in these households were more likely to experience "material hardship".

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