20 Jul 2017

Voters to choose: tax cuts or more social spending

5:59 am on 20 July 2017

Voters are faced with a choice between National's tax cuts and Labour's promise to pump billions more into core services such as health and education.

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Steven Joyce's Budget promises tax cuts, while Grant Robertson's offers billions more dollars for social spending. Photo: RNZ

Labour's alternative budget, released yesterday, would spend $17 billion more on health, education and family incomes over four years, but would scrap National's planned tax cut package to help pay for it.

The party's finance spokesperson, Grant Robertson, said now was not the time for tax cuts, but for investing in "public and social services that will give New Zealanders a good life".

Leader Andrew Little said the package signalled fundamental differences between National and Labour.

"You can't do absolutely everything.

"We have to make choices about what takes priority and for Labour those priorities are the things that are going to give people a chance."

In order to boost spending, Labour would run lower surpluses than those forecast by National.

In 2021/2022 National is predicting an operating surplus of $8.6bn, while under Labour that would be $7.4bn.

Labour would also reduce debt at a slower pace; National aims to have debt at 17 percent of Gross Domestic Product (GDP), or about $60bn, by 2021/2022, whereas Labour's target is about $67bn, or 20 percent of GDP.

National Party campaign chairman Steven Joyce said voters would be hearing a different message.

"It shows voters we're much more careful with their money. Labour are proposing to borrow an extra $7bn, cancel the tax threshold adjustments and then somehow not spend much more on core services. I think it's just a signal they'd waste more money."

ACT leader David Seymour said the plan was economically irresponsible.

Green co-leader James Shaw 20 June 2017

Greens co-leader James Shaw said Labour's spending plans were a 'good piece of work'. Photo: VNP / Daniela Maoate-Cox

"We have gotten used to having fiscal restraint, lower mortgage rates and a steadily growing economy for the last nine years. With what Labour's proposing, that could change very quickly."

Council of Trade Unions President Richard Wagstaff said Labour had its priorities right.

It was not possible to properly fund public services and deliver tax cuts at the same time, he said.

"We've had a growing population which puts an additional burden on the public services and of course National talks about putting more and more money into them... but the money is not keeping up with the pressure those services are under."

Greens agree to Labour's spending plans

Labour also said if National intended to deliver its debt target of 17.9 percent of GDP by 2022 it would have to start cutting services.

But Mr Joyce said that was not correct.

"We're adding actually $7bn over the next four years from this Budget alone in core public services, it is however the right time to be bringing debt down."

Labour and the Greens have signed up to a Memorandum of Understanding, but Labour said this was its spending plan alone.

Green Party co-leader James Shaw said it was a budget they could work within.

"Look there's nothing that we're unhappy with, it's Labour's budget for their policies and their proposals and it's a good piece of work - philosophically we're largely on the same page."

About $800m a year in the spending plan has not yet been allocated.

Mr Robertson said some of that could be used to accommodate spending demands from other parties in post-election negotiations.

He said there could also be other areas of "reprioritisation" but would not say exactly where Labour would be prepared to negotiate.

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