Labour, Greens, ACT, Winston Peters attack Budget 2011, say National has it wrong; Maori party proud to secure funding for their people

By Alex Tarrant

Labour says the budget lacked courage and vision to fix the economy, ACT says it was an opportunity missed to comprehensively change the economy, the Greens say it lacked courage on the revenue front, and the Maori Party was proud to secure another NZ$214 million in funding for initiatives that will directly benefit their people.

Opposition parties (as well as one in coalition with National) were quick to attack Bill English's election year budget, saying it did not do enough, change enough, changed the wrong things, or didn't even do anything. But despite their agreement on how bad the budget was, their prescriptions for fixing the mess were all different.

Meanwhile, the Maori Party trumpeted the gains it achieved for its people, with NZ$214 million in funding for Maori-related initiatives added to NZ$407 million in funding from the previous two budgets.

'Hurting middle and low income earners'

Labour leader Phil Goff said the budget lacked the courage required to fix the economy, and put more pressure on middle income earners even more through cuts to KiwiSaver and Working for Families. Labour would look to make higher income earners pay more tax to take pressure off lower and middle income earners, while taking GST off fresh fruit and vegetables.

"The Budget identifies future cuts worth NZ$1 billion in the public sector. But they don’t have a clue where they will come from. Or they just don’t want to say," Goff said.

Departmental CEOs will be told how much funding they will receive, but have to identify where that spending would go, and what cuts there would be, themselves.

“National promised we’d come aggressively out of the recession. It keeps promising that good times are just around the corner. New Zealanders don’t believe them anymore. The reality for most Kiwis is that they are hurting. They are struggling to put food on the table, petrol in the car and keep their homes warm as we head into winter. They’re worried that that one in four young New Zealanders are out of work and losing hope," Goff said.

“What the country needed was bold and courageous action. What we’ve got from National is a long list of broken promises. National said it wouldn’t cut KiwiSaver, Working for Families or student loans and that it wouldn’t increase GST. It’s done all of those things," he said.

Labour accepted existing spending was not sacrosanct.

"But if cuts have to be made, they should be justifiable and fair. The sacrifices that need to be made to turn our country around should be fairly shared by all New Zealanders – not just pushed on to those who can afford it the least," Goff said.

“Labour will relieve the financial pressure from the rising cost of living because we think New Zealanders deserve a break. We will take GST off fresh fruit and vegetables. We will make the first NZ$100 a week tax free. We will implement bold new economic policies and a fairer tax system," he said.

“Labour will put hardworking families at the centre of everything that we do. We will take New Zealand forward with vision and courage.”

Lacks courage on raising revenue

Green Party co-leader Russel Norman said the National Government's refusal to look at different ways of raising revenue had left it no other option but to cut, borrow and sell in this year's budget.

"You can avoid the need to cut government services, borrow heavily, and sell off state assets, if you consider some revenue raising options,” Norman said.

“By raising revenue in the right way, you can move the economy towards clean, green prosperity. But instead we’re standing still, for lack of a better vision. It takes a bit of courage to talk about transformative ideas — like a capital gains tax or charges on commercial water use— when the conversation between National and Labour has been solely about spending cuts versus more borrowing,” Norman said.

“A tax on capital gains [excluding the family home] would, in time, raise revenue by NZ$4.5 billion per annum and shift investment incentives back towards the productive sector. If you want an economy that earns its way in the world, then our Government needs to support our productive sector."

The Greens supported broadening the revenue base to include a charge on the commercial use of water would raise significant new revenue and lead to the "smarter use of water".

“Unfortunately for New Zealand, the Government can’t see beyond the next boom and bust economic cycle,” Norman said.

“It’s disappointing that we’ve previously had tax cuts that help the wealthy, while for the rest of New Zealand, the price of food and petrol goes up and now KiwiSaver, Working for Families, and other essential government services goes down. Middle and lower-income New Zealanders are shouldering a disproportionate cost of the Government's poor economic management," he said.

"And what's worse, none of these cuts will leave the economy in a more resilient or environmentally sustainable position than before.”

'Missed opportunity'

ACT parliamentary leader John Boscawen said National missed an opportunity to comprehensively change the economy with the budget. ACT supports National on confidence and supply along with the Maori Party in the coalition government. ACT also attacked the government's refusal to raise the pension age.

"For months the Minister of Finance has been warning New Zealanders that we can’t go on borrowing in excess of NZ$300m a week, that we have to get our house back in order and that we need to exercise tight restraint to get back into surplus by 2015," Boscawen said.

"And what has he delivered? He delivered little more than a commitment to make a few timid reductions in programmes introduced by the last Labour government - and then not starting until 2012."

"There is no such thing as a free lunch and we now incentivise young 17, 18 and 19 year old students to go out and borrow as much as they can, while leaving their holiday earnings in a bank account to earn interest.  They would be crazy not to, and in fact when they can pay their loan back in devalued dollars some years later, if at all, you would almost say that those who didn’t weren’t smart enough for tertiary education," Boscawan said.

"Not only is it not fair for the parents of children in Otara and Porirua to pay taxes to subsidise the children of the better off who are most likely to go on to tertiary education we have also incentivised our young to take on debt for courses that they neither need nor would use and are then saddled with debt for the rest of their lives," he said.

"To the parents and grandparents of those students I ask do you really want to see your children and grandchildren permanently emigrate overseas only to be condemned to talking to them by Skype each night?

"Or do you want to see your children and grandchildren grow up in a prosperous country whose income levels not only equal but exceed Australia and are the envy of the world?  A country with low marginal tax rates that incentivise work, savings and personal responsibility.  A country that truly delivers a world class education system, not just for some New Zealanders, Mr Speaker, but for all New Zealanders.  And a country that allows not just the wealthy but all New Zealanders to have access to a proper health system."

"In the same way that the poor have subsidised those with student loans, if not through the income tax they pay certainly through GST, the poor have also been a net contributor to the very generous Kiwisaver subsidies.

While Kiwisaver had been an undoubted success and the cost blowout was due to this success, the poor and the disadvantaged were the least able to make the minimum 2% contribution that triggered taxpayer subsidies.

"The Budget also forecasts a significant increase in the cost of New Zealand superannuation. You would expect this as a consequence of rising incomes and the growing number of New Zealanders reaching the age of 65.  This number is set to balloon over the next 15 years to the point where it will no longer be sustainable," Boscawen said

"Most New Zealanders understand and accept this, and certainly those under the age of 55," he said.

"Already countries are signalling an increase in the age of entitlement as people live longer and the baby boom bubble works its way through.  Australia’s Labor Prime Minister Julia Gillard recognises this too and their pension age is set to increase at a rate of 6 months every two years beginning in 2017 and reaching 67 years in 2023.

"ACT agrees.  However, what we wouldn’t do is change the age of entitlement for those already 65, or close to it.  What we would do is actually be honest and tell those in their 50s now to give them the maximum time to prepare," Boscawen said.

"This is a Budget that was an opportunity missed.  It was an opportunity to radically transform our growth prospects and to show leadership and courage to the nation," he said.

'Proud to help our people'

The Maori Party said it was proud that it had been able to secure NZ$620 million over the government's three budgets, specifically for initiatives that would directly benefit Maori.

“We’ve been able to achieve these gains despite the worst financial recession this country has seen in decades, the rigorous tightening up of the Government purse and a natural disaster that has put unprecedented pressure on our country’s economy,” Maori Party co-leaders Tariana Turia and Dr Pita Sharples said.

“If we looked at the financial gains we are achieving for our people for every day we’ve spent at Parliament since entering the agreement, it would work out to be $2.67 million (per sitting day). We know many of our people have high expectations of us, that they need more resources to grow their businesses and create jobs, so that’s why we are in this for the long haul and why we must stay in a position of influence regardless of who governs," they said.

“The circumstances that our people face were created over the equivalent of 57 parliamentary terms or 170 years so fixing them will not happen over night or even in one term. Our biggest focus has been on protecting vulnerable whanau, empowering whanau and education because we know that strong and knowledgeable whanau is the answer to reducing high unemployment, imprisonment and poor health.”

Despite cuts in other Government initiatives, the co-leaders said they were pleased they had been able to maintain funding for the Maori Party initiatives and in actual fact, gain some new money in the Budget.

In this Budget the Maori Party secured NZ$213.55 million for Maori initiatives. In the previous two budgets, it secured NZ$406.9 million, Turia and Sharples said.

'Wait till the black budget next year'

Meanwhile, out of Parliament New Zealand First leader Winston Peters said the major fiscal surgery would come in the Budget next year when the Government privatised state-owned assets and sold them overseas.

“The fact that the government is going to start selling the power companies should send a shiver up the spines of all New Zealanders," Peters said.

“When people turn on a heater tonight they should think about next year when the Chinese or Australians get to own the power stations and if they try to leave on a jet plane, their plane will also be owned by someone else,” he said.

Describing the budget as a “savings” budget was a gimmick devised by National's Australian public relations advisors. 

“The Budget actually does nothing to really boost the levels of savings. It is an election year document that fails to get to grips with the real problems facing New Zealand. We need to lift exports, create wealth and help industry create jobs for our people. This will not happen by using the same mechanisms that failed with Roger Douglas and Ruth Richardson," Peters said.

"Somebody is going to make a lot of money when the government carries out its surgery on our state companies next year. Unfortunately it will be the Chinese and the Australians," he said.