National promises $4.7bn in tax cuts in economic and tax policy

National's promising a short-term package of tax cuts - worth about $4.7 billion - to kick start the economy.

Leader Judith Collins and finance spokesperson Paul Goldsmith announced the policy in Wellington this morning.

The changes would be made by significant increases to income tax thresholds, but would only be in place for 16 months, from December this year until March 2022.

National says this would put $46.50 each week in the pocket of the average earner.

The tax cuts would be paid for out of the $14bn Covid Recovery fund the coalition had set aside in the event of, for example, a second wave.

Other key aspects of National's economic plan are a revised debt repayment target, more generous tax write-offs for new business assets, and a tighter budget for new spending.

Lift the bottom tax threshold from $14,000 to $20,000, the middle threshold from $48,000 to $64,000 and the top threshold from $70,000 to $90,000, from 1 December 2020 until 31 March 2022 - estimated cost $4.7bn Offering a 12-month tax incentive for investments over $150,000 for businesses that invest in new plant, equipment and machinery and double the depreciation rate for such businesses - estimated cost $430m Winter Energy Payment would not change The previously announced JobStart scheme, paying businesses $10,000 for every new job created The BusinessStart scheme, allowing

New Zealanders who lose their job to claim $10,000 tax credit and up to $20,000 from KiwiSaver for working capital for a new business

National says it would achieve that by a more disciplined approach including suspending Super Fund contributions, and scrapping spending on initiatives like tertiary fees free and KiwiBuild.

It would return New Zealand to surplus by 2028, the party says, and the package also leaves $10.2bn in unallocated operating allowances over the next four years.

It says it would achieve that by a more disciplined approach including suspending Super Fund contributions, and scrapping spending on initiatives like tertiary fees free and KiwiBuild.

Goldsmith also confirmed plans to suspend Crown contributions to the New Zealand Super Fund - money that would go into the sharemarket to accrue value - for four years.

It also plans to invest $31bn on transport in the next 10 years, $1.1bn extra in education, $800m in health, $900m in social development and $170m in law and order, and set up an infrastructure bank to ensure well-managed investments and minimise debt.

The party also plans to set up a Border Protection Agency to help manage Covid-19, and

Debt reduction

The party says it would trim back the amount of money available each year compared to Labour, allowing it pay debt more quickly. Under National the cap would be $1.8bn compared to $2.4bn as laid out by the government in this week's pre-election Economic and Fiscal Update.

The party pulled back on its original plan to have debt to 30 percent of Gross Domestic Product (GDP) within a decade, with a new target of 35 percent by 2034. That compares to 48 percent under Labour's plan.

The announcement follows the release of the Treasury's analysis of the government books ahead of the election in the pre-election economic and fiscal update on Wednesday, and official GDP figures yesterday that showed New Zealand in its first recession since 2010 - and the deepest fall in living memory.

National's finance spokesperson Paul Goldsmith says the pre-election update showed their original plan would not be "practical or feasible" given the economic forecasts.

"The numbers in prefu in terms of debt were much worse and so we've taken what we think is a fairly pragmatic step which is to say it was never a religious conviction, it was a desire to reduce our debt faster than the Labour government is," Goldsmith says

"Our plan right now is still substantially faster than Labour to reduce debt."

Its plan would also require a "more disciplined approach" to spending, he says.

"Suspending Super Fund contributions, eliminating wasteful spending like Fees Free and KiwiBuild."

That would not represent a cut to public services, insists Goldsmith.

"It's not a cut, it's not a cut to social spending or anything like that, there's just more discipline to the extension of spending over the extended period of time."

Tax cuts

National says more than 2.6 million taxpayers would benefit from the tax cuts, including more than a million who would get more than $2500 over the 16 months.

Goldsmith says the tax cuts would be funded out of the Covid-19 fund.

"Well, $4.7bn of the tax cuts is funded out of the Covid fund, we've allowed another $4bn for potential spending and then we're working on the assumption that we'd be able to use the rest of it to pay off debt.

"We've got about $9bn available in the Covid fund as it stands. Obviously if we go into another heavy lockdown we may have to adjust but we'll be doing everything we possibly can to avoid that.

He says the party would like to keep the tax cut permanently, but cannot promise that now given the state of the books.

"It's a temporary tax cut and it's a lot better than they'll be getting under Labour, which is nothing.

"It's a stimulus, what we're seeing right now is that New Zealand is in a deep economic hole ... are we gonna be going in and out of lockdowns?

"Obviously we want to do everything we can to avoid that but that is having a real toll on the economy and that is why a short-term stimulus is so important to reduce the damage.

He says it has been targeted "very much at the average income earner".

"We'll be trusting them to decide what they want to do with their own money, that's the oint of tax relief, but I'm sure this will help particularly helkp those hospitality and tourism sectors which are really struggling."

Labour: Use of Covid-19 fund 'beggars belief'

Labour finance spokesperson Grant Robertson targeted the plan to use the funding from the Covid-19 Recovery Fund.

"It beggars belief that in the middle of a pandemic the National Party is planning to gut the money set aside to protect New Zealanders in case of another major outbreak of Covid-19," he said in a statement after the announcement.

"We carefully put aside $14 billion to look after New Zealanders' health and wellbeing and now National wants to put that at risk. This policy reeks of desperation as National races to borrow money to pay for a $4000 temporary tax cut for Judith Collins."

In the lead-up to today's announcement,said National's economic stance was in a "Bermuda triangle" of trying to achieve three incompatible things at once.

"They both want to increase spending, reduce revenue and dramatically reduce debt. You can't do all of those things at once credibly and I think their plan is lost somewhere in that triangle."

Desperate and irresponsible from National. They will need to cut billions of critical investments in health and education. What's needed now is Labour's strong leadership and balanced plan for recovery and rebuild. #LetsKeepMoving

— Grant Robertson (@grantrobertson1) September 17, 2020

Robertson repeated this criticism this morning, targeting National's leadership spills this year and the likelihood of a coalition with ACT.

"National is a shambles, with multiple leaders, incoherent policy this year and growing factions," Robertson said in a statement. "Now their health spokesman is talking about his leadership ambitions."

He said National would be forced to implement severe cuts - including to incomes of the elderly in winter as a price of working with ACT, which could exploit internal divisions to demand radical changes as the price of government.

"On current polling, if National are to have any hope of forming a Government, ACT will have to play a big role.

"ACT's radical austerity plan puts popular programmes like KiwiSaver, Superannuation, the Winter Energy Payment and Working for Families at risk, right at a time when people need certainty and continuity."

In a statement after the announcement, Robertson said the plan was unaffordable and would lead to harsh cuts to public services during a global pandemic.

National's plan 'not credible' - ACT

ACT leader David Seymour said National was trying to have its cake and eat it too, and yo-yo tax cuts are not what New Zealanders need right now.

"They're still having a bob each way. You cannot balance the budget and reduce taxes if you're not prepared to look at spending and that's one thing they're still not doing.

"The National Party's basic proposition is that with a small reduction in increases to future spending we can eat our cake and have it too, i.e. cut taxes and keep spending. I don't think that's credible.

"ACT's tax cuts are permanent and that's the way you should do it but you have to be prepared to look at spending in order to achieve that."

He said National's policy shifted more of the tax burden to high salary earners.

"High salary earners generally are not rich, high salary earners generally are people who work hard. The National policy actually makes the taxes system more progressive and I think that's a mistake."

He said the National Party move on superannuation was right.

"We cannot keep investing money in the global sharemarket while we're borrowing money off the global debt market."

Green Party:

The Green Party said the plan showed National was planning huge cuts to public service spending.

"National spent their time in government gutting health, education and conservation spending, and now want to do it all again. Our hospitals and schools are already at breaking point because of neglect. They desperately need an increase in funding, not more cuts," co-leader James Shaw said in a statement.

He said it would risk gutting critical public services, and put health, education and nature at dire risk.

"This plan would inflame the inequality this government has worked so hard to reduce. Where the Green Party has a plan to put at least an extra $100 a week in the pockets of low income families who need it, National is proposing just $8.10, not even enough to buy a block of cheese.

"The Greens believe the best way to increase economic stimulus is through a Guaranteed Minimum Income, which would go into the hands of the people who need it most, and who are most likely to spend that money straight away in their communities.

"National is proving, once again, that it doesn't care about public services or low-income New Zealanders."

New Zealand First: Tax cut just trying to buy votes

New Zealand First leader Winston Peters said the policy was trying to buy votes and was crude in the extreme.

"Bribes only work if people take the bribes and they're not gonna take the bribes because they're not gonna vote for them ... if you were to have a referendum amongst New Zealanders today from all sections of society they would not think that consumption and indulgence is the way out of this lot."

He said "hedonism" at a time of economic crisis like New Zealand faces simply will not to work.

"A spend on consumption is only about consumption, we've got to get offshore, grow far greater wealth for the family of New Zelaand.

"We've got to go to our manufacturing base doing far more things with our own products. we've got to go to M4 substitution so we don't have to for example pay a lot of money on our export earnings and inbalance is huge. The balance between exports and imports has got to be addressed.

"With the greatest respect to them it's never gonna be implemented. They're not gonna be elected on a policy like that."