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Goff should explain his own policy, stick to facts

Hon Bill English
Minister of Finance

27 January 2011
Media Statement

Goff should explain his own policy, stick to facts

Phil Goff should focus on explaining to New Zealanders how he will pay for his own reckless economic policies rather than deliberately misrepresenting the Government’s economic programme, Finance Minister Bill English says.

"Phil Goff has this week made promises that will leave a hole of more than $1 billion a year in the Government’s books, which Labour will have to borrow to fill or increase taxes on hard-working middle income earners.

"In the meantime, they are reverting to misinformation about the Government’s economic programme.

Goff's claim that the Government has borrowed to pay for tax cuts is wrong.

"Taken as a whole National's tax changes are in fact reducing the Government deficit compared to the situation we inherited in 2008.

"Those tax changes include two broadly fiscally neutral tax packages, a tax assistance package for small and medium-sized businesses during the recession and cancelling two rounds of future tax cuts that had been previously planned by both Labour and National.

"Without these changes the deficit next year would be almost $1 billion higher.

"This Government has a comprehensive economic programme to get back to surplus sooner, build faster growth and support higher paying jobs.

"Improving national savings – including Government savings - is central to the Government's economic programme which is designed to tilt the economy towards savings, exports and investment and away from excessive borrowing and spending.

"By contrast Phil Goff and Labour are still promising to spend more without explaining to anyone where the money is going to come from. This is a recipe for more debt, a credit ratings downgrade and higher interest rates for everyone," Mr English says.

The attached table shows how the Government's tax changes have been treated in the Crown accounts and fiscal forecasts.

Net fiscal impact of the Government’s tax changes ($million increase (decrease) in the operating balance)

2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 6-year total
Election tax package1 (133) (238) (37) 188 198 198 176
Budget 2009 cancellation of 2nd and 3rd tranches2 105 553 956 999 999 3,612
SME tax package3 (294) (189) 214 (108) (108) (108) (593)
Budget 2010 tax package4 (460) (90) (40) 175 (415)
Total (427) (322) 270 946 1,049 1,264 2,780

1. Fiscal impact = revenue (removal of R&D tax credit + KiwiSaver changes + cancelling remaining tranches of Labour’s tax cuts) minus costs (personal tax + IETC). Source: Cabinet Paper CAB(08)585.

2. This is not an increase in taxes but the cancellation of future intended tax cuts which were already in the fiscal forecasts. Source: Treasury Report T2009/418.

3. February 2009 SME tax package. Source: BEFU 2009, Table 1.7.

4. Fiscal impact = revenue (GST increase + depreciation + LAQC + thin cap + WFF + GST base + tobacco + increased audit) minus costs (personal tax + company + PIE and savings vehicles + GST compensation). Source: Budget 2010 Executive Summary, Table 1.

Note: all source documents are available on the Treasury’s website.

ENDS

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