20 May 2011

Parliament passes Budget cuts under urgency

8:54 pm on 20 May 2011

Future cuts to KiwiSaver and Working For Families have been passed into law under urgency in Parliament.

The Government says the changes are necessary and are part of a plan to return to surplus by the 2014-15 fiscal year. They were announced in Thursday's Budget, but will not come into effect until after the election on 26 November.

Under the Taxation Bill passed on Friday afternoon, the Government's contributions to KiwiSaver will be halved and employer contributions will no longer be tax-free.

Working for Families tax credits will also be reduced for thousands of families.

The vote was 67 to 51 in favour of that bill, with ACT, the Maori Party and United Future supporting National.

Labour Party MP Brendon Burns told Parliament the Government's changes to KiwiSaver will put people off the voluntary workplace savings scheme.

"We're seeing cuts being made to it, we're seeing the value of it being undermined and New Zealanders will take those signals and say, 'Well, if the Government's not staying aboard, what is the point. Why are we going to contribute?'"

But National Party MP Amy Adams said the Government is still making a substantial contribution to KiwiSaver.

"We're going to be committing $2.5 billion to KiwiSaver over the next four years. That is important to emphasise. We are committed to it, we are going to see it remain viable and successful, and all the projections tell us that it will continue to grow."

National MP Tau Henare told the House back-in-black will be the catch-cry of the election, when voters will have their say on the Government's management of the books, and the changes are a step in the right direction.

Earlier on Friday, Finance Minister Bill English said the Government would not make any further changes to KiwiSaver or Working For Families in future budgets, as now they are more sustainable.

However, Prime Minister John Key is refusing to rule out further cuts.

The Labour Party has questioned National's commitment, saying it is already broken its promise not to raise the goods and services tax. GST increased from 12.5% to 15% in October last year.

The party also questioned Mr Key's claim that the Budget contained no new taxes, saying before the Budget there was no tax on employer contributions - and now there is.