25 Aug 2014

National and Labour signal their plans

7:04 pm on 25 August 2014


The Labour Party has announced it is reining in its spending plans while the National Party is promising to make some sort of tax cut announcement before the election.

John Key's dream run at the top continues, while David Cunliffe is no longer seen as a credible leader by some media.

National is promising to make a tax cut announcement prior to the election, while Labour says it will rein in its spending plans. Photo: RNZ

National's leader John Key raised the prospect of a tax cut announcement on the campaign trail in Auckland. But he said it would not amount to a detailed tax cut package.

"We would like to lower taxes if we can. We'll only do it in a fiscally responsible way. Post the PREFU (Pre-election Economic and Fiscal Update) we're sort of cutting those numbers to see what sort of headroom we've got. If we can say a bit more definitively about that we will coming into election day," Mr Key said.

But his comments are vague and come just a week after his finance spokesperson Bill English ruled out any tax cut announcement before the election.

Meanwhile, Mr Key criticised the release of Labour's revised Budget.

Labour released it today in response to the pre-election economic and fiscal update, which forecast the tax take and budget surpluses would be lower than predicted in the May Budget.

The party's finance spokesperson David Parker said the party had decided to drop six policies it was still to announce to keep its spending plans within budget. Dropping those policies and delaying the introduction of free doctors visits and prescriptions for the elderly will save about $300 million.

Mr Parker said that would ensure Labour ran bigger surpluses than National and reduce debt faster.

But John Key dismisses the latest set of numbers, saying he thinks Labour's in trouble and has committed $18 billion of spending over the next four years.

National though has put aside $15 billion for new spending over the same period, some of which will go on tax cuts.

David Parker said National cannot have it both ways.

"The Government says that they have got a $1.5 billion spending allowance going forward and that they might commit about half a billion dollars of that to tax cuts in the future, leaving them about $1 billion to work through with, for other pressures. Well, it's remarkably similar to our billion dollars which we have left aside for those other pressures too," Mr Parker said.

Green Party co-leader Russel Norman also dismisses Mr Key's criticism and said National had cut real spending on health and education.

"That's how they've managed to build up what they've called an operating allowance for new spending. And so now it looks like National's planning for that new spending, at least in part, to be on tax cuts. And so effectively they are cutting health and education to pay for tax cuts," Dr Norman said.

John Key is adamant that Labour and the Greens would spend, as he puts it, like drunken sailors. He said National was more responsible and would not put forecast budget surpluses at risk.

Despite the political rhetoric the parties have produced robust sets of figures around their tax and spend plans. The difference is that National would tax less and spend less than Labour and the Greens.

Both Opposition parties intend introducing a capital gains tax and lifting the top rate of tax. On that basis a Labour-led Government would collect more tax and have more to spend while still running surpluses.

Follow Brent Edwards on Twitter @rnzgallerybrent