Election 2023: National releases its draft budget - $800m surplus, but benefit budget loses $2b
National is promising a larger surplus and lower debt in its fiscal plan, unveiled this morning by leader Christopher Luxon.
But in a sign of the fiscally constrained times, the party can only get to surplus the same year as Labour, 2027. However that surplus will be $800m bigger at $2.9 billion.
In response to National’s plan, Labour’s finance spokesman Grant Robertson said it “relies on more cuts to services and cuts to incomes of the poorest New Zealanders” and there was a $537 million “hole” in it.
Luxon and finance spokeswoman Nicola Willis announced the party’s fiscal plan - effectively a blueprint for a government’s budget - which tallies up the costs of what the party has been promising on the campaign trail, and whether deep cuts will be needed to pay for it.
National has come under pressure to release its plan, and Labour leader Chris Hipkins highlighted this point on Wednesday’s leaders’ debate after Labour released its plan that morning.
Vera Alves
Listen: On the Campaign - analysis
Vera Alves
Listen to On the Campaign for analysis on how National's fiscal policy differs from Labour, and go inside the Mood of the Boardroom event for the latest head to head between Grant Robertson and Nicola Willis - including the statement that could haunt a National-led government.
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"The whole thing is built on smoke and mirrors"
Bailey Brannon
Robertson said Labour had a $10.5b buffer - "that's money that's needed for cost pressures".
He said when Labour came into government, they faced "astronomical bills" for prisons. He hit out at National's plan for a "mega-prison".
Robertson said "this budget is built on a sand castle".
"The fiscal prudence we we're looking for was that Nicola Willis would admit their plan doesn't add up.
He said "we were all wanting to look at" congestion charging.
"Congestion charging has its place, but Simeon Brown needs to say how much revenue and when.
"I would be extremely surprised if it was possible [for revenue to come next year].
"You can't base your fiscal plan on income no one thinks you're going to get - it's a sand castle.
Robertson slams National's Fiscal plan
Bailey Brannon
Finance Minister Grant Robertson, Labour's finance spokesman, said National' fiscal plan "relies on more cuts to services and cuts to incomes of the poorest New Zealanders."
Robertson said there was a $537m hole.
"To make matters worse, cutting incomes to fund tax cuts for millionaires is shameful.
"Within National's plan is a so called buffer. This is a fiction.
"If we were to put Labour's fiscal plans on the same terms as National's we have a larger buffer.
"Also, National's plan continues no further funding for climate action.
He said that was a "recipe for more emissions".
"We intend to go through the detail of National's plan in the coming days.
He said the buffer was propping up the plan.
"Today was an opportunity for Nicola Willis and Christopher Luxon to acknowledge their plan doesn't add up.
"It's right there under the preconditions line.
Robertson said any buffer has to be used for other cost-pressures.
"National took money out of the allowances to make their plan look good.
"The money is needed for cost-pressures. They'll have to spend what's in their buffer.
"It doesn't add up.
"It relies on the tax plan that virtually no body thinks adds up.
Hipkins: National's plan will push more children into poverty
Bailey Brannon
Hipkins said more a detailed comment about Naitonal's fiscal plan would be coming later from Labour's finance spokesman Grant Robertson.
But he told reporters that National, by cutting benefits by indexing them inflation instead of average wage growth, would push more children into poverty.
"Their priorities have been really clear. They want to sell New Zealand homes to overseas investors. They want to put thousands of people out of work but they won't say who's going to lose their jobs or when. They want to continue to run down our public services like they did last time, and today we're seeing they want to force more children into poverty."
National has defended those policies, saying the homes sold to foreign buyers won't impact the price of homes in what would be considered the normal price range, that there is too much fat in the public service, and that it would be up to public service bosses to determine what jobs could be trimmed.
Luxon said earlier today that getting people into jobs was more more important to pulling them out of poverty than higher benefit levels.
Hipkins said National wouldn't be able to deliver a higher surplus and less debt because "none of their numbers add up".
National has previously been pressured to release the assumptions and numbers behind its tax package, but has refused to do so. Economists have variously described National's expectations for tax revenue from the foreign buyers tax as plausible, optimist, or complete rubbish.
"Contrary to what the National Party think, it's not easy to live on a benefit," Hipkins said.
"People on a benefit generally live a hand-to-mouth existence. Cutting their benefits in order to pay for tax cuts would make life very difficult for those families."
Hipkins responds to National's fiscal plan
Bailey Brannon
Speaking to media at a stand up in Lower Hutt Labour leader Chris Hipkins says the National Party is "cutting benefits" and that will lead to more people and children living in poverty
National leader Christopher Luxon repeatedly said in his media stand up earlier today that his party weren't "cutting benefits" and that benefits would increase and match the cost of living.
- RNZ
Chris Hipkins' rugby challenge
James Wheeler
Chris Hipkins has had a go at displaying his infamous sporting skills in a rugby challenge at the mall.
Encouraged by some young rugby enthusiasts, Hipkins has a go at passing balls through a target.
"How do you rate my chances," he asked.
"Zero!" One enthusiastically replied.
Although the next raised it to eight out of 10.
With the pressure of the media pack all around Hipkins managed three out of five, which appeared satisfactory to the audience.
Chris Hipkins live shortly
James Wheeler
Our reporter on the ground, Michael Neilson, tells us the walkabout is still going and he will address media soon.
Labour says National’s welfare changes will see benefits fall $2621 by 2028
James Wheeler
Labour claims National’s proposed changes to welfare will see main benefits drop an average $2621 a year by 2028 compared to what it is proposing, effectively pushing thousands more families and children into poverty.
Social development spokeswoman Carmel Sepuloni laid out her party’s platform today with a compilation of mostly existing policies but framed as a “line in the sand” when it comes to Labour’s approach to welfare compared to National’s.
“Our plan will continue to lift children out of poverty, increase incomes and ensure hard-working Kiwis are supported into employment, education and training,” Sepuloni said.
Read more here:
Hipkins overwhelmed by supporters during walkabout in Lower Hutt mall
Bailey Brannon
Labour leader Chris Hipkins has been mobbed by supporters during a campaign walkabout at Queensgate Mall in Lower Hutt.
Hipkins is visiting the mall with Wellington-based MPs and candidates including Ginny Andersen, Andrew Little and Ibrahim Omer.
There is a positive atmosphere around the leader, with many words of encouragement for the election ahead.
Luxon: 'I condemn and reject racism in all its forms'
Bailey Brannon
Asked to respond to Maori leaders this morning calling for political leaders to call out racism, Luxon said he condemned racism "in all its forms".
He added that race was not a conversation that voters were focused on.
"I condemn and reject racism in all its forms."
He said when Maori was doing well, New Zealand was doing well.
The letter was from 17 Māori leaders who collectively urged Luxon to "draw a line in the sand".
"Leaders, whether it is within your iwi, your whānau or of a political party, have a responsibility to call out racism and race-baiting and publicly condemn it," the group said.
The group said they supported Labour leader Chris Hipkins' position, who called for an end to "race-baiting and racist comments" on the election campaigns.
"We acknowledge both the Green Party and Te Paati Māori for their anti-racism positions and respect the words of Kiingi Tuheitia Pōtatau Te Wherowhero IIV, who, at his Koroneihana called for political parties to stop using Māori people as a political football."
Luxon's focus is set on children in material hardship and benefit-dependent homes
Bailey Brannon
Willis noted that Labour's fiscal plan had booked savings from 2 per cent baseline reductions. National would ask chief executives to come up with plans for potential savings before Christmas (6.5 per cent on average) and provide them to ministers.
"I'm told many of them [public service bosses] are already working on it," she said, later clarifying that this was not in expectation of National winning the election but because it was generally good practice.
Luxon: "We're going to deliver those savings."
He said benefit levels were only one part of several factors that could contribute to child poverty in New Zealand. Another was petrol prices.
"We grow the economy is what we need to do and get people from welfare into work."
He said among the nine child poverty measures, he was particularly focused on children in material hardship and children in benefit-dependent homes.
He said the $9.9b in unallocated spending was not being set aside for the policies of potential coalition partners. "This is our fiscal plan. The New Zealand people will deliver what they will deliver on October 14. We will get into coalition conversations on the other side."
Luxon said he disagreed with experts saying the most important thing to reduce child poverty was indexing benefit levels to wage growth instead of inflation. He said it was more important to get those on welfare into work.
'I utterly reject that': Willis confident National's fiscal plan has no holes
Bailey Brannon
Asked about the $9.9b in unallocated spending over the forecast period, Willis said some of that would be used for new spending rather than just be left in a siloed kitty for a rainy day for unexpected events.
She said anyone who believed Labour would stick to its spending expectations in coming years may as well believe in the tooth fairy, given Labour's failure to stay within its anticipated spending envelope every year.
Labour has defended its spending, saying it had to respond to the pandemic, natural disasters and cost-of-living pressures.
Asked if she was 110 per cent sure there were no holes in the fiscal plan, Willis said "yes".
"I utterly reject that," Willis said when asked if slashing benefit levels relative to their current ones and a rise in the prison projection was a repeat of the "moral and fiscal failure" that Sir Bill English described of prisons in general.
Luxon said there were other measures to help beneficiaries including not adding to fuel taxes for the next three years.
He also wanted to keep Labour's scrapping of the $5 prescription fee but targeted at those most in need.
Luxon defended the 6.5 per cent savings from certain public service agencies, saying there would still be better outcomes after "stopping dumb projects".
Nicola Willis outlines fiscal plan detail
James Wheeler
Finance spokeswoman Nicola Willis said "we are very conscious of the fact that while there have been inflation adjustments for many, taxpayers have still not had brackets adjusted".
Willis confirmed she adopted the current Government's health spending track.
She said this was to confirm National could "continue to improve front-line services and ensure New Zealanders can continue to rely on them".
She has also allowed for the costs of a higher prison population, given National's proposal for harsher sentences.
There was a $9.9b buffer - unallocated spending - to allow for unforeseen costs over the forecast period, she said.
"This will mean we will be able to meet costs for future costs."
Willis said she had set aside additional funding for corrections worth $700m to fund National's tough-on-crime approach.
"We do expect the prison population to rise as a result of our sentencing policy," Willis said.
"We have set aside a total of $718m in contingency," Willis said.
Willis said this was a conservative estimate based on growing the prison muster by over 1000 as a result of sentencing policies.
The figure came from an estimate of 350 additional prisoners in year one, 700 in year two, 1100 in year three, and 1400 in year four, based on $200,000 for the average annual cost of housing a prisoner.
Promise of larger surplus and lower debt
James Wheeler
National is promising a larger surplus and lower debt in its fiscal plan, unveiled this morning by leader Christopher Luxon.
But in a sign of the fiscally constrained times, the party can only get to surplus the same year as Labour, 2027. However that surplus will be $800m bigger at $2.9 billion.
Luxon announces National's fiscal plan
Bailey Brannon
National leader Christopher Luxon said, "Labour has shown economic mismanagement and vandalism on a scale we have never seen before".
"Despite all that spending and borrowing New Zealanders haven't seen the improvement in services that they deserve," Luxon said.
"Labour's only approach to the economy is to spend more, to tax more, to borrow more," Luxon said.
"The bottom line is this, we are not better off under six years of this government, and we will not be better off after another three years," Luxon said.
He said government spending had increased by 80 per cent and debt is forecast to hit $100b.
Labour has defended this by saying it has responded to unexpected events such as the pandemic, natural disasters, and to ease cost-of-living pressures.
He said National would reduce the allocation for new spending but still put more into health and education every year.
There would also be breathing room for cost pressures while still delivering lower debt and higher surpluses.
Seymour: ACT 'falsely accused' of racist policies
Anneka
David Seymour told media in Christchurch today that ACT has been "falsely accused" of having racist policies.
He referred to an open letter published by the Herald on Friday, written by Māori leaders calling out racism in this year's election.
The letter referenced comments from the Māori King, Tūheitia Paki who said during his coronation it was ignorant to believe one could "erase te Tiriti from legislation and rewrite it in your own words".
It then called on Christopher Luxon, leader of the National Party to condemn ACT for its "race-baiting policies".
Seymour rubbished the claim his party wanted to rewrite the treaty, stating ACT's policy is to properly define the treaty's principles.
"Parliament has a right to define it and the people have the right to debate them," the party leader said.
"If they can't take the time to read our policies, they shouldn't be criticising us - especially with unfounded, unjustified accusations of racism. That's dogma over reason and we need honest, healthy debate in this country."
ACT leader David Seymour has been speaking in Christchurch today. Photo / Courtney Winter
Anneka
Nicola Willis: ‘I don’t want to go into Government with NZ First’
Anneka
Anneka
Vera Alves
In case you missed it:
Vera Alves
Vera Alves
Could National do a deal with the Greens?
Vera Alves
"Luxon, who believes abortion is murder yet strangely doesn’t want to do anything to stop those so-called 'murders', seems to hold any economic beliefs he may have just as lightly as his religious convictions," writes Matthew Hooton.
Vera Alves
Nicola Willis and Grant Robertson in Mood of the Boardroom.
You can watch live via the link below.
Watch live: Mood of the Boardroom - CEOs deliver verdict on the Government
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Labour leader Chris Hipkins addresses roading concerns in Northland during visit
Vera Alves
Prime Minister Chris Hipkins went to Northland yesterday and said out loud what everyone living in the region knows to be true - the roads are not good enough.
Mood of the Boardroom: CEOs give rating on Prime Minister Chris Hipkins
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After six months in the job, the Herald asked New Zealand’s business leaders to rank his performance as prime minister.
Vera Alves
Happy Friday, New Zealand!
Welcome to another day of the 2023 election campaign. Stay with us as we bring you the latest from the campaign trail.
National’s plan shows it gets to its projected surplus by filleting new spending from its next three budgets. Those cuts come on top of the cuts that Labour announced it would do to its own budgets in August.
Prior to August the next term’s budgets all had net new day-to-day spending, known as an operating allowance, of $3.5b. This is the pool of new money governments use to fund the growing cost of public services, and any new things they want to do, like the removal of $5 prescription fees in the most recent budget.
In August, Labour cut two of these allowances to $3.25b in 2025, and $3b in 2026, meaning spending still increases each year, but not by as much.
National has cut these even further. Under National Budget 2024 would have an allowance of $3.2b, Budget 2025 would have an allowance of $2.85b, and Budgets 2026 and 2027 would have an allowance of $2.7b.
That saves the Government $3.3b over the four-year forecast period and $1.3b a year by 2027.
In 2027, core Crown expenses are expected to be $153b.
The biggest saving announced on Friday was $2b cut from the amount forecast to be spent on benefits over the four-year forecast period.
In 2019, Labour indexed benefits to wages, rather than CPI inflation, meaning benefit levels increase more quickly. New Zealand’s main benefit, superannuation, is indexed to wages too.
National wants to change this back, costing someone receiving the basic rate of jobseeker $33 a week by the end of the forecast period. The benefit payments will still go up, but not by as much.
The changes are trigger immediately, saving $40m by the end of the fiscal year, $195m next year, $452m in 2025, $616m in 2026 and $739m in 2027.
Willis said that despite the savings, she had kept “significant buffers” in the plan to deal with shocks.
“We have provided for significant buffers, with $9.9 billion of unallocated operating spending to ensure we can respond to cost pressures and changing circumstances,” she said.
Willis also took aim at Labour, who have repeatedly spent more than signalled in each budget, leading to a large increase in the size of the state.
“Labour’s plan does not have any credibility when they have failed to stay within their spending limits for every single Budget since they have been in office, nor when they have delayed the return to surplus three times in the last two years,” she said.
National has decided to match Labour’s pre-committed health spending, meaning it matches the Government’s health spending track. In Government, Labour has begun multi-year funding for health, meaning each budget signals what future health funding will be.
This system gives $1.43b to health next year, and $1.47b in the next two years under both National and Labour.
National’s changes would mean smaller deficits in the years to 2027 and larger surpluses thereafter, which leads to faster debt repayments.
Net debt would be $97.6b under National in 2028, compared to $101.1b under Labour, a $3.4b difference.
‘Numbers don’t add up’
In response to the plan, prime minister Chris Hipkins said National wouldn’t be able to deliver a higher surplus and less debt because “none of their numbers add up”.
National has previously been pressured to release the assumptions and numbers behind its tax package, but has refused to do so. Economists have variously described National’s expectations for tax revenue from the foreign buyers tax as plausible, optimistic, or complete rubbish.
“Contrary to what the National Party think, it’s not easy to live on a benefit,” Hipkins said.
“People on a benefit generally live a hand-to-mouth existence. Cutting their benefits in order to pay for tax cuts would make life very difficult for those families.”
Finance Minister Robertson said there was a “$537m hole”.
“To make matters worse, cutting incomes to fund tax cuts for millionaires is shameful.
“Within National’s plan is a so called buffer. This is a fiction.
“If we were to put Labour’s fiscal plans on the same terms as National’s we have a larger buffer.
“Also, National’s plan continues no further funding for climate action.
He said that was a “recipe for more emissions”.
“We intend to go through the detail of National’s plan in the coming days.”
He said the buffer was propping up the plan.
“Today was an opportunity for Nicola Willis and Christopher Luxon to acknowledge their plan doesn’t add up.
“It’s right there under the preconditions line.”
Robertson said any buffer has to be used for other cost-pressures.
National took money out of the allowances to make their plan look good.
“The money is needed for cost-pressures. They’ll have to spend what’s in their buffer.
“It doesn’t add up.”
‘Very conservative approach’
Earlier Willis told the Herald she has set herself even tighter parameters than Labour’s finance spokesman Grant Robertson had allowed in his party’s fiscal plan.
Willis told the Herald she would ratchet down the growth in new spending even tighter, reducing the amount of deficits and borrowing in Labour’s plan.
“You will see in that fiscal plan that we will work within lower operating allowances than Labour are forecasting,” Willis said.
Willis promised to take a “very conservative approach to ensuring that there are significant buffers in the Government spending to allow for additional funding for frontline services, including capacity pressures in the future”.
Labour has left itself room to accommodate cost pressures too. It left $662m unspent for Budget 2024 rising to $1.9b in 2025, and $3.1b in 2026 - although those figures are cumulative. National’s test will be whether it can match or exceed those figures.
One area that will drive significant savings will be reversing a change Labour made in 2019 that indexed benefit increases to the inflation rate, rather than to wages, which National recommitted itself to this week.
Wages typically rise faster than inflation, and New Zealand’s largest benefit, superannuation, is indexed to wages rather than inflation. The change would see someone on the basic rate of jobseeker $40 worse off a week at the end of the forecast period in 2027.
That cost to beneficiaries would be a National-led government’s gain. National has not yet published costings for benefits policy, but an Act costing from May reckoned the change would save $166m from the 2024 budget, $391m from the 2025 budget and $552m from the 2026 budget - a large saving.
Act has since walked away from the policy, saying it will keep the existing formula for calculating benefit increases.
Hipkins has said National’s policy would drive more children into poverty, while Luxon has pledged to continue the Government’s efforts to lift 80,000 more children out of poverty by 2028.
Willis said the plan would see government spending as a share of the economy reduce too.
Labour’s fiscal plan, released on Wednesday, showed a return to surplus (of $2.1 billion) in 2027 and net debt remaining under 30 per cent during the forecast period.
The plan includes Labour’s election promises - such as taking GST off fresh and frozen fruit and vegetables, and a pledge to train more doctors - but leaves scant headroom for new promises.
The health budget increases each year and in 2027 would be 17.5 per cent larger than this year.
Hipkins accused National of trying to bury the plan by dumping it on a Friday afternoon, a time governments of both colours have historically used to release something unpopular, owing to the belief that people are tuned into their weekend plans, rather than the news.
“The fact they want to dump it on a Friday afternoon after everyone’s gone to the pub shows that they’re embarrassed by it,” Hipkins said.
Derek Cheng is a senior journalist who started at the Herald in 2004. He has worked several stints in the press gallery and is a former deputy political editor.
Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.