The Labour Party has released its fiscal plan showing how its election promises and the ongoing cost pressures in the public sector would fit within Budget allowances.
Finance spokesperson Grant Robertson said the plan had been independently verified by economics firm Infometrics.
“Labour’s fiscal plan is responsible, balanced, costed and credible,” he said.
But the National Party maintains Labour cannot be trusted to stick to its budget.
Finance spokesperson Nicola Willis said the plan was a “fantasy”.
“They have never delivered on the commitments they have made in their fiscal plans. If you go back to 2017 every single operating allowance they have set since then they have blown, because they are a government that is addicted to spending.”
The plan has been released on the same day overseas voting opens with Labour leader Chris Hipkins saying New Zealanders “here and around the world” should be able to verify what each party is offering.
Willis said National’s plan would be released on Friday ahead of early voting opening next week, and had also been independently costed.
Labour’s plan includes $2.2 billion until 2028 for its promise to remove GST from fresh fruit and vegetables, $1.4b to boost Working for Families and $230 million for its new paid parental leave policy.
There’s also the continuation of the apprenticeship boost scheme and free school lunches, 6000 more public homes, 300 more police and $14b in health funding which includes more for Pharmac and free dental for under-30s.
Robertson said health funding would move to a three-yearly allocation from next year.
“Setting these budgets upfront allows the health sector to plan ahead, knowing just what they will be getting … these are significant commitments but the reality is that anything less than this will mean our health system will go backwards.”
The plan confirms revenue sources already released such as removing depreciation from non-residential buildings, a Digital Services Tax targeting large multinationals, cuts of up to 2 percent in the public sector and an increase in fuel taxes by 4 cents per litre every year for the coming three years.
Robertson said all cost pressures had been accounted for.
“We have carefully set aside an appropriate pot of money in each year to deal with other cost pressures that the Government faces in areas such as education.
“At Budget 2023 cost pressures accounted for 79 percent of all new spending in the Budget and we’ve ensured that ratio is able to stay about the same across each of the three budgets next term.”
The fiscal plan also said there would be enough money to fund policies from the Climate Emergency Response Fund.
This includes the roof-top solar rebate announced last week, replacing diesel boilers in schools and continuing the Green Investment Fund which invests in companies to reduce emissions.
The report from Infometrics’ principal economist Brad Olsen said it was all accounted for.
“Infometrics has assessed the annual spending commitments for fiscal years 2023/24 to 2027/28. Alongside assessing the spending commitments against the total Budget allowance allocations, Infometrics has also assessed that the Labour Party spending commitments can be met by the remaining Budget allowance spending once existing pre-commitments have been considered.”
There’s $660m remaining from the costings for the 2024/2025 year, which Robertson said would cover other cost pressures that would arise.
“It’s important to remember that $660m adds to $2.7b that we’ve set aside for cost pressures. So that’s all of the health pressures accounted for, all of the pressures in police, justice, environment, they’re all counted already. So the $660m covers off areas like education and if you look at last year’s Budget, there was about $150m of new spending per annum for education so there’s plenty of room within the $660m.
“And the big cost in the education area is salaries and we’ve dealt with that, there’s a pre commitment here in the numbers.”
The report also confirms that spending from the Climate Emergency Response Fund adds up.
“Prefu 2023 set out that $1b remained unallocated in the CERF, which is available across the remaining three years of the forecast period (fiscal years 2024/25 to 2026/27).
“The value of policies announced by the Labour Party that will be funded from the CERF totals $888m, which fits entirely within the remaining unallocated CERF envelope.”
Willis said despite the numbers adding up, she remained unconvinced about the true cost of some of Labour’s policies.
“While they have had someone independently assess whether the numbers add up, they have not had the individual costings or the individual policies externally assessed. That’s very important, because already there are significant questions about whether they have under-costed some of those policies.”
She was likely referring to recent concerns raised by the Taxpayers’ Union that the GST-exempt policy would leave a revenue hole of up to $411m because more people may eat fresh fruit and vegetables if they were cheaper.
Labour leader Chris Hipkins has rubbished those concerns.
“We’ve already banked the savings that people make. So when people get their GST off their fruit and vegetables, we’ve assumed that 100 percent of the savings they get from that are going to be spent on more fruit and vegetables.
“If they spend that on something else then actually, our costings are overly conservative because they’ll pay GST on the other stuff. The Taxpayers’ Union beat-up is just fictional. It doesn’t make sense. They haven’t actually got their numbers right.”
Relying on debt
Robertson reiterated Budget 2024 would be tight, but said headroom remained in case of emergency.
“These are the allowances that have been set out. They’re the allowances we’re committed to but I’m also not going to stand here and say, it will never change, because you deal with it … if we did have another event, we would deal with it.
“We deal with that by making use of the balance sheet we have and our level of net debt is low, relative to the rest of the world, and so it means we’ve got headroom.”
Willis said National would also draw down debt if it needed to, in case of an emergency.
“That is why we need to pay down our debt faster. Because if we don’t, we won’t have the resilience needed for the rainy days that do come along.”
On releasing Labour’s plan today Hipkins took the opportunity to talk up Robertson, saying his decisions as Finance Minister had saved lives.
“Grant has run two surpluses in the years before Covid-19, they were $5.5b and $7.4b – that’s larger than any surplus delivered under the previous National government. In fact, these surpluses are higher than the target that Bill English had set for himself, but had never managed to achieve in the nine years that National was in government.
“We’ve also brought our debt down so that net debt is in a world-leading position. We did that before Covid-19, we bought our debt well below target, which meant that we were in a position to support New Zealanders as we headed into the global pandemic; and during and since then, Grant’s economic management has helped to save lives and livelihoods.”
He said now was not the time for a “radical change in direction”.
“Steady, consistent and balanced economic management is what the country needs right now.”