Analysis: Grant Robertson says National’s new fiscal plan has a $537 million hole in it and plans to spend the weekend looking for more.
The plan, which involves reducing future Budget operating allowances and cutting $2 billion off future benefits to return a higher surplus in 2027 than under Labour’s projections, has been vetted by the consultancy firm Castalia. However, that vet – as with Infometrics’ review of Labour’s fiscal plan released on Monday – is relatively superficial.
“Castalia was asked by National to review the underlying assumptions and the calculations of elements of the fiscal plan, as well as its overall consistency. We have not been asked to comment on the merits of the proposed policies or to cost all of them,” the firm reported.
“In addition to reviewing National’s tax plan, we also assessed the specific policy costings for changes to benefit indexation, changes to transport policies, and an increase in correctional occupancy. Castalia has not modelled the costings of some other policies in National’s fiscal plan. Overall, we confirm that National’s calculations are consistent and that their policies can be met from the proposed spending allowances. Their proposed allowances are fully reflected in the projected net debt and OBEGAL (operating balance before gains and losses).”
That will do little to reassure voters who, according to this week’s Newshub-Reid Research poll, mostly don’t believe National can pay for its tax cuts.
Robertson’s allegation of a hole is based on National passing on additional savings from its foreign buyer tax and other new revenue measures to the general coffers. If they aren’t going to be able to raise enough revenue to fund their tax cuts, he argued, they definitely won’t have any left over to reduce the deficit.
“In this next Budget year, they’re looking for $537 million from a plan that nobody thinks adds up to prop up their overall fiscal plan,” he said.
National of course rejected the allegation, with campaign chair Chris Bishop posting on Twitter, “This is utter nonsense from Grant Robertson. Just total rubbish.”
Partisan attacks about holes aside, there is one gap still remaining in National’s plan. Two weeks ago, Newsroom reported National’s tax break for landlords could cost an extra $100 million a year due to rising mortgage rates. While National had used the most recent public figures in its tax plan, these numbers were released to Newsroom under the Official Information Act.
Although they were provided to National two weeks ago – and used in the Act Party’s updated alternative budget from last week – the new figures don’t appear in National’s fiscal plan. That’s a potential error that just looks a bit sloppy.
What does this mean for the campaign? Not all that much, probably. Labour’s attacks on National’s fiscal credentials have clearly worked, if voters think the tax cuts won’t be funded the way National says. But Labour is still dropping in the polls, so people may well simply not care – or not trust Labour to do any better.
The fact that Nicola Willis has staked her job on delivering the tax cuts but neither she nor Christopher Luxon would pledge to resign if they couldn’t fund them suggests even National has doubts about its workings.
To some extent, a bit of grace is deserved here. Political parties don’t have the resources of government departments in producing robust costings. Besides, plenty of government cost estimates get blown out by the time a policy or project is finally delivered.
The notion that we should expect parties to predict, with a crystal ball, the size of the surplus in 2027 to within $100 million is patently absurd. Four years is a long time. Four years ago, the Government was running surpluses and still expected to be doing so in 2023. No one really knew what a coronavirus was.
Instead, the substantive fiscal issues going into the last two weeks of the campaign for National are the same as before their new plan: The dwindling likelihood that they’ll be able to pay for their tax cuts the way they say they will.
Voters deserve to know the backup plan. Will National borrow more to cut taxes, or will they cut spending?
While the party may have hoped a detailed fiscal plan would put these questions behind them, the public has heard no satisfying answers yet.
It’s entirely possible that National runs the gauntlet all the way to polling day with these questions still hounding them. As damaging as they may be, these doubts don’t seem poised to turn the race on its head.
But if Willis and Luxon get into government, they’ll have to offer up an answer eventually. It just may be too late for the voters to render their judgment.