The Labour Party has an $11.7 billion hole in its fiscal plan that blows its debt out and breaks its own budget responsibility pledge, National’s Finance spokesperson Steven Joyce says.
"These are significant errors that raise questions about Labour's whole spending approach and their fiscal competence," Mr Joyce says. "Their spending numbers were already high and this makes them a lot worse.
“Labour’s recipe would lead to more debt, higher interest rates and a slower economy – not to mention the host of extra and unexplained taxes they would impose on households and businesses.
“All of this would cost jobs and eat into family budgets.”
The five errors are as follows, over four years:
- Failing to roll out their operating allowances for each year into subsequent years ($9.4 billion).
- Failing to allow for any increase in paid parental leave in their Family Incomes package despite saying they have included it ($567 million).
- Counting additional BEPs multinational tax revenue when Treasury has already counted it in the PREFU update ($902 million).
- Only including costs of their Family Package from 1 July 2018 when they said it would begin on 1 April 2018 ($289 million).
- Further finance costs associated with extra borrowing ($580 million).
“The biggest error is their failure to continue each year’s operating allowances for additional expenditure into subsequent years. When operating expenditure is added, for example an increase in wages for police, that expenditure continues into following years. Labour’s operating allowances don’t allow for that.
"Once corrected, Labour’s spending plans result in net debt increasing by nearly $20 billion from current levels of $60.6 billion to $79.3 billion over four years.
"Labour was already increasing debt by $7 billion from current levels by their own admission, but this takes it to nearly $20 billion. This would be an irresponsible level of debt increase at this stage of the economic cycle. New Zealand should be reducing debt now, not increasing it, so we are ready for the next rainy day.
"They also would break their fiscal responsibility rules as net debt would not fall below 23.5 per cent of GDP by the end of the forecast period, in fact it would be higher than it is now, and get nowhere near their own plan to reduce debt to 20 per cent of GDP by 2022.
“That level of spending and increased debt can only lead to one thing – higher interest rates for Kiwi mortgage holders.
"Labour’s true spending plans as revealed in this analysis confirms that behind the leadership change we are dealing with the same old irresponsible tax, borrow and spend Labour Party.
“Labour needs to withdraw its fiscal plan and re-work its proposals.”