Budget 2010 tax package creates huge fiscal hole

The longer-term impact of the Government’s tax package delivering large tax cuts to the wealthiest Kiwis is likely to be an increase in Crown debt of more than $9 billion by 2024, says Labour Finance spokesperson David Cunliffe.

“This projection --- worked out on the basis of Treasury assumptions contained in the Budget --- confirms Labour’s worst fears about Budget 2010,” David Cunliffe said.

“The Government made much, particularly pre-Budget, of the importance of the document being fiscally neutral, but that’s clearly not going to happen.

“The only way that National can fund long-term tax cuts for the wealthy on such a scale is by reducing the level of public services, or selling off the family silver.”

David Cunliffe said Budget 2010 worsened the fiscal deficit by 1.1b in the forecast period up to 2013/14, and after that time additional debt accumulates more rapidly, rising to $9.2 billion by 2024.

“That means the Government will no longer be able to sustain the level of spending on public services because it simply won’t have enough revenue coming in, “ David Cunliffe said.

“Even in this budget the Government has re-directed $1.8 billion of what it calls lower quality spending, and that has meant savage attacks in areas like home support for the elderly and running down early childhood education.

“That’s about just $1.8 billion. How does National plan to cope with a $9 billion blow-out in the decade after that?

“If National is allowed to continue down this irresponsible path, New Zealand will look a far different country in a decade’s time to what it is now.

“Services will have disappeared, meaning we are a less caring society. The Super Fund will be at risk. Our prized state assets will have been sold in increasingly desperate attempts to balance the books.

“More and more of New Zealand will have been sold overseas, and our sovereignty will have been undermined once and for all.”