Budget 2015: Tackling hardship with an eye to future tax cuts video

ROBERT KITCHIN/Stuff.co.nz

Andrew Little, John Key, and Metiria Turei give their views on the budget.

Opposition leaders have slammed the Budget as a mixture of broken promises and the bare minimum in addressing child poverty.

Beneficiaries will see the largest boost to their incomes in more than 40 years in 2016, as Finance Minister Bill English delivers a Budget targeted firmly at poorer Kiwi children.

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ROBERT KITCHIN/Stuff.co.nz

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As Prime Minister John Key claimed that at the first possible opportunity it had moved to give relief to those on low incomes, Labour leader Andrew Little said it had come after seven years of inaction.

Little, whose speech included a gaffe in which he mistakenly called a constituent Gene Simmons, questioned whether National could ever get the books back into surplus.

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"This is not about building for the future, this is about doing the bare minimum year by year, and then setting something aside for a big spendup in 2017," Little said.

"The problem they have is of course their track record in achieving their goals and targets is a pretty hopeless one," Little said, referring to National's failure to reach its long held promise of a surplus.

Green Party co-leader Metiria Turei said the Budget did not do enough to tackle children growing up in hardship.

It's the biggest day of the year for Finance Minister Bill English. Budget day has arrived.
Getty-Images

It's the biggest day of the year for Finance Minister Bill English. Budget day has arrived.

"This Budget is not a solution to child poverty. The Government has done the bare minimum for those at the very bottom, but there is no indication of how many children will be raised above the poverty line."

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NZ First leader Winston Peters said the Budget simply robbed Peter to pay Paul, in removing the KiwiSaver kickstart payment, while doing little to create work.

"They have a doff to child poverty but they don't address the real thing in family poverty which is low income or no income at all."

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Prime Minister John Key insisted the Budget was one of "compassionate conservatism". After years getting the books back in order, National had moved to help low income families.

"There's not a lot of money to go around, I think everyone can appreciate that, but we've certainly channelled our resources where possible to very low income families," Key said.

"We have had to get the books back in order, we had the Christchurch earthquake, we had a global financial crisis, and actually in the very worst of time we stood behind those families and maintained benefits and entitlements, a lot of people were saying we should be cutting those, we couldn't afford it."

The "first chance" the government had to address low income families, it had done so, he said.

TACKLING HARDSHIP

In a surprise move, English's seventh Budget tackles hardship among the poorest households.

There is a package including $790 million over four years to boost welfare payments for beneficiaries with children and low income parents receiving Working for Families payments.

There is a sting in the tail of the increases for beneficiaries though, as well as a new tax on travel and the abolition of a popular subsidy on saving.

The Budget, and its focus on lower incomes, appears aimed squarly at clearing the path for future tax cuts.

A cut in income taxes is slated as a fiscal priority for the first time, starting in 2017, likely to coincide with the next election.

Families on benefits with children will get another $25 a week - $1300 a year. It will be the first time since 1972 that payments have been increased by more than inflation.

Working for Families payments will also be increased for low and middle income families by up to $12.50 a week, although households earning $88,000 or above will see a small cut. The changes come into effect on April 1, 2016.

English said the increases were balanced to not undermine the incentive to work while "address[ing] our concern about children whose family's resources have been falling behind other households".

Sole parents will now have to be "work ready" when their youngest child turns three (down from five years old), and the hours they are expected to work rises from 15 to 20 hours.

STING IN THE TAIL

Potential savers will foot much of the cost of the package. By the time you read this, the $1000 "kickstart" to join KiwiSaver has already been abolished.

Travellers will also be stung with a new international departure levy to help cover the costs of new biosecurity measures.

Although the exact structure of the levy is yet to be determined, it is expected raise $100m a year, adding $16 to the cost of flying to New Zealand and $6 to departing.

Key, the Minister of Tourism, has previously lobbied against similar - albeit larger - taxes in countries such as the United Kingdom.

Thursday's Budget revealed, once again, that the Government has abandoned attempts to reach surplus this year, with Treasury forecasting a deficit of $684m. Next year's predicted surplus is a wafer thin $176m.

Since the forecasts were prepared, dairy prices have continued to slide.

KEY POINTS

-$790 million over four years for increased welfare payments and higher Working for Families payments in return for greater work obligations

-No surplus, and next year's forecast surplus is within the margin of error

-An immediate end to the $1000 Kiwisaver kickstart payment

-A new $100 million tax on international travel to cover the cost of border protection and customs activities.

 - Stuff

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