National's "paper boy" Budget is a wasted opportunity. Finance Minister Bill English has let another year go by without putting in place measures that would make a real difference to the economy.
OPINION: Instead, he is going after nickel and dime savings that will not help New Zealand meet its future challenges. Removing tax credits for children with after school jobs is a glaring example. It will scrape back $14 million a year – a measly amount compared to the more than $94 billion the Government will spend in the coming financial year.
Mr English says his fourth Budget is a sensible one for uncertain times. Certainly, his insistence on returning to surplus by 2015 while increasing spending in the priority areas of health and education, funded by demanding greater efficiencies in the wider public service and axing programmes that do not work or are of little value, is worthy of the description.
The sooner more cash comes into the Government's coffers than goes out, the sooner it can start reducing the growing mountain of debt. National is to be commended for chasing that important goal while not making savage cuts that would be counter-productive and cause real harm to the most vulnerable and needy.
But the forecast surplus of just $197m in 2015 is wafer thin, and at the mercy of unforseen events or expenses. A single tremor in Christchurch could wipe it out at a stroke; a major economic disaster in Europe could turn it into yet another multi-billion dollar deficit.
At the same time, the extra $755.4m revenue from cracking down on tax dodgers, closing loopholes, and scrapping three tax credits, including the one for children, is peanuts compared to the huge amount of extra borrowing planned for the next four years. Government debt will balloon from about $52b now to nearly $71b by 2016. The cost of servicing that debt will grow to more than $4.2b a year - $1b higher than the amount spent annually on police and the Defence Force put together.
What New Zealand really needed was a brave Budget that made bold changes. Such a budget would have addressed the unsustainability of national superannuation in its present form, reduced forecast borrowing by canning interest-free student loans and changed a tax system that encourages investment in boom and bust property cycles at the expense of the productive sector.
National has moved to broaden the tax base through measures such as ending tax breaks for bach owners who rent out their holiday homes, but continues to shy away from a capital gains tax. The former will deliver a mere $109m over the next four years; the latter would help direct much-needed cash into the high-tech and innovative enterprises New Zealand needs.
Meanwhile, Mr English now seems to be openly admitting that the entitlement age for national superannuation will need to rise 10 or 15 years down the line. In the intervening years, debt will continue to be piled on future generations who almost certainly will not get the same entitlements as their parents and grandparents. Not only is that not fair, it is not sensible.
- The Dominion Post